Form 10-Q
|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Cornerstone OnDemand, Inc.
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
13-4068197
|
(State or other jurisdiction of
incorporation or organization)
|
(IRS Employer
Identification No.)
|
Registrant’s telephone number, including area code:
(310) 752-0200
|
Large accelerated filer
|
x
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
¨
|
Emerging growth company
|
¨
|
|
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, par value $0.0001 per share
|
CSOD
|
Nasdaq Stock Market LLC (Nasdaq Global Select Market)
|
Class
|
Outstanding as of May 3, 2019
|
Common Stock, par value $0.0001 per share
|
59,652,871
|
|
|
Page No.
|
|
|
|
|
||
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||
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||
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||
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||
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||
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|
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ITEM 1.
|
Condensed Consolidated Financial Statements
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
357,015
|
|
|
$
|
183,596
|
|
Short-term investments
|
34,950
|
|
|
204,732
|
|
||
Accounts receivable, net
|
92,645
|
|
|
125,300
|
|
||
Deferred commissions, current
|
16,013
|
|
|
24,467
|
|
||
Prepaid expenses and other current assets
|
33,802
|
|
|
34,940
|
|
||
Total current assets
|
534,425
|
|
|
573,035
|
|
||
Capitalized software development costs, net
|
45,766
|
|
|
45,416
|
|
||
Property and equipment, net
|
33,081
|
|
|
77,254
|
|
||
Operating right-of-use assets
|
82,984
|
|
|
—
|
|
||
Deferred commissions, non-current
|
58,755
|
|
|
45,444
|
|
||
Long-term investments
|
750
|
|
|
1,250
|
|
||
Intangible assets, net
|
12,581
|
|
|
13,867
|
|
||
Goodwill
|
47,453
|
|
|
47,453
|
|
||
Other assets, net
|
2,920
|
|
|
3,437
|
|
||
Total Assets
|
$
|
818,715
|
|
|
$
|
807,156
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
9,156
|
|
|
$
|
11,921
|
|
Accrued expenses
|
46,353
|
|
|
68,331
|
|
||
Deferred revenue, current
|
290,993
|
|
|
312,526
|
|
||
Operating lease liabilities, current
|
9,274
|
|
|
—
|
|
||
Other liabilities
|
6,269
|
|
|
7,645
|
|
||
Total current liabilities
|
362,045
|
|
|
400,423
|
|
||
Convertible notes, net
|
289,994
|
|
|
288,967
|
|
||
Operating lease liabilities, non-current
|
78,930
|
|
|
—
|
|
||
Other liabilities, non-current
|
305
|
|
|
2,484
|
|
||
Deferred revenue, non-current
|
11,876
|
|
|
13,275
|
|
||
Facility financing obligation
|
—
|
|
|
46,100
|
|
||
Total liabilities
|
743,150
|
|
|
751,249
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
||||
Stockholders’ Equity:
|
|
|
|
||||
Common stock, $0.0001 par value; 1,000,000 shares authorized, 59,407 and 58,886 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
|
6
|
|
|
6
|
|
||
Additional paid-in capital
|
608,168
|
|
|
585,387
|
|
||
Accumulated deficit
|
(533,426
|
)
|
|
(529,962
|
)
|
||
Accumulated other comprehensive income
|
817
|
|
|
476
|
|
||
Total stockholders’ equity
|
75,565
|
|
|
55,907
|
|
||
Total Liabilities and Stockholders’ Equity
|
$
|
818,715
|
|
|
$
|
807,156
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenue
|
$
|
140,117
|
|
|
$
|
133,113
|
|
Cost of revenue
|
33,695
|
|
|
37,020
|
|
||
Gross profit
|
106,422
|
|
|
96,093
|
|
||
Operating expenses:
|
|
|
|
||||
Sales and marketing
|
54,505
|
|
|
59,245
|
|
||
Research and development
|
27,746
|
|
|
15,984
|
|
||
General and administrative
|
22,940
|
|
|
21,985
|
|
||
Restructuring
|
—
|
|
|
7,725
|
|
||
Total operating expenses
|
105,191
|
|
|
104,939
|
|
||
Income (loss) from operations
|
1,231
|
|
|
(8,846
|
)
|
||
Other income (expense):
|
|
|
|
||||
Interest income
|
1,990
|
|
|
1,819
|
|
||
Interest expense
|
(5,366
|
)
|
|
(8,700
|
)
|
||
Other, net
|
(597
|
)
|
|
44
|
|
||
Other income (expense), net
|
(3,973
|
)
|
|
(6,837
|
)
|
||
Loss before income tax provision
|
(2,742
|
)
|
|
(15,683
|
)
|
||
Income tax provision
|
(722
|
)
|
|
(533
|
)
|
||
Net loss
|
$
|
(3,464
|
)
|
|
$
|
(16,216
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.06
|
)
|
|
$
|
(0.28
|
)
|
Weighted average common shares outstanding, basic and diluted
|
59,141
|
|
|
57,425
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net loss
|
$
|
(3,464
|
)
|
|
$
|
(16,216
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Foreign currency translation adjustment
|
169
|
|
|
(2,111
|
)
|
||
Net change in unrealized gains (losses) on investments
|
172
|
|
|
(225
|
)
|
||
Other comprehensive income (loss), net of tax
|
341
|
|
|
(2,336
|
)
|
||
Total comprehensive loss
|
$
|
(3,123
|
)
|
|
$
|
(18,552
|
)
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
(Deficit)
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
|||||||||||||
|
Shares
|
|
Par
Value
|
|
||||||||||||||||||
Balance as of December 31, 2017
|
57,512
|
|
|
$
|
6
|
|
|
$
|
536,951
|
|
|
$
|
(515,054
|
)
|
|
$
|
217
|
|
|
$
|
22,120
|
|
Issuance of common stock upon the exercise of options
|
211
|
|
|
—
|
|
|
5,149
|
|
|
—
|
|
|
—
|
|
|
5,149
|
|
|||||
Vesting of restricted stock units
|
225
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Repurchase of common stock
|
(423
|
)
|
|
—
|
|
|
(16,024
|
)
|
|
—
|
|
|
—
|
|
|
(16,024
|
)
|
|||||
Stock-based compensation
|
|
|
|
|
20,732
|
|
|
—
|
|
|
—
|
|
|
20,732
|
|
|||||||
Cumulative effect of accounting change
|
—
|
|
|
—
|
|
|
—
|
|
|
18,935
|
|
|
—
|
|
|
18,935
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,216
|
)
|
|
—
|
|
|
(16,216
|
)
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,336
|
)
|
|
(2,336
|
)
|
|||||
Balance as of March 31, 2018
|
57,525
|
|
|
$
|
6
|
|
|
$
|
546,808
|
|
|
$
|
(512,335
|
)
|
|
$
|
(2,119
|
)
|
|
$
|
32,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Common
Stock |
|
Additional
Paid-In Capital (Deficit) |
|
Accumulated
Deficit |
|
Accumulated
Other Comprehensive Income (Loss) |
|
Total
|
|||||||||||||
|
Shares
|
|
Par
Value |
|
||||||||||||||||||
Balance as of December 31, 2018
|
58,886
|
|
|
$
|
6
|
|
|
$
|
585,387
|
|
|
$
|
(529,962
|
)
|
|
$
|
476
|
|
|
$
|
55,907
|
|
Issuance of common stock upon the exercise of options
|
129
|
|
|
—
|
|
|
4,984
|
|
|
—
|
|
|
—
|
|
|
4,984
|
|
|||||
Vesting of restricted stock units
|
392
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
17,797
|
|
|
—
|
|
|
—
|
|
|
17,797
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,464
|
)
|
|
—
|
|
|
(3,464
|
)
|
|||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
341
|
|
|
341
|
|
|||||
Balance as of March 31, 2019
|
59,407
|
|
|
$
|
6
|
|
|
$
|
608,168
|
|
|
$
|
(533,426
|
)
|
|
$
|
817
|
|
|
$
|
75,565
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019*
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(3,464
|
)
|
|
$
|
(16,216
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
10,858
|
|
|
7,831
|
|
||
Accretion of debt discount and amortization of debt issuance costs
|
1,027
|
|
|
3,426
|
|
||
Purchased investment premium, net of amortization
|
(216
|
)
|
|
(81
|
)
|
||
Net foreign currency (gain) loss
|
294
|
|
|
(356
|
)
|
||
Stock-based compensation expense
|
17,045
|
|
|
19,479
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
32,955
|
|
|
41,888
|
|
||
Deferred commissions
|
(4,274
|
)
|
|
(528
|
)
|
||
Prepaid expenses and other assets
|
3,641
|
|
|
(8,841
|
)
|
||
Accounts payable
|
(2,781
|
)
|
|
(7,605
|
)
|
||
Accrued expenses
|
(23,287
|
)
|
|
(15,059
|
)
|
||
Deferred revenue
|
(23,959
|
)
|
|
(23,751
|
)
|
||
Other liabilities
|
(545
|
)
|
|
(4,767
|
)
|
||
Net cash provided by (used in) operating activities
|
7,294
|
|
|
(4,580
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Maturities of investments
|
170,679
|
|
|
40,677
|
|
||
Capital expenditures
|
(4,243
|
)
|
|
(2,559
|
)
|
||
Capitalized software costs
|
(7,399
|
)
|
|
(6,039
|
)
|
||
Net cash provided by investing activities
|
159,037
|
|
|
32,079
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Payments of debt issuance costs
|
—
|
|
|
(152
|
)
|
||
Proceeds from employee stock plans
|
6,840
|
|
|
6,765
|
|
||
Repurchases of common stock
|
—
|
|
|
(14,700
|
)
|
||
Net cash provided by (used in) financing activities
|
6,840
|
|
|
(8,087
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
248
|
|
|
357
|
|
||
Net increase in cash and cash equivalents
|
173,419
|
|
|
19,769
|
|
||
Cash and cash equivalents at beginning of period
|
183,596
|
|
|
393,576
|
|
||
Cash and cash equivalents at end of period
|
$
|
357,015
|
|
|
$
|
413,345
|
|
Supplemental cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
8,685
|
|
|
$
|
3,000
|
|
Cash paid for income taxes
|
390
|
|
|
452
|
|
||
Proceeds from employee stock plans received in advance of stock issuance
|
1,856
|
|
|
1,616
|
|
||
Cash paid for operating leases*
|
2,601
|
|
|
—
|
|
||
Right-of-use assets obtained in exchange for lease obligations*
|
86,120
|
|
|
—
|
|
||
Non-cash investing and financing activities:
|
|
|
|
||||
Assets acquired under capital leases and other financing arrangements
|
$
|
485
|
|
|
$
|
—
|
|
Capitalized assets financed by accounts payable and accrued expenses
|
1,789
|
|
|
5,201
|
|
||
Capitalized stock-based compensation
|
752
|
|
|
1,253
|
|
||
Unsettled share repurchase in other liabilities
|
—
|
|
|
1,325
|
|
•
|
the recognition of additional operating lease liabilities of
$82.5 million
and corresponding operating ROU assets of $
80.5 million
. These represent the operating leases existing as of the effective date which have a lease term of greater than twelve months. The operating ROU assets were recorded net of a
$2.0 million
reclassification of other accrued liabilities and prepaid expenses representing previously deferred or prepaid rent and lease incentives.
|
•
|
the de-recognition of previously recorded facility financing obligations of $
46.1 million
and related plant, property and equipment assets of $
46.1 million
from a build-to-suit lease arrangement for which construction is complete and the Company is leasing the constructed asset but previously did not qualify for sale accounting.
|
|
Fair Value
|
||
Cash and cash equivalents
|
$
|
115
|
|
Other assets
|
68
|
|
|
Intangible assets - developed technology
|
7,500
|
|
|
Goodwill
|
10,525
|
|
|
Total purchase price
|
$
|
18,208
|
|
|
Fair Value
|
||
Cash and cash equivalents
|
$
|
508
|
|
Accounts receivable
|
761
|
|
|
Property and equipment, net
|
51,967
|
|
|
Other current and non-current assets
|
1,001
|
|
|
Intangible assets - content library
|
4,700
|
|
|
Intangible assets - developed technology
|
2,500
|
|
|
Goodwill
|
11,034
|
|
|
Facility financing obligation
|
(46,100
|
)
|
|
Accounts payable, accrued expenses, and other liabilities, current and non-current
|
(3,465
|
)
|
|
Net assets acquired
|
$
|
22,906
|
|
|
Useful Life
|
Property and equipment, net
|
25 years
|
Intangible assets - content library
|
6 years
|
Intangible assets - developed technology
|
3 years
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net loss
|
$
|
(3,464
|
)
|
|
$
|
(16,216
|
)
|
Weighted-average shares of common stock outstanding
|
59,141
|
|
|
57,425
|
|
||
Net loss per share – basic and diluted
|
$
|
(0.06
|
)
|
|
$
|
(0.28
|
)
|
|
March 31,
|
||||
|
2019
|
|
2018
|
||
Options to purchase common stock, restricted stock units and performance-based restricted stock units
|
10,029
|
|
|
11,629
|
|
Shares issuable pursuant to employee stock purchase plan
|
96
|
|
|
114
|
|
Convertible notes
|
7,143
|
|
|
11,825
|
|
Common stock warrants
|
—
|
|
|
4,682
|
|
Total shares excluded from net loss per share
|
17,268
|
|
|
28,250
|
|
|
March 31, 2019
|
||||||||||||||||||||||
|
Amortized Cost Basis
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Cash Equivalent
|
|
Investments
|
||||||||||||
Money market funds
|
$
|
279,317
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
279,317
|
|
|
$
|
279,317
|
|
|
$
|
—
|
|
Corporate bonds
|
15,973
|
|
|
—
|
|
|
—
|
|
|
15,973
|
|
|
—
|
|
|
15,973
|
|
||||||
U.S. treasury securities
|
18,987
|
|
|
—
|
|
|
(10
|
)
|
|
18,977
|
|
|
—
|
|
|
18,977
|
|
||||||
|
$
|
314,277
|
|
|
$
|
—
|
|
|
$
|
(10
|
)
|
|
$
|
314,267
|
|
|
$
|
279,317
|
|
|
$
|
34,950
|
|
|
December 31, 2018
|
||||||||||||||||||||||
|
Amortized Cost Basis
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Cash Equivalent
|
|
Investments
|
||||||||||||
Money market funds
|
$
|
129,321
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
129,321
|
|
|
$
|
129,321
|
|
|
$
|
—
|
|
Corporate bonds
|
58,115
|
|
|
—
|
|
|
(82
|
)
|
|
58,033
|
|
|
—
|
|
|
58,033
|
|
||||||
U.S. treasury securities
|
138,826
|
|
|
—
|
|
|
(100
|
)
|
|
138,726
|
|
|
—
|
|
|
138,726
|
|
||||||
Commercial paper
|
7,973
|
|
|
—
|
|
|
—
|
|
|
7,973
|
|
|
—
|
|
|
7,973
|
|
||||||
|
$
|
334,235
|
|
|
$
|
—
|
|
|
$
|
(182
|
)
|
|
$
|
334,053
|
|
|
$
|
129,321
|
|
|
$
|
204,732
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Developed technology
|
$
|
39,984
|
|
|
$
|
(31,769
|
)
|
|
$
|
8,215
|
|
|
$
|
39,984
|
|
|
$
|
(30,817
|
)
|
|
$
|
9,167
|
|
Content Library
|
4,700
|
|
|
(334
|
)
|
|
4,366
|
|
|
4,700
|
|
|
—
|
|
|
4,700
|
|
||||||
|
$
|
44,684
|
|
|
$
|
(32,103
|
)
|
|
$
|
12,581
|
|
|
$
|
44,684
|
|
|
$
|
(30,817
|
)
|
|
$
|
13,867
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024 and thereafter
|
||||||||||||
Estimated remaining amortization expense
|
$
|
3,141
|
|
|
$
|
4,188
|
|
|
$
|
3,236
|
|
|
$
|
855
|
|
|
$
|
855
|
|
|
$
|
306
|
|
|
Useful Life
|
|
March 31,
|
|
December 31,
|
||||
|
2019
|
|
2018
|
||||||
Computer equipment and software
|
3 – 5 years
|
|
$
|
55,230
|
|
|
$
|
52,055
|
|
Build to suit property
|
25 years
|
|
—
|
|
|
51,058
|
|
||
Furniture and fixtures
|
7 years
|
|
4,616
|
|
|
4,367
|
|
||
Leasehold improvements
|
2 – 6 years
|
|
14,975
|
|
|
9,987
|
|
||
Renovation in progress
|
n/a
|
|
3,345
|
|
|
1,984
|
|
||
|
|
|
78,166
|
|
|
119,451
|
|
||
Less: accumulated depreciation and amortization
|
|
|
(45,085
|
)
|
|
(42,197
|
)
|
||
Total property and equipment, net
|
|
|
$
|
33,081
|
|
|
$
|
77,254
|
|
|
March 31,
|
|
December 31,
|
||||
|
2019
|
|
2018
|
||||
Accrued compensation
|
$
|
22,045
|
|
|
$
|
31,799
|
|
Accrued commissions
|
6,261
|
|
|
13,856
|
|
||
Accrued interest
|
4,312
|
|
|
8,625
|
|
||
Other accrued expenses
|
13,735
|
|
|
14,051
|
|
||
Total accrued expenses
|
$
|
46,353
|
|
|
$
|
68,331
|
|
•
|
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
|
•
|
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
•
|
Level 3 – Unobservable inputs.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||||
Cash equivalents
|
$
|
279,317
|
|
|
$
|
279,317
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
129,172
|
|
|
$
|
129,172
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate bonds
|
15,973
|
|
|
—
|
|
|
15,973
|
|
|
—
|
|
|
58,033
|
|
|
—
|
|
|
58,033
|
|
|
—
|
|
||||||||
U.S. treasury securities
|
18,977
|
|
|
—
|
|
|
18,977
|
|
|
—
|
|
|
138,726
|
|
|
—
|
|
|
138,726
|
|
|
—
|
|
||||||||
Commercial paper
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,973
|
|
|
—
|
|
|
7,973
|
|
|
—
|
|
||||||||
|
$
|
314,267
|
|
|
$
|
279,317
|
|
|
$
|
34,950
|
|
|
$
|
—
|
|
|
$
|
333,904
|
|
|
$
|
129,172
|
|
|
$
|
204,732
|
|
|
$
|
—
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Principal amount
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Unamortized debt discount
|
(3,943
|
)
|
|
(4,348
|
)
|
||
Net carrying amount before unamortized debt issuance costs
|
296,057
|
|
|
295,652
|
|
||
Unamortized debt issuance costs
|
(6,062
|
)
|
|
(6,685
|
)
|
||
Net carrying value
|
$
|
289,994
|
|
|
$
|
288,967
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Contractual interest expense at 1.5% and 5.75% per annum
|
$
|
4,313
|
|
|
$
|
5,261
|
|
Amortization of debt issuance costs
|
623
|
|
|
916
|
|
||
Accretion of debt discount
|
404
|
|
|
2,510
|
|
||
Total
|
$
|
5,340
|
|
|
$
|
8,687
|
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value (1)
|
|||||
Outstanding, December 31, 2018
|
3,828
|
|
|
$
|
32.41
|
|
|
4.1
|
|
$
|
70,436
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
(129
|
)
|
|
38.74
|
|
|
|
|
|
|||
Forfeited
|
(22
|
)
|
|
45.40
|
|
|
|
|
|
|||
Outstanding, March 31, 2019
|
3,677
|
|
|
$
|
32.12
|
|
|
3.8
|
|
$
|
83,504
|
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value (1)
|
|||||
Exercisable at March 31, 2019
|
3,647
|
|
|
$
|
32.09
|
|
|
3.8
|
|
$
|
82,901
|
|
Vested and expected to vest at March 31, 2019
|
3,676
|
|
|
32.11
|
|
|
3.8
|
|
83,480
|
|
(1)
|
Based on the Company’s closing stock price of $54.78 on March 31, 2019 and $50.43 on December 31, 2018.
|
Grant Date
|
|
Performance Measures
|
|
Vesting Term
|
|
Performance Period
|
|
# of Shares at Target
|
|
# of Shares at Maximum
|
|
Grant Date Fair Value per share
|
|
# of Shares Outstanding at Target (2)
|
|
# of Shares Outstanding at Maximum (2)
|
||||||
March 2017
|
|
(a) the Company meeting certain revenue and cash flow targets through December 31, 2019 and (b) the recipient continuing to provide services to the Company through the end of March 2020
|
|
Three years
|
|
Fiscal years 2017, 2018 and 2019
|
|
185,270
|
|
|
555,810
|
|
|
$
|
41.73
|
|
|
141,540
|
|
|
424,620
|
|
February 2018
|
|
(a) the Company meeting certain combined subscription revenue growth and unlevered cash flow margin targets for the year ending December 31, 2020 and (b) the recipient continuing to provide services to the Company through the end of February 2021
|
|
Three years
|
|
Fiscal year 2020
|
|
121,764
|
|
|
304,410
|
|
|
$
|
40.64
|
|
|
121,764
|
|
|
304,410
|
|
February 2018
|
|
(a) the Company meeting certain combined subscription revenue growth and unlevered cash flow margin targets for each of the years ending December 31, 2020, December 31, 2021, and December 31, 2022 and (b) the recipient continuing to provide services to the Company through each respective vest date at the end of February 2020, 2021 and 2022
|
|
Five years
|
|
Fiscal years 2020, 2021 and 2022 (1)
|
|
411,412
|
|
|
1,028,530
|
|
|
$
|
40.64
|
|
|
411,412
|
|
|
1,028,530
|
|
April 2018
|
|
(a) the Company meeting certain combined subscription revenue growth and unlevered cash flow margin targets for the year ending December 31, 2020 and (b) the recipient continuing to provide services to the Company through the beginning of April 2021
|
|
Three years
|
|
Fiscal year 2020
|
|
3,572
|
|
|
8,930
|
|
|
$
|
39.54
|
|
|
—
|
|
|
—
|
|
April 2018
|
|
(a) the Company meeting certain combined subscription revenue growth and unlevered cash flow margin targets for each of the years ending December 31, 2020, December 31, 2021, and December 31, 2022 and (b) the recipient continuing to provide services to the Company through each respective vest date at the beginning of April 2020, 2021 and 2022
|
|
Five years
|
|
Fiscal years 2020, 2021 and 2022 (1)
|
|
53,572
|
|
|
133,930
|
|
|
$
|
39.54
|
|
|
53,572
|
|
|
133,930
|
|
February 2019
|
|
(a) the Company meeting certain combined subscription revenue growth and unlevered cash flow margin targets for the year ending December 31, 2021 and (b) the recipient continuing to provide services to the Company through the beginning of February 2022
|
|
Three years
|
|
Fiscal year 2021
|
|
13,178
|
|
|
32,945
|
|
|
$
|
58.23
|
|
|
13,178
|
|
|
32,945
|
|
February 2019
|
|
(a) the Company meeting certain combined subscription revenue growth and unlevered cash flow margin targets for the year ending December 31, 2021 and (b) the recipient continuing to provide services to the Company through the beginning of February 2022
|
|
Three years
|
|
Fiscal year 2021
|
|
80,559
|
|
|
201,398
|
|
|
$
|
57.27
|
|
|
80,559
|
|
|
201,398
|
|
March 2019
|
|
(a) the Company meeting certain combined subscription revenue growth and unlevered cash flow margin targets for the year ending December 31, 2021 and (b) the recipient continuing to provide services to the Company through the beginning of February 2022
|
|
Three years
|
|
Fiscal year 2021
|
|
43,136
|
|
|
107,835
|
|
|
$
|
56.15
|
|
|
43,136
|
|
|
107,835
|
|
(1)
|
One-third of the total eligible shares shall vest on each of the third, fourth and fifth anniversaries of the grant date. This award is a one-time equity award intended to cover expected grant levels over a three-year period. In exchange, the Compensation Committee does not plan to grant any additional equity awards to recipients of this award until 2021.
|
(2)
|
Excludes shares that were forfeited due to termination of employment.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Cost of revenue
|
$
|
1,136
|
|
|
$
|
1,002
|
|
Sales and marketing
|
6,047
|
|
|
6,246
|
|
||
Research and development
|
4,196
|
|
|
2,308
|
|
||
General and administrative
|
5,666
|
|
|
4,487
|
|
||
Restructuring
|
—
|
|
|
5,436
|
|
||
Total
|
$
|
17,045
|
|
|
$
|
19,479
|
|
|
March 31,
|
January 1,
|
|||||
|
2019
|
2019
|
|||||
Operating lease right-of-use assets
|
$
|
82,984
|
|
$
|
80,544
|
|
|
Operating lease liabilities (current and non-current)
|
88,204
|
|
82,544
|
|
|||
Weighted-average remaining lease term
|
5 years
|
|
5 years
|
|
|||
Weighted-average incremental borrowing rate
|
3.3
|
%
|
3.3
|
%
|
|
Operating Leases
|
||
2019
|
$
|
11,576
|
|
2020
|
14,162
|
|
|
2021
|
14,277
|
|
|
2022
|
14,823
|
|
|
2023
|
14,710
|
|
|
Thereafter
|
17,961
|
|
|
Total minimum lease payments
|
$
|
87,509
|
|
ITEM 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Our Recruiting suite helps organizations to source and attract candidates, assess and select applicants, onboard new hires and manage the entire recruiting process;
|
•
|
Our Learning suite enables clients to manage training and development programs, knowledge sharing and collaboration among employees, track compliance requirements and support career development for employees. Our content offering delivers fresh, modern content, fueling employee curiosity and inspiring growth;
|
•
|
Our Performance suite provides tools to manage goal setting, performance reviews, competency assessments, development plans, continuous feedback, compensation management and succession planning; and
|
•
|
Our HR Administration suite supports employee records administration, organizational management, employee and manager self-service, workforce planning and compliance reporting.
|
•
|
Focus on Client Success, Retention and Growth.
We believe focusing on our clients’ success will lead to our own success. We have developed a Client Success Framework that governs our operating model. We strive to maintain our strong retention rates by continuing to provide our clients with high levels of service, support and increasing functionality.
|
•
|
Sell Additional Products to Existing Clients.
We believe there is a significant growth opportunity in selling additional functionality to our existing clients. Many clients have added functionality subsequent to their initial deployments as they recognize the benefits of our unified platform. As a result, approximately
71%
of our clients today utilize two or more products and approximately
41%
utilize three or more products. With our expanding product portfolio functionality, we believe significant upsell opportunity remains within our existing client base.
|
•
|
Invest in Direct Sales in North America.
We believe that the market for human capital management is large and remains significantly underpenetrated. In particular, Recruiting and Content provides an opportunity to increase our sales to both new and existing clients. Additionally, the Small and Medium-sized Business (SMB) market represent a very large and underpenetrated opportunity.
|
•
|
Significantly Grow Our International Operation.
We believe a substantial opportunity exists to continue to grow sales of our platform internationally. We intend to grow our Europe, Middle-East and Africa ("EMEA") and Asia-Pacific and Japan ("APJ") operations.
|
•
|
Grow Our Cornerstone Content Anytime Sales.
We believe there is a significant market opportunity for developing employees throughout their careers with modern, fresh e-learning content. Our Content Anytime subscription offering provides access to industry leading content which we believe will increase user engagement on our platform. Our content partners for Content Anytime include industry leaders as well as regional, functional and vertically-focused online training providers. In addition, we have agreements with providers of specific competency models for use by our clients directly in our human capital management platform. We intend to enter into additional license agreements to continue providing the best content available for our clients.
|
•
|
Expand the Ecosystem.
During 2018, we migrated a sizable portion of our implementation services to our partners. We have also expanded in recent years our relationships with various third-party consulting firms to deliver the successful implementation of our platform and to optimize our clients’ use of our platform during the terms of their engagements. Our partner strategy and experience includes certifications and curricula developed to ensure successful delivery by
|
•
|
Revenue.
Our revenues primarily comprise of subscriptions to our human capital management platform and related support and accompanying one-time professional services. Our revenues can be impacted by the timing of new client agreements signed as well as the mix between subscriptions and one-time professional services.
|
•
|
Subscription revenue.
Subscription revenue includes revenue from subscriptions to our human capital management platform and related support. We generally recognize subscription revenue ratably over the contract period, and as a result of timing of when we enter into new client agreements, revenue from subscriptions signed in the current period are typically reflected in future periods.
|
•
|
Annual recurring revenue.
In order to assess our business performance with a metric that reflects a subscription-based business model, we track annual recurring revenue, which is another financial metric we define as the annualized recurring value of all active subscriptions at the end of a reporting period.
|
•
|
Unlevered free cash flow.
We define unlevered free cash flow, a non-GAAP financial measure, as cash provided by operating activities minus capital expenditures and capitalized software costs plus cash paid for interest. We present this metric because it is a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet.
|
•
|
Annual dollar retention rate
. We define annual dollar retention rate as the percentage of annual recurring revenue from all clients on the first day of a fiscal year that is retained from those same clients on the last day of that same fiscal year. Accordingly, this percentage excludes all annual recurring revenue from new clients added during the fiscal year. Furthermore, incremental sales during the fiscal year to clients included in the calculation are only counted to the extent those sales offset any decreases in annual recurring revenue from the original amount on the first day of our fiscal year. Therefore, the annual dollar retention rate can never exceed 100%. This ratio excludes the annual recurring revenue from clients of our Cornerstone for Salesforce, Cornerstone PiiQ, Grovo, and Workpop products. We believe that our annual dollar retention rate is an important metric to measure the long-term value of client agreements and our ability to retain our clients.
|
•
|
Constant currency results
. We present constant currency information, a non-GAAP financial measure, to assess how our underlying business performed excluding the effect of foreign currency fluctuations. Due to our legal and operating structure, our international revenues are favorably impacted as the U.S. dollar weakens relative to the British pound and euro, and unfavorably impacted as the U.S. dollar strengthens relative to the British pound and euro. We believe the presentation of results on a constant currency basis in addition to reported results helps improve the ability to understand our performance as it excludes the effects of foreign currency volatility that are not indicative of our core operating results. To present this information, current period results for entities reporting in British pounds and euros are translated into U.S. dollars at the prior period exchange rates instead of the actual exchange rates in effect for the current period. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP.
|
•
|
Number of clients
. We believe that our ability to expand our client base is an indicator of our market penetration and the growth of our business as we continue to invest in our direct sales teams and distributors. Our client count includes contracted clients for our enterprise human capital management platform as of the end of the period and excludes clients of our Cornerstone for Salesforce, PiiQ, Grovo, and Workpop products. In the three months ended March 31,
2019
, our number of clients grew
9%
when compared to the same period in the prior year.
|
•
|
Subscriptions to Our Products.
Clients pay subscription fees for access to our enterprise human capital management platform, which may include third-party e-learning content, and support. Fees are based on a number of factors, including the number of products purchased and the number of users with access to a product. We generally recognize revenue from subscriptions ratably over the term of the agreements beginning on the date the subscription service is made available to the client. Subscription agreements are typically three years, billed annually in advance, and non-cancelable.
|
•
|
Professional Services and Other.
We offer our clients assistance in implementing our products and optimizing their use. Professional services include application configuration, system integration, business process re-engineering, change management and training services. Services are generally billed upfront on a fixed fee basis and to a lesser degree on a time-and-material basis. These services are generally purchased along with a subscription arrangement and are typically performed within the first several months of the arrangement. Clients may also purchase professional services at any other time. We generally recognize revenue from fixed fee professional services contracts as services are performed based on the proportion performed to date relative to the total expected services to be performed. Revenue associated with time-and-material contracts are recorded as such time-and-materials are incurred.
|
•
|
Sales and Marketing.
Sales and marketing expenses consist primarily of personnel and related expenses for our sales and marketing staff, including salaries, benefits, bonuses, stock-based compensation and commissions; costs of marketing and promotional events, corporate communications, online marketing, product marketing and other brand-building activities; and allocated overhead.
|
•
|
Research and Development.
Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, bonuses and stock-based compensation; the cost of certain third-party service providers; and allocated overhead. Research and development costs, other than software development costs qualifying for capitalization, are expensed as incurred.
|
•
|
General and Administrative.
General and administrative expenses consist primarily of personnel and related expenses for administrative, legal, finance and human resource staff, including salaries, benefits, bonuses and stock-based compensation; professional fees; insurance premiums; other corporate expenses; and allocated overhead. We expect over time general and administrative expense to decrease as a percentage of revenue as we continue to scale our business by optimizing the efficiency of our operations.
|
•
|
Restructuring.
Restructuring consists of stock-based compensation, payroll-related costs, such as severance, outplacement costs and continuing healthcare coverage, associated with employee terminations.
|
•
|
Interest Income.
Interest income consists primarily of interest income from investment securities partially offset by amortization of investment premiums. We expect interest income to vary depending on the level of our investments in marketable securities, which include corporate bonds, agency bonds, U.S. treasury securities and commercial paper.
|
•
|
Interest Expense.
Interest expense consists primarily of interest expense from our convertible notes, accretion of debt discount and amortization of debt issuance costs.
|
•
|
Other, Net.
Other, net consists of income and expense associated with fluctuations in foreign currency exchange rates, fair value adjustments to strategic investments and other non-operating expenses. We expect other income (expense) to vary depending on the movement in foreign currency exchange rates and the related impact on our foreign exchange gain (loss).
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Revenue
|
$
|
140,117
|
|
|
$
|
133,113
|
|
Cost of revenue
|
33,695
|
|
|
37,020
|
|
||
Gross profit
|
106,422
|
|
|
96,093
|
|
||
Operating expenses:
|
|
|
|
||||
Sales and marketing
|
54,505
|
|
|
59,245
|
|
||
Research and development
|
27,746
|
|
|
15,984
|
|
||
General and administrative
|
22,940
|
|
|
21,985
|
|
||
Restructuring
|
—
|
|
|
7,725
|
|
||
Total operating expenses
|
105,191
|
|
|
104,939
|
|
||
Income (loss) from operations
|
1,231
|
|
|
(8,846
|
)
|
||
Other income (expense):
|
|
|
|
||||
Interest income
|
1,990
|
|
|
1,819
|
|
||
Interest expense
|
(5,366
|
)
|
|
(8,700
|
)
|
||
Other, net
|
(597
|
)
|
|
44
|
|
||
Other income (expense), net
|
(3,973
|
)
|
|
(6,837
|
)
|
||
Loss before income tax provision
|
(2,742
|
)
|
|
(15,683
|
)
|
||
Income tax provision
|
(722
|
)
|
|
(533
|
)
|
||
Net loss
|
$
|
(3,464
|
)
|
|
$
|
(16,216
|
)
|
|
Three Months Ended
March 31, |
||||
|
2019
|
|
2018
|
||
Revenue
|
100.0
|
%
|
|
100.0
|
%
|
Cost of revenue
|
24.0
|
%
|
|
27.8
|
%
|
Gross profit
|
76.0
|
%
|
|
72.2
|
%
|
Operating expenses:
|
|
|
|
||
Sales and marketing
|
38.9
|
%
|
|
44.5
|
%
|
Research and development
|
19.8
|
%
|
|
12.0
|
%
|
General and administrative
|
16.4
|
%
|
|
16.5
|
%
|
Restructuring
|
—
|
%
|
|
5.8
|
%
|
Total operating expenses
|
75.1
|
%
|
|
78.8
|
%
|
Income (loss) from operations
|
0.9
|
%
|
|
(6.6
|
)%
|
Other income (expense):
|
|
|
|
||
Interest income
|
1.4
|
%
|
|
1.4
|
%
|
Interest expense
|
(3.8
|
)%
|
|
(6.5
|
)%
|
Other, net
|
(0.4
|
)%
|
|
—
|
%
|
Loss before income tax provision
|
(2.0
|
)%
|
|
(11.8
|
)%
|
Income tax provision
|
(0.5
|
)%
|
|
(0.4
|
)%
|
Net loss
|
(2.5
|
)%
|
|
(12.2
|
)%
|
|
At or For Three Months Ended
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenue (in thousands)
|
$
|
140,117
|
|
|
$
|
133,113
|
|
Subscription revenue (in thousands)
|
131,256
|
|
|
113,134
|
|
||
Unlevered free cash flow (in thousands)
|
4,337
|
|
|
(10,178
|
)
|
||
Number of clients
|
3,567
|
|
|
3,280
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Subscription revenue
|
$
|
131,256
|
|
|
$
|
113,134
|
|
Percentage of subscription revenue to total revenue
|
93.7
|
%
|
|
85.0
|
%
|
||
Professional services revenue
|
$
|
8,861
|
|
|
$
|
19,979
|
|
Percentage of professional services revenue to total revenue
|
6.3
|
%
|
|
15.0
|
%
|
||
|
$
|
140,117
|
|
|
$
|
133,113
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Revenue for United States
|
$
|
90,596
|
|
|
$
|
82,747
|
|
Percentage of total revenue for United States
|
64.7
|
%
|
|
62.2
|
%
|
||
Revenue for all other countries
|
$
|
49,521
|
|
|
$
|
50,366
|
|
Percentage of total revenue for all other countries
|
35.3
|
%
|
|
37.8
|
%
|
||
|
$
|
140,117
|
|
|
$
|
133,113
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Reconciliation of unlevered free cash flow:
|
|
|
|
||||
Net cash provided by (used in) operating activities
|
$
|
7,294
|
|
|
$
|
(4,580
|
)
|
Capital expenditures
|
(4,243
|
)
|
|
(2,559
|
)
|
||
Capitalized software costs
|
(7,399
|
)
|
|
(6,039
|
)
|
||
Cash paid for interest
|
8,685
|
|
|
3,000
|
|
||
Unlevered free cash flow
|
$
|
4,337
|
|
|
$
|
(10,178
|
)
|
Unlevered free cash flow margin
|
3.1
|
%
|
|
(7.6
|
)%
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
(dollars in thousands)
|
||||||
Sales and marketing
|
$
|
54,505
|
|
|
$
|
59,245
|
|
Percent of revenue
|
38.9
|
%
|
|
44.5
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
(dollars in thousands)
|
||||||
Research and development
|
$
|
27,746
|
|
|
$
|
15,984
|
|
Percent of revenue
|
19.8
|
%
|
|
12.0
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
(dollars in thousands)
|
||||||
General and administrative
|
$
|
22,940
|
|
|
$
|
21,985
|
|
Percent of revenue
|
16.4
|
%
|
|
16.5
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Interest income
|
$
|
1,990
|
|
|
$
|
1,819
|
|
Interest expense
|
(5,366
|
)
|
|
(8,700
|
)
|
||
Other, net
|
(597
|
)
|
|
44
|
|
||
Total
|
$
|
(3,973
|
)
|
|
$
|
(6,837
|
)
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Income tax provision
|
$
|
(722
|
)
|
|
$
|
(533
|
)
|
|
Three Months Ended
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net cash provided by (used in) operating activities
|
$
|
7,294
|
|
|
$
|
(4,580
|
)
|
Net cash provided by investing activities
|
159,037
|
|
|
32,079
|
|
||
Net cash provided by (used in) financing activities
|
6,840
|
|
|
(8,087
|
)
|
ITEM 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
ITEM 4.
|
Controls and Procedures
|
ITEM 1.
|
Legal Proceedings
|
ITEM 1A.
|
Risk Factors
|
•
|
changes in billing terms and collection cycles in client agreements;
|
•
|
the extent to which new clients are attracted to our products to satisfy their human capital management needs;
|
•
|
the timing and rate at which we sign agreements with new clients;
|
•
|
our access to service providers and partners when we outsource client service projects;
|
•
|
our ability to manage the quality and completion of the client implementations performed by partners;
|
•
|
the timing and duration of our client implementations, which is often outside of our direct control;
|
•
|
our ability to provide, or partner with effective partners to provide, resources for client implementations and consulting projects;
|
•
|
the extent to which we retain existing clients and satisfy their requirements;
|
•
|
the extent to which existing clients renew their subscriptions to our products and the timing of those renewals;
|
•
|
the extent to which existing clients purchase or discontinue the use of additional products and add or decrease the number of users;
|
•
|
the extent to which our clients request enhancements to underlying features and functionality of our products and the timing of our delivery of these enhancements to our clients;
|
•
|
the addition or loss of large clients, including through acquisitions or consolidations;
|
•
|
the number and size of new clients, as well as the number and size of renewal clients in a particular period;
|
•
|
the mix of clients among large, mid-sized and small organizations;
|
•
|
changes in our pricing policies or those of our competitors;
|
•
|
seasonal factors affecting demand for our products or potential clients’ purchasing decisions;
|
•
|
the financial condition and creditworthiness of our clients;
|
•
|
the amount and timing of our operating expenses, including those related to the maintenance, expansion and restructuring of our business, operations and infrastructure;
|
•
|
changes in the operational efficiency of our business;
|
•
|
the timing and success of our new product and service introductions;
|
•
|
the timing of expenses of the development of new products and technologies, including enhancements to our products;
|
•
|
our ability to aggregate large data sets into meaningful insights to drive increased demand for our products;
|
•
|
continued strong demand for human capital management in the U.S. and globally;
|
•
|
our ability to successfully integrate our operations with those of recently acquired privately-held companies;
|
•
|
the success of current and new competitive products and services by our competitors;
|
•
|
other changes in the competitive dynamics of our industry, including consolidation among competitors, clients or strategic partners;
|
•
|
our ability to manage our existing business and future growth, including in terms of additional headcount, additional clients, incremental users and new geographic regions;
|
•
|
expenses related to our network and data centers and the expansion of such networks and data centers;
|
•
|
the effects of, and expenses associated with, acquisitions of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions;
|
•
|
equity issuances, including as consideration in acquisitions or due to the conversion of our outstanding convertible notes due 2021;
|
•
|
business disruptions, costs and future events related to shareholder activism;
|
•
|
legal or political changes in local or foreign jurisdictions that decrease demand for, or restrict our ability to sell or provide, our products;
|
•
|
fluctuations in foreign currency exchange rates, including any fluctuation caused by uncertainties relating to the United Kingdom's vote in favor of exiting the European Union (often referred to as “Brexit”);
|
•
|
general economic, industry and market conditions; and
|
•
|
various factors related to disruptions in our SaaS hosting network infrastructure, defects in our products, privacy and data security and exchange rate fluctuations, each of which is described elsewhere in these risk factors.
|
•
|
human error;
|
•
|
security breaches;
|
•
|
telecommunications outages from third-party providers;
|
•
|
computer viruses;
|
•
|
acts of terrorism, sabotage or other intentional acts of vandalism, including cyber attacks;
|
•
|
unforeseen interruption or damages experienced in moving hardware to a new location;
|
•
|
fire, earthquake, flood and other natural disasters; and
|
•
|
power loss.
|
•
|
lost or delayed market acceptance and sales of our products;
|
•
|
early termination of client agreements or loss of clients;
|
•
|
credits or refunds to clients;
|
•
|
product liability suits against us;
|
•
|
diversion of development resources;
|
•
|
injury to our reputation; and
|
•
|
increased maintenance and warranty costs.
|
•
|
the need to educate potential clients about the uses and benefits of our products;
|
•
|
the relatively long duration of the commitment clients make in their agreements with us;
|
•
|
the discretionary nature of potential clients’ purchasing and budget cycles and decisions;
|
•
|
the competitive nature of potential clients’ evaluation and purchasing processes;
|
•
|
the lengthy purchasing approval processes of potential clients;
|
•
|
the evolving functionality demands of potential clients;
|
•
|
fluctuations in the human capital management needs of potential clients; and
|
•
|
announcements or planned introductions of new products by us or our competitors.
|
•
|
unanticipated costs or liabilities associated with the acquisition;
|
•
|
incurrence of acquisition-related costs;
|
•
|
diversion of management’s attention from other business concerns;
|
•
|
harm to our existing relationships with partners, distributors and clients, including as a result of competing in the markets in which such parties operate;
|
•
|
the potential loss of key employees and clients;
|
•
|
exposure to claims and disputes by third parties, including intellectual property claims and disputes;
|
•
|
the use of resources that are needed in other parts of our business; and
|
•
|
the use of substantial portions of our available cash to consummate the acquisition.
|
•
|
unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;
|
•
|
differing labor regulations;
|
•
|
regulations relating to data security and the unauthorized use of, or access to, commercial and personal information;
|
•
|
potential penalties or other adverse consequences for violations of anti-corruption, anti-bribery and other similar laws and regulations, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act;
|
•
|
greater difficulty in supporting and localizing our products;
|
•
|
unrest and/or changes in a specific country’s or region’s social, political, legal or economic conditions;
|
•
|
challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, controls, policies, benefits and compliance programs;
|
•
|
currency exchange rate fluctuations, including any fluctuations caused by uncertainties relating to Brexit;
|
•
|
limited or unfavorable intellectual property protection;
|
•
|
competition with companies or other services that understand local markets better than we do;
|
•
|
increased financial accounting and reporting burdens, and complexities associated with implementing and maintain adequate internal controls; and
|
•
|
restrictions on repatriation of earnings.
|
•
|
Selling to governmental entities can be more competitive, expensive and time-consuming than selling to private entities, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale;
|
•
|
Government certification requirements may change, or we may lose one or more government certifications, such as FedRAMP, and in doing so restrict our ability to sell into the government sector until we have attained revised certificates;
|
•
|
Governmental entities may have significant leverage in negotiations, thereby enabling such entities to demand contract terms that differ from what we generally agree to in our standard agreements, including, for example, most favored nation clauses and terms allowing contract termination for convenience;
|
•
|
Government demand and payment for our products may be influenced by public sector budgetary cycles and funding authorizations, with funding reductions or delays having an adverse impact on public sector demand for our products; and
|
•
|
Government contracts are generally subject to audits and investigations, which we have limited experience with, potentially resulting in termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.
|
•
|
our operating performance and the performance of other similar companies;
|
•
|
the financial or non-financial metric projections we provide to the public, including the failure of the projections to meet the expectations of securities analysts or investors, and any changes in these projections or our failure to meet or exceed these projections;
|
•
|
the overall performance of the equity markets;
|
•
|
developments with respect to intellectual property rights;
|
•
|
publication of unfavorable research reports about us or our industry or withdrawal of research coverage by securities analysts;
|
•
|
speculation in the press or investment community;
|
•
|
the size of our public float;
|
•
|
natural disasters or terrorist acts;
|
•
|
actual or perceived data security incidents that we or our service providers may suffer;
|
•
|
announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments; and
|
•
|
global economic, legal and regulatory factors unrelated to our performance.
|
•
|
authorize “blank check” preferred stock, which could be issued by the board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
|
•
|
create a classified board of directors whose members serve staggered three-year terms, until the 2021 annual meeting of stockholders, at which point all directors will be elected for a one-year term;
|
•
|
specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of the board, the chief executive officer or the president;
|
•
|
establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;
|
•
|
provide that our directors may be removed only for cause until the 2021 annual meeting of stockholders when all directors may be removed either with or without cause;
|
•
|
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
|
•
|
specify that no stockholder is permitted to cumulate votes at any election of directors; and
|
•
|
require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
ITEM 3.
|
Defaults Upon Senior Securities
|
ITEM 4.
|
Mine Safety Disclosures
|
ITEM 5.
|
Other Information
|
ITEM 6.
|
Exhibits
|
*
|
Indicates a management contract or compensatory plan or arrangement
|
†
|
The certifications attached as Exhibits 32.1 and 32.2 accompanying this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Cornerstone OnDemand, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
|
††
|
The financial information contained in these XBRL documents is unaudited.
|
Cornerstone OnDemand, Inc.
|
(Registrant)
|
|
/s/ Brian L. Swartz
|
Brian L. Swartz
|
Chief Financial Officer
|
(Duly Authorized Officer and Principal Financial Officer)
|
Executive Officer
|
Target Bonus Amount
|
||
Mark Goldin, Chief Technology Officer
|
$
|
262,500
|
|
Jeffrey Lautenbach, President of Global Field Operations
|
$
|
400,000
|
|
Brian Swartz, Chief Financial Officer
|
$
|
297,500
|
|
Adam Weiss, Chief Administrative Officer and General Counsel
|
$
|
225,000
|
|
1.
|
|
I have reviewed this Quarterly Report on Form 10-Q of Cornerstone OnDemand, Inc.;
|
2.
|
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Adam L. Miller
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Adam L. Miller
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Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Cornerstone OnDemand, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Brian L. Swartz
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Brian L. Swartz
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Chief Financial Officer
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/s/ Adam L. Miller
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Adam L. Miller
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Chief Executive Officer
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/s/ Brian L. Swartz
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Brian L. Swartz
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Chief Financial Officer
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