Cornerstone OnDemand Announces Fourth Quarter and Fiscal Year 2014 Financial Results

Talent management software provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results for its fourth quarter and year ended December 31, 2014.

Revenue for the fourth quarter of 2014 was $76.4 million, representing a 39% increase compared to the same period in 2013. Revenue for the full year of 2014 was $263.6 million, representing a 42% increase compared to the same period in 2013.

Bookings, which the Company defines as revenue plus the change in deferred revenue for the period, were $114.2 million for the fourth quarter of 2014, representing a 35% increase compared to the same period in 2013. 1 Bookings for the full year of 2014 were $316.1 million, representing a 36% increase compared to the same period in 2013. 1 Deferred revenue at December 31, 2014 was $191.3 million, representing a 38% increase compared to the balance at December 31, 2013.

“While 2014 certainly presented its challenges, our fourth quarter performance represented a strong finish to the year and we believe is indicative of the significant opportunity that lies ahead,” said Adam Miller, the Company’s President and CEO. “With the sales force changes fully behind us, the competitive environment in a further weakened state, and our continued commitment to product innovation, Cornerstone is well-positioned for a strong year in 2015.”

Gross profit for the fourth quarter of 2014 was $52.9 million, representing a 34% increase compared to the same period in 2013. Gross profit for the full year of 2014 was $185.9 million, representing a 41% increase compared to the same period in 2013.

Non-GAAP gross profit for the fourth quarter of 2014 was $55.8 million, representing a 38% increase compared to the same period in 2013.1 Non-GAAP gross profit for the full year of 2014 was $191.8 million, representing a 42% increase compared to the same period in 2013.1

The Company’s operating loss for the fourth quarter of 2014 was $(14.2) million, yielding an operating loss margin of (18.6)%, compared to an operating loss of $(7.8) million, yielding an operating loss margin of (14.3)%, for the fourth quarter of 2013. The Company’s operating loss for the full year of 2014 was $(49.9) million, yielding an operating loss margin of (18.9)%, compared to an operating loss of $(34.0) million, yielding an operating loss margin of (18.4)%, for the full year of 2013.

Non-GAAP operating loss for the fourth quarter of 2014 was $(2.0) million, yielding a non-GAAP operating loss margin of (2.6)%, compared to a non-GAAP operating loss of $(0.4) million, yielding a non-GAAP operating loss margin of (0.7)%, for the fourth quarter of 2013.1 Non-GAAP operating loss for the full year of 2014 was $(10.3) million, yielding a non-GAAP operating loss margin of (3.9)%, compared to a non-GAAP operating loss of $(9.6) million, yielding a non-GAAP operating loss margin of (5.2)%, for the full year of 2013.1

The Company’s net loss for the fourth quarter of 2014 was $(18.2) million, yielding a net loss margin of (23.8)%, or a $(0.34) net loss per share, compared to a net loss of $(10.8) million, yielding a net loss margin of (19.6)%, or a $(0.21) net loss per share, for the fourth quarter of 2013. The Company’s net loss for the full year of 2014 was $(64.9) million, yielding a net loss margin of (24.6)%, or a $(1.22) net loss per share, compare to a net loss of $(40.4) million, yielding a net loss margin of (21.8)%, or a $(0.79) net loss per share, for the full year of 2013.

Non-GAAP net loss for the fourth quarter of 2014 was $(3.9) million, yielding a non-GAAP net loss margin of (5.0)%, or a $(0.07) non-GAAP net loss per share, compared to a non-GAAP net loss of $(1.7) million, yielding a non-GAAP net loss margin of (3.1)%, or a $(0.03) non-GAAP net loss per share, for the fourth quarter of 2013.1 Non-GAAP net loss for the full year of 2014 was $(17.0) million, yielding a non-GAAP net loss margin of (6.4)%, or a $(0.32) non-GAAP net loss per share, compared to a non-GAAP net loss of $(12.5) million, yielding a non-GAAP net loss margin of (6.7)%, or a $(0.24) non-GAAP net loss per share, for the full year of 2013.1

For the full year of 2014, net cash provided by operating activities was $33.0 million as compared to $17.4 million for the same period in 2013. For the full year of 2014, non-GAAP net cash provided by operating activities was $33.3 million as compared to $20.6 million for the same period in 2013.1

At December 31, 2014, the Company’s total cash and cash equivalents were $166.6 million, investments were $120.0 million, and accounts receivable were $84.5 million, yielding a total of approximately $371.1 million.

The Company ended the quarter with approximately 18.1 million users, representing the addition of approximately 1.5 million users.2

Quarterly Conference Call

Cornerstone OnDemand, Inc. will host a conference call to discuss its fourth quarter and fiscal year 2014 results at 2:00 p.m. PST (5:00 p.m. ET) today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Company’s Investor Relations Web site at http://investors.cornerstoneondemand.com/events.cfm. The live call can be accessed by dialing (877) 445-4619 (U.S.) or (484) 653-6763 (outside the U.S.) and referencing passcode: 62167300. A replay of the call will also be available at http://investors.cornerstoneondemand.com/events.cfm or via telephone until 11:59 p.m. PST on February 14, 2015 by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and referencing passcode: 62167300.

About Cornerstone OnDemand

Cornerstone OnDemand, Inc. is a leader in cloud-based applications for talent management. Our solutions help organizations recruit, train, manage and engage their employees, empowering their people and increasing workforce productivity. Based in Santa Monica, California, our solutions are used by over 2,100 clients worldwide, spanning approximately 18.1 million users across 191 countries and in 42 languages. For more information about Cornerstone OnDemand, Inc., visit www.csod.com.

Note: Cornerstone® and Cornerstone OnDemand® are registered trademarks of Cornerstone OnDemand, Inc.

Forward-looking Statements

This release and the quarterly conference call referenced above contain forward-looking statements, including statements regarding Cornerstone OnDemand’s future financial performance, including the performance of our core business and emerging businesses, market growth, the demand for and benefits from the use of Cornerstone OnDemand’s solutions, and general business conditions. Any forward-looking statements contained in this press release or the quarterly conference call are based upon Cornerstone OnDemand’s historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Cornerstone OnDemand’s expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Cornerstone OnDemand disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from Cornerstone OnDemand’s current expectations. Important factors that could cause actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, our ability to attract new clients; the extent to which clients renew their subscriptions for our solution; the timing of when consulting services are delivered to our new and existing clients by our services organization and implementation subcontractors; the complexity of deployments and product implementations, which can impact the timing of when revenue is recognized from new and existing clients; our ability to compete as the talent management provider for organizations of all sizes; changes in the proportion of our client base that is comprised of enterprise or mid-sized organizations; our ability to manage our growth, including additional headcount and entry into new geographies; our ability to expand our enterprise and mid-market sales teams; our ability to maintain stable and consistent quota attainment rates; our ability to exploit Big Data to drive increased demand for our products; continued strong demand for talent management in the U.S., Europe, Asia Pacific and Latin America; the timing and success of solutions offered by our competitors; unpredictable macro-economic conditions; reductions in information technology spending; the success of our new product and service introductions; a disruption in our hosting network infrastructure; costs and reputational harm that could result from defects in our solution; the success of our strategic relationships with third parties; the loss of any of our key employees; failure to protect our intellectual property; acts of terrorism or other vandalism, war or natural disasters; changes in current tax or accounting rules; unanticipated costs or liabilities related to businesses that we acquire; our ability to successfully integrate our operations with those of recently acquired Evolv Inc.; and other risks and uncertainties. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in Cornerstone OnDemand’s reports filed with the SEC, including its Quarterly Report on Form 10-Q filed with the SEC on November 7, 2014.

Additional Information

The Company is in the process of completing its analysis of its deferred tax balances, which include a full valuation allowance. Final GAAP financial statements and related footnotes with finalized deferred tax balances and disclosures will be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles, or GAAP, Cornerstone OnDemand has provided in this release and the quarterly conference call held on the date hereof certain measures that have not been prepared in accordance with GAAP. These non-GAAP financial measures include (i) non-GAAP revenue, which is defined as revenue plus revenue not recognized in the period due to the impact of purchase accounting rules on deferred revenue acquired through acquisitions, (ii) non-GAAP cost of revenue, which is defined as cost of revenue less amortization of intangible assets and stock-based compensation and employer-related taxes, (iii) bookings, which are defined as revenue plus the change in deferred revenue for the period, (iv) non-GAAP net cash provided by operating activities, which excludes payment of acquisition related costs, payment of premium on investments net of related amortization and employer-related taxes from stock-based compensation, (v) non-GAAP net cash provided by operating activities margin, which is defined as non-GAAP net cash provided by operating activities divided by non-GAAP revenue, (vi) non-GAAP net loss and non-GAAP net loss per share, which are based on non-GAAP revenue and exclude, for the periods in which they are present, stock-based compensation and employer-related payroll taxes, amortization of intangible assets, adjustments to taxes related to acquisition adjustments, acquisition related costs, accretion of debt discount and amortization of debt issuance costs, and other amortization costs, (vii) non-GAAP net loss margin, which is defined as non-GAAP net loss divided by non-GAAP revenue, (viii) non-GAAP gross profit and non-GAAP gross margin, which are calculated based on non-GAAP revenue and exclude stock-based compensation and employer-related taxes and amortization of certain intangible assets reflected in cost of revenue, (ix) non-GAAP operating loss and non-GAAP operating loss margin, which are calculated based on operating loss and exclude adjustments to revenue, stock-based compensation and employer-related taxes, amortization of intangible assets and acquisition costs, and (x) non-GAAP operating expenses, which exclude stock-based compensation, employer-related taxes, and amortization of intangible assets, and (xi) non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, each of which excludes stock-based compensation and employer-related taxes attributable to the corresponding GAAP financial measures.

Cornerstone OnDemand’s management uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating Cornerstone OnDemand’s ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures to help investors understand the operational performance of their businesses. However, it is important to note that the particular items Cornerstone excludes from, or includes in, its non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measures to such GAAP measures has been provided in the tables included as part of this press release.