Business Wire | Feb 16, 2021 04:02PM EST

Cornerstone OnDemand Announces Fourth Quarter and Fiscal Year 2020 Financial Results

Feb. 16, 2021

SANTA MONICA, Calif.--(BUSINESS WIRE)--Feb. 16, 2021--People development solutions provider Cornerstone OnDemand, Inc. (NASDAQ: CSOD) today announced results1 for its fourth quarter and fiscal year ended December 31, 2020. The Company has provided supplemental financial information located on its Investor Relations website. On April 22, 2020, the Company acquired Saba Software, Inc. ("Saba"); the discussion below includes Saba's results for the post-acquisition period.

Fourth Quarter 2020 Results:

* Revenue for the fourth quarter of 2020 was $206.9 million. This represents a 38.3% increase compared to the same period of the prior year. Without giving effect to the acquisition of Saba, revenue would have increased 4.7%. * Subscription revenue for the fourth quarter of 2020 was $197.9 million. This represents a 39.6% increase compared to the same period of the prior year. Without giving effect to the acquisition of Saba, subscription revenue would have increased 7.3%. * (Loss) income from operations for the fourth quarter of 2020 was $(4.8) million, yielding a margin of (2.3)%, compared to (loss) income from operations of $10.6 million and margin of 7.1% in the same period of the prior year. * Non-GAAP operating income for the fourth quarter of 2020 was $52.1 million, yielding a non-GAAP operating margin of 25.2%, compared to non-GAAP operating income of $28.3 million and a non-GAAP operating margin of 18.9% in the same period of the prior year. * Net income for the fourth quarter of 2020 was $1.6 million, or $0.02 diluted net income per share, compared to net income of $9.4 million and $0.15 diluted net income per share in the same period of the prior year. * Non-GAAP net income for the fourth quarter of 2020 was $44.0 million, or $0.64 non-GAAP diluted net income per share, compared to non-GAAP net income of $28.3 million and $0.43 non-GAAP diluted net income per share in the same period of the prior year. * Unlevered free cash flow for the fourth quarter of 2020 was $36.4 million, yielding a margin of 17.6%, compared to unlevered free cash flow of $54.7 million and a margin of 36.6%, in the same period of the prior year. Unlevered free cash flow for the fourth quarter of 2020 includes approximately $11.2 million of restructuring and acquisition-related cash outflows.

Fiscal Year 2020 Results:

* Revenue for the full year of 2020 was $740.9 million. This represents a 28.5% increase compared to the prior year. Without giving effect to the acquisition of Saba, revenue would have increased 6.5%. * Subscription revenue for the full year of 2020 was $705.2 million. This represents a 29.9% increase compared to the prior year. Without giving effect to the acquisition of Saba, subscription revenue would have increased 9.4%. * (Loss) income from operations for the full year of 2020 was $(31.6) million, yielding a margin of (4.3)%, compared to (loss) income from operations of $11.9 million and margin of 2.1% in the prior year. * Non-GAAP operating income for the full year of 2020 was $163.5 million, yielding a non-GAAP operating margin of 22.1%, compared to non-GAAP operating income of $88.8 million and a non-GAAP operating margin of 15.4% in the prior year. * Net loss for the full year of 2020 was $(40.0) million, or $(0.63) diluted net loss per share, compared to net loss of $(4.1) million and $(0.07) diluted net loss per share in the prior year. * Non-GAAP net income for the full year of 2020 was $121.4 million, or $1.78 non-GAAP diluted net income per share, compared to non-GAAP net income of $77.0 million and $1.17 non-GAAP diluted net income per share in the prior year. * Unlevered free cash flow for the full year of 2020 was $113.9 million, yielding a margin of 15.4%, compared to unlevered free cash flow of $90.2 million and a margin of 15.6%, in the prior year. Unlevered free cash flow for the full year of 2020 includes approximately $47.4 million of restructuring and acquisition-related cash outflows.

"I'm very pleased with our fourth quarter and full year 2020 results, which show operational and financial strength," said Phil Saunders, Chief Executive Officer. "While we have a long roadmap of execution ahead of us, I believe we are starting to unlock the growth and earnings power of this company."

Recent Highlights:

* The Company announced the appointment of Chirag Shah as Chief Financial Officer. * The Company appointed two new members to the board of directors: Felicia Alvaro, former Chief Financial Officer and Treasurer for Ultimate Software, and Nancy Altobello, former Global Vice Chair of Talent for Ernst & Young. * The Company announced the formation of the Cornerstone Innovation lab for AI, a new center of excellence within the Company composed of data scientists and machine learning experts who specialize in innovating practical and ethical ways to apply AI technology to the workplace.

"Our financial results represent a strong finish to 2020, and I am proud of our accomplishments as a team," said Chirag Shah, Chief Financial Officer. "After a year in which we completed a major acquisition, navigated a pandemic, transitioned leadership, and initiated significant internal transformation, we believe our fourth quarter performance is indicative of the strength of this company's opportunity, and we are confident that the steps taken over the past year will position us for sustained long-term success."

Financial Outlook:

The following outlook2 is based on information available as of the date of this press release and is subject to change in the future.

For the first quarter ending March 31, 2021, the Company provides the following outlook:

* Revenue between $203.0 million and $205.0 million. * Subscription revenue between $198.0 million and $200.0 million. * Non-GAAP operating income between $44.0 million and $46.0 million.

For the year ending December 31, 2021, the Company provides the following outlook:

* Revenue between $847.0 million and $857.0 million. * Subscription revenue between $825.0 million and $835.0 million. * Annual recurring revenue between $868.0 million and $878.0 million. * Non-GAAP operating income between $205.0 million and $212.0 million. * Unlevered free cash flow between $195.0 million and $205.0 million. Captured in this is approximately $50.0 million in non-recurring cash outflows for restructuring and integration activities related to the Saba acquisition.

The revenue, subscription revenue, and non-GAAP operating income numbers above are impacted by a deferred revenue write-down related to purchase accounting. For more information, refer to the Company's investor relations presentation.

The Company has not reconciled the guidance for non-GAAP operating income or unlevered free cash flow to the corresponding GAAP measures because it does not provide guidance for such GAAP measures and would not be able to present the reconciling items between such GAAP and non-GAAP measures without unreasonable efforts. For example, stock-based compensation expense is excluded from the Company's non-GAAP operating income as the quantification requires additional unknown inputs such as the number of shares granted and market prices that are not ascertainable.

^1 Financial measures presented on a constant currency basis, non-GAAPoperating income, non-GAAP operating income margin, non-GAAP net income,non-GAAP diluted net income per share, unlevered free cash flow, and unleveredfree cash flow margin are non-GAAP financial measures. See the discussion inthe section titled "Non-GAAP Financial Measures and Other Key Metrics" and thereconciliations at the end of this press release.

^2 In order to translate the financial outlook for entities reporting in GBP toUSD and EUR to USD, the following exchange rates have been applied:

Exchange rate applied to revenue for the first quarter of $1.37 USD per GBP2021

Exchange rate applied to revenue and annual recurring revenue $1.37 USD per GBPfor fiscal 2021

Exchange rate applied to revenue for the first quarter of $1.22 USD per EUR2021

Exchange rate applied to annual recurring revenue for fiscal $1.22 USD per EUR2021

Quarterly Conference Call

Cornerstone will host a conference call to discuss its fourth quarter and fiscal year 2020 results at 2:00 p.m. PT (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 website at http://investors.cornerstoneondemand.com. The live call can be accessed by dialing (877) 445-4619 (US) or (484) 653-6763 (outside the US) and referencing passcode: 6062779. A replay of the call will also be available at http://investors.cornerstoneondemand.com/investors/news-and-events/events/default.aspx or via telephone until 5:00 p.m. PT (8:00 p.m. ET) on February 23, 2020 by dialing (855) 859-2056 (US) or (404) 537-3406 (outside the US), and referencing passcode: 6062779.

Featured Presentation

An accompanying featured presentation will be available at https://investors.cornerstoneondemand.com/investors/overview/default.aspx.

About Cornerstone

Cornerstone is a premier people development company. We believe people can achieve anything when they have the right development and growth opportunities. We offer organizations the technology, content, expertise, and specialized focus to help them realize the potential of their people. Featuring comprehensive recruiting, personalized learning, modern training content, development-driven performance management, and holistic employee data management and insights, Cornerstone's people development solutions are used by over 6,000 customers of all sizes, spanning more than 75 million users across over 180 countries and nearly 50 languages. Learn more at www.cornerstoneondemand.com.

Note: Cornerstone(r) and Cornerstone OnDemand(r) are registered trademarks of Cornerstone OnDemand, Inc.

Forward-looking Statements

This press release and the quarterly conference call referenced above contain forward-looking statements, including, but not limited to, statements regarding the expected performance of our business, our future financial and operating performance, including our non-GAAP guidance, strategy, long-term growth and overall future prospects, the demand for our offerings, our competitive position, general business conditions, our ability to execute our strategies and business plans, the integration of Saba into our business, anticipated synergies from our acquisition of Saba, the recent departure of our chief financial officer and appointment of a new chief financial officer, and our expectations regarding certain financial measures including subscription revenue, capital expenditures, unlevered free cash flow, recurring revenue growth, and operating margins. Any forward-looking statements contained in this press release or the quarterly conference call are based upon our historical performance and our current plans, estimates, and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim any obligation to update the forward-looking statements in the future, except as required by law. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from our 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 customers; the extent to which customers renew their subscriptions for our solutions; the timing of when consulting services are delivered to new and existing customers 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 customers; allowing our implementation subcontractors to contract directly with customers for implementation services; our shift to focusing on recurring revenue streams; our ability to compete as the learning and people development provider for organizations of all sizes; changes in the proportion of our customer base that is composed 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 opportunities; our ability to maintain stable and consistent quota attainment rates; continued strong demand for learning and people development in Europe, the Middle East, Africa, Asia-Pacific, and Japan; the timing and success of efforts to increase operational efficiency and cost containment; the timing and success of solutions offered by our competitors; unpredictable macro-economic conditions; the impact of foreign exchange rates; reductions in information technology spending; the success of our new product and service introductions; a disruption in our hosting network infrastructure; problems caused by security breaches; costs and reputational harm that could result from defects in our solutions; the success of our strategic relationships with third parties; the loss of any of our key employees and our ability to locate qualified replacements; failure to protect our intellectual property; acts of terrorism or other vandalism, war, natural disasters, or the ongoing COVID-19 pandemic; changes in current tax or accounting rules; legal or political changes in local or foreign jurisdictions that decrease demand for, or restrict our ability to sell or provide, our products; the failure to achieve expected synergies and efficiencies of operations between us and Saba; our ability to successfully integrate Saba's market opportunities, technology, products, personnel, and operations; and unanticipated costs or liabilities related to businesses that we acquire. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.

Non-GAAP Financial Measures and Other Key Metrics

To supplement its consolidated financial statements, which are prepared and presented in accordance with US generally accepted accounting principles, or GAAP, the Company has provided in this press release and the quarterly conference call held on the date hereof certain non-GAAP financial measures and other key metrics. These non-GAAP financial measures and other key metrics include:

(i) non-GAAP cost of revenue, which is defined as cost of revenue less stock-based compensation and amortization of intangible assets;

(ii) annual recurring revenue, which is defined as the annualized recurring value of all active contracts at the end of a reporting period;

net annual dollar retention rate, which is defined as the percentage of annual recurring revenue from all customers on the first day of a fiscal year that is retained from those same customers on the last day of that same fiscal year. This percentage excludes all annual recurring revenue from new customers added during the fiscal year. Incremental sales(iii) during the fiscal year to customers are included in the calculation solely for customers that existed as of the first day of the fiscal year. Therefore, it is possible for our net annual dollar retention rate to exceed 100% in a given year if incremental sales to existing customers exceed the churn in annual recurring revenue from those same customers during the fiscal year.

Prior to 2020, incremental sales were only included to the extent those sales offset any decrease in annual recurring revenue from the original amount on the first day of the fiscal year and therefore, the historical net annual dollar retention rate could never exceed 100%. This ratio for 2020 includes all customers. Previously, Cornerstone for Salesforce, Cornerstone PiiQ, Grovo, and Workpop customers were excluded from the calculation. We believe that our net annual dollar retention rate is an important metric to measure the long-term value of customer agreements and our ability to retain and incrementally sell to our customers;

unlevered free cash flow, a non-GAAP financial measure, which is defined(iv) as net cash provided by operating activities minus capital expenditures and capitalized software costs plus cash paid for interest;

(v) unlevered free cash flow margin, a non-GAAP financial measure, which is defined as unlevered free cash flow divided by revenue;

non-GAAP net income and non-GAAP diluted net income per share, which exclude, for the periods in which they are presented, stock-based compensation, amortization of intangible assets, acquisition-related and integration expenses, restructuring expenses, accretion of debt discount(vi) and amortization of debt issuance costs, discrete tax items, fair value adjustments on strategic investments, and excludes the impacts of unamortized stock-based compensation expense in applying the treasury method for determining the non-GAAP weighted average number of dilutive shares outstanding;

non-GAAP gross profit and non-GAAP gross margin, which exclude(vii) stock-based compensation and amortization of intangible assets reflected in cost of revenue;

non-GAAP operating income and non-GAAP operating income margin, which(viii) are defined as income or loss from operations excluding stock-based compensation, amortization of intangible assets, acquisition-related and integration expenses, and restructuring expenses;

non-GAAP operating expenses, which exclude stock-based compensation,(ix) amortization of intangible assets, acquisition-related and integration expenses, and restructuring expenses; and

non-GAAP sales and marketing expense, non-GAAP research and development(x) expense, and non-GAAP general and administrative expense, each of which excludes stock-based compensation and amortization of intangible assets attributable to the corresponding GAAP financial measures.

The Company's management uses these non-GAAP financial measures and other key metrics internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating the Company'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 and key metrics to help investors understand the operational performance of their businesses. In addition, the Company believes that the following non-GAAP adjustments are useful to management and investors for the following reasons:

* Stock-based compensation. The Company excludes stock-based compensation expense because it is non-cash in nature, and management believes that its exclusion provides additional insight into the Company's operational performance and also provides a useful comparison of the Company's operating results to prior periods and its peer companies. Additionally, determining the fair value of certain stock-based awards involves a high degree of judgment and estimation. The expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of such awards. * Amortization of intangible assets. The Company excludes amortization of acquired intangible assets because the expense is a non-cash item and management believes that its exclusion provides meaningful supplemental information regarding the Company's operational performance and allows for a useful comparison of its operating results to prior periods and its peer companies. * Acquisition-related and integration. The Company excludes expenses related to acquisitions and integration because the expenses are discrete to specific acquisitions and are not necessarily indicative of its continuing operations. The Company believes that the exclusion of these expenses provides investors with a supplemental view of the Company's operational performance. * Restructuring. The Company excludes expenses related to restructuring because the expense is not indicative of its continuing operations. The Company believes that the exclusion of these expenses provides investors with a supplemental view of the Company's operational performance. * Accretion of debt discount and amortization of debt issuance costs. The Company recognizes effective interest expense on its debt. The difference between the effective interest expense and the contractual interest expense, which is composed of accretion of debt discounts and amortization of issuance costs, is excluded from management's assessment of the Company's operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance. In addition, the exclusion of these items provides a useful comparison of the Company's operating results to prior periods and its peer companies. * Discrete tax items. The Company excludes discrete income tax charges or benefits that are not expected to recur because the items are not indicative of continuing operations. The Company believes that the exclusion of these items provides investors with a supplemental view of the Company's operational performance. * Fair value adjustments on strategic investments. The Company views the increase or decrease in the fair value of its strategic investments as not indicative of operational performance during any particular period and believes that the exclusion of these gains or losses provides investors with a supplemental view of the Company's operational performance.

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. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies. For the periods presented, reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the tables included as part of this press release.

Cornerstone OnDemand, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31, December 31, 2020 2019

Assets

Current assets:

Cash and cash equivalents $ 153,151 $ 215,907

Short-term investments - 201,579

Accounts receivable, net 221,461 131,105

Deferred commissions, current portion 45,786 33,215

Prepaid expenses and other current assets 30,615 30,512

Total current assets 451,013 612,318

Capitalized software development costs, net 50,812 50,023

Property and equipment, net 32,271 36,526

Operating right-of-use assets 74,419 72,944

Deferred commissions, net of current portion 89,698 74,563

Long-term investments 8,565 60,192

Intangible assets, net 436,290 9,440

Goodwill 961,322 47,453

Deferred tax assets 19,169 1,045

Other assets 11,010 1,597

Total assets $ 2,134,569 $ 966,101

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 1,424 $ 3,803

Accrued expenses 112,274 78,075

Deferred revenue, current portion 446,886 339,522

Operating lease liabilities, current portion 10,830 7,235

Debt, current portion 10,047 -

Other liabilities 16,210 11,015

Total current liabilities 597,671 439,650

Debt, net of current portion 1,176,239 293,174

Deferred revenue, net of current portion 5,184 6,945

Operating lease liabilities, net of current 65,911 67,195 portion

Deferred tax liabilities 11,936 -

Other liabilities, non-current 8,754 655

Total liabilities 1,865,695 807,619

Stockholders' equity:

Common stock, $0.0001 par value 6 6

Additional paid-in capital 835,069 682,717

Accumulated deficit (564,662 ) (524,680 )

Accumulated other comprehensive income (1,539 ) 439

Total stockholders' equity 268,874 158,482

Total liabilities and stockholders' equity $ 2,134,569 $ 966,101

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019

Revenue

$

206,924

$

149,594

$

740,916

$

576,523

Cost of revenue 1,2

62,587

38,166

227,014

149,215

Gross profit

144,337

111,428

513,902

427,308

Operating expenses:

Sales and marketing 1,2

73,394

56,722

265,516

227,733

Research and development 1

30,857

23,373

112,945

101,151

General and administrative 1,2

31,408

20,750

110,637

86,491

Acquisition-related and integration

5,533

-

37,289

-

Restructuring1

7,971

-

19,066

-

Total operating expenses

149,163

100,845

545,453

415,375

(Loss) income from operations

(4,826

)

10,583

(31,551

)

11,933

Other income (expense):

Interest expense

(19,687

)

(5,416

)

(63,016

)

(21,559

)

Other, net

7,884

4,728

7,823

8,262

Other expense, net

(11,803

)

(688

)

(55,193

)

(13,297

)

(Loss) income before income tax provision

(16,629

)

9,895

(86,744

)

(1,364

)

Income tax benefit (provision)3

18,190

(463

)

46,762

(2,690

)

Net income (loss)

$

1,561

$

9,432

$

(39,982

)

$

(4,054

)

Net income (loss) per share, basic

$

0.02

$

0.16

$

(0.63

)

$

(0.07

)

Net income (loss) per share, diluted

$

0.02

$

0.15

$

(0.63

)

$

(0.07

)

Weighted average common shares outstanding, basic

64,717

60,813

63,585

60,086

Weighted average common shares outstanding, diluted

66,092

63,482

63,585

60,086

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Revenue $ 206,924 $ 149,594 $ 740,916 $ 576,523

Cost of revenue ^ 62,587 38,166 227,014 149,215 1,2

Gross profit 144,337 111,428 513,902 427,308

Operating expenses:

Sales and marketing 73,394 56,722 265,516 227,733 ^1,2

Research and 30,857 23,373 112,945 101,151 development ^1

General and 31,408 20,750 110,637 86,491 administrative ^1,2

Acquisition-related 5,533 - 37,289 - and integration

Restructuring^1 7,971 - 19,066 -

Total operating 149,163 100,845 545,453 415,375 expenses

(Loss) income from (4,826 ) 10,583 (31,551 ) 11,933 operations

Other income (expense):

Interest expense (19,687 ) (5,416 ) (63,016 ) (21,559 )

Other, net 7,884 4,728 7,823 8,262

Other expense, net (11,803 ) (688 ) (55,193 ) (13,297 )

(Loss) incomebefore income tax (16,629 ) 9,895 (86,744 ) (1,364 ) provision

Income tax benefit 18,190 (463 ) 46,762 (2,690 ) (provision)^3

Net income (loss) $ 1,561 $ 9,432 $ (39,982 ) $ (4,054 )

Net income (loss) $ 0.02 $ 0.16 $ (0.63 ) $ (0.07 ) per share, basic

Net income (loss) $ 0.02 $ 0.15 $ (0.63 ) $ (0.07 ) per share, diluted

Weighted averagecommon shares 64,717 60,813 63,585 60,086 outstanding, basic

Weighted averagecommon shares 66,092 63,482 63,585 60,086 outstanding,diluted

1 Includes stock-based compensation as follows:

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019

Cost of revenue

$

1,817

$

1,612

$

8,845

$

6,282

Sales and marketing

6,894

7,009

28,303

27,780

Research and development

5,329

3,203

17,136

16,003

General and administrative

5,320

4,892

19,873

22,365

Restructuring

671

-

1,071

-

Total

$

20,031

$

16,716

$

75,228

$

72,430

^1 Includes stock-based compensation as follows:

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Cost of revenue $ 1,817 $ 1,612 $ 8,845 $ 6,282

Sales and marketing 6,894 7,009 28,303 27,780

Research and development 5,329 3,203 17,136 16,003

General and administrative 5,320 4,892 19,873 22,365

Restructuring 671 - 1,071 -

Total $ 20,031 $ 16,716 $ 75,228 $ 72,430

2 Includes amortization of intangible assets as follows:

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019

Cost of revenue

$

9,405

$

1,047

$

27,864

$

4,427

Sales and marketing

14,039

-

39,078

-

General and administrative

597

-

1,657

-

Total

$

24,041

$

1,047

$

68,599

$

4,427

^2 Includes amortization of intangible assets as follows:

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Cost of revenue $ 9,405 $ 1,047 $ 27,864 $ 4,427

Sales and marketing 14,039 - 39,078 -

General and administrative 597 - 1,657 -

Total $ 24,041 $ 1,047 $ 68,599 $ 4,427

3 Includes a discrete income tax benefit of approximately $18.8 million and $45.5 million during the three and twelve months ended December 31, 2020, respectively, related to release of valuation allowance against previously reserved deferred tax assets.

^3 Includes a discrete income tax benefit of approximately $18.8 million and$45.5 million during the three and twelve months ended December 31, 2020,respectively, related to release of valuation allowance against previouslyreserved deferred tax assets.

Cornerstone OnDemand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Cash flows fromoperating activities

Net income $ 1,561 $ 9,432 $ (39,982 ) $ (4,054 ) (loss)

Adjustments toreconcile netincome (loss) tonet cash provided byoperatingactivities:

Depreciation and 36,796 10,751 116,986 41,599 amortization

Accretion ofdebt discountand amortization 4,290 1,077 11,792 4,207 of debt issuancecosts

Amortization(accretion) ofpurchased - (57 ) 41 (957 ) investmentpremium ordiscount, net

Net foreigncurrency and (7,901 ) (3,179 ) (6,239 ) (1,079 ) other gain

Stock-basedcompensation 20,031 16,716 75,228 72,430 expense

Deferred income (22,108 ) 61 (54,189 ) 61 taxes

Bad debt expense 712 46 3,113 450

Changes inoperating assetsand liabilities, net ofacquisitions:

Accounts (63,212 ) (29,454 ) (30,969 ) (5,554 ) receivable

Deferred (17,151 ) (13,111 ) (25,866 ) (27,241 ) commissions

Prepaid expenses (2,678 ) 245 13,213 12,834 and other assets

Accounts payable (5,059 ) (2,719 ) (11,911 ) (8,759 )

Accrued expenses 19,414 13,991 14,869 8,428

Deferred revenue 72,533 58,683 29,184 19,635

Other (2,203 ) 112 1,664 3,549 liabilities

Net cashprovided by 35,025 62,594 96,934 115,549 operatingactivities

Cash flows frominvesting activities

Purchases ofmarketable - (79,001 ) (20,419 ) (282,426 ) investments

Purchases ofnon-marketable - (9,000 ) - (9,000 ) investments

Maturities andsales of - 28,917 272,173 236,401 investments

Capital (2,875 ) (2,047 ) (5,785 ) (18,034 ) expenditures

Capitalized (6,779 ) (5,833 ) (27,075 ) (24,668 ) software costs

Cash paid foracquisitions, - - (1,295,508 ) - net of cashacquired

Other, net (1,387 ) - (1,387 ) -

Net cash used ininvesting (11,041 ) (66,964 ) (1,078,001 ) (97,727 ) activities

Cash flows fromfinancing activities

Proceeds fromterm loan debt, - - 979,582 - net of discount

Payments of debtissuance and - - (30,429 ) - modificationcosts

Repayment of (52,512 ) - (52,512 ) - debt

Proceeds fromemployee stock 4,592 9,528 20,545 42,600 plans

Repurchases of - (8,826 ) - (22,356 ) common stock

Payment of taxwithholdings for - - - (5,469 ) employee stockplans

Net cash (usedin) provided by (47,920 ) 702 917,186 14,775 financingactivities

Effect ofexchange ratechanges on cash, 3,825 837 3,828 (286 ) cashequivalents, andrestricted cash

Net (decrease)increase incash, cash (20,111 ) (2,831 ) (60,053 ) 32,311 equivalents, andrestricted cash

Cash, cashequivalents, andrestricted cash 175,965 218,738 215,907 183,596 at beginning ofperiod

Cash, cashequivalents, andrestricted cash $ 155,854 $ 215,907 $ 155,854 $ 215,907 at end of period^1

Supplemental cash flow data

Cash paid for $ 10,985 $ - $ 49,858 $ 17,356 interest

Cash paid for 2,465 216 6,190 1,704 income taxes

Non-cashinvesting and financingactivities:

Capitalizedstock-based (333 ) 1,420 5,134 4,847 compensation

Issuance ofcommon stock forpartial - - 32,889 - considerationfor acquisition

Increase in debtdiscount as aresult of - - 18,598 - modification ofConvertibleNotes

1 Below is a reconciliation of cash, cash equivalents, and restricted cash:

As of December 31,

2020

2019

Cash and cash equivalents

$

153,151

$

215,907

Restricted cash included in prepaid expenses and other current assets

484

-

Restricted cash included in other assets

2,219

-

Total cash, cash equivalents, and restricted cash

$

155,854

$

215,907

^1 Below is a reconciliation of cash, cash equivalents, and restricted cash:

As of December 31,

2020 2019

Cash and cash equivalents $ 153,151 $ 215,907

Restricted cash included in prepaid expenses and other 484 - current assets

Restricted cash included in other assets 2,219 -

Total cash, cash equivalents, and restricted cash $ 155,854 $ 215,907

Cornerstone OnDemand, Inc.

RECONCILIATIONS OF COST OF REVENUE TO NON-GAAP COST OF REVENUE, GROSS PROFIT,AND GROSS MARGIN TO NON-GAAP GROSS PROFIT AND NON-GAAP GROSS MARGIN, (LOSS)INCOME FROM OPERATIONS TO NON-GAAP OPERATING INCOME, AND OPERATING MARGIN TONON-GAAP OPERATING MARGIN

(in thousands)

(unaudited)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Reconciliation of cost of revenue, gross profit, and gross margin:

Revenue $ 206,924 $ 149,594 $ 740,916 $ 576,523

Cost of revenue 62,587 38,166 227,014 149,215

Gross profit $ 144,337 $ 111,428 $ 513,902 $ 427,308

Gross margin 69.8 % 74.5 % 69.4 % 74.1 %



Cost of revenue $ 62,587 $ 38,166 $ 227,014 $ 149,215

Adjustments to cost of revenue:

Stock-based compensation^ (1,817 ) (1,612 ) (8,282 ) (6,282 )1

Amortization of (9,405 ) (1,047 ) (27,864 ) (4,427 )intangible assets

Total adjustments to cost (11,222 ) (2,659 ) (36,146 ) (10,709 )of revenue

Non-GAAP cost of revenue 51,365 35,507 190,868 138,506

Non-GAAP gross profit $ 155,559 $ 114,087 $ 550,048 $ 438,017

Non-GAAP gross margin 75.2 % 76.3 % 74.2 % 76.0 %



Reconciliation of (loss) income from operations and operating margin:

(Loss) income from $ (4,826 ) $ 10,583 $ (31,551 ) $ 11,933 operations

Operating margin (2.3 ) 7.1 % (4.3 ) 2.1 % % %

Adjustments to (loss) income from operations:

Stock-based compensation^ 19,360 16,716 70,096 72,430 1, 3

Amortization of 24,041 1,047 68,599 4,427 intangible assets

Acquisition-related and 5,533 - 37,289 - integration^2

Restructuring^3 7,971 - 19,066 -

Total adjustments to(loss) income from 56,905 17,763 195,050 76,857 operations

Non-GAAP operating income $ 52,079 $ 28,346 $ 163,499 $ 88,790

Non-GAAP operating margin 25.2 % 18.9 % 22.1 % 15.4 %

1 The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the twelve months ended December 31, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020.

^1 The difference between stock-based compensation presented above andstock-based compensation as reported in the consolidated statement ofoperations for the twelve months ended December 31, 2020, represents an amountaccrued for cash bonuses as of December 31, 2019, which was settled in equityduring the first quarter of 2020.

Twelve Months Ended

December 31,

2020

Cost of revenue

$

8,282

Sales and marketing

27,393

Research and development

15,722

General and administrative

18,699

Total

$

70,096

2 Expenses related to the acquisitions of Saba Software, Inc. and Clustree SAS primarily consisting of external professional services directly associated with the acquisitions, such as advisory fees, accounting and legal costs, filing fees, due diligence, and integration costs.

3 Stock-based compensation related to restructuring is presented in the restructuring line item.

Twelve Months Ended

December 31,

2020

Cost of revenue $ 8,282

Sales and marketing 27,393

Research and development 15,722

General and administrative 18,699

Total $ 70,096



^2 Expenses related to the acquisitions of Saba Software, Inc. and ClustreeSAS primarily consisting of external professional services directly associatedwith the acquisitions, such as advisory fees, accounting and legal costs,filing fees, due diligence, and integration costs.

^3 Stock-based compensation related to restructuring is presented in therestructuring line item.

Cornerstone OnDemand, Inc.

RECONCILIATIONS OF NET INCOME (LOSS) TO NON-GAAP NET INCOME AND NON-GAAP NETINCOME PER SHARE

(in thousands, except per share amounts)

(unaudited)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Net income (loss) $ 1,561 $ 9,432 $ (39,982 ) $ (4,054 )

Adjustments to net income (loss)

Stock-based 19,360 16,716 70,096 72,430 compensation^1, 3

Amortization of 24,041 1,047 68,599 4,427 intangible assets

Acquisition-related 5,533 - 37,289 - and integration^2

Restructuring^3 7,971 - 19,066 -

Accretion of debtdiscount and 4,290 1,077 11,792 4,207 amortization of debtissuance costs^4

Income tax benefit^5 (18,795 ) - (45,454 ) -

Total adjustments to 42,400 18,840 161,388 81,064 net income (loss)

Non-GAAP net income $ 43,961 $ 28,272 $ 121,406 $ 77,010

Non-GAAP basic net $ 0.68 $ 0.46 $ 1.91 $ 1.28 income per share

Non-GAAP diluted net $ 0.64 $ 0.43 $ 1.78 $ 1.17 income per share

Weighted-averagecommon shares 64,717 60,813 63,585 60,086 outstanding, basic

Non-GAAPweighted-average 69,067 66,072 68,365 65,605 common sharesoutstanding, diluted

1 The difference between stock-based compensation presented above and stock-based compensation as reported in the consolidated statement of operations for the twelve months ended December 31, 2020, represents an amount accrued for cash bonuses as of December 31, 2019, which was settled in equity during the first quarter of 2020.

2 Expenses related to the acquisitions of Saba Software, Inc. and Clustree SAS primarily consisting of external professional services directly associated with the acquisitions, such as advisory fees, accounting and legal costs, filing fees, due diligence, and integration costs.

3 Stock-based compensation related to restructuring is presented in the restructuring line item.

4 Debt discount accretion and debt issuance cost amortization have been recorded in connection with our issuance of (i) $1.0047 billion of term loan debt on April 22, 2020; and (ii) $300.0 million in convertible notes on December 8, 2017 as well as the modification of these convertible notes on April 20, 2020 to extend the maturity date from July 1, 2021 to March 17, 2023. These expenses represent non-cash charges that have been recorded in accordance with the authoritative accounting literature for such transactions.

5 Discrete income tax benefits of approximately $18.8 million and $45.5 million were recognized during the three and twelve months ended December 31, 2020, respectively, related to release of valuation allowance against previously reserved deferred tax assets.

^1 The difference between stock-based compensation presented above andstock-based compensation as reported in the consolidated statement ofoperations for the twelve months ended December 31, 2020, represents an amountaccrued for cash bonuses as of December 31, 2019, which was settled in equityduring the first quarter of 2020.

^2 Expenses related to the acquisitions of Saba Software, Inc. and Clustree SASprimarily consisting of external professional services directly associated withthe acquisitions, such as advisory fees, accounting and legal costs, filingfees, due diligence, and integration costs.

^3 Stock-based compensation related to restructuring is presented in therestructuring line item.

^4 Debt discount accretion and debt issuance cost amortization have beenrecorded in connection with our issuance of (i) $1.0047 billion of term loandebt on April 22, 2020; and (ii) $300.0 million in convertible notes onDecember 8, 2017 as well as the modification of these convertible notes onApril 20, 2020 to extend the maturity date from July 1, 2021 to March 17, 2023.These expenses represent non-cash charges that have been recorded in accordancewith the authoritative accounting literature for such transactions.

^5 Discrete income tax benefits of approximately $18.8 million and $45.5million were recognized during the three and twelve months ended December 31,2020, respectively, related to release of valuation allowance againstpreviously reserved deferred tax assets.

Cornerstone OnDemand, Inc.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO UNLEVERED FREECASH FLOW AND UNLEVERED FREE CASH FLOW MARGIN

(A Non-GAAP Financial Measure)

(in thousands)

(unaudited)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Reconciliation of unlevered free cash flow:

Net cash provided by $ 35,025 $ 62,594 $ 96,934 $ 115,549 operating activities

Capital expenditures (2,875 ) (2,047 ) (5,785 ) (18,034 )

Capitalized software costs (6,779 ) (5,833 ) (27,075 ) (24,668 )

Cash paid for interest 10,985 - 49,858 17,356

Unlevered free cash flow $ 36,356 $ 54,714 $ 113,932 $ 90,203

Unlevered free cash flow 17.6 % 36.6 % 15.4 % 15.6 %margin

Cornerstone OnDemand, Inc.

TRENDED OPERATIONAL & FINANCIAL HIGHLIGHTS

(unaudited)

The following metrics are intended as a supplement to the financial statements found in this press release and other information furnished to or filed with the SEC. In the event of discrepancies between amounts in these tables and the Company's historical disclosures or financial statements, readers should rely on the Company's filings with the SEC and financial statements in the Company's most recent earnings press release.

The Company intends to periodically review and refine the definition, methodology, and appropriateness of each of these supplemental metrics. As a result, metrics are subject to removal and/or change, and such changes could be material.

FY 2019

FY 2020

Q1'19

Q2'19

Q3'19

Q4'19

Q1'20

Q2'20

Q3'20

Q4'20

FY18

FY19

FY20

SELECTED METRICS:

Number of customers1

3,367

3,423

3,446

3,508

3,522

6,308

6,229

6,157

3,333

3,508

6,157

% y/y

8.6

%

6.9

%

5.7

%

5.3

%

4.6

%

84.3

%

80.8

%

75.5

%

2.6

%

5.3

%

75.5

%

% q/q

1.0

%

1.7

%

0.7

%

1.8

%

0.4

%

79.1

%

(1.3

)%

(1.2

)%

n/a

n/a

n/a

Number of employees

2,017

2,034

1,986

1,993

1,975

3,184

3,027

2,919

1,953

1,993

2,919

% y/y

10.3

%

9.9

%

5.0

%

2.0

%

(2.1

)%

56.5

%

52.4

%

46.5

%

3.3

%

2.0

%

46.5

%

% q/q

3.3

%

0.8

%

(2.4

)%

0.4

%

(0.9

)%

61.2

%

(4.9

)%

(3.6

)%

n/a

n/a

n/a

Net annual dollar retention rate2

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

105.7

%

104.6

%

95.1

%

Annual recurring revenue (in thousands)

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

510,000

575,000

840,000

Net cash provided by operating activities (in thousands)

7,294

21,183

24,478

62,594

5,988

22,774

33,147

35,025

90,253

115,549

96,934

Unlevered free cash flow (in thousands)

4,337

9,470

21,682

54,714

6,253

15,394

55,929

36,356

63,471

90,203

113,932

Unlevered free cash flow margin

3.1

%

6.7

%

15.0

%

36.6

%

4.2

%

8.4

%

28.0

%

17.6

%

11.8

%

15.6

%

15.4

%

FINANCIAL DATA (in thousands, except percentages):

Revenue

140,117

141,860

144,952

149,594

150,136

184,358

199,498

206,924

537,891

576,523

740,916

Subscription revenue

131,256

132,562

137,446

141,704

144,421

177,217

185,643

197,878

473,052

542,968

705,159

% y/y growth

16.0

%

15.5

%

15.7

%

12.2

%

10.0

%

33.7

%

35.1

%

39.6

%

n/a

14.8

%

29.9

%

% y/y growth constant currency3

18.2

%

17.3

%

17.2

%

12.4

%

10.7

%

n/a

n/a

n/a

n/a

16.2

%

n/a

Subscription revenue % of total revenue

93.7

%

93.4

%

94.8

%

94.7

%

96.2

%

96.1

%

93.1

%

95.6

%

87.9

%

94.2

%

95.2

%

Income (loss) from operations

1,231

(3,594

)

3,713

10,583

(2,739

)

(22,368

)

(1,618

)

(4,826

)

(7,769

)

11,933

(31,551

)

MARGIN DATA:

Gross margin

76.0

%

71.7

%

74.4

%

74.5

%

72.1

%

68.5

%

67.7

%

69.8

%

73.2

%

74.1

%

69.4

%

Sales and marketing % of revenue

38.9

%

41.4

%

39.9

%

37.9

%

36.9

%

35.2

%

36.0

%

35.5

%

41.8

%

39.5

%

35.8

%

Research and development % of revenue

19.8

%

17.2

%

17.7

%

15.6

%

16.0

%

15.4

%

14.9

%

14.9

%

14.3

%

17.5

%

15.2

%

General and administrative % of revenue

16.4

%

15.6

%

14.2

%

13.9

%

16.5

%

13.8

%

14.5

%

15.2

%

16.7

%

15.0

%

14.9

%

Acquisition-related and integration % of revenue

-

-

-

-

4.5

%

10.9

%

2.4

%

2.7

%

0.2

%

-

5.0

%

Restructuring % of revenue

-

-

-

-

-

5.3

%

0.7

%

3.9

%

1.7

%

-

2.6

%

Operating margin

0.9

%

(2.5

)%

2.6

%

7.1

%

(1.8

)%

(12.1

)%

(0.8

)%

(2.3

)%

(1.4

)%

2.1

%

(4.3

)%

NON-GAAP MARGIN DATA:

Non-GAAP gross margin

77.7

%

73.7

%

76.3

%

76.3

%

74.6

%

73.7

%

73.5

%

75.2

%

74.1

%

76.0

%

74.2

%

Non-GAAP sales and marketing % of revenue

34.6

%

36.6

%

34.4

%

33.2

%

31.7

%

26.4

%

25.3

%

25.4

%

37.2

%

34.7

%

26.9

%

Non-GAAP research and development % of revenue

16.8

%

14.1

%

14.8

%

13.5

%

13.8

%

13.9

%

12.7

%

12.3

%

12.1

%

14.8

%

13.1

%

Non-GAAP general and administrative % of revenue

12.3

%

11.3

%

10.3

%

10.6

%

12.5

%

11.8

%

12.1

%

12.3

%

13.2

%

11.1

%

12.2

%

Non-GAAP operating margin

14.0

%

11.7

%

16.7

%

18.9

%

16.6

%

21.6

%

23.4

%

25.2

%

11.8

%

15.4

%

22.1

%

Non-GAAP research and development plus capitalized software % of revenue

22.1

%

18.8

%

18.0

%

17.4

%

18.7

%

17.2

%

16.1

%

15.6

%

16.8

%

19.1

%

16.8

%

FOREIGN EXCHANGE RATES:

GBP to USD average period rate

1.30

1.29

1.23

1.29

1.28

1.26

1.29

1.32

1.34

1.28

1.29

GBP to USD end of period spot rate

1.30

1.27

1.23

1.32

1.23

1.23

1.28

1.37

1.27

1.32

1.37

EUR to USD average period rate

1.14

1.12

1.11

1.11

1.10

1.11

1.17

1.19

1.18

1.12

1.14

EUR to USD end of period spot rate

1.12

1.14

1.09

1.12

1.10

1.12

1.17

1.23

1.14

1.12

1.23

Cornerstone OnDemand, Inc.

TRENDED OPERATIONAL & FINANCIAL HIGHLIGHTS

(unaudited)

The following metrics are intended as a supplement to the financial statementsfound in this press release and other information furnished to or filed withthe SEC. In the event of discrepancies between amounts in these tables and theCompany's historical disclosures or financial statements, readers should relyon the Company's filings with the SEC and financial statements in the Company'smost recent earnings press release.

The Company intends to periodically review and refine the definition,methodology, and appropriateness of each of these supplemental metrics. As aresult, metrics are subject to removal and/or change, and such changes could bematerial.

FY 2019 FY 2020

Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 FY18 FY19 FY20

SELECTED METRICS:

Number of customers 3,367 3,423 3,446 3,508 3,522 6,308 6,229 6,157 3,333 3,508 6,157 ^1

% y/y 8.6 % 6.9 % 5.7 % 5.3 % 4.6 % 84.3 % 80.8 % 75.5 % 2.6 % 5.3 % 75.5 %

% q/q 1.0 % 1.7 % 0.7 % 1.8 % 0.4 % 79.1 % (1.3 ) (1.2 ) n/a n/a n/a % %

Number of employees 2,017 2,034 1,986 1,993 1,975 3,184 3,027 2,919 1,953 1,993 2,919

% y/y 10.3 % 9.9 % 5.0 % 2.0 % (2.1 ) 56.5 % 52.4 % 46.5 % 3.3 % 2.0 % 46.5 % %

% q/q 3.3 % 0.8 % (2.4 ) 0.4 % (0.9 ) 61.2 % (4.9 ) (3.6 ) n/a n/a n/a % % % %

Net annual dollar n/a n/a n/a n/a n/a n/a n/a n/a 105.7 % 104.6 % 95.1 %retention rate^2

Annual recurringrevenue (in n/a n/a n/a n/a n/a n/a n/a n/a 510,000 575,000 840,000 thousands)

Net cash providedby operating 7,294 21,183 24,478 62,594 5,988 22,774 33,147 35,025 90,253 115,549 96,934 activities (inthousands)

Unlevered free cash 4,337 9,470 21,682 54,714 6,253 15,394 55,929 36,356 63,471 90,203 113,932 flow (in thousands)

Unlevered free cash 3.1 % 6.7 % 15.0 % 36.6 % 4.2 % 8.4 % 28.0 % 17.6 % 11.8 % 15.6 % 15.4 %flow margin

FINANCIAL DATA (inthousands, except percentages):

Revenue 140,117 141,860 144,952 149,594 150,136 184,358 199,498 206,924 537,891 576,523 740,916

Subscription 131,256 132,562 137,446 141,704 144,421 177,217 185,643 197,878 473,052 542,968 705,159 revenue

% y/y growth 16.0 % 15.5 % 15.7 % 12.2 % 10.0 % 33.7 % 35.1 % 39.6 % n/a 14.8 % 29.9 %

% y/y growth 18.2 % 17.3 % 17.2 % 12.4 % 10.7 % n/a n/a n/a n/a 16.2 % n/aconstant currency^3

Subscriptionrevenue % of total 93.7 % 93.4 % 94.8 % 94.7 % 96.2 % 96.1 % 93.1 % 95.6 % 87.9 % 94.2 % 95.2 %revenue

Income (loss) from 1,231 (3,594 ) 3,713 10,583 (2,739 ) (22,368 ) (1,618 ) (4,826 ) (7,769 ) 11,933 (31,551 )operations

MARGIN DATA:

Gross margin 76.0 % 71.7 % 74.4 % 74.5 % 72.1 % 68.5 % 67.7 % 69.8 % 73.2 % 74.1 % 69.4 %

Sales and marketing 38.9 % 41.4 % 39.9 % 37.9 % 36.9 % 35.2 % 36.0 % 35.5 % 41.8 % 39.5 % 35.8 %% of revenue

Research anddevelopment % of 19.8 % 17.2 % 17.7 % 15.6 % 16.0 % 15.4 % 14.9 % 14.9 % 14.3 % 17.5 % 15.2 %revenue

General andadministrative % of 16.4 % 15.6 % 14.2 % 13.9 % 16.5 % 13.8 % 14.5 % 15.2 % 16.7 % 15.0 % 14.9 %revenue

Acquisition-relatedand integration % - - - - 4.5 % 10.9 % 2.4 % 2.7 % 0.2 % - 5.0 %of revenue

Restructuring % of - - - - - 5.3 % 0.7 % 3.9 % 1.7 % - 2.6 %revenue

Operating margin 0.9 % (2.5 ) 2.6 % 7.1 % (1.8 ) (12.1 ) (0.8 ) (2.3 ) (1.4 ) 2.1 % (4.3 ) % % % % % % %

NON-GAAP MARGIN DATA:

Non-GAAP gross 77.7 % 73.7 % 76.3 % 76.3 % 74.6 % 73.7 % 73.5 % 75.2 % 74.1 % 76.0 % 74.2 %margin

Non-GAAP sales andmarketing % of 34.6 % 36.6 % 34.4 % 33.2 % 31.7 % 26.4 % 25.3 % 25.4 % 37.2 % 34.7 % 26.9 %revenue

Non-GAAP researchand development % 16.8 % 14.1 % 14.8 % 13.5 % 13.8 % 13.9 % 12.7 % 12.3 % 12.1 % 14.8 % 13.1 %of revenue

Non-GAAP generaland administrative 12.3 % 11.3 % 10.3 % 10.6 % 12.5 % 11.8 % 12.1 % 12.3 % 13.2 % 11.1 % 12.2 %% of revenue

Non-GAAP operating 14.0 % 11.7 % 16.7 % 18.9 % 16.6 % 21.6 % 23.4 % 25.2 % 11.8 % 15.4 % 22.1 %margin

Non-GAAP researchand developmentplus capitalized 22.1 % 18.8 % 18.0 % 17.4 % 18.7 % 17.2 % 16.1 % 15.6 % 16.8 % 19.1 % 16.8 %software % ofrevenue

FOREIGN EXCHANGE RATES:

GBP to USD average 1.30 1.29 1.23 1.29 1.28 1.26 1.29 1.32 1.34 1.28 1.29 period rate

GBP to USD end of 1.30 1.27 1.23 1.32 1.23 1.23 1.28 1.37 1.27 1.32 1.37 period spot rate

EUR to USD average 1.14 1.12 1.11 1.11 1.10 1.11 1.17 1.19 1.18 1.12 1.14 period rate

EUR to USD end of 1.12 1.14 1.09 1.12 1.10 1.12 1.17 1.23 1.14 1.12 1.23 period spot rate

1 During the second quarter of 2020, we adjusted our method of determining customer count to exclude customers that are sold through resellers that share one tenant or instance of our product. The numbers included here reflect this change. We continue to exclude customers from our Cornerstone for Salesforce, PiiQ, Grovo, Workpop, and Clustree products from our customer count metrics.

2 During 2020, we adjusted our method of determining our net annual dollar retention rate. Prior to 2020, incremental sales were only included to the extent those sales offset any decrease in annual recurring revenue from the original amount on the first day of the fiscal year and therefore, the historical net annual dollar retention rate could never exceed 100%. This ratio for 2020 includes all customers. Previously, Cornerstone for Salesforce, Cornerstone PiiQ, Grovo, and Workpop customers were excluded from the calculation. The percentages included here reflect these changes.

3 We have historically presented constant currency information, a non-GAAP financial measure, to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency fluctuations. However, due to the acquisition of Saba in the second quarter of 2020, constant currency results on a combined company basis were not presented for the second, third, and fourth quarters in 2020 as the historical comparative periods did not include the combined company results for a full quarter.

^1 During the second quarter of 2020, we adjusted our method of determiningcustomer count to exclude customers that are sold through resellers that shareone tenant or instance of our product. The numbers included here reflect thischange. We continue to exclude customers from our Cornerstone for Salesforce,PiiQ, Grovo, Workpop, and Clustree products from our customer count metrics.

^2 During 2020, we adjusted our method of determining our net annual dollarretention rate. Prior to 2020, incremental sales were only included to theextent those sales offset any decrease in annual recurring revenue from theoriginal amount on the first day of the fiscal year and therefore, thehistorical net annual dollar retention rate could never exceed 100%. This ratiofor 2020 includes all customers. Previously, Cornerstone for Salesforce,Cornerstone PiiQ, Grovo, and Workpop customers were excluded from thecalculation. The percentages included here reflect these changes.

^3 We have historically presented constant currency information, a non-GAAPfinancial measure, to provide a framework for assessing how our underlyingbusiness performed excluding the effect of foreign currency fluctuations.However, due to the acquisition of Saba in the second quarter of 2020, constantcurrency results on a combined company basis were not presented for the second,third, and fourth quarters in 2020 as the historical comparative periods didnot include the combined company results for a full quarter.

FY 2019

FY 2020

Q1'19

Q2'19

Q3'19

Q4'19

Q1'20

Q2'20

Q3'20

Q4'20

FY18

FY19

FY20

NON-GAAP RECONCILIATIONS FOR SELECTED METRICS(in thousands, except percentages):

Net cash provided by operating activities

7,294

21,183

24,478

62,594

5,988

22,774

33,147

35,025

90,253

115,549

96,934

Capital expenditures

(4,243

)

(5,031

)

(6,713

)

(2,047

)

(971

)

(1,304

)

(635

)

(2,875

)

(14,895

)

(18,034

)

(5,785

)

Capitalized software costs

(7,399

)

(6,728

)

(4,708

)

(5,833

)

(7,389

)

(6,135

)

(6,772

)

(6,779

)

(25,515

)

(24,668

)

(27,075

)

Cash paid for interest

8,685

46

8,625

-

8,625

59

30,189

10,985

13,628

17,356

49,858

Unlevered free cash flow

4,337

9,470

21,682

54,714

6,253

15,394

55,929

36,356

63,471

90,203

113,932

Unlevered free cash flow margin

3.1

%

6.7

%

15.0

%

36.6

%

4.2

%

8.4

%

28.0

%

17.6

%

11.8

%

15.6

%

15.4

%

Gross margin

76.0

%

71.7

%

74.4

%

74.5

%

72.1

%

68.5

%

67.7

%

69.8

%

73.2

%

74.1

%

69.4

%

Stock-based compensation

0.8

%

1.3

%

1.2

%

1.1

%

1.4

%

1.2

%

1.1

%

0.9

%

0.7

%

1.1

%

1.0

%

Amortization of intangible assets

0.9

%

0.7

%

0.7

%

0.7

%

1.1

%

4.0

%

4.7

%

4.5

%

0.2

%

0.8

%

3.8

%

Non-GAAP gross margin

77.7

%

73.7

%

76.3

%

76.3

%

74.6

%

73.7

%

73.5

%

75.2

%

74.1

%

76.0

%

74.2

%

Sales and marketing % of revenue

38.9

%

41.4

%

39.9

%

37.9

%

36.9

%

35.2

%

36.0

%

35.5

%

41.8

%

39.5

%

35.8

%

Stock-based compensation

(4.3

)

%

(4.8

)

%

(5.5

)

%

(4.7

)

%

(5.1

)

%

(3.0

)

%

(3.5

)

%

(3.3

)

%

(4.6

)

%

(4.8

)

%

(3.6

)

%

Amortization of intangible assets

-

%

-

%

-

%

-

%

(0.1

)

%

(5.8

)

%

(7.2

)

%

(6.8

)

%

-

%

-

%

(5.3

)

%

Non-GAAP sales and marketing % of revenue

34.6

%

36.6

%

34.4

%

33.2

%

31.7

%

26.4

%

25.3

%

25.4

%

37.2

%

34.7

%

26.9

%

Research and development % of revenue

19.8

%

17.2

%

17.7

%

15.6

%

16.0

%

15.4

%

14.9

%

14.9

%

14.3

%

17.5

%

15.2

%

Stock-based compensation

(3.0

)

%

(3.1

)

%

(2.9

)

%

(2.1

)

%

(2.2

)

%

(1.5

)

%

(2.2

)

%

(2.6

)

%

(2.2

)

%

(2.7

)

%

(2.1

)

%

Non-GAAP research and development % of revenue

16.8

%

14.1

%

14.8

%

13.5

%

13.8

%

13.9

%

12.7

%

12.3

%

12.1

%

14.8

%

13.1

%

General and administrative % of revenue

16.4

%

15.6

%

14.2

%

13.9

%

16.5

%

13.8

%

14.5

%

15.2

%

16.7

%

15.0

%

14.9

%

Stock-based compensation

(4.1

)

%

(4.3

)

%

(3.9

)

%

(3.3

)

%

(4.0

)

%

(1.8

)

%

(2.1

)

%

(2.6

)

%

(3.5

)

%

(3.9

)

%

(2.5

)

%

Amortization of intangible assets

-

%

-

%

-

%

-

%

-

%

(0.2

)

%

(0.3

)

%

(0.3

)

%

-

%

-

%

(0.2

)

%

Non-GAAP general and administrative % of revenue

12.3

%

11.3

%

10.3

%

10.6

%

12.5

%

11.8

%

12.1

%

12.3

%

13.2

%

11.1

%

12.2

%

Operating margin

0.9

%

(2.5

)

%

2.6

%

7.1

%

(1.8

)

%

(12.1

)

%

(0.8

)

%

(2.3

)

%

(1.4

)

%

2.1

%

(4.3

)

%

Stock-based compensation

12.2

%

13.5

%

13.4

%

11.1

%

12.7

%

7.4

%

8.9

%

9.3

%

11.1

%

12.5

%

9.5

%

Amortization of intangible assets

0.9

%

0.7

%

0.7

%

0.7

%

1.2

%

10.1

%

12.2

%

11.6

%

0.2

%

0.8

%

9.3

%

Restructuring

-

%

-

%

-

%

-

%

-

%

5.3

%

0.7

%

3.9

%

1.7

%

-

%

2.6

%

Acquisition-related and integration

-

%

-

%

-

%

-

%

4.5

%

10.9

%

2.4

%

2.7

%

0.2

%

-

%

5.0

%

Non-GAAP operating margin

14.0

%

11.7

%

16.7

%

18.9

%

16.6

%

21.6

%

23.4

%

25.2

%

11.8

%

15.4

%

22.1

%

Research and development plus capitalized software % of revenue

25.1

%

21.9

%

20.9

%

19.5

%

20.9

%

18.7

%

18.3

%

18.2

%

19.0

%

21.8

%

18.9

%

Stock-based compensation

(3.0

)

%

(3.1

)

%

(2.9

)

%

(2.1

)

%

(2.2

)

%

(1.5

)

%

(2.2

)

%

(2.6

)

%

(2.2

)

%

(2.7

)

%

(2.1

)

%

Non-GAAP research and development plus capitalized software % of revenue

22.1

%

18.8

%

18.0

%

17.4

%

18.7

%

17.2

%

16.1

%

15.6

%

16.8

%

19.1

%

16.8

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210216006046/en/

CONTACT: Investor Relations Contact: Jason Gold Phone: +1 (310) 526-2531 jgold@csod.com

CONTACT: Media Contact: Deaira Irons Phone: +1 (310) 752-0164 dirons@csod.com