Cornerstone Q1 2020 Earnings Presentation
Safe Harbor This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that look to future events and consist of, among other things, statements regarding our future financial and operating performance, including our GAAP and non-GAAP guidance, the growth of the learning and human capital management market, our business strategy, the integration of Saba into our business, and our plans and objectives for future operations. In light of the risks and uncertainties outlined below, the future events and circumstances discussed in this presentation may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the date of this presentation and management’s good faith belief as of such date with respect to future events, including management’s current expectations and projections about futur e events and financial trends affecting our business, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: Statements regarding the Company’s business strategies; • The Company’s anticipated future operating results and operating expenses; • The Company’s ability to attract new clients to enter into subscriptions for its solutions, to service those clients effectiv ely and to induce them to renew and upgrade their deployments of the Company’s solutions; • The Company’s ability to expand its sales organization to address effectively the new industries, geographies and types of or ganizations the company intends to target; • The Company’s ability to accurately forecast revenue and appropriately plan its expenses; market acceptance of enhanced solut ions, alternate ways of addressing people development needs or new technologies generally by the • Company and its competitors; continued acceptance of SaaS as an effective method for delivering people development solutions and other business management applications; The Company’s ability to protect and defend its intellectual property; costs associated with defending intellectual property infringement and other claims; • The effects on the Company of global outbreaks of pandemics or contagious diseases or fear of such outbreaks, such as the recent COVID-19 pandemic; • Events in the markets for the Company’s solutions and alternatives to the Company’s solutions, as well as in the United State s a nd global markets generally; future regulatory, judicial and legislative changes in the Company’s industry; • changes in the competitive environment in the Company’s industry and the markets in which the Company operates; The failure to achieve expected synergies and efficiencies of operations between Cornerstone and Saba; the ability of Cornerstone and Saba to successfully integrate their respective market opportunities, technology, products, • personnel and operations; The other factors discussed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s periodic reports filed with the Securities and Exchange Commission (the • “SEC”). In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” and similar expressions or the negative of such terms or other comparable terminology. Forward-looking statements speak only as of the date of this presentation. You should not put undue reliance on any forward-looking statement. The Company assumes no obligation to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting future performance or results, except to the extent required by applicable laws. If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Please see the discussion of these non-GAAP financial measures and their reconciliations to the most directly comparable U.S. GAAP measures at the end of this presentation. The financial information of Saba included in this presentation is preliminary, unaudited and subject to revision upon completion of closing and audit processes. 2
Welcome and COVID-19 Update 3
Business Resiliency COVID-19 Response: Work from home beginning March 11 • Addressing client hardships • Launch of Cornerstone Cares • Launch of Remote Work Essentials • Extensive scenario planning • Liquidity stress testing • 4
COVID has Brought Challenges • New logo acquisition • Cross-sells 5
Highly Diversified ARR…. (CSOD + Saba) 2019 ARR Breakdown by Segment Others Telecommunication Healthcare Utilities CSOD Saba Food & Beverage Industry Exposure Exposure Media & Entertainment Hotels, restaurants & Technology leisure 3% 3% Public Sector Pharmaceuticals & Life Sciences Specialty retail 2% 2% Education Consumer Services Airlines 1% 1% Professional Services Automobiles Oil, gas & consumable Materials fuels 1% 1% Banks Insurance Retailing Capital Goods Transportation Software & Services Diversified Financials Notes: 6 1 - Chart is drawn approximately to scale and not intended to be a precise measurement tool 2 – Cornerstone and Saba stand-alone exposures refer to their respective percentage of total ARR by segment
….that is also Primarily Up -market (ARR) (CSOD + Saba) 2019 ARR Breakdown by Company Size Less than 500 Employees Customers with greater than 500 Employees 7 Chart is drawn approximately to scale and not intended to be a precise measurement tool
Dollars of ARR Up for Renewal in 2020 (CSOD + Saba) Real Estate Others Household & Personal Products Healthcare Energy Consumer Goods Professional Services Media CSOD Saba Food & Beverage Materials Industry Exposure Exposure Non-Profit Telecommunication Hotels, restaurants & leisure 2% 2% Utilities Consumer Services Specialty retail 2% 3% Technology Airlines 1% 1% Pharmaceuticals & Life Science Capital Goods Oil, gas & consumable fuels 0% 0% Automobiles Insurance (1) Public Sector Software & Services Banks Education Retail Transportation Financials Notes: 1 – Chart is drawn approximately to scale and not intended to be a precise measurement tool 2 – Cornerstone and Saba stand-alone exposures refer to their respective percentage of total ARR by segment 8 (1) Excludes United States Postal Services and US Census
Response: Stress-Testing our Liquidity Q1:20 Q2:20 Q3:20 Q4:20 Q1:21 Q2:21 Q3:21 Q4:21 Total Liquidity Even if we sell $0 in new ARR between Q2 2020 and Q4 2021, we expect our pro forma liquidity to grow and exceed $225M at the end of 2021 (1) Q1 20 is pro-forma liquidity assuming the Saba acquisition closed (2) Assumes flat renewal rates for CSOD and an increase in churn for Saba 9 (3) Chart is drawn approximately to scale and not intended to be a precise measurement tool
Financial Review 10
Q1 Performance Q1 2019 Q1 2020 Q1 2020 Difference Q1 2019 GAAP Guidance Non-GAAP GAAP Non-GAAP (from midpt) Subscription Revenue $131.3M $131.3M $144.4M $144.4M $143.0 - $145.0 $0.4M Total Revenue $140.1M $140.1M $150.1M $150.1M $147.0 - $150.0 $1.6M Low Teens Operating Operating Margin 0.9% 14.0% (1.8%) 16.6% ~4pts Margin 11 Notes: 1 – Please see the appendix for a GAAP to Non-GAAP reconciliation
Saba Transaction 12
Summary of Transaction Terms ($ in millions) $1,500 $ 1,395M $1,400 $1,295M (1) $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 (2) Price at Annoucement Final Purchase Price Cash Equity 13 (1) 1,110,352 shares of common stock were issued at $0.0001 par value. $29.62 on closing date (April 22, 2020) and $55.05 on the announcement date (February 24, 2020) (2) Buyer also agreed to pay certain seller transaction fees, which are not included here
Our Industrial Logic of Deal Together we are Bigger and Stronger We believe the combination offers huge benefits INNOVATION REACH CASH FLOW 14
Strong History of Technological Innovation Now Accelerated with Significantly More Resources Globally +60% 2020 Lower-Cost Innovation Resources Artificial Intelligence 2010 1999 Open Platforms Big Data Mobile Secure Global Multitenant Cloud 15
Combined 7000+ Clients Combined ~7,000 Global Clients including many of the world’s leading companies 16 Notes: 1 – Number of clients is approximate and as of 12/31/2019 for the combined Cornerstone + Saba
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