| Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are presented in accordance with accounting standards generally accepted in the United States of America (“GAAP”), and include the accounts of Cornerstone OnDemand, Inc. and its wholly owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. Certain prior period balances have been reclassified to conform to the current year presentation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management evaluates its estimates, including but not limited to those related to: (i) the realization of tax assets and estimates of tax liabilities and reserves, (ii) the recognition and disclosure of contingent liabilities, (iii) the evaluation of revenue recognition criteria, including the determination of standalone value and estimates of the selling price of multiple-deliverables in the Company’s revenue arrangements, (iv) fair values of investments in marketable securities and strategic investments carried at fair value, (v) the fair values of acquired assets and assumed liabilities in business combinations, (vi) the useful lives of property and equipment, capitalized software, and intangible assets, (vii) impairment of long-lived assets, (viii) the period of amortization of the commission payments to record to expense and (ix) determination of the number of shares that are probable of vesting for performance-based restricted stock unit awards (“PRSUs”). These estimates are based on historical data and experience, future expectations, and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Revision of Prior Period Financial Statements During the preparation of the financial statements for the three months ended September 30, 2019 , the Company identified a misstatement in previously issued financial statements. The misstatement related to an error in the measurement of the cumulative effect of the accounting change related to the Company’s January 1, 2018 adoption of Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09” or “Topic 606”) and impacted the January 1, 2018 opening accumulated deficit balance and the related opening balances of deferred commissions assets and accrued expenses. The Company determined that the error was not material to any previously issued financial statements. The Company has revised the December 31, 2018 consolidated balance sheet and the statements of changes in stockholders’ equity for all periods after January 1, 2018 to correct the misstatement as follows (in thousands): December 31, 2018 As Previously Reported Adjustment As Revised Deferred commissions, current portion $ 24,467 $ 1,064 $ 25,531 Total current assets 573,035 1,064 574,099 Deferred commissions, net of current portion 45,444 10,006 55,450 Total assets 807,156 11,070 818,226 Accrued expenses 68,331 1,734 70,065 Total current liabilities 400,423 1,734 402,157 Accumulated deficit (529,962 ) 9,336 (520,626 ) Total stockholders’ equity 55,907 9,336 65,243 Total liabilities and stockholders’ equity 807,156 11,070 818,226 Business Combinations The results of operations of entities acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. The Company determines the estimated fair value of assets acquired and liabilities assumed for an acquisition and allocates the purchase price to its respective net tangible and intangible assets on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Revenue Recognition Effective January 1, 2018, the Company adopted the guidance under Topic 606 using a modified retrospective approach. The Company derives its revenue from the following sources: Subscriptions to the Company’s products and other offerings on a recurring basis Customers pay subscription fees for access to the Company’s enterprise people development solution, other products, and support on a recurring basis. Fees are based on a number of factors, including the number of products purchased, which may include e-learning content, and the number of users having access to a product. The Company generally recognizes revenue from subscriptions ratably over the term of the agreements beginning on the date the subscription service is made available to the customer. Subscription agreements are typically three years, billed annually in advance, and non-cancelable, with payment due within 30 days of the invoice date. Professional services and other The Company offers its customers and implementation partners assistance in implementing its 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 up-front on a fixed fee basis and to a lesser degree on a time-and-material basis. These services are generally purchased as part of a subscription arrangement and are typically performed within the first several months of the arrangement. Customers may also purchase professional services at any other time. The Company generally recognizes 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. Out-of-pocket travel costs related to the delivery of professional services are typically reimbursed by the customer and are accounted for as revenue in the period in which the cost is incurred. The Company recognizes revenue from contracts with customers based on the five steps below. The application of these steps may require the use of certain estimates and judgments, particularly in identifying and evaluating complex or unusual contract terms and conditions that may impact revenue recognition. 1) Identification of the contract, or contracts, with a customer 2) Identification of all performance obligations in the contract 3) Determination of the transaction price 4) Allocation of the transaction price to the performance obligations in the contract 5) Recognition of revenue as the Company satisfies a performance obligation The Company identifies enforceable contracts with a customer when the agreement is signed. Some of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, the products sold, customer demographics, geographic locations, and the number and types of users within the Company’s contracts. For arrangements in which the Company resells third-party e-learning training content to customers, revenue is recognized at the gross amount invoiced to customers as (i) the Company is primarily responsible for hosting the content on the Company’s solution for the term of the agreement, (ii) the Company controls the content before access is provided to the customer, and (iii) the Company typically has discretion to establish the price charged. Deferred Revenue The Company records amounts that have been invoiced to its customers in accounts receivable and deferred revenue. The Company records revenue once the revenue recognition criteria described above have been met. Deferred revenue that will be recognized during the succeeding twelve-month period from the respective balance sheet date is recorded as current deferred revenue and the remaining portion is recorded as non-current. Sales Commissions The Company defers commissions paid to its sales force and related payroll taxes as these amounts are incremental costs of obtaining a contract with a customer and are recoverable from future revenue due to the non-cancelable customer agreements that gave rise to the commissions. Separate periods of benefit are determined for commissions related to initial contracts and commissions related to renewal contracts. Commissions for initial contracts are deferred on the consolidated balance sheets and amortized on a straight-line basis over a six year benefit period. The Company takes into consideration technology and other factors in estimating the benefit period. Commissions for renewal contracts are deferred and amortized on a straight-line basis over the related contract renewal period. Amortization expense is included in sales and marketing expenses in the accompanying consolidated statements of operations. Cost of Revenue Cost of revenue consists primarily of costs related to hosting the Company’s products and delivery of professional services, and includes the following: • personnel and related expenses, including stock-based compensation; • expenses for network-related infrastructure and IT support; • delivery of contracted professional services and ongoing customer support staff; • payments to external service providers contracted to perform implementation services; • depreciation of data centers and amortization of capitalized software costs, developed technology software license rights, content and licensing fees, and referral fees. In addition, the Company allocates a portion of overhead, such as rent, IT costs, depreciation and amortization, and employee benefits costs, to cost of revenue based on headcount. Costs associated with providing professional services are recognized as incurred when the services are performed. Out-of-pocket travel costs related to the delivery of professional services are typically reimbursed by the customer and are accounted for as cost of revenue in the period in which the cost is incurred. Cost of revenue also includes fees paid to third-party content providers. Research and Development Research and development expenses consist primarily of personnel and related expenses for the Company’s 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 expenses are expensed as incurred except for certain software development costs which are capitalized when the following criteria are met: the preliminary project stage is completed, management has decided to make the project a part of its future offering and the software will be used to perform the function intended incurred. Advertising Advertising expenses for 2019 , 2018 , and 2017 were $10.8 million , $7.1 million , and $9.0 million , respectively, and are expensed as incurred and recorded within sales and marketing in the accompanying consolidated statements of operations. Stock-Based Compensation The Company measures and recognizes compensation expense for stock-based awards granted to employees and directors using a fair value method, including restricted stock units (“RSUs”), PRSUs, stock options, and purchases under the 2010 Employee Stock Purchase Plan (“ESPP”). For RSUs, and PRSUs with service and performance conditions, fair value is based on the closing price of the Company’s common stock on the date of grant. For PRSUs with service and market conditions, fair value is estimated using a Monte-Carlo simulation. The Company recognizes compensation expense for PRSUs only if it is probable the performance or market conditions will be met, which is dependent upon its expectations of whether future specified financial targets will be achieved. The likelihood of achievement of these targets is assessed at each balance sheet date. Previously recognized compensation expense may be prospectively adjusted if current expectations differ from assessments made in previous periods. Compensation expense, net of estimated forfeitures, is recognized over the requisite service period (which is generally the vesting period) on a straight-line basis for awards with only service conditions and using the accelerated attribution method for awards with both performance or market and service conditions. The Company estimates forfeitures based on its historical experience and regularly reviews the estimated forfeiture rate and makes changes as factors affecting the forfeiture rate calculations and assumptions change. For stock options and ESPP, fair value is estimated using the Black-Scholes option pricing model. The risk-free interest rate is based on the US Treasury yield in effect during the period the award was granted. The expected term for stock options is determined using a simplified approach in which the expected term of an option is presumed to be the mid-point between the vesting date and the expiration date of the option. The expected term for ESPP approximates the term of the offering period. The computation of the expected volatility assumption is based on the historical volatility of the Company’s common stock. The dividend yield is assumed to be zero as the Company has not paid and does not expect to pay dividends for the foreseeable future. Compensation expense is recognized on a straight-line basis over the requisite service period. Due to the full valuation allowance provided on its net deferred tax assets, the Company has not recorded any significant tax benefit attributable to stock-based compensation expense as of December 31, 2019 , 2018 , and 2017 . Capitalized Software Costs The Company capitalizes the costs associated with software developed or obtained for internal use, including costs incurred in connection with the development of its products, when the preliminary project stage is completed, management has decided to make the project a part of its future offering and the software will be used to perform the function intended. These capitalized costs include external direct costs of materials and services consumed in developing or obtaining internal-use software, personnel, and related expenses for employees who are directly associated with internal-use software projects, and, when material, interest costs incurred during the development. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Costs incurred for upgrades to the products are also capitalized. Post-configuration training and maintenance costs are expensed as incurred. Capitalized software costs are amortized to cost of revenue using the straight-line method over an estimated useful life of the software, which is typically three years , commencing when the software is ready for its intended use. The Company does not transfer ownership of or lease its software to its customers. Income Taxes The Company uses the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities, using tax rates expected to be in effect during the years in which the bases differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need for valuation allowances, the Company considers projected future taxable income and future reversals of existing taxable differences. The Company has recorded a full valuation allowance to reduce its US, UK, New Zealand, Hong Kong, and Brazil net deferred tax assets to zero, as it has determined that it is not more likely than not that any of these net deferred tax assets will be realized based on a history of losses in these jurisdictions. The Company has assessed its income tax positions and recorded tax benefits for all years subject to examination, based upon its evaluation of the facts, circumstances, and information available at each period end. For those tax positions where the Company has determined there is a greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is determined there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less on the date of purchase to be cash equivalents. Investments in Marketable Securities The cost of marketable securities is determined based on historical cost through the specific identification method and any realized or unrealized gains or losses on investments are reflected as a component of other income (expense). In addition, the Company classifies marketable securities as current or non-current based upon the maturity dates of the securities. Strategic Investments The Company invests in equity securities of various privately-held companies. When the fair value of an investment is not readily determinable, the Company accounts for the investment using the measurement alternative, which is defined as cost, plus or minus changes resulting from observable price changes. If the Company has significant influence or a controlling financial interest over the entity, the investment is accounted for using the equity method. Under the equity method, the Company records its proportionate share of the equity method investee’s income or loss, net of the effects of any basis differences, to other income (expense) on a one-quarter lag in the accompanying consolidated statements of operations. These investments are included in long-term investments on the consolidated balance sheets. Strategic investments are subject to periodic impairment reviews; impairment losses are recorded in other income (expense) in the accompanying consolidated statements of operations. Allowance for Doubtful Accounts The Company bases its allowance for doubtful accounts on its historical collection experience and a review in each period of the status of the then-outstanding accounts receivable. A reconciliation of the beginning and ending amount of allowance for doubtful accounts is as follows (in thousands): 2019 2018 2017 Beginning balance, January 1 $ 2,429 $ 7,478 $ 3,532 Additions and adjustments 1,074 1,691 7,680 Write-offs (2,128 ) (6,740 ) (3,734 ) Ending balance, December 31 $ 1,375 $ 2,429 $ 7,478 The Company recognized bad debt expense of $0.5 million , $0.8 million , and $1.4 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively. Property and Equipment Property and equipment are recorded at historical cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets, generally two years to seven years (refer to Note 7). Leasehold improvements are depreciated on a straight-line basis over their estimated useful lives or the term of the lease. Repair and maintenance costs are charged to expense as incurred, while renewals and improvements are capitalized. Impairment of Long-lived Assets The Company evaluates the recoverability of its long-lived assets with finite useful lives, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Such triggering events or changes in circumstances may include: a significant decrease in the market price of a long-lived asset, a significant adverse change in the extent or manner in which a long-lived asset is being used, a significant adverse change in legal factors or in the business climate, the impact of competition or other factors that could affect the value of a long-lived asset, a significant adverse deterioration in the amount of revenue or cash flows expected to be generated from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable and the expected undiscounted future cash flows attributable to the asset group are less than the carrying amount of the asset group, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Fair value is determined based upon estimated undiscounted future cash flows. Intangible Assets Identifiable intangible assets primarily consist of acquisition-related intangibles. The Company determines the appropriate useful life of its intangible assets by performing an analysis of expected cash flows of the acquired assets. Intangible assets are amortized over their estimated useful lives ranging from three to six years , generally using the straight-line method which approximates the pattern in which the economic benefits are consumed. Goodwill Goodwill is not amortized; it is tested for impairment annually, and more frequently upon the occurrence of certain events. The Company performs such testing of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Convertible Notes In June 2013, the Company issued 1.50% convertible notes due July 1, 2018 with a principal amount of $253.0 million (the “2018 Notes”). The 2018 Notes were paid on July 2, 2018 and are no longer outstanding. In December 2017, the Company issued 5.75% senior convertible notes due July 1, 2021 with a principal amount of $300.0 million (the “2021 Notes”). In accounting for the 2018 Notes at issuance, the Company separated the 2018 Notes into debt and equity components pursuant to the accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion. The fair value of the debt component was estimated using an interest rate, with terms similar to the 2018 Notes, excluding the conversion feature. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature. The excess of the principal amount of the 2018 Notes over the fair value of the debt component was recorded as a debt discount and a corresponding increase in additional paid-in capital. The debt discount is accreted to interest expense over the term of the 2018 Notes using the interest method. The equity component of the 2018 Notes recorded to additional paid-in capital is not to be remeasured as long as it continues to meet the conditions for equity classification. The 2021 Notes were recorded based on the fair value of the proceeds, net of discounts and issuance costs, and will be accreted to face value over the term of the 2021 Notes. Fair Value of Financial Instruments Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal, or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on the following three levels of inputs, of which the first two are considered observable and the last one is considered unobservable: • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that management 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. Observable inputs are based on market data obtained from independent sources. Concentration of Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, debt securities, and accounts receivable. The Company’s deposits exceed federally insured limits. The Company performs ongoing credit evaluations of its customers. For the years ended December 31, 2019 , 2018 , and 2017 , no single customer comprised more than 10% of the Company’s revenue. No single customer had an accounts receivable balance greater than 10% of total accounts receivable at December 31, 2019 or 2018 . Foreign Currency Transactions and Translation Transactions in foreign currencies are translated into US dollars at the rates of exchange in effect at the date of the transaction. Unrealized transaction losses were approximately $(1.2) million , $(0.4) million , and $(3.1) million for the years ended December 31, 2019 , 2018 , and 2017 , respectively, and are included in other, net within other income (expense), in the accompanying consolidated statements of operations. The Company has entities in various countries. For entities where the local currency is different than the functional currency, the local currency financial statements have been remeasured from the local currency into the functional currency using the current exchange rate for monetary accounts and historical exchange rates for non-monetary accounts, with exchange differences on remeasurement included in other income (expense). To the extent that the functional currency of the Company’s subsidiaries is different than the US dollar, the financial statements have then been translated into US dollars using period-end exchanges rates for assets and liabilities and average exchanges rates for the results of operations. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive income in the consolidated balance sheets. Leases The Company has various non-cancelable arrangements to lease office and dedicated data center facility space. These arrangements include services and other incremental costs to maintain or operate the space and do not contain any significant residual value guarantees, significant variable payments, or restrictive covenants. The Company determines at contract inception whether the arrangement 1) contains a lease based on its ability to control a physically distinct asset for more than 12 months, and 2) should be classified as an operating or finance lease. For both its office and data center facility leases, the Company combines all components of the lease including related services as a single component. Operating leases are reflected as operating right-of-use (“ROU”) assets and operating lease liabilities in the accompanying consolidated balance sheets. Operating ROU assets represent the Company’s right to use the underlying asset for the lease term. Operating lease liabilities represent the Company’s obligation to make payments arising from the lease. The operating ROU asset also includes any lease payments made and excludes lease incentives. The liabilities are measured at the commencement date based on the present value of lease payments over the lease term utilizing an estimated incremental borrowing rate. Lease payments are typically discounted at an estimated incremental borrowing rate as the interest rate implicit in the lease cannot be readily determined in the absence of key inputs which are typically not reported by our lessors. Judgment was used to estimate the incremental borrowing rate associated with these leases based on relevant market data and Company inputs applied to accepted valuation methodologies. The Company recognizes lease expense relating to its operating leases on a straight-line basis over the lease term, which commences when the Company controls the leased asset. The lease term includes optional periods to extend or terminate the leases when it is reasonably certain that the option will be exercised. Lease incentives are recognized as a reduction to lease expense on a straight-line basis over the underlying lease term. In the normal course of operations, the Company enters into subleases for unoccupied leased office space. Any sublease payments received are recognized as a reduction to the related lease expense on a straight-line basis over the life of the sublease. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02” and “ASU 2018-11”). The ASU requires lessees to record most leases on their balance sheets but recognize the expense on their statements of operations in a manner similar to accounting rules previously in effect. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a ROU asset for the right to use the underlying asset for the lease term. The Company has completed its implementation of ASU 2016-02 and applicable methods of transition. As permitted under the transition guidance, for leases in existence prior to adoption, the Company carried forward the assessment of whether its arrangements are or contain leases, the classification of its leases, the impact of initial direct costs associated with its leases, and the remaining lease terms. The Company adopted the requirements of ASU 2016-02 utilizing the modified retrospective method of transition to identified leases as of January 1, 2019 (the “effective date”). The adoption of the standard had a material impact to the Company’s consolidated balance sheets. There was no impact upon adoption to the consolidated statements of operations or cash flows. The impact of the adoption was due to: • 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 12 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 was complete and the Company was leasing the constructed asset but previously did not qualify for sale accounting. The lease for this facility was treated as an operating lease upon the adoption of ASU 2016-02 and was included in the operating lease liabilities and ROU assets recorded on adoption. Accounting Pronouncements Pending Adoption In June 2016, the FASB issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments,” (“ASU 2016-13”). The ASU requires recognition of an estimate of lifetime expected credit losses as an allowance. Adoption of the standard will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of January 1, 2020, the effective date, to al |
