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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 (Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to                      
Commission File Number 001-35098
 
Cornerstone OnDemand, Inc.
(Exact name of registrant as specified in its charter)

Delaware13-4068197
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
1601 Cloverfield Blvd.
Suite 620 South
Santa Monica, CA 90404
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:
(310) 752-0200
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareCSODNasdaq Stock Market LLC(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of October 30, 2020, the registrant had 64,602,956 shares of common stock, $0.0001 par value per share, outstanding.



CORNERSTONE ONDEMAND, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
  Page No.
TRADEMARKS
© Copyright 2020 Cornerstone OnDemand, Inc. All rights reserved. “Cornerstone,” “Cornerstone OnDemand,” the Cornerstone OnDemand logo, “CyberU” and other trademarks or service marks of Cornerstone OnDemand, Inc. appearing in this Quarterly Report on Form 10-Q are the property of Cornerstone OnDemand, Inc. Trade names, trademarks and service marks of other companies appearing in this Quarterly Report on Form 10-Q are the property of their respective holders and should be treated as such.
1


PART I. FINANCIAL INFORMATION

ITEM 1.Condensed Consolidated Financial Statements
CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)
(unaudited)
September 30, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$170,937 $215,907 
Short-term investments 201,579 
Accounts receivable, net156,738 131,105 
Deferred commissions, current portion38,874 33,215 
Prepaid expenses and other current assets30,577 30,512 
Total current assets397,126 612,318 
Capitalized software development costs, net51,683 50,023 
Property and equipment, net33,892 36,526 
Operating right-of-use assets78,874 72,944 
Deferred commissions, net of current portion76,621 74,563 
Long-term investments9,043 60,192 
Intangible assets, net458,006 9,440 
Goodwill960,420 47,453 
Deferred tax assets2,928 1,045 
Other assets10,843 1,597 
Total assets$2,079,436 $966,101 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$9,165 $3,803 
Accrued expenses90,665 78,075 
Deferred revenue, current portion370,494 339,522 
Operating lease liabilities, current portion17,230 7,235 
Debt, current portion10,047  
Other liabilities15,696 11,015 
Total current liabilities513,297 439,650 
Debt, net of current portion1,224,646 293,174 
Deferred revenue, net of current portion4,150 6,945 
Operating lease liabilities, net of current portion68,929 67,195 
Deferred tax liabilities17,396  
Other liabilities, non-current6,267 655 
Total liabilities1,834,685 807,619 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.0001 par value
6 6 
Additional paid-in capital808,592 682,717 
Accumulated deficit(566,223)(524,680)
Accumulated other comprehensive income2,376 439 
Total stockholders’ equity244,751 158,482 
Total liabilities and stockholders’ equity$2,079,436 $966,101 
See accompanying notes.
2


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 Three Months EndedNine Months Ended
September 30,September 30,
 2020201920202019
Revenue$199,498 $144,952 $533,992 $426,929 
Cost of revenue64,503 37,167 164,427 111,049 
Gross profit134,995 107,785 369,565 315,880 
Operating expenses:
Sales and marketing71,850 57,815 192,122 171,011 
Research and development29,665 25,695 82,088 77,778 
General and administrative28,884 20,562 79,229 65,741 
Acquisition-related costs4,852  31,756  
Restructuring1,362  11,095  
Total operating expenses136,613 104,072 396,290 314,530 
(Loss) income from operations(1,618)3,713 (26,725)1,350 
Other expense:
Interest expense(19,609)(3,321)(43,329)(9,889)
Other, net5,817 (1,018)(61)(2,720)
Other expense, net(13,792)(4,339)(43,390)(12,609)
Loss before income tax provision(15,410)(626)(70,115)(11,259)
Income tax (provision) benefit(371)(591)28,572 (2,227)
Net loss$(15,781)$(1,217)$(41,543)$(13,486)
Net loss per share, basic and diluted$(0.25)$(0.02)$(0.66)$(0.23)
Weighted average common shares outstanding, basic and diluted64,375 60,652 63,204 59,841 
See accompanying notes.
3


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(unaudited)
 Three Months EndedNine Months Ended
September 30,September 30,
 2020201920202019
Net loss$(15,781)$(1,217)$(41,543)$(13,486)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment(1,450)1,198 2,160 2,389 
Net change in unrealized gains (losses) on investments 167 (223)352 
Other comprehensive (loss) income, net of tax(1,450)1,365 1,937 2,741 
Total comprehensive (loss) income$(17,231)$148 $(39,606)$(10,745)
See accompanying notes.
4


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
 Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal
 SharesPar Value
Balance as of June 30, 202064,060 $6 $788,150 $(550,442)$3,826 $241,540 
Issuance of common stock upon the exercise of options70 — 1,166 — — 1,166 
Vesting of restricted stock units424 — — — —  
Stock-based compensation— — 19,276 — — 19,276 
Net loss— — — (15,781)— (15,781)
Other comprehensive loss, net of tax— — — — (1,450)(1,450)
Balance as of September 30, 202064,554 $6 $808,592 $(566,223)$2,376 $244,751 

 Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal
 SharesPar Value
Balance as of December 31, 201961,038 $6 $682,717 $(524,680)$439 $158,482 
Issuance of common stock upon the exercise of options774 — 9,354 — — 9,354 
Vesting of restricted stock units1,502 — — — —  
Shares issued under employee stock purchase plan130 — 4,370 — — 4,370 
Stock-based compensation— — 60,664 — — 60,664 
Common stock issued in acquisition1,110 — 32,889 — — 32,889 
Modification of Convertible Notes— — 18,598 — — 18,598 
Net loss— — — (41,543)— (41,543)
Other comprehensive income, net of tax— — — — 1,937 1,937 
Balance as of September 30, 202064,554 $6 $808,592 $(566,223)$2,376 $244,751 
See accompanying notes.















5


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)
(in thousands)
(unaudited)
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal
SharesPar Value
Balance as of June 30, 201959,977 $6 $637,770 $(532,895)$1,852 $106,733 
Issuance of common stock upon the exercise of options474 — 16,826 — — 16,826 
Vesting of restricted stock units529 — — — —  
Repurchase of common stock(254)— (13,530)— — (13,530)
Stock-based compensation— — 20,832 — — 20,832 
Net loss— — — (1,217)— (1,217)
Other comprehensive income, net of tax— — — — 1,365 1,365 
Balance as of September 30, 201960,726 $6 $661,898 $(534,112)$3,217 $131,009 

Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal
SharesPar Value
Balance as of December 31, 201858,886 $6 $585,387 $(520,626)$476 $65,243 
Issuance of common stock upon the exercise of options744 — 26,973 — — 26,973 
Vesting of restricted stock units1,260 — — — —  
Shares issued under employee stock purchase plan90 — 3,927 — — 3,927 
Repurchase of common stock(254)— (13,530)— — (13,530)
Stock-based compensation— — 59,141 — — 59,141 
Net loss— — — (13,486)— (13,486)
Other comprehensive income, net of tax— — — — 2,741 2,741 
Balance as of September 30, 201960,726 $6 $661,898 $(534,112)$3,217 $131,009 
See accompanying notes.
6


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended
September 30,
 20202019
Cash flows from operating activities
Net loss$(41,543)$(13,486)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization80,190 30,848 
Accretion of debt discount and amortization of debt issuance costs7,502 3,130 
Amortization (accretion) of purchased investment premium or discount, net41 (900)
Net foreign currency and other loss4,063 2,504 
Stock-based compensation expense55,197 55,714 
Deferred income taxes(32,081) 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable32,243 23,900 
Deferred commissions(8,715)(14,130)
Prepaid expenses and other assets14,302 12,589 
Accounts payable(6,852)(6,040)
Accrued expenses(4,545)(5,563)
Deferred revenue(43,349)(39,048)
Other liabilities5,456 3,437 
Net cash provided by operating activities61,909 52,955 
Cash flows from investing activities
Purchases of marketable investments(20,419)(201,981)
Maturities and sales of investments272,173 206,040 
Capital expenditures(2,910)(15,987)
Capitalized software costs(20,296)(18,835)
Cash paid for acquisitions, net of cash acquired(1,295,508) 
Net cash used in investing activities(1,066,960)(30,763)
Cash flows from financing activities
Proceeds from term loan debt, net of discount979,582  
Payments of debt issuance and modification costs(30,429) 
Proceeds from employee stock plans15,953 33,072 
Payment of tax withholdings for employee stock plans (5,469)
Repurchases of common stock (13,530)
Net cash provided by financing activities965,106 14,073 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash3 (1,123)
Net (decrease) increase in cash, cash equivalents, and restricted cash(39,942)35,142 
Cash, cash equivalents, and restricted cash at beginning of period215,907 183,596 
Cash, cash equivalents, and restricted cash at end of period$175,965 $218,738 
Supplemental cash flow data
Cash paid for interest$38,873 $17,356 
Cash paid for income taxes3,725 1,488 
Non-cash investing and financing activities:
Assets acquired under capital leases and other financing arrangements$ $1,276 
Capitalized assets financed by accounts payable and accrued expenses56 1,205 
Capitalized stock-based compensation5,467 3,427 
Issuance of common stock for partial consideration for acquisition32,889  
Increase in debt discount as a result of modification of Convertible Notes18,598  
As of September 30,
20202019
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents$170,937 $218,738 
Restricted cash included in prepaid expenses and other current assets3,752  
Restricted cash included in other assets1,276  
Total cash, cash equivalents, and restricted cash$175,965 $218,738 
See accompanying notes.
7


CORNERSTONE ONDEMAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Overview
Cornerstone OnDemand, Inc. (“Cornerstone” or the “Company”) is a leading global provider of people development solutions, delivered as software-as-a-service (“SaaS”). The Company helps organizations around the globe recruit, train, and manage their employees. The Company’s solution combines the world’s leading unified talent management solutions with state-of-the-art analytics and HR administration solutions to enable organizations to manage the entire employee lifecycle. Its focus on continuous learning and development helps organizations empower employees to realize their potential and drive success. On April 22, 2020, the Company acquired Saba Software, Inc. (“Saba”), a provider of talent experience solutions.
The Company works with customers across all geographies, vertical markets, and market segments. Its Learning, Performance, Recruiting, and HR administration solutions help with sourcing, recruiting, and onboarding new hires; managing training and development requirements; nurturing knowledge sharing and collaboration among employees; goal setting, reviews, competency management, and continuous feedback; linking compensation to performance; identifying development plans based on performance gaps; streamlining employee data management, self-service, and compliance reporting; and then utilizing state-of-the-art analytics capabilities to make smarter, more-informed decisions using data from across the solution for talent mobility, engagement, and development so that HR and leadership can focus on strategic initiatives to help their organizations succeed.
The Company’s management has determined that the Company operates in one segment as it only reports financial information on an aggregated and consolidated basis to the Company’s chief executive officer, who is the Company’s chief operating decision maker.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements. These unaudited condensed financial statements are presented in accordance with (i) accounting standards generally accepted in the United States of America (“GAAP”) for interim financial information and (ii) the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements include all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim periods presented.
Results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, for any other interim period, or for any other future year. Certain prior period balances have been reclassified to conform to the current period presentation.
Recently Adopted Accounting Pronouncements
Effective January 1, 2020, the Company adopted the requirements of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using a modified retrospective method of adoption. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q have been updated to comply with this new standard with results for reporting periods beginning after January 1, 2020 presented under ASU 2016-13, while prior period amounts and disclosures were not adjusted and continue to be reported under the accounting standards in effect for the prior periods. ASU 2016-13 replaces the incurred loss methodology with an expected loss methodology, referred to as current expected credit loss (“CECL”), for financial instruments, including accounts receivable. The cumulative effect of adopting ASU 2016-13 did not have a material impact on the Company’s accumulated deficit as of January 1, 2020. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current receivables aging, consideration of current conditions, and other relevant data.
On January 1, 2020, the Company adopted the requirements of Accounting Standards Update No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement (“ASU 2018-15”), using a prospective method of adoption. ASU 2018-15 aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.
8


Accounting Pronouncements Pending Adoption
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which enhances and simplifies various aspects of the income tax accounting guidance. The guidance is effective for the Company in the first quarter of 2021, although early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2019-12 on its consolidated financial statements.
Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission, or SEC, on February 25, 2020.
2.    BUSINESS COMBINATIONS
Saba
On April 22, 2020, the Company acquired 100% of the equity interests of the direct and indirect subsidiaries of Vector Talent Holdings, L.P., including Saba Software, Inc. (such subsidiaries, collectively, “Saba”), to expand its cloud-based learning, talent management, and talent experience software offerings. The Company acquired Saba for an aggregate purchase price of $1.310 billion, consisting of $1.277 billion in cash (net of cash acquired) and 1,110,352 shares of the Company's common stock with an aggregate value of $32.9 million. The acquisition was financed with a combination of cash on hand and proceeds from new borrowings (refer to Note 3 – Debt for further details). Under the terms of the purchase agreement, the final consideration is subject to certain adjustments based on a determination of closing net working capital and net indebtedness (as defined in the purchase agreement). The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill is primarily attributable to the acquired workforce and synergies expected to arise after the acquisition, including future technologies and customers of the combined business. The final allocation of purchase consideration to assets and liabilities remains in process as the Company continues to evaluate certain balances, estimates, and assumptions during the measurement period (up to one year from the acquisition date).
The results of operations and the provisional fair values of the assets acquired and liabilities assumed have been included in the condensed consolidated financial statements as of the date of acquisition. During the three and nine months ended September 30, 2020, Saba contributed approximately $47 million and $76 million to revenue, respectively. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as a result of the acquisition of Saba, as adjusted in the third quarter of 2020 (in thousands):
Preliminary Fair Value at Acquisition Date
Measurement Period Adjustments1
Adjusted Fair Value at Acquisition Date
Cash and cash equivalents$49,471 $49,471 
Accounts receivable58,764 58,764 
Prepaid expenses and other current assets13,020 13,020 
Property and equipment9,446 9,446 
Operating right-of-use assets16,700 16,700 
Intangible assets481,000 481,000 
Goodwill905,498 (2,694)902,804 
Other assets2,698 1,122 3,820 
Total assets1,536,597 (1,572)1,535,025 
Accounts payable and accrued expenses28,978 28,978 
Deferred revenue69,940 1,092 71,032 
Operating lease liabilities16,532 16,532 
Deferred tax liabilities, net46,472 46,472 
Other liabilities12,782 12,782 
Total liabilities174,704 1,092 175,796 
Total purchase consideration$1,361,893 $(2,664)$1,359,229 
1 The Company received approximately $2.7 million from escrow and made other revisions to certain acquired balances during the three months ended September 30, 2020.
9


Identifiable Intangible Assets
The following table provides the preliminary valuation of the Saba intangible assets, along with their estimated useful lives:
Estimated Fair Value
(in thousands)
Estimated Useful Life
(in years)
Customer relationships$294,800 11
Customer contracts58,500 2
Developed technology120,500 
3 5
Trade names, trademarks, and domain names7,200 3
Total$481,000 
The identifiable intangible assets are amortized on a straight-line basis over their respective estimated useful lives to sales and marketing for customer-related intangible assets, cost of revenue for developed technology intangible assets, and general and administrative expense for all other intangible assets. Management applied significant judgment in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to estimated future subscription revenue and related profit margins, costs anticipated to fulfill remaining acquired performance obligations and related profit margins, customer retention rates, technology migration curves, royalty rates, discount rates, and economic lives assigned to acquired intangible assets.
Unaudited Pro Forma Financial Information
The following table presents the unaudited pro forma results for the three and nine months ended September 30, 2020 and 2019. The unaudited pro forma financial information combines the results of operations of Cornerstone OnDemand and Saba as though the companies had been combined as of January 1, 2019. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at such time. The unaudited pro forma results presented below include adjustments for amortization of identifiable intangible assets, interest expense related to debt financing, and related tax effects (in thousands):
 Three Months EndedNine Months Ended
September 30,September 30,
 2020201920202019
Revenue$199,498 $209,465 $639,036 $618,765 
Net loss(10,776)(20,641)(95,625)(79,164)
Clustree
On January 24, 2020, the Company purchased all of the outstanding shares of Clustree SAS (“Clustree”), a developer of a skills engine and skills ontology. The Company paid cash consideration of approximately $18.6 million. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill generated from this transaction is primarily attributable to the ability to enhance the Company’s product portfolio. The final allocation of purchase consideration to certain assets and liabilities, primarily related to taxes and assumed liabilities, remains in process as the Company continues to evaluate certain estimates and assumptions during the measurement period (up to one year from the acquisition date).
The Company's preliminary allocation of the total purchase consideration as of January 24, 2020 is summarized below:
Fair Value
(in thousands)
Tangible assets$1,275 
Intangible assets developed technology
9,800 
Intangible assets customer relationships
800 
Goodwill8,875 
Deferred tax liabilities(1,020)
Accounts payable and accrued expenses(755)
Deferred revenue(336)
Net assets acquired$18,639 
10


The intangible assets related to developed technology and customer relationships are amortized on a straight-line basis over three years to cost of revenue and two years to sales and marketing expense, respectively.
Pro forma results of operations related to the acquisition of Clustree have not been presented as the impact of the acquisition is not material to the Company’s financial results.
Acquisition-related costs
Acquisition-related costs for both Saba and Clustree primarily consisted of external fees for advisory, legal, and other professional services, and totaled approximately $4.9 million and $31.8 million, for the three and nine months ended September 30, 2020, respectively. These costs were expensed as incurred and recorded in acquisition-related costs in the condensed consolidated statements of operations.
3.    DEBT
Term Loan B and Revolving Credit Facility
On April 22, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent (“Agent”), which provided for a seven-year senior secured term loan B facility (the “Term Loan Facility”) in an aggregate principal amount of $1.0047 billion for a purchase price equal to 97.5% of the aggregate principal amount after original issue discount. Principal payments are due quarterly, beginning in the fourth quarter of 2020, at a rate of 0.25% of the principal amount; the remaining outstanding principal balance is due in April 2027. In addition, the Company entered into a five-year senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $150.0 million, of which $50.0 million remained available at September 30, 2020. The available borrowings under the Revolving Credit Facility are limited by indebtedness covenants with the holders of the Convertible Notes (as defined below) and drawn letters of credit issued under the Credit Agreement. The Revolving Credit Facility includes a letter of credit sub-facility of up to $30.0 million. Borrowings under the Credit Agreement bear interest at a rate per annum equal to LIBOR for an interest period of one month, plus an applicable margin of 4.25%, with a 0.00% LIBOR floor. Interest is payable on a monthly or quarterly basis at the Company’s option.
The net carrying amounts of the components of the Term Loan Facility consist of the following (in thousands):
September 30, 2020
Principal amount$1,004,700 
Unamortized debt discount(23,971)
Unamortized debt issuance costs(22,237)
Net carrying value$958,492 
The effective interest rate is 5.3% for the Term Loan Facility as of September 30, 2020.
The following table presents the interest expense recognized related to the Term Loan Facility (in thousands):
Three Months EndedNine Months Ended
September 30, 2020
Contractual interest expense$12,061 $22,359 
Accretion of debt discount447 1,146 
Amortization of debt issuance costs425 1,088 
Total$12,933 $24,593 
Undrawn amounts under the Revolving Credit Facility accrue a commitment fee at an initial per annum rate of 0.50% subject to certain adjustments, beginning July 1, 2020. In addition to the unused commitment fee, the Company is required to pay certain letter of credit and related fronting fees and other administrative fees. The Company did not draw any amounts under the Revolving Credit Facility as of September 30, 2020.
The Term Loan Facility, Revolving Credit Facility, and Convertible Notes (as discussed below) contain customary covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens, make certain investments (including acquisitions), dispose of certain assets, and make certain payments (including share repurchases and dividends). As of September 30, 2020, the Company was in compliance with all financial covenants.
11


Convertible Notes
In 2017, the Company issued $300.0 million principal amount of 5.75% senior convertible notes (the “Convertible Notes”) for a purchase price equal to 98% of the principal amount. The Company received net proceeds of $284.8 million, net of a discount of $6.0 million and issuance costs of $9.2 million. The debt discount is being accreted to interest expense over the term of the Convertible Notes using the effective interest method. The issuance costs were deferred and are being amortized to interest expense over the term of the Convertible Notes using the effective interest method. Interest is payable semi-annually in arrears on January 1 and July 1, commencing January 1, 2018.
The Convertible Notes are convertible at an initial conversion rate of 23.8095 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which represents an initial conversion price of $42.00 per share, subject to adjustment for anti-dilutive issuances, voluntary increases in the conversion rate, and make-whole adjustments upon a fundamental change. A fundamental change includes a change in control, delisting of the Company’s common stock, or a liquidation of the Company. Upon conversion, the Company will deliver the applicable number of the Company’s common stock and cash in lieu of any fractional shares. Holders of the Convertible Notes may convert their Convertible Notes at any time prior to the close of business on the scheduled trading day immediately preceding the maturity date.
The holders of the Convertible Notes may require the Company to repurchase all or a portion of their Convertible Notes at a cash repurchase price equal to 100% of the principal amount of the notes being repurchased, plus the remaining scheduled interest through and including the maturity date, upon a fundamental change or event of default, including non-payment of interest or principal and other obligations.
On April 20, 2020, the Company amended the indenture to the Convertible Notes with US Bank National Association, as trustee (the “Supplemental Indenture”). Upon the completion of the acquisition of Saba on April 22, 2020, the Supplemental Indenture became effective, which permitted the Company to incur additional indebtedness and extended the maturity date of the Convertible Notes from July 1, 2021 to March 17, 2023. In connection with this amendment, the Company paid approximately $3.4 million in consent and other fees to the holders of the Convertible Notes which were capitalized as debt issuance costs. As part of the amendment, the Company applied modification accounting as the criteria requiring extinguishment accounting were not met. As a result of the modification accounting, the fair value of the conversion feature increased by $18.6 million. This increase in fair value was recorded as a debt discount with a corresponding increase to additional paid-in capital. The Company will accrete the debt discount related to the conversion feature and amortize the debt issuance costs related to consent and other fees, including the previously unaccreted and unamortized amounts, to interest expense over the remaining term of the Convertible Notes.
The net carrying amounts of the components of the Convertible Notes consist of the following (in thousands):
September 30, 2020December 31, 2019
Principal amount$300,000 $300,000 
Unaccreted debt discount(17,930)(2,691)
Unamortized debt issuance costs(5,869)(4,135)
Net carrying value$276,201 $293,174 
The effective interest rate is 9.9% for the Convertible Notes as of September 30, 2020.
The following table presents the interest expense recognized related to the Convertible Notes (in thousands):
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Contractual interest expense$4,313 $4,313 $12,939 $12,939 
Accretion of debt discount1,428 418 3,358 1,233 
Amortization of debt issuance costs414 642 1,670 1,897 
Total$6,155 $5,373 $17,967 $16,069 

12


4.    NET LOSS PER SHARE
The following table presents the Company’s basic and diluted net loss per share (in thousands, except per share amounts): 
 Three Months EndedNine Months Ended
September 30,September 30,
 2020201920202019
Net loss$(15,781)$(1,217)$(41,543)$(13,486)
Net loss per share, basic and diluted$(0.25)$(0.02)$(0.66)$(0.23)
Weighted-average shares of common stock outstanding,
basic and diluted
64,375 60,652 63,204 59,841 
The potential shares of common stock that would have a dilutive impact are computed using the treasury stock method or the if-converted method, as applicable. The following potential shares were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive (in thousands):
September 30,
 20202019
Options to purchase common stock, restricted stock units, and performance-based restricted stock units8,091 9,146 
Shares issuable pursuant to employee stock purchase plan161 103 
Convertible notes7,143 7,143 
Total shares excluded from net loss per share15,395 16,392 

14


5.    CASH AND INVESTMENTS
The Company’s investments in marketable and non-marketable securities are made pursuant to its investment policy, which has established guidelines relative to the diversification of the Company’s investments and their maturities, with the principal objective of capital preservation and maintaining liquidity that is sufficient to meet cash flow requirements.
As of September 30, 2020, the Company did not have any marketable investments. The following is a summary of cash and marketable investments, including those that meet the definition of a cash equivalent, as of December 31, 2019 (in thousands):
Amortized CostUnrealized GainsUnrealized LossesFair Value
Cash$67,818 $— $— $67,818 
Cash equivalents:
Money market funds126,075   126,075 
Corporate bonds1,000   1,000 
Agency bonds6,485 1  6,486 
Commercial paper9,609  (1)9,608 
Certificates of deposit171   171 
US treasury securities4,749   4,749 
Total cash equivalents148,089 1 (1)148,089 
Total cash and cash equivalents$215,907 $1 $(1)$215,907 
Short-term investments:
Corporate bonds$103,130 $110 $(7)$103,233 
Agency bonds3,966 2  3,968 
US treasury securities50,703 62 (1)50,764 
Commercial paper23,827 1  23,828 
Certificates of deposit3,936 2 (1)3,937 
Asset-backed securities15,837 12  15,849 
Total short-term investments$201,399 $189 $(9)$201,579 
Long-term marketable investments:
Corporate bonds$19,407 $12 $(4)$19,415 
US treasury securities19,300 25  19,325 
Asset-backed securities11,693 10 (1)11,702 
Total long-term marketable investments$50,400 $47 $(5)$50,442 
Unrealized gains and losses on investments were immaterial individually and in aggregate as of September 30, 2020 and December 31, 2019. Realized gains and losses for sales of investments during the three and nine months ended September 30, 2020 and 2019 were immaterial.
The Company’s long-term investments are composed of the following (in thousands):
September 30, 2020December 31, 2019
Long-term marketable investments$ $50,442 
Non-marketable investments9,043 9,750 
Total long-term investments$9,043 $60,192 
The Company’s non-marketable investments are composed of the following (in thousands):
September 30, 2020December 31, 2019
Accounted for at cost, adjusted for observable price changes$1,750 $1,750 
Accounted for using the equity method7,293 8,000 
Total non-marketable investments$9,043 $9,750 

15


6.    INTANGIBLE ASSETS AND GOODWILL
Finite-lived Intangibles
The Company has finite-lived intangible assets which are amortized over their estimated useful lives on a straight-line basis. The following table presents the gross carrying amount and accumulated amortization of finite-lived intangible assets (dollars in thousands):
 September 30, 2020December 31, 2019
 Weighted Average Useful Life
(in years)
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated Amortization