SANTA MONICA, Calif.–(BUSINESS WIRE)–Human capital management software provider Cornerstone
OnDemand, Inc. (NASDAQ: CSOD) today announced results1
for its first quarter ended March 31, 2019. The Company has provided a
quarterly shareholder letter on its Investor Relations website at http://investors.cornerstoneondemand.com.
“We are off to a great start for 2019, continuing the momentum that we
saw during 2018,” said Adam Miller, founder and CEO of Cornerstone.
“With the skills divide making news almost every week, learning and
development directors are embracing solutions like ours. The injection
of our emerging content business into our massive installed base of more
than 40 million users, is enabling us to truly differentiate.”
Adoption of the New Lease Standard – ASC 842:
The Company adopted the new lease accounting standard Accounting
Standards Codification (“ASC”) 842 effective January 1, 2019 on a
modified retrospective basis. Financial results for reporting periods
during 2019 are presented in compliance with the new lease standard.
Historical financial results for reporting periods prior to 2019 are
presented in conformity with amounts previously disclosed under the
prior lease accounting standard. The new lease accounting standard does
not result in any change to future operating expenses or cash flows.
First Quarter 2019 Results:
-
Revenue for the first quarter of 2019 was $140.1 million compared to a
guided range of $134.5 million to $136.5 million. This
represents a 5.3% increase compared to the same period of the prior
year. Revenue growth on a constant currency basis was 7.3%. -
Subscription revenue for the first quarter of 2019 was $131.3 million
compared to a guided range of $127.5 million to $129.5 million. This
represents a 16% increase compared to the same period of the prior
year. Subscription revenue growth on a constant currency basis was
18.2%. -
Operating income for the first quarter of 2019 was $1.2 million,
yielding a margin of 0.9%, compared to $(8.8) million and margin of
(6.6)% in the same period of the prior year. -
Non-GAAP operating income for the first quarter of 2019 was $19.6
million, yielding a margin of 14%, compared to $12.9 million and
margin of 9.7% in the same period of the prior year. -
Net loss for the first quarter of 2019 was $(3.5) million, or a
$(0.06) diluted net loss per share, compared to $(16.2) million and
$(0.28) diluted net loss per share in the same period of the prior
year. -
Non-GAAP net income for the first quarter of 2019 was $15.9 million,
or a $0.25 diluted net income per share, compared to $9.0 million and
$0.14 diluted net loss per share in the same period of the prior year. -
Operating cash flow for the first quarter of 2019 was $7.3 million,
yielding a margin of 5.2%, compared to $(4.6) million, yielding a
margin of (3.4)%, in the same period of the prior year. -
Unlevered free cash flow for the first quarter of 2019 was $4.3
million, yielding a margin of 3.1%, compared to $(10.2) million,
yielding a margin of (7.6)%, in the same period of the prior year.
“During Q1, we continued to expand our operating margins while investing
in our key priorities,” said Brian Swartz, CFO of Cornerstone. “As we
look out to the balance of 2019, we are encouraged by the opportunities
we see ahead and are raising our financial guidance accordingly.”
Recent Highlights:
-
The Company helps the Ventura County Fire Department serve its
community through online learning and performance management. -
The Company launched a 14-day free trial for small businesses to try
PiiQ Learning by Cornerstone. -
The Company was recognized by TrustRadius with four 2019 Top Rated
Awards in the categories of Corporate Learning Management and Talent
Management Software. -
The Company was named to the Constellation ShortList™ for Talent
Management Suites. -
The Company and its CEO Adam Miller, announced the 5 for 20 Challenge,
a program challenging companies to dedicate 5 percent of their
employees’ time to learning, which will deliver improved employee
retention. -
The Company received the 2019 Talented Learning Award for Best
Corporate Extended Enterprise Learning System. -
The Company hired Trish Coughlin as its first Chief Accounting
Officer. She brings more than 25 years of experience in finance and
operations to the Company and will lead its new hub in Utah.
Financial Outlook:
The following outlook is based on information available as of the date
of this press release and is subject to change in the future.
For the second quarter ending June 30, 2019, the Company provides the
following outlook:
-
Revenue between $137 million and $140 million, representing
year-over-year growth at the mid-point of 4.5%2, or 6%3
on a constant currency basis. -
Subscription revenue between $131 million and $133 million,
representing year-over-year growth at the mid-point of 15%2,
or 16%3 on a constant currency basis.
For the year ending December 31, 2019, the Company provides the
following outlook:
-
Revenue between $562 million and $570 million, representing
year-over-year growth at the mid-point of 5%4, 6, or 6%5
on a constant currency basis. -
Subscription revenue between $537 million and $545 million,
representing year-over-year growth at the mid-point of 14.5%4, 6,
or 15%5 on a constant currency basis. -
Annual recurring revenue as of December 31, 2019 between $578 million
and $590 million, representing year-over-year growth at the mid-point
of 15%,4, 6 or 15%4, 6 on a constant currency
basis. -
Non-GAAP operating income between $78 million and $85 million.
Assuming the midpoint of the revenue range, this represents a non-GAAP
operating margin of 14.5%. -
Unlevered free cash flow between $84 million and $92 million. Assuming
the midpoint of the revenue range, this represents an unlevered free
cash flow margin of 15.5%.
The Company has not reconciled the guidance for non-GAAP operating
income or non-GAAP operating income margin 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 non-GAAP operating
income and non-GAAP operating margin, the Company excludes stock-based
compensation expense, which is impacted by the number of shares issued
and the market price, which are both uncertain. The actual amount of
stock-based compensation expense in the second quarter ending June 30,
2019 will have a significant impact on the Company’s GAAP operating
margin.
|
1 |
Financial measures presented on a constant currency basis, non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non-GAAP diluted net income per share, unlevered free cash flow and unlevered free cash flow margin are non-GAAP financial measures. Please see the discussion in the section titled “Non-GAAP Financial Measures” and the reconciliations at the end of this press release. |
|
In order to translate the financial outlook for entities reporting in GBP to USD and EUR to USD, the following exchange rates have been applied: |
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|
2 |
Exchange rate applied to revenue for the second quarter of 2019 | $1.32 USD per GBP | |||
|
3 |
Exchange rate from the second quarter of 2018 applied to calculate revenue growth for the second quarter of 2019 on a constant currency basis |
$1.36 USD per GBP | |||
|
4 |
Exchange rate applied to revenue and annual recurring revenue for fiscal 2019 |
$1.32 USD per GBP | |||
|
5 |
Average exchange rate from fiscal 2018 applied to calculate revenue growth for fiscal 2019 on a constant currency basis |
$1.33 USD per GBP | |||
|
6 |
Exchange rate applied to revenue and annual recurring revenue for fiscal 2019 |
$1.12 USD per EUR | |||
Quarterly Conference Call
Cornerstone will host a conference call to discuss its first quarter
2019 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 (U.S.) or
(484) 653-6763 (outside the U.S.) and referencing passcode: 3438807. 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 11:59 p.m. PT (2:59 p.m. ET) on May 10, 2019 by
dialing (855) 859-2056 (U.S.) or (404) 537-3406 (outside the U.S.), and
referencing passcode: 3438807.
About Cornerstone
Cornerstone was founded with a passion for empowering people through
learning and a conviction that people should be your organization’s
greatest competitive advantage. Cornerstone is a global human capital
management leader with a core belief that companies thrive when they
help their employees to realize their potential. Putting this belief
into practice, Cornerstone offers solutions to help companies
strategically manage and continuously develop their talent throughout
the entire employee lifecycle. Featuring comprehensive recruiting,
personalized learning, development-driven performance management, and
holistic HR planning, Cornerstone’s human capital management platform is
successfully used by more than 3,500 global clients of all sizes,
spanning over 190 countries and over 40 languages.
Learn more at www.cornerstoneondemand.com.
Note: Cornerstone® and Cornerstone OnDemand® 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 GAAP and
non-GAAP guidance, our strategy, long-term growth and overall future
prospects, the demand for our offerings, our competitive position, our
expectations regarding certain financial measures, including
subscription revenue, capital expenditures and unlevered free cash flow,
and general business conditions. 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 clients; the extent to
which clients renew their subscriptions for our solutions; the timing of
when consulting services are delivered to new and existing clients by
our services organization and implementation subcontractors; the
complexity of deployments and product implementations, which can impact
the timing of when revenue is recognized from new and existing clients;
our shift to focusing on recurring revenue streams; our ability to
compete as the learning and human capital management provider for
organizations of all sizes; changes in the proportion of our client base
that is comprised of enterprise or mid-sized organizations; our ability
to manage our growth, including additional headcount and entry into new
geographies; our ability to expand our enterprise and mid-market sales
opportunities; our ability to maintain stable and consistent quota
attainment rates; continued strong demand for learning and human capital
management in the Americas, Europe, and Asia Pacific; 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 or natural disasters; 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; 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 Annual Report on Form 10-K for the fiscal year ended
December 31, 2018.
Non-GAAP Financial Measures and Other Key Metrics
To supplement its consolidated financial statements, which are prepared
and presented in accordance with U.S. 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 amortization of intangible assets and stock-based compensation, |
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| (ii) |
annual recurring revenue, which is defined as the annualized recurring value of all active contracts at the end of a reporting period, |
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| (iii) |
unlevered free cash flow, which is defined as net cash provided by operating activities minus capital expenditures and capitalized software costs plus cash paid for interest, |
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| (iv) |
unlevered free cash flow margin, which is defined as unlevered free cash flow divided by revenue, |
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| (v) |
non-GAAP net income and non-GAAP basic and diluted net income per share, which exclude, for the periods in which they are presented, stock-based compensation, amortization of intangible assets, accretion of debt discount and amortization of debt issuance costs, restructuring costs, acquisition costs 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, |
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| (vi) |
non-GAAP gross profit and non-GAAP gross margin, which exclude stock-based compensation and amortization of intangible assets reflected in cost of revenue, |
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| (vii) |
non-GAAP operating income and non-GAAP operating income margin, which exclude stock-based compensation, amortization of intangible assets, restructuring costs and acquisition costs, |
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| (viii) |
non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangible assets, restructuring costs and acquisition costs, and |
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| (ix) |
non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, each of which excludes stock-based compensation 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 other 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
and 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. -
Accretion of debt discount and amortization of debt issuance costs.
For GAAP purposes, the Company is required to recognize the effective
interest expense on its senior convertible notes and amortize the
issuance costs over the term of the notes. The difference between the
effective interest expense and the contractual interest expense and
the amortization expense of issuance costs are 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. -
Restructuring. The Company excludes costs related to
restructuring because the expense is not indicative of its continuing
operations and believes that the exclusion of these costs provides
investors with a supplemental view of the Company’s operational
performance. -
Acquisition costs. The Company excludes costs related to
acquisitions because the expense is not indicative of its continuing
operations and believes that the exclusion of these costs 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 prior periods, 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) (unaudited) |
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|
March 31, |
December 31, 2018 |
|||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 357,015 | $ | 183,596 | ||||
| Short-term investments | 34,950 | 204,732 | ||||||
| Accounts receivable, net | 92,645 | 125,300 | ||||||
| Deferred commissions, current | 16,013 | 24,467 | ||||||
| Prepaid expenses and other current assets | 33,802 | 34,940 | ||||||
| Total current assets | 534,425 | 573,035 | ||||||
| Capitalized software development costs, net | 45,766 | 45,416 | ||||||
| Property and equipment, net | 33,081 | 77,254 | ||||||
| Operating right-of-use assets | 82,984 | — | ||||||
| Deferred commissions, non-current | 58,755 | 45,444 | ||||||
| Long-term investments | 750 | 1,250 | ||||||
| Intangible assets, net | 12,581 | 13,867 | ||||||
| Goodwill | 47,453 | 47,453 | ||||||
| Other assets, net | 2,920 | 3,437 | ||||||
| Total Assets | $ | 818,715 | $ | 807,156 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Accounts payable | $ | 9,156 | $ | 11,921 | ||||
| Accrued expenses | 46,353 | 68,331 | ||||||
| Deferred revenue, current | 290,993 | 312,526 | ||||||
| Operating lease liabilities, current | 9,274 | — | ||||||
| Other liabilities | 6,269 | 7,645 | ||||||
| Total current liabilities | 362,045 | 400,423 | ||||||
| Convertible notes, net | 289,994 | 288,967 | ||||||
| Operating lease liabilities, non-current | 78,930 | — | ||||||
| Other liabilities, non-current | 305 | 2,484 | ||||||
| Deferred revenue, non-current | 11,876 | 13,275 | ||||||
| Facility financing obligation | — | 46,100 | ||||||
| Total liabilities | 743,150 | 751,249 | ||||||
| Commitments and contingencies (Note 12) | ||||||||
| Stockholders’ Equity: | ||||||||
| Common stock | 6 | 6 | ||||||
| Additional paid-in capital | 608,168 | 585,387 | ||||||
| Accumulated deficit | (533,426 | ) | (529,962 | ) | ||||
| Accumulated other comprehensive income | 817 | 476 | ||||||
| Total stockholders’ equity | 75,565 | 55,907 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 818,715 | $ | 807,156 | ||||
|
Cornerstone OnDemand, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) |
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| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Revenue | $ | 140,117 | $ | 133,113 | ||||||
| Cost of revenue 1, 2 | 33,695 | 37,020 | ||||||||
| Gross profit | 106,422 | 96,093 | ||||||||
| Operating expenses: | ||||||||||
| Sales and marketing 1 | 54,505 | 59,245 | ||||||||
| Research and development 1 | 27,746 | 15,984 | ||||||||
| General and administrative 1 | 22,940 | 21,985 | ||||||||
| Restructuring 1 | — | 7,725 | ||||||||
| Total operating expenses | 105,191 | 104,939 | ||||||||
| Income (loss) from operations | 1,231 | (8,846 | ) | |||||||
| Other income (expense): | ||||||||||
| Interest income | 1,990 | 1,819 | ||||||||
| Interest expense | (5,366 | ) | (8,700 | ) | ||||||
| Other, net | (597 | ) | 44 | |||||||
| Other income (expense), net | (3,973 | ) | (6,837 | ) | ||||||
| Loss before income tax provision | (2,742 | ) | (15,683 | ) | ||||||
| Income tax provision | (722 | ) | (533 | ) | ||||||
| Net loss | $ | (3,464 | ) | $ | (16,216 | ) | ||||
| Net loss per share, basic and diluted | $ | (0.06 | ) | $ | (0.28 | ) | ||||
| Weighted average common shares outstanding, basic and diluted | 59,141 | 57,425 | ||||||||
|
1 Includes stock-based compensation as follows: |
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| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Cost of revenue | $ | 1,136 | $ | 1,002 | ||||||
| Sales and marketing | 6,047 | 6,246 | ||||||||
| Research and development | 4,196 | 2,308 | ||||||||
| General and administrative | 5,666 | 4,487 | ||||||||
| Restructuring | — | 5,436 | ||||||||
| Total | $ | 17,045 | $ | 19,479 | ||||||
|
2 Cost of revenue includes amortization of intangible |
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| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Cost of revenue | $ | 1,286 | $ | — | ||||||
|
Cornerstone OnDemand, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) |
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| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (3,464 | ) | $ | (16,216 | ) | ||
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization | 10,858 | 7,831 | ||||||
| Accretion of debt discount and amortization of debt issuance costs | 1,027 | 3,426 | ||||||
| Purchased investment premium, net of amortization | (216 | ) | (81 | ) | ||||
| Net foreign currency (gain) loss | 294 | (356 | ) | |||||
| Stock-based compensation expense | 17,045 | 19,479 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 32,955 | 41,888 | ||||||
| Deferred commissions | (4,274 | ) | (528 | ) | ||||
| Prepaid expenses and other assets | 3,641 | (8,841 | ) | |||||
| Accounts payable | (2,781 | ) | (7,605 | ) | ||||
| Accrued expenses | (23,287 | ) | (15,059 | ) | ||||
| Deferred revenue | (23,959 | ) | (23,751 | ) | ||||
| Other liabilities | (545 | ) | (4,767 | ) | ||||
| Net cash provided by (used in) operating activities | $ | 7,294 | $ | (4,580 | ) | |||
| Cash flows from investing activities: | ||||||||
| Maturities of investments | 170,679 | 40,677 | ||||||
| Capital expenditures | (4,243 | ) | (2,559 | ) | ||||
| Capitalized software costs | (7,399 | ) | (6,039 | ) | ||||
| Net cash provided by investing activities | $ | 159,037 | $ | 32,079 | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible notes and payments of debt issuance costs | — | (152 | ) | |||||
| Proceeds from employee stock plans | 6,840 | 6,765 | ||||||
| Repurchases of common stock | — | (14,700 | ) | |||||
| Net cash provided by (used in) financing activities | $ | 6,840 | $ | (8,087 | ) | |||
| Effect of exchange rate changes on cash and cash equivalents | 248 | 357 | ||||||
| Net increase in cash and cash equivalents | 173,419 | 19,769 | ||||||
| Cash and cash equivalents at beginning of period | 183,596 | 393,576 | ||||||
| Cash and cash equivalents at end of period | $ | 357,015 | $ | 413,345 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | 8,685 | $ | 3,000 | ||||
| Cash paid for income taxes | 390 | 452 | ||||||
|
Proceeds from employee stock plans received in advance of stock issuance |
1,856 | 1,616 | ||||||
| Cash paid for operating leases | 2,601 | — | ||||||
| Right-of-use assets obtained in exchange for lease obligations | 86,120 | — | ||||||
| Non-cash investing and financing activities: | ||||||||
| Assets acquired under capital leases and other financing arrangements | $ | 485 | $ | — | ||||
| Capitalized assets financed by accounts payable and accrued expenses | 1,789 | 5,201 | ||||||
| Capitalized stock-based compensation | 752 | 1,253 | ||||||
| Unsettled share repurchase in other liabilities | — | 1,325 | ||||||
Contacts
Investor Relations Contact:
Jason Gold
Phone: +1 (310) 526-2531
[email protected]
Media Contact:
Deaira Irons
Phone: +1 (310) 752-0164
[email protected]
