CSOD - Earnings call transcript Q3 2017 | Cornerstone OnDemand Inc

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Operator

Good day, ladies and gentlemen, and welcome to Cornerstone OnDemand's Third Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded. And now, I'll turn the call over to Alexandra Geller, Manager of Investor Relations for Cornerstone OnDemand.

Alexandra Geller

welcome OnDemand's and earnings quarter everyone, call. conference afternoon, to third Cornerstone XXXX Good

call was market copy with quarter of a you will Executive today's financial Financial should now, always, As begin today some review XX, on will then September of Swartz, press furnished key SEC a Officer, and will session. Officer, for Adam our provide brief question-and-answer ended performance; with overview XXXX. the the Later, on our we By results Brian Chief released which who release, Chief was and Form which received closed will a after conduct the have X-K. Miller,

website. and investor press You can detailed the also materials, related access Investor financials, release Relations including on our

being As a following call and available made reminder, replay conclusion be today's of call. the is recorded the will a

ongoing forward-looking demand in not R&D, of future realize potential competitors our benefits GAAP from discussion professional including, business. the spending visibility business strategy, business excellence financial and strengthen proposed Our (XX:XX) our our our to margin ability operational our and activity solutions, retention, results, actions growth, effectively, satisfaction and and our their market of our and costs, capitalized ability of effect investment products, into operating appraisal or business, and other to, our and aspects performance, development and improvement services our on the and to statements, include business, model including our of to initiatives, recent compete both and product development, business for statements reduction guidance, regarding our client our will but our non-GAAP limited

periodic materialize expressed risks, risks of assumptions. release financial of or today's the These are or assumptions assumptions, uncertainties, that those implied included could other incorrect, our from the factors could differ uncertainties If press information recent Forward-looking prove and SEC. we Factors Form in statements statements our with section make. well potential of or the and affect the risks, results and results actual any most by forward-looking involve as filings subsequent as Risk in materially the any on uncertainties XX-K

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Adam Miller

for everyone us Thanks, Alex, to thank today. and joining you

Goldman of updating news like to recently the I share. strategic start board undertaken directors of evaluation an ago, oversee options. months and committee We The lot Sachs to our our process this a strategic to Several retained independent board have of the by alternatives. process Centerview to of conduct fulsome company's results review would of board a Partners the by and established directors. you available review on all

received we and both interest process, this Cornerstone. in During unsolicited solicited

and plan a XX strategic the more rule renewed achieve that will to received of to plan several revenue a to conducted drive is growth accelerate plan process, us that of with believe shareholder support partnerships. meetings, full and our largest by provides value focus and capital subscription and allow reductions operations our optimal the execute some conclusion transform a account independent committee the new seven and cost of the on from growth We based recurring or of the The operating flow. a Over margins free meetings of our board shareholders, will infusion to the cash evaluation XXXX. we've plan course plus feedback this maximize At had to way board into than months, proposals. ongoing thorough determined of board taking dozen that the a

and and We private it growth accelerates only invest plan, our technology under with equity Silver into investors notes. not into we it. supporting and extensive We and believe endorses agreement help expansion believe Lake in will $XXX advice and has Silver one company. have LinkedIn, a million Lake leading which investment Silver margin Lake, Silver world's growth the will by form convertible support senior their our LinkedIn and the initiatives, entered LinkedIn experience of Lake transformation both the Cornerstone of high-margin an in speed software

enable investment of a program long-term up vote and investment the to portion million our share common strategy a to of of future is This fund We use confidence repurchase strong on will potential, a our shareholders while their return stock. $XXX of and to growth fund near-term, shareholder to value the investment and in preserving ability our in want to Cornerstone monetize the ahead. opportunities cash years who those will growth it to increase

Osnoss, expand Joe this our is and We the Lake, our directors we the board to upon occur of the to of by with of of debt. Director will also of appoint connection board investment retire portion use investment, the which a Managing Silver transaction, to expected existing our In closing to year. immediately plan the convertible end

more the strategic plan their specifically about that with endorsing talk Silver investment. LinkedIn is let's Lake Now, and

basis and by allows X,XXX and we by a growth to Over margins over Today, past the two Cornerstone revenue nearly XX expect combination XXXX rule committing margin grown the achieve net years, expansion. XX% to has points. of with we're a of which by revenue us plan recurring income

pillars. plan strategic Our three has

driving we recurring growth. renewed on are First, revenue focus

to in e-learning content on leadership executing margins and global grow leveraging are plan operating learning rapidly free to third, And the market. we Second, enter flow. our cash are aggressively a position we

multiple renewed Regarding recurring to taking focus drive actions revenue, we're growth. on our

services in upfront the of been substantial grown selling that years. revenue to demand the up-market done contrast have clients. we've strengthen effect services percentage new sales world's to are business with contract scale, to globe. implementation partners non-recurring the our our companies include employees We deploy our that the completion project success services unfortunate paper The As a Brian has has all with at largest past required and the to had to higher the effect and subcontracting contracted us, partner on we a of mentioned our what subcontract software these even implementation recent non-recurring be non-recurring dramatically of to has will in or referral revenue by on calls, almost us. many service organizations. work our offices overall believe of subscription partners side hundreds and increase as software, In their implementation significant to of services Simply our roll-off at of will put, software around the clients now, year, growth. Until then this Beginning do our of encourage services all we dampening other and we ecosystem our we services, have more instead allow delivery directly will needed. next thousands

in which rates well-established global able will our but diverse It business margins. note improved the We operations. we recurring drive embracing and higher part to least our towards that will will organization, is be growth to by and continue our global network, large revenue, of profitable important to turn delivery shift is services the believe enterprise our partner we maintain sales mix more

this To XXX% our focused commission in to our an on a in XXXX, adverse As this recurring reps to revenues margins. expected we plan, reduction plans get impact support gradual change is on in to business operating result, a revenue. not beginning have plan

calls we our convert plan plan improvements certain some margin, non-recurring subscription such strategic also one-time With operating the connectors. to continuation expansion to the services the integration began improvement anticipated regard as to program We technical to and conversion in for of year. offerings, of margin recurring services of based last our a

are has a our G&A, on are rather the To still are been the simply way we categories, key one-time that to we in manage specifically We success. cost in be and preserving costs clear, about believe driving while corporate we're cutting, our acquisition change the focused we culture several fundamental think and changes making efficiencies business. making customer not overall

Our improvement margin plan has five initiatives. key

in years, necessary. as over of First, optimization great expense a strides believe past marketing further is have and our while sales reducing we two percent we revenue the made

customer to now in recurring area. versus highlighted looking based has acquisition new costs are on on based solely save and at this this additional us We for total sales, revenue annual opportunities

sales year improvement result, to been marketing a be expect it's next annual two As of as than revenue even percent greater and a in the over years. we the last

additional to see reductions our strategic initiatives. drive sourcing clear cost opportunities we through Second, ongoing

employees. We to a significant achieve areas our primarily benefits service procurement rigorous and travel, expect savings of more in driven for quality reduction in the without through

us from profitable away services shift from our the certain allows to profitable more business move to line least delivery Third, business. away

that are order-to-cash margin program, which our partners level improvement their of consulting is able operational will automation through our on services to and support. available related have believe improvement to their deliver these including process initiatives automation in to innovation Fifth, we our zero those Our improvement it further paper, in related further preference. continue we Fourth, we excellence contractors, these third-party as and to to part processes. expect is fees margin reduction consultants internal further and to expect our to invest with important we that competitive simplify initiatives, Even business we note R&D a drive systems advantage. increase be

to content platform agreements our millions significant The time, clients of plan new as to across evolving of our subscription-based into the in to by with course providers recently the we verticals satisfy conferences Cornerstone our with position a offering market our expect clients We've strategic Cornerstone subscriptions. Netflix-like our Over for we our learning our to with content up needs to regional largest Learning of multiple modern, of experience, intend position already a last distributor and our content is offering, provide We registrations content month, at offerings. of with each of the showcasing offerings technology geographies. compelling subscription some growing industry-based content training the entered specific is the there content global subscription Experience to believe Content curate Anytime of extend workplace. global third new and multiple serving coupled leadership today's HR sales pillar multiple year leverage demand various create new available. After online best hundreds in in

to driver a we Cornerstone subscriptions and material a a suite result, expect as will to believe existing holistic learning a which to we solution drive leader our will using deals, be clients further entire Furthermore, specialized Cornerstone of corporate learning. As have differentiates development this we that of incremental clients the to recurring our believe in opportunity with recurring force sales we With learning learning provide currently today, revenue which addition revenue. content long-term that X,XXX annual believe can the new our their than content needs, their meet enables global more growth. and attach

these business initiatives is good of coming a are All our at in momentum palpable. The time.

trends downward we in of the we've few reversal Over significantly our our quarter. I exceeded last months, go-to-market the pleased to third efforts. in very areas that in report the seen am expectations several

representing Third a quarter reached record of expectations currency constant billings XX%. our and million, eclipsed growth XX% record reported growth $XXX of and

addition, of constant currency at and came $XXX end In high of revenue third above in the million, a our record guidance reported range representing quarter growth XX%.

profitability net We see to million continued in with income. in approximately $X improvements

have to the base client We X,XXX we third profitability. now mid-market grown and quarter, In of expanded three consecutive the from world. enterprise achieved more all quarters over than organizations our organically

University, the City to Nikon our user provider in Tre bases New to in financial base, more us a Entertainments U.S. Manufacturing subscriber to enabled one of France, Italy, which Brenntag than of institution, than in bank, largest Goodman the in among and Today, Acquisition client QX, Company, more Wind of UK, in build client include grow Mexico, XXX of largest virtually user software Corporation, our California, we more. total adding Merlin in world, Samsung, users, vertical, Group Austria's million the amounting base Defense net subscribers. base in leaders global Germany, the In largest additions many every million YMCA world. has Manitou X cohort XX Fortune Riverside, any Home includes second the the Depot AG the continued a

Leader Strategic consecutive am year, I their top spot that year's into Cornerstone competition. X-Grid HCM, in of advancing for the a Potential third from Challenger the their last report month moving were last Challenger. X-Grid Additionally, the in for a was Integrated also Fosway as ahead in for the recognized us We position talent, Cloud well Talent Management to as proud Core named

leadership As analyst in management by is to Europe, a position recognition our this globe. around a industry HR premier Fosway talent in testament the

South accounts and Pacific up-sells Shifting magnitude our growing municipalities second for international of state XXXX. We saw greenfield and volume gears government quarters and of Defense and have learning addition client the as we've the We continue point us South After University, level which reached adding U.S. wins OUTSOURCING allow notable continued several local this in its quarter the roster landmark in of to the well strength QX, premier recruiting build to saw with the region MST wins Corporation, corporate Following team Nikon the the will penetrate the Korea. including install in little second Acquisition business public QX, in to the with the Japanese wins with vertical, expanded first Acquisition an within sector, Samsung to considerable seen in with order with and in base, two Also, the of federal university new as within federal segment believe workforce. momentum and a inflection their segment. this in continued U.S. best at by the added footprint The logos Commission we referenceable we movement our Exchange new ever. our we in our suite. Asia Postal QX. is client Insurance the client to federal Defense markets, the had signing the task won Service Within largely Securities Inc. pleased the Korea, years we're deal no of

previous a substantial calls, over for five a on would mentioned believe I've time. As it and Japan that market market we represents Cornerstone opportunity top become

This new by added for comeback HR was adoption a product logos continued European as well strong which the of in quarter number Another UK, driven businesses. of our largest ever. performer as the client European the the was business, Cornerstone its among

company's base, European new We as nine continue compared region. XXXX. wins doubling the in first will more the HR to of The within largest believe the the our third of of growth when history, quarter volume well new saw clients HR among in as the number client than Cornerstone European HR Cornerstone year-to-date wins drive months to Cornerstone wins existing client

So, our overall, for what our it third this to outlook and in performance encouraged QX like quarter to over to our we're I'd Brian performance financial by detail. very in pleased that, our with and are we outlook. With turn discuss means more

Brian L. Swartz

capital good and and in to plan everyone. say, a of the and Adam, extensive experience just improvement managing Thanks, operational Adam have business supporter Needless I'm outlined, big transformations, afternoon, I structures initiatives.

quarterly expected our two go-forward to with the of near-term Adam begin that financial Before the like I discussed. impacts financial review, plan just plan I'd highlight The has impacts.

subscription understand have the said, XXXX The of we'll first is go-forward on to our strategy, revenue. detail as Once we the we'll services insight impact not into coming soon expect With impacts as in we you and revenue possible the that with that services months. clear better trends strategy revenue. go-forward communicate do

in our as well Assuming the grow in revenue market demand continued subscription as strong low standards, mid XXXX to teens. we GAAP current expect recognition to revenue

our margin on which of strategy to The XX% XXXX. midpoint expected our our based XXXX communicated and are operating previously efficiency on target our margins. of range a is of profitability of XX%, Irrespective second operational XX% the we to services raising go-forward doubles impact at from rate plans,

push a public performance follow-on currency. about U.S. for in U.S. in is Now, to QX. on all primarily XX% the summary the billings revenue solid constant public has order came in in half in performance of deferred primarily currency next Service and financial quarter, the the was XX% from due was favorable About and to order This beat continued months. sector, to for of Postal the and and software the was due of was the part in year-over-year strong $X It's sector strong as respectively, basis order basis, acceleration performance this from that important note third balance a and U.S. million. the reported XX% to revenue quarter. result an – increase EMEA a long-term $XXX on on terms X%, of In beyond the as the and been classified million, for a the recognition contractual the which for at a represents billings XX most the

to XX%, in increase first between by in of often before Consistent split our XX, and clients. quarter, increased X.X on as million, Moving we and revenue, end dictated the the that $X at our be constant as nearly users the million, services QX historical to experienced new the than the year-end. of to comments clients more revenue a of currency of on enterprise during our on last XX% historically nine metrics, base the year, to was basis. XX coming size XX.X revenue has services client base high of is added range XX% we many mix the Through my months have of year-over-year revenue with in services key than client reported subscription of our finalize which a to software guidance bringing lower million other net exceeded the representing A few X,XXX to $XXX respectively. large expect September QX service during we million and more third of call, additions the user delivery, services-heavy timing quarter, averages due by users. been quarter, net and the projects The

the prior year. employees, X,XXX added us over XX employees at end represents bringing increase we net quarter, a new XX% of Finally, to which the the

XXXX, and record optimization the or marketing XXX you expenses subscription revenue demonstrate a as we marketing head of of for efficiency operating of made is third largely improvement improvement sales expense. Our well gross XX% than QX respect up is two a and in Sales expense changes some improved basis was today. in marketing years in of higher a QX. was ago, to quarter, plan XXXX. the percentage margin expense early of This the as it higher X,XXX low to largely to perspective, the driven just various count give across result year. XX% from basis commission continue our of in points This sales be the impact of in points and of revenue continued quarter, XX% sales we prior by reached With revenue. To teams,

costs. that customer Looking to XXXX, improve the to improvement efficiency reducing part outlined, of towards continue plan further acquisition program we margin our sales as by Adam our

the XXX of basis R&D be over a As points $X expect to head count expense greater a initiatives. Continuing last XX% that more I'd new software product capitalized than efforts, in development XX% to of expense million of revenue due revenue. year the was and even expense, investment to next year, it's percentage R&D we costs result as these P&L, was marketing sales $XX improvement of million, years. annual prior to principally two the support our point in been including than the revenue or out increased development of like or down

Our roughly year line G&A XX% in prior of was revenue. at with the

of of marks of the achieved year. diluted $X.X year-over-year savings Please was three We in quarter, in we've on consecutive of share, operational initiatives by income first also or X% note, are this prior implemented. as in quarter in this net three profitability. operating profit. net with the the $X.XX an million resulted fully the consecutive margin to excellence quarters line expenses, for improvements controlling expect in focus our It quarters part G&A for income is see continued our to expectations. Overall, operating incremental per $X.X million Driven compared our time

operating increases we share a approximately XX quarters As With in to for to flow, our average in which regard count to diluted a XX%. third free as year-over-year flow free of million approximately XX million define expenditures, weighted cash cash and than capital cash million cash the by in improved report we profit. of software EPS which flow purposes, a reminder, quarter, representing $XX $X million less capitalized more flow, margin

the turn to let's sheet. Now, balance

a continue We sheet. maintain balance to well-capitalized

our and approximately XXth, $XXX investment cash million. total was As balance of September

of of debt. Additionally, as million $XXX XXth, carrying September value we had in

interest senior we share. have discussed, Lake million $XXX are due $XX entered and of XX% with X.XX% into per purchase Silver Adam per As conversion of and of at agreement convertible par July of notes annum an in to that price XXXX. at pay have notes The LinkedIn a

to complete existing and the notes repurchase expect customary end to regard closing fund year, repurchase executed intend the program. other With debt, convertible We to the program, be share specific by how is be of sale has the subject expected to We to as purposes. many directors not two purchased. use to share the it conditions. our from The general years, a or the will pay when proceeds authorized of corporate board a program, is program shares the our share repurchase next over $XXX to but off million

prior representing $XXX $XXX was balance revenue XXth, year, September year-over-year XX%. increase deferred of in to Our million of as a compared million the

note let's X, have which Now, guidance to call. assumes information our the of X.XX exchange our of using earnings on developed pound British outlook, XXXX all to best rate as been has we that dollar last Please up discuss from today. U.S. X.XX a

revenue XXXX of $XXX million of XXXX million. year full to our this range XX% tightening and a constant million, of $XXX are XX% million. to midpoint At growth $XXX million million currency the $XXX $XXX the guidance revenue range over $XXX growth represents We to of

revenue the this currency $XXX will with to as efficient It's faster on did guidance QX. new at will margin QX we million and Therefore, faster XX% expected revenue services At QX Our consistent the gross our a year-over-year grow of a or driven or noting client fourth still note last on that worth continue midpoint, is related by our to please we our more our believe Cornerstone we come QX QX revenue constant requested adversely clients significant and methodology, full slightly majority in subscription represents guidance as Realize, which as Despite assumes year-over-year to it this expect achievable in supported quarter, services in Also, delivery revenue QX. same revenue, a increase in clients $XXX with new further do large rate services drive expecting to We million. wins. based not implies growth from increase existing well to quarter expect are services than this basis to revenue conversations increase service year implementations. by of and year-over-year. has impacted. be growth of XX% is compared backlog about our perhaps

year highlight billings, to typical Regarding we operating and for pleased maintaining the growth. X% item XXXX year-to-date than QX. margin middle of to expectations range our on year the approximately full we track believe X%. are guidance billings our year of year-over-year I respect teens With profitability, margin assumes very full we're margin to mid maintain wider deliver low with guidance our one range. to revenue a the in we're performance want to full operating of the guidance This operating previously related revenue communicated in

that variance the to estimate we As potential nuance a the range, the of I the than the or QX. lower generally We the outlook. extent expect delivery To point is did the the our dollar flow range want of typical we basis. is target to to I in just at best higher mentioned, service wider as out in revenue variability the this X% financial would due line believe are of for to today, end on but dollar the bottom in

to pertains cash free our reaffirming X% XXXX, highlight I items. X%. I'd also are the margin target like for to mentioned to as full two flow it of And year We earlier, as

impact go-forward go-forward strategy, revenue. expect first trends understand we as we'll to have the detail our of clear XXXX the as that Once revenue do strategy coming in The insight revenue. services we'll the not With better impacts and possible months. we services soon said, on communicate that you into with subscription is

as market demand subscription the revenue our GAAP continued well as current recognition XXXX low to expect to teens. we mid grow standards, Assuming strong revenue in in

Irrespective achieve expected of are our and The profitability margins. respect services our raising operational margin midpoint our we as efficiency expect rate of of range by the long-term XXXX. mentioned, which on of XXXX XX% based XX targets, margin of to to from go-forward our communicated target previously strategy at rule With plans, XX%, to XX% operating a second Adam is on XXXX. doubles we to the

As the margin. and a growth annual we define flow reminder, cash as sum free the of revenue rule of XX

plan Needham announce I'd Suisse we Fargo Finally, like the UBS including the & to Wells Conference to this several Credit the Tech the and quarter, Company Summit. Technology investor attend SaaS Technology that upcoming conferences Conference, Event,

We host Day in turn back I'll also Adam. to XXXX. quarter Analyst plan Investor and first to an the that, it of With

Adam Miller

Brian, everyone Thanks, to you today. thank and joined us who

opportunity, able our confident I'm Given achieve our years greater market plan to strong strategic we'll to strategic partnerships come. we've the today, commitment outlined new and the value growth to be shareholder our enhance in even profitable and

their great to than global As team their help always, to thank to I for people of especially want realize all work potential. our more XX million around world the

your now take questions. We will

Operator

Certainly.

Michael Credit of Our Suisse. comes the from question line Nemeroff from first

- LLC couple. I've the guys. Thanks questions. taking Nice Michael job on Your my question, Suisse actually way. Nemeroff (USA) for a Credit Hey, QX, please? Securities by got

old than currently. the one, one is, the looking the plan floating one know much one I a the first on The old of had lower you're the coupon at structure the convert, repay is terms I'm just the old that to

the you could to where want then would give a it go zero be expect why Do it process? And push curious year? don't guidance amount, as this going it you as that and I'm to weeks X%, do for know on the I the contracting you the quarter? to And you be but to next be the of out very that off paying partners, XXXX. would could revenue thanks in the those think So, expect is to Just do to that down slowing services total add which the think relates have also much. is on you other actual moving an your paper and that Thanks down? to percentage of you impact billings then this services or revenue could question – be around into – revenue questions. next months

Brian L. Swartz

it's hear Michael; Nice welcome Sure, to everyone. from Yeah. Brian. and you

two first your questions and answer third. will think the to take try Adam me let So I

respect and bring technology is LinkedIn, we LinkedIn more networking to is lots property – and to transaction which – equity not which beneficial and is this Obviously, has investor LinkedIn, employees they around Lake clearly lot financing help capital. So financing view a the there successful more jobseekers the out just this the us site with media we there Silver is as this think view will both than social Silver professional most purely – I Lake leading transaction, of right, is obviously really by the out intellectual value and to our table a private business.

we a lot So a more is just helping it's the doing. knowledge, experience lot a both to transformations, it transform than we're strategic it more that extensive right, bringing experience what companies it's exactly in partners money, are and – table, just capital, institutional view lot

margin because services services generate not adversely strategy. our revenue do less from do line a So for bottom it operating of revenue the do that's and be to What all QX XX% revenue, number just to impact services line, revenue changes for to we the call perspective but go-forward that's a that this we provided one. disclosing you the respect we to as the think on which specifically a while. know year. on been beyond. for more to or with subscription we next as and Number paper more to We why XX% next services do XXXX was I will profitability you service at comment expect subscription of tried tried our what guidance and now give services or on lot nature year, We we've impacted partners obviously we expect will to two, so about our specifically call not

have our We're more when be and process but Day this. that prepared in right QX be not of kind we'll budgeting XXXX, for the QX, a we walk to beyond. company now Analyst transparency lot through next every in provide will lot and numbers to able other just through year So, to clarity of finalize our like going a

Adam Miller

have do But services out estimates And Securities Nemeroff a you're with amount Michael for XXXX Michael, Credit that's there, Leaving normal creating respect, they or all due and it with revenue. regards... include regular LLC we of Brian, - helpful. this overhang (USA) that next in until what maybe us you revenue kind of mix could our you you tell us what quarter, expect to if that you decline a expect so would be just helpful. estimates or when do have the lower services we Suisse give

Brian L. Swartz

it's we are Michael, is operationalizing that Yeah, want out. not will I truth that to to plans exactly you, how tell know now the phase don't

$XX revenue. somewhere $XX and of we between So, do million million services

papered will services of revenue into burn Over obviously a the to backlog the and that of end XXXX, next have of but our delivery new we'll going quickly off partners start are opportunities those those to will to new the opportunities. year the of continue opportunities really do of It function We're some be at year. how course by partners. – a our will paper are internally, some

And have. best I understand, information that I some we'll helpful conclusions is focus to I I can lot revenue, the ARR, We again what – recurring I and is services I happen helpful think, make about, welcome the with going which revenue. So, a is will here about on key revenue, and as – you subscription some will but revenue key as as start the more only you're with growing to be be subscription want I think can. the can talking forward. is make to key

Operator

you. Thank

question JMP comes from the next Our line of Patrick from Securities. Walravens

Your question, please?

Pat D. Walravens

Great. Oh! Thank you.

big going your fact Benioff is and surprising amount hear been has it I'll trailblazers a guess, is trailheads Microsoft that's and answer. suspect what I as could opposed this? investment, in in there that little about more I the One if that industry So, other that, on here than talking of it two somewhere? to in your is be is the explain picture to And Dreamforce tidbits is, secondly, making that can comment why the in saying sort trailblazers. And then is on you thoughts. underway in love nothing LinkedIn fits maybe So just important really driving Adam, you throw helpful would us here to strategically

Adam Miller

Yeah.

of So very, moving jobs being quickly skills doing the what is are changing that this the in the at world. very level, minds point. is those it if transformed front macro very jobs and and the by and you just minute; day, the quickly; more are becoming need Technology people do CEOs at take center around the we're by more to

have you job are of If XX probably now, years skills today. not or do that from the be you to think new that can dramatically you generally that think years just need you job to and technology about any X today, is going job because different skills of

training And world. in incredibly important so that becomes

this with to to becoming more And so recognize of one able all deals whole is access, one one every doing learning not as of leader in we're and and idea important, this the is we're we days, these deals we're the phenomenon, of is or industry. global this we geographical industry that that both that to clients is world, size the regard today, region, closing the a the do what the that point types this group distribution that more or

are train and regard it's that that enter that talent as is they And to talking learning it it part management, surprising talking development trying and talent more companies about about about enablement Benioff whatever obviously and into an how do. management, so of important are people salespeople. are and with you to talking more sales not more more

point one And so we all that the in to today player number have those TAM opportunity things that as the of space.

content. the which but that's Lake in. we the comes there, LinkedIn help means platform, in we it right the we to we the need think think down not there's learning means we double so have comes to not the focused just and on in, non-recurring way, experience and way, here it revenue. holistic need opportunity focused to be also do It that's on we means And where efforts us and learning revenue, partners the have right our enormous means recurring which Silver it and solution, get so do an And be to on where profitable learning to a

part space. two LinkedIn As you of what's that is time. relationship had in many LinkedIn know, we We work to deepen relationship, collaboration There recruiting wanted us. of and We've learning one a both is areas Microsoft, to We in and that the work with long now companies. between happening. the LinkedIn and are that's the closer the space, for many, exactly both is

Pat D. Walravens

Okay. Good. you. Thank

Operator

Thank you.

the next line Our comes Scott question of Berg from from Needham.

Your question, please?

Scott Berg

guess Because probably to is plans? won't three of are Hi, part equation? Adam how does and in I've space many content How to part you enter in remarks two your to mentioned, I that going all, but on professional my that does last question, month content, guess, forward. very that and a the pre-scripted in selling But how Brian, change strategy? set services your on changing on is, competitively? that Kind you that related think how Adam, times moving comp that, then times comp I content why in thanks my that, but does you focus taking first secondly up of regarding plans impact comp of review deal, the of the question. strategic emphasized of it's that content relative your written does important a terms kind be your the your for how be plans the

Adam Miller

Yeah.

of always the been content's So, story for us. part

that hours to translates the year, it world happened of of doing a content, training players look at I us learned big for when revenue for they really corporate support quickly more you if capability on exactly a software opportunity that and company, in course start content. that And focused really what's on we're platform, started obvious the happening was reasons. better for fact, hundreds us it's content That's here. we millions In the to as number two Netflix, with we develop they with they in the of minimal hundreds stream One software, that focused and different that that cost. then a were distributor with other that of more But what's their you first Last to in clients is effort and delivered incremental with one then at of of monetize you millions start look very the way. distribution registrations, a space, not notice training piece. and

for content. costs, same delivering If you but the infrastructure this if buyer, share, the content an yes, the perspective, same about process, operating that, think about same you think same and it, it we're or from revenue licensing salespeople, there is cost beyond minimal already

So, delivering it getting it. we're for without paid just

get Now, we intend to paid for it.

puzzle is to the approach entire the second modernizing The content. of piece

right. used sold, content still be to most So, is way today music the sold

subscription. You then used album, the song, buy you bought the to the now you buy

the introducing are We subscription.

bag, salespeople with their to their revenue, gives actually industry, recurring people it for commissions sell So our specialized else with buy we're model revenue, a it our and geography our that their margins recurring the grows in giving in specialized us helps content their gives to helps for opportunity attainment. subscription their quota obviously which something that and

Scott Berg

my question. it. for taking Got Thanks

Adam Miller

Thank you.

Brian L. Swartz

Thanks.

Operator

you. Thank

of question Mark from Murphy JPMorgan. comes the Our from next line

question, Your please?

Pinjalim Bora

in see. just changes inherent but Pinjalim is on question, quarter. pro forma good mix? XXXX's operating you year-to-date on it's wondering us giving the that or head question in margin in revenue the a should like will dramatic – increase guidance talked it's any well the think X%; way Is for growth because Thanks count that for congrats expansion expect XXXX seems Mark. in is expansion for lag that there this growth revenue, lag what I total and good margin And taking to you essentially you're XXXX, to sitting about Was in second XX% Hi, for my not I the about any built XXXX, head about, is, we as and I guess XXXX, said mean, to there think the number? count XXXX gross side will the time of for XXXX? growth, part about last

Brian L. Swartz

Yeah.

XXXX, budgets details now. of answer of XXXX my try similar we're all both me let the to our of to earlier, comments With respect So finalizing to those. obviously

on growth So that, count respect we'll numbers, provide to lot I able specific more here's a tell to will with be head you. but clarity what

margin a at We grow rate some the it expansion, which we revenue revenue, this next to because to draw rate count clearly revenue that, is XX% are improvement, what services lower certainly year, would lose double and at XX% margin that of it head to – did are year. portion some the this losing of to to the is of going XX% a the committed with what committed the the year, midpoint we that conclusion XX% as you obviously at than us result was

your So I'm in hopefully structures count. question, then the of general, think you again, second growth kind it helps cost sorry, part including repeat can you of again? through of – and head that kind you And could

Pinjalim Bora

margin for is dramatic shift change mix expansion in margin expecting? gross I the mean, inherent the there you might that be gross of an XXXX, because in The

Brian L. Swartz

Yeah.

start question answer is, time little business, quickly taking over business, comp do So the but a services next bit gets very, you course delivery months the there the months, XX see is XX numbers. annualize the we business be as and will portion business, our happens, in the are that? basically, as a manifest we Michael's inherent of to that. to the yes, paper margins of In over lap over the which it very do how positive and business, operating that partners future, that of itself in we're will will to time, it, earlier, think services we're our We obviously the it or that still of you improvement still some our in an and in

Pinjalim Bora

you. Thank

Operator

you. Thank

question Zukin line of Piper from next the from comes Alex Jaffray. Our

please? question, Your

Alex J. Zukin

taking question. from me. for thanks ones guys, Hey, my Two quick

the the the of that to and get there? maybe basically M&A to could First, out in also Adam, number to And growth guiding after you to that on interesting ex-federal core does you I going gives rule term, domestically ask deals accelerated subscription influence or you're your your reason of with the maybe potentially environment would competitive infusion but next deeper of to year, the for into years of comment really mentioned comment and the separately and HR, come What performance confidence that? the APAC EMEA, payroll? is capital And a consider on you XX. change kind also flat short strategy revenue in you

Adam Miller

seen question performance we we're to multiple the first regard whether different the to Yeah, team, so shift M&A, rates business. like particular time, or forecasts. area But looking trough no of regard our we given different pretty of good have the the a are an and – overall we've every major of feel business, sales period about of any industries, teams, have And through geographies, on sales in feeling no, good with almost With quarter. that demand. the very in at in performance we different pipelines obviously uptick the with We've year a particular overall the to overall the seen the of strategy. regard we business trail is of are the answer

the groups look of year, have at our half a second Specifically, to of them weak first stronger year. expect team sales if did you have much like sales half the a group, strategic the or we they large enterprise

Operator

you. Thank

Our line Inc. question Samana comes Samad next from the from of Stephens,

Your question, please?

Samad Samana

one questions. going to on Cornerstone's you. as is content a learning Lynda.com my where that, pricing this other And they're as base to this? the uses the base? taking back contribute core or color that will content the sell often multi-part partnership deal, special part partnerships your to is consider LinkedIn tech product. on Adam, derivative more see will if, some I or this mechanism strategic this company You using taking guess large Maybe as using into distribution the content with for Thank this around with their thanks I'm installed you LinkedIn how the other's about of platform? side. and a just also I Cornerstone is curious investments to guess there Hi, that as or give

Adam Miller

Yeah.

regard and LinkedIn. of are with both client Microsoft LinkedIn of and clients clients we question, are to the Microsoft and So, both Cornerstone

relationship. client been have already we So, having mutual a

We also had already been partners.

stack. shop. we use a are large very .NET entire across .NET So, We our

in closely different LinkedIn work of number already also areas. We a with

relevant at data points, looking have other. be We have we ways are to both deepen that integration would relationship. each both have both relevant that APIs, we to We

developed is time. So, this opportunities there something for and many collaboration are that over will be

Operator

you. Thank

Company. of comes question next the Our line & Furby Blair William Justin from from

please? question, Your

Justin A. Furby

that in, sort tougher Thanks. is guys. mentioned join on to team, a out why what so wonder second unsolicited that and can those? guess Adam, that theme. the of concern like Thanks, offers and you guess you – you far Can I seeing were Multi-part sort the different weak sales folks came years, landscape through the couple then in you was and SumTotal I think specifically next what as of Saba And the over competitive just walk and first mentioned those you've part – And question this over half of and is with of strategic favored the look rejected I I'll QX around year. the getting you're QX? comment the Workday? I solicited

Brian L. Swartz

Hi, Justin, it's Brian.

gotten and question, any evaluated process proposal we all that whole have remarks. was of in process, obviously of of But the just want whole of on in solicited part assisted first interest. Adam I and all board with this just might of we process. they of commented to meetings respect the the participated the or handle that me throughout on Let the There day, kind to and reiterate ran nature or offers the of of end any several of that not nature his over commenting decisions not of top And We banks our obviously last months the that a the type had independent us, was by the who fulsome that. at that did the We're board. variety dozens and two There we the out process. unsolicited dozens gotten. that committee a there an was very made It was made. that that had overseen

commenting we're process very managed a it that, specifically level. fulsome rest should assured any on board So, more was you not that the was at but

that, Adam second answer with let the I'll question. So

Adam Miller

to regard the times at binary in said past. typically are strategic many with the happen year. they this And the of end These accounts, Yeah. I've and

to quarter, spread be an in this is reality over likely number come the while the these number year, out so true have and tend year. gets team the in same the the annual does course So, that deals and theoretically to the fourth of is

Justin A. Furby

Thanks. it. Got

Adam Miller

you. Thank

Operator

Thank you.

line Sachs. question from from next Jesse Our of Goldman comes Hulsing the

please? question, Your

Jesse Hulsing

what you around the on I Yeah, comments improving It thank for you're like the expansion that's wanted to follow-up guiding key customer costs. that guess next – year. what the to the seems things you. specific that are acquisition I margin significant to you growth is pretty percentage I plan slowing to the of is of the marketing And can and improve group around significantly? much think it do a guess, of reducing sales the of size as related sales efficiency? revenue how improving or you. to that Thank

Adam Miller

focus So now the primary growth. we have on revenue is recurring

deals with time, provide containment, move going next cost cost at number to best about almost reps And us non-recurring different which supported And the helps us process We're the with and on allow same different the of approaches, doing the partners salespeople, of Day more approaches we're At in at recurring bringing helping that recurring details focus changes this are all ratios. including CAC that in arrangements revenue. to the through better a services on of number that containment helps that revenue plans commission also the be we idea ratios will to side able and by a for services, Analyst to CAC the This mix improve of CAC between to and helps to way sales the mix recurring better to so, allows quarter. that much better shift, and for and better own much and the between the productivity again deals. and ratios. drive sale the entirely looking shift recurring paper are our will software is their the it is more

Jesse Hulsing

Adam. Thanks,

Operator

Adam the the today's I'd for this of question-and-answer hand Thank to you. back does And conclude session any further to remarks. program program. like Miller

Adam Miller

upcoming you the for and we you. Thank to forward participating at Thank conferences. you look seeing all

Operator

for your Thank you, conclude today's gentlemen, does ladies program. in participation the and conference. This

disconnect. Good You may day. now

Alexandra Geller	Cornerstone OnDemand, Inc.
Adam Miller	Cornerstone OnDemand, Inc.
Brian L. Swartz	Cornerstone OnDemand, Inc.
Michael Nemeroff	Credit Suisse Securities (NYSE:USA) LLC
Pat D. Walravens	JMP Securities LLC
Scott Berg	Needham & Co. LLC
Pinjalim Bora	JPMorgan Securities LLC
Alex J. Zukin	Piper Jaffray & Co.
Samad Samana	Stephens, Inc.
Justin A. Furby	William Blair & Co. LLC
Jesse Hulsing	Goldman Sachs & Co. LLC

Cornerstone OnDemand (CSOD) 8 Nov 172017 Q3 Earnings call transcript