CSOD - Earnings call transcript Q3 2018 | Cornerstone OnDemand Inc

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Operator

Good day, ladies and gentlemen and welcome to Cornerstone OnDemand's Third Quarter 2018 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 Jennifer Gianola, Vice President of Investor Relations for Cornerstone OnDemand.

Jennifer Gianola

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

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

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

on Relations have your review. for our Investor a also prepared We shared website copy of remarks the

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

include will our long-term performance overall discussion to, expected not but the prospects. growth and Our performance, regarding financial business, statements, statements guidance, strategy, forward-looking future future and non-GAAP operating our limited of and including, our GAAP including

uncertainties, our assumptions. included our Forward-looking to risks, periodic subsequent cause SEC. most materially Form the results assumptions, contained factors that and as are involve These could actual and risks, differ those XX-K, and from as forward-looking statements statements well in uncertainties other recent in filings with

we press we some our are measure. unless to turn press provided Revenue call summary our Please and GAAP for changes in the our release financial non-GAAP state financial financial of to value our non-GAAP, our the financial that is figures of XXX Standard. GAAP Please ASC made and discussed that due we Relations be website. disclosures, non-GAAP on both ASC over information on will the GAAP today part call, to we discussed today website referring that, the and to a is reconciliation XXX note Adam. will Investor new During measures. measures. to refer deck to All is the in ASC to have the The on basis, release basis. figures non-GAAP supplemental a state the With unless financial XXX are All I changes the Recognition measure

Adam Miller

revenue we enterprise one marks successfully plan later strategic strengthening and the on industry-leading, annual service pleased into our I am business since executed growth margin recurring have one been year highlighted new corporate report five-point and quite included transform first company. our plan delivery announced that our recurring Cornerstone we Today plan profile, an against to year We the strong. exiting which improving high-margin a streams, revenue, governance. management focusing introducing have and extremely our bolstering to results Cornerstone

XXX more have now ecosystem. over product reduced have completed successfully our successfully moved non-recurring service X,XXX delivery global partner have We consultants, business have to-date, sales We certifications XX%. than who by our over our to enterprise certified we services and

X,XXX XX% will in discuss spend have is sales due three Brian QX, XX% In our We primarily This which XXXX basis exclude XXXX. from are from had of to marketing we XX% XX% margins double Also, last in move GAAP and operating we the first-ever improvement nearly QX, QX expect sales to XX% margins. In if in drop revenue, almost of operating and point we improvements margins profitability reallocations from track X% quarter years, to operating last certain or later. year, marked to on seen over profitability. to operating productivity. you in

We've the seen the XXXX. As came our time, XX% representing grew per third million, nine Recurring measured of over revenue nine in through productivity we up accelerate. first was sales for growth of and first same guidance the for At have year-over-year ahead growth at months by over sales year-over-year burgeoning rep, Learning sales Year-to-date, ARR Content Content year-over-year our nine already of quarter the sales XX% the $XXX of step-up year. in months Subscription XX%. have in business. we for saw Content growth year, sales recurring a in to to leadership and revenue subscription the of XX%. invest new introduced the revenue streams first build our momentum. and last arena to eclipsed are months continuing of leveraged our all position Content

contributed our strengthened continued success. to scale, also and help team management undoubtedly and that board our us to We has our

organizations the than our mid-market in discuss more we detail. let's expanded enterprise all to the strong our quarter, X,XXX QX over world. third base In more Now from and client organically-grown

New Xpress Thailand, additions consumer South Singapore, in include: FX Co. the & the cooperative in in Africa, largest one AG in more. Transit Henkel UK, Financial SBS in and France, U.S. the Germany, largest Services client Enterprises, banks IRPC Networks, many Management Life in among Natural of in Valeo Resources, Canada, Sun Xth Pioneer

of nearly one build largest bases vertical, with enabled any has world across XX than provider every the base subscribers. us client million global of Our which leaders the in software more subscriber includes to

QX many by focus with on teams. in our revenue solid Our was performance recurring driven contributions across

now sector K-XX, state great and local, which public another had includes higher quarter. healthcare sales, federal, Our ed, team, and

including team, States clients new Service, to United Bureau, Our upsells delivering United wins and in quarter existing Security United the Census from largest Representatives wins the both of came the States Social Postal Administration. federal House States our and

to Cornerstone's Security on-premise employees the deploy Cornerstone's of They Denver; for Hospital to talent management both They of FedRAMP-certified, were our Healthcare with the the the On unified Environmental had to Placer, robust replace U.S. the cloud-based, Regional as incremental University looking ramp offering. public U.S. base, Suite. the homegrown, recruiting platform of Bureau Other existing we Social offering. sector wins Suites. modern included client Within Appalachian our and Representatives new chose also of instance learning selling Quality and near contractors for Service the a due Department XX,XXX University Tech SumTotal Children's County Administration across Learning hiring The Postal Texas U.S. and client Baptist Recruiting success licenses California; its Census additional to the chose with The and Learning Cornerstone of organizations Alabama, and Health System. and Virginia replaced and of in future. House and on-premise front, its

in Our been sector cloud. public have well as continues the we the recent driven to sector past and transition believe years this by that wins the over to have in positioned vertical momentum up Cornerstone is we few built

had hypothesis the despite would On our have to massive more side, teams to that our sales no sales from services continued in we on one-time if We to that team paper recurring one-time time business proved spent moved team the the services. commercial as has transition particular our faced client sell That longer outperform accurate. they hypothesized partners. time

As existing about client sales enterprise products. services, been new exited educating delivery team able installed has base more and we to the dedicate our time

an their uptick result, well a Management seen recurring Anytime Subscriptions, Human Cornerstone footprint. such have we new clients in solutions Customer and as our as As as adding Capital expanding Packages Support Content

market instructor-led XXX,XXX been For drivers. in Performance delivery training new an quarter, added package Cornerstone to Learning to the example, reduce our population has third Suite new their the entirely Suites, the drivers for and accelerate using to speed seasonal of largest company, and Learning world's which

strong prior Europe our Anytime recruiting have performance included and spanned to with new in least, our to QX Suite, we all due capabilities. their year-over-year. QX, unified learning Content see client to the attach the past EMEA an across in Cornerstone more number but in of Cornerstone the two demand their device the of using we than more Cornerstone Cornerstone Learning tool. XX% ability number we products products. to clients Suite the product a Last continued they offering has in to HR our with our platform, In for more in have due talent with global HR to with clients, of the Performance footprint medical with more adoption EMEA growth total integrate offering. extensive Driven saw and Cornerstone strong cross-sell XX% footprint manufacturer our continued wins With our number addition the or the adoption our EMEA over of than using in continued success half QX continued management three alignment the largest year. EMEA Learning relative any Another performance, and second Abroad, Human doubled homegrown between our that and the vendors. region nearly doubled have or Momentum Management in offering, multi-language clients With XX numerous increased has outgrew of clients in Capital history. by months not see the in European seen using we Cornerstone products Recruiting our

of for mentioned, I continued first this on can months productivity. operating the see profitability. we in Much line, the operating Moving $XX operating we the margin. an be income, first-ever profitability of operating or generated as Non-GAAP achieved XX% in million GAAP quarter quarter to Through to sales nine rep in in the XX% attributed to $XX improvement margin. progress operating improvements income was year, and, our in bottom continued resulting of we million

Excellence Additional benefits to the initiatives. be to through continued our realized have Operational bottom line

life negotiations more million sourcing year nine due first First, by $XX the competitive strategic reductions bidding contract of in our achieved avoidance months and of through than to cost this we team. and

savings capture our from as believe as realized this will million software $X.X run-rate two early savings over the and next we Second, initiative from years rationalization effort. in much we

office, second of in City, gives in of believe manner. we this near of Third, will growth cost-effective be recently support manage opening several the opportunity a which the our Salt to U.S. expansion that Silicon office Utah. U.S.-based the largest will teams, We Slopes, announced us we Lake addition our

in our with While environments deep September, retail focus and for for and steadfast. efficiencies focused our automation, to see we're to will volumes believe employees. substantial strong application of are we over pain-point We retail, on business a from this high our is already through help the can Recruiting, the on with third-party With process strategic sourcing, in improvements huge the first believe we our improvement upside and According change outstanding there initiatives. Workpop, of area. this manufacturing substantial Workpop's expanding the hourly and clients innovation incremental opportunity global Suite has these healthcare. of half gained in improvements online momentum Content on training solution Recruiting and we acquisition results, recruiting accelerate be initiatives, significant expanded expertise, Workpop. After industry, Recruiting, Even with seen and make year, able Like we in $XX margin design to Recruiting to billion. all solve making our reality the training doubled-down while product entry-level a through capabilities, further domain of have market remained

offerings, Content of enabling first our the our We for sales for Content Content win through exceed Content sales team largest and XXXX in closed to XXXX. have of full-year see months the history, continued to strong demand second Content the nine

Anytime for capitalize in with a which The we content. on momentum had definitive expanded a bank announce we Content in and because concept their microlearning into addition, increasingly accessibility, that a Grovo name the one-year a have four renewal its levels of population. and Cornerstone effectiveness. leader is provides time X their popular of agreement become which at am user training Content To in today acquire Content with minutes, that we business, acquisition value a for it came to X has Anytime believe have fortuitous of teaches pleased leading the in us, converted minutes a drivers. In and content, key short-form three-year and engagement them seen I the to single Microlearning, into Grovo, contract workplace trial global to the we French entered

exclusive now First, Cornerstone. Grovo barriers top-rated through library to additional Content replicate to our for This of will makes available and library our X,XXX Subscriptions others robust Anytime more strategy. trying This only entry a Content be has creates courses. microlearning

the global training limited curated leaders partner capability content unique sourced titles remain content content provides Grovo our on in supplement us majority allows vast to will our us with production subscriptions. from subscriptions to Second, The our that thought a with Content of our ecosystem. create relationships to capitalize

the an differentiates the because such from proprietary training for for to know we've it employees. their Learning has a this tool Create over Create tool. Grovo and Learning our Capital offering, key this our value plan is expected clients their our to own content high-quality, their laser-focused to a Fourth, upon standpoint, a will to highly clients to completion Third, directly, opportunity content. real content In content recapture represents them transformation efficiently production. Grovo develop many We Suite build acquisition, we solution offerings Human any We content our of royalties. Management streamline We creation order offer our into their our business strategy Content embark which their software remain inquiries to to our Grovo improve unit and economics and a Anytime developed this Create in will with of tool has subscription value acquisition allow Neither on are company. the planning content delivering financial to on efficient been for Content through model. on the Grovo not content, our of capital adversely years. impact nor partner type received

Essentials beyond new for service subscriptions in our the to top clients. for providers including continue for Germany, our and today Over for highly-curated released to subscriptions to end, add transformation several Spain. time, e-learning plan with job and Anytime will we functions. partner offering, subscriptions that Content industries focused world compliance on and our modern regional more subscriptions, thematic and subscriptions We digital Content the Anytime popular To content specific including France, offer we those

the e-learning the Learning Suite, a of and Grovo of include and wide believe variety further of Content Anytime of attach All of state-of-the-art to content future. are provide differentiation subscriptions the providers. competitive our expected drive combination Learning Subscription into these will our We to increased Content offerings our from service, acquisition

the a consecutive innovation product time to industry vision execute. in Management analysts. month, Talent recognition to fifth to to ability we recognized from were Suites commitment Gartner's for our of continued as Our due completeness Last leading significant generate and has Leader

Oracle, continued Cornerstone For consecutive consecutive best fourth in ahead "Strategic leading the the Cornerstone HR numerous discuss as their as the the space. Cornerstone the performance Fosway X-Grid position as Gartner Cornerstone's Management Challenger" the both performance for to Leader" to in recognized execute". culture that, in quarter financial Brian the corporate a for advanced our potential. and third TalentSoft. and outlook time, it for to improvement our recognized clear and in in SAP, and times Talent to SumTotal time, HCM due recognized in third also quarter their October, With turn was more also vendor to with our of our like "ability I'd over leadership Fosway In "Core also Saba, X-Grid detail.

Brian L. Swartz

everyone. afternoon, good and Adam Thanks,

an over discussed, against year. very team's pleased with past Adam our As are execution we plan strong ambitious this strategic

a and I $XX to discuss for closing outlook, updated moment Grovo results agreement Before QX acquisition spend to announcement like cash our a I'd adjustments. million our to financial subject this summarizing definitive today. We in quarter, acquire signed customary

an do maintain beyond. to impacts guidance, accounting, positive operating the expect Grovo from we expect Cornerstone, as a have in excluding achieved not into and the business. purchase to ensuring we Furthermore, Accordingly, we updated of provide the not material the incorporated business. our XXXX we expect to the income synergies Grovo capture is Grovo ARR, accounting meaningful Content it while core result we of acquisition, although our of momentum perspective, enhance capabilities to other we do than While have in

year, Now XX% QX revenue to our the on share share $X.XX to doubled prior performance. subscription our to by year. nearly $X.XX grew We per per EPS compared year-over in

first In addition, marked profitability in our quarter the quarter history. operating of Cornerstone's third GAAP

with we intentional revenues. impacted far revenue is work our representing total XXXX. million, of still at is there that overall the in our in third In quarter, to Remember year-over-year performance our XX%. growth achieve by reduction pleased long-term to growth goals, be services our $XXX are done revenue adversely of Although thus came

increased in guidance our revenue quarter. net metrics. $XX A and Subscription year-over-year QX revenue, XX% in year-to-date. Accordingly, in over with coming QX XX million, on we was or focus XX% XXX, subscription other Services is growth $XXX of year during the our ASC to the year. the of The additions at Our progress X,XXX, key revenue full-year Under will million, I recurring outperformance size are revenue $X shortly. decrease a XX%. pleased at client representing raising few our linearity client to better high-end was range discuss ARR, new which guidance representing primarily year-over-year. of increase we're base This exceeded our quarter. a annual came by or million, in related

XX.X rates keenly leading bringing maintaining base users. Additionally, retention and approximately the our disciplined operating to focused than renewals we users remain on net dollar-based satisfaction. through during industry million We procedures our quarter, around added user strong client more million maintaining X.X

Cornerstone As quarter, I product Content less expect suite and HR, story. every client very become for several selling multiple add-ons base. discussed a represents a and today's diversified growth growth user as of we growth last installed user Cornerstone, due is to Accordingly, our correlated offerings, forward opportunity large part user revenue future having we move only and while to to including growth tremendous

continue For will following not periodically, it that disclose call. basis longer disclosing and user key on counts no therefore to will our we metric a be earnings user be reason, will while counts to consider XXXX a we QX quarterly

For financial modeling recommend business. use we you to internally, same model use ARR, metric we the purposes, the

Finally, September over the X% X,XXX XX, as representing prior we year. employees had a of decrease

driven research align of revenue. updated increasing reducing had third for better transformation some This driven improved activities to quarter, in margin functions. primary this margin prior us development, approximately the Continuing expense in by the to revenue, strategic in XX% and a XX% revenue resulted count gross GAAP out R&D on R&D in moved was basis. of XXX points operating capitalized of development X point marketing improvement during The plan basis mix and Sales of expenses year. marketing and the and basis quarter the aspects to In quarter. a for year. by quarter, long-term was organization line the points gross This their costs percentage revenue, I'd by non-GAAP impact certain as was of prior of including and development. product a basis in completed quarter, resources, XX% of up as of reallocation into were quarter, was P&L, of revenue, The both With percentage for sales higher that year. expense, that points like reallocation a the expense the the as respect was in primarily increase XX the of on research growth. $XX compared well down the development Our and year. head phase certain The the points subscription we third in to prior million, position job resources. the investment reallocation to from the software XX% continued X up was marketing of just completion XX% I and to in discussed, revenue, XX% or resulted with prior in with sales a the G&A our

time to improvement G&A XXX is fully driven our represents implemented. a of operating income from largely expect QX Excellence which of over margin $XX marketing. optimization a a see and in We Operational basis by million Overall, the sales in margin, point XX% years' are this as or This resulted leverage operating initiatives X%. prior

million our million cash income. we in free cash regard by in process noting cash that share calculation $XXX was our EPS in We very net per unlevered our million free GAAP share per in flow cash XXXX ever to to third million to the of operating was quarterly quarter XX%. or up I billing count improved generate Additionally, until convertible to $XX Net of driven to flow $XX an improvements. representing quarter, is am the $X for also year-over-year the It's collection income primarily XXX%, dilutive $X quarter prior timing, margin that flow, profitability. expectations $X.XX million diluted the first quarter, marking $XX operating pleased $X.XX GAAP compared report on income by With due or our note to unlevered exceeded worth year. not in flow, and roughly million share,

balance Now turn let's to the sheet.

maintain We balance well-capitalized a to sheet. continue

million $XXX had we and investments. cash XX, of September of As

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

our reminder, a shares on convertible investments $XXX July November that of and in we cash directors board share million to $XXX the share $XX of totaling XXXX authorized used As Back off our In last XXXX, Friday, cost X.X $XX at we of approximately approximately for came due notes a third about X, total average repurchase per through pay shares $XX million XXXX. an program. we of XXX,XXX million. million. inception repurchased quarter, From repurchased million

Now Please you website our outlook XXXX developed our to look discuss been of as we using as information I note updated which follow to guidance. first on we supplemental our have have has the financial at a best XXXX, Relations today. help along included let's turn and our Investor deck

all can XXX, the comparative view the As deck. purposes guidance supplemental guidance XXX reminder, ASC you a for assumes in ASC but

million current and the is assumes revenue. to dollar to $X $X the U.S. by British to dollar exchange a Our of U.S. to to a impact of X. U.S. X.XX and dollar X%, X X.XX pound to were rate approximately guidance million to ARR rate exchange If euro change

As to impacts as reference the accounting. from out that the acquisition we like I guidance encourage quantify following earlier, deck, discuss the I updated financial are you the excluded I as would are impacts the from I ARR, with purchase point exception of supplemental Grovo financial to to our of working guidance. our also mentioned

million growth quarter XXXX, At For $XXX higher. and of $XXX of in in reported currency ASC On these we XX% million this the $XXX the million. revenue XXX million $XXX to expect the the X approximately range rates basis, approximately range of growth. percentage total XX% midpoint, constant to fourth are represents subscription an point revenue and growth

increase $XXX for are range headwinds, neutral expected million. those basis, currency by a of million in increases numbers $X On currency impacted revenue range an of million. to the are $XXX million million to $X an full-year $XXX guidance million we which of our to by Regarding midpoint $X million, reported $XXX resulting guidance, raising the to reported midpoint

to to range which the in currency increases of reported neutral $X headwinds, $X million. guidance million, constant rates currency million, of increase On points the reported At approximately full-year million midpoint X by numbers $XXX growth a On basis, million subscription currency an basis, our $X midpoint raising by XX% also these revenue to approximately represents an those are $XXX impacted higher are percentage We at XX%, $XXX to midpoint, growth. $XXX are reported for and XX% growth an respectively. the XXX of million expected range million. this XX% and ASC resulting

we revenue $XX As continue million, service partners down we in resulting QX services year-over-year. about million, QX, in our to believe move $XX to in projects revenue will under of be just services XX% full-year

to on run quarterly expect revenue. We rate XXXX normalized begin a of services

on end as our the XXXX. best ARR includes of Moving ARR earlier, estimate to ARR, Grovo's at the I guide of mentioned

of in $XX acquisition Please growth for rates million. disclose ARR impacted points. will ongoing reported million constant $XXX it positively Grovo about is currency X this of At on separate disclosure XX% Given by those guide reported the represents are resulting we we headwinds, midpoint $XXX midpoint, including so basis, range an neutral by and to are in On reported currency basis. growth. an $XX by to $XXX and from note one-time Grovo's new not Grovo, midpoint the the our currency the $X in range nature and impacted $XXX expected ARR million million these far growth raising the numbers million. increase year, benefit which to million an million $X ARR a increases full-year this of strength the million, XX% percentage in approximately

large our of business months XXXX, XXXX to our mindful times first the first and about number As had nine ago. deals modeling execution. the please more through some year nine in performance you of through two strong deal than the a included months think X-figure relative of XXXX that beyond, be We

on million. a results profitability, $XX to by of to million million, an XX%. the operating operating midpoint to XXXX income in margin which This increases Moving are to XX% our raising $X $XX we range of

expect QX, income be line of income we million. in QX of For XXXX with $XX operating operating to

unlevered note are free guidance $XX flow $XX XXXX, this $XX flow, to the full-year the cash million. our $X we expense. cash to of range midpoint excludes cash increases for million, Regarding Please million interest which million by raising

an XX% by this is free services XX%. to cash XX% of to revenue Assuming amounts down unlevered of XXXX, flow end margin the

We years in a to expect as operating normalize. faster services ahead at than increase begin the to rate revenues this margin income our

free QX, For be unlevered million. expect with flow line at unlevered of in flow cash to $XX we XXXX around QX free cash

provide to some like XXXX. for preliminary thoughts I'd Now

to grow ARR XXXX. We in expect continue to

As mentioned I new important prior in it more in which ARR XXXX. is acknowledge amount the to earlier, concentrated new up-market been ARR of that impact XXXX could than has growth years,

but to to The expect growth. not in as revenue of about service million represent be the percentage revenue XXXX revenue revenue. continue impact our therefore million revenue and growth revenue quarter. subscription revenue total of Service mid-to-high total digits, subscription We mid-teens would decline in $X our $XX a growth, to XXXX will per single services from to XXXX

about services Assuming growth expect XXXX total subscription and revenue would X% revenue, mid-teens of growth revenue about we of X%. of total

it's subscription our As moving services partners, of a revenue transition on reminder, growth. important revenue of growth to instead during total focus the to

flow longer-term the as free to that growth improvements roughly in operating free margin in Rule sales With revenue or respect cash $XXX of and will million share. XXXX, diluted $X which sum continued margins our We of we resulting margin, remain by unlevered of annual the flow, flow on XX, cash cash approximately we per unlevered define and free track efficiency expect by enabled Operational be and continued initiatives. to improvement targets, in achieve Excellence unlevered

Fargo Conference. attend the Summit, conferences Telecom Media & Wells announce plan Lastly, including Tech and I'd the Technology, upcoming to we & this the that Telecom investor like quarter, to Conference, several Credit Barclays Technology, Media Suisse Annual

of If it turn strong our a meetings, we back you I'll forward Investor performance to quite In with to would are those With look XXXX. out and that, like XXXX Relations to please participate to pleased in Adam. team. any our summary, reach

Adam Miller

Brian thank our today. everyone incredibly execution. with of you mark transformation to and us Thanks, year I'm strategic our who plan, pleased one joined At the

changes the continued we Cornerstone, into transformed We the made and a have have the fitter to indicators validate success business. stronger, of

to excited for solid XXXX. through and the progress end are continued year We a

We your will questions. now take

Operator

sir. you, Thank

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

Your line is open.

Scott Berg

Hi, got Brian, start a good questions. very everyone. of Congrats we'll It's on taking couple things. with quarter my here. a I've you.

more Your deals underperforming guess, question and year-over-year normalized forward. comments were outperforming? on that's is this a that a expected the X-figure Or results? going drastically comment XXXX the or is level, was XXXX I XXXX versus materially and that really XXXX up to relative is that a

Brian L. Swartz

anomaly. really year, I and say, we're No, upmarket. an but pleased I it concentration certainly Scott, more is mean, success would we've is with this there great so I that, mean, had

Now, lot there opportunity big could higher year. have, when compare of there's logos the still growth out but of year concentration, level expectations a next it around and we obviously, and next have for you that for a impact

got we've look get pipelines at what through year. look So, like We'll next QX. to

a the As our guidance in do to large XXXX here for close. plus. six done deals four guidance, consistently reminder, last not That's near-term assume financial we now, I've something quarters, right the quarters

than investors but more there are of opportunity was big are very there everyone is for there, deals, concentration this to there that important for year we all targeted and it year. our lots is So, and on last of understand

Scott Berg

do you just they're like product? help for you. longer-term? time? the this this their Thank of you expand like the you your several on are familiar maybe Got over Content Or can offering And at of customers does Adam, kind acquisition. using Grovo I'm question the where today? it. Then maintain upsell much understand But with company. opportunity currently reasons. Content a radically What I us look how

Adam Miller

over Yeah, so XX% a Content business. our is Grovo today of little

we're base. content in very who as best think XX years very the with the So, some somebody It's client almost familiar it's been it's out popular our I spent e-learning there. space, company of a And with.

the pleased with and it the have with grow forward very margins, helps we're It think business. pay us in very to just on now obviously our So, of up. up have momentum don't as we the acquisition. and the Content well We XXX% royalty Content also a builds strategy, Content to sets with going Anytime our Grovo

So, business. on economics it part improves our that of

Scott Berg

questions. Got it. for taking Thank Helpful. my you

Adam Miller

you. Thank

Brian L. Swartz

you. Thank

Operator

you. Thank

Bank of line from Lynch. of America Merrill Our next the Sills question Brad comes of

Your question, please?

Brad Sills

there. really some sales you Hi, are a Oh, Cornerstone HR more gains thanks relatively in salespeople you year. for team you to great. there going to productivity flattish I drive point still guys, be Europe, thinking ask my need at to is opportunity more growth, productivity. forward? Obviously, or wanted of this good balancing this the do and seen to taking have, you there's that with been had? about How the hire that real Content like you've question. Are Headcount's ramping results feel

Adam Miller

still think opportunity we gain Yeah, productivity. there's to

relatively flat into and look count head going optimize allocating improve We will sales we're ratios, greater XXXX, opportunities performance. to CAC better we'll that in head to and further overall at how efficiency, keep drive count

margin is this improvement have we speaks the to and extensive Wheaton optimizing overall. Chris some And ops improvements we the bringing from organization the and the management both the team, just sales gains. think coming that from it in in productivity sales has focus of experience to And Lautenbach Jeff with made I helping

Brad Sills

if I business is there mean going take commercial? deals, success then, And Great. comment on comp can the be seeing we that perhaps year commercial, may the weighted to in more the to you're tougher on larger next into towards it. the drill given Got

Adam Miller

on specific. commenting really not we're No, anything

large Just mean X- deals. That into we in upmarket. next we've deals We've going good pipeline and both the X-figure very had have year significant of number deals done a a X-figure that year, doesn't figure deals. don't

to And have so, good upmarket. forward we're performance looking to continuing

this more upmarket. concentration that little to Brian's I trying think just highlight been a year there's

does set us pretty Having forward. tougher up feel the compare. a about that, upmarket going And it pipeline said good so, for we

Brad Sills

Adam. Thanks, Great.

Adam Miller

you. Thank

Operator

Thank you.

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

is open. line Your

Alex J. Zukin

Hey, guys.

of that, commentary deals got there intended were just on just posture? color question I've more guess, pulled is had horse a I than typically any a conservative the Then that forward, a time. that signed set for emerges, earlier deals that is that? dead the expected, to large fourth quarter one follow-up. you Or big big a maybe the deals, given you the beat So, for to one guys kind maybe around

Brian L. Swartz

come Yeah, up a in here. topic. this row big Alex, it's Brian. three Obviously, a times It's is

So, had strong of upmarket. be clear. lot to We've be let year. success me transparent. we're had is just trying a very We've do a to try very very All

for further execution the opportunities out our important that have that believe and to for deal success, large but everyone quarter-after-quarter-after-quarter to there continue also We contemplate it's to I've the last of that laid year, philosophy very, kind year-after-year. philosophy, understand are doesn't ongoing very guidance consistently

on in to quarters. get we're that and outperform that be but a trying year, until kind simply the exceed to that XXXX respective XXXX to So, transparent into We to into have you in relatively same would hope able basis, conservative. we're large-deal those having don't know obviously and of those numbers continue year you be

deals trying It's and pipeline, that. So, QX, year, performing about around as that's not this QX, both next issue still excited all we're of to all QX, mentioned, deals and Adam timing in QX, there's the year. QX in QX, QX, a against tell. we're

Adam Miller

did Alex, pull And into Yeah. anything QX. we that just not forward on point,

QX about feeling pipeline going fact, we're and In XXXX. into very good the

Alex J. Zukin

optically across if guess metric metrics, only which increasingly Perfect. being subscription billings from I the the diverging next type the calculated growth board. of you're bit, that, and this as little ARR for revenue that The follow-up metric, year year. jumps guiding And strong raises on I beats the growth is seemingly look of is to and out across kind the a both weak

much explain that from forecasting baking anticipation? just And the then that is year, of growth you can the in maybe revenue So, the subscription case? next why How business? are you what's you're the Content for

Brian L. Swartz

Yeah.

So, first to respect on question, with the billings.

transition. on. intentionally, in we billings why services our reason in our and services. associated key is our as everyone are revenue as change which moving revenue, why services knows, It's consider to calculation, component Analyst we partners with component a at said, I three metric we we And It's we a as (XX:XX) are we're Day, commenting talked said, metric extensively So, a the metric not about ago, going that right quarters now, through not this. the a our deferred our of a billings number, is, business or the – the is which are revenue deferred

fully And watch of which The anyone happen it obviously guidance it's the every is year-over-year so, metric right on obviously talk business. full-year not not key normalize focus it's on But on and metric XXXX, a a of each will revenue the standpoint the provide internally. our for about encourage I the we We metric on. likely running to until that would at ARR, we basis, services which a from end quarter, quarter report we and the year. in

about subscription And business. that Content prepared year talked of we It's we're enhancing thus acquisition are and and out With Cornerstone They've we board had it's offerings like in unwinding, continued said, as the all services as intentionally obviously So, on Obviously, great function team in a would done, if Adam growth rolled about understood exit business. offerings I to have excited the question, it. think expecting Alex, are a that's we the remarks, how as today, the Anytime. today, bringing Content year. his I under question I this respect how about being Grovo our far of correctly, just really strong very services new the overall. Content the

the the expect strong in do we'll quarters. continued business, we of talk more that from about So, obviously it and coming growth side

Alex J. Zukin

for Thanks, taking guys, questions. the Great.

Adam Miller

you. Thank

Operator

you. Thank

Furby & Blair question next of the Co.] comes (sic) line Co. Your Blair please? Our [William William & of from Justin question,

Justin A. Furby

I Thanks, the you of for time, side go seeing quarter. percentage can what and big you're it, to and got My a but follow-up. just you mid-market, how – Adam sense guys, your a if talk as can about pipeline guess, quick the that over is, come and down I've maybe other is of it's give Remind business? Brian, to sense there? a the us, nice or there

Adam Miller

Thanks, Justin.

segments; more on having on commercial looking about small basis. perspective, front. the is inside relatively a the So, which public we're at opportunity now say from into lot are XX% SMB, on of a percent mid-market, all mid-market, in capabilities optimization of ARR business sales, annual a obviously strategic, and mid-market SMB. in sector to at cost-efficient. success the of and new our With is are What with expanding sales regard of would an coming of doing It's less enterprise, both lot side I expensive this seeing and We're point. we

are So, we are teams management efficiency going consolidating our our inside and more the bar team, mid-market and XXXX. enterprise raising for sales into to enable we

We are year. track mid-market with on this

very brings packages total those and into it value that contract successfully, the ASP price and short a done market, projects all as We done we targets targets. being lot They're quickly, attached as teams, for up opportunity. part smaller in to really the client and across rolled see service the segment, They're overall service-inclusive pricing as well got lot worked are that hitting and us that up team. all the And We're has our of very very they're allows success of our and a to that Remember, that of segment. to traction, down seeing non-enterprise the attached brings hitting so being deals. by are these implementation. has of content that implementations. We're roll also

seen today that to way. to And good us an in X,XXX there's opportunity to segment, think in to we've is drive overall, we efficient So, mid-market a growth XXX business ASP and good continue employees. which progress that more

Justin A. Furby

change points side, have for or more are your points, you Adam, curious, where of super Thanks. business That's terms or And a it. ramping from sales given doubling go-to-market versus two? ARR Content but bigger? the some as around you of over year guess, several growth a you QX to Do have you being to and Content points, sell you And of ended I'm helpful. next there means the the reps up then and given around this year Got year X need to able of that. I I hard a becomes Content. what more of know you? all, on you've give? success it Is just, think to in this sort color anything anything with any terms lot it's Or Brian, next you Because in big Is X color? them last year? data your the can connect that guys

Brian L. Swartz

Yeah.

Justin. the latter So, handle let me question,

QX, mentioned, get trends, to we'll by And the they commentary We rate including growth certainly time, that, the the our try both QX is of obviously once over, but faster but a maintain market the market more importantly, ARR existing today, end So, they not the by year, at is on that can some they're for product, are much also execute, new believe just but business. of I products. billion-plus think, the the team, three than a think and it's we our have size they Adam of last we number. in bigger, how overall we've year. business Obviously, over we quarters offering. first the definitely got very for already right? growing They commentary Content. to beat relative of As given market pipeline this $XX some see year's given strong Obviously, to so unique

other With the it our to unlike enhances acquisition subscription-based the have today, the moat and just I we advantages competitors, relative grows, competitive into offering. competitive that think

and call, of think – commentary sales might into we on So, no give we some look composition beyond. and about more the breakdown we'll how on to – it of the the going promises, the XXXX QX that's

Justin A. Furby

then Okay. the Adam, And on go-to-market?

Adam Miller

sell sales all the And all across good We've by segments. globally. content world. over from it selling we're go-to-market able the we're been force seeing perspective, to adoption Yeah, a

part and So, there's make It's of Not the a it during around within every matter sold more us kickoff acquisition sale we do. we both of single expertise content, the training. rep has And subject sold our every Grovo content. could in track horsepower single to but team always January. has content. obviously, more our gives And production sales big training of continue

a opportunity. of So, gives us lot

Justin A. Furby

Thanks so guys. Great. quarter. Okay. much, Nice

Brian L. Swartz

you. Thank

Adam Miller

Thanks.

Operator

Thank you.

of line Please go JMP ahead. question the Pat next comes Our of Walravens from Securities.

Pat Walravens

congratulations. much Thank and very great. you Oh,

So, I guess, I two. have

The seeing? with are with you and has how their evolved Learning Adam, is, first things happening product? What what's Workday And competitively? one

Adam Miller

Yeah.

been has the situation I'd competitively, say, fairly the same. So,

Lumesse. consolidation, in example, We for competitive changes haven't landscape. bought are new We've further entrants. Saba lot seen not of the seen some a There

is a say that have also for Recruiting us position in Learning would our front static forward. on All fairly very strong I competitive environment, makes going us. put for both of the and that which a good moves,

leader the the our now us Not with combined experience strategy, further the the Grovo experience brought and of makes Workday. particular, certainly our limited to on investment the side, Workday, learning Learning distances you combined clear but that platform, including of in since competition. Learning, from availability into platform up in learning us So, Workday continued acquisition learning, the Subscription with whole and Anytime Content

engineering well. particular, And positioning the of the going in good in so, we've investments around space, that Workpop, and product, and forward in in recruiting, Recruiting made acquisition feeling very investments our well the market Recruiting, very about we the we've the we're our all to Learning as think improvements for position made us

feeling Recruiting we're both Learning good So, about and going forward.

Pat Walravens

picture And All my – question little Thank bigger you. is right. I second Great. then a guess. philosophical,

from you've you gone early hyper-growth rate days How right to the if what things this And the So, sort we'll in is? growth much of do accelerate. then, a balanced see more decide now. model growth

Adam Miller

Yeah.

I Rule think what fast grow, is not which at, we're we I can And you looking but know, you expect CEO, long another where of free we flow XXXX. and by achieve on and we're much think just recently it, a how on think to growth XX, a is from XX, right as is to think a about to it's way heard we're can So, the grow. XX, how track margin the to of of that. cash balanced We of which the that. approach very revenue attain Rule combination for We've Rule taken track you

seen in gains profitability. You've significant

you been made. Recruiting us revenue Content and we've Learning, We into even especially with when upside sustain able transformation consideration. the take seen there's also think growth You've both in obviously to in

mentioned, as Brian execution. long-term strong puts TAM, all for growth our and position have us which in expanded also, effectively effective a of long-term We

Pat Walravens

you. Thank Great.

Operator

Thank you.

comes question last the Greendale from of Corey of Analysis. line Our First

Your open. is line

Corey Greendale

my Great. Thank you question. for taking

positives, more of So, a you just may talk in more agnostic, content on I others partners acquisition. how how Grovo kind that? other terms the question the Can just being Content is strategically, provider first the view just to the question it. as versus react about strategic might that understand, of

Adam Miller

Yeah. Great question.

partners. to attentive very Content are our We

a in We trying to change signal are not strategy.

best the acquisition pie the expand We our to providers from in the out enables opportunity will And Grovo continue for partners. which world. our in of the turn business, believe to us we increases curate the there actually top the Content e-learning Content of

we does universe the actually rather the them. So, expands compete our deal and all think to of revenue our partners, but kind partners available with that of this for that's not

Corey Greendale

Okay.

Adam Miller

worth the mentioning business, Content in a also life like that is their spots. It's people that sciences little pick bit

And fact, today content. Pluralsight number even think out we we're becoming believe and content are a growing with. we already to partnerships an with Anytime example, Subscription nothing great that the pick that. specialized, the pie grow we for Grovo And a of these healthcare highly these Content as do providers the There content retain with can working continue even from content our effectively example or top have partnerships we're a in type we'll has providers lanes we've that So, I But being the discussions partnered are we that to and, operate in work better with. there for everybody, of have of content healthcare on. efficiently, for we and providers partner

Brian L. Swartz

going the large not Yeah, lanes, that's content there, of we expect Brian. it of believe content the certainly or swim piece where Grovo it be add will of a lanes. be our to we've gotten that and will acquisition offered Corey, the offering. into those What I'd we majority the the with vast various will part third-party swim a and even only take forward, majority from those but The be subscription it's in that, thing

partner The holistic super important comprehensive a third-party clients. is be to our have that to offering able content and ecosystem for

Corey Greendale

you're do doing were well follow-up of services reps terms gaining partners talk about is work they just of you and of clearly freeing Like of Got partners as other the in much benefit quick third in Can piece parties refer your doing are business – And also seeing implementations is, going? order my working as kind shifting services how (XX:XX) then to the question you it. when you implementation it, how are the were first to those you the up time. internally?

Adam Miller

order. had as going the past. are well gone implementations in that reverse do Yeah, as I'll The in they

ecosystem delivery we because I now. In very remember consistent for are of were delivery the part, working service now people have to are our delivery partners part we you that most today. think have team that have and service our that of on

the people literally delivering So, same the work. it's service

second On to benefit. to partners, the work benefit see the order our of are the moving starting service we

I seen not as the but of out a continue benefit. opportunity full we the to in more the have believe build there's We benefit. XXXX these and have we at the beyond, lot some seen extent practices already of partners,

in, of and some have teams from on we the the these with our deals in of deals our larger partners, working are brought come on Some absolutely ecosystem. partner opportunities we're we've working larger

believe time, continue to benefit that that see we So, upmarket. we'll over grow should and particularly benefit,

Corey Greendale

And Great. progress. the congratulations on

Adam Miller

Thank you.

Brian L. Swartz

you. Thank

Operator

and remarks. to Miller? I'd time, this At call like Founder Miller, the you. over Adam to any CEO, Thank turn for Mr. closing back

Adam Miller

Thank today. you us joining everyone to

to work throughout realize this transition to great of organizations look want soon investor conferences. of their people thousands We the forward potential. especially help to I team always, our global As upcoming everyone. for around and of the to you their Thanks, thank all world seeing millions at

Operator

this wonderful a gentlemen, participation concludes for and Ladies Thank your you, you today's sir. have conference. and day. Thank

You may disconnect this at your time. lines

Cornerstone OnDemand (CSOD) 7 Nov 182018 Q3 Earnings call transcript