CSOD - Earnings call transcript Q2 2019 | Cornerstone OnDemand Inc

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Operator

Good day, ladies and gentlemen, and welcome to Cornerstone OnDemand Second Quarter 2019 Earnings Conference Call. [Operator Instructions].

As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Jason Gold, Cornerstone's Vice President of Finance and Corporate Development. Please go ahead, sir.

Jason Gold

you. Thank and OnDemand's everyone, Earnings Quarter to Call. welcome afternoon, Second Cornerstone XXXX Good today's similar will format call The of be to quarter. last our published today remarks we short, of updated a letter Adam QX of about outlook, with our results us Brian's will should be Since time and and for give a shareholder which information prepared lot plenty relatively Q&A.

we like period, we've outlined of events for participate including when calendar so any our the quiet our you'd Relations In plan Investor also our enter the please to to letter, in feel if to reach quarter, scheduled free out.

release X-K. both furnished press with Form shareholder a in Our letter and the were SEC

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

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

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

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

in we non-GAAP release. non-GAAP During the be and information unless to the All that in measures. financial our and our figures is the GAAP financial Reconciliation will shareholder today a GAAP is of to we non-GAAP state call, both GAAP press measure discussed are referring letter provided number.

to to like Adam. I'd backdrop, the turn a as call that over With

Adam Miller

year company's quarter transition, outlook for how which what have in who thrived remain everyone marked of they've accordingly. this overall, today. we we QX our incredibly Jason, about of position, through the they good simultaneously the our first looking the the best when while and I thanks increasing proud we've and moat. accomplished our second Thanks, And raising of the at size us feel half financial they've are and joined done had history. our team competitive to

competitive we Cornerstone content little on of call, I offering but in to think The competitors. the we a point Analyst had to last it's talked our positioning, combination about Convergence Learning at us create our traditional and that the Day a emerging distance that on it's starting again so our June, which To effect repeating. is worth flywheel on believe story Suite will and fundamental from core we quarter's of this

our we've years. One is assets scale of greatest a developed the over

Over platform. the the past of data geography, popular, on not content only online provides, by over particularly our data XX what Think registrations We our flows courses through but the which know about metadata overall, by related have system. all had we've employee and course the those data we when of and and by it an to million turnover clients XXX of from us with content It the extremely and and our as things engagement, repository job want. that that data, are anonymized serve These relevant have Performance ability our with valuable matched reduces improves drives we since also the that amount are user industry provides productivity. function. months, most up Suite,

to AI, companies have greater. like things almost about how never workforces making become divide news Think skills every learning companies divide the the burning number that and that to has compare all soon rescale issue is their and a the how globe. then been skills around upscale realize possess in the you'll week, cloud the With need and for for world, of these areas today's skills in requisite workers machine computing and the prevalent becoming

the walk only meeting that into we our scale, strategy, Our data providing properly clients content our and while to now the but not our are we solutions asked simultaneously positioned to and we see by have actively address and products a company present these only this sales when subscriptions And right execute vision, that's we're globally. strategy distribution on our that leveraging issue.

is truly is performances around win. strategy that story helping As to we us us a this our massive globe clients injection enabling that quarter, that business. last brings pointed a will the offering we and our compelling This product install drove differentiating having into act overall It's the scale propellant for the our and suites. to strong think as tell and a that base out across of content our content

notable second at the U.S. Richard like and the Service, wins During quarter, Ellis Lockton. we organizations some Postal CB had

a team year, even onus sales I've about before our at management. and our deal Convergence, particularly positioning as our strategic Cornerstone Our and in that annual leader strategic better closed feel really multimillion-dollar the on about half opportunity business accounts proprietary I'm our and received content that QX, in to The team a had subscription, conference Anytime. this the us talent of commercial U.S. enthusiastic been. performance me our deliver. is learning of of us strong feedback first and Content made sits The the even in June, more Because first our both than we client today

is about minor not bumps encounter some may our the linear, I'm be and always it. the strategy we'll way, really While surely clear, road along and excited

capitalizing in is to about turning shareholder creating Before the to for growth and comment operational of long-term over our plan driving philosophy foundation want XX our to ability achieve Rule value. while to our continue We the things believe our opportunities I XXXX. Brian, simultaneously on efficiency

of our discussed consider we year longer to XX it have next We XXXX. our is no Over several achieve in months, goal aspiration, last expectation. the aspiration an the this Rule now

cash stronger subscription this today, our than margin XX, revenue feeling Although free are to the about to unlevered flow constant will a see a confident we XXXX have currency things an may somewhat which growth. way, achieve path Rule clear metric change the increasingly along ability be and of in contributor

the published letter shareholder XX next the detailed are efficiency some In expansion our of today, months. operational we the we over margin initiatives that driving earlier

stepped up efficient place, more we of Our plan. that an every and plan that our confident I'm do, we more to in team has ways business. excellent to corner but found our have become in on can deliver I There's almost always and really believe in ability

I'll a now turn provide to financials. our the Brian to comments call over few on

Brian Swartz

we've and letter, a to Thanks, afternoon, updated keep quarter thorough Adam, overview the my shareholder good of Since I'm and provided brief. in our guidance the comments everyone. very going

raise we had ARR, and on quarter, a full As second you our chose good financial feel metrics: guidance our profit year and we to we cash strong revenue, about all can performance. see, Accordingly, flow.

XX% year. operating in margin over budgeted that they XX% the income There financial XXX timing-related was expense second fell by subscription constant-currency on of few rate timing-related, Operating or In key second points highlights. QX basis year-over-year $XX come they few was XXX an in to a prior than the approximate better revenue XX% into constant-currency guidance a about the year-over-year points. million, an of items in, representing basis midpoint occur the half This were Since QX won't representing are the our improvement basis. million, A was growth growth QX, of half. year. or that nearly $XXX we

in currency-neutral income increase amount This we by headwind $XXX,XXX midpoint operating guidance $X.X is at Additionally, million. impacted the raised for $XXX,XXX. have currency constant by a our adversely of or currency full year net

with a Regarding historical this more of XXXX expect the in trends. be half, cash year had expect will second further linearity. to CapEx in QX our for which our so than line in the guidance flow we note more we we Please will that exacerbate comparison year, back-end-loaded XXXX's XXXX, higher

back-end-loaded variations quarterly are these in to forecasts. these optics year, confident ability meet of our While create we the a

you'll disaggregated currency our in guidance, impacts letter currency keeping over that quarters, with updated result our movements into we guidance changes shareholder last are notice practice nature. in Regarding financial that on from have from changes our in the few which operational our in

changes of are when the whether also that depending X we disclosures moved FX provided from British better see, you It's to guidance months so spot the pointing changes new British magnitude rate, pound, pound or initially transaction they currency in on have gave understanding about the can notably the the worth you were ago. we most have out considerably a where euro. have the tied sensitivity that of As

like in full also transparency, expenses Finally, that a few to I'd out business. is point by spirit sequentially dollars atypical for which the declined R&D of million our

flow. has more tech While that prospective some were amount stack into or of in chose an costs with this, items quarter-to-quarter on classified our in could revenue cloud, cash on income a our some also transitioning was previously that R&D. public result appropriately the cost to basis, dollar which operating this immaterial namely there we no impact into Obviously, classify variability associated drove operational

Like about what we've very team excited for accomplished lies QX, of I'm proud ahead. Adam, I'm the what and in

still we on a Although strength left feel our of team half us, our in and year front of about the have strongest and ahead. the the record, good first the been has of I opportunity lot

your With that, questions. we will now take

Operator

Instructions]. [Operator

comes Chris Merwin question the Goldman first from from Our line Sachs. of

Kevin Kumar

This is Kevin Kumar on for Chris.

deals. about the you that sounds a that you for like U.S. one deal. how's federal, looking talk of was broadly the it federal QX? more mentioned relatively was It Postal large For Service Can and pipeline

Adam Miller

good momentum in couple federal that federal, had last Yes. about through very today. good and years We're our continues feeling business. We've over of the

to our about opportunities with already relationships new QX, clients as the good we're growth We good future. opportunities there well. our feeling existing we'll in continue seeing business the well going we're as seen opportunities So the into as and and that see have

Operator

the from comes Lenschow from of Our question next line Raimo Barclays.

Unidentified Analyst

Mike Raimo. This on is for

letter working detail on Just bit in you best I operating question Could you partner that practices what's were It of going the that end? partner that the are -- you're go relationships talking little seems into on more a evaluation on the had through. quick like and a a model. shareholder saw guys on about you

Adam Miller

Sure.

help So ecosystem. is in did the brought some we partner outside our entire with and structure what our from operating analyzed in we

majority have to this new deal everything we which interact service quality services back organize work, all where delivery to how partners vast the months delivery, when first to the did how service doing team been had assurance, how our advisory work. our things we of alliances moved So partner but ago make partner XX we like we enablement, our of with model to audit, control, partners, we from certification, we with guesses

the and components have in in that's And feel and really to exactly the about they good model, work want relationships we feel so we efficiency drive good particularly later, that feel back-office the we established, did. we the there, have we done, good we XX months our we've about what place, partners about

in resulted over period close which six business. the that of and real a results in study did the to efficiency some the we made month So reviewed and study changes

Operator

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

Mark Murphy

revenue mentioned is or the to for You sort currency are you new Or it by bp just QX? quarter in the second consider subscription the clarify, a to into and where have that the you you -- in guidance ARR listing that had a it that developing pipeline -- strength And than this best wanted is so, Brian, bookings? if apparent new of the more year? was company's case history, you did reference subscription I of constant that sales seen coming for X the was and kind

Brian Swartz

ACV understand best your new I basis, in history. first quarter mean it -- the new new the of the company's It's Mark, in half quarter, measured first bookings on basically I I the best all, the hope right? so, is was and to ARR, reference Well, bookings question.

from that's So what that mean metric pure a we by perspective.

quarter to other or to through whatever we that that in impacted of reflects that it have account flow currency point of Obviously, well, how and it of whether today any obviously at through into but the this flow renewal and rates, it's last guidance we all guidance that we as all otherwise, our subscriptions. guidance, in give There's time. rates terms is it reflected take In performance. quarter, in that things be

Operator

question the line Amladi Our Nandan of next from comes from Guggenheim.

Nandan Amladi

your you place recruiting on content push continuing side management big are the emphasis with to sales now suite? efforts, So your expanding how in much the talent and on

Adam Miller

is business true software about pipeline is is are talent talking of of so remain of at that's these obviously, very seeing performance or Cornerstone good to our the remained components. been of which opportunity whether they why of calling which business, the and strong; suite, all big and are all Learning go-to-market. today, our still So all true future. you very into look components important specifically. see Recruiting of our to if the and upside that, for; about we important will out continuing that's we're Suite, for software. we're both parts are growth HR, be the incremental half our the we've business, And extremely half the management about to incremental how other and content sales But Suite Content Content,

Operator

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

Scott Berg

Congrats first of of unique my transaction on spend? I anything level is there the guess this about the that maybe of just quarter. Is that Adam, deal you that a number seats of question, that's good Anytime were drive Content outside multimillion-dollar around sheer part that that to discussed.

Adam Miller

and that bought it the was of Yes, combination subscriptions. both a the fact account of actually the size they multiple

And case, and which to now particular have, size Anytime compliance. of multiple relationships is separate deal, So obviously. the from know, modern in subscription X sales skills fluency, as the seen Anytime everything you the of increases we in Content offerings, subscriptions, purchase professional that digital and customer Content

So and generally, it's about business content just we're and the progress. feeling Content of the Anytime good our proof specifically point business another

Operator

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

Corey Greendale

in two-part. Actually, a to to try I'm going sneak

you about of that or enhanced are traction the cash to data elaborate what data, help you'd now is more Or share of content my part the the back the potential your as And getting you're that, to with come Day. say a you to metadata some Talking can not you to in getting is to idea away on sure data growth that subscription there, on partners, margin make revenue as with just just just the are be and the Investor -- it at want could them than potential free content from is partners that on you I when their the find sharing you guidance the improve of there if expect the bit. best of content a consistent content intended partners you're contribution XX, question combinations? First, the the you really or is I sort partners. continued the one flow questions of or is with communicated second And that Rule content? is or -- just hear

Brian Swartz

it's Brian. Corey, to and hand I'll then part Yes, take two X Adam. I'll over part

the question, of Rule is your answer XX to consistent. So

expect achieve way. balanced we the that Rule XX of a said consistently have We to in

We are feeling more confident now.

quarter and to a in really the XX of the published operational As lot today, achieve we of levers of you Rule last course letter cost ARR our plan there. guide plans variety to this can out kind the for fine-tuning of of see time current we the base a laid get to shareholder us over the We given year. for us the operational enable spent

can maybe you higher. or take as mid-teens, roughly that's bit see, So a give little

year free performance. to about We or that flow free next achieve are talked bottom on basically planning unlevered able line flow cash being the cash we through targets

growth, revenue next call, strong, are for about talked strive to market feeling the coming our higher more very Day. we continuing as the confident and at and the on believe we in than content we're Obviously, particularly But Analyst now and opportunity years. we did with we even is subscription year revenue

Adam Miller

be with sharing the Part working with that is a help content content obviously to overall them And around the with tools support their that going businesses the regard to for partners. well to of of as be content as Cornerstone we our providing business. to Cornerstone's are optimize content, we're of individual benefit data providers going suite

the own system has portal provider well us partners a data internal data consumption data to for that their data the improving that allows business. for to and leverage their as content the been own visualize both with provide manage put that as So into to

Operator

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

Bradley Sills

or any Just ask domains? just are cases that wanted success to or use on about domains Any cases here in. content some emerging to you've again, seen as themes use that

Adam Miller

train people. or talk people any broad, they the a it. job -- business, in not Virtually every it be way on limited have. of horizontal companies those Actually, best variety particular needs areas, to depending And but very it's or to need trained organization to is its typically is organization every probably corporations, about what to

So that development. employees of need the employee. entry-level specific, management on employees content leadership based is some management subject our token, some By or because is level the allow the entry-level content of already of it. content senior don't have functionally Obviously, for or hopefully basic time professional other all that they And need same the skills matter. employees need disparate offerings don't

able of Anytime things organization to Content that's breadth handle geography. by is you're your of of about irrespective size an And one irrespective that of and compelling the required your that's content the

because are kind the do into the that are is the have Content you do downmarket, able people these employee to that internally So enter you or operating. build Anytime work compelling for learning paths how even of to optimize don't to the curation, agreements content,

complexity, a token, level of requirements, with potentially at different same different combined makes skill, requirements, being multinational, subject which a functional upmarket, more duration of having employees the you have matter levels of breadth industry just By different difficult. lots of different

lower, seat clients bigger that so on just have a upmarket or be downward Anytime if works Obviously, sale Content And volume be or price large tend each price had. do. We've for have downmarket. and big higher, total to this is even to like because we if going the the big volumes. predominantly lot deal seat is multimillion-dollar per deals And the those vary depending the vary you're our So upmarket. than seen clearly both ASPs points small lower now, prices offering companies per enterprises

us, downmarket multimillion-dollar but very are price albeit much for contrast, deals. not And high low nice also per points seat. you'll there volume By are have smaller, opportunities that deals

interesting many that's compelling have very offering of us for and clients we think a to quite different we So overall. quite kinds is many, accretive

Operator

Instructions]. [Operator

Our Davidson. next from comes from question Jaluria of Rishi the line D.A.

Hannah Rudoff

Hannah on Rishi. This for is

believe call, and as that the last I mentioned improvement Officer, the term? With in Chief room with Adam, you you near recently regards top Heidi, the market. say would her for marketing priorities the and hired X On positioning spend there's in are to returns still on Strategy what you've Marketing

Adam Miller

the based Great most the the things see we is positioning establishing competition fit number consistent have product say our where messaging market but one we're would vis-à-vis also opportunity. in question. we that positioning branding, and demand, market, that both assuring so and I on market properly

So one. that's number

blocking I centrally, that marketing team related two, or Number would locally, organization. analyst the a a us globally say is single global ensuring see by tackling, more more and more decentrally others our of third is our to that operating efficient And overall. relationships. for functions in some operating and our is room We efficiency as spend lot makes

major So influencers. space ability impact personal not of influencer has which the demand-generation community to has over for analyst industry advantage, been the having with the on decades these relationships the a And compete two many analysts analysts, and that's something where and and enormous financial effectively. but community Heidi having in our an

So those say that's I is would but Top X. Top than X, X. list longer the are The

I'll broadly. more then answer And

and While in overall we a making improving and marketing, by more opportunity productivity efficient us we as improvement. months, success the productivity throughout XX sales are to means to have over drive sales continue driving and finished, incremental in sales last margin had tremendous think cost efficiencies there's business we no

Operator

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

Patrick Walravens

Content disappointing why yet out it's can interesting had I'm is Anywhere hoping might which technology pretty focus Pluralsight, a figure you us learning, for be. me of that has to help Adam, last strong. skills your that sort and results, so So week,

Adam Miller

good on I many So well. their Pluralsight. things done specific. I'm is say What not extremely offering comment going very company, They've very will that good Obviously, is business. to

are they I development very Anytime, earlier, So whereas very Content offering. on broad focused is mentioned and engineering, as a

applicable geography. any any any any it's So group size of people, to organization, business, any and

to diversification horizontal and that times of much at think global large opportunity us success. our different different better which allows business, to fact for I we also that us that allows that to that kind geographies distribution leverage gives us a times to scale. have very our of offering. and different is keys It one the portfolio have at sell us allows so into The and different are us gives And markets

established But of content, of has we're at that able generally. think that segment offering content market we're the distribution world. to on through concerning to and not bullish and in anywhere breadth still do We're part sell the the already any in into seeing all, anything with the our global I fact again we've

Operator

question from of Merwin is Goldman follow-up a Chris line from next the Sachs. Our

Christopher Merwin

-- called you other about Just about the -- it first half companies talking having think wanted We've running ever. cycle far pressure as to the ask in best its letter, in I out so shareholder there. this heard

first is So That strong if just curious at just any did obviously speak curious you climate if in so could there. lull see is it demand all. half, great the really you execution, to a if

Adam Miller

Yes.

for Brexit last EMEA. by obviously, mistake. we make repeat throughout is didn't sure that we wanted severely everybody of top Brexit and in to and so impacted We around, So were mind time Europe all

Europe We better diversified EMEA much and throughout generally. are throughout

any We lower risk concentration have single much market. in

an of Europe. about are confident in accounting set from We up us and the which makes currency opportunity perspective, better all more

any seeing market That's not imagine but anything not there's feel we could there particular any seeing to headwinds not good there we're also are We hard Brexit a in slowdown about that at that not I say impact. seeing be collateral geography, any and this or this any damage, time. won't time. very if We're business. at be

strong pipeline the an EMEA, in and obviously half year. excellent We first have of

Operator

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

Adam Miller

questions all call. today's participation for your for you on Thank and your

you Cornerstone re-skill I its the especially team the thank done Thank the to continues want drive workforce great as our global have they always, for global future. to As work attending. for for

Operator

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

now day. You disconnect. may Good

Cornerstone OnDemand (CSOD) 5 Aug 192019 Q2 Earnings call transcript