CSOD - Earnings call transcript Q4 2019 | Cornerstone OnDemand Inc

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Cornerstone OnDemand Q4 2019 Earnings Conference Call. At this time, all participant lines are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer. [Operator Instruction] Please be advised that today's conference is being recorded. Instruction] [Operator

ahead like Gold, conference and Vice Thank Please now speaker to Corporate hand you. Jason today, President go to would over the your Development. I sir. of Finance

Jason Gold

afternoon Financial Thank you fourth of Officer, Adam our Brian earnings XXXX Miller And are to With today Executive Cornerstone Swartz. quarter me everyone. call. Chief very OnDemand's welcome and Good much. Officer, our Chief

call SEC announcing call. results call. our be a the both to two of did our one fourth is and press presentation a and with XXXX the in in a website. on made releases published also conclusion shareholder We and second of We there's not Relations Form Adam a furnished related financial on acquisition discussing publish available Saba. our Today's letter Brian The releases quarter be the following were today, will being replay X-K. recorded will press Investor a quarter. this today's

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

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

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

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

Adam Miller

simple but in started, In anniversary. audacious, on Good global adults Jason. was afternoon, education to first our When celebrated got we dialing access QX, and for XXth for you we mission everybody, a today. Thanks, thank our basis. improve

have we millions XXX our multiple million goal, but as XXX decade we revolutions mission. people seemed online in we global Over to over employees what and economic from after Last delivered unachievable veered witnessed the year, nearly years a level. technological classes in Cornerstone revenue, to almost like cycles, in and million market time XXXX of the nearly its original now at $XXX countries are global with the third decades, subscription our we last taking transformation, next nearly XX vision enters setting two never

our kick the some next To share. in off decade exciting news history, we have to

signed have acquire to We definitive billion. for Saba $X.XXX agreement a

build talent Saba to one transaction in believe today. enables you the industry us is business we the for the it of sustainable management As long term. the creation this know, pioneers of We global know a

delivered the have divide. We pro and shared around sense thousands ARR $XXX million $XXX combination, a people and entity in people of a provide skills will the To have this for million the revenue. organizations of forma millions nearly to passion overcome development world reach XXXX help would our and of subscription of of

wave and term evolved looked When ahead was years we size value our of of for to market time way of the this management the this shareholders. the for our innovation, both opportunity, excellent clients of saw do long is Saba recognized growth stock deal. we position took the our substantial driving sheer the began several innovation to has The industry and as global and Cornerstone acquisition an we we first and industry evaluate transaction, right that rapidly talent the to to over next last

and to deep The clients Cornerstone will new that take whole our of level. to features needs will help domain will us us accelerate resources innovation Cornerstone the combination new the people our innovation, engineering a expertise of millions enable has been always meet our before, While of evolving and of known for Saba's potential. never and products like new to delivering piece realize their

get in greater fourth review full details transaction detail, XXXX. the results our of we I'd Before the to into for year and like quarter

full million, year-over-year by our businesses. and S. XX% the on year For in growth free and a profit growth SMB sector, of basis. reported currency our exceeded a driven on XXXX, total U. We operating subscription flow, we revenue revenue, public representing guidance in unlevered XX% EMEA cash $XXX part basis on constant and reported strength

like State some notable and in Life Sun Northwestern had Wisconsin, wins Mutual. the we quarter, of the organizations During

and color strong successes from contributed XX% our particularly approximately which This more extent an competition. down XX% investors revenue Our and two to U. QX our approximately revenue, XXX Sales quarters. expenses to churn and shortfall be of had European to help to basis the to in like into to guidance, team ago. The I'd of fourth a increase drivers. XX%, margins from the content of on fell attributed operating Despite softness XXXX short S. in marketing to our to understand forecast years total provide can annual relative this rose sales increased points some recurring results. sales were and team XXXX, lesser

we on partially decision end fourth content made quarter, teams the at the can anytime The versus shortfall to sales made be other focus our of a selling of the to in in content In year. content sales. subscriptions our business Let elaborate. types change we me attributed ARR the

year-over-year, also of had our cart of decreasing partners. content sales, our resell dramatically where we change dramatically ala unintended XXX% the the libraries change intended effect of the effect the content of which simply anytime, sales increasing had content growth in While resulted the

drop because ratios. the approximately short-term sales off In a cart anytime content healthy negative more QX, new saw content cycle represented was LTV shorter however, of in model we XX% content our anytime to business ala Long-term impact of bookings, our the content sales. are and content the as is our CAC change good, of with aligned this core subscriptions are strategy, driving

So came on consequently while in internal did ending meet annual a light percentage high-single-digit not we of content forecasts, recurring the does and represent our our revenue, ARR.

contributing factor total in to churn. to shortfall Another ARR the relates

can see, in to dollar retention XXXX. you approximately our number XX% As annualized dropped

clarity, above this gross XXX%. number. the a a number On is net basis, remain For

how quarter, the the rates. increase we in Last retention on of base size discussed our renewable pressure downward some our created

to from We XXXX out customer end also of after early XXXX, discussed by We rate cases staffing of impact beginning support at business When to centers centers centers. faced improper calls of teams how and we was partner XXXX. in our the impacted simply issues to the the in from our in were churn that not support our team ecosystem, transitioned moved support delivery delivery missed service historically we our resulting volume. previously increase delivery our of deflected those our deflecting straight the we the handle equipped and had went

part historically issue our up We in with opening XXXX, levels. high satisfaction in and addressed are the City, now office to in Salt back Lake this customer the of scores our

service we However, to add service clients. that third Saba we our It elevated with experienced resources, been done to incremental provide so the noting the damage had enable which acquisition, customer the customer some to quarter us worth XXXX. churn should more expect is exceptional significant even of through

traditional contributing experience on or track release particular, employee industry-leading back demand directed learning and worked workplace self-development, LXP experience both learning that ARR new competition unified solution which to and ERP venture factor the LXP were be we a competitors to share. learning competes Cornerstone to our one startups Cornerstone several with platform The on year, wallet the will this learning, real product. HR final for which shortfall increased completely providers. market with In state-of-the-art was is create category we The focused is a new skills our in have faced from

of skills. clients R&D at core acquisition recent of provides also Cornerstone Our our skills resources with which the in of skills learning will launch a acquisition as incremental will help engine, prime Clustree We accelerate today's thousands integration Cornerstone believe Clustree with of of our the the beneficiaries. be the

our X% the total, was XXXX than In put growth. shortfall revenue subscription pressure less but does on it ARR

we actionable the performance simultaneously basis. AlixPartners, as planned targets. we expect performed drive and has exceed result, appropriate recommendations, cost we retained a and we help in consulting of firm actions world-class To of the a of us many standalone our to unlevered deep performance operational to needed this flow our implementing. margin cost to structure AlixPartners expertise efficiency our With particular possibly cost cost stay optimize to meet which our margin improved with take initial to actions already some delivered plan, help cost rule free were cash improvement series a to optimization. and on on and has a identify on dive and XX hit to structure a As incremental increase track overall

way news, shares of the equity. to our we We other a more conditions, outstanding customary planned big cash of Saba $X.XXX Pending XX% billion over acquire talk closing let's subject in that Now is approval for and regulatory Saba. acquisition about footprint close very has X,XXX $XXX different Saba today time to in product from to rest the and XXX% transaction today's background, of of plan expect The global deal in a clients million. to over were last public they the By the XXXX in of visible portfolio complimentary Cornerstone revenue markets. QX. looks approximately a and with the company

management in XXXX company. long history after that a remember private You might as learning they a went

Over the by four performance cost their acquiring next of dramatically for Halogen for Lumesse improved broadened product recruiting. profile, course the and portfolio and their restructured margins they’ve years, management

shareholders. many this major believe three others, transaction benefits, We will our and amongst to Cornerstone to provide

The to dramatically users. The acquisition reach. first clients increases ability is and greater our reach

in expertise leaders $XX will and specialists sizes of enables Our partnerships with developers, around X,XXX support globe. This talent whole million more community client content more organizations integrators an providers, more technology system the software have to new expanded company all stronger users over and worldwide. of approximately

addition, to our our accelerate our public grow move service augment allows operations, the HR to In and ecosystem. support it partner and cloud us

more We more our also more subjects augment content partners. expect with curetted subscriptions and languages, anytime rapidly to

us to on cross-selling run surface successful Cornerstone’s allows larger also transaction meaningfully playbook This area. a

client momentum to our We great they cross-selling teams content now like Saba edge can sales the had anytime, we've content careers products already products Saba’s Cornerstone in software and offer Specifically, anytime. skills cutting products have. addition and with clients Cornerstone our

initial but traction content Over Saba is opportunity offering last selling user content recognize base. also the to offering Saba’s in significant content base. selling we anytime and promising global see install Their the was bring their to years, to limited, of their appeal our two

prices per year, opportunity we we come. to selling untapped believe $XXX average from can years anytime over an content $XX many we With leverage for see that to ranging user per

brings opportunity worth determining when are cross-sell us acquisition, Saba of we potential the to of we the complement a offered We accretion as revenue account into value clients noting the the to about term the products have It the by excited in that that synergies while portfolio very modeled taken deal. any cost is product opportunities have have. determining Saba our not the medium already

importantly, The second our will of product innovation. personnel combination years big is of us and understands experience. organization development. product resources product to management benefit the with substantially Saba’s only the resources in Remember, the but as innovation talent accelerate increase have and the our been Not development nuances space. piece development those XX industry significantly domain provides The over the has working last

existing simultaneously platform, Saba’s differentiation to competitive ambitious the resources needs. respond enable to to to Saba’s expect engineering our increase our offerings, While effectively to product leverage to which continue us and accelerate also Cornerstone will clients' we roadmap support our product expertise development will

data world. We More around a engine feed productize personalization usage, more top accurate continues. of will increase product time precisely to drive acquisition generate even in our engineering machine has has more allow We leader users that skills become vision been in better drives divide and to and and data turn capacity. innovation, the product flywheel from an at more drive capacity to insights lead significantly bottleneck that our the the believe a yet resulting the to AI industry the the mean engineering cycle our clients, feed mind which learning for vision faster even key substantial us can long have also which been the more recommendations organizations and effect, into based around platform for extend

in development, the cash see third is the of state profile have shareholder margin optimize sheet flow. the rapidly of sizable taken that to the and standalone meaningful cost de-lever identified. art the drive and cash we We in invest we flows, synergies the will cost margins, Saba’s big benefit will actions convergence cash flows continue our to substantial allow We drive to the strength have we people solutions of us from And returns. believe balance resulting increase free acquisition our unlevered to the believe a cash of flow

not the know We be integration an undertaking. will easy

a to help We will engagement we transaction, have decade. will entities for combine We've acquisition. have we integration on to work and support the next to on they run the so these focus management extended our scale us need to with execution continue brought and the and office heightened AlixPartners as for help with significant resources the scope of the

identified than that have next XX combined annual we of more we months. out cost the to identify millions We of take entity million already course the synergies run over $XX of the and plan more rate to expect

cost reference, of As combined a approximately our XXXX of base. represents frame $XX million X%

their by insights combined see benchmarking with to also margin many opportunities Saba’s seek from company. improve AlixPartners already operational we which Working efficiency their leveraging for to profile. will strong We capabilities, operational the demonstrated and discipline, in is benefit

one of low will Saba’s locations, of cost and will India as an headcount further benefits us of combined operating margin such improvement. to is believe allow our and effective in employee combination Pune improve We Mumbai drive lower offices the in which geographies, example, the of this As acquisition mix Krakow, cost Poland. use

Phil I'm our and optimization experience, support announce very organizational Saunders, the of current business. knowledge also leadership, operational of the greatly interim that and pleased COO will will business. combined CEO, become Phil's combined the to Sabah's

financials. will specifics transaction to on off that, thoughts I forma some discuss the hand this pro With initial call Brian financing to of and the

Brian Swartz

led and on the with I'd like provide transaction to Adam, billion for $XX secure the provide liquidity a everyone. the and $X.XX million. provided good papers purchase the cash $X.XX to $XXX banks and have Stanley cash of us price, position. of of capital about commitment by impact group structure, of a afternoon of the portion Morgan our the details of common you, anticipated financials transaction, to million. credit shares facility with sellers we billion more expect Thank To Of up senior fund

of purchase cash the We price from expect balance fund sheet. the balance with to our

coming rating to offering. B a loan In meet the agencies begin we the plan debt marketing term with and weeks,

interest are a mid or Although an approximately B conditions, subject plus targeting market to X.X%. we single approximately XXX rating of rate LIBOR and

of have revenue. Looking combined financial at two $XXX $XXX nearly companies’ ARR in forma and would the delivered XXXX million results, pro the subscription million entity

be But approximate closer $XX expect we closing, the if cost synergies, approximately in we times. At we our include LTM be to million X leverage would much times. to X

particularly of three flows enable that two shareholders. the combined of debt drive key ability X transactions’ within we synergies it a our the attractive the cash quickly We expect our of the from attributes de-leveraging the to will of years cash substantial balance cash close the enable transaction believe us flows down leverage one plus date. flow The strength the to and over forma to below years. believe three rapid pro will this makes of generation resulting next combined companies’ sheet to We the of business is times our course pay the

deal, Lake from of the has Our roughly note has of years initial unanimously waived this transaction board March three level support the approved until covenant of increased now. indebtedness months will and to Silver convertible XXXX and related Partners, extend their XX for the duration or the for

ability estimate operating tax our to million. to is transaction net the of benefit $XXX which losses, we financial currently Another leverage approximately Saba’s be

not of it financial we As will taxpayer benefit, be this a full until a result anticipated do believe XXXX.

XXXX the the around at the to Due our to guidance of close, not combined outlook. are full when entity deal for providing this will the year timing we turning time. Now quantitative uncertainty

which power the that, quarter. upon you to help with details closing, second guidance earnings to we said company. the do in Having expect incremental combined understand pro occur the provide however I provide will you want We some of to forma

As standalone basis. Adam to actions on achieve a are we taking, mentioned, the on are with XX cost we Rule the track

unlevered cash million free be now for XXXX flow revised based developed in XXXX, plan that. While with $XXX assistance will our us our the flow we of plan with standalone higher our than original free meaningfully reaching believe on had AlixPartners, cash unlevered

dramatically The flow cash opportunity with to acquisition level shareholders. us the increase presents the for of generation

combined As benefit depreciation plus the annualized and cost in of looking roughly income margin. entities the had operating $XXX operating XX% would we the you full example, at XXXX non-GAAP an have approximately included amortization of ratings, or million generated

combined discern income Please the keep entities’ revenue difficult in mind make that will purchase operating of view accounting the to the year. for first clean and rules

We are expect and help various and understand you with entity metrics of you the the provide guidance of model. combined transparent financials closing components committed to you metrics understand detailed to upon the providing to the to for

first revenue $XXX guidance million of in to XXXX, to we quarter total million million. of We $XXX margins the are $XXX believe be of For and guidance revenue operating low-teens. million providing $XXX subscription should the

is in margin flow. impact don't few QX cash expenses operating by Our that burdened a

while so flow margins flat through does and as our expect year. cash reflect progress business Please ramp show margins completion year-over-year the this forecasted guidance on substantial of basis, we today, our is standalone not Cornerstone acquisition. to Saba And will for more the roughly a note be are operating and we the improvement QX a

questions. With will take that, now we your

Operator

question And from from Berg Scott Instructions] our the comes line of Needham. [Operator first

Scott Berg

business. popped start the of is up initial My they reasons off with were your Adam, highlighted that a you QX, on in of Let's the in kind issue call. guidance guess shortfall. the new sales ARR quarter's churn net couple different of XQ since

this areas. next enthusiasm -- But maybe two those there the permanent focus of years? terms from of other content one away terms the sounds I is, less pivot was to content guess in the over anything a of content any side like else that it's Is particularly to I in call out there So let's guess churning business? on

Adam Miller

constantly fact not was buying we are really co-terminate sales in behavior to positive. though has we're old -- were great clients, out content in which that on cycles, move and they maybe for personalized, subscriptions, more even contracts us just to happy it's The actually much and our better so fully content, and importantly the constantly it's in, longer of for putting shorter future, from business is content business stickier, because in us sales, which year-over-year, be a we anytime curated content new market’s was and with the we and very sale with objective the about that the to content changing much they're anytime more subscription partner best us it's the XXX% is cycles, the think No, believe fully to very area. improved, be a better offer we content breed for thought up every did subject bringing more world evolving around which

long a benefit. does it term Speakers] but [Multiple So pain

Scott Berg

then What know when margins set viewpoint on next kind lately, lot going together? a public, Are you look a Cornerstone, bring made of does Halogen. went technology And that do you those large when perspective, you years, know well. you expectation And a undertaking. impact getting couple you’re of you're on platforms business this that do all does technology try move also given throwing the with that you. they've well covered to that to Thank from I What follow-up and customer from as because somewhat off forward? this their pretty your to platform then relatively Saba those like? stones, I have acquisitions that's do technology set going customer is acquiring But I there's so Adam, know my the Lumesse covers, the under especially

Adam Miller

the out saying, mess, were there having five let the issues, very, different services, is to forward So up only moving many, XX. job fewer think moving to accounting to all clients, Saba that's on-premise were fact were very than done Saba very, micro a ago. few very and building a was Saba the think on-premise cloud. today, by company in years there moving I were cloud. really five today, cloud the years, They clean ago years me Fast of many they than Saba start many, been clients, they difficulty I XX, unprofitable, have five good

as cloud. recruiting Halogen really the have have is in clients we in distinct is client think bases. the mostly now Lumesse SMB They the in three client They have client Europe. of today base, our they And which or client base, the XX% as And three base, predominantly them world which We performance Saba have up organization. is different three SMB would work those clients. opportunities. opportunity with global SMB different enterprise of of We we for team. think distinct team. the a segments. entirely those parts They almost have a sell We product is separately think Obviously, market each our of which global

We have team. a dedicated EMEA

the support integration and those So we're well. able to of clients handle quite

our focus the make is all And primary successful. clients to

learning. clients their some what on make service Cornerstone happening side, quite client few clients their some benefit performance of innovation And the by well skills, what of the customer adding with the capabilities, our successful So adding and and the on done capabilities last content around doing recruiting manage base, done it's careers and with doing Cornerstone how frankly, side any that's which over their some we're support they we're has by years. our and of what flip of time processes and we've operational whether around the their quite giving

real of benefits the to that's as want lots primary So view focus. to their clients both relationship. sides upside We clients and all this sure our on potential make to

Operator

Thank you.

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

now line open. is Your

Raimo Lenschow

TDIs? you like there? Can Can have to a content you of that? they Were new guys rates, churn talk more from than you on suffering the didn't talk on Saba going the in lot or Alix terms not churn

Adam Miller

space, they bases. now. to They of in their core pretty years is business or they on. churn moved predominantly, and think over in They as the the two their described have base which two rates with years cloud right business, they've churn. either components, think entirely to their had three good of as cleaned are over cloud. about components, cloud that's business issues was up which And historically talent as client have I churn three major with client last what's it that just their talent and are actually and definitely their the so had Their they also more cloud, Yes, migrate to off. link Saba churn which legacy products products happened the three cloud, they They several a more the those expected focus was the not last

actually core the well. in So that group And a their a quite that business of growing their of that is XX% legacy much they already smaller think now business has and they set largely lot group remains that split we from that think put of what migrated. churn in

the So than options to Saba are product obviously left offer And simply we stay. cloud. moving to that likely people are other

churn, churn. ability So not But lot decrease increase to purposes we modeled a in their of have churn an keep in think we there's say modeling, low of that a side. on I will for

Raimo Lenschow

you kind your correlation of that that is or so less some slightly And in it's then cetera, it anything? year consensus side? obviously being trying direct disruption ARR the et means and assume a QX ARR to like modeled left worth, on factor. I in also looks modeled just there Is below I'm is the guidance, a like lower this just kind understand on QX Have of of kind what's

Brian Swartz

are of 'XX some just out there's obviously, And came function spent we Raimo, it’s Brian. assumed the things there. that again that. Saba time obviously, and numbers ARR where then a the in are assuming no about at the The only, end QX really Cornerstone of quo impacted talking numbers status

Operator

Thank you.

Zukin Our Markets. RBC next Alex question comes Capital from from the

open. now is line Your

Alex Zukin

lose as deals, of in for maybe So equation What environment? that or Saba understand then at that, change us When market driven the Adam, the and more talk system of could integrated then just of competitive you? and can or by competition. of cost lack dynamic XXXX, how fully look about maybe about you just in help thinking, churn talked maybe the increase is it you kind you kind are the you evolving you

Adam Miller

answer in I competition, that would the increase that ways. say different I'll biggest and two

in capitalization So to with of result is biggest a start the increase the the startups. competition of

time those amount back to success all into companies of poured some and and so were public you HR have if gotten venture Connexco] now and there of [Taleo is XXXX them. go in factors was bigger, eight XXXX, tech, a So years we tremendous sold, when that capital that ago, went

a still of lingering went them some Some them scale, away, at of got are very bigger. of small lot on them but

one that got segment. bigger the of And learning experience this platform areas was

be So EdCast substantial and the in raised rounds to That many Fuse, there were has and you just in D Degreed companies out and have B some like real that that C, not others and rounds but and A raised proven real market and a rounds, market capital. cases a market segment.

compliance and very Cornerstone years. training. that the have self-directed learning, now aggressively market. are But segment We be the will as answer well skills we Cornerstone over as that with learning improved We deal to targeting

has We away share think that us. taken from wallet

an of head-to-head legacy learning simply product, maybe from and losing more go-to-market, instead that less they've been deal it's or a a because bought these platforms. one a deal new up So a sell would've conversion or even doesn't experience what

clear it to have that product. we they just us would very competitive, clients if much Our build made use something rather our

creates differentiation against of simultaneously it and a wave a for opportunity So us competition. new revenue this competitive

be that competition bigger with. be we've be Saba in resources. comes is to what out going and more the in and address the of engineering into and build we we able it innovative side better sooner one than to think it increase that We're seen we and able that's have, where we'll can So play would do there we to come

parity, the out there. in we trying of be instead to other So systems are be than that will better

out is the more have AI of and far course by We learning, And most unified there. Cornerstone it's with system learning, and depth. more which used machine breadth better better data,

So one of side it. that's

thousands there of The other we think as it if And we weren't accounts, thousands new were people is is we've block there more it but side been many I ERP are there. entering not to where tried for in there first. the us accounts of first know years now,

And the good the we're makes breaking particularly account, in in time had and a many places we've more more in many, incumbent of vendors. accounts, not so is The for of the us Saba certain incumbent, addition cases that us. difficult where really into an

the over our shown ability several sell accounts. years to and sell last the cross up We've

most sales the and years the since teams have extremely just notably gives client more clients. performed did services well we this year-after-year, two us Our last transformation over

larger is winning we a a So run playbook same definitely strategy. the which surface with think against exact area more clients,

Alex Zukin

the And can one and you're for then to both I retention execution is for rates? to should into the you you the compares to you renewal Can renewal, business risk. Saba's XXXX for color how that retention us modeled about you and think think, year renewal what curious about maybe rate give about from account renewal for maybe core you just some talk to the churn a numbers a I'm uptick Adam, Saba guys. have in we impacts the you thinking and any that think how how perspective, Brian, and mentioned larger I base rate

Brian Swartz

is the most as focused respect mean improving second down me really to seen me let two some into I've nice even rates, And few a mentioned, answer Saba's the let and terrific. rates, break job Adam one. they've particularly years I which recently that stabilization renewal renewal done nice Alex. Yes, With that. answers, maybe being on last

So most improve to to renewal things data. improve we'll from think just rates. work collectively that's I their doing we’ll we're and able that things learn there's overall and clients be to recent with our their experience doing they’re there's the And

With large renewable base have respect we XXXX. do in to us, a

on guidance we come way focused the stay future. retention we'll with optimizations sure have focused experience and release in those number, and know, that don't And new making which we through it's XXXX, go in winning from didn't a it out. we're clients the gross churn we forecasted on is to always is. goes we're client As the down that in right just ADRs. very so and dollar obviously more give out, improving a super do on mind to XXX%, consistently It keep The you net still like net it -- above point all

Operator

Thank you.

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

Corey Greendale

have I products? secondly, L&D there And to of specifically On the subscription, give Saba can like Saba, of what rate coming of some their revenue their excluding customers bigger some is a picture of us question subscription of growth dynamic transferring sense percentage standalone is a the versus of is any sense maintenance their then and you given migrations? what other the about way us from a question. the giving

Brian Swartz

we'll obviously combined see as you that, of at can consolidate this forward me Corey and for and let we So the some I guidance if all help when entity I give on mentioned. closing

to So financial would everyone combined at. on There direct I about Web take posted today talks that entity. the deck in site a some is our that we look information a there

are products Saba core If referred to cloud, roughly you the and link haven't, core mentioned, it products migration take talent is Halogen products. the recruiting and does that the and so. which sell give Adam as $XX not space, There's million which Saba the break down LTM, ones or do in Lumesse are in the ARR, performance what's talent $XXX $XXX around million or They and migration. million

So you in least growth terms of not in can breaking the see versus at growth ARR from yet, core migration. year-over-year but that down rates, we're

lay be. basis but and business with also model to a Cornerstone's forma a that Obviously the We the the on it'll in give of all historical a on point. pro at what of would you have and you hopefully, out how add sense chart future then come more numbers to information this combined

Corey Greendale

just to going a growth flow? that? I'm there's question is And want for looking the business commentary in the cost side relative stuff could on that the are worked term, QX way you've you not you about consultants Is year. have that think structure. And and cash focused versus index still is reaccelerating on long-term between sort given, generation free XX on recent over picture that of I at impression Rule One and the of thinking the more be is on the way right results more with just and to the next How the of you're long-term, to think chance don't sort growth. the Or bigger it? the talking about cash to versus long flow cash

Adam Miller

are of we we absolutely growth we the and synergies believe Yes, are modeled. important. revenue can reaccelerate think both None

there Cornerstone that content some well, successfully recruiting the coming the learning opportunity think We performance- is cross that's with one we one able component. if sell upside their There's out. massive new the base could opportunity products and significant There to component. upside ability we taking cases, sell are are for do HR. are user Saba just to, in thing do the just So we example, same to If with for anytime is to us, that a

performance so clients, their only to clients. the to clients. sell learning opportunities recruiting only There’s only

sell talked cross there up the any this So which the synergy of of base, sell we've and are we're in about about. none any client modeled numbers of to talking opportunities are numbers many or

working that for that combined many longer becoming a that, efficiency are Now operational company, no a we we business, take are with there having realizing don't said small opportunities larger are growth. away Alixpartners, cap from much

the don't process that a obvious So two you wise. law would have where very if integration today, fact need XX synergies out good combination I you the mentioned Saba which AWS. whether very don't optimizations, obvious you're despite of completed also not two they make There are Lumesse. has that the of margins centers to auditors, data don't you you it's need need firms, operating of

referenced our Brian side opportunities on there's and earlier. there's that's side know And their so even we on standalone, standalone opportunities what

business. had obvious the confident, number all well-above are we also before, that million now we $XXX are free XXXX. we for different be Whereas incremental will cash There highly for unlevered parts synergies target in of flow XXXX,

both us They're in both there of sides we Alixpartners the at both not with a to work fact one So is exclusive. record we think are And selected opportunities. reasons to do and to which growth. both. looking of improvement, equation, are obvious, absolutely which are revenue are some performance of we which the obvious really And speaks less cost of some track of they have optimizations, looking

Operator

Thank you.

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

now Your open. line is

Rishi Jaluria

and technological wanted Cornerstone what what of on needs and is And to this including clearly on got Saba I by work private, you done very and acquisitions, that. about a of integration know one. Saba of with when Maybe asking the does Halogen, it technology better I lot big said Saba sort companies to they've different the wanted was itself, like look I path taken front. the obviously most to start understand recent

I've follow sense get And a wanted for acquisitions technological how up. a got were on those from integrated to perspective Saba? then Just a

Adam Miller

the very. base. effectively; are, said, is not three bases which third, are the products the independent. second like Those Yes, base; There I and Lumesse the client relatively the separate one, client Halogen base; client Saba client

really micro they them a nice product. to done system, a job and any architecture any open which to However, moving services other have allows product plug more of into

have situations Saba recruiting Halogen this For they Cloud. they several have with also example, Lumesse to done space, where and talent they've added

the forward. different to So many, we be it of think do will world providers that in component there integrate in all we with many but Obviously, relatively straight areas. there's work software

both straight making a priority, not sides did relatively intentionally before do and it with be it we trying integrate forward. think but So it'll I them with to

Rishi Jaluria

not to the go Rule commentary at just I wanted Brian, you're line, you a in just have standalone in XX% if to is mentioned basis some subscription the this the or which understand get this you the sell there said, re-accelerate we to us to items -- would no hit cash about on Adam guidance would are as on flow view I talking have then that on year XX to know hit free you growth? on year. XXXX, Maybe line getting that growth such Thanks. drivers XX.XX% QX meaningful constant XX%, margins be look where currency, of year. were And If that, back operating you’re what help subscription potential nearly on basis, subscription I guiding year-over-year. double the but assume those the margins even standalone down and margin this non-cash again expansion a

Adam Miller

I with to public few that AWS. let Yes, answers, the cloud. a there's because one me the obvious We're so take move think is working one

us some set We agreement agreement up example. gives credits, that set as we modeled now become have that up that's that gives so had advantages an us one previously that some expenses

example is had Another certain where in issues. geographies we've

some turning productive. areas been go-to-market are of have We operations that certain less in our

coming We now. sourcing a online expenses. strategic Brian look also see into of at years some are those of team opportunity to ago, our couple of basic some put the place a initiatives

about or global generally policies, opportunities mobile we're whether talking other of some T&E those in policies, So G&A, areas. many phone there's travel phone, mobile

Brian higher across is actually in across the I'm some certain to seen sure So more, growth ability we've the reducing to in board, add what cases, board level other the spends. areas investments areas the can reallocate

we've And headcount work higher more Even at with the still initiatives, company to same that to reallocated in tech effective keep us on headcount and the some growing, time. flat of has be all pressing allowed our which to the translates area, of example, margins. for more

the there, different just specifically by against So being make analysis areas. those is out not higher ourselves Alixpartners things to other sure are in we companies generally aided this margins but functional all of benchmarking really very and drive that done, has

Brian Swartz

There some Rishi, The that, a I 'XX. XXXX only thing items in in repeat good won't would question add it’s are to that is.

you've So the kind the and margin, heard lead our difference been is which we And negative flow couple capital unusual for of with where a between cash talk margin previously before revenue. we me out last collect those roughly about margins years, have margins. operating and business that's rates like recognize of a working free ours same unlevered

XXXX basis, and well in gap in 'XX. some from will be a close CapEx ultimately in that to out repeat standalone provide will have that where on help that expect elevated in and we tailwind we a XXXX and expect So we 'XX we 'XX as don't finished that

cash the free an that point repeat services keep help some that structural, flow basis. is which of to 'XX at bridge say full business, of burn items in you annualize the the ongoing just then we margins, onetime of just this CapEx So doubling off and on basically just some that gap mind when don't just in

as bridge gap well. helps just the it So

Operator

you. Thank

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

Brad Sills

mentioned near-term? you at for look low number Saba's acquisition, where excited about excited developing, you things for not the modeling into lot recruiting for a where this Cornerstone about years. see what of I could of I when On mean, but in base. guess selling, install there. content the base, you you're several could see synergy you're install now the fruit year, Saba of There's you most some upside that cross been you the Adam, potentially number revenue out has are hanging is some the legacy

Brian Swartz

We think that base anytime content global theirs. obvious to the client entire is opportunity of biggest most

Brad Sills

a is just that a guess learning is is your Cornerstone platform. Is to different How don't And complimentary adding? case the interested install potentially a replacement? it this of full I add base more need customer? a experience an use learning on I or that's Okay. on something more in that of suites

Brian Swartz

that installations could Yes, of there particularly a it's larger it’s on, use management add out typically very company. on. an learning are from company these add more the seen startups standalone, likely business a A the all but small the the top on we've

or and both both. learning experience the system but So the learning other one the platform, management they have not

our does upside. it's it’s not It upside. cannibalize So business,

Operator

you. Thank

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

Unidentified Analyst

Kevin is for for my question. taking This thanks Chris, on

hiring moving forward forward, about should growth? revenue are Moving more sales subscription I about the post rep investments sales and integration, growth how And think relative we to you thinking how guess marketing broadly? and

Brian Swartz

a lot those of working things. We’re through

we just we certain As and you talking do, things can't close we imagine as start things transaction. there's actually can some planning integration the can the about if do obviously we

incremental all operating around of best financial as as closing push Once will both we the an metrics we as provide have think to numbers those guidance as mentioned actual we I well we So transaction, down questions you can. more need the that road.

Operator

you. Thank

from line comes of Panigrahi Mizuho. question next from the Our Siti

now Your open. line is

Siti Panigrahi

But post do you do now against it's leader in certain Cornerstone how And use Adam, this landscape Saba? in how and them, how display often, Lumesse see does whether in put segments. Saba, used them acquisition? change or to or or winning acquisition even definitely often you Halogen the often how competitive you a competition to

Adam Miller

probably They've one has in them. the the been a been is lots acquired away Saba of space This crowded obviously space. longest a long of competitor others competitors. or our have been Most of gone. competitor. standing player and term They're are or

the all and know So we the years extremely see XX last over we time them the well. company do

Siti Panigrahi

And then could any color, EMEA geographically, here. some the going you about us give you But you have seen? You've back talk SFA? could to in and QX, about weakness what and talked strength weakness

Adam Miller

a been during we said well as quite we've was mixed EMEA. quarterly contributor before has APJ for so core did very long the Yes, EMEA in to calls a business last time. year. some because momentum Japan still of has into see say now reached going APJ its signs good I'd of for potential. was But And mixed XXXX we performance. Japan. did Japan's

Operator

you. Thank

Our next question comes JP from from Morgan. the line Murphy Mark of

now line Your open. is

Mark Murphy

XXXX offering Brian, you standalone? guidance full are Thank for Cornerstone year not you.

Brian Swartz

QX. mean in to some Obviously, close We the Mark, uncertainty I not. related transaction, there's We did expect we that. guided to QX,

at full expected nuances giving when do guidance at provide Cornerstone and not to to you all that point coming the help that's QX XXXX close and to with closing, expect year We guidance into financials, build the will model. the to financial combined the at be for we given going of in our But transaction this close we point. are uncertainty that the

Adam Miller

to plan of is qualitative we Now, hit we $XXX the Mark, standalone in original that and our target, million. significantly comments, have rule flow basis exceed do some to that cash one we did XXXX a which remarks in was caveat our to prepared expect a on XX have the

ago, couple to that. expect laid we If above we be of meaningfully a out that years you recall

Operator

no questions. call for turn like Miller At remarks. you. I to to this the closing back Thank Adam showing would I'm time, further over

Adam Miller

on I we two as and next always you us for Thank the our of the joining everyone thank their weeks. global all to for today. be contributions, want for team will road

get accommodate. with be please you. IR if meet, in would we'll happy to So Jason in our and Gold touch Thank you team like to

Operator

call. conference today's concludes this participating. gentlemen, and Thank you for Ladies

disconnect. now may You

Cornerstone OnDemand (CSOD) 24 Feb 202019 Q4 Earnings call transcript