Cornerstone OnDemand's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Cornerstone OnDemand, Inc. (CSOD)

Q2 2012 Earnings Call

August 9, 2012 5:00 pm ET


Adam Miller – President and Chief Executive Officer

Perry Wallack – Chief Financial Officer


Laura Lederman – William Blair & Company LLC

Mark R. Murphy – Piper Jaffray, Inc.

Michael B. Nemeroff – Credit Suisse

Patrick Walravens – JMP Securities

Rick G. Sherlund – Nomura Securities International, Inc.

Greg Dunham – Goldman Sachs

Marc Fuller – Needham & Co. LLC

Brendan Barnicle – Pacific Crest Securities

Scott Berg – Northland Capital Markets

Bradley Hartwell Sills – ThinkEquity LLC



Good day, ladies and gentlemen, and welcome to the Cornerstone OnDemand’s Second Quarter 2012 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. And now I’ll turn the conference over to Perry Wallack, Chief Financial Officer for Cornerstone OnDemand. Sir, the floor is yours.

Perry Wallack

Good afternoon everyone. This is Perry Wallack, CFO of Cornerstone OnDemand and welcome to our second quarter 2012 earnings conference call. Today’s call will begin with Adam providing a brief overview of our company and the second quarter, and then I will review some of the key financial results for the quarter, which ended June 30, 2012. Later, we will conduct a question-and-answer session.

By now you should have received a copy of our press release, which was released after the market closed today and furnished with the SEC on Form 8-K. You can also access the press release and the detailed financials on our Investor Relations website. As a reminder, today’s call is being recorded and a replay will be made available following the conclusion of the call.

During the call, we will be referring to both GAAP and non-GAAP financial measures. The reconciliation of our GAAP to non-GAAP information is provided in the press release and on our website. All of those financial measures that we will discuss today are non-GAAP unless we state that the measure is a GAAP number. Any non-GAAP outlook we provide has not yet been reconciled with the comparable GAAP outlook because, among other things, we cannot reliably estimate our future stock-based compensation expenses, which are dependent on our future stock price.

Our discussion will include forward-looking statements such as statements regarding our business strategy, demand for our products, certain projected financial results and operating metrics, product development, customer satisfaction and retention, customer attrition rate, market or business growth, our revenue run rate, investment activity in our business, visibility into our business model and results, the effect of capitalized development costs, spending on R&D, professional services and other aspects of our business, our appraisal of our competitors and their products, and our ability to compete effectively.

Words such as expect, believe, anticipate, plan, illustrate, intent, estimate, and other similar words are also intended to identify such forward-looking statements. Forward-looking statements involve risks, uncertainties, and assumptions. If any of the risks or uncertainties materializes or any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by the forward-looking statements we make.

These risks, uncertainties, assumptions, as well as other information on potential factors that could affect our financial results, are included in today’s press release, the risk factors section of our most recent Form 10-K, and subsequent periodic filings included in our most recent Form 10-Q with the SEC.

With that, I’ll turn the call over to Adam.

Adam Miller

Thanks, Perry, and thank you to everyone for participating in Cornerstone OnDemand’s second quarter earnings call. In a quarter in which many enterprise software companies stumbled, Cornerstone had one of its best quarters ever. Our business continued to performance exceptionally well in Q2 and I’m excited to share some of the highlights of the quarter with all of you today.

Revenues for the second quarter came in at $26.7 million, representing a year-over-year increase of 54%, and bookings came in at $31.5 million, representing a year-over-year increase of 51%. We are very pleased with this bookings growth, particularly given the difficult compare against our extremely strong second quarter in 2011, where our bookings grew at approximately 90% year-over-year. We also added approximately 120 new enterprise and mid-market clients during the quarter bringing the size of our organic client base to over 1,000 of the world’s leading organizations.

Our client additions in Q2 were comprised of more key names across the globe with both our domestic and EMEA sales teams continue to perform exceptionally well. New client additions during the quarter include National Instruments, (inaudible), Visa Europe, the largest security systems company in the world, the web’s premier professional social networking site and one of the largest consumer products companies in Europe and one of the largest financial institutions in Asia.

While other companies have talked about macro economic softness, we have seen no slowdown in demand for Cornerstone. Over the years, we have grown through multiple recessionary periods and in the first half of 2012, we saw some of the strongest sales pipelines in our history in our major geographic regions.

We believe this is due to our ability to provide positive business impact for our clients, helping them to improve compliance, increase employee productivity and engagement through our performance management and social collaboration tools, save training and administrative costs and enable the extended enterprise often providing a positive ROI in the first year of purchase.

As Cornerstone has continued to grow at an industry leading pace, I remain most proud of our ability to make our client successful. This is evidenced by our retention rate, which averaged approximately 95% from 2002 through 2011 and remains on pace to do the same again this year. Our combination of growth and retention help us to increase the size of our user base to over 9.4 million users in the second quarter, which represents one of the largest SaaS subscriber bases in the world.

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