Q1 2020 Earnings Call
Ladies and gentlemen, please standby years also told began momentarily. Thank you for your patience and please standby.
[music].
After the speakers presentation, there will be a question and answer session.
The question during the session you need a press Star then one your telephone.
Besides a chain conference is being recorded if you require any further assistance. Please press star then zero.
I would now like to hand, the conference over to your speaker today, Mr., Jason Bowles, Vice President of Finance and corporate development, Sir you may begin.
Thank you good afternoon, everyone and welcome to cornerstone Ondemand first quarter 2020 earnings call.
With me today, virtually our Chief Executive Officer, Adam Miller.
In our Chief Financial Officer, Brian Schwartz.
As well, it's still Saunders.
In conjunction with today's call we published a presentation. That's located on the Investor Relations section of our website.
During the call, Adam and Brian will be making reference to particular slides in that presentation.
Today's call will be a bit longer than normal.
Discussed.
The press releases were furnished to the FCC in a form 8-K.
The discussion will include forward looking statements, including but not limited cheese statements regarding the expected performance of our business, our future financial and operating performance, including our GAAP and non-GAAP guidance integration of saw the into our business and achievement of related cost synergies and efficiencies our strategy, a long term growth and our overall.
And your prospects.
Forward looking statements involve risks uncertainties and assumptions these risks uncertainties and assumptions as well other factors that could cause actual results could differ materially from those contains forward looking statements are included in our most recent 10-Q intensity as well a subsequent periodic filings with the FCC.
During the call, we will be referring to both GAAP and non-GAAP financial measures all financial figures discussed today or non gap, but let me sneak a measure is a good number the reconciliation of our GAAP to non-GAAP information is provided me earnings press release and also in the presentation.
The data as a backdrop I'd like to turn the call over there.
Thanks, Susan.
And we get to the presentation for today's earnings call I wanted to address today's announcement.
It's hard to believe that two decades ago on this morning cornerstone was incorporated in my one bedroom apartment in New York City.
I started with a simple but audacious mission.
We could leverage that power be internet to improve access to education on the global basis.
From the outside.
What are your journey may seem to be mostly opt into the right.
We still look twists and turns bubble burst through September wasn't the financial crisis.
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For seven years or the practically drugs for capital you see from friends and family.
As rather money on multiple occasions.
We persevered.
Building a team once more cool dependable visionary person could have gone girl.
We'll bring the company will decline as a time manically focused on client success.
Sure.
We piece bigger competitors from the beginning back or first really big competitor was a company called shopper.
On the ERP is 200 or space.
Product vision or ability to innovate and our focus on client success enabled us to win.
Today with the acquisition of Sabal completed.
I'll be over 75 million people across over 180 countries to utilize or potential.
Now clearly on track to over 1 billion in revenue.
And the world's leading technology learning company.
We have delivered over 800 million online courses in the last year.
In other words, we made real progress or mission.
So after 20 years, having achieved much with an amazing global team I'm excited for the next chapter.
Sounds good amazing partner in a phenomenal operator, infield Saunders, whose solvency.
I think spend so much time is that what management I've learned that.
The importance.
In the right person at the right time.
Bill was that person per quarter. So now it's time.
Today, we announced it feel we'll be taking over as cornerstone C. O next month.
We move up to executive culture, partnering with Elisa Steele.
I will continue to work with filled helped drive cornerstones innovation into the future.
Leverage the Powerbar combined R&D team to our nearly 100 million people around the world.
Before we get to the presentation I back filled and see a few words.
Phil.
Thank you Adam for the warm introduction and thanks, everyone for giving me a moment to introduce myself.
That said, we are choosing to get to know each other and our respective companies quite well over the past couple of years I've come to witness firsthand why Adam is the respected visionary in both the HCM and talent management space and I've also seen the impact of whose contagious passion evidenced by such a winning.
Company culture at cornerstone.
As in any competitive arena, you come to appreciate and respect the strengths and capabilities of others in the game your competitors, it's truly exciting to now be one combined and what I believe to be a very powerful force Fulton financial prowess and market strength.
This is a tremendous opportunity for me personally.
Adam and I, both navigate through our transitions execute on the integration and drive success here a cornerstone.
I believe my past 12, plus years of transforming companies in a private equity setting and more notably my task five years and the evolution of Saba.
The H.C.M. space is a wonderful backdrop and a complement Adam in the cornerstone team, having led many acquisitions successful integrations and of course the related synergy activities, while building a winning company culture makes a really good fit.
Yes.
I didn't mean I've been working closely with the integration management office over the past several weeks and I'm quite confident and what will be successful and really exciting outcome.
This is much more than an opportunity to further cornerstones financial markets right.
An opportunity to serve our clients and employees with a meaningful lasting personalized development experience that I believe only cornerstones can deliver on I look forward to talking with you and meeting you all in the near future. Thank you for the time back to you out of.
Thanks, Phil now once our formal presentation.
We will refer to slide number so that you can fall.
Starting on slide four.
I want to recognize this unprecedented moment that we're living with Coburn 90.
It's a store public health crisis that none of us have ever experience will be and we're being impacted by this pandemic just like everyone else.
A 1% of our workforce tested positive for the buyers.
Thankfully they have already covered.
However, we all have friends family members customers in communities that are being impacted by the virus in very serious ways.
No that we're not yet in the clear.
We have offices in most of the big cities that have been adversely affected by the buyers we have taken expires extremely seriously.
We believe we wanted the first companies in southern California home to our global headquarters.
<unk> a mandatory work from home policy.
The pandemic begin to dissipate stay at home orders are relax and were lifted.
We will make changes to our policies in accordance with federal state and local guidelines and recommendation.
Until then all of our employees worldwide remain work from home environment.
On the business plenty level, we collaborated with the team around a few key areas.
Well my focus has been on the safety of our employees.
Powering our customers through these difficult times.
For community and our clients, we recently launched cornerstone cares.
Program that includes born free.
Free online portal for the general public in a pretty content offering for our clients.
Leveraging the cornerstone platform.
So care provides training on cobot 19, managing anxiety in working remotely for both managers and employees.
It is launching this program we've had over 1 billion course registrations.
We also released cornerstone content anytime remote work essentials.
Which is meant to help train our clients on how to best work from home.
Working with those clients were experiencing financial hardship since our mission is to help clients realize or potential.
Stepped up our commitment to that gold grades trying times.
Global team has adapted well to remove work.
From a business continuity perspective, we've seen no disruption to our services.
Our platform has been stable during this period.
Our employees productivity levels have been strong.
With respect to our financials on models contemplate various outcomes, we have done scenario planning, including some scenarios that are terribly bleak.
We remain confident in our liquidity position, even with the added debt we took on to complete this all the acquisitions.
Moving onto slide five as you know, we're subscription based business with historically high renewal rates.
As a result, we expect to continue to grow revenue three be places, albeit a slow rate what was expected them to more normalized environment.
We have reasonably high levels of visibility.
Substantial portion of our revenues amortized off our balance sheet and in comparison to other businesses that are more transactional and have to book and ship the bulk of the revenue each quarter. We believe we operate under more stable and predictable business model.
Although we have lived through the dotcom bubble September 11th and the global financial crisis, and therefore have some experience dealing with adverse situations.
This situation, it's still different than anything we've seen before.
Despite what we believe it's a relatively.
Stable and predictable aspects of our business, we're not immune to the effects of this pandemic.
We are seeing some bigger challenges that I'd like to discuss.
First off our new logo acquisition has trended down at the end of Q1.
Our sales cycles for new customers generally range from two months for smaller customers over 10 months as we get into large strategic enterprise.
As the Kogan situation cause he called me to freeze.
Noticed a weakening of sales cycles.
Continuing to drive these opportunities forward.
Many deals have already close.
Reps can continue doing demos and writing proposals while working remotely.
We expect that we could see longer sales cycles for new companies on a multi year agreements with the new vendor until some sense of normalcy returns to the broader economy.
Number two our ability to cross sell new products to our clients slowed a bit is we ended Q1.
Crossover handlebar client sales team.
The wall Cross sales are still doing well.
Right spot for our company and we feel confident another new products to our customer base.
Uncertain economic climate is called some companies to pause reconsider any new spending.
Nonetheless.
We still believe quite strongly in our cross selling value proposition.
Our solutions drive increased value, an ROI to our clients.
So although our team is facing some headwinds.
Being cautiously optimistic about their ability to continue driving you.
[music].
Having said all that.
Keep in mind that even with the headwinds our solutions, what cornerstone darts is particularly relevant to our clients in an environment where their employees.
Working from home.
For example.
Many of our courts, but certainly John executive development and all of their employee Onboarding in person.
We've now seen almost all of our clients' needs are trending onboarding online.
On slide six.
Talk about how our client piece has been impacted.
Obviously, the pandemic has had very effects.
Different sectors the economy.
Yes, you could see on the slide six.
Cornerstone services, all major industries around the world.
We thought therefore, it might be helpful. Helpful to look at the combined cornerstone in Saba.
Entity on a holistic basis.
He industries, we serve.
This chart shows our total combined they are for 2019.
Hi industry, so that you could see or potential exposure.
We provided that information to help you get a more gradual walk.
Our business during this very unusual time.
We do not expect update or revise its a convention regularly going forward.
As you can see our client be spans across a broad range of industries.
We've called out on the Rightbehind industries that are often thought Doug.
Two others is being some of the most negatively impacted due to the cobot 19 pandemic.
As an example, combined with Saba.
Less than 1% of our annual recurring revenue.
Airline sector.
On the flip side, we also clients like Amazon and U.P.S., both of which you've had a very different experience in the pandemic than most other companies.
In addition, we have a substantial public sector business, which is less impacted due the to the government's desire to preserve the economy.
The chart on slide seven shows a combined exposure to small businesses.
We want them to do a sense of what our exposure was to be smaller companies.
You can see oil exposure Didnt say that said this segment is relatively small I will point out however that our SMB segment, which we define this company's fewer than 1000 employees.
It's chart is really focused on under 500 employees is one of our fastest growing segments and what about which we're very excited over the long term.
Slide eight shows.
Shows total dollars of annual recurring revenue.
For the combined cornerstone and saw the entity.
Our optimal renewal in 2020, who industry.
So why I'm showing this remember we generally.
Slide three year contracts with our customers and show we're showing this data in this way in addition.
These other two slides.
Because it's primarily the contracts that are up for renewal in 2020 that present, the highest risk of churn in this economic climate.
If you believe for example that certain industries, we'll see more severe impacts in could therefore be candidates for increased churn.
It's 20 $20 up renewals I'd want to analyze.
Well you draw your own conclusions.
You can see that we have low concentration risk lives industries that are most impacted by the pandemic.
Turning to slide nine.
Any company that takes on significant leverage during this pandemic.
It was it to their shareholders to run that liquidity stress test.
Assuming truly dire outcomes.
This is precisely what we've done.
This chart.
I can see what happens to cornerstone.
All the cells wouldn't stop between Q2 this year in Q4 that next year in other words, if we had no cells from April.
For the next several seven quarters.
Clearly next year.
With zero new.
For seven quarters, which we model.
We believe the combination of a high renewal rates the realization of our planned synergies in the ultimate rolling off of onetime costs associated with the transaction.
As our models showing that our total liquidity rises from approximately $150 million pro forma at the end.
Q1, 2022, greater than 225 million at the end of Q4 2021.
With that shows that we generate cash flow well in excess of our interest expense.
Even in this super unlikely incredibly dire scenario.
Just kind of planning and the conclusions that we're able to draw from them that give us confidence in the Sabah deal and our overall business.
I will point out that whatever scenario, we face our priority use of cash in coming quarters will be to pay down our debt de lever our balance sheet.
Now quicker your view of Q1.
Let's turn to slide 11.
You can see here, we had a strong quarter from a reported financials perspective.
Our subscription revenue came in at $144.4 million, where the high end of our guidance nor total revenue came in at $150 million, which slightly exceeded the high end of our guidance range.
Additionally, although we saw slow down and new business Chinese late in Q1, it's worth pointing out that our Q1 renewal rates were slightly ahead of plan, which helps support our total ending Q1 they are balance.
Our non-GAAP operating margin exceeded the high end of our guidance.
Coming in at nearly 17%.
Several factors continue to the strength in our operating margins.
As we implemented work from home policies, our travel and entertainment expenses related costs came down meaningfully.
The next few minutes I'd like to talk about the trial the transaction and why we're so excited about it.
We believe the acquisition of Sabal will create meaningful shareholder value.
Well bore.
Of our businesses have been impacted due to the pandemic.
We believe the impacts are manageable.
We are just as excited today about the deal is we were when we first announcement.
As you know there will press reports last summer that sabal would be put up for sale. We participated in the transaction on the sellers timetable.
Turning to slide 13.
As you know we completed the acquisition of Saab on April 22nd for total purchase price of approximately $1.295 billion.
Which is about $100 million less than the announced place from February.
Brian will discuss the final details of the transaction.
I just want to thank all of our investors, who reached out and offer their support advice and guidance during this process.
We think that's the transaction brings significant opportunity for value creation.
To our cornerstone shareholders.
Of course of the next few minutes walking through our logic.
There are three basic reasons, why we did the sabra transaction.
Number one is innovation.
Number two scale, what we refer here to its reach and number three cashel, let's dig deeper into each of these.
On Slide 15, you can see that we believe the huge infusion of engineering talent.
Enable us to accelerate our product roadmap.
Deal increases or innovation focused engineering resources by more than 60%.
While simultaneously lowering average headcount costs.
Spanning our footprint into lower cost geography.
Yes, the real key here is that we won't be integrating our products in the traditional way software companies integrate.
Because our products significantly over while we're not trying to deeply integrate two different pieces together.
Rather we are connected feature sets, where they make sense and eliminating duplication of efforts to free up substantial capacity to accelerate innovation.
This allows us to simultaneously service our clients more effectively.
And deliver on our product vision faster building more competitive differentiation with a relatively lower cost of development in higher returns for our shareholders.
Turning to slide 16, the increase reach that this transaction brings us events.
Increased number of clients and users will enable us to feed a huge increase in data into our machine learning engines.
To help deliver the right learning opportunities to the right people at the right time.
Think about how.
Giant companies like Netflix involved I.
I think got bigger the recommendation engines got smarter.
And they were able to show you content that they knew you'd like through better personalization.
It's drove increased engagement, which lowered churn further expanded user base.
The Sabal acquisition Daschle increases our reach which we expect will help us to improve user engagement and ultimately drive more growth.
In the transaction brings us an opportunity that meaningfully expand our revenues if we're able to successfully cross sell our products into one another's user basis.
Now we'd like.
Current market conditions.
We believe that having a large.
Incumbent base is likely to work in our favor.
Just consider the reverse situation.
Badging, if we were at the start up like many of the ones I told you compete with us.
Looking hard with limited developing resources in a small customer base.
Not case survival depends on two things raising more money in winning new clients.
Although we didn't do the acquisition with the foresight to know about the pandemic. The fact is that both raising money winning new clients is more difficult today than it has been for a long time.
And as the incumbent now.
More than 7000 accounts with over 75 million users.
An army of developers that 60% larger than it was before we did that steel we think we're in a strong competitive position within HR tech against any of those startups.
Better position today than we had been in quite some time.
Just in the last quarter.
I mean, some statements about how the competitive environment. It played a role in some of the churn we saw last year.
Current environment, we're seeing some company stick with what they have rather than making decisions to switch providers.
The combination of a larger client base larger engineering team.
Positions us well.
During and after this pandemic.
Now on Slide 17, you can see the third benefit of the deal.
She's financial.
Well, we first announced the transaction. We told you that we were planning to achieve $35 million in synergies over the first 24 months always going to transactions close.
Today as a result at the hard work that we did in conjunction with the team it Alex partners.
We're raising that guidance to $15 million run rate synergies that we expect now do we achieved by the end this year.
I'm really proud of the team for all the hard work that they put in on this and we see savings in many areas.
Some of which are listed on this chart.
The good news about these synergies is that their cash.
This extra cash cushion is especially helpful. During times like these we do see impact.
On the virus on our cash ones.
As I pointed out earlier, we believe the combination of our recurring revenue business and these synergies gives us ample cash flow.
As a result sufficient liquidity to weather the current store.
I think this chart on slide 18, succinctly captures the way, we saying we see the economic value this transaction.
On a standalone basis, Saba did roughly $85 million, an unlevered free cash flow 29 teeth.
If you add the $15 million in cash synergies, we expect to achieve and hold the $85 million 2019 cashflow flat.
We bought an asset that we believe should generate approximately 135 million.
Unlevered free cash flow as part of cornerstone on a pre cobot piece.
Economic cost to cornerstone shareholders to doing is steel roughly $55 million, an incremental annual cash interest expense.
Taking the fold that into account and roughly 1 million shares dilution on a piece of 67 million shares were just under 1.5%.
That drives $80 million net incremental cash flow each year.
We think that represents a good value to shareholders not only provides us with some flexibility to weather the near term challenges presented to us by the pandemic, but also gives us a strong base from which to grow and create additional value when things improve.
Now on slide 19, I'd like to talk about Sabah is a business and help this aggregate it's trends.
So that ended 2019 with $243 billion annual recurring revenue.
Which grew 2% year over year.
As we discussed in our February 24th deal announcement call Saba categorized since it's a our into what Sabah calls core pay our which was $200 million growing 10% between 18 and migration, a or which was $44 million declining 23.
Percent employee 19 difference between these two categories that Sabah focused on selling core products to new customers. While products label is migration, we're not sold to new clients.
Simply maintained.
In 2019.
While sabal Clark functionality is quite similar to cornerstone learning.
Top is recruiting product.
I don't like which came from will mess.
What is predominantly sold in Europe, Sabal plan to bring the products to the less in 2020.
We believe talent like there's a strong applicant tracking.
Tracking system with solid candidate relationship management capabilities, and we plan to sell it on a standalone basis.
For recruiting deals around the world.
Sabas SMB performance product Alan space.
And from Allergan.
He is just under half.
Of the Sabal cloud puts talent.
They are.
Alan space, they are declined 7% year over year in 2019.
Now this is because.
Solve it stopped selling talent space to new clients during the year.
And there was not good migration option for those accounts.
We believe there's a significant opportunity to move some of the talents based client base to cornerstone performance, which then gives us the ability to provide those clients with a full talent management solution.
It gives us a real cross sell opportunity.
In providing this disaggregation of San Jose Art help you better understand why we believe that in addition to the cost synergies, we will realize we expect to see some real revenue synergies from the steel.
Although this represents pre cobot performance, we continue to believe the combined cornerstone of product.
And Sabah products will offer great benefit for customers partners employees and shareholders for many years to come.
Hi, all this together on the next slide Slide 20.
You can see how we thought about the value each component stacked on top of each other.
To generate something on the order of $225 million.
2019 pro forma Unlevered free cash flow.
If you start.
On the left chart, we did $90 million, an unlevered free cash flow in 2018. We also told you that solve it did about 85 million.
Unlevered free cash flow and 29 team.
And then you can add the $50 million in synergies that I talked about earlier.
You can see a path to the 225 million dollar figure on the right.
Of course, these numbers ignore any of the onetime costs associated with the transaction. We wanted to give you the framework and we've been using to evaluate the transaction.
To help you understand the value creation opportunities that we see.
Of course, you also remember that we had expected to grow cash flow this year and and into the future and so we look at this as a clear opportunity to significantly increase cash flow overtime.
Turning to slide 21.
Bringing these sales teams together also give us some interesting opportunities to drive shareholder value creation.
Persons that were actively reviewing the combined sales teams and plan to develop what we call. It all start to the best reps from each of the two companies.
Cornerstone as an exceptional sales culture. We've also been really impressed with what we've seen Saba.
Looking forward to working with.
This allstar team.
We're also working to take the best concepts that sobbing used to win deals and apply that to.
Our go forward market motion, it's going to be a combination of their best reps at our best reps and I think that will position us to be quite successful together.
Just two to the point.
Got a market motion in certain cases.
They had higher when rates in certain areas and so we plan to take a few pages out of their playbook to improve our combined go to market strategy and execution.
Finally in certain areas sabas compensation programs contributed to higher customer satisfaction renewal rates, we plan to incorporate some of these improvements into our joint compensation plan overtime.
I'd like to now take a few minutes to talk about our product vision.
Obviously, the world is moving in.
I'm on slide 23 from.
The pre cobot world too.
Rebounding from the volatility we have seen trying to stabilize so companies and ultimately rebound.
And for the future.
What we see is an opportunity to create.
Vision.
For our clients in the new world of work and to help these companies operate and down.
Not just rebounding, but beyond the rebound operating in a new way more adaptable.
More responsive.
And more effective in the new World on Slide 24, we talked about learning being the primary accelerator to enable this we've been in a world where skills matter. The skills divide is real that has become even more true during this pandemic.
We're seeing this idea of digital transformation go from a future prospects to occur reality companies have been Forbes to digitally transform on a dime.
And.
That means massive technology change for employees all over the world.
We think the only way for people to be able to adapt well in those environments.
His toward.
Training is the accelerator.
We believe in that world.
Learnings should be unbound.
People should be able to a personalized learning anytime anywhere and.
And that's why you see on slide 25.
Our initiatives around curing not just professional content that we do with content any time, but also external open source content.
What can be curated by our machine learning as well as by our clients, we want to make sure that that content for professional and in formal is available to people in the flow of work.
Everybody, it's been using collaboration tools.
During this remote work era.
To stay connected.
We want to enable training in the full work in slot in teams.
In workplace, allowing people.
To learn.
In the for work and we want to ensure that the learning is happening in the context of skills gaps that people after the current job and for the job the dream up.
So completely personalized training available anytime anywhere on any device.
On Slide 26, we also believe that the unbound company.
Wow is for personal lives coaching for every single employee.
Now a lot of us a little bit are aware of executive coaching programs and executive development programs on imagine if you could use the power of artificial intelligence.
To accomplish two different things one make sure that the managers are better coaches.
Everybody has had a pad manager.
In their life.
Why not make every manager better manager and a better coach give them the tools leverage machine learning and personalization for the manager to give better coaching to the employee and it's the same time.
We have the employee direct access to the tools they need for truly personalized career navigation.
Making the recommendation so that not only executives have coaches.
Every employee.
Yeah, I base coach from the machine to supplement their manager.
This is all possible and.
Acquisition of cost three combined with incremental R&D resources, we have.
Saba make this entirely possible for us.
And we believe on slide 27 that.
We have the opportunity to provide holistic employee data.
To enable our clients and executives and even line managers to make better people decisions that means.
Enabling people to have deep.
Skills profiles on employees understand.
The whole view of the employee being able to make skills piece recommendations about people in understand gaps in the workforce based on skills capabilities and experiences to ensure that the company optimize.
On slide 28, we talk about.
The point integration with Saba.
So for example, cornerstone learning supplemented with Sabah median Sabah classroom.
Enabling us to have a very deep.
Virtual instructor led training experience to compliment what we're already doing with online training.
In this environment, there's almost no classroom training taking place.
So everything that's happening virtually so in addition to the relationships we have with companies like.
Zoom and Cisco Webex, we're going to supplement our offering with southern meeting and saw the classroom.
We are going to make quarter, so caught at a time available to all Sabah cloud clients.
So they had already begun selling content.
Leveraging some partnerships that they had but they were about two years behind where we are from a contact curations standpoint, we're able to bring them.
Constant anytime.
Right away, which leap frog Sam into the modern era with fully curated mobile ready content available anytime.
In a constantly evolving subscription.
We're going to take.
Candidate relationship management capability of talent link.
Which was built museum microservices architecture and apply it to cornerstone recruiting.
To enable even better recruiting solution for our clients and we're going to take the power of Saab planning and transition manager.
And apply it to cornerstone HR.
Lots of opportunities to integrate well also overtime going to make our two newest products quarter, so careers and cornerstone development available to the Silva client base.
On slide 29, you'll see our media cross sell opportunities, we have the ability to cross sell cotton any time again to that cyber cloud learning days.
To cross sell sub immediate saw the classroom to the cornerstone learning client base.
To the extent, we have clients move from talent space. The cornerstone performance, we can upsell cornerstone careers recruiting and HR is well its content anytime.
And we will have the ability to upsell.
Saba weren't planning and transition manager to the cornerstone HR client base, so lots of immediate opportunities and lots of focus on making our client successful Phil and I believe that the number one priority.
For this combined business is to make our clients successful and ensure high levels of renewals and.
Long term relationships with our 7000 strong client base.
With that I'll hand, it over to Brian to discuss our financials.
Thanks, Adam and good afternoon, everyone.
I'd like to spend a few minutes reviewing our quarterly financial results and then jump right into more detail about the Sabah transaction and how we're thinking about our cash flow generation framework going forward.
Adam already pointed out we had a solid Q1 from reported financial perspective, as you can see on slide 31.
Our Q1 subscription revenue came in at $144 million.
10.7% year over year constant currency growth.
And our Q1 total revenue came in at $150 million or 7.8% constant currency growth.
Gross margins were a little less than 75% and were adversely impacted on a year over year basis, a higher content revenue, which carries a lower gross margin as all higher allocated engineering service delivery cost in 2020.
This higher allocated costs created about a point headwind to gross margin.
Of which about two thirds comes out of R&D and one third comes out to fill the marketing.
Accordingly, R&D and sales and marketing as a percentage of revenue were favorably impacted on a year over year basis by the same amount.
Overall operating margin improved by three percentage points from 14% in the prior year to 17% this year.
Turning to slide 32.
Adam mentioned, we completed the acquisition of Saba on April 22nd for a total purchase price of $1.95 billion.
Given these unprecedented times, we naturally received a number of questions and comments from investors about the deal following the covert 19 outbreak and we appreciate all of your feedback.
Setting aside the details of the purchase agreement I want to clarify we did not have a simple 75 million dollar walkaway breakup.
However, we did a pay any purchase price reduction in light of general market conditions.
We believe at the time of the announcement and we continue to believe today that this transaction will be value accretive to cornerstone shareholders.
Given current market conditions, we obtained a headline purchase price reduction of $100 million.
Based on reduced equity value of $32 million and reduced cash consideration of $68 million.
It's worth pointing out that we agreed to pay certain seller expenses.
Which resulted in a net cash reduction of a bit more than $50 million.
As I mentioned, we move forward with the trip we moved forward with the transaction because we believe the acquisition isn't the best interest of our shareholders.
The next slide simply laid out our various debt instrument.
On a lot you could see that we raised a little over $1 billion than a term loan b.
The deal with fully underwritten and ultimately funded by forcing them a bit.
The banks have not yet syndicated the term loan b given market conditions.
The dead priced at LIBOR plus the threat.
Because the banks not yet on the market with the deal there's still some flexibility on the spread although we do have a cap and we know within a reasonably tight range what the ultimate interest rate will be one the syndication is complete.
To help you with your financial model based on where the current LIBOR rate is trading.
Reasonable to assume a total cash interest expense.
Approximately 5% plus or minus.
We also have assets were revolving line of credit.
As we discussed on the last call Silverlake agreed to extend the maturity of their five in three quarter convertible note from July 2021 in March of 2023.
Moving on to slide 34.
You could see our pro forma capitalization table.
Calculate our leverage ratios, we are using non-GAAP operating income and adding back depreciation amortization and certain other adjustments, including $50 million et cetera.
Pro forma as of the close the Q1, our capitalization included $114 million in cash on hand.
Just over $1 billion of term loan B and 300 million dollar than debt from our convertible note.
This drives a total net debt position of just under $1.2 billion or a net leverage of 4.3 times.
Pro forma at the end of Q1, we had over $160 million available liquidity.
Composed of $114 million of cash on hand, and act up to $50 million revolver capacity.
As Adam mentioned earlier, I would like to reiterate that our capital allocation priority in the coming quarters it to pay down debt.
Since we announced the transaction we have gotten a part of questions about our leverage ratio I understand the confusion given the way we discussed on our last call.
For the avoidance of doubt as you can see on slide 30 fly pro forma at the end of March.
Our net leverage inclusive of our current view on synergies is 4.3 times.
Again, we're committed to paying down debt and reducing our leverage over time.
Now I'd like to spend a few minutes talking about our financial frame framework.
Well Adam showed you a version of the chart on Slide 37.
Earlier in the presentation.
I think it's worth repeating here.
The version shows our Q1, new air are in the Blue Bar and then assumes we did not sell any new a are for the next seven quarters.
Although we don't expect us to happen and based on what we've seen so far in Q2. This is not going to happen.
I wanted to run dire scenarios to ensure we had adequate liquidity given the covert 19 environment and our increased debt.
Well you can see here is that our liquidity in the next few quarters.
Burdened by the front end loading of our onetime hall.
As you begin to fade and the synergies start to be realized.
Eight it of course by the natural cash flow generation of our business.
You'd see that our liquidity position bill.
The result of an increase of approximately $150 million a pro forma liquidity at the end of Q1 2020 over 225 million at the end of 2021.
Again, we don't expect this extremely low level of new sales to occur we simply wanted to make sure we're prepared as possible for very challenging time.
I'd also like to point out this assumes flat renewal rates for cornerstone.
Although we feel good about this assumption. We also ran a further stress test to see what happens if renewal rates decline and the conclusion is the thing.
Ultimately, we feel very good about our position even in these types of situations where would face multiple.
And planning for dire scenario like that and the conclusion that we're able to draw from them that give us confidence in the Sabah deal and our business overall.
Summarize, even an extreme situation, where we sell no new way our for seven quarters. We believe we're able to not only service the debt balance, but also reduced it by generating increased liquidity.
As a result, we feel very good about what will be able to do in a scenario that showed any.
Doublet, a return to normalcy.
Adam and I mentioned earlier, our new Air are in January and February was good but did fall off in March due to covert Nike.
Those bookings were somewhat offset by stronger than expected performance on renewal during Q1.
Given these trends.
And with the need to complete the integration of our financial records, including items like purchase accounting, which will certainly require a write down of deferred revenue, we're not providing quantitative guidance at this time for 2020.
However, as we bring the companies together over the next few quarters, we will share more granular detail when possible.
With all that said well visibility is definitely limited and we expect uncertainty to persist.
The start of Q2.
Signals have emerged in our latest sales forecast model that give us some cautious optimism.
As a reminder, large percentage of our new bookings are typically close in the last few weeks of the quarter. So the own it is upon us to capitalize on these opportunities.
More importantly, and as we discussed today and as you can see on our final slide number 38.
We believe the available synergy value when combining cornerstone and Saba will enable us to continue expanding our unlevered free cash flow margins from 21% pro forma in 2019 into the Thirtys. After all the onetime costs are incurred and we realized all the synergies.
What we'd love to give you a timeframe over which we will hit $1 billion in revenue the current environment makes it a bit tricky.
So we're not commenting on that at this time.
Once the environment settled out we'll look to be more explicit on this target.
I'd like Adam we'd like to thank all of our global team members for all their hard work each and every day as we strive to exceed our customer expectation while at the same time enhancing shareholder value.
Adam and I will now take your question.
Thank you.
Ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your Touchtone telephone.
If your question has been answered all your wish are moving Oh from Mckeel. Please press the pound key once again to ask the question. Please press Star then one now.
And our first question comes from Scott Berg from Needham Your line is open.
Hi, everyone. Thanks for taking my questions Congrats on a good quarter.
I guess couple of different things here first fill welcome to look forward to meeting in person.
Adam Congrats on a 20 year run I think I've been chatting with you for about half of that.
Well look forward to hearing about your next endeavors whenever they materialize.
Yes first question is Adam on the transition why is now the right time and part of that is was was just kind of contingent on the acquisition or was this part of the negotiations either before or during.
Your time shedding with south.
Yes, I mean, obviously the logic.
Acquisition stands on its own the enormous inhibition benefits scale benefits and casual benefits.
So we think it made financial sense.
But Philadelphia has gotten to know each other over the last couple of years and in particular over the last several months.
Had been working very closely together and that's became a natural me.
Got it helpful and then.
As you ran through product can probably extra surpass synergies a striking to me that you really pushing the product upsell opportunity, which I certainly get today, given the amount of additional product that the new combined entity will have but as we look out maybe 12 to 24 months down the line hopefully when the correct.
Macro subsides, a little bit is this an organization that will sell more to new logos or do you think it's really more about selling more to your existing installed base.
I mean, there's always the balance we want to always feltl.
I don't think it's ever one or the other it's not binary we obviously have a very large client base now and so we would just expect.
That there will be significant amount of cross selling up sell to the installed base into the future.
Relative to what we had before.
It's a much bigger base and so if you have roughly similar size direct sales team, but a much bigger client sales organization and client base of course, you would expect.
The.
Meaningful portion of the business to be cross selling them. So.
It's all this.
Got it it's Brian one think I would add to that just as a reminder, I mean, the last several quarters, probably more than the last several quarters call. It.
For six quarters I believe.
I have commented that a larger percentage of our new era cornerstone standalone pre pre dollar transaction was coming from.
That was actually part of the basis and the theory on one of the three reasons that explain.
Why we thought this audio middle of.
7001 client that's a lot of clients by the way, there's still a lot of new logo opportunity and greenfield opportunity certainly in emerging markets like if you Jay let him in way down market in SMB, but that that was one of the trends we were seen in the cornerstone business over the last several.
Got it quite helpful. I will jump back into the queue, Congrats again and good luck.
Hey.
Thank you Sir our next question comes from which each and L'oreal from D.A. Davidson. Your line is open.
Hey, guys. Thanks, so much for taking my question.
Adam Congrats on a a great Ron.
But they are looking forward to seeing the next chapter cornerstone evolve.
Yeah, maybe two questions I wanted to.
Drill down on.
First I I wanted to turn maybe better understand I.
I know last time when the deal was first announced there was.
Talk about the integration plan from a from a technology perspective, and I believe kind of the line as.
You know, it's it's going to be pretty a distinct now and the focus is gonna be on on joint go to market can you maybe expand a little bit on on that and thinking you know in terms of.
Backend integration or anything what sort of work do you expect from from a product and Tech perspective, and then I've got a follow up.
Yes. So this is different than a lot of other acquisitions and you might see because we're not trying to.
Deeply integrate the products together, we're not going down to the code level in trying to create a single unified.
User experience across multiple disparate products, we already have that in the cornerstone platform.
And we have the opportunity now to take the best feature sets within.
Solvents product portfolio and apply that to cornerstone products like Sabah meeting like the CRM capability.
Like all blending capability and then we have Conversely, the ability to upsell and cross sell the Sabah base with content anytime.
With the new products that were coming out which will be built to work both would close no clients and solving clients like our learning experience platform product, that's coming out of course on development and.
Oh, we have the ability to leverage connectors that both companies have made so.
It's not bad or this you Saba classroom as an example, we already out there.
Base connector to enable virtual circular training providers to hook into cornerstone warning kind of leverage that exact.
I said.
For the integration of solve a classroom.
So there's not a whole lot of work. We acquired this is worth that we had already done to open up or system. The same thing is true for sabal with regard to continent.
They already we're allowing third party content to one through cyber cloud.
Content anytime essentially its third party content from Sabas perspective, which will run through Sabah pod. So the tools already exists.
And the work required to do that integration is relatively minimal.
Which allows us to very quickly go to market and focus our integration efforts on back office processes and go to market.
Okay, Great. That's really helpful and then Adam and prepared remarks, you talked a little bit about a you know what you're seeing in terms of deals kind of slipping with with newer customers wanting to get a sense for any changes in customer buying behavior from existing.
Customers, they maybe beyond that anything in terms of customers looking for restructuring of contracts shortening duration and any customers looking for a changes and payment terms or or extending them any sort of color on that would be really helpful. Thank you.
Yes, I mean like you hear from other companies Robinson seem a little bit about.
What.
Yeah, but in this case I believe.
Is maybe two within phone number one we've been through these types of situations before we went through the financial crisis, we had a much smaller client base, but we were heavily weighted to the financial services sector back then.
And that was a second most impacted by the financial crisis. So it was significant during that time, we were able to navigate that period ended up keeping most of our client and actually growing a lot of those accounts. So it's something that our contracts are built for in something.
We've learned how to navigate the second thing is you have to remember that our products.
Our perfectly applicable to the situation that we're in right now most organizations, we're trying to deal with the fact that they have to work remotely.
Keep in mind, what I've said, we are operating at 100% even with the integration of a very large other business that we just acquired.
How did we do that we did that leveraging video conferencing tools leveraging collaboration tools.
And leveraging our own since the Weve news cornerstone to help US do the integration onboarding of the sabatier into cornerstone. So our tools are highly relevant in this environment.
And the third piece is that.
Oh, we're seeing.
Deferred parts of the economy impacted in different ways. So the reason we gave the very specific detail of our a our by industry. So that people really can put a box around these concerns obviously the airlines were impacted obviously, the major hotel chains and restaurant.
And our impacted.
The core into.
And by the pandemic in a way that's very different from E. Commerce companies would technology companies will perhaps healthcare companies and so we want to people who understand that we are highly diversified we do not have concentration risk and to the extent that we do have larger set of coin.
Once in a particular area like public sector. Those are the sectors that are.
Navigating this economic uncertainty a little bit better than others and so we're in we have relatively mitigated the risk and we want to people.
I want to be very transparent about that and we want people to be able to see for themselves. What is the risk profile. We showed you. The industries that we believe the most impacted but have different views of what industries might be impacted today or in the future and so all the data is now available.
And hopefully people will draw the conclusion that we have a very strong sustainable business now and having a larger client base helps us in this environment.
Alright, great. That's super helpful. Thank you so much.
Thank you Sir our next question comes from Raimo Lenschow from Barclays. Your line is open.
Hey, Thank you I hope you guys the whole thing safe Adam first of all congratulations on the the successful career for like for like 20 years and now that you were happening over the leadership like what's in place like So you know you get a co chairman escrow like how does this is going to work there.
There is obviously, it's still your baby food running it can you just help us and or help us to be comfortable about that's kind of.
That's a new situation, we have there and then Brian just to you talked about some early signs in April.
Can you just talk us for like what are you looking for in terms of like signs Terry said like number of conversation declines.
New logos.
Engaged in the final order that you and at the tell US a follow like Ken how do you kind of quantify that qualify that thank you.
Thanks, Jonathan.
So.
On June 15 fill become CEO and I'd become coach or the board.
The rules will be very clear feel is one company. The today I will support the team will support fill in any way needed.
And I will remain a major shareholder the company.
Obviously on the board is co chair.
I will also stayed very involved with.
The innovation that he's got to accompany the world's today and will take us.
To a very successful place in the future.
So that's where my passion is and that's where all stay involved but still in taking command of the shifting is running all day to day activities on Monday, all operations at the company.
Thank you okay.
Got it right both Brian.
With respect to early April or kind of since Q2, I mean, the last several weeks, we certainly seen.
I would characterize it is just more confident more positive signals in our forecast how we're feeling about Q2 bookings.
Content business in particular, we've been having deeper and more serious conversations with clients clients are more interested into their just feels like a little bit of reengagement.
By our client base and the opportunity that we had in the pipeline for Q2. So again I think it it's probably too early to call. It a trend, but I think it's an important data point for everyone understand Robert.
Nearly.
Hey, we're about halfway through the quarter.
As I told you many time your I know you know.
Most.
Mentioned most of our booking happened in last.
Couple of weeks the quarter over the last few weeks for the quarter. So there's a lot to do but I think the opportunity there for us to gain ground here in it.
We've seen last few weeks continue that will be positive heading into.
Hey, Thank you all the best.
Thanks.
Thank you Sir our next question comes from Pat Walravens from JMP Securities. Your line is helping.
Hi, This is actually Joe on surpassing so much for taking your question.
So we know.
Sabas revenue performance and 22019, but you're just directionally.
In the combined entity, how should we think about that.
How should we kind of think about revenue growth going forward.
Yes, Hi, Joe It's Brian I mean, I listen there's obviously, there's there's two factors really impacting that said I want everyone to understand I think everyone knows I try to provide the best.
Transparency that would pan on guidance.
At least that's our goal I mean, we have to I think that to two things in backing. This one there was obviously environmental a marketplace issues going on in particular, we pull that.
That.
Clearly impact.
All that we don't normally.
Yes.
The second one is.
As we bring saw the into our financial numbers will happen on reported basis from April 20 seconds.
There will be thing like.
Pushed county has to be done we have to adjust their different revenue to fair value that we'll have a meaningful impact on growth rate really for the next four quarters for the most part a little bit longer that likely want.
I will provide as much transparency, so that everyone can adjust for that kind of pro forma model, obviously got about him outflow and what were mostly focused on the were it backwards. We focused on is capturing the synergies.
On target.
Including the onetime cost we have to incur to capture those synergies. Thanks for that comes in.
Below budget.
Hopefully exceed synergy target.
That we'd have an outlined today and that's what's most important for us. So that's what we're focused on and what we have confidence in our ability to forecast to that whether it's one quarter out 234 quarters out.
Coupled with all the marketplace environmental factors will talk more about it but as of right. Now. We're we're we're just trying to give you a perspective of what cash flow generation can look like 123 years from now given the synergies given where we're at last year.
Focusing less on that.
Sure.
Got it thank you.
Thank you.
Our next question comes from Brad Sills from.
Bank of America Securities. Your line is open.
Hey, guys I wanted to ask about the comments made on the the combined R&D organization and focused on accelerating the content road map could you elaborate on that and kind of what what is the focus for content anytime.
Development.
Yes, we continue to build out the company time, offering there or both technical aspects of it which we've been working on and there are products the aspects of it.
The product itself keeps getting more and more mature.
Dozens of comfortable doctors that are working with US now it's available in multiple languages and we continue to expand offering all of the content is mobile ready.
And.
It's covering our full taxonomy of subjects.
At the gleaned from.
The aggregate about find this.
In terms of of other development, we are going to leverage the power, but combined team.
To really accelerate a launch of course on development, which is all morning, excluding platform.
And.
The launch and build out of quarter, so careers, which allows for that personalized navigation by the employee.
Career, working with 40 employees managers.
A lot of development coming.
And it allows us to accelerate the roadmap cross border.
Got it. Thank you and then thanks, Adam and then I wanted to ask about comments you made on on renewal rates improving from last quarter.
Can you just provide some color on on where the changes were made and what impact that's had on renewal rates. Thank you.
That's how we've been hard at work at.
I'll, let Brian comment on on the actual change your renewal rates, but generally speaking as you know we've been working hard on our support operations not client success operations, we had a misstep.
In 2018, beginning 2019 with.
Our support operations based on the transformation, we made it services business.
We will be doing something very similar with sabal.
We will not be concerned mistake twice and so we are paying very close attention to support required support levels and how we ensure that the clients how the access they need and the response onto need.
You get to help we need if they need.
Right.
Yes, Hi, Brad just to put in perspective, right I mean, obviously every quarter every month for forecasting.
New bookings new they are walls renewal rates and the point of the comments were although near our new Air argue trail off in March postcode bid.
Which had an impact on total bookings for Q1.
Electrification.
Helping offset some of that.
Were favorability in our forecasted renewal rate.
That is that going to be a trend for the full year two way too early to tell it obviously Q1 a day.
We thought quarter from both renewals and new bookings.
But in general it's one of those green shoots and not all that unexpected.
You know given.
Happening in the world and the fact that more and more clients.
Pundits are staying with their existing.
Providers like us.
Client and obviously, making it harder.
Right now to acquire new logo. So that was the nature of the comment hopefully that will continue hopefully the renewal rate improvement relative to expectations will continue regardless what happens with hoping that.
What we're focused on and what we obviously.
Last year with respect to this point issue that Adam.
Got it thanks guys.
Thank you Sir our next question comes from 16th and a great from Mizuho. Your line is open.
They are thanks for taking my question and I Hope you all are doing well.
It's a question Saba, so what percent of Saba contracts it up for renewal. This year, then and what sort of renewal of it and then are you going to end of life sell up products or continue to maintain without much innovation and Saba.
Yes, so the sabal products with respect to the renewal rate question. The saw the cloud client which are the.
Primary product at the other went to market with.
Contractually and renewal rates are very similar Q cornerstones core product, which three year contract.
Well in advance annually and renewals of three or term some of the other products, namely talent space and some of it Halloween products are slightly different our renewable basis. Some of them had initial three year terms with annual auto renewal.
Some of them have pure more periodic billing such as you know quarterly billing those type of thing for the core product is very similar this out of five product is very similar to cornerstone.
And I'm, sorry, I'm sorry, what was the second question you asked about.
And the end up are you going to end of life Sabah or are you going to maintain without much innovation and the Silva site.
Yes, I don't think that so.
On the.
So that has a broad range of products some of them. We're already in maintenance mode and will continue and maintenance mode. These are older products.
Came from prior acquisitions.
We are doing to continue developing the core products most notably.
Cyber cloud intelligently those will still be pleased they will still be sold will still be actively in the market.
We are actually going to be grieving life into some of the products that didnt have a good hold it sabal them off very good home with quarter still namely.
On planning and transition management products, which fit very well with cornerstone HR.
And the opportunity to take Saba meeting and saw the classroom to a much larger base those will actually get more developments in this on the path.
So overall the products or the be maintained or.
Even more development than it had before.
Thank you for that and you I am somebody me good cross sell opportunity they see here to sell and few other products you talked about but have you guys. Just talked about in <unk> was when you're going to start migrating customer and also do you expect a price uplift or down too.
When you might get subject to cotton as Sean.
Yes, so nothing in our industrial logic, we're in the business case for this deal included the requirement that we migrate clients.
In fact, it's a little bit to contrary, we also very very focused on client retention and so if a client likes the products that though on the consumer product, if they want something different or more notably if they want to move to a more unified talent management solution, we would.
Enabled them to easily move over to the cornerstone platform. So.
Our goal is to make this a win win for the Saba quantities to they do they get.
To stay on what they have for me to something different if they so choose either way. It's a good option for them the way they will be supportive.
Thanks, Adam Thanks for that call list.
Thank you.
Thank you Sir our next question comes from Mark Murphy from JP Morgan Your line is okay.
Yes. Thank you Adam was there any pause in spending that you can associated with the actual announcement or the other merger.
<unk>.
Some customers or prospects, we're waiting to see the combined roadmap I'm just.
I'm curious looking back on it how do you discern and separate out the pandemic impact versus anything there was kind of merger related pausing.
Yeah, Mark that's it that's a great question and I think those things get completed it together and I think it's hard even in the clients minds to decide to meet those two things having said that there are certain deals where full saba and cornerstone were fine arts.
And we know at least some of those deals have been disposition. So in some cases sabal one in other cases cornerstone one.
But they did pause all of them to see what would happen to hear from either me or fill Jeff. So you get a sense of what the go forward plan was we've been very transparent with the clients on both sides.
We're still clients and the Sabah clients.
And with me employees, so that the company.
Our clients and prospects have a good understanding what the roadmap is what the plan is.
Where they fit and that's allowed us to relatively quickly progress on those deals that doesn't mean all of them have been finalized there are still deals that slipped and are still open right now.
Okay, and as a follow up Brian how do you see the combined company head count trending.
Say between today and end of year.
Yeah, So just high level.
Others roughly.
2000 employees on the cornerstone side there is roughly.
1200, or so on the other side, we will it's reasonable to expect that come down, but we're not guiding to a specific number.
As we considered.
Okay.
One final one Brian.
Going back to an earlier question I just wanted to double click on what do you have seen since the start of Q2 are you would you say you're back to the original bookings plan you know either for the month of April or.
The original Q2.
Bookings forecast or are you are you kind of more just pointing to qualitatively no more people are answering the phone and I'm just sort of off the off the kind of bookings levels. They were seeing in late March.
Yes, so we're not back to our original plan for Q2, if that's your question, but we are relative to the.
Late March early April drop that we saw for obvious reasons given what's happening.
We have seen some momentum back now, but we're not back to our original plan for.
Or may or.
For Q2.
Okay. Thank you and Adam Congrats on 20 years of great success, and best wishes in her new role.
Thanks, Mike.
Thank you. Our next question comes from Alex second from RBC Capital markets. Your line is open.
Yeah, Hi, Thanks, guys. This is that Scott on for Alex I guess, you know first question Adam Congrats on a 20 year on very impressive.
And now that you're leaving with two of the largest pure play vendors being merged I'm curious how do you think the competitive environment may or may not change for cornerstone. When you think about specifically competing with the ERP vendors that are also in this market some thinking and does your side either from a revenue perspective, or a product breadth perspective or even just.
Customer count perspective give you any advantage is that you think as you think I think what the future here.
Yes. Thanks, a lot question. So I would say first of all one of the reasons. It's a good time for me with the transition is we have now.
Gotten to where we.
Aimed for day, one which is we are the clear leader in this space.
We are number one without a doubt and.
The combination gives us I think two real advantages so number one is.
It is now truly for prospects decision between ERP suite for best of breed.
If they want to ERP suite, then they're going to go with whoever the incumbent vendor is whether that's sep work or was there if they want best of breed, there's really only one choice now which is cornerstone eased up two choices. They can go with cornerstone were Saba now, it's a very clear binary decision I think.
That will work toward damage.
Other kids or scale does matter.
I had talked about this in the past when we first talked about the deal.
Having bigger scale means better support from system integrators and software partners all over the world.
And that even as the playing field for us and makes it easier for us in the yields.
Against ERP vendors.
And so salva gives us both advantages, which I think will result in higher when rates and.
Better opportunity for our sales team going forward.
Got it and then just kind of yeah I think a couple people have asked about these positive distinct signals that you're seeing in early QQ here I'd be curious have you seen any kind of shift and what customers are looking at from a product perspective, I guess in the current environment or any products kind of resonating louder.
Her or or less loudly I'd be curious, if you're seeing any kind of mix and what customers are looking for today.
Yes, I mean, obviously, there's less focused on recruiting during April.
Nobody time.
But there is absolutely massive focus on warning and in particular online training. We saw in March the highest number of hours of training consumed ever in our history.
Of online training consumed over 27 million hours of training can seem just in the month of March which is an all time high for us.
And that speaks to the fact that.
Both companies are required to do all their training online they can't do classroom training right now.
And the fact that employees.
Many cases have more time in this work from home environment, depending on what's happening with the company and so companies have seen this is an opportunity to take some of that excess timing use it to better upscale and re skilled employees.
So we're seeing more training happening and we are clearly the leader in that space. So.
For us that's potentially a tailwind.
Into the future.
Perfect, Thanks, and congrats again.
Thank you.
Thank you and that does conclude the question and answer session for today's conference and I'll turn the call back over to Adam Miller for any closing remarks.
So I want to thank everyone for joining the call today, and enabling us to walk through the presentation.
I also want to today, especially thank our amazing global team.
For.
Part of this journey with me.
As we've gone from.
Really an idea to.
The largest.
Learning company in the World.
With over 75 million people using our products across 180 countries and.
Most importantly.
Enabling.
Tens of millions of people around the world to realize their potential.
Thank you all can be part of it.
Oh Lady.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program you may all disconnect everyone have a wonderful day.
[music].