Marketo Inc (NASDAQ:MKTO)
Q2 2014 Earnings Conference Call
July 24, 2014 5:00 PM ET
Erica Abrams - IR, The Blueshirt Group
Phil Fernandez – Chairman and Chief Executive Officer
Fred Ball - Chief Financial Officer
Greg Dunham – Goldman Sachs
Philip Winslow - Credit Suisse
Patrick Walravens - JMP Securities
Terry Tillman – Raymond James
John Byun - UBS Securities
Richard Davis - Canaccord
Jason Maynard - Wells Fargo Securities
Good day and welcome to the Marketo Second Quarter 2014 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Erica Abrams. Please go ahead.
Thank you, Danny. Thank you all for joining us today for the Marketo second quarter 2014 financial results conference call. Joining me on the call today are Phil Fernandez, Chairman and CEO, and Fred Ball, CFO of Marketo.
Before we get started today, I would like to remind you that this call is being webcast and recorded. The webcast can be accessed live on the Investor Relations section of our website, and via replay on our website shortly after the conclusion of the call. Our website can be accessed at investors.marketo.com.
On this call today, we will provide you with details about our performance in Q2, 2014, including certain non-GAAP financial measures. Numbers discussed on this call will be non-GAAP unless stated otherwise. We provide non-GAAP financial measures because we believe that they are the most valuable way to review our core operating results.
We have provided a reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release which is available on our website and has also been filed on Form 8-K with the SEC today.
Some of our comments today may include forward-looking statements, which are based on certain assumptions and are subject to a number of risks and uncertainties. Actual results may vary materially.
Please refer to the section on forward-looking statements in our earnings release and read the risk factors included in our filings with the SEC, most recently, our 10-K was filed on March 3, 2014.
The forward-looking statements and risks stated in this conference call are based on current expectations as of today and Marketo assumes no obligation to update or review them whether as a result of new developments or otherwise.
Now, I will turn the call over to Phil Fernandez for his remarks. Please go ahead.
Thanks, Erica. And thank you everyone for joining us today as we report second quarter 2014 financial results. Simply put, we were pleased with our results in the quarter and more broadly I have to say I'm struck everyday about how much recognition Marketo is receiving as a leader in our category and I think our results really reflect this position of strength.
Revenue in Q2 was $36 million, an increase of 60% over the prior year. And I like to highlight that for the first time we generated positive cash flow from operations of $3.6 million.
As I’ve said it frequently since we took Marketo public a little more than a year ago, our mission and strategy is to build the iconic marketing software company. The independent leader in our category, powered by continuous thought leadership, technology innovation, a passion for customer success and a unique alignment with the needs of the marketing professional and what I call a marketing first world.
In the second quarter, we saw ample proof point that the strategy is paying off. For example, several independent authorities published updated research on our category. The Gartner Group has again listed Marketo as one of two leaders and the only independent leader in their most recent MQ covering our space. Similarly, SiriusDecisions named the Marketo the highest ranked marketing automation vendor in the industry with a particular emphasis on our balance strength for enterprise as well as SMB customers.
Marketo has long had the most capable technology platform in our category. But the world of marketing technology is incredibly dynamic as new digital, social and mobile technology seems to upend the status quo every few months. This puts a premium on continuous product innovation and highlights one of the unique advantages we have here at Marketo. As an independent innovator focused solely on building the best marketing software, we are able to move like the wind to release new and updated products to stay ahead in this dynamic market. And as proof of this in the second quarter, our technology team delivered major new products for search engine optimization, real time personalization and marketing management.
These  [ph] new products as well as our commitment to the success of our customers has produced a strong contribution to revenue from our growing installed based. This is evidenced by our subscription dollar retention rate which rose in Q2 to 105%.
Let me unpack the numbers a little bit, this metric is really driven by several factors including customer retention, discount recovery, cross sell and usage rights expansion, and all of these factors are moving in a positive direction. Specifically one of the things we are seeing at work here is the success of our new Real Time Personalization product for which we are seeing excellent cross-sale uptake into our installed base.
More strategically, one of the things that I am seeing is that more and more of our customers have moved beyond using Marketo as a tactical solution and begun to place Marketo right at the center of their revenue operations and their growth strategies. In Q2, I had the pleasure of spending quite a bit of time in the field with some of our key customers. And I was frankly wowed by some of the stories I heard. For example, I just recently spent some time with the CMO of the top ten 10 global software company. And she told me how her CEO starts every executive staff meeting now asking to hear “the Marketo numbers.” By this, he means the weekly results on percentage of pipeline created by marketing and the average deal velocity across the sales teams. These so called Marketo numbers are produced by our unique revenue cycle analytics product which gives business executives unprecedented visibility in the marketing contribution to revenue.
Moving on new business was strong in the quarter as well. And I was particularly pleased to see continued strength with our focused growth strategy to serve B2C markets. Just last week I spoke at the Fortune Brainstorm Tech Conference in Aspen, and I was seated on the panel between the CMO's of Unilever and Kraft Foods. I think it actually opened some eyes to see Marketo represented together with these kinds of global consumer brands on the same stage. And by the way we did add Unilever to our customer list in Q2 as they chose Marketo to help them drive new customer activation and brand engagement across a number of European markets.
Our B2C success was broad based in the quarter and we added customers like 3-Day Blinds as well as major high-end appliance manufacture, [PPG] [ph] customers like Unilever that I just mentioned; membership in non-profit groups like the New York Road Runners and Oxfam, travel and leisure where we added the likes of Turtle Bay Resort.
Education continues to be a strong area of focus for us and we see institutions such as Tufts University choosing our Customer Engagement Platform to cultivate personal lifelong relationships with family, students and alumni.
And of course results in our tradition core B2B market were strong as well. And we added customers like Sherwin- Williams and SGK, multiple financial services providers such as American Financial Group, Zurich Financial Services, WorldPay and Principal Funds. We also expanded within a number of our large enterprise customers including Cisco, Honeywell and GE. Overall, our customer count increased to 3,359 in the quarter.
It's worth noting that we are the only marketing software company among our core competitors that has a stated strategy of serving both B2B and B2C customers with a single, unified technology platform. And this is important because I am seeing a rapid conversion and requirements coming from these once distinct sectors. For example, business marketers are increasingly adopting techniques previously reserved for large brands, for example, programmatics display advertising, while consumer marketers are starting to focus on customer lifecycle nurturing, very, very much akin to that lead nurturing that our B2B customers have long mastered. Marketo's ability to serve global customers across both B2B and B2C with one single technology platform provides leverage in our business plus the continuing opportunity for us to standout as the thought leader across the entire marketing industry.
Another highlight in the quarter was that we saw continued strength in our international operations which contributed 15% of revenue. We saw specially strong performance from our SMB and mid market teams in EMEA and good activity in Latin America with the new distribution capabilities we have added in that region. We also achieved the first book business from our new entity in Japan which just began operations in the middle of last quarter. Also, I was pleased to see that our professional services contribution to the business grew nicely in the quarter, rising to 13% of total revenue. Achieving scale and strength in that part of our business is essential to our success in the enterprise as customers look to Marketo to participate along with our key alliance partners in global deployment. As I’ve previously stated, our goal is to take services to 15% of total revenue and then largely cap it there as partners take over an increasing share of our deployments. And it's really great to see us start to close in on these long-term goals we have been shooting to achieve.
Overall, Marketo continues to grow and thrive as a company. In Q2, we crossed a milestone on our employee count growing to over 600 employees around the globe. And we added a number of new key executives to the business across marketing, sales, technology and human resources, giving us the leadership capacity to continue to scale the business. Notably, we added a new executive sales leader in EMEA and regional sales VPs in the Mid Central and Northeast region of North America. And of course in the quarter we named Yasutaka Fukuda, formerly Senior Vice President for Salesforce, Japan to head our new Japanese operation.
Let me close by returning to one of our key achievements in the quarter. In Q2, we delivered positive cash flow from operations for the first time. This very clearly demonstrates the operating leverage that our business model can produce as we continue to scale. But make no mistake, Marketo is fundamentally a growth business. We will continue to invest in customer acquisition and growth because we are so excited by the size of addressable market we are serving and by the leadership position within this market. So to net it out overall Q2 was an excellent way point on our journey to build the iconic marketing software company, or more precisely was an excellent way point on our journey to build the iconic but also a very profitable and valuable marketing software company.
With that now I'll turn the call over to Fred for his detailed review of the quarter. Fred?
Thank you, Phil. As Phil stated we had another strong quarter with our business performing well on multiple fronts. Total revenue in Q2 was $36 million, up 60% year-over-year. Our revenue performance reflects ongoing success adding new customers as well as ongoing strength in customer retention rate, discount recovery, cross sell and usage right expansion into our existing customer base. We continue to increase our investments internationally and experienced returns from those investments that international contribution increased 16% of total revenue during the quarter. We expect that international as a percentage of total revenue will continue to increase in the back half of this year and into 2015 as we ramp our presence in Japan and add to our investments in our other international markets.
Professional services and other revenue in Q2 was $4.8 million, up 83% year-over-year. This strong revenue growth was primarily attributed to increasing customer demand for professional services associated with new enterprise business bookings as well as repeat sales into our installed base. We also benefited from an increase in education revenue related to our annual user summit. Professional services revenue increased to 13% of total revenue in the quarter as we drive towards our target mix of 15% of total revenue. In Q2, total gross margin were 69.2%, unchanged from Q1, 2014 and up strongly when compared to the 59.5% we had in Q2 a year ago.
Subscription and support gross margins were 80.2% in Q2 largely unchanged from 80.5% in Q1, and up significantly from 69.1% in Q1 a year ago. In the back half of the year we expect a small decline in subscription gross margins as we bring on our new data center operation in Asia-Pac.
Professional services gross margins were negative 2.8%, an improvement from negative 13.2% a year ago and from negative 19.4% last quarter. We see variable quarter-to-quarter fluctuations in professional services gross margins due to the timing of hiring new staff who are not yet fully billable and the impact of increasing customer demand which drives higher utilization rate. Q2, 2014 also benefited from an increase in education revenue from our Marketing Nation Summit in April which will not repeat in Q3.
Looking forward we expect professional services gross margins to be in the negative low-teens percentage for the balance of 2014.
Turning to operating expenses. Sales and marketing expenses were $21.6 million or 60% of total revenue in Q2 as compared to 65% a year-ago and up from $18.4 million or 57% of total revenue last quarter. In Q2, we continue to add incremental sales and marketing capacity to support our growth and to address the sizable market we are serving. We expect Q3 expenses for sales and marketing to increase both in absolute dollar and as a percentage of revenue due to ongoing investments required to support our expected growth in 2014 and beyond.
R&D expenses were $6 million for the quarter and represented 17% of total revenue in Q2 as compared to 22% a year ago and 19% last quarter. We expect R&D spending to increase in absolute dollars and modestly as a percentage of revenue throughout 2014 as we continue to build and expand our products offerings.
G&A expenses were $4.1 million or 11% of total revenue in Q2 as compared to 15% a year ago and 15% last quarter. G&A expenses decreased in absolute dollars from Q1 where we had higher cost for the yearend audit and related compliance efforts as well as cost associated with integrating Insightera.
We expect the G&A expenses will increase throughout the remainder of 2014 in absolute dollars and as a percentage of total revenue as we continue to expand our business internationally and develop infrastructure to support our growth in regulatory compliance requirement.
Our operating loss in the second quarter was $6.7 million or 19% of total revenue. As we drove strong growth and continued to invest and scale our business.
Net loss in Q2 was $6.7 million and the net loss per share was $0.17 based on $40.3 million weighted average common shares outstanding.
Now on to the balance sheet. We closed the quarter with deferred revenue of $53.2 million up 74% year-over-year, an increasing from $45.6 million at the end of Q1. As we've discussed in the past, predicting deferred revenue is challenging as we experienced seasonality, timing in our sales, customer mix shifts, and the impact of annual versus quarterly billing frequency.
Also, and as you may recall, in Q4 of 2013 we changed our billing policy which now provides for invoicing upon contract signature versus upon contract start date. Given the effects of these items, year-over-year billings growth for Q2 was 51%.
Looking to Q3, 2014, which is typically a seasonally softer quarter for us, we expect our deferred revenue balance to be flat as compared to Q2 which is similar what we experienced in the same period in 2013.
We closed the quarter with $119.7 million in cash and cash equivalents, representing an increase of $142,000 compared to Q1, 2014. The increase was primarily attributed to $3.6 million of cash generated by operations offset by $1.7 million of CapEx and $1.6 million of net cash used in financing activity.
Cash flow provided by operations was positive for the first time, reflecting as Phil mentioned the operating leverage our business model can produce.
As we've highlighted in the past, cash flows can vary significantly from quarter-to-quarter. We continue to expect CapEx to be in the range of $11 million to $12 million for the full year 2014.
Turning to our outlook for the third quarter, we expect revenue in the range of $36.5 million to $37.5 million, and non-GAAP net loss per share in the range of $0.25 to $0.27 assuming approximately 40.6 million weighted average common shares outstanding.
For the full-year, we are raising our revenue guidance to the range of $143 million to $145 million and expect non-GAAP net loss per share in the range of $0.89 to $0.93, assuming approximately 40.4 million weighted common shares outstanding.
With that, I'll turn the call back over to Phil for closing remarks.
Great. Thank you, Fred. Well, in summary we had another great quarter at Marketo. I think our key strategies for growth and success that is thought leadership, technology innovation, customer expansion, our balanced focused across B2B and B2C industries, and our initiatives on global expansion, all continue to pay dividends in the quarter. I am thrilled that our cash flow results are beginning to show the kind of leverage that Fred and I believe is achievable in our business. In overall, I see excellent positive momentum in Marketo and I look forward to the second half of this year with great optimism. We will continue to drive to scale up operations and to capitalize on the exciting opportunities that we have created for ourselves.
So with that Fred and I now will take your questions. Operator, please go ahead.
(Operator Instructions) Thank you. We will take our first question from Greg Dunham with Goldman Sachs.
Greg Dunham – Goldman Sachs
Yes, thanks for taking my question. I want to start with the positive cash flow in the quarter as well as the margin expansion. On an operating margin basis you expanded nearly 25 points year-over-year. So clearly showing leverage in the business. But at the same time this is a big opportunity right and you want to invest. How should we think about or how do you think about that transition to profitability? And how it may transition as you look out to 2015 and 2016? I mean can this be this business be positive operating cash flow next year?
Greg, this is Fred. I think we will be sustainably positive operating cash flow in 2016, that's the year I am targeting because we are continuing to drive growth and that will continue through 2015, but I do believe we will have sustainable cash flow in 2016 and then within a couple quarters of that will be positive profitably.
Greg Dunham – Goldman Sachs
Okay, thanks for that. And then the second one, your revenue per customer continues to go higher. Phil, you talked about a number of these deals, Unilever, couple other big expansion with Cisco, Honeywell and GE. Can you give us a little context? How much different are the deals today with some of these larger enterprises versus two years ago, three years ago?
Well, I think, as I said in prepared remarks Greg we are seeing very much among more larger, more experienced and expert customers a real strategic adoption of this technology. It's really moved to the center of operations where companies really do rely on Marketo and the techniques we enable to be -- center of their business, I actually had in the quarter a couple of CEOs use of language that they were - from big companies, they were “Marketo companies.” I think that notion that this is a transformative technology and not just a tool is increasingly out there. And as a result, we see companies that have been with us for a while like a Cisco or Honeywell or GE and number of others, that have now reached the maturity in their operations to be thinking of this in a very different way and that produces the effect if they buy more, we've had a couple of customers that have said to me things like unless it’s really crazy, we are going to buy whatever you release in the future. Where we have developed that kind of trusted relationships and it's just, it is distinctly different than it was as we were just earning our way into the enterprise a few years ago.
Greg Dunham – Goldman Sachs
Okay, great. One last question if you permit. It has been over a year now since Salesforce announced its acquisition of ExactTarget. And you have clearly you have 53% year-over-year billings growth or 51% if you normalize for [terms out] [ph] of the big comp. I mean clearly we are not seeing any change from a competitive standpoint in the numbers. How about from a field perspective? What are you seeing? What has surprised you over the last 12 months and how do you feel about the competitive dynamics today? Thank you.
Yes, well, we -- it's really simple. Since we came to the market whatever it has been now seven years ago, we won more than we’ve lost. And the competitive dynamics continue to be I think nicely in our favor. It's a very competitive market. We do see the big competitors we compete against occasionally use enterprise pricing leverage or bundling leverage in the market. But at the same time when it comes down to the market or making a decision about what platform for them, we just win more than we lose. And I would say as we continue to innovate and we continue to move faster as I commented on in the script, I think if anything we are opening the gap versus the competition.
And we will take our next question from Philip Winslow with Credit Suisse.
Philip Winslow - Credit Suisse
Hi, thanks, guys and congrats on another great quarter. Phil as you said in your opening remarks there you are unique in the fact that you serve both B2C and B2B customers. Wondering if you could give us just a sense of the trends that you are seeing in both these B2B, B2C, so how those are contributing in your growth? Thanks.
You bet. Well, for marketing automation and for the lead nurturing kinds of capabilities that we have long been a leader in, I would say the degree of sophistication in B2B continues to increase at least in industries that have been exposed to it for while like technology and some financial industries and the like. There are still lots and lots and lots of Greenfield even in B2B where these technologies haven’t reached and I think represent tremendous growth potential. But I would say that’s in some ways a maturing market in terms of accumulated expertise. What's really interesting in B2C as evidenced by this thing, I did an [inaudible] last week that I mentioned and just all over, I hear continuously consumer marketers talking about, we want to build lifetime relationship with customers. We want to activate the customer relationship which is the same as we want to generate a lead in B2B and then we want to sustain that relationship over time. And I almost wanted to jump up and down when I give some of these talks because it's like I wave my hand and say yes that's what we do. And so what I see these incredible conversions in B2C between where the leading edge thinking has gone about what CMOs want to accomplish and it turns out that we’ve built exactly that right engine. And so I think that I just see tremendous alignment of our priorities and thought leadership in B2C with what the buyers seems to be saying they want.
And the next question is from Patrick Walravens with JMP Securities
Patrick Walravens - JMP Securities
Oh great, thank you and congratulations. So do you mind talking just a little bit about the changes that you've made in the sales organization? Any changes that we should expect going forward and just what sorts of capabilities you are looking to build there that maybe you don't have as much of today as you would like.
You bet, you bet. Well, I would say the single most important factor in our business is the continued scale up for the field force. We see just immense opportunity out there and the ability to source to higher really high quality enterprise sales executives with vertical industry expertise and to train them and bring them on board and make them productive it's a challenging endeavor and they are hard to hire and it's a challenge. So that's a real focus, is just core scale up of the organization and the kinds of numbers we need to add in terms of sales capacity. It's not ones and twos any more but it is fives and tens in terms of people and so you need the management capacity to do that as well. So the activity scale up, now I am struck everyday that we’ve started and created this business as a high transaction velocity, telephone based sales organization into the SMB and mid market and that represents still a real core foundation of our business, huge market, we are really very well positioned in it. But as we've just been sucked up into the enterprise, into these large organization of Panasonic, GE, Samsung and Cisco etcetera, it’s a whole different complexion, a whole different kind of sales strategy, more patience in the selling, more getting to power, more selling longer and more complex strategic deals, and we just need to continue to build muscle strength in that sort of markets to capitalize on the opportunity. So everything we are doing in sales is about scale up and just adding that enterprise expertise that we need. So this guy we -- we hired in Europe, comes to us from SAP and that kind of top organization and represent exactly the kinds of sales leadership we need to capitalize on that opportunity. Does that help?
(Operator Instructions) We will take our next question from Terry Tillman with Raymond James.
Terry Tillman – Raymond James
Hey, good afternoon, everyone. Sorry for the background noise. Hi, Phil, Fred and Erica. So my first question actually Fred, it's for you. In terms of the billing term assumption for the back half of the year. And may be you said this in your prepared remarks so maybe any kind of shift in the billing terms that is in relationship to the annual component in the back half of the year versus what you saw in the first half of the year and then secondly on that this concept to be in cash flow positive 2016, does that represent structurally different mix of business in terms of annual versus more periodically invoice?
Answer to the first question, we really seeing mix of quarterly and annual kind of order end to this kind of 50:50 range, may move a little bit around that. But it will stabilize in a pretty tight range there and our expectations for the back half are fairly similar to that. I mean there is a chance that Q4 because it tends to be a little bit more enterprise heavy could swing a little bit. But I have not modeled it that way. And as I look out to 2015 and 2015, I am going to use same assumption as I look forward because the strength in SMB continues to go and I think that's just going to naturally keep the quarterly cadence as an important part of the business.
Terry Tillman – Raymond James
Okay, got it. And I guess Fred, you talked about how you have been out on the road meeting customers and you have done different events and you get to interact with lots of large companies and the CMOs and senior executive, I am sure if we could say about the actual budget allocation for tools like where you are selling. Do you see overall budgets for the marketing department really ticking up and do you see that's more of kind of reallocation of existing budget but they are not necessarily growing, what could you say about the pull of dollars that are -- that you are seeing that you can address.
It's really hard to get any kind of accurate handle on percentage of budget and it varies tremendously across our customer base. The share of total budget growing her percentage of revenue going into marketing at Cisco is wildly different than a big BPG firm like Unilever. So the ratios are all over the map. What I would say is there is a long-term very, very powerful continuing shift towards digital marketing technologies. And what that mean that represent a shift of dollars from traditional advertising other activities into digital. And that shift into digital, while some of that goes into Facebook or Google or whoever's pocket, it also goes into ours because we are the technology platform that good drives and guide the spending to the digital channel. And so I think in particular our exposure to B2C in the long range global shift, there were still just midway on towards digital represent tremendous budget flows available for our technology.
Terry Tillman – Raymond James
Okay and I just -- it's nice to see the product expansion happening and I am assuming that it is opening more for dollars that are available for you guys. But in terms of the STL products, the personalization and then the marketing management solution, I know I would benefit from some perspective, what kind of lift could you perceive with those kind of tools versus what should I say you are selling a couple years ago marketing automation so if you are selling a dollar marketing automation what are these three newer solutions, what can they do in terms of giving you incremental lift. I know it's hard depending on the type of the account but anything you can about the economic opportunity with this newer product.
Well, it's a continuously evolving mix, right. As products mature and become widely populated across the base like our sales inside products, our revenue cycle analytics products and then continues flow of new products coming to market, the competitive changes happened that cause us to have pricing leverage and scenarios. I would say in general of those three products that I mentioned over the near terms the Real Time Personalization carries the biggest incremental dollar value at least in terms of list prices and we are seeing meaningful contribution. I don't know -- it varies but if our marketing automation is a dollar -- the Real Time Personalization is $0.40 something like that. Now it's not really that simple because we increasingly sell a platform and a set of module and so to the eyes of the buyer-- if they are buying our entire platform, they are not buying -- they see it through a different eye because the platform which we achieved is different from anything like a disconnect sort of apps. So I think 105% fourth quarter average subscription dollar retention rate which takes into account some of that cross- sell. It's just evidence that just generally speaking were taking increasingly revenue out of the customer base.
And we will take our next question from John Byun with UBS.
John Byun - UBS Securities
This is actually -- it's John Byun for Brentel. So I have couple of questions, impressive numbers all around. First question I had was the pace of new custom ads seems to slowed a little bit in Q2. So just wanted to hear about that and then second, we are also hearing that some marketing automation buyers are as you mentioned looking at things more as a bigger structural or I mean strategic or architectural decision and maybe taking a little bit longer to decide and just want to see what you are hearing yourself? Thank you.
The customer count, you remember which is a net count between our ad as well as our churns is the numbers we report, it is just super sensitive to the mix, very low end deal which could be voluminous but ever higher churn rates and lower impact on revenue. So it is a number that wags around quite a bit in detail especially because there are two independent factors at work, generally our retention is in a really good place that is moving in a right direction but it is sensitive. I don't see any macro trends in some slowdown buying or anything like that. In terms of customers taking longer, I don't see that. There is still -- because we still generate a very large volume of our business through leads that are generated by our marketing organization. We do tend to be exposed to a lot of high velocity transactional buying that takes place and I would say that's funnel of those kinds of businesses is healthy as ever and at the same time as larger enterprises start to put this technology at the center, the revenue app is no question the larger strategic enterprise deal do tend to have 9 or 12 months sales cycle. I don't think that's a change per se as opposed to the marketer has grown and earned our way into being the credible leader in that sort of deal. If I come up a level I don't see any macro slowdown in this market at all. And I should I say see, I see quite the opposite in this incredibly healthy market.
We will take our next question from Richard Davis with Canaccord.
Richard Davis - Canaccord
Hey, thanks. Well, just kind of a general question. What do you hearing from your customers? You have some kind of social media tool and stuff like that. Where are they with regard to reviewing ROI on that? Because it's kind of absent flows. Is there a still a big push? Is that a less of big push? How it is evolved and those kinds of things? Thanks.
Well, social has -- somewhere it is matured so much that it is sort of part of the fabric because if there is phase when you are talking about it's the new, new thing and calling out and separating it out and now we just see I mean we use the phrase when we really first introduced all sorts of products, it is not about doing social campaigns but it is about making every campaign social. And I would say it's just become embedded in the fabric. And so we've seen companies from big payroll processes in our customer base to consumer marketing companies and everything in between choosing our social products as well as partner products ubiquitously. So I guess I am not sure what to say other than it is just ubiquitous in the took kit now, it is a well used part of our product and it's well used part of everybody's arsenal in the marketing department. Now in terms of exactly what kind of results Facebook advertising yielding here it would have advertising there, LinkedIn here has everything to do with the quality, the content and naturally the execution from the customers but there is lots of people getting really good results.
Richard Davis - Canaccord
Got it, that was -- it sounds like people all as you said thanks.
Very much evolved in -- very forward but sort of fading into the background is just part of the of course -- the of course the world rather than the new thing that people are doing.
We have our final question from Jason Maynard with Wells Fargo
Jason Maynard - Wells Fargo Securities
Hey, good afternoon, guys. Just one question I would love to get a little bit of color and perspective on as you exit this year and really centers around your hiring plan. And specifically your ability to kind of continue to add talent and what the climate is for bringing on sales reps and getting them around. And so if you could just maybe talk a little bit about what you are seeing in that area and how you think that shapes up as you exit the year. Thanks.
Well, I think I probably been quoted on the call before I was saying that if you think it's a hard to hire a big data Hadoop engineer along one on one in Silicon Valley, you should try to hire a financial services, enterprise sales professional in Manhattan and then you will experience what real hiring demand is like. It is -- the great enterprise sales people with vertical industry knowledge in a certain set of well traveled industries are really scares people. Now that said, we have some eye popping W2s of what we are paying sales people, sales people make money here, they see Marketo as a winning sales culture and so I think we are doing quite well in attractive staff to Marketo and making them successful. It is simply the case that, as I said earlier we need to add five of sales people to continue to keep quarter on street to drive growth rather than one or two or ten or whatever the numbers are. You need infrastructure; you need more executive, there to hire them, to train them, to bring them along. And so there is just a massive scale of effort that is underway and I am very confident as I mentioned we've added a couple of sales, regional sales vice presidents that is the core frontline hiring exes for those people and the fact that layer of management is growing gives me a lot of confidence that they we are going to be able to track our hiring goals through the end of the year and beyond.
And ladies and gentlemen, that does conclude our question-and-answer session. And it does conclude today's call. We appreciate everyone's participation. You may now disconnect.
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