Saba Software F4Q07 (Qtr End 5/31/07) Earnings Call Transcript

TRANSCRIPT SPONSOR

Saba Software (SABA)
F4Q07 Earnings Call
July 12, 2007 5:00 pm ET

Executives

Peter Williams – EVP, Corporate Development
Bobby Yazdani - Chairman and CEO
Mike Martini – CFO

Analysts

Eric Martinuzzi - Craig-Hallum
Ariel Sokol - Wedbush Morgan
Andrey Glukhov - Brean Murray
Ross Koller - Diker Management
Matthew Weiss - Maxim Group
Justin Cable - Global Hunter

Presentation

Operator

Welcome to the Saba fourth quarter fiscal year 2007 financial results conference call. (Operator Instructions) I would now like to turn the conference over to our host, Executive Vice President of Corporate Development, Mr. Peter Williams. Please go ahead, sir.

Peter Williams

Thank you, and thanks for joining us today. By now, you should have received our press release. If not, it is available on our website at www.Saba.com. I would like to remind you that this call is being taped and a replay will be available today after 5:30 pm Pacific Time by calling 320-365-3844 and using the access code 874375.

Joining me today to discuss fourth quarter and fiscal 2007 results are Bobby Yazdani, our CEO and Chairman; and Mike Martini, our new CFO.

Before we begin, I would like to point out that certain statements made in the course of this conference call about the company's intentions, hopes, goals, beliefs, projections, plans, outlook, or predictions of the future are forward-looking statements.

Such statements include financial projections including Saba's anticipated first quarter and fiscal 2008 GAAP revenue, and the GAAP and non-GAAP earnings data; non-cash amortization of purchased intangibles; charges related to stock-based compensation expense; the writedown of acquired deferred revenue deferred value and amortization of acquired backlog; and statements regarding the strength of Saba's business fundamentals; the increasing interest of our customers in and our continued shift to OnDemand; Saba's better visibility and stable revenue outlook; growth in the mid-market; strong interest from large customers; strong pipeline; ability to achieve growth objectives and expected growth across all geographies, product lines, and revenue lines. Saba disclaims any duty to update such statements.

It is important to note that the company's actual results could differ materially from those projected in such forward-looking statements. Factors that could cause the anticipated results not to occur include a decline in the demand or price for our products; Saba's dependence on growth of the markets for our products; dependence on acceptance of our products by customers and partners; increased competition and the inability to obtain key employees.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our annual report on Form 10-K for the year ended May 31, 2006 and similar disclosures in subsequent Saba periodic SEC reports. Copies of these reports may be obtained from the SEC.

I would also like to remind you that some of today's financial information will be non-GAAP. Non-GAAP results for the quarter and year are computed by adjusting GAAP results to exclude the amortization of acquisition-related intangibles, stock-based compensation expense, the writedown of acquired deferred revenue to fair value, the amortization of acquired backlog and the reversal of the prior period restructuring charge. A reconciliation of GAAP to non-GAAP results is included with the financial statements accompanying our earnings release.

As you know, the exclusions of such items is not in accordance with Generally Accepted Accounting Principles and is not intended as a substitute for GAAP revenue, net income or any other GAAP measure, and may not be consistent with similar measures used by other companies.

However, Saba's management believes that non-GAAP information is an additional meaningful measure of operating performance because it measures the principal operating results that can be directly influenced by management and provides more consistent comparability to our financial results against historical results and the reported results of other software companies. Accordingly, it is used by management and the board of directors to measure our performance against our operational objectives.

While I have the opportunity to beat Bobby to the punch, I would like to welcome Mike to Saba. I look forward to working with him.

I would now like to turn the call over to Bobby.

TRANSCRIPT SPONSOR Want to understand the future of software? Cornerstone OnDemand is the leading provider of hosted software solutions for learning management, employee performance management, and succession planning. We offer over 30,000 online training titles and integrated tools for compliance and analytics to help companies maximize workforce productivity and achieve organizational excellence. Learn about OnDemand talent management and our industry leading products for large enterprises, small businesses, offices and K12. Or view our list of featured clients, and contact us for more information. To sponsor a Seeking Alpha transcript click here.

Bobby Yazdani

Thanks, Peter and thank you for joining us today. First, I'm really excited and pleased to announce that this week Mike Martini has joined us as Chief Financial Officer. Mike comes to Saba from @Road, where he was Senior Vice President and Chief Financial Officer. Prior to @Road, he was CFO at SPL WorldGroup, CFO for the west region of TCI Communications and CFO for Pacific Bell Communications. Mike's expertise in the high-growth, OnDemand software and services companies will be a great asset to Saba.

As we announced two weeks ago and also in today's earnings announcement, our Q4 revenue fell short of our earlier expectations. While we're not happy with this result, we believe that the underlying reason for this shortfall was affected by a continued shift in our business model resulting in greater than expected OnDemand bookings relative to license bookings, and by contractual contingencies in three large license transactions that were signed in Q4, but precluded us from recognizing the revenue. Despite this shortfall in our Q4, we had record total bookings representing a 28% increase over total bookings in the fourth quarter in fiscal 2006.

We added 27 new customers in the fourth quarter 2007, up from 14 new customers in the fourth quarter of 2006. New customers included Yum! Brands, Catholic Healthcare West, and the U.S. Department of Health and Human Services. For the full fiscal year, we added 90 new customers compared to 44 in fiscal year '06.

In general, our business fundamentals are strong . We are seeing an increasing interest from our customers for our OnDemand offerings. As a result, our business continues to transform to a more recurring base model. This shift is providing a better visibility and a stable revenue outlook for Saba.

We're also experiencing good growth in the mid-market and a strong interest for our integrated people management solution from large global customers. In short, we expect growth across all geographies, product lines, and revenue lines in the new fiscal year.

Also in the fourth quarter, Saba received a positive ranking from Gartner in the employee performance management market report. We consider the positive rating as another indication of our continuing momentum in providing a fully integrated people management solution.

In fiscal year '07, we made significant investment in further advancing our learning, performance, talent and central solutions. The new release of Saba Enterprise Suite has considerably strengthened our people management solution with enhancement across the entire solution suite, with a particular focus on talent functionality, integration with Saba Central and further advances in our industry-leading architecture.

These developments are based on feedback and input from our large global customers and further our vision of delivering the most integrated and complete people management solutions in the industry.

Before I turn the call back to Pete to go over the financials one last time, I would like to thank Pete for being Saba's CFO for the past 13 quarters. During that time, Saba grew from a $30 million to a $100 million company. It's been a challenging and exciting time at Saba and I could not have built the company without him. Pete will continue working directly with me in his new role as Executive Vice President, Corporate Development. He will also work closely with Mike to transition the CFO responsibilities. Pete, thank you for all your help and hard work.

Peter Williams

Thanks, Bobby. Turning to the quarterly results, total revenues in the fourth quarter of fiscal 2007 increased 11% to $25.6 million from $23 million in the fourth quarter of fiscal 2006. We closed deals across all major geographies. 74% of total revenues in the fourth quarter of fiscal 2007 was from North America and 26% was international.

As Bobby indicated, three significant license transactions signed in the quarter included contractual contingencies that precluded revenue recognition. In addition, a significant transaction won in the quarter resulted in an initial services engagement without any accompanying license fees. As a result, license revenue in the fourth quarter decreased 18% to $5 million on a GAAP basis from $6.1 million in the fourth quarter of fiscal 2006. These agreements, as well as the agreement for services that is expected to result in a license transaction, provide additional visibility into our projected fiscal 2008 license revenues.

In the quarter, OnDemand revenue increased 43% to $4.3 million from $3 million in the same quarter of the prior fiscal year. Combining license revenues and OnDemand revenues, solution sales totaled $9.4 million in the fourth quarter of 2007, representing 37% of our total revenue in the quarter.

We completed 197 license and OnDemand transactions in the quarter, including Yum! Brands, Department of Health and Human Services, Catholic Healthcare West, Singapore Ministry of Finance, and AMP. The average deal size with customers having a transactional value of $50,000 or more in the quarter was $288,000.

Our license updates and product support revenue in the fourth quarter of fiscal 2007 increased 22% to $8.4 million on a GAAP basis, from $6.9 million in the same quarter last year. As indicated on our calls in prior quarters, our business strategy includes continued focus on growing our recurring revenue base. In the quarter, OnDemand revenue and license update and product support combined to represent 50% of total revenues on a GAAP basis.

Professional services revenue increased 12% in the fourth quarter of fiscal 2007 to $7.9 million from $7 million in the fourth quarter of fiscal 2006. Professional services gross margins were 30% in the fourth quarter. This represents the third consecutive quarter of 30% plus professional services gross margins. We believe that these margins are sustainable going forward and they reflect the quality and maturity of the Saba products as well as the experience of our professional services team.

Gross margins on a GAAP basis were 62% in the quarter, a decrease from 64% in the fourth quarter of fiscal 2006. GAAP margins were negatively impacted primarily by the license revenue shortfall, which resulted in a higher mix of services to license.

Total costs and expenses were $28.7 million in the fourth quarter of fiscal 2007 compared to $26.4 million in the fourth quarter of fiscal 2006. Total costs and expenses in the fourth quarter of fiscal 2007 included amortization of total purchase intangible assets of $929,000 and stock-based compensation of $645,000. In addition, we incurred one-time charges of $462,000 relating to restructuring and other organizational changes.

On a GAAP basis, our net loss for the quarter was $3.1 million or $0.11 per share compared to a net loss of $3.5 million or $0.12 per share in the fourth quarter of fiscal 2006. Non-GAAP net loss in the quarter was $1.4 million or $0.05 per share, compared to non-GAAP net income of $1.1 million or $0.04 on a basic and diluted basis in the fourth quarter of fiscal 2006.

We ended the fourth quarter with $29.5 million of deferred revenue, a slight increase above deferred revenue of $29.1 million at the end of last quarter and a 22% increase from $24.1 million in the same quarter of the prior year. We ended the fourth quarter with $18.1 million in cash and cash equivalents. In the quarter, we used $3.1 million in operations and made capital purchases of $1.2 million.

Our DSO for the quarter was 73 days. approximately the same as the fourth quarter last year. We expect DSOs to continue to fluctuate based on the number and size of transactions that closed in the last month of the quarter and range in the 70s to 80s on a go forward basis.

In summary, although we are disappointed that we were unable to meet our fourth quarter license revenue forecasts, we believe that our business is strong. We are entering fiscal 2008 with a larger recurring revenue stream and a strong pipeline and are well positioned to achieve our growth objectives for the year.

Looking forward to fiscal 2008, we are projecting total revenues to range from $110 million to $115 million on a GAAP basis. We anticipate net earnings per share for fiscal 2008 to range from a loss of $0.07 to earnings of $0.03 on a GAAP basis and from net earnings of $0.15 to $0.25 on a non-GAAP basis.

The non-GAAP outlook for fiscal 2008 excludes the estimated non-cash amortization of purchased intangibles, $3.7 million; charges related to stock-based compensation expenses, $2.8 million to $3.5 million; and the writedown of acquired deferred revenue to fair value and amortization of acquired backlog of $270,000.

For our first quarter of fiscal 2008, we are projecting total revenues to range from $25 million to $26 million on a GAAP basis. We anticipate net earnings per share for the first quarter of fiscal 2008 to range from a loss of $0.06 to $0.09 on a GAAP basis and from breakeven to a loss of $0.03 on a non-GAAP basis.

The non-GAAP outlook for the first quarter of fiscal 2008 excludes the estimated non-cash amortizations of purchased intangibles, approximately $900,000; charges related to stock-based compensation expense, $700,000 to $800,000; and the writedown of acquired deferred revenue to fair value and amortization of acquired backlog, $90,000.

This concludes our formal remarks. I will now turn the call over to the operator for Q&A. Thank you.

Question-and-Answer Session

Operator

Our first question comes from Eric Martinuzzi - Craig Hallum.

Eric Martinuzzi - Craig Hallum

Thank you. Welcome to Mike. Congratulations on your position with Saba and congrats to Peter for your new role as corp dev.

I have a question about the guidance. Basically if we look back at Q1 of fiscal '07, we posted an adjusted revenue number there or a non-GAAP revenue number of $25.3 million. At the midpoint of the guidance here we are at $25.5 million, so we're looking at relatively flat performance year over year.

Could you address why that is? I would have thought we would have seen some growth here given the fact that there were some deals that had pushed out for Q4 of '07.

Peter Williams

I think, Eric, when we modeled '08, we've taken into account some of the experience over the past quarters and the model shift. I think the revenue numbers in Q1 are flat to up on the high end of the range from a year ago. We are modeling a larger shift toward the ratable OnDemand bookings. So, I think what you will see is we expect bookings to exceed the revenue number for the year, but we are modeling the revenue number a bit more conservatively to accommodate the model shift.

Eric Martinuzzi - Craig Hallum

Okay. And then, just on the full-year basis, as we look at Q4 of 2007, OnDemand was about 17% of the revenue. As you guided to 110 to 115 for 2008, does OnDemand make up a bigger demand percent? And if so, what's the percentage range you are looking for OnDemand to contribute in '08?

Peter Williams

It is somewhere between 17% and 20%. It's a little bit higher than the past year.

Eric Martinuzzi - Craig Hallum

Some housekeeping questions here. The cash burn in Q1, what was the cash from ops, the CapEx and then the depreciation and amortization?

Peter Williams

The cash from ops, we used $3.1 million in operations. CapEx was $1.2 million and the depreciation I think was about $400,000 to $500,000.

Operator

Our next question comes from Ariel Sokol - Wedbush Morgan.

Ariel Sokol - Wedbush Morgan

I am just trying to reconcile the strong bookings number and a sequentially flat OnDemand number. How should we be thinking about that?

Bobby Yazdani

It's just the ratable over the term of the contracts, so you don't see the immediate revenue benefit. But we will get to recognizing over the course of the term of the contracts.

Ariel Sokol - Wedbush Morgan

Were there any contracts which rolled off and were not then re-signed? What was the renewal rate for the OnDemand revenue?

Bobby Yazdani

Actually quite high. It was north of 90%. What you are seeing is that there are bookings where either they will start 30 days or 60 days out where we start recognizing that revenue, and you'll recognize it throughout the course of the terms of the contracts. The starting point of them is subject to when the customer is going to start the service, and from time to time it could vary from 30 days to 60 days from the day they sign.

Ariel Sokol - Wedbush Morgan

The follow-up question would be deferred revenue and its growth sequentially too. How should we think about deferred revenue growth moving forward? Is it a good proxy for looking at bookings growth?

Bobby Yazdani

Not necessarily because not all of the bookings would be invoiced immediately. There are contracts that we could be invoicing them a year ahead of time. Of course those will show up in our deferred revenue, but the majority of them are quarterly, and they would be off balance sheet bookings.

Ariel Sokol - Wedbush Morgan

The final question would be, what does the bookings number represent? Is there a way that we can think about the bookings number and how those bookings inevitably go into revenue on the income statement?

Bobby Yazdani

This is an area that I think we need to give an opportunity to Mike to get his hands around how he wants to report on the strength of the business. The key message again and the key information here is that the year-over-year bookings were up 28% and there were a number of license bookings that would be recognized in the future quarters and the OnDemand bookings, of course, is going to be recognized throughout the term of the contract.

So the underlying amount of bookings that occurred over the Q4 was quite strong, and we paid already commission on that, so it appears on our expenses. As I said, we're going into our '08 with a fairly good visibility just because of the recurring revenue or number of these license contracts that would be recognized in future quarters.

Operator

Our next question comes from Andrey Glukhov - Brean Murray.

Andrey Glukhov - Brean Murray

Thanks. Pete, can you address what is the timing of the revenue rec on the three deals where you had contingencies and could not recognize the revenue?

Peter Williams

Those are dependent on the contingencies being removed and advance both in our control and in the customer's control, and they will, through the course of the fiscal year '08, get removed. So it's not one specific quarter. They will come out over the course of the year.

Andrey Glukhov - Brean Murray

Do any of them come off in Q1?

Peter Williams

Yes.

Andrey Glukhov - Brean Murray

To follow up on Ariel's question, the fact that your OnDemand revenue was essentially flat sequentially, did you have an unusually front end loaded booking in the previous quarter and back end loaded booking in this quarter so there is a gap quarter before the revenue gets recognized?

Bobby Yazdani

Yes, there were a lot of bookings that came in the last month of the quarter and there were also a number of those projects as we turn on the service, we will get the revenue benefit. We'll start recognizing those as we turn on the service. So it's a combination of the customer projects, when we would turn on the service; it is a timing issue.

Andrey Glukhov - Brean Murray

Now, Bobby, conceptually, even recognizing the business model transition, it looks like you stepped up the hiring a bit in the fourth quarter?

Bobby Yazdani

Yes.

Andrey Glukhov - Brean Murray

It looks like operating expense structure seems a bit heavy for the current revenue levels. What is your thinking there in terms of what are you going to do with operating expenses?

Bobby Yazdani

In particular, there are three areas that we are investing. One area that we are investing is in the professional services area, where we have increased our headcount across the board, because we have quite a bit of backlog going into the 2008. Necessarily, we don't get the revenue benefits because of the nature of the ratable model of some of these OnDemands and because we just have to get, as I said, the upcoming projects for '08, we have good visibility into the second half of the year, it requires us to be ready to service our customers.

We have started to staff our mid market team. We are seeing good growth there. Last quarter we announced Kerry Fullbright came on board. That's an area of investment. We sold number more mid market this last quarter. We feel that there was enough proof points for us to proceed with making that investment. So we will see and we are hoping to get the benefit of that investment second half of 2008.

The third area is expansion in the North America direct enterprise sales. We have now increase the number of our direct salespeople in North America. We have a very strong pipeline across the board. In order to service the pipeline, we stepped up the hiring in North America under Don Bosworth.

So I hope that both the hiring practice that you are seeing, as I indicated, the strong booking numbers, the fact that we're going into the year with a fairly strong professional services backlog that, again, is an indicator of large projects that we have been awarded, it tells you the underlying strength of the business necessarily does not reflect other revenue at this point.

Peter Williams

I think that's where the investments were and we will reap the benefits of that in future periods. I think the level set for Q1 moving forward, I think that the Q4 sales and marketing is a little bit higher and can come down a bit because of restructuring charges that we talked about earlier and the commission rates, while they were accelerators in Q4, go away. So I think the run rate in Q1 will drop 300 to 500 on the sales and marketing line and it will drop a bit, a couple hundred grand or so on the G&A line as well, as we had a number of one-time charges and recruiting fees.

Andrey Glukhov - Brean Murray

Okay now, how many quota carriers do you guys have as you enter the year?

Bobby Yazdani

We are starting our year north of 40 direct sales reps. These are actual quota carrying reps. These are not the management and what have you. Again, we are looking to increase that by 20% throughout the year.

Andrey Glukhov - Brean Murray

Bobby, I would imagine you already had the sales kickoff. What have you done with the quotas as you enter the new year?

Bobby Yazdani

Because of the fact that we are entering the new year with a bit of a different model because of the recurring revenue base and the renewals, we have distributed the renewals across our team accordingly that the quotas have been increased because of the fact that they are going into the year with a very good predictability, our sales team has a good predictability because of the renewal business that they are carrying on the quota.

Andrey Glukhov - Brean Murray

Last question if I may, have you thought through longer term as we approach the end of a business model transition, what would be the perpetual license percentage in the overall revenue mix?

Bobby Yazdani

It would be probably within 15% to 20% of the overall revenue. There is still a lot of customers, even I experience it right now where they are more comfortable buying perpetual licenses and they have capital budgets. It's hard to necessarily predict that, so our expectation would be anywhere between 15% to 20%.

Andrey Glukhov - Brean Murray

Thank you for taking the questions.

Operator

Our next question comes from Ross Koller - Diker Management.

Ross Koller - Diker Management

Mike, congrats on the new job. I was wondering if you could just talk a little about why you joined Saba and the opportunity that you see?

Mike Martini

Sure. I would say first of all that I've formed some beliefs about this whole decision. One is that I believe that the human capital market, the space is excellent. It's large; it's growing; still somewhat undefined, which is very good.

I believe that companies that can demonstrate a leadership position in both product and presence in this market are more likely to create higher returns, and I think Saba is a leader in the market.

So when you boil all those beliefs about this, I think that it's going to be a real good opportunity for me personally. I look forward to exciting our investors with good returns and carrying on Saba's tradition here.

Ross Koller - Diker Management

Great. Bob, can you talk a little about the acceptance among your customer base of your integrated vision of HCM and how you are doing cross-selling performance and talent management? Are there these multi-product sales in the pipeline, and just the acceptance of that right now?

Bobby Yazdani

Yes. I am seeing that the global large enterprises as they have now moved, consolidated at their LMS systems, they are looking to consolidate more of their disparate systems into one. The other day, I was in a FORTUNE 50 customer that they are consolidating their entire portfolio under one platform and it's a trend, it's a cost-saving.

These are becoming crucial management systems for the head of HR's. The individuals we were talking to were to generate all their board reports off of our system, walking into the board room for the CEO, generating all the appropriate management reports with respect to the workforce is coming off of systems like ours.

So the indication that we're getting from our customer advisory board and, of course, existing customers and their prospects is that this trend is going to become more real as they are going to turn into consolidating more and more into a single platform.

Now, they could get that product from an OnDemand basis in some cases and also the mid-market would like to an OnDemand offering and in the case of the enterprise, it's just simplifying the IT infrastructure by developing a single platform for an overall strategy around people management. It's very, very positive. I believe that this is solidifying very nicely.

Operator

Our next question comes from Matthew Weiss - Maxim Group.

Matthew Weiss - Maxim Group

I was wondering if you could tell me what percent of the total bookings -- and if you can't give me a quantitative number, maybe qualitatively -- you can speak to the bookings that you are seeing from new customers versus your installed base?

Bobby Yazdani

More than 50% of the bookings were from new customers and also a pretty good split, a similar split between OnDemand and license.

Matthew Weiss - Maxim Group

Okay that's helpful.

Bobby Yazdani

About one-third was outside of United States, two-thirds was North America.

Matthew Weiss - Maxim Group

Okay, great. Was there a seven-figure deal at all in the quarter?

Bobby Yazdani

Yes. We had three, two really close to seven figures, one was seven figure.

Matthew Weiss - Maxim Group

What do you see as your CapEx requirements for fiscal '08?

Peter Williams

We have right around $3 million.

Matthew Weiss - Maxim Group

Right around $3 million for the year?

Peter Williams

Correct.

Matthew Weiss - Maxim Group

I know you gave EPS guidance for the full year. In the past, you've spoken to EBITDA margin goals. Is there anything along those lines that you could speak to?

Bobby Yazdani

We are looking to, again, look at the right around north of 10% is the EBITDA margin we're chasing.

Operator

Our next question comes from Justin Cable - Global Hunter.

Justin Cable - Global Hunter

I would like to get an idea of what the average deal size is between your perpetual business and your subscription business, and perhaps the average length of your subscription contracts that you are booking?

Bobby Yazdani

The contracts are typically three-year contracts.

Peter Williams

We don’t break out the five-year deals. We would break them out by deals above and below $50,000 and quantify them that way. I think the number we gave this quarter was $288,000 was for deals in excess of $50,000. There's a mix in that $50,000 and above, of both license and OnDemand transactions.

Justin Cable - Global Hunter

So the OnDemand transactions would encompass the three years worth of subscription payments in that deal size?

Peter Williams

No, just the first year.

Justin Cable - Global Hunter

Just the first year. Okay that's good to know. But you are signing three-year contracts with these customers?

Peter Williams

Yes, correct. I think to just be a little more granular, on the Saba OnDemand offerings, to date I think they've all been three years or they're mostly three-year transactions because the project duration of the learning and performance, the suite. On the Centra Saba product line, it's more of a split between one-year term deals and three-year term deals.

Justin Cable - Global Hunter

Is there a variation between the sales cycles between your perpetual and subscription businesses?

Bobby Yazdani

The sales cycles are more bifurcated around the mid-market versus the enterprise, so the mid-market, it's around three to six months. The enterprise is closer to six months to a year.

Justin Cable - Global Hunter

But does it matter whether it's perpetual versus subscription?

Bobby Yazdani

We don't carry a perpetual product to the mid-market. We only sell our OnDemand offerings to the mid-market. So our sales organization, they only carry the OnDemand in their bag to sell to the mid-market.

Justin Cable - Global Hunter

Your comment about professional services backlog being high and therefore hiring some folks there in that group, what is that driven by? Do you see that continuing to rise going forward?

Bobby Yazdani

The answer is yes. It's pretty strong both in terms of the existing customer expansion, upgrades, given our OnDemand offerings do require a limited amount of professional services. We try to do a lot of that in a very packaged way, essentially, but the number of transactions of course are higher.

So all in all, that business remains very healthy. As Pete indicated the gross margin was around 30%. The utilization, realization of the practice seems to be very, very healthy. Again, the margin, we think it's a fairly good margin. The quality of the product is high. The quality of the people are high. We expect a very good business next year from our professional services.

Operator

There are no further questions in queue at this time. Please continue.

Bobby Yazdani

Thank you very much for joining us this afternoon.

Peter Williams

Thank you.

TRANSCRIPT SPONSOR Want to understand the future of software? Cornerstone OnDemand is the leading provider of hosted software solutions for learning management, employee performance management, and succession planning. We offer over 30,000 online training titles and integrated tools for compliance and analytics to help companies maximize workforce productivity and achieve organizational excellence. Learn about OnDemand talent management and our industry leading products for large enterprises, small businesses, offices and K12. Or view our list of featured clients, and contact us for more information. To sponsor a Seeking Alpha transcript click here.

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