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Cornerstone OnDemand, Inc. (CSOD)
Q1Â 2019 Earnings Call
May. 7, 2019, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, my name is Latiff, and I will be your conference operator today. At this time, I'd like to welcome everyone to Cornerstone OnDemand's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference may be recorded.
I'll now turn the call over to Jason Gold, Vice President of Finance and Corporate Development.
Unidentified Speaker
Good afternoon everyone and welcome to Cornerstone OnDemand first quarter 2019 earnings Call. The format of today's call will be a bit different than in prior quarters, in case you haven't seen it, I'd like to draw your attention to the shareholder letter we issued this afternoon. In it, you'll find a lot of descriptive information about the strategic priorities of our business. How we performed in Q1 with commentary by line item and our outlook for Q2 and the full fiscal year.
As a result, Adams and particularly Brian's prepared remarks today will be shorter than they've been in the past, which will give us plenty of time for Q&A. In the letter, we've also outlined our Investor Relations calendar for the quarter, including when we plan to enter our quiet period. So if you'd like to participate in any of our scheduled events, please feel free to reach out. Our press release and shareholder letter were both filed with the SEC in a Form 8-K, you can access the shareholder letter, press release and related investor materials including detailed financials on our Investor Relations website.
As a reminder, today's call is being recorded and a replay will be made available following the conclusion of the call. Our discussion will include forward-looking statements, including but not limited to statements regarding the expected performance of our business, our future financial and operating performance including our GAAP and non-GAAP guidance, strategy, long-term growth and overall future prospects. Forward-looking statements involve risks, uncertainties and assumptions. These risks, uncertainties and assumptions as well as other factors that could cause actual results to differ materially from those contained in our forward-looking statements are included in our most recent 10-Q and 10-K, as well as subsequent periodic filings with the SEC.
During the call, we will be referring to both GAAP and non-GAAP financial measures. All financial figures discussed today are non-GAAP, unless we state that the measure is a GAAP number. The reconciliation of our GAAP to non-GAAP information is provided in our shareholder letter and in the press release. With that as a backdrop, I'd like to turn the call over to Adam.
Adam Miller -- Founder, Chief Executive Officer
Thanks, Jason, and good afternoon, everyone. In Q1, we continued the momentum that we saw during 2018. I'm incredibly proud of our team for what they've accomplished and how they have thrive through this transition, which they have done while we have simultaneously increased the size of our competitive mode. I'd like to take a few minutes to talk about why, the combination of our learning suite in our emerging content offering is starting to create a flywheel effect in distancing us from our traditional competitors. One of the greatest assets we have is the scale we have developed over the years. In 2018, for example, we had over 520 million online course registrations on our platform. Think about the amount of data that provides, particularly since the related user data and content metadata flows through our system.
We know which of those courses are the most popular not only overall, but also by geography, by industry, by job function. It provides us with an extremely valuable repository of anonymized data and when matched up with the data that we have from our performance suite, we have the ability to surface relevant content that drives employee engagement, reduces turnover and improves productivity. These are the things that all of our clients want. With the skills divide making news almost every week, learning and development directors are embracing solutions like ours. Every day, we see examples of companies struggling to find highly skilled workers, while at the same time, unskilled workers line the street's looking for jobs, creating a mountain of applications for companies to handle. Our solutions actively address this issue. And now when we walk into sales situations and we are asked to present our vision, these clients see that we not only have the right strategy, but we are the only company that's properly positioned to execute on that strategy.
The buying into the vision and only Cornerstone, will be able to deliver targeted learning content based upon skills gaps highlighted through the performance management process. The buying into the vision and only Cornerstone can use it's immense dataset to service and deliver the most popular content for particular job functions. They're excited to have the ability to immediately train and on board new recruits. And even brace the idea that only Cornerstone will soon be able to deliver solutions that tail-end users, not only which courses are the most popular with their peers, but what training best positions them for career progression along their desired career path. That's a really powerful message and it's one that's creating barriers to entry for our Talent business. I believe it's also important to point out how being in this position as the world's largest distributor of corporate learning content is benefiting us in other ways that ultimately accrued our and our clients benefit, think about it. If you're a content creator what you really want is to get your content into the hands of somebody that can distribute that content on a massive scale.
It's just like how the Consumer Media businesses are growing today. Access to a wide audience drives content creators to want to work more closely with you and access to great content drives more users. We're now taking advantage of a virtuous cycle that is only beginning for us, given the size and fragmentation of the corporate learning content market and how early we are in this evolution.
Over the past few quarters, we've spent a lot of time talking to investors about the economics of our Content business and how exciting that is but what I think we need to do a better job of explaining is how the Content business also acts as a propellant for our overall business. It's the injection of this content into our massive install base that is enabling us to tell a story to our clients that is truly differentiating. And I think we're only in the first inning of delivering on this vision. It was just over a year ago that we started really selling content and it took us a little while to get our teams ready but we're still not perfect. There's further work to do to capture this opportunity but it is a huge opportunity and so our teams are hard at work putting together the infrastructure necessary to deliver on these solutions. Our field ops team are beefing up their processes and procedures to handle the influx of multi-product deals and our tech teams of scaling our infrastructure to be able to take us to the next level with the strategy. This is truly a team effort and I'm very pleased with how the different teams at Cornerstone are coming together to make this a reality.
The work our teams are doing is also extending our footprint within our client base beyond just our Learning Suite. Today, a substantial portion of our revenue comes from performance, recruiting and HR, and as we continue to innovate and expand both our product portfolio and our global client roster, our market opportunity continues to rise. We continue to have strong performances around the world and across industries. During the first quarter, we had some notable wins at organizations like CBS, The University of Arizona, Banco Santander, The Delaware Department of Human Resources and the Steel Corporation.
Our EMEA sales team had a particularly strong Q1, with solid direct sales of our learning and recruiting suites. In APJ, we brought on new leadership to capitalize on the market opportunity in Japan. In the Americas, we saw a notable strength in our SMB business. I'm more enthusiastic about our business today than I've ever been and I can see the opportunity ahead of us. The onus is really upon us to execute on this vision. And while the road may not always be linear and will surely encounter some minor bumps along the way. Our strategy is clear. I'm really excited about it. I want to thank our global team for all of their great work. Before we take your questions, I'll turn the call over to Brian to provide a few comments on our financials.
Brian Swartz -- Chief Financial Officer
Thank you, Adam and good afternoon, everyone. Since we provided a very thorough overview of the quarter and our updated guidance in the Shareholder Letter, I'm going to keep my remarks brief. As you can see, we had a very healthy first quarter and chose to raise the midpoint of our ARR, revenue, operating margin and unlevered free cash flow guidance. We had a solid Q1. We feel good about our performance and we are confident in the direction of our business. A few other key highlights, in Q1, subscription revenue was $131 million, representing 16% year-over-year growth and 18% on a constant currency basis.
Non-GAAP operating income was nearly $20 million, representing a 14% operating margin, and an improvement of 430 basis points over the prior year. I'd like to point out that the amount we've raised, the full-year revenue guidance by was only slightly more than the amount we exceeded the midpoint of our Q1 guidance. While the dollar value, we're talking about a relatively immaterial. And nevertheless tackle this head on to avoid any questions or confusion. And so I'd like to take a minute to explain some of the mechanics . In any given quarter, we can have up to about 1% of our subscription revenue that may not recur. It's made up of various components as sometimes we see and sometimes do not. To help you understand this and why it can cause our sequential growth rates to very? I want to provide a bit more color. We do not generally include these items in our guidance. Let me give you two different examples of where we might have a hard to predict favorable adjustment to revenue. The first is when we withhold the recognition of revenue, until certain software features are released. Where not particular feature is ultimately delivered, we can have a favorable revenue adjustment to record revenue that we previously withheld. The second is when we true up a client for prior periods in which they had more users on the system than our contract stipulated . In both of these instances, you can see how we would recognize revenue in that period, but wouldn't be appropriate to flow that through the remainder of the year in the same way that a traditional new ARR out performance flow through. I hope that provides a bit more context about how we forecast revenue.
In terms of other items worth noting, we think that our professional services revenue is starting to approach a consistent quarterly cadence. Of course, while there will be some variability to this line, our sense is that it should stay at or below the Q1 level for the near-term on a dollar basis. And over time it will grow in line with the overall growth of our business. I'd also like to point out that we've experienced a notable increase in research and development expenses as a percentage of revenue on a year-over-year basis. A meaningful part of that increase is related to the reclassification of certain expenses out of sales and marketing and into R&D that we implemented in Q3 of last year.
We have discussed this in detail on our prior calls. Also driving the increase is additional investments we have made in product development, infrastructure and the migration of our application to a micro services architecture. We expect to maintain R&D expense around its current level as a percentage of revenue for the foreseeable future. We continue to target achieving the Rule of 40 in 2020. As a reminder, we define the Rule of 40 a subscription revenue growth plus unlevered free cash flow margin. Our strong performance on cash flow in Q1, was primarily related through profitability and strong collections, the latter of which is timing related .I'd like to remind you that similar to 2018, our unlevered free cash flow margin continues to face headwinds in 2019 as we unwind our Professional Services business. We expect to obtain incremental positive working capital benefits in 2020 as our business normalizes on a full year basis and it's headwind from working capital abates.
And finally, with regard to key metrics, you'll notice that our increase in net clients during Q1 was lower than in prior quarters. This is primarily due to the success we had in signing larger clients and that strength shows up in our constant currency, subscription revenue per client, which was up 12% in Q1 on a year-over-year basis. Like Adam, I'm very proud of the team for what we've accomplished in Q1 and I am excited about what lies ahead. Although it's early in 2019. We are off to a solid start and I feel good about our opportunity and the team's ability to capitalize on that opportunity in the future.
With that, we will now take your questions.
Questions and Answers:
Operator
Thank you, sir. (Operator Instructions) Our first question comes from the line of Scott Berg of Needham & Company. Your question, please.
Unidentified Participant
Hey, guys. This is Josh on for Scott. Congrats on the strong quarter. Starting off with the Content Solution, what are you seeing in terms of pricing on content? Are you still seeing a 3 times to 4 times uplift versus traditional Learning deal?
Adam Miller -- Founder, Chief Executive Officer
Yes, the pricing is varying tremendously based on A, the subscription, B the industry, C the geography and D, maybe most importantly the size of the clients. So because we sell into all those different segments. We do see a lot of variability, and it is very different depending on the competitive environment in a particular deal. So pricing is still all over the place, like we said before, we're seeing ranges from 3x to 10x and that continues. Now, the good news is the $25 billion market for online training content is super fragmented. So is fragmented as the Learning businesses on the platform side, the content side is much more fragmented. And that gives us a lot of opportunity in every one of these segments and we feel very strongly that we'll be able to achieve that $250 million market opportunity within our install base today.
Unidentified Participant
Okay, great and then one more, Q1 subscription revenues obviously look great. Can you comment on large enterprise deal pipeline or traction in Q1? And are you seeing sales cycles within normal ranges or are there any deals that are moving between quarter is more than normal?
Adam Miller -- Founder, Chief Executive Officer
Yeah, so there were no mega deals in Q1, we do see a decent pipeline of deals for 2019 and beyond. We're seeing activity up market, all the way up market and that's good for our strategic accounts team and for our large enterprise group. We expect those deals to happen, but they are very difficult to predict exactly when. And so we are very conservative in our guidance about those deals given the difficulty in assessing the timing of when they might close.
Brian Swartz -- Chief Financial Officer
Yes, Josh, it's Brian. Just add a little more color in terms of more specificity in terms of what we -- how we think about the guidance specifically. We obviously expect those teams at some level of success from a win rate perspective. But as Adam said, it is hard to predict those deals and particularly the timing of those deals, so it doesn't assume, we don't assume none in the full-year outlook, but we assume some level of success for that team .
Unidentified Participant
Okay. Great. Thanks, guys.
Operator
Thank you. Our next question comes from the line of Chris Merwin of Goldman Sachs. Your line is open.
Kevin Kumar -- Goldman Sachs -- Analyst
Hi, this is Kevin on for Chris. Thanks for taking my questions. You had noted strong win rates in Europe during the quarter, can you talk a little bit about that? Has anything changed in terms of the competitive environment in the region and then also how did Cornerstone HR do during that quarter?
Adam Miller -- Founder, Chief Executive Officer
Yes. So no real change in the competitive landscape. It remains very stable. In terms of Cornerstone HR, we still see very strong progress in Europe in particular, but we are selling it internationally all over the world. And we have very good penetration rates outside the US as you know, we are not selling it in the US, and probably won't in 2019, but may consider that next year certainly by 2021.
Kevin Kumar -- Goldman Sachs -- Analyst
Great. Thank you.
Operator
Thank you. Next question comes from the line of Alex Zukin of Piper Jeffrey. Your line is open.
Alex Zukin -- Piper Jeffrey -- Analyst
Hey, guys. Thanks for taking my question. Maybe just one or two for Adam. I guess, maybe first on, can you talk about the performance of the recruiting product in the quarter, in the pipeline, is it paying off from new sales perspective this year and kind of the traction you're expecting from the balance of the year?
Adam Miller -- Founder, Chief Executive Officer
Yes. So recruiting is doing well. We're seeing good recruiting sales globally across multiple industries. As you know, we've made some significant investments over the last couple of years on the engineering side related to recruiting, those are starting to pay off and we've made some investments on the sales and marketing front, around recruiting and I think those are still to come. So you're going to see that over the next few months. But we are feeling good about the pipeline in recruiting and we feel very good about the changing competitive landscape, particularly in recruiting. We're seeing some real weakness among the legacy incumbents. And that's going to create opportunity for the newer players like us in the recruiting field. So feeling good about it.
Alex Zukin -- Piper Jeffrey -- Analyst
And and then on learning, can you maybe speak to a little bit of the most successful selling tactics that you're seeing work from not learning upon this content perspective, in terms of the synergies are the buyers are the same? What the attach rates look like in new deals, are you seeing more success on existing customers when the time for renewal conversation, just a little bit of context and maybe kind of how we should think about it on that progress to 250?
Adam Miller -- Founder, Chief Executive Officer
Yes, we definitely see more success selling into the installed base than indirect sales and that makes sense right until the learning system is up and running. Pushing the content through it is a less urgent. Once you have a system in place and you're thinking about how do I optimize the content and the training, that's going to be deployed to my employee base, you do think a lot about what your opportunities and options are in the content field. What we are offering through the Content Anytime subscription is very compelling. So we are seeing the ability to do this with our existing clients. It is not necessarily upon renewal, a lot of them are doing it mid cycle. It's just after learning has been deployed and remember some of our clients will deploy recruiting or performance before they deploy learning, and so the timing of the content deals typically is after they've deployed learning.
Now, the other reality here is there is in fact less friction for both us and clients. It is typically the same buyer, certainly the same buyer of the learning system. And from a contractual perspective or if you think about procurement, it's literally a one page addendum, so it is very, very easy for the client. There is not a new security review, you don't need to get the procurement team involved. You don't need a big legal review. It's just simple and relatively painless. And we believe the content offering will continue to get more and more compelling as our curation and content provider universe continues to expand. So not only do we have the global content to leverage, and we're working on a localization strategy of that global content to use an outside the US, but you think about the incremental providers out there. I told you, there is a very long tail of content providers around the world. We're able, because of our scale and distribution to attract and distribute content from virtually anybody and that's giving us a real opportunity here in different markets, in different geographies and in different industries to be the preferred provider. The last point, I'll make is that our machine learning as we have more and more data from the content being consumed, our machine learning gets better and better. So the personalization keeps improving. So there is a virtual cycle up here in the Content business.
Alex Zukin -- Piper Jeffrey -- Analyst
Just one maybe quick when are just to seek and just a question on the federal vertical pipeline opportunity traction, do you see any impact from the shutdown, pushed deals into this quarter? And just a general update on vertical would be helpful.
Adam Miller -- Founder, Chief Executive Officer
Yes, the shutdown really did not have an impact on the pipeline or any of the deals that were in progress. We continue to see strong performance out of our public sector teams generally in the federal team specifically. And there are continued upsell opportunities in the existing accounts that we have, and we are far along on new opportunities within the federal government.
Alex Zukin -- Piper Jeffrey -- Analyst
Okay. Thank you, guys.
Adam Miller -- Founder, Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Brad Sills, Bank of America Merrill Lynch. Your line is open.
Brad Sills -- Bank of America Merrill Lynch -- Analyst
Oh! great, thanks guys. I wanted to ask, Adam, a little bit more color on the comments you made earlier that the Content business is providing a catalyst for the rest of your suite. Are you seeing content lead some of these deals and then bringing in learning or is it primarily selling content into the base that's kind of driving that business?
Adam Miller -- Founder, Chief Executive Officer
Well, I think it's the next generation of the strategy we've had for a long time which is that we lead with learning. And then attached to that deal, the other suites. So in some cases, it's learning and performance, that's about 50% of the time. In other cases, it's learning performance in recruiting and then in Europe periodically, more and more often, we're seeing warning performance recruiting and HR. What content does is it makes us even more differentiated in the learning space, makes the opportunity even more compelling. And when you think about things like onboarding for recruiting, it provides us the opportunity to not only give them a platform for managing onboarding, but actually gives them a lot of relevant content to make the onboarding experience more impactful and more effective. It also gives us competitive differentiation, not only on direct sales but even within the client base. So when you think about renewals, when you think about upsell opportunities, content provides catalyst to bo back to go back to the client, get the meeting talk about what our offerings are and sell more products.
Brad Sills -- Bank of America Merrill Lynch -- Analyst
That's great. Thanks, Adam. And I you've seen nice leverage here on sales and marketing. Can you just remind us kind of where you are in those efforts, where has been the focus this year and going forward? Where are some other areas, you can continue to drive good sales productivity, sales and marketing leverage? Thank you.
Adam Miller -- Founder, Chief Executive Officer
So, as you know, we had tremendous improvement in sales and marketing productivity last year. We have now lapped some of that productivity gains. So you're not going to see the same gains this year. That doesn't mean that there is not incremental opportunities both in sales and marketing. I am particularly focused on the opportunities this year from a marketing perspective. I think there's much more we can do to get higher returns from our marketing spend, and improve some of our positioning and awareness in the market.
In addition, our reps are now very targeted. We've been very surgical about where we add reps, and even thoughtful about when reps are inside and when they are in the field. So as you guys might know, at the beginning of this year, we merged our mid-market and enterprise team. So we now just have the enterprise team for upper mid market and we moved what we consider a lower mid markets to sub 1,0000 employees, down to our SMB Group, which is an inside sales operation and so we got some leverage there as well, which also increases productivity and improves (ph) cap ratios further.
Brad Sills -- Bank of America Merrill Lynch -- Analyst
Great. Thanks, Adam.
Adam Miller -- Founder, Chief Executive Officer
Thank you.
Operator
Thank you. (Operator Instructions) Our next question comes from the line of Justin Furby of William Blair. Your line is open.
Justin Furby -- William Blair -- Analyst
Hey guys, thanks for taking the questions nice quarter. Brian, maybe just a housekeeping item for you to start and I apologize if you said this already, but what was the growth in this quarter when you net out the one-time items, the constant currency growth?
Brian Swartz -- Chief Financial Officer
Yes, so about maybe another way of saying -- answering the question, Justin. About 80% or so of the beef off of our midpoint was related to kind of these not one-time items, but non-recurring items, I'll call it. So take the midpoint of the prior guidance, which was effectively -- if you take the midpoint of the prior guidance on subs revenue, which is $128.5 million, roughly 20% off the beef from that perspective was related to kind of outperformance (inaudible)
Justin Furby -- William Blair -- Analyst
Okay, got it. And then just Adam, I'm just curious on the pricing side of the market, if you kind of the go back three years ago, five years ago, whatever time horizon, you want to go back, what are you seeing on that is the core LMS from a per seat basis? Then I know it varies tremendously by the size of the engagement, but just what are the overall trends you're seeing there? And then what are you seeing on renewals in terms of like-for-like renewal on the per seat pricing? Thanks.
Adam Miller -- Founder, Chief Executive Officer
Yes, so let me answer the two parts in order. So from a competitive standpoint, I think it's been very stable over the last few years. As you know, several years ago, there were major downward pressure on pricing from both sub and sum total as well as from SAP and Oracle, that is abated somewhat I think it's maybe it's because it's become the new normal, but it hasn't changed much in the last several years, in the last three years. With regard to our pricing in the way we think about both direct sales and renewals, we made changes to our pricing at the beginning of 2018. Those have stayed intact that has served us very well. So our pricing is more in line with the market, but we are the premium provider. So we are not the low cost provider by any stretch. We maintained premium price points and we will continue to do that because we have the better solution. On renewal, we have moved away from trying to negotiate price uplifts once every three years and it moved to annual price escalators, what we call the innovation index, which takes into account the fact that we're doing four major releases a year. And so in the course of a typical three-year relationship, the clients had 12 major releases. And we're finding that to be much, much easier to negotiate and we had really good attach for the innovation index, which means we are seeing an annual increase in pricing across the client base.
Justin Furby -- William Blair -- Analyst
Okay, that's helpful. And then just real quickly, the Content business, how does it do in the quarter versus expectations? And just can you remind us the type of growth, you're expecting from an ARR perspective this year? Thanks.
Adam Miller -- Founder, Chief Executive Officer
Yes. So obviously content growth is fully baked into our numbers. We are still seeing strong double-digit growth in the Content business and we think, it will continue to be a meaningful opportunity for us and this year will be a high-single digit percent of total ARR -- of exit ARR for '19.
Justin Furby -- William Blair -- Analyst
Okay. Great. Thanks, guys.
Operator
Thank you. Our next question comes from Mark Murphy of JPMorgan. Your line is open.
Unidentified Participant
Hey, thank you. This is Benjamin, nice quarter, I on behalf of Mark. Adam, you clearly have a great position in the market in learning element and now content obviously makes it even differentiated. As you look ahead, what has to go right into the business for the subscription revenue growth to curve up maybe well into 20% range or is it just a matter of execution and what part would do you think content will play for that growth curve to go up?
Adam Miller -- Founder, Chief Executive Officer
Yes. So I'm going to answer this two different ways. So just mathematically, the way we get our subscription revenue to extend over 20% is by executing on the content opportunity in front of us. It is a very clear opportunity. This is baked into our numbers in our assumptions. We've been relatively conservative about it, when you think about the scale of the opportunity both from our install base and from the wider market at large, as nothing stopping us from going outside our install base. So we think a lot of that is just pulls down to execution. In terms of learning in general, what I will tell you is that we have a real macro tailwinds available to us now. I go to conferences, I speak to CEOs, I read the same articles that you guys read and the skills divide has become very real. The need for organizations to continuously train their employee base has become a very real thing and is no longer something that we're trying to evangelize. This is now a top of mind for CEOs around the world, people understand the technology is transforming not only every business, but every job and that people need to be continuously trained. So that puts us in an amazing position as the number one corporate learning solution in the world.
Unidentified Participant
Understood. And secondly on retention rate, I know you don't really update on retention quarterly, but qualitatively, could you talk about the retention rate overall? Are you seeing any change in gross renewal dollars or has it been consistent to what you have seen in the end of 2018?
Brian Swartz -- Chief Financial Officer
I will make some comments and maybe Adam wants to as well. As you mentioned, we only disclose that once a year and generally don't comment it quarterly. What I can tell you is obviously renewals are critical to our business and we are super-focused on client satisfaction and always raising the bar in that regard. It's obviously from just a financial point of view, that caps to maintain existing clients or to upsell existing clients are much better than that for new logos and acquiring logos are still a lot of new logos we can acquire, but we are super-focused on client satisfaction and continuously raising the bar in that regard.
Adam Miller -- Founder, Chief Executive Officer
Just as part of that, we have made significant investments to complete what I really consider the last phase of our services transformation, which is really bolstering our global support operations. We've increased the size of the team, we've reorganized the team, brought in new leadership to operate on a global basis and continue to focus on a world-class client experience for all of our accounts.
Unidentified Participant
Understood. I will go back in the queue. Thanks.
Operator
Thank you. Our next question comes from Raimo Lenschow of Barclays. Your line is open.
Raimo Lenschow -- Barclays -- Analyst
Hey, thanks for taking my question and congrats on a great Q1. And can you talk a little bit about Adam, the different areas of content that where you said that you see. They're kind of more or less successful in the offering at the moment. Does that make sense to kind of specializing some of them or push certain areas more than others? And thanks for that. Thank you.
Adam Miller -- Founder, Chief Executive Officer
Yes. So the content opportunity varies a little bit by industry and by geography, clearly the number one seller in the content world is compliance training, it's mandatory every employee needs to take it. So in our base, that would be 40-plus million people that need to take compliance training. That's a very big market, as you can imagine, but the price points are going to be lower because it goes out to every single person. In Europe, as you know (ph) Primo, there's a very strong desire to enable the employee basis there for digital transformation. And so digital fluency is a really hot topic there, making sure people understand not only their jobs changing, but the way they interact with customers, the way they go to market, the way they operate is going to be strongly influenced by software today. And so digital fluency really big topic there. When you get into markets like healthcare, there are very jobs specific requirements in the training area. So this ball has to do with continuing education requirements and the joint commission, but also how those organizations want to develop their people and ensure their confidence. And so you get into very industry specific training around patient care and the like, and there is obviously for companies like ours, our real focus on things like sales and marketing. And so when you get into organizations that are selling to other businesses, there is a real desire to have a world-class sales and marketing training to make sure that you have proper sales enablement as contrasted to modern compliance. Those tend to have higher price points, people are willing to spend more on their salespeople that obviously is demonstrated by what they spend on CRM systems per person. And the idea of spending a little bit more to enable a salesperson to be more effective is money well spent in most companies eyes. So we're seeing different opportunities in different segments in different markets. Language requirements are very important in Europe and in Latin America. So making sure that people have not only the proper subject matter but also the subject matter in the local language is very important, also very difficult for these companies to do by themselves, particularly if the multinationals, because it's very difficult to curate high quality training across multiple subject areas and across multiple languages that's mobile ready and modern. So we're uniquely positioned to help organizations in this and that's why we're so bullish about this opportunity.
Raimo Lenschow -- Barclays -- Analyst
Perfect, very clear. Congrats, again.
Adam Miller -- Founder, Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Patrick Walravens of JMP Group. Your question please.
Patrick Walravens -- JMP Group -- Analyst
Oh, great. Thank you and congratulations to you guys.
Adam Miller -- Founder, Chief Executive Officer
Thanks for that.
Patrick Walravens -- JMP Group -- Analyst
So, Adam, it seems like a lot of the pieces of the strategic transformation are starting to work and so I'm wondering where are you spending your time these days, what do you personally most focused on?
Adam Miller -- Founder, Chief Executive Officer
I would think about three or four different areas. So number one Content, Content business is a start-up for us. I love start-ups. So I'm helping Josh, (inaudible) and others manage that organization along with Jeff. Number two is client success. We know the importance of retention rates and renewals and the upsell opportunity within our install base. So making sure that this service transformation is fully complete is really important and the phase, we're on is really global product support and so making sure we land that well, just like we did with service delivery. And then the third piece is working with our partners. So making sure that we're getting the most out of the partner ecosystem that we've built, which helps not just the sales force, but it helps our clients as well. I think making sure that the partners are properly enabled, making sure we're going to market together and not independently, all help build the business for the long term. And the last is recruiting. I think there is a clear opportunity in recruiting. We've made investments there, obviously work popping among them and we think there's a big upsell opportunity there. Then the last one, I'll touch on is marketing. I still think we have a lot of room to run in marketing. We are despite being known in certain circles, our brand awareness is definitely limited, especially relative to our ERP competition. And so better brand awareness , better positioning, stronger messaging, all helps us in every respect to the business. That's how I spend my time.
Patrick Walravens -- JMP Group -- Analyst
That's great, if I can drill down just a little bit on the last one. So what should we expect to see from you guys from a marketing point of view that we haven't really seen before?
Adam Miller -- Founder, Chief Executive Officer
I mean, I think you're going to see some changes in marketing, you're going to see some tighter positioning in messaging. You're going to see us doing things to drive awareness in areas like recruiting and HR, spending more time with the analysts not the Wall Street analysts but the industry analysts to drive awareness of what we do and the strength we have in those areas. You'll also be seeing a new website that's coming out around the time Convergence, and a lot of this positioning will be released at Convergence, which is at the beginning of June, which is our Annual Client Conference as you know.
Patrick Walravens -- JMP Group -- Analyst
Yes, yes, awesome, all right. Thank you.
Adam Miller -- Founder, Chief Executive Officer
Thank you.
Operator
Thank you. At this time, I'd like to turn the call back over to our CEO, Adam Miller, for any closing remarks. Sir?
Adam Miller -- Founder, Chief Executive Officer
Thank you, everyone, for your participation. Hopefully, everybody likes new format we've taken and the information available. We'd love your feedback on the information we're putting out and I want to once again thank the global team for the amazing work they do to help over 40 million people around the world to realize their potential. Thank you.
Operator
Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may disconnect your lines at this time.
Duration: 43 minutes
Call participants:
Unidentified Speaker
Adam Miller -- Founder, Chief Executive Officer
Brian Swartz -- Chief Financial Officer
Unidentified Participant
Kevin Kumar -- Goldman Sachs -- Analyst
Alex Zukin -- Piper Jeffrey -- Analyst
Brad Sills -- Bank of America Merrill Lynch -- Analyst
Justin Furby -- William Blair -- Analyst
Raimo Lenschow -- Barclays -- Analyst
Patrick Walravens -- JMP Group -- Analyst
