Q3 2019 Earnings Call

Greetings and welcome to the all tricks third quarter 2019 conference call. At this time, all participants are any listen only mode.

Sure that's recession will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero under telephone keypad.

As a reminder, this conference is being recorded it's now my pleasure to introduce your host Chris Law. Please go ahead.

Thank you operator, good afternoon, and thank you for joining us today to review all trick this third quarter 2019 financial result.

With me on the call today are Deans, Dogar, Chairman and Chief Executive Officer, and Kevin Rubin, Chief Financial Officer.

Additionally, Scott Jones, President and Chief revenue Officer will be joining us for the question and answer session after prepared remarks.

During this call we make we may make statements related to our business that are forward looking statements.

Ladies laws.

These statements are not guarantees of future performance, but rather are subject to a variety of risk and uncertainty.

Our actual results could differ materially from expectations reflected in any forward looking statements.

For a discussion of the material risks and other important factors that could affect our actual results.

Please refer to our FCC filings.

Little on the Fccs Edgar system, and our website as well as the risks in other important factors discussed in todays earnings release.

Additionally, non-GAAP financial measures will be discussed on this conference call. Please.

Please refer to the tables in our earnings release in the Investor section of our website, where a reconciliation of these measures because they're most directly comparable GAAP financial measure.

With that I'd like to turn the call over to our Chief Executive Officer, Dean Stoker Deane.

Thanks, Chris and thank you everyone joining us today.

Oh, that's delivered another solid quarter in Q3 on todays call it will be providing some high level market trends that we believe validate our longer term strategy.

These trends are automation convergence and community.

Kevin will then walk through our Q3 performance in our outlook for Q4 and full year 2019.

Before we get started here a few highlights revenue was $103 million up 65% year over year non-GAAP operating margins were 21% and we generated positive cash flow from operations of $7 million.

We added 335, net new customers, including 27 of the global 2000.

We now have over 5600 active customers, including 34% of the global 2000.

Net expansion was 132% as customers continue to invest in all sorts of their data science and analytics platform of choice across their enterprises.

In the quarter, we had 92% growth and the number of expand greater than $250000.

We believe all parts is benefiting from a number of trends, we expect will enable us to deliver growth for many years to come.

The first is automation.

Well well overall I keep spending levels are expected to both the only modest growth in 2020.

We believe there are emerging categories that will demonstrate outsized growth.

What are these categories is automation, we are increasingly hearing from customers the desire to drive more operational efficiencies and an uncertain times companies look to do more with less.

I do you see indicated there would be two trillion dollar spent on digital transformation in 2019 alone and last year. The World Economic Forum found that 29% of all work performed by machines and is expected to grow to 42% by the end of 2022.

Additionally industry analyst of estimated that a significant portion of data science tasks will be automated like 2020.

Identifying preparing data for analysis remains the most time consuming tasks pacing data and analytics users.

This leaves much of the data work to line of business analyst data scientist or in many cases did engineers and I T.

This creates a business risk due to a lack of data governance as organizations give more users the ability to access data directly treat to create analytic content.

My automating both simple in complex analytic tasked with the old trucks platform. We can significantly increased the productivity for all categories of data workers across the enterprise.

As a leader in the analytics market that is agnostic to the shape size and location of data as well as ignostic to how it is consumed we have a unique position in the market.

Altrus designer enables companies to build workflows to automate data data science and analytic pipeline and ultra AXR orchestrates. These pipelines autonomously yet in schedule scaled secured and governed ways.

This type of advanced analytic process automation is increasingly important and our messaging is resonating with chief data officer is overseeing digital transformation efforts for enterprises around the world.

Customer conversations about the first mile of analytics, leveraging the social catalogs of connect.

The onerous last mile of analytics via the model deployment and management of promote are becoming more common.

We believe the addition of our recently announced acquisition of feature labs and their expertise in automated feature engineering and auto modeling will also advance our automation capabilities and bring another level of sophistication to the ultra its platform.

Automation is also increasingly coming into play with our open an expanding ecosystem of partners another key element to our growth.

Conversations around driving digital transformation and automation or at play in organizations of all sizes and an all theaters around the globe.

Partners continue to play a critical role in these conversations that we intend to expand the number and type of partners, we engage with around the world.

As a leading standalone end to end data science and analytics platform in the market today, we have proven we have a unique value proposition for independent software vendors large systems integrators, and global advisory and analytic consultants.

The second trend is convergence of analytic persona.

We are starting to see that citizen data scientists, who are business professionals with limited or no coding abilities and professionally trained data scientist that have strong coding abilities converge around a single platform for their analytic work.

Next generation technology providers will need to address the requirements of users with a variety of skills coating abilities, and comfort with advanced analytic capabilities, including spatial and predictive analytics machine learning and auto modeling.

Citizen data scientist are no longer simply creating dashboards and static reports, but are working on higher value outcomes and data scientists are increasingly looking to automate and streamline data pipeline data pipelining to enable them to spend more time on building Operationalizing managing models.

Tricks addresses both of these challenges by up leveling skills for line of business analyst and automating data flows and streamlining model deployment and management for data scientists.

All the a single unified platform experience.

This convergence has been accelerating with the emergence of chief data officers and organizations focusing on digital transformation.

While the competitive field is populated with vendors delivering some dimensions of the analytic and data science needs today. They failed to address the automation needs for the entire end to end analytic pipeline. We believe the ultra ex platform is uniquely suited to unlock tremendous business value across all analytic persona.

We also believe that we're well positioned to win in this market because of our extreme focus on customer success, winning the hearts and minds of data workers across the globe, while driving enormous value.

For example at inspire EMEA held in London earlier. This month, we had the opportunity to hear from a number of customers who graciously shared their ultimate success stories.

Andrew Dunn senior financial controller at Siemens AG, who is responsible for the digital finance initiative with a focus on automation was able to production eyes is first work flow within two weeks without any formal training, enabling thousands of employees to consume analytic reports powered by ultra rigs.

Recall older a data scientists that UK retailer as it up.

Is focused on ecommerce analytics and when he found alter it it was love at first sight. He said with ultra rich we have revolutionize the way, we connect work and drive true insights with data.

His organization is Productionized, nearly 200 daily workflows and tens of analytical applications democratizing data and embracing the mindset of true self service analytics.

Another example is a large systems integration effort with Aldrich that saved $1 million in internal cost by monitoring inline media.

In a third use cases.

Involving product availability ultra to help reduce the unfulfilled rate one of the biggest challenges and ecommerce by 7%, which resulted in both enhances customer experience and reduce costs.

The third trend is community.

We have long seen analytics as a social experience and that was on on full display AD inspire EMEA.

The mix of attendees that inspire truly illustrates the range of our platforms capabilities. We had attendees from 19 industries 11 functional areas from 48 countries prosecuting dozens of use cases and sharing their successes with each other.

Carlene Jones data scientists for global pharmaceutical company Novo Nordisk is one of 350 users who are creating huge amounts of innovation, including working on a wide range of challenges across supply chain finance R&D and more.

Ultra ex made a significant difference in many areas including automated.

Automating routine reporting where they were able to take processes required forman months to just a few minutes.

Additionally, they have improved there are notoriously difficult demand forecasting process building segmentation models that improve the planning process and have plans to continue to innovate across the company with all torics as part of their analytical true. They founded an internal ultra its user group, helping to facilitate continued analytic innovation.

And finally, Brian Milliron business strategy director for the UK.

UK based Brooks and group indicated that ultra X is bigger than analytics and bigger than data science.

We see ultra acts as a digital transformation platform underpinning our own digital platform, which provides services to the flexible workforce, including current payroll accounting and financial services Ultra brings intelligence to our customer portals. It drives customer next best action It automates bookkeeping, it even and.

Underpins the delivery of complex tax advice for our customers.

With all tricks, we are not just building workflows that save tens of thousands of pounds. We are building workloads that deliver products that create millions of pounds shareholder value.

Given the multiple avenues of growth available to us.

We expect to continue to invest in our platform and our go to market model in order to capitalize on the significant opportunities we face.

Here at all tricks, we believe that humans are only limited by their imagination I have continually amazed and humbled by the breadth of use cases that our customers leverage ultra Ics for each and every day.

With that let me turn the call over to Kevin to discuss our Q3 financial performance and outlook for Q4 in 2019, Kevin.

Thank you Dean.

Q3 represented another strong quarter with revenue of $103.4 million, an increase of 65% year over year and net expansion of 132%.

Our revenue upside was due to the following three factors first we had another quarter of strong execution.

Second product mix was favorable resulting in the upfront percentage of our revenue being once again at the high end of the range.

Third we did see a modest sequential increase in contract duration driven by some of our larger customers entering into longer term contracts. Although overall duration continues to average two years.

I'd like to briefly remind you of how our revenue is determined under assay six so six.

Revenue is determined based on the total amount of bookings in the period total contract value or TCV.

As a reminder, we typically enter into one or three year agreements with our customers.

CB includes the full value of multiyear agreements.

Of our TCV booked in the quarter, we recognize between 35% to 40% of TCV upfront based on product mix sales of our designer product skew towards the lower end of the range, while sales of server connect and promote skew to the higher end the us as we experience more enter what enterprise wide deployment.

That includes servers connects and or promote our upfront percentage skews towards the higher end of the range.

We recognize revenue upon the later of contract signing or contract start date as we discussed earlier this year during our Q1 earnings call. This factor is important to keep in mind as we enter Q4, because we have a number of renewal contracts that expire December 30, Onest and which renew on January onest.

This dynamic results in Q4, TCV bookings that will not translate into revenue until Q1 2020.

Finally revenue includes the recognition of the ratable portion of our bookings.

International revenue was $28.7 million up 48% year over year as we continue to benefit from the strong global demand for analytics. This validates our continued investment in our global go to market and support organizations.

In Q3, we added 335 net new customers and now have 5600, 13 customers, including 683 or 34% of the global 2000.

Notable customers that transacted with all three weeks during the third quarter include Amazon UK Services, Canada Post Commonwealth Bank of Australia, Ingram micro, Microsoft Rockets, and marketing Workday and Super technologies.

Before moving on I want to remind everyone that unless otherwise stated I will be discussing non-GAAP results. Please refer to our press release for a full reconciliation of GAAP to non-GAAP results.

Our Q3 gross margin was 92% consistent with Q3 2018.

Our Q3 operating expenses were $73.4 million compared to $43.2 million in the same period last year.

The year over year increase in operating expenses was due primarily to additional headcount and other investments and scaling our global operations.

Our Q3 operating income was $22 million or an operating margin of 21%.

Net income was $16.4 million or 24 cents per share based on 69.5 million non-GAAP fully diluted weighted average shares outstanding.

Our net income assumes a non-GAAP effective tax rate of 20%.

Turning now to the gap balance sheet as of September Thirtyth, we had cash cash equivalents short term and long term investments of $986.5 million compared with $426.8 million as of the end of Q2 2019.

The increase in cash is related to the convertible note offering we successfully completed in August .

Finally, we ended the quarter with 1100 76 associates up from 1076 associates at the end of Q2, 2019, and 756 associates at the end of Q3 2018.

Our increase in head count is reflective of the pace of investments, we're making and we expect to continue to make to capture the meaningful opportunity we see globally.

Now turning to our outlook for Q4 and full year 2019.

Also as a reminder, please note that our guidance assumes the following.

The average duration of our subscription agreements will be two years consistent with current levels.

Approximately 35% to 40% of our TCB booked in the quarter with subscription start dates in the quarter will be recognized upfront with the remainder recognized ratably over the life of the contract.

Quarterly revenue seasonality will be consistent with what we experienced in 2018.

And no material changes to the overall macroeconomic conditions.

For Q4, 2019, we expect GAAP revenue in the range of $128 million to $131 million representing year over year growth of approximately 44% to 47%.

We expect our non-GAAP operating income to be in the range of 26 million to $29 million and non-GAAP net income per per diluted share of 27 to 30 cents. This.

This assumes 71 million non gap weighted average fully diluted shares outstanding and an effective tax rate of 20%.

For the full year 2019, we're raising our outlook and now expect GAAP revenue in the range of 389 million to $392 million representing year over year growth of 53% to 55%.

We expect our non-GAAP operating income to be in the range of 50 million to $53 million and non-GAAP net income per diluted share of 57 to 60 cents.

This assumes 69.1 million non-GAAP fully diluted weighted average shares outstanding and an effective tax rate of 20%.

And with that we'll open up the calls to questions operator.

Thank you will not be ducking. Your question answer session, if you'd like to be placing the question Q. Please press star one of your telephone keypad confirmation tone will indicate your line is in the question Q.

Press star to if you'd like to move your question from the Q for participants using speaker equipment, and I'd be necessary to pick up or handset before pressing the star keys.

Once again that is far one to be placed in the question Q.

Our first question today is coming from Tyler Radke from Citi. Your line is allies.

Hey, Thank you.

Maybe I'll start off a question for Dean It seems like you talk.

More of this call about automation and just around the evolving strategy of vaults risks I know in the past as you've thought about M&A.

The most recent acquisitions has.

Turning to and kind of centered around acquiring assets in building out your citizen data science capabilities. Just how are you thinking about balancing the investments from the product side and and kind of the analytics first verse automation capabilities.

Well I actually think Tyler that the to go hand in hand.

When we talk about these trends.

Automation and convergence and community.

All three are tied to digital transformation success, and so as as the convergence of the train statistician, who loves to write code.

Converges with the citizen data scientist to Doesnt know how to write code is capable of building models, but needs assistance in building those models, we're seeing the the need for more automation within the data science World. The reason, we bought feature labs is that they figured out what.

No one else is really figured out within the auto modeling space and that is their focus on automated feature engineering, which is.

The the precursor to actually having any models.

Work and perform for you so.

Very tight.

Analogy to our data prep world for the citizen data scientists to the automated feature engineering for the train statistician. So automation is going to be important going forward, it's going to affect routine analytics for day to day reporting in Cape size and diagnostic.

Use of analytics in dashboards, but the more advanced capabilities around data science outcomes, along with automation of those taxes exceedingly important to us, it's kind of coming up more and more in deals around the world.

Great. Thanks, and then maybe less.

Interesting question from a strategy perspective for you Kevin, but obviously there is there's a lot of metrics to look at this quarter whether it.

The very high strong revenue growth is 65%.

Or an adjusted billings calculation that actually lower than that.

Also with this RPL number.

How would you just encourage investors to to evaluate the underlying growth as a business and how should we think about the sustainability.

Of that growth rate going forward. Thank you.

Thanks Tyler.

As we've said for several quarters now.

Under six so six given that a meaningful portion of our revenue gets recognized now upfront.

I think revenue is a clear indicator of the strength both in terms of.

The business as well as in quarter performance.

You know, we're obviously very pleased with with the over performance of revenue this quarter.

And coupled with ultimately our guidance our guidance for for the future quarter I think those two in combination are pretty indicative of how we see the underlying momentum in our business. Thanks.

Thank you. My next question is coming from Derrick Wood from Cowen and company. Your line is now live.

Great I guess, yeah first for for Dean.

Heron more analytic software companies partnering and integrating with let's cloud data lakes and cloud Datawarehouse vendors like Snowflake who's seen a lot of growth how are you guys positioned around.

Companies like like Snowflake.

And do you see your users are trying to leverage those cloud platforms and they're all towards workflow.

Yes, as a matter of fact, Eric we do.

As you know our design time experience is on premise and our runtime experiences is wherever you choose to put it.

We have a fair number of server based customers, who deploy both an E.W. asked and Azure.

Many of them.

Have have leveraged snowflake as their persistence layer of choice not all of them. Some have it's rare that anyone has a a complete set of analytic pipelines that leverage a single data source.

Most of them have.

Many persistence layers, some which reside.

In cloud vendor of choice.

Other parts of their persistence layers reside on premise.

So it's going to be hybrid cloud on Prem and ultimately cloud to cloud world for quite some time, we actually have a strong relationship with snowflake and many of our customers have moved off of other platforms to go to snowflake and we're quite supportive of our customers who choose to do so.

Alright and Kevin.

Going back to the numbers, obviously, you talked about two factors that pull more revenue upfront that would be product mix and then.

Duration and I think those were both Tailwinds for you. This quarter is there anyway to quantify.

The benefits you reported revenue growth whether it in dollar terms or growth terms because of these mix shift changes.

Yes, thanks to our great question.

If you think about the product mix, we've talked to a.

A reasonable range of 35% to 40%.

So as you move across that.

That range I mean, you can kind of figure out.

That there's some contribution to product mix and it's certainly favorable but it's not enough in terms of order of magnitude.

To drive a significant uplift, but it does have an impact and then duration as I as I mentioned, there was a modest increase sequentially, but we're still averaging about two years.

Both of those two factors certainly contributed to the strong revenue performance.

But having said that it was actually execution that really drove the lions share of the revenue that we put up this quarter.

Okay. Thanks, nice job in the quarter.

Thanks. Thanks next question is coming from David Gryphon from William Blair. Your line is now live.

Hey, good afternoon, thanks for taking my questions.

My first question is a quick follow up or Kevin on billings.

First off just want to say thanks for taking level disclosure this quarter of the contract asset on the give us compare.

So as we kind of look at the year on year growth number here, 38% looks certainly looks pretty healthy.

But given that it feels like this metrics going to be top of mind for investors on a go forward basis I did want to ask if there was anything worth calling out from either a timing or seasonality perspective that may have influenced the growth number this quarter.

Yes, Thanks, David.

So billings or I mean, essentially in invoicing activity at the end of the day they are subject to the timing and the amounts that get build in the contracts.

So to your point there is seasonality there is timing.

And that can fluctuate quarter to quarter as I mentioned to Tyler's question. We do think that revenue is the most.

Appropriate indicator of the strength and momentum in the business.

Billings can move up and down based on contractual arrangements.

Got it thanks, and then just a quick follow up for Dean.

So I wanted to dig in a little bit more into your experience that inspire Europe earlier. This month I think this is your fourth annual European customer conference and it certainly sounded like that was well attended.

So I was wondering if you could share kind of your key takeaways, maybe the top one or two from your conversations with customers that the event.

As long as maybe just talk a little bit about whether you're seeing any key differences between your international and domestic customers in terms of something like adoption of the platform usage characteristics or just a general level of analytics maturity.

So let me address the first issue on inspire Europe , Yes, we've had our fourth conference we had roughly 2500 customers partners and employees and attendance the biggest take away.

For me was the change in the conversations that we're having with customers.

When we had our first inspire EMEA conference.

Four years ago. The conversations were more about who are you guys. What do you do features and functions and trying to resolve very specific use cases today.

The conference was about.

Digital transformation. It was about building cultures that were organizations are hoping to get there their teams to think about data as.

An asset to drive the business, they're thinking about automation. They understand this convergence of the citizen data scientists in the train statistician.

And most of the meetings that I had.

Were identical to the ones, we had in Nashville back in June .

How do we go from 100 seats to 500 seats or how do we go from 500 seats to 5000 seats. There was zero conversation about features and functions. It was about.

Driving a culture of data science and analytics, because everyone realizes the power of automation in the hands of more people to sold.

More complex business challenges. So that was the first take away its second takeaway was there.

You just noticed the lines at.

The advanced analytics sessions, it's clear, we're striking a chord with both the citizens scientist and the the trained phds.

Two of the people I had on stage, we're actually data scientists, who are leveraging all tricks and really really interesting ways to drive.

Enormous.

Resolutions to complex problems that they face in the business. So.

I think the for me the conversation was consistent with.

Our trends automation convergence and community community is it is the conference it's pretty clear that people show up and they love to too.

That with each other.

We know that the people who are involved in our community expand considerably more than people who are not involved in the community.

We see through telemetry their advancing their skill sets.

Hi by leveraging advanced analytic tool sets in inside the platform.

The second part of your question was any big differences around the world.

Actually there's almost no difference there there's some cultural differences in certain parts of of certain theaters around the world, but no. This quarter. For example, we landed 27 additional G. Two guys.

17 of those were international.

And it's the same problem, whether you're a major retailer in Dubai doing hyperlocal merchandising or you're an airport in in or an airline in Hong Kong trying to hedge fuel.

Everyone has the same issue so that part again, we're we're really confident that we've we've touched dinner with global organizations, which is why we've been.

Reporting on and going after the gays were $9 million of these citizen data scientists hanging out in the lions share of the Phds.

Got it Thats very helpful. Thank you.

Thank you. Our next question is coming from you take your drawn from Oppenheimer and company. Your line is alive.

Thanks, guys congrats great quarter.

Kevin starting with you on given that were tied to focus on the right matrix.

Net expansion rate since it takes a few basis, perhaps not the cleanest stuff or best of indicator as well is that way for you to give us perhaps.

Design or seat expansion or pay design a seat expansion per customer I mean that will will probably be a very good.

Proxy to the true underlying expansion rate from a user standpoint moving to customers.

That that's an interesting point I mean, I think if you look at the nature of our expansion and we've talked about this in the past.

We land with a few seats we expand.

Several times with more kind of blocks of seats, we introduce servers more seats servers and maybe other other products and then more seats.

But at some point I mean, it really is a platform solution that we are deploying across an organization and so im not sure that that would.

Certainly wouldn't send you any different trend than you're seeing in our net expansion of 132%.

In any of that and in the in the end our largest deployments are really about how do we enable.

How do we enable as many.

Individuals within the organization as possible.

Net expansion ultimately is providing you the dollar capture which is something I think we all want you to focus on got it.

Also.

Yes go ahead.

Remember in in terms of designer seeds were still in the.

1% penetration rate of of even the GE to Casey that exist out there so.

I think theres, a long time before you would see any degradation in seed activity for that would support our net expansion numbers.

It's great that you mentioned that will mill, maybe can double click on that a little bit Dan because.

That I want to nitpick, but you had a great corridor, but the number of customer our net additions this is down.

Quite nicely actually on a year over year basis, and your Salesforce is getting bigger bigger so I'm just kind of wondering.

Is the focus shifting more towards expansion activity was your existing base should we not assume.

That customer additions is growing year over year growth.

Going forward, right, or perhaps flatten and where demand for because it got to be more on expansion.

No I think we've we've actually reported in prior quarters that when we started this this land and expand model all the way back to Q1 of 2014 that would take us quite some time to understand the S curves the expansion capabilities of customers and.

Actually very happy with our net new customer ads.

Because there is actually the right customers and you can see that as evidenced by the fact that we hit 132 net expansion numbers. Once again, so we're comfortable with it I think we have a very healthy dose of both folks focused on landing new accounts in the accounts that have that expansion opportunity and healthy dose of.

New bad carriers and quota carriers, who are prosecuting those expands around the world.

Got it maybe not.

I'm sorry go ahead, just just to nail that point.

We've been talking for the last four or five quarters about the notion that we continue to focus on.

A better higher quality land and you look if you look at over that period of time that we've had that conversation we've seen consistent net expansion through that period, which I think as validation to the point that we're doing a better job at landing.

Higher quality better logos today than what we may have two years ago, and we still have 66% of the GE Tuco GTK to go.

Hi, Great then maybe lastly on the international front.

Now that 40% is bad number but that revenue base over there was clearly much smaller than to us and not growing as fast as the US is there anything thats handicapping girlfriend is this something unique city international properties that one make them grow as fast if not faster than just given their size relative to the us.

No I actually think that it's just the.

The maturity and when we entered these markets more than anything else.

So so we don't we don't go into much detail other than international in general but.

All the markets did well again the customer.

Focused on.

Automation conversions can be unit community aren't really any different around the world.

The teams are newer in some of the markets and that might might have an impact on things, but I'd also say that we actually did quite well in North America.

That's great good luck guys.

Yes.

Thank you. Our next question today is coming from Mike tourists from Raymond James Your line is allies.

Hi, guys, maybe I wonder if you could.

Talk about the data science, Hey, I am L. space a little bit.

Obviously, the beneficial and acquisition how is promote doing and how do you.

See that space strategically what are the functional areas that you feel like you want to be and indeed to be in.

And which ones do not need to be in.

Well, we we believe that every functional area is going to have a need for.

Machine learning outcomes.

I think it.

It actually placed our strength of having an end to end horizontal platform that can prosecute most most any challenge that of business has.

I think we reported 19 different.

Industry is showing up at inspire Europe 11 functional areas and the same platform is used to everything from hedge fuel to do doing predicting patient re entry into emergency rooms to helping the fastest UK ecommerce companies see success.

So.

We believe that everyone has a need for four.

Automating complex analytic task.

A lot of it's predicated, though on their success of whether or not we're dealing with citizens scientist who need to be.

Assisted in their their machine learning work, where their model building work.

And we have plans of course to do that at the conference we talked about our assisted modeling effort to help amp up the skills to the scientists of the citizens scientists to canal build models just needs to know what features do include what model to choose and had a decision off of it.

And the the scientists are really trying to work on edge cases, so our acquisition of feature labs.

Allows them to two to leverage open source technologies, but ideally at some point in time in the future via a platform like ours, because the the chief data officer don't want a whole bunch of platforms. They want one platform to cover off on both the persona is as they I think they're all beginning to realize that the convergence that we've been talking about quite.

Some time is in fact real.

Great. Thanks, and then then.

Kevin We know where you're going long term in terms of your targets for for margins and it's really too much to talk about 20 at this point, but there has been an acceleration year in opex growth.

Should we begin to think about next year as more of a leverage here and if not if it's more based around investment what are those investment priorities.

Yes, Michael I think it's a little bit too early to talk about 2020, we havent introduced any guidance there yet.

As you said I mean, we do have long term model out there that we presented to to investors back in June and.

So so that is what it is but I think it's a bit too early to talk about 2020.

And then anything in terms of priority without talking about numbers just more on go to market is it more and R&D at this point.

Yeah, I wouldn't signal there is any fundamental change in priorities I mean, we continue certainly with the continued strength. We've seen this year from a go to market perspective, we continue to.

To have focus on go to market and I think second to that would be product.

Okay, great. Thanks.

Thank you. Our next question today is coming from Risi jewelry from D.A. Davidson Your line is allies.

Hi, guys. Thanks for taking my question.

I see some continued strong execution.

I wanted to start asking about.

Momentum you're seeing on the GTK slide maybe help us understand.

We've been going to GTK presence of his time.

Any any color you can provide a country, where you're landing insurance department users on the maybe how the size of that land has trended over time.

Well our playbook.

For landing new accounts.

Really isn't any different whether it's a commercial account a mid market account in enterprise account for a g. Two games. We are playbook has worked we know it works we continue to refine it every quarter as we leverage all trips to understand the metrics of our business.

So.

I guess the first point is we we don't see big changes in our land efforts, we approach the market the pretty much the same way the expansions or are happening for sure as evidenced again by our net expansion number 132, I think what's happening is that that.

We've become a known.

Platform people have gotten tremendous value.

The.

The the lands that we're seeing tend to be in.

Thank the sweet spot of large global enterprises.

A lot of our partnerships tend to work with the C suite, particularly the office of finance and if you're going to land in any enterprise the place to probably land is where people understand the ROI of software technologies that the acquire.

And so the Cfos office is a place where we're landing quite often.

I think they're freeing up budgets for for organizations.

Under their umbrella too.

To spend money on analytics, because they get the benefit.

Great. That's helpful. And then just in terms of verticals looking forward in terms of how helpful. In public sector did in the quarter.

Or any other particular verticals that you'd call out as being particularly strong and as you pointed out financing some tax last quarter.

Thanks.

Yes, Hey, this is Scott.

So last year, we we started a up a healthcare vertical.

And we've been very pleased with the result, so far and.

We've continued to expand our public sector vertical both in the UK and in the us.

And we're quite pleased with the direction in the business.

In that segment as well.

When you talk about buying centers is being just mentioned office of the CFO has been really strong but quite frankly, we're seeing use cases applied throughout ball buying centers within within organizations I think the other follow up the deans comment around landing in global two thousands is.

Up we're engaged more often with Ceos in global two thousands and the conversation even if the land is more strategic which sets both us and our customers up for.

More strategic.

Expanse, which is obviously are key to the way our model works.

Great Thats helpful. Thank you guys.

Thank you. Our next question is coming from Jack Andrews from Needham and company. Your line is now live.

Well good afternoon. Thanks for taking my questions I would ask I guess, a two part question on the partnership side could you give an update in terms of any partnerships for example, Thompson Reuters that might be impacting your results in the near term then the follow up would be just how do we think about more broadly the present the potential demand generator.

And from these partnerships should we think of it every similar cadence of land and expand or do you think that these development of these partnerships may have a different impact on your business.

Well remember we have.

Three kinds of partners in general terms, we have resellers that I think we've reported before roughly 20% of our revenues coming from resellers around the world in total we have about 300 partners of of various definitions.

We have strategic tech alliances the folks like the snowflakes and the PTAB lows in the Microsoft's of the world.

And while they are great partnerships, it's more.

In market.

<unk>.

Co selling.

With customers that are to their joint jointly looking for four products.

The area, where there is the most influence it tends to be the global analytic consultants.

And the the big six accounting firms.

They are actually.

Helping carry a lot of the messaging to the C suite, both Ceos CFO Ceos, who are.

Acutely aware of the necessity to have a digital transformation effort.

So.

There their global expanse has been very helpful in helping us land.

Many of the GE to case, so we're going to continue to leverage these strong partnerships.

Where there is no margin shift.

Going forward, just just to talk about the the Thomson Reuters.

Ownership.

Relatively new still we do see pipeline building, they're very excited when there's a number of joint events that either have been held or will be held going forward and so we're pretty excited about all of our partners who also have gone through digital transformation of their own most of these folks are customers from.

And then take us to market because they provide services that we don't.

Thank you, ladies and gentlemen, the interests of time, we ask you. Please ask one question from this point forward. Our next question is coming from Taz Koujalgi from Guggenheim Partners. Your line is allies.

Hey, guys. Thanks for taking my question, Kevin You said that the contract duration, we went up slightly I guess for bookings, but can you comment on what the painless for invoicing duration. If you sign any change in the invoicing duration in Q3 versus just last year.

Thanks to as we always book, one year and advance invoice when you're advance excuse me.

Thank you. My next question is coming from Steve Kenny from Wedbush Securities. Your line is alive.

Hi, I will take thanks for taking my question.

So im wondering.

About machine learning here in the market for machine learning as we look at it.

Talk to.

Industry participants in the space.

We hear that we hear about.

Paul moving from say after spss to the Python our world.

We also hear about.

Several vendors competing.

Based on auto and dollar assist them now and including all Trex breaking new ground here.

And lastly, we were hearing more and more.

From from some of the innovators here in the states, including you guys about the challenge of getting models into production and how this helping customers deploy those miles will increasingly become the high ground in the platform competition. So I'm wondering can you compare and contrast never the importance of those functionalities in kind.

The new pipe on our world versus the old Fms World.

And what's what's what's changing as data volumes grow.

Well I think that the data volumes, aside and where the data volumes reside reside.

I think is is perhaps a different kind of a question, but in terms of.

Of the players in the space, it's a very crowded space because everyone. I think sees that machine learning is going to eat the world. We just believe it won't until you amplify the human in the mix and Thats why this convergence between the citizen scientist, who doesn't know how to right our and Python at least not much.

Needs to be working on the same platform as the train statisticians, who love to write are in Python and so we see a collaborative effort between these two persona is.

And until you have a platform like ours, there's going to be a disparate mix of tools and technologies that enterprises will have to use if theyre going to actually eke out. The 10 to 15 trillion dollars of value that's locked up in data wherever that data might might be locked up and so our belief is that.

That are in Python, clearly have a play but not just for the scientists we want to be able to share.

Automated feature and engineering sets.

With.

The citizens scientists that they can actually get to outcomes sooner. We also believe that not all models have to be deployed.

But we want to make sure that the model that the scientists do treat that do need to get deployed I have an easy path to deploy them.

It is a very noisy crowded space and I think you're going to see we see great technologies out there today, but the only cover off on a sliver of the activities at enterprise is actually need and unless you're part of an end to end platform like ours, you probably go to the way side.

Thank you. Our next question is coming from Chris Merwin from Goldman Sachs. Your line is now live.

Okay. Thanks for taking my question I guess, maybe keeping on the theme.

Have you seen any shift in budgets from customers, who are traditionally have been spending on analytics more through the department shifting that budget towards self service or is this more a function of actually growing the tam by expanding the number of citizen data scientists just curious.

You're hearing from from customers and see as in particular thanks.

That's a good question, we've long said the that the audience, we're self service data science and analytics was.

Was going to be one by us in the line of business. It's a $15 billion space winner of that space will be the natural beneficiary of the $28 billion share shift of all that technology that has historically sat in it.

We are beginning to see that shift.

Yes.

It's important though that that.

We're focused on the G two k. and having Ceos or proxies for Ceos in the mix because they are the ones we're going to drive.

That that shift from systems of record deepen IP to systems of engagement out in the line of business, but we are beginning to see the early early stages of that.

Thank you. My next question is coming from Brad Sills from Bank of America Merrill Lynch. Your line is now live.

Great. Thanks, guys wanted to ask about connected for about how does how did those those to trend during the quarter any traction there.

Well the conversations we're having around the end caps has definitely accelerated and.

Direct result of.

The continued net expansion numbers that we see.

What happens in these large global enterprises. They I think Kevin mentioned earlier, we we land with a couple of seats. They buy a bunch more if a CEO is in the mix the by hundreds more where thousands more and they are beginning to recognize the need to.

Harvest the the assets that are being produced by these analysts now.

So we do have.

A number of implementations on very very large complex datasets around the world.

The conversations are happening more and more people who have promoter are acknowledging that we've reduced.

The time it takes to actually deploy machine learning algorithms for operational systems.

So were actually pretty excited about where the conversations have led and I think over the long haul you'll see them being.

Become a critical part of our platform.

Thank you. Our next question is coming from Mark Murphy from Jpmorgan. Your line is alive.

Yes. Thank you Kevin I noticed a contract assets grew by about 12 million sequentially.

Presumably that flows into revenue I guess I'm I'm curious how much of that was anticipated or anticipated Bill and then.

As well the kind of one question in two parts that.

The ARPU growth, 13% sequentially.

I'm just I guess I'm wondering if you look at that as a decent proxy for the backlog trend or was that somehow impacted by the duration changes I think you said the duration increased put it but it's still two years.

I'm just wondering if you can put a finer point on that.

Yes, thanks Mark.

The contract asset is and in the same token that the deferred revenue I mean, those two are purely a function of timing of contract bookings revenue recognition and invoicing. So those can fluctuate period to period as a result with respect to the IPO, we do disclose.

As the FFO remaining obligations. So that is in effect the backlog that we have going forward.

Thank you. Our next question is coming from Yun Kim from Rosenblatt Securities. Your line is now live thank you.

Can you talk about trends around like deals, especially those above 250, k. and any seven figure deals for instance.

How much of your 250, K. plus deals $1 million plus deals representing your total revenue mix and how that has been trending.

And any color around that will be helpful. And then also maybe.

We'll go to market in sales process is changing.

A large deal activity is increasing and begin to focus more on that GTK. Thanks.

Well, let me just comment that we did have 92% growth in those large it spans north to 50, we don't talk about their contribution to overall.

Revenue, but we called this out for a reason.

The large organizations that we're dealing with particularly but but not exclusively in the GE to K.

Our recognizing that we have become an enterprise standard.

In their enterprises and many of these customers are are going from tens of seats to thousands of seats in their buildout of our of our platform.

Ill, let Scott talked about the the sales motions around it again I don't think we.

Have much difference in what we've been doing I think we've just been doing better in every theater around the world.

Yes, Thanks, David.

No real change to our Playbooks, we continue to run the land and expand motion with our customers and I.

As Dean noted I think we're executing.

Really well across the board across all of our regions and.

Across the size of companies that were working with so we havent had to retool the sales team or.

Really adjust our playbooks anyway.

Thank you we've reached end of our question answer session I like to turn the floor back over management for any further a closing comments.

Thank you before closing call, let me take the opportunity to thank our customers for their continued business here at Ultramax customer Trust defines the integrity of our business and we thank you for trusting us with helping to drive value in your business. I also want to think the more than 300 partners in more than 1100 associates around the world helping to ensure our customers.

See success with our platform. Thanks, again to everyone for joining US today, we look forward to updating you on our progress next quarter take care. Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.