Q1 2020 Earnings Call
Greetings and welcome to the off directs first quarter 2020 earnings conference call.
All participants are not listen only mode.
A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
I would now like to turn the conference over to Chris <unk> General Counsel. Thank you. Please be gets thank you operator, good afternoon, and thank you for joining us today to review all tricks his first quarter 2020 financial results.
With me on the call today are deemed Stoker, Chairman and Chief Executive Officer, and Kevin Rubin, Chief Financial Officer.
During this call we may make statements related to our business that are forward looking statements under federal Securities laws. These statements are not guarantees of future performance.
Subject to a variety of risk and uncertainties.
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 SEC filings available on yes, he sees website and the Investor Relations section of our website as well as the result in other important factors discussed in todays earnings release.
Additionally, non-GAAP financial measures will be discussed on today's conference call.
A reconciliation of these measures to their most directly comparable GAAP financial measures can be found in today's earnings release.
With that I'd like to turn the call over to our Chief Executive Officer deemed Stoker Deane.
Chris and thanks to everyone on the coal.
Joining us today, we hope that everyone is healthy unsafe. During this challenging time, let me begin by thinking or 1500 associates around the world their incredible and impactful response.
So the cold that 19 crisis your ability to rise to the occasion in challenging times to help your fellow workers provide assistance to first responders and rush to help or most affected customers is inspiring.
Our thoughts and prayers bought the old those who have been negatively impacted.
And why we will get through this the genius of humanity is not that we will recover.
But then we will be stronger when we do.
Let me give you a brief overview of our Q1 results.
And then we'll dive into how old trucks is adapting to the current environment and outline our plans to navigate through these uncertain times.
Kevin will then.
Walk through our first quarter financial performance and provide our outlook for the second quarter.
In Q1, we booked more than $107 million and total contract value.
53% year over year.
We posted $109 million in revenue up 43% year over year, we generated $20 million and positive operating cash flow and exited the quarter with approximately $1 billion in cash and equivalents.
We added 356, net new customers, including 12 of the global 2000, and now have more than 6400 customers around the world, including 37% of the global 2000.
Finally, net expansion remains strong at 128% overall and 140% for the GE to cat as we continue to see strong engagement levels within our larger customers.
Our Q1 bookings activity reflects the broad applicability of the Ultrabooks platform to companies in nearly every vertical across the globe.
We believe digital transformation with a focus on analytics process automation.
And most importantly, the upskilling up workers remains a strategic imperative for many businesses.
For example in Q1 in the heavily impacted travel and hospitality segment, we did business with Australia, leisure and hospitality Caesars Entertainment choice hotels Copa Airlines.
Transferable Hertz Corporation rail Caribbean cruise line, six continents hotels and Sun country airline.
The energy sector, we did business with Chevron USA Dominion Energy services Midamerican Energy company.
Pacific gas and electric and tight oil.
In financial services, we did business with BNP parabolic Royal Bank of Canada, and standard chartered Bank.
We did business with Allergan, Pfizer, Eli Lilly Hospital Corporation of America, and United Health Group, and the health care and biotech segment.
Our platform continues to prosecute analytic challenges globally in the telecommunications sector.
In Q1, we did business with Saudi Telecom company, Softbank, Telstra and Vodafone, we now count the top 10 telecommunications companies in the U.S. as customers.
And he'll be economic times enterprises rely on data and analytics to be competitive.
In the now uncertain times, we find ourselves leveraging the data and analytics culture to make better decisions to survive let alone thrive is paramount.
The covert 19 pandemic.
As a reminder of how accurate and timely data and analytics provides the foundation for critical operating decisions and we saw this an action within our customer base.
For example, an existing public sector client that needed to adapt quickly to the cobot situation purchased additional ultrabooks licenses to analyze and measure the effectiveness of multibillion dollar eat programs.
Sales cycle. The started in completed in the last two weeks of March as those eat programs were announced.
In another example of hospital leveraged ultra to quickly adapt their supply chain to source additional personal protective equipment for their frontline workers and first responders and built predictive models to understand the need for IC you bet.
Well, our Q1 results were strong we did observe an abrupt and significant change and customer buying behavior in March as many of our customers and prospects around the globe.
Responded to shelter in place directive and the realities of rapidly changing macro economic conditions.
Some sales sales cycles length in its customers paused spending in light of increased uncertainty well they adjusted the logistical challenges related to doing business in a fully remote environment.
These challenges.
The ultra extreme quickly adapt to our own work from home environment, and even close to seven figure transaction with the European financial institution in the last week of the quarter, despite having to coordinate with 12 different buying entities and 16 different centers located in 16 different locations all done remotely.
From start to finish this global pandemic.
And subsequent ones that may follow presented a myriad of data and analytic challenges.
And it requires business leaders to upskill their workforces to see data as an asset analytics as a prowess and process automation has a necessity.
From genome sequencing needed at the start of the virus to the geospatial analytics to manage and monitor it spread to the predictive modeling to anticipate the need for personal protective equipment to the identification of alternate supply chains for their manufacturer to logistics for redirecting products from shuttered restaurants to food stores, the managing the deployment of.
Trillions of dollars from Central Bank. This crisis presents an enormous data and analytics problem.
We also continued to have meaningful conversations with executives the global organizations, who see cobot 19, accelerating digital transformation initiatives the need for very data driven culture has never been greater.
We are confident the ultra ex platform can help organizations unify the data analytic processes and people to see success in digital transformation.
Let me now address the current environment in the steps, we've taken to protect our employees partners and customers and manage our business.
In mid March as most of the countries, we conduct business in mandated shelter in place actions, we shifted to a work from home model for our associates to protect their health and wellbeing.
Ultra Acs has many work from home technologies to help our associates be as productive as possible.
We will continue to allow associates to work at home until it has saved returned to their ultimate sauces and they feel comfortable in doing so.
To provide additional support for Altrus partners and customers, we launched a virtual solution center, giving customers the ability to connect directly with solutions experts to date, a few hundred customers have already leverage this offering.
We are launching the advancing data and analytics potential together program, otherwise known as adapt adapt as a free resource to help upskill workers around the world that have lost their jobs due to the current environment.
Under this program, we are providing free software licenses access to the ultra community learning path software certification and even nano degrees and business analytics that are being made available in.
Collaboration with Udacity, a leader in digital learning.
In this challenging environment, we're reminded that we can and should help create solutions to improve people's lives and we believe that offering up a skill around data science and analytics can be an important way to help these individual thrive in the 21st century, we are fortunate to be able to provide this program as a way to support the global analytics community.
As a result of cobot 19, and the resulting macroeconomic deterioration. We immediately took a number of actions in response, including pausing hiring in the near term until we better understand customer buying behavior.
Although we will move forward with any outstanding offers and hiring will continue for critical roles and functions.
We have also curtailed nonessential spending in are focusing our investments in those areas that we believe our most important to continue to drive the business through this recovery.
We rescheduled both of our 2020 us in European users conferences to 2021 and continue to leverage our digital events.
We have eliminated all unnecessary travel and continued to focus on operational efficiencies leveraging ultrabooks ourselves to make this process much easier.
Taking care of our employees customers and partners is our highest priority and our current plan is to maintain headcount levels.
This will allow us to preserve capacity not only in customer facing functions, including customer support but also maintain our development resources to continue to innovate.
We continue to monitor the productivity of our sales and marketing investments, including our 14 day trial activity pipeline creation sale cycle average deal sizes contract duration renewal rates and overall discounting levels. So that we can appropriate align our cost structure with our topline performance.
We are an unprecedented times and there was much that is unknown. What we do know is that leveraging data and analytics is equally if not more important in uncertain times.
And when Workforces have been reduced either temporarily or permanently there are fewer resources to help answer these questions.
Better outcomes happen when you combine the imagination of human the power of data and the speed of modern compute.
Everyday Ultramaxes amplifying human intelligence and enterprises around the world, which in turn is delivering better results for our customers.
For these reasons, we believe that our business is well positioned with the uncertainties we face.
Leveraging our own platform, we will continue to monitor business conditions closely.
And we'll continue to adjust our operating plans of the economic effects in the current color per run a virus unfold to come out of this crisis stronger than ever before.
With that let me turn the call over to Kevin to discuss our Q1 financial performance and our outlook for Q2.
Kevin.
Thank you deem.
Despite the abrupt slowdown we saw in March which I will discuss further in a moment Q1 results were solid.
Revenue was $109 million, an increase of 43% year over year, driven by favorable product mix, resulting in the upfront portion of revenue recognition being at the high end of the range and an average contract duration of approximately two years consistent with prior periods.
Overall net expansion for Q1 was 128% while net expansion for the global 2000 was 140%.
We added 356 net new customers in the quarter and now have 6443 total customers, including 731 or 37% of the global 2000.
Finally, we crossed another key milestone in the first quarter and now have over $400 million in annual recurring revenue or a RR.
Before moving on I want to briefly discuss the impacts of cobot 19, and our business that we have experienced thus far.
Coming into Q1, the momentum that we saw in 2019 continued and we got off to a solid start to the year.
However in March we saw activity levels slowed considerably.
This was particularly evident with opportunities with new customers and expansion opportunities that were not attached to a renewal.
Although as Dean mentioned, we did close a number of transactions with companies in highly impacted verticals, such as travel and hospitality manufacturing and retail we did experience lower expansion rates from these verticals. As these companies focus is focused on difficult decisions to realign their operation in response to cobot 19 and.
The macroeconomic slowdown.
Finally, we experienced a moderate increase in our churn rates, most notably in Europe.
To give you more color on our business approximately one third of our A.R.R. is from our global 2000 customers.
About 25% of our IR today is from customers who are in the most impacted verticals I previously mentioned.
And only 6% of or a our is from small to medium sized businesses within these highly impacted verticals.
We are committed to working with our customers, especially in these verticals through these challenging times.
Now turning back to revenue our us revenue was $80.5 million, an increase of 52% year over year, while international revenue was $28.3 million, an increase of 22% year over year.
Our strong use performance was driven by continued robust customer demand specifically within our global strategic customer segment.
Internationally, we saw continued strength in Asia, including regions like Japan, but churn rates in Europe increased moderately particularly in the most impacted verticals previously discussed.
We were able to quickly adapt our go to market efforts to transition to a work from home environment.
Since the end of the quarter, we have seen improved levels of customer activity as we continue to have productive conversations with both new and existing customers.
In April we saw new business activity resume and was consistent with activity levels in April 2019.
We view this as an indication that data and analytics remains critical even in challenging times.
We will continue to monitor key productivity and activity levels affecting unit economics to inform us on how or if we continue to invest for the remainder of the year, we intend to balance future growth and profitability appropriately.
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 Q1 gross margin was 91% consistent with Q1 of 19.
Our Q1 operating expenses were $102.6 million compared to $67.3 million in the same period last year.
The increase in operating expenses is primarily attributable to increases in our overall headcount levels.
Included in our Q1 operating expenses were approximately $6 million of onetime and seasonal expenses primarily related to our annual global kickoff meeting held in February and cost associated with rescheduling, our us in EMEA user conferences, which were originally scheduled for June in October respectful respect.
Lovely.
These onetime and seasonal expenses are not expected to recur this year.
Our Q1 operating loss was $3.2 million or an operating margin of negative 3%.
Net loss was $6.5 million or negative 10 cents per share based on 65.6 million non-GAAP fully diluted weighted average shares outstanding.
Turning now to the GAAP balance sheet in statement of cash flows for the quarter ended March 30, Onest, we generated $20 million of positive operating cash flow and exited the quarter would just shy of $1 billion in cash cash equivalents short term and long term investments compared with $975 million as of the end of Q4.
Our 2019.
We ended the quarter with 1400 78 associates up from 1200 91 associates at the end of Q4, 2019, and 936 associates at the end of Q1 of 2019.
Now turning to our outlook.
The current macroeconomic environment is clearly in this data turmoil and we expect it will continue to negatively impact our business.
Given the involving situation with cobot 19, and the increased uncertainty has created for businesses across the globe at the present time, we cannot reasonably predict the impact on our full year 2020 financial results.
As a result, we are withdrawing our previous full year guidance and do not intend to provide financial guidance for the full year 2020 at this time.
However, based on the Q2 quarter to date activity, coupled with the ratable portion of our revenue that will be recognized in Q2. We believe we have sufficient visibility to provide to Q2 guidance for revenue operating income NPS.
For Q2, nearly two thirds of on revenue will be recognized from deferred revenue and scheduled multiyear billings approximately 15% is expected from contract renewals and the remainder will be generated from net new business closed in the quarter.
We have historically seen between 80 and 85% of in period bookings coming from existing customers, which is generally inline with what we saw in the first quarter.
As we are closely monitoring the business to retain our strong financial position. We are also sharing any high level overview of our expected cost structure.
Our cost structure is primarily fixed in the short term as the majority of our expenses, our head count related and as Dean noted earlier, we intend to maintain current staffing levels.
Also as I highlighted previously Q1 expense levels included onetime and seasonal expenses of approximately $6 million, which by definition will not recur in Q2. So we expect to see Q2 operating expenses declined sequentially.
We believe these expense levels are prudent given our strong base of recurring revenue.
However, we will continue to monitor productivity metrics and unit economics to align our investments with the topline performance.
We remain committed to long term profitability and cash generation.
As a result of the current macroeconomic environment and greater variability in our business our guidance assumes the following.
We are expanding our guidance range to account for the increased uncertainty of new business timing of renewals slightly higher churn rates and the potential impact to revenue of more flexible payment terms, especially for customers and highly impacted verticals.
The average duration of our subscription agreements continued to be approximately two years.
Approximately 35% to 40% of our TCB booked in the quarter will be recognized upfront with the remainder recognized ratably over the time of the contract.
Current headlamp headcount levels will be maintained.
For Q2, 2020, we expect GAAP revenue in the range of 91 million to $95 million representing year over year growth of approximately 10% to 15%.
We expect our non-GAAP operating loss to be in the range of 9 million to $13 million and non-GAAP net loss per share basic and diluted of negative 12 cents to 18.
This assumes 67 million non-GAAP fully diluted weighted average shares outstanding.
In summary, while we are an unprecedented times, we believe all tricks remains well positioned given our strong product market fit significant market opportunity given the low penetration into our total addressable market powerful business model capable of delivering strong levels of profitability and operating cash flow and our solid for.
To answer position with approximately $1 billion of cash on the balance sheet.
We have demonstrated the financial discipline of balancing investment for growth while maintaining profitability.
We plan to continue to manage our cost structure based on topline dynamics in line with historical levels of profitability.
Finally, I would also like to have my thanks, all of the all tricks associates across the globe quickly adapted to support our customers in these uncertain times.
And with that we'll open up the call for questions operator.
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One moment, please while we call for your questions.
Our first questions come from the line of Tyler Radke of Citi. Please proceed with your questions.
Hey, Thanks for taking my questions and hope you are all staying safe and healthy.
I wanted to follow up on just trying to better unpack the guidance here for the second quarter because.
I think.
Obviously that was that came in a lot lower than than people were expecting.
I guess given that you have seen kind of business trends in April in line, with maybe where where things were last year I mean, I guess, what what what's the reason why.
You expect I guess, the bookings pattern to d. so severe.
Then we would just love to better understand anymore.
But I understand the framework around duration I know about two years.
What you said, Kevin, but maybe if you could just help us understand if you're expecting duration to be a headwind.
In the second quarter, so we could better understand the moving pieces associated with the revenue guidance.
Hey, Tyler Dean I'll, let Kevin.
Follow up with some some comments but.
Just as a reminder to everyone on the colors, we kind of two factors at play one is while we are.
Completely subscription based we are not 100% ratable.
So we don't have.
Perfect visibility into the entire run rate, we've got visibility into roughly 60, 65% from the balance sheet and and.
As an analytics company the second part of this is.
If you put that data indicates that data out and so.
We leverage our own platform on all of the key size will indicate.
When things might change for us we still don't have all the information that would give us better visibility.
And I think that the the April.
Performance is actually fairly strong.
We've always been conservative even though we've we've seen some glimmers of hope in April.
Turns out of the the logos, we we brought in April 35% of them, we're actually in the highly impacted verticals. That's also some.
Some silver lining in this there's you know we've been fairly conservative Kevin.
Yes. Thanks, Thanks, Tyler just a couple things I think to Dan's point, given that we have an upfront portion to our.
Our revenue.
There is a heightened impact.
In the current environment too that we also have typically seen our quarters.
Backend loaded in the sense that we do more business in the third month of the quarter than we tend to do early in the quarter. So based on our visibility Guidances is what we can reasonably see as we sit here today and then finally your question with respect to duration, we've actually not really seen a material shift in duration either.
In Q1, nor in the beginning of Q2, so I would not described duration as a headwind at the moment.
Let me add one additional comment and that is around.
But what maybe.
False positive or a false negative I guess in the case of the impacted verticals.
Most organizations are talking about the impacted verticals as having a negative impact on their business.
I highlighted a number of verticals and customers who joined us in Q1 to illustrate that those impacted verticals may turn out to.
Performed better for us.
When we've always said that when things are good analytics are.
Important but when times are bad analytics are absolutely.
Critical and so we're very optimistic about what is happening.
In this space in the kinds of customers that are joining us.
And the impacted verticals I think have have another silverline.
Great and then if I can just sneak in as a follow up.
I think Dan you mentioned in both the press release and the opening commentary that you hit 400 million of our AR.
This quarter and I think Thats really the first time, we've heard you talk about a our AR I know there's been a lot of questions around.
Disclosure there are in the various definition. So maybe just help us understand is that kind of at end of quarter, what's on the books.
Finish and they are.
And what was kind of the inspiration around giving that and is that something that you expect to provide going forward.
Well I think we've actually given they are our when we hit the 200 million dollar or number I don't think we've given it's a sense. We wanted to give everyone. Some comfort on the the health of the business.
So I don't know if we'll we'll provide that number again as we hit these milestones I think it's important that you understand under the guise of six so six that there are lots of great metrics that drive all tricks and so.
Kevin May have some some additional comments on the our number yes, I mean, I would just I guess double down on the on the points Dean made in Q2 2018, we did provide the milestone of going through 200 million, which we thought was.
It was an important milestone and we felt the same way going from Q1 crossing 400 million was also in our view a very important in key milestone to the business, we're not necessarily going to continue to provide that going forward, but as we do have these key milestones will we'll communicate those.
Okay.
And then Tyler your last question. The definition was actually in the press release, but it is essentially the totality of all our active contracts at the end of the period.
Great. Thanks, a lot.
Our next question has come from a line of Brent Bracelin of Piper Sandler. Please proceed with your questions.
Hello, This car Jeffrey launch for Brent up for question I have is around that AD.
One thing that Thats me was net adds.
Remains strong about 30% growth rate I was wondering if you could impact that if the the typical land up just a few fee that was not not any disruption in the march or even the April timeframe.
No, we really havent seen a change in the.
New adds obviously was a good quarter 356 net new customers.
Most impressively was the 12 new G. Two k. So we said at 37% I think I think what's important to know is that our our business models fairly frictionless.
As you know our land cycle is.
Typically a 45 day or so land cycle.
10, 12, $15000 on the land with a couple of designers. It always begins with a frictionless 14 days self service trial.
That that hasn't really changed at all and in fact, we were pretty excited even through the last two weeks. When there was an abrupt halt to working in the office there would really wasn't an abrupt halt to doing business. It was just done in a different environment.
Unfortunately.
As a company, who who prides itself on on being agile and being ready for moments like this we turned our teams into work from home teams and we have all the business systems to support it.
Including Onboarding, new those new customers. So we stood up a virtual solution centers.
Many of the new customers the opportunity to engage with solutions engineers and experts.
To get time to value and quick ROI on the investments that they just made so.
Really excited about the net new ads.
All right got it really helpful and.
Maybe just to unpack the commentary on the attrition.
Just to be clear about.
The potential you see for.
Churn to purchase contraction.
For the one of the commentary so we'd heard about its budgetary scrutiny and I think that's typically happening aligned business level. So I just was wondering if there's any kind of trends you're seeing between.
Customers that are maybe more wall to wall or on an overall corporate budget.
More contemplating contraction rather than.
No we fully churning off at the solution and so.
Just certainly up whether you think contractual there'll be more possible Robyn.
Sure.
So thats a great question. So we haven't actually seen a a big change in any of that we we had slower growth in Europe in part.
Kevin mentioned in the prepared remarks to higher churn in Europe number to Europe is driven far more by reseller relationships a lot of those resellers are smaller resellers that didnt have the ability to to react quickly to to keep customers. Most of the churn we do get tends to.
To be in single seat implementations, where it was really more of a lack of expansion.
In terms of the the expand model that we have we actually haven't seen we've seen people pause it but we haven't seen them hunt and I think that.
The other part of even Q1 that was particularly exciting is that I think we had a record number certainly for Q1, a record number of adoption licenses where.
It's easier for people to absorb more of all tricks under an adoption license that can be trued up at a future date when things are better. So weve mitigated. We believe most of the risks that we have not seen major customers put a big pause on their spend.
Perfect. Thanks very much.
Thanks.
As a reminder, we ask that you please limit yourself to one question.
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Our next question comes from the line of Derrick Wood Cowen and company. Please proceed with your question.
Great. Thanks, It's Andrew on for Derek Hope, you're all while.
Maybe just wanted to touch on.
The larger expansion deals and maybe how how of reps adjusted to selling virtually.
How did how to closure rates walk in.
Yes, hey, playbooks or anything looking forward.
And this expansion motion in particular.
Well, our playbooks or are well established.
I think they work regardless of whether it's in office or work from from home in environments.
When we put into place our own a shelter in place plans largely driven by local jurisdictions requirements.
We've got people up and running right away you whats collaboration software access to enter our enterprise business systems portal.
We're largely a cloud based organization there are some things that are on prem, but accessible through VPN.
So that part that I think was to our advantage.
I think the more challenging part, particularly in the last two.
Weeks of the quarter was it was work from home dealing with work from home, we illustrated the large European financial institution to illustrate the complexity of.
Deal management, if if you have all the centers in in a single office.
Or even in offices that are remote its little bit differently than getting signers all working from home in 16 different locations. So.
I don't think our our expand motions are are fairly frictionless as well.
Much of our are driving expansion in accounts is that is actually driven by.
Customers.
Getting excited over the the benefits that they're seeing in the platform. Yes. We do go onsite, we've actually turned to not just our virtual solution center, but we've seen.
In the last 30 days, a record attendance and registration on our community.
We have long talked about the impact of of community on expansion I think we've set a number of occasions that customers who have registered for community expand three times more than people who are customers of ours, who are not involved in community and so we saw a record number of.
Of unique registrations for community in the last 30 days and so.
And that community is accessible in the you either platform. So it again that supports a work from work from home environment.
Pretty nicely we also have.
Pivoted many of our user groups around the world. Our community is made up of both online and offline community. The offline component, we talked with you about.
Pushing our users conferences.
This year to next year.
But our user groups around the world.
Have also gone virtual so if you.
Care to see them you can join them go to community and you'll see them, you'll see them Oliver Twitter and linked in.
So we have made a pretty easy for customers to get the expertise they need the support that they need to to drive.
Greater expansion of the only challenge there of course is.
We're going to patients who are trying to figure out what ends up themselves and that may paas things for a short bed.
Great. Thanks, and then internationally results ended pretty good you called out in APAC and Japan, maybe just touch on the region's reopened what are you seeing there and.
How much of a leading indicator that can be for here for us.
Thanks.
[music].
But yes, I was just going to comment we the comments, we made around the business with.
Respect to April activity.
Being fairly consistent with what we saw April of last year.
We didn't break that down by region, but rather just globally.
But we do see continued engagement from all of our teams we did call out Packard, specifically, Japan.
Strong growing team.
In Japan doing really well.
I think the only saw spot was that renewal base in.
Northern Europe.
Great. Thanks.
Our next question is from Chris.
And with Goldman Sachs. Please proceed with your question.
Okay. Thank you very much.
And just I want to redeem given the importance of analytics, obviously as you mentioned in good times and Bad times, just curious how we should think about the sense of urgency that customers have about either adding a brand new deployment or even adding seats to the existing deployment that they had or are there any examples of customer leaning in and doing even more with all tricks claim.
And for many of these customers are facing unprecedented unprecedented circumstances in their business. Thanks.
No. It's a great question and I think.
We have long talked about the deep and wide mode. We've created and the fact that we can become the analytics fabric of large we're going to organizations, we're trying to to get their arms around digital transformation.
If cobot 19.
It is not the wakeup call and not be accelerant to digital transformations and there will never be.
Digital transformation I personally spend quite a bit of of my day talking with.
Not just our employees around the world, but the executives around the world, who who are trying to figure. This whole thing out I think they're realizing that.
Being complacent and trying to leverage systems of record deepen IP that got him great to begin with or not the kinds of systems and implementations you need.
To get great in the next.
Generation.
There is up there is a a.
A new skill set I think thats being developed in.
In the C suite around the world is called creative destruction into the ability to reimagine yourselves in a different fashion you can either.
Wait for this thing to define you or you can take control of it and we're seeing large organizations have pronounced impact around an effort to not just democratized data, but to prosecute analytics to automate everything that that's happening in their business and most importantly, I think the thing that.
Been missing and digital transformation one dato.
Is not being missed in two data and Thats upskilling. The workforce. We have heard this repeatedly over the last three years since going public and I think it's now to a heightened sense where organizations know that they have to do this.
Otherwise the next pandemic, where the next.
Financial collapse or the next calamity that we will face.
Could destroy many of these organization. So we see this as a huge tailwind for a long long time coming.
Great. Thanks very much.
Our next question comes from the line of Brad Sills Bank of America Securities. Please proceed with your question.
Oh, Thanks, guys for taking my question.
One of the ask if you if you've seen in those vertical that have not been is impacted by by the pandemic. The other 75% would you classify things kind of business as usual or even maybe a catalyst that you might have seen.
For some color that in those industries.
Well I don't think we've seen.
Significant change in the the non impacted.
Verticals.
As I said before I think it's even encouraging even though people are talking about the 25% that are in the impacted verticals. We're beginning to see glimmers of hope there I mean when.
Oil hit negative territory in Q1, all bets were off people, probably thought nobody would buy anything, but we actually did quite well in oil and gas because analytics becomes more critical in those situations, but we have not seen a sea change, but it's early it's April.
While we're excited about the fact that weve.
Landed about the same number of logos that we had in Q1 of or in April of last year.
The fact that we still are obtaining key to case in April the positive sign but in the non impacted verticals, we really haven't seen.
A shift.
Thank you.
Our next question comes from a line of David Griffin of William Blair. Please proceed with your question.
Hey, good afternoon. Thank you for taking my question up so I wanted to talk a little bit about the pricing environments.
Increase the price of lesser or the list price of server by about 35% at the beginning of the year.
And I know that was a reflection of all the incremental capabilities you've added over the last several quarters and given that you kind of haven't really changed pricing their sense at least heading prior to the IPO I suspect there hasn't been much pushback, but just given the current macro environment and.
Earlier comments kind of a leading to some customers potentially looking at changing like payment terms I think it's a great just to get an update.
On the customer response that you've seen the price uptake and then maybe if you could just talk a little bit more generally about what you're seeing out there and the pricing environment that'd be helpful.
[music].
Well, yes, you know we haven't changed pricing other than the server price for many many years, we went to our our designer price of $4000 back in 2014, it still remains.
At that.
Price.
And.
We raise server because we're seeing customers get value. There. There are ROI is that are.
Pretty meaningful thousand percent improvements in operational efficiency gains hundred $77 million gross margin improvements $250 million returns and we're seeing we're seeing this in the value of automation. So.
We havent had any kicked back really on servers.
Having said that there are there are customers even in April that that have come back and said well I'd, rather now have fewer designers and server to begin to automate because the.
If they get in particular, if they were in the impacted verticals and they did have furloughs or layoffs.
Work still has to get done the questions don't slowdown it back the questions accelerate the data doesn't slowdown it continues to to get larger but you might have fewer people to answer those questions. So.
Server is still a mainstay for us a big portion of our customers have server, we believe over the long haul.
Seeing success with digital transformation.
All of the GE to case that we end up with will eventually have servers from our perspective because automation.
Absolutely essential to to seeing success and digital transformation.
Overall, we haven't really seen.
Big changes in pricing.
I think that we've probably been seen in.
Early stages of April less discounting.
So we're excited about.
The place so that we're in I think that were just pausing to see what other data points, we can gather.
Okay, Great Thats helpful. Thank you.
Yes.
Our next question comes from a line of Jack Andrews of Needham and company. Please proceed with your question.
Well good afternoon, thanks for taking my question.
On the call. It so I apologize if you've addressed this but I wanted to see if you could touch a little bit more on what's happening on the partner side of things.
How they're engaging with with your customer base and I'm also wondering just.
Or the mechanics of the deals that your partners are leading you to.
Any different in terms of deal sizes or duration than your historic cadence of business. Thanks.
Oh, great questions I think we've we haven't addressed that on today's call. But this is a good opportunity to do so as you know about 20% of our business has historically been driven by reseller partners. These are typically value added resellers most of them are on the.
Subject matter expertise side, maybe they have a vertical.
Ben.
Local market coverage.
A few of them are.
US base or country focus some our international very few were actually international and in order to.
That take the platform in a into an ecosystem of people, who who could drive higher value for us we set up a strategic alliance program last fall I.
I think the in the.
Year end earnings call, we talked about Pwc, joining us as a global elite.
That agreement was signed.
The first couple of days of February regular for our.
Global kick off.
Where we brought all of our employees together.
I am I can't tell you too much about that although we know that at the time is right for these global alliances, we're starting to see a lot of inbound activity.
Particularly around digital transformation.
And what I can tell you is we're building pipeline.
And I think that that the global analytic consulting vendors recognize that we have the end in platform.
That that allows this data to be democratize that allows analytic processes to be built that allows these processes to be automated and it drives value for not just us, but it drives tremendous services.
Revenue, particularly now as these global organizations have to go in and build models retrofit departments.
Upskill Workforces and so perfect timing for having global elite like Pwc.
On our side.
Great. Thank you for the color.
Thank you.
Our next question comes from a line of Michael So it's a Raymond James. Please proceed with your question.
Hi, guys. This is Eric Thanks, Michael.
Kevin on the net expansion rate can you provide some color on how you expect this metric so the trend going forwards at year end, maybe some of the puts and takes on those assumptions.
Yes. Thanks.
Well.
We don't guide out to net expansion. So I'll give you just some directional color I mean, when we went public I think we.
We indicated that we felt north of 120 over the long term was it was sustainable and we still believe that to be true.
Certainly as we've gotten larger.
That naturally does have impacts on how net expansion continues to go.
Overtime that being said, we're still pretty pleased with 128% on the quarter and 140% within the G. Two k. I think that continues to demonstrate our largest customers continue to make significant investments in all tricks and remember that.
The market that we are going after.
The 54 million.
Disgruntled analyst, who heat their jobs, who want to be upskill to be citizen data scientists 15 million of those exist in the G. Two k. and so we have less than 1% penetration of that entire audience. So there is massive opportunities for continued expansion and when you look at the penetration rates of.
Yes.
The designer knowing that automation is key.
And roughly let's call it 15 or 20 designers to be gets a server there's a significant upside to to this whole model that we've we've created so we think that.
Certainly the 120 is.
For the extended period and we we believe that the numbers we've posted for for our ordinary or our overall customer base, along with GE to case will continue to be strong.
Our next question comes from a tie a key John of Oppenheimer. Please proceed with your clients.
Thank you and Thats driven by the way fold incremental color on the breakdown so I'm very helpful.
Just one follow up again to the first question of the onto Q, an area, which was your comments on improved level of activity.
In April and Youve pulled it forward to find this as same as April 2019.
So I understand really what does that mean from a new customer acquisition pace from an expansion pattern.
Help me understand in what way is it the same as April 2019, and when you give your guidance for down sort of Jim quarter, or you see assumption that level.
Is the revenue to our target for the second quarter. So instead that level are still stays the same what continues to improve tell me kind of think about the underlying assumptions here.
Well, we actually are comfortable with what happened in April I think we were pretty excited that we could continue to drive the number of logos we did.
Post work from home posts shop from from coated.
The fact that we were able to get 35% of those those new logos in the highly impacted vertical is beginning to.
Potentially change our thesis around whether or not there.
Good or bad for an analytics platform like ours, we're we're pretty convinced that analytics is going to via the the savior for a lot of these these organizations who are highly that it.
Im not sure I have any other commentary on that Kevin.
Yes. Thanks, Thanks, Ittai, that's a great question.
Look I mean, we've provided the assumptions and kind of the build up as we think about Q2.
In terms of what we're expecting and where it's being contributed two thirds of.
Of the quarter is essentially coming from backlog or ARPO, you've got no, 15% or so thats coming from renewals and than the rest will be generated from in quarter bookings. The commentary around April I think was really the.
The totality of the business. So you know dean touched on net new logos and what we've seen in terms of that activity being very similar.
And so the general comment was was with respect to our overall business.
And then we did build up the I did provide quite a bit of detail in the build up to how we're looking at guidance and.
The revenue that we expect to see this quarter.
Good like ours.
Our next question comes from the line of Steve coating of Wedbush Securities. Please proceed with your question.
Hi, gentlemen, thanks for taking my question and I apologize in advance if you discuss this already but maybe in thinking about your Q2 outlook.
Maybe just qualitatively color on.
Kind of the reduction in the outlook compared to maybe what you're thinking three months ago.
Kind of if you were to break that down between.
Attrition in the base versus expansions.
Versus lighter expansion.
Kind of impacted verticals versus the non impact to kind of what what are the most important factors.
As you think about what affected your outlook.
Yes, Thanks, Steve.
So as I went through in the prepared remarks, I kind of gave some color in that regard.
We.
We went through and built up guidance I mean, obviously.
It's being impacted by a lot of the things you described right I mean.
We expanded the range a bit too you know to be able to accommodate for what we're seeing from a variability perspective, we commented on moderate increases in churn rates in Europe.
And so as we go through and look at the various different aspects of the business.
Obviously the growth rate is lower than we saw in Q1, but we're still optimistic around the conversations we're having with customers.
Into Deans point kind of a focus on digital transformation and how the alter its platform can ultimately fee fit into those initiatives.
And are you guys doing anything in terms of giving especially the most impacted customers kind of easier is your payment terms.
Or things like that on the contracts.
Yeah. We're we're certainly working with customers me, we're obviously, a customer centric organization and providing flexibility where we can and so we are having those conversations and we are accommodating and working with customers that are most impacted.
Thank you very much.
Yes.
Our next question comes from a line of received Jay Laurie Da Davidson. Please proceed with your question.
Hi, guys. This is Hana Rudolph Andres you today. Thank you for taking my questions. So first can you talk about how postponing your conferences to 2021 is going to impact this year beyond the onetime expenses you mentioned and then how much do rely on conference it's partly generation.
Well conferences aren't really.
The lead Gen activity, there our prospects that that show up to two our conferences.
It is impactful for four business, but much of that as throughout the year not just the the onetime year, we get together face to face, but we have.
Community events online offline were very engaged throughout the year with our customers we have.
The incredible net promoter score not because of our conference, but because of our overall customer centric behaviors.
And while it's disappointing to push them off.
No one could get there.
With planes not in the air and so as you know one of the things that we're doing with our conferences were renaming it to analytic Khan.
Because in times like this we actually see.
C change happening when it comes to the.
Overall sector for data science and machine learning Theres going to be continued consolidation in the space. We wanted to clear the air because there's so much confusion about data science and analytics. So we're going to open up the conference to a much broader ecosystem. So next year, perhaps for the first time will we actually will have.
Prospects coming to the conference the the 16 million Python developers that exist in the world in the adjacent technology.
Alliances that we have with.
The folks like each too low and and Snowflake and we'll bring all these people into the ecosystem for data science and analytics to clear the era to let people know that it's a real it's critical for digital transformation.
So we're disappointed that we pushed it but we have a whole bunch of really great go to market activities coming out over the next few weeks you will start to hear about them early next week.
And we hope you attend them.
Great. Thank you.
Our next question comes from the line of task Fuji Guggenheim Partners. Please proceed with your question.
Hey, guys. Thanks for taking my question Kevin had a question for you. If you look at your revenue model you have some revenue there is no problem the balance sheet, you're making investments before and then I guess some some bumpy revenues are coming from renewals from these have you signed about two years ago.
If you break down how.
How much of the revenues are basically Neil was coming from deferred and renewals. What is what is that mix how much of the revenues are on a safe in the says that there you already have them in Europe in euro in your bag wishes.
Thank you have the Gen. We ended the quarter, what would that mix look like.
Yes. Thanks, that's a great question. So in my prepared remarks actually went through that unpacking. So about two thirds of the revenues coming from backlog.
15% or so is coming from renewals.
So that I guess, you can consider that.
Still in periods, so to speak and then the balance of the revenue will actually be from.
Business that we closed in period.
Got it that's what level sorry, I was jumping between calls so I'm not so good.
And then and then April after April color I think you said the credits look pretty strong any any more details on how upsells.
Our looking at April versus the new customer acquisition.
Well again I think our comments generally speaking is that we saw a similar activity in April of this year.
Similar to what we saw April of last year.
And so that is intended to reflect the overall aspect to discuss in addition to just the commentary around net new assets.
That's very helpful. Thank you.
Our next question comes from a line of Pat Walravens of JMP Securities. Please proceed with your question.
This is joey on for Pat Thank you for the question.
Dean can you can you help us framed the long term opportunity you see ahead, and then maybe give us some perspectives on your product market fit. Thank you.
Great question and an important one in times like this.
Well lots of people are are impacted we believe that winners and losers are made in times like this.
We see the focus on digital transformation being.
Right in front of us if as I said earlier this is not a wake up call two executives around the world nothing nothing will wake them up.
We're seeing a clear change from the last.
Attempt at digital transformation.
I've talked to a number of chief data officer is over the last three or four weeks and many of them have said, we thought digital transformation was about buying more of what we had an IP and systems of record.
In hiring scientists, we recognize now that that didnt actually deliver success.
And in in digital transformation Twod auto it really is.
The.
Collection of of.
Seeing data as as an asset in an organization turning analytics into a prowess and most importantly, automating routine task, while you're upskilling the humans in the mix, we believe that those 54 million.
Potential citizen data scientists are real they do want this work they do want to provide value to organizations and we see this is a huge opportunity back.
Over the next two or three weeks, you'll start to here.
A lot more about a category of software that that we see emerging that we intend to own and.
You've looked at.
Category creation.
In the past, whether it was HCM or TSM or SF say.
The winter in that category tends to get 85% of the the market cap of the entire category and we intend that to be ultra mix. So we believe we're we're particularly well positioned for not just the the short term, but the medium term in the long term.
We have reached the top of the hour I will now turn the call back over to Jane Stoker for any closing remarks.
Thank you operator.
Finally, I want to once again, the express my gratitude and appreciation for the Altrus associates around the world for their continued dedication and flexibility while we work our way through this moment in time.
Thank you to our customers for putting your trust and ultra rich and allowing us to be part of the analytic fabric of your organization and thank you to our partners for your trust and commitment to work together to deliver better analytic output for our joint customers. We believe that people are the ultimate differentiator here and there is no better group prepared to address the current challenges than.
This global analytics community you can find some of these remarkable work from our community by following the together, we solve hash tag on social media. Thanks for your time today be well and stay strong.
Thank you.
This concludes todays conference you may disconnect. Your lines at this time. Thank you for your participation have a great evening.