Q2 2020 Alteryx Inc Earnings Call
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A brief question answer session will follow the formal presentation.
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It is now my pleasure to introduce your host Creswell.
Mr. Allow you may begin.
Thank you operator, good afternoon, and thank you for joining us today to review all tricks of the second 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 statement under federal Securities laws.
These statements are not guarantees of future performance they 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 material risks and other important factors that could affect our actual results.
Please refer to our FTC filings available on the Fccs website, any investor relations section of our website as well as the risks and 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 being Joker Deane.
Thanks, Chris and thanks to everyone on the call for joining US today, we hope that everyone continues to be healthy on state during this challenging time.
Let me give you a brief overview of our Q2 results followed by some detail on Cobots impact on our go to market activity.
Then we'll dive into our strategy for navigating the uncertainty that we expect will continue for some time.
Lastly, and perhaps most importantly, Q2 was a quarter for innovation swell bring you up to date on three meaningful additions to our product portfolio and how they are they are resonating with customers and advancing our role in the analytic process automation category.
He will then walk through our second quarter financial performance.
Provide our outlook for the third quarter and.
In high level commentary on what we're expecting for the remainder of the year.
In Q2, we generated $96 million in revenue up 17% year over year, well bookings were flat, we did an exit the quarter with over 40% year over year growth in annual recurring revenue.
Our Q2 gross margins remain strong at 91% and we added 271 net new customers, including six of the global 2000.
We now have more than 6700 customers around the world, including 37% of the global 2000.
Net expansion was 126% overall and 137% for the GE to CAD.
Finally, our balance sheet remains strong with just under a billion dollars of cash and equivalents.
The global dislocation experienced as a result of the cobot pandemic followed by shelter in place orders altered our customers buying behaviors in Q2.
We observed notable changes such as higher levels of scrutiny on spending across all sectors, resulting in longer sales cycles smaller deal sizes and less favorable linearity in the quarter.
Based on what we see today, we do not anticipate a material improvement in business conditions during twentytwenty.
At the same time, we believe the cobot is creating a longer term tailwind for our business.
Companies that lack analytic rigor, where those with data challenges sought out a quick ROI solution to help them adapt to rapidly changing business conditions.
Then he found their cancer with older rigs.
We believe this dynamic provided a tailwind for new business. During Q2, as we saw solid land activity in high risk verticals, such as transportation accommodations foodservice and retail.
We believe this illustrates the data and analytic capabilities are important, particularly in challenging times. Although initial deal sizes were slightly smaller than they have been historically.
The industries and functional use cases, ultrabooks addresses continued to be quite broad.
We landed new customers, including Levi Strauss, Brazil industry, and Burchfield limited Petro BAW, Banco Santander and Omega in Latam.
That's all group limited Samsung Biologics Fiveg, Japan, Toyota Systems Corporation in China construction bank in a P.J.
Suncor Energy match group Snap Black line and service now in North America.
And bear AG Mondelez Statistics Center, Abu Dhabi, Merck chemicals, Gutter Airways, southern water services and L'oreal in EMEA.
Well, we see incredible ROI stories every quarter in Q2 two stood out.
The first example was like so many activities during this pandemic delivered virtually in a webinars in early July.
In the session Neil Liebowitz, Vice President of tax at Sirius XM described the journey Hiscox team had in landing and expanding with the Ultrabooks EPA platform.
It began in Q3 of last year with an adoption license to create efficiencies.
In compliance in provision process, along with developing cash models for the complex task of federal and state apportionment.
Neil stated that quote ultra ex was easier to use it more likely to be adopted.
By a larger audience close both.
Early use cases that drove hundreds of hours of savings led to a third expand in Q2 of this year to support shared services and accounting operations with a focus on automation and its ROI.
<unk> business case for analytic process automation was defined and 157 use cases with potential savings of more than 9200 hours annually.
In a period of just 90 days they automated more than 40 use cases and contributing more than 2500 hours of annual savings.
Over their short nine month journey of transformation Neil indicated the covenant successfully forced them to think more critically through a financial lens to justify technology investments, we're super excited to count Sirius XM as an ultra land and expand customer.
Additionally, when you save lives ROI is a measurable with the assistance of our Riyadh, Saudi Arabia partner want data and analytics, we close Saudi Arabia Ministry of health, primarily for a cobot 19 use case.
The Ministry manages local government hospital in medical activities.
There were any trial experience when cobot started.
With the ultra its EPA platform they were able to automate the collection of Cobot Test result from National Labs integrated with hospital data and data on those who were quarantined and hotels.
They then built network analysis workloads to understand the virus reproduction rate and track it spread.
According to the customer this helped them slow the spread of the virus and save lives the frontline healthcare workers and the population at large.
Power of ultra give them insights into how when and where to respond to cope with 19 cases, and who took quarantine what facilities to close and how to allocate hospital bed space.
These use cases are 100% aligned to our company mission to unleash the thrill inherent in solving problems using our platform to fuel remarkable business and social outcomes.
Let's turn to Cobas impact on our Q2 expansion activity.
As with new business, we saw expansion business sales cycle slow conversations with customers indicated that many sought to leverage their existing investments rather than undertake large new projects and consequently postponed or downsize larger initiatives.
To address this new normal of buying behavior, we increased our use of adoption licenses.
And adoption license is the short term contract generally six month that allows the customer to effectively take all trucks for an extended test drive to prove value engage demand before they make a longer term commitment.
Adoption licenses allow us to engage with broader audiences at larger enterprise for an extended period of time to help prove out digital transformation initiatives.
It is also away for us to continue to engage with and support our customers in these trying times and also acts as an insurance policy of sorts for our customers.
In Q2 adoption agreements increased by over 60% year over year and more than 100% sequentially.
As you heard and the Sirius XM story. These have been a successful sales strategy for us since we initiated initiated our land and expand model historically upon expiration of the adoption agreement, we see a large number convert to departmental or enterprise license agreements accelerating expansion velocity.
While we cannot predict when macro conditions will improve we can and will continue to support our customers as they navigate these difficult times.
Turning to retention.
As we discussed on our Q1 call. We once again experienced high customer churn, particularly in smaller organizations in highly impacted verticals and regions, mostly impacted by cobot.
Dollar based churn was predominantly scene and downsize contracts as customers braced themselves for potential economic impacts related to the pandemic and rationalized existing investments.
As has been the case in prior quarters most of the customer churn was driven by organizations with only a single designer seat that had not yet expanded.
It is also important to note that customer churn continued to be concentrated in the commercial sector, which we define is less than $100 million an annual revenue regardless of the vertical.
Turning to our ecosystem on the heels of announcing our global ALLETE relationship with Pwc in Q1 in Q2, we broadened our partner network by adding two strong technology partners in Adobe and you why path, we believe that having an open and vibrant ecosystem is an important element to bringing our analytic process automation vision to life at the.
Market for data analytics and automation continues to converge.
During Q2 ultra ex delivered significant innovation to the market with the launch of intelligent Sweet ultra its analytics hub and our next generation and engine.
Intelligence, we bring to market a powerful designer add on bundle of assisted modeling, which enabled analysts in the line of business to build a robust machine learning and advanced analytic models in a code free environment three guided step by step process.
Intelligent suites text mining and natural language processing building blocks also deliver improved capabilities for we're working with semi structured and unstructured data through LCR recognition sentiment analysis and topic modeling as a result.
Early feedback from customers has been positive.
In early customers include Siemens gas and power Bell, Canada to Doba Restaurant Corporation Mars incorporated General dynamics in the U.S. navies Naval Research lab.
Ultra analytics hub sets the stage for the next generation of analytic process automation by up leveling automation collaboration and data discovery in the securing governed way.
Allowing everyone across the entire enterprise to benefit from actionable data and analytics.
Hub of blurs the lines between the design time experience and designer and runtime automation in server and provides an affordable path for smaller working to leverage the benefits of automation.
In future releases, we intend to see greater integration with some of the capabilities of connect and promote auto modeling capabilities currently being developed and the potential marketplace for third parties to monetize assets to the growing audience of ultra to users around the world.
We also introduced our new Ultrabooks, multi threaded processing engine or amp, allowing customers to execute workflows simultaneously, resulting in processing efficiency on larger dataset with complex analytical processes.
While not a standalone skew the MPN engine is shipped with every designer server and analytics hub and we're delighted to see impressive efficiency gains and analytic processing.
Ultra is proud and humbled to have been named a customers choice recipients in the Gartner peer insights for data science and machine learning platforms for the third consecutive year.
Let me now give you an update on how ultragaz adjusting to operating in todays fluid environment.
We continue to operate primarily in the work from home environment. Although we have started to reopen select offices in regions, where it is permitted and where it is safe to do so.
However in regions were offices have reopened we will not require associates to return to work. If they are not comfortable doing so and we'll continue to support the more remote work in the near term.
Health and safety of our associates is our primary objective.
Well overall ultra his team adapted well to working at home, we did struggle to effectively onboard and enable some of our new hires, particularly new sales reps learning our systems, Playbooks and new product offerings.
Many of these new sales reps had very limited if any time onsite at one of our offices and Havent ramped up as quickly as historical cohorts.
To address this specific challenge and restore overall sales and marketing efficiency to historical levels, we are or have made the following operational adjustments.
We are improving sales enablement and further refining our learning and development capabilities to help reps ramp up at the same levels. They have historically, we've adopted a new learning platform adjusted sales Playbooks to account for additional offerings and our creating enhanced content to foster learning in a fully remote environment.
While improving sales enablement, we're also enhancing our engagement of the global alliances and tech partners to expand our sales footprint.
With the negative financial realities, taking hold and many verticals midmarket in SMB organizations. We're reallocating some sales resources. For example, we have reassigned some of our reps from the commercial teams to our enterprise customer success teams to help support larger expansion and customer renewal activity.
We will continue to realign enhanced marketing community and support initiatives to digital experiences to reflect today's reality.
As we discussed with you last quarter.
We launched a virtual support center, which continues to see strong engagement levels in our community site continues to be a great resource for customers to connect with each other well in person opportunities to do so our limited.
Maintaining profitability is an important strategic objective. So we continue to closely monitor and if necessary, we'll adjust operating expenses to appropriately well aligned to our operating plan.
We are monitoring key performance indicators, such as pipeline creation and conversion rates average deal sizes sales cycles renewal rates and overall discounting to ensure that our top and bottom line performance is aligned.
I am proud of the work our associates has done in the most uncertain times, but what I'm. Most proud of this quarter is the work that our team has done on our adaptive program.
As we discussed with you last quarter adapt our advancing data science and analytics potential together program is a way to give back to the global analytics community and help upskill those negatively impacted by the cobot 19 crisis.
Since launching in early May we have welcomed almost 10000 participants from 125 countries into the program.
We are excited to bring more people into the analytics fold and provide them with the resources to help them be part of todays data driven economy.
With hundreds of into the individuals becoming certified and our platform and obtaining their nano degrees in business analytics on the Udacity learning system, we're doing our part to help future proof their careers.
In closing despite the continued uncertainty that I believe will remain for the foreseeable future. We remain steadfast in our belief that ultra is well positioned to execute on our vision for analytic process automation. We are confident we will emerge from this crisis stronger than ever and then a solid position to drive higher levels of growth and margin expansion.
With that let me turn the call over to Kevin to discuss our Q2 financial performance and our outlook for Q3 as well as some commentary for the remainder of the year Kevin.
Thank you Dean before jumping into the numbers, let me provide you some additional color on the business impacts we experienced in Q2 as a result of the current pandemic.
Last quarter, we highlighted that new business activity in April was consistent with the levels in April 29 team.
This gave us some degree of confidence the customers were reengaging. After the abrupt slowdown we saw at the end of March.
However, as we have typical software linearity in our business, meaning the majority of our bookings are generally concentrated in the back half the quarter changes in customer buying behavior did not become apparent to us until later in the quarter.
These changes included a long dated sales cycles, resulting from customers, having more robust approval processes and higher levels of scrutiny smaller deal sizes and less favourable linearity with some transactions slipping into Q3.
During the quarter, we added 271, net new customers and now have 6714 customers, including 737 or 37% of the global 2000.
Within our new logos for the quarter, we landed new customers in high end medium risk verticals demonstrating that even in these in challenging times analytics remains very important.
The changes in customer buying behavior were most evident in our expansion business, particularly for transactions that were not attached to renewal.
Along with these trends sales and marketing productivity declined for the quarter and we saw a moderate increase in our churn rates globally.
As Dean mentioned there are a number of actions we are undertaking in the near term to drive efficiency in our business I will lay these out these actions out by strategic investment priority.
First sales and marketing.
As we discussed previously our primary investment area has been expanding our global go to market footprint Q2 was a challenging customer buying environment and as a result, we are focusing on improving sales rep training and enablement reevaluating our partner engagement redeploying sales resources to focus on higher value opportunities and adjusting.
Getting spend to reflect the digital reality, we're living in today.
We will continue to monitor key activity levels affecting unit economics, including our trial activity in conversion pipeline creation sales cycles average deal sizes contract duration renewal rates and overall discounting levels to inform us how or if we continue to invest during the remainder of the year.
Our second investment areas product development.
We expect to continue to invest in our product development efforts to advance our product roadmap in support of Apiay and digital transformation, we believe being able to continue to advance our product roadmap. Despite the sort of short term challenges will better position us when we emerged from the pandemic and current economic dislocation.
Our third investment area is back office support and infrastructure.
We are critically evaluating investments in this area in direct response to our go to market dynamics, we will closely monitor momentum in our go to market and make future investments in this area as deemed necessary in the near term. We are focused on ensuring these teams are operating efficiently in support of our global teams.
As we navigate the remainder of the year, we intend to balance future growth and profitability appropriately until we begin to see renewed strengthen our go to market.
We have historically demonstrated the financial discipline, the balancing investment for growth and profitability and we intend to manage our cost structure based on topline dynamics.
Now turning back to the numbers.
Revenue was $96.2 million, an increase of 17% year over year.
US revenue was $66 million, an increase of 14% year over year, while international revenue was $30.2 million, an increase of 25% year over year.
Both in North America was negatively impact negatively impacted by lower expansion activity, specifically within our enterprise and global strategic customer teams.
Internationally, almost most regions, although most regions did experience weakness, we saw strength in the middle East and Asia.
Overall average contract duration for Q2 was approximately two years consistent with prior periods.
That expansion for Q2 was 126% and that expansion for the global 2000 was 137%.
We ended the quarter with over $430 million, if they are or annual recurring revenue, which was up 40% over 40% year over year.
Going forward, we intend to provide a ARR as an additional operating measure to help investors assess the health of our business.
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 Q2 margin was 91% consistent with Q2 2019.
Our Q2 operating expenses were $88 million compared to $73.4 million in the same period last year.
The increase in expenses is primarily attributable to increases in our overall headcount levels.
Our Q2 operating loss was effectively breakeven.
Net income was $1.7 million or two cents per share based on $69.6 million non-GAAP fully diluted weighted average shares outstanding.
Turning now to the GAAP balance sheet and statement of cash flows in the second quarter, we use $13.4 million in cash flow from operations, primarily related to timing of payments related to canceled events and other working capital needs.
Year to date, we have generated $6.6 million million dollars of positive operating cash flow and as of June thirtyth had $974.4 million and cash cash equivalents short term and long term investments.
We ended the quarter with 1500 15 associates up from 1400 78 associates at the end of Q1 2020.
And 1076 associates at the end of Q2 2019.
Now turning to our outlook.
The current macroeconomic environment continues to be in the state of turmoil and we expect conditions will remain fluid.
Taking this into account, we're providing revenue operating income EPS guidance for Q3, consistent with historical patterns.
We're also providing a full year outlook for revenue and they are.
We emphasize that our guidance is subject to various important risks and cautionary factors referenced in our call today and in today's earnings release.
Our guidance considers the following.
The overall macroeconomic environment continues to be as challenging as we experienced in Q2 2020.
And expanded guidance range to account for increased uncertainty of new business timing of renewals variability in contract duration and slightly higher churn rates.
The average duration of our subscription agreements will be approximately two years. However, there may be headwinds relative to contract duration as compared to the second half of 2019.
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.
For Q3, approximately 70% of our revenue will be recognized from deferred revenue and scheduled multiyear billings approximately 15% is expected from contract renewals and the remainder expected to come from net new business closed in the quarter.
We've historically seen 80% to 85% of in period bookings coming from existing customers, which is generally inline with what we saw in the first half of 2020.
For Q3, 2020, we expect GAAP revenue in the range of 111 million to $115 million representing year over year growth of approximately 7% to 11%.
We expect our non-GAAP operating income to be in the range of $8 million to $12 million and non-GAAP net income per fully diluted share of nine to 14 cents. This.
This assumes 71 million non-GAAP weighted average fully diluted shares outstanding.
Again, assuming no major changes to macro conditions, we believe that revenue for the full year 2020 will be approximately 460 million to $465 million or a year over year increase of approximately 11%.
Additionally, we expect to exit 2020, with approximately $500 million of our or annual recurring revenue, which translates into over 30% year over year growth.
In summary, while we were in unprecedented times, we believe that alternates remains well positioned given our strong market product market fit significant market opportunity given the low penetration into our total addressable market powerful business model and strong financial position with nearly 1 billion of cash on the balance sheet.
Finally, I would also like to extend my special thanks to all of the alter its associates across the globe, who have adapted to our work from home reality and have continued to delight our customers each and every day in these uncertain times.
And with that we'll open up the call to questions operator.
Thank you.
And now have our question answer session.
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One moment, please while we now poll for questions.
Our first question comes from Tyler Radke with Citi. Please proceed with your question.
Okay.
Okay.
There is.
Between new business duration.
In churn I guess just on duration I know, Kevin you said duration was about two years, but just curious if there was any kind of year over year headwind.
I know you said you may expect that a little bit in the second half the year.
Okay.
As you mentioned bookings were flat year over year.
But I just wanted to make sure.
Whether there's any duration impact on on the Q2 numbers.
Helped drive the.
Flat bookings and billings grew much faster so just trying to understand the discrepancy.
Yeah, Hey, Tyler. Thank you we did not here the first part of the question, but if the end of it if you're just asking for the direct contract duration dynamics relative to kind of Q2 in the first half happy to answer that but I want to make sure I'm answering that question.
Yeah. It was it was mainly just are you seeing what was there a duration headwind if I look at Q2 20 versus Q2 19 to your bookings look like they were flat year over year, but it looked like billing.
We're grew around 25%. So just wanted to understand if there was a duration headwind on on the bookings.
Thanks for clarifying we did not see any material change in contract duration as it related to Q2 versus Q2.
And.
Okay.
What we experienced with billings was really a timing effect.
That that came into Q2.
Okay.
And then I guess just.
Question, maybe for Dean.
I think.
As you look at the the broad customer base of all tricks and there's there's tons and tons of different use cases out there from.
Data prep too advanced analytics to kind of automation within finance departments and I'm curious if you've observed.
If any of those use cases.
Our stickier you know I would I would think yes. Some of the work you're doing with Pwc in terms of modernizing.
Pacsun and finance obviously, the those departments are still have to do their taxes and what not in this environment. So just kind of curious if if theres any kind of discrepancy between.
Business trends based on the use case.
No I don't think Theres really been any major sea change in the the use of all tricks for any.
Functional area, we I would say that we did see a bit more scenario planning with all tricks in in the FPN eighteens.
In Q2, and probably will continue to see that in Q3, I think that that.
For the last six months or so more and more activity is around automating the office of finance.
Similar to two what you saw in the Sirius XM use case, the the partnerships with folks like Pwc bring this subject matter expertise for sure.
Most of the the the churn that we saw the business was actually.
Commercial accounts that either couldn't expand or just didnt have.
Tam available and so I think what we saw in the quarter was just elongated sales cycles and smaller average deal sizes for the most part and Thats why we kick in with our our adoption licenses. So the use cases remained the same the selling cycle changed a bit the vehicle.
Wasn't a new one it's been time tested with the adoption licenses and so we continue to be pretty excited about what's happening in the space I think that.
A lot of the large organizations have positive major transformation efforts, we saw a lot more mini and micro transformation efforts so that folks in the the Cxo office can continue to.
March down this journey to digital transformation success.
If I get a sneak one clarification when you talk about some of these license agreements, where maybe give an unlimited amount of users for a period of time, just kind of trial and see demand when do those periods. When did when did that typically expires at year end does that kind of alignment.
Q4.
I wanted to clarify that.
Well, the we have different milk, so we control the three dial that matter to us into the customers.
And they are the number of seats in servers, we don't do unlimited.
We have a price point for that that use and.
A duration and sometimes depending on the maturity or the culture. The organization has or the vision that they have for transformation. It may be three months. It may be six months it might be nine months. What we do know is that we've had very good conversion success historically with this.
We saw a number of new business.
Add this last quarter with adoption licenses, which typically is not the case. So now we're helping out customers, who don't want to give up on their journey, but have have slowed down the velocity of that journey.
And.
Coming out of the the.
Adoption period tend to lead to much bigger expansion, we're not sure if that will be the case. This time, if they'll get pushed from Q3 to Q4 from Q4 to Q1, we do know the vehicle works.
Thank you.
Good thing thank you.
Our next question comes from Derrick Wood with Cowen and company. Please proceed with your question.
Thanks, Kevin.
You gave there are that's helpful. You gave it last quarter I think you just gave a number last quarter, but now you're giving a number and growth.
Can you tell us what how air our grew and Q1 and what growth was in.
In 2008 games, so we have those numbers.
Yes, Thanks Derek.
It is a metric that we've kind of drift out at various different milestones over the years and more recently, we did provided in both Q1 and now going forward, we aren't providing what those interim periods are but I think theres enough information, we can kind of.
Interpret relate to come up with your own estimate.
Well I think it's important that every month.
These important derricks remember that we guided to 30% growth on a are to the end of the year. So.
Healthy strong growing business and.
The very large space for data science and analytics and today, we're the only publicly traded company that focus in on this space with a code free gold friendly platform to help.
Ill people see success in digital transformation.
Yes, Thanks, Deane I just I.
I wanted to parse this is little bit more in terms of what you guys are saying because because there's.
We've seen other software companies, whether this storm a bit better through Q2, particularly in the enterprise and clearly you've got some some more headwinds and caught you by surprise going in the back part of the quarter. So.
I mean, I guess, if you look at internal and external factors on the external as or something that.
With respect to your end markets that may be facing greater budget pressure or labor. There is it changed competitively or internal was there.
Some development, where maybe there were seats oversold and there's more absorption needed to be taking now.
Maybe you could just kind of walk us, they're a little bit more thoughts on internal versus external impacts, yes, and I think it was a tale of two quarters. It was the things we can't control coated.
And it's spread and its impact on on businesses and then the things we can control and so what we did see.
It was almost like three quarters and one in Q2 with April being very different than May and in June.
So obviously there was an air pocket that had a big blip in it for April we didn't see actually much improvement, although we anticipated some improvement in may so linearity wasn't necessarily on our side. So we we actually took control of the things that we can continue can take control of we for example.
Rationalize our marketing spend almost everything has gone to a virtual reality.
Moving everything all the excitement from our inspire conference which drives people.
Excited about the platform to two to buy we've moved all that excitement to the community we've seen a 60% 68% growth in the monthly active users.
Of community, we've seen an 82% engagement.
In any in engaged users on the community we've launched our virtual solution center for 2000 customers continue to advance their learning and understanding the value that our platform brings.
We saw the discovery program launch which is a.
These were launched actually the pre cobot almost all these activities began pre covered.
30 day trial program, that's kind of a guided discovery effort to get to value quickly we held 235.
Virtual webinars, including.
Livestream for the EPA event.
We reiterated a bunch of things in the sales organization.
Allocating people to the customer success team and and the enterprise expansion team. So we there's a whole bunch of things that we can't change, but what we do know is that the conversation that the strategic level continued to be very strong we're quite bullish on what's going to happen as people start to emerge from coated.
And frankly, I think that the use of adoption licenses help helps us in the long run.
If I could squeeze one more on that last point.
Can you give us a sense of the mix of adoption license percentage of total transactions or some metric and Q2 and how you see that moving into the second half.
Can't give you that I think that.
I think whats telling about it is that we had.
More than a 60% growth and the use of adoption licenses over same period last year and I think the most telling is the 100% increase in adoption licenses in a mostly pre coded quarter in Q1, two a cobot world in Q2 so.
It was a.
It was a quick change to the model as soon as we recognize that there were some things we couldn't control organizations were standing up.
New teams to scrutinize every kind of a spend.
They were.
Delaying cycles, they were inserting as much but in the process as possible and so the adoption licenses took out as much friction as we could possibly takeout being some of the things we we can control.
Okay. Thank you.
Thank you.
Next question comes from Ittai Kidron with Oppenheimer. Please proceed with your question.
Hi, Thanks, Thanks, guys Indian maybe just kind of following up.
On the again on does adoption licenses can you clarify if the pricing on those is materially.
Lower and Im trying to gauge again just to make sure I understand this whether this is something that you chose to try and push on customers given the challenges you had.
Closing deals and renewals or this is something to customers came to you and said listen we're having a bit of the challenge here can we just something temporary and then revisit somewhere down the road.
Yes, we have standard skews for for adoption licenses, there's some flexibility and again it goes back to the vision the customer has the the aptitude.
An appetite for for growth.
Of our platform.
I would say that that.
We offered them up typically as an apps from customers, who would say things have slowed down we're not going to be able to get this deal through so let's figure out what the true demand is.
They tend to be anywhere between let's say 25 of 100 Grand.
I don't have the exact count for Q2, what I do note. It was a large increase in the number of adoptions.
Okay and.
As you and regardless of the business itself, we've talked about commercial.
I just want to make sure again Dave.
Good buying behavior has changed.
It applies across your business and across all verticals or just as just a commercial and impacted industries.
Well I think the the.
Elongated sales cycles occurred across the entirety of the base of the business.
I think that the.
Churn was mostly impacted in commercial businesses.
Much of it in the highly impacted verticals, but at the same time, 20% of our new customers came from high risk verticals tend to tend to tending to be in larger organizations in those verticals.
Some of those examples are like Qatar Airways, who I don't know if they had a plane in the air, but but landed with us to really understand what's happening in their operations.
Got it it's very good thanks, guys. Good luck.
Thank you.
Thank you.
Our next question comes from Chris Merwin Goldman Sachs. Please proceed with your question.
Great. Thanks for taking my question.
I wanted to ask about the cloud strategy of it.
Theme, we keep hearing from companies is that as they talk to customers are increasingly looking to migrate all different types of systems to the cloud and I know that obviously some of your customers today have a cloud and sense of the product but.
Are you thinking about trying to migrate more and more of your customers to the cloud and time or architecting more coordinated products.
Is there more of an imperative to do that particularly in light of what seems to be an acceleration of digital transformations for customers. Thank you.
Sure. Thank you for the question.
So everyone knows we actually have quite a few customers who are in the cloud we have our server deployments for automation and analysts processing up an eight abuse and azure for as little as $9 an hour that you can execute.
With just a few keystrokes, we actually have had that up there for three or four years with almost no activity and thats not to suggest that cloud isn't important but.
We're hybrid we understand that we want to be close to where the data lives and in large organizations, especially in the global 2000, most of their data hasn't moved in fact earlier. This week I was on the phone with achieved data officer of a fortune 50.
Insurance company on the East Coast.
And he indicated that.
They have been dabbling with the cloud for quite some time, but not a single bit of customer data was currently in the cloud and so I think that that.
We've been focused on cloud for a very long time, we are in the process of.
The cloud based.
Designer, mostly to ease the burden of deployment of of large.
Implementation in organizations around the world.
We have.
If you attended our EPA event, you would have heard that Pwc indicated that they up 55000 users of all tricks now it's a hassle to deploy a quarterly releases.
I'll have an image for for those users so having a browser based delivery would be better the the customers are not pushing us for a multitenant SaaS service at least not today.
The data is living everywhere, it's going to be hybrid for ever.
And.
We will will live where the customer told us to lift and we'll be prepared when the customer says that the data gravity has shifted it just has not shifted and I don't think it's going to shift for quite some time.
Got it thanks very much.
Thank you.
Our next question comes from Brad Sills with Bank of America. Please proceed with your question.
Hey, guys. Thanks for taking my question I wanted to add more about the adoption licenses what has your experience been historically in terms of version of both.
Okay.
Types license to.
Expansion from from there.
Well, we we see.
Significant conversion rates.
Considerably higher than our normal conversion rates and.
That's because we have strategic conversations typically top down we don't offer adoption licenses to the analysts who just trying to solve the data problem than might have 10 users in their functional area. It's typically someone who's.
Moving down the path of major transformation, who isn't sure that Theyve got 200 user June 2000 users are 20000 users. So we're pretty careful on how we move those dials of the adoption licenses. We have seen great success, we've tried not to rely on them, but in a time like Q2.
As customers struggled to.
Figure out how they were going to get to their successes, we came to their rescue to help them out in it'll work out for us in the long run whether that converts in the period in which the adoption license expires or not is yet to be seen.
Again.
We're bullish on what's going to happen in the future. It's just a matter of timing and we're going to recover from cobot.
Thank you.
Our next question comes from Jack Anders with Needham. Please proceed with your question.
Hi, good afternoon, its cotton in for Jack Anders Today I was wondering if you could provide some color on some of your comments on longer fuel cycles can you provide some numbers around average deal time for our in house. This change today and how should we be thinking about what you can control in terms of sales and marketing that gets these sales cycles back to normal.
Well, we've clearly looked at every aspect of our sales and marketing go to market activities. We've rationalized a bunch of things away. We've moved most everything to virtual weve doubled down on ways to support and engage our customers.
Yes, well give you the magnitude of the deal sizes, but they are.
I wouldn't say theyre extremely smaller.
There.
Smidgen smaller, but the sales cycles are a bit longer.
And.
No. It's it there are some ways you can control some of it and there's other ways you can most of the customers that we sell to is in particular, the top down selling motion.
Most organizations, who are going to have large expansions with us inserted their own teams just like we did where we have scrutiny over big spend and committees get get more involved and when they're all working remotely.
It becomes more and more of a challenge I think we actually illustrated the customer from Q1 that was just out of very large expand that had.
16 difference.
Signers across four different countries and and those are just challenging things for customers in Q2.
End of accelerated that that change and so we embrace that in the ways, we could and.
We're doing all the weekend to two well unit you know that we've been very.
Capital efficient so we're never going to take these situations lightly we're going to look at it all of our own spend we're going to make sure that we're investing in the things that drive the most value for shareholders.
Thank you Thats helpful and can you talk about how you recently announced AK messaging has resonated so far with customers. How's. This provides go to market helped in terms of new lands specifically.
Well, it's been great actually the EPA message.
We started that whole process.
Back in late summer of last year, we recognize that what was happening is all of our conversations.
Have become more strategic in our platform has become more critical for.
Transformation remember that the EPA message is all about this convergence of.
Analytics data science and automation and it's at the forefront of of certainly the C suites.
Mine.
And the EPA messaging.
Came up really well in June we launched the the.
Category first we can in June we had large attendance at our live event, we continue to have meaningful conversations with with both new customers and existing customers by the way the the.
Fortune 50 insurance company that was on the phone with that I mentioned earlier. He actually is large customer of all tricks and we were talking about the EPA message and he said well your platform not only allows me to do things better but allows me to do better things, meaning we give them all their time back so they can folk.
'cause in on more strategic initiatives to drive higher values.
In terms of outcomes. So the response has been great in our product innovations that we rolled out.
Fit very cleanly and nicely into that EPA messaging.
Thank you appreciate the color.
Sure.
Thank you.
Our next question comes from Bob I'm, Sorry, with William Blair. Please proceed with your question.
Hey, guys I know, it's been a while the thanks for taking my question being put to catch up Kevin I guess I wanted to touch a little bit just on on sort of backing up limit. The logic here. So in tough times, we think about core use case like setting price elasticity or how to.
Create new pricing model that drive greater usage side also law sub et cetera. It feels like they use case for the core technology should tick up like the ability to say how do we drive.
Got it profitability better pricing better segmentation.
Better.
Allocation on store shelves et cetera.
Help me sort of reconcile a little bit with what you're seeing in terms of the larger customers again commercial I understand the logic is totally get the value. That's what makes sense I feel like they use it should be picking up dramatically as people trying to figure out how do I optimize and this environments.
Well.
I think the timing is kind of what's at stake here, it's not the interest in the technology or the value proposition that the technology drives sure.
When when companies are down digital transformation efforts they want to ensure that it's not a single use case thats driving the value they care about well what Sirius XM cared about 157 use cases.
And they wanted to make sure that they could cover off on a large number of those use cases before they actually did expand I will say that would the as we've gone more from in the last.
12 months, maybe even 18 months more and more from a.
Small land to the top down selling motion with with larger Landon larger expands what are the things that we've also done even in the last 90 days as.
Leverage our value engineering team for more of the strategic discussions that we're having with with the C suite, we put together a value engineering team about a year and a half two years ago.
Weve perfected the the playbook for value engineering in a few of the verticals.
And we begin we've begun socializing that effort with a broader part of our go to market team. So we do drive value I think you'll see that in every customer you talk to you see that in all the use cases that you find on 260 used cases that you find on community.
And so the key is actually driving more of it so that sellers have that value proposition at the moment of inflection for customers to buy.
Got it got it got it and then maybe touch other on the products when I think about.
The MPMP products and I should think about the scale of what you're doing now in terms of data cleansing data, perhaps at a pulling it all at the together in a much bigger scale do you feel like you're moving back into the stack a little bits of that each shelf space at all because it's still a business units still sort of Loco Dakota help me think about sort of the sort of where you're headed towards that direction is this sort of stay.
And your direction had back towards a little deeper in the stack there.
Have a quick follow up.
No. The Amp engine isn't in memory engine. It is it is far more scalable we're seeing.
The extraordinary throughputs on on processing for large databases, particularly when there is complex analytics processes being run.
But again, it's it is an engine for processing in memory.
And frankly, we don't care, where the processing does occur or someone wants to push business logic from the ultra if you buy back into.
Redshift or teradata or snowflake or.
Sequel Server will allow you to do that.
But it but it makes the the it provides the horsepower that analysts need now that weve liberated data across their enterprise they don't always half due.
Go with the server, although I will say that the purpose of rolling out.
The the analytics hub was intended to get people to adopt server earlier and of course, the Amp engine is shipping with.
Server.
Hub.
And designer.
Got it got it now that that that instead is helpful and pushing the technology back wherever going to use. It seems like are we are useful sort of incentive for others to sort of expand usage I want just quickly on.
When you think about sort of the automation piece here.
Think about RPH think about hey, I'm going to conduct a bunch of things and as a onetime use case and as multiple times sort of reiterating that and integration. How do you think of so where our PPA sits next to you guys or is that sort of a totally separate space, but it feels like rps hasn't really adapted to analytics much but it feels like it could be a good sit here synergistically just trying to think through that process. Thank you.
Great question, I think that the the corollary of RPK to the automation continuum is similar to visualization to the analytic continuum.
The automation vendors are I think really important for.
Organizations around the world understand.
The impact that automation can have and for us we actually tend to automate more sophisticated complex processes. The partnership we have formed with you why path is really very nice the build.
Some some capabilities that allow you to execute bots.
In all tricks as part of an analytic pipeline both at the front and the pipeline to go.
Get some data, let's say and at the end to go do another activity and so.
There will be some some joint activity with with you I path, you'll probably see some announcements here very soon we're excited about the the RPH space. It opens up the aperture around the third leg of of EPA and that is a focus on automation.
Got it trying to thanks, guys. Good connect again, thanks, taking my questions.
Thank you.
Our next question comes from received urea with da Davidson. Please proceed with your question.
Hi, guys. This is hana Rudolph on for ratio today. Thanks for taking my questions on first Kevin maybe could you walk us through the factors that are contributing to the delta between aircraft in revenue growth.
Yes sure. Thank you it's a great question.
If you remember we've we've we've spoken for quite some time, our revenue mechanics and they are.
Disconnected.
Revenue was driven by.
Bookings, which is TCV and an upfront portion based on product mix and they are our is really just the accumulation of ACB overtime. So the two are very disconnected in that regard.
Okay, Great and then second question how long do you expect all takes you get these newer sales reps backup to the productivity levels maybe at.
Well, that's progressing pretty quickly be the for covered we started down the path of modernizing our enablement systems here as you know, we typically front load our our quota carriers at the beginning of the year.
No had we been able to predict covance emergence, we might not have hired quite so many.
But we were right in the in the mix of modernizing the entire enablement process and we are on phase two of that process and so it won't be too much longer before we see them.
Be productive back to historical levels.
Great. Thank you.
Thank you.
Our next question comes from Mark Murphy with JP Morgan. Please proceed with your question.
Hi, it's Adam appreciate or on for Mike Murphy. Thanks for taking my questions on so for one is there any additional color you guys can provide on the difference.
Just in the general macro I guess from a pipeline perspective between April and Chen.
Well I I think that.
The primary difference was.
As we went into June.
Our customers and prospects, we're faced with internal headwinds of their own.
And.
Again, I think Thats why we chose to use our other playbooks to help them out.
I don't think that there was I.
I think I think there was some change in attitude, but I think the process change so that at that attitude couldn't actually reveal itself and in terms of deals being done.
Got it that's helpful color and second is there any additional I guess.
Well on like the X on the investment Joe that making fair digital marketing strategy going forward.
Well, we we've actually made lots and lots of changes to it much of it was also.
Plan pre co that we've been investing in our community for.
The last five years, and we have a very very active community.
Again, we had 60% improvement in the monthly active users on community and we know the impact that community has on our customers. They they tell us.
We help them get up to speed in the data science World, we help them socialize it to their co workers. It leads to more expansion and when we come out of coded we'll see that expansion I suspect.
But we also have done a lot of around new programs in community that would take the place of.
Onsite.
At the working days, where we'd go on site and have workshops with customers. So everything from our discovery program, we have lots and lots of people in our discovery programs. Our virtual solution Center has gone over extraordinarily well more than 1000 customers spend considerable time with our teams online.
So I think we've made the pivot to the virtual world.
Quite well.
Sounds good thank you guys.
Thank you.
Our next question comes from Brent Bracelin with Piper Sandler. Please proceed with your question.
Hi, its cortech resolve Brad.
I was wondering if you compare and contrast, what you're seeing right now with what you saw in the last period of economic uncertainty may not be the financial crisis, but what does that telling you about how long will take for spending level to return to normal.
Yes. Good question I I've been at this for a while I've seen three I'll, even say four of.
These events or this is my fourth event.
This one is different in that.
It's kind of hard to predict what's going to happen next based on what media says and whether theres going to be people going back to school and back to it to the office and.
Whether it will emerge again in the second wave that part is a little.
Uncomfortable, but but.
I think.
The long term as we believe in this space, obviously, it's not going to go way, it's perhaps put a pause button down.
Down but.
It's going to reemerge and I actually think it will be justice Swift of re emergence as we had in 2008, you've heard me say on many quarters that.
In in good times people need data science and analytics in bad times, they need them more and it's a matter of time and.
Yeah, I'm pretty confident that in the end, we're going to win the EPA category and will be the leader in the data science and analytic space and we just made have to wait a smidgen longer.
Perfect. Thank you that's very helpful. And then Kevin I, just wanted to clarify that contract duration remained constant despite adoption life.
And if so it does that really just reflect low contribution to one dollar basis of the adopt licenses.
Yes, I mean, great question. So when we look at contract duration is on it is on a dollar weighted basis.
As Dean alluded to the whole advantage of adoption licenses.
Our that there are low entry price and they really give customers and opportunity to trial, a large swaths of licenses at relatively low cost so.
They don't generally have an impact on overall contract duration.
Perfect. Thank you very much.
Thank you.
Final question comes from Pat Walravens with JMP Securities. Please proceed with your question.
Great. Thank you. This is Joe Im Rentech on for Pat just quickly on M&A I was curious that build top of mind for you guys and just any color higher thing about M&A right now thank you.
Sure. Thanks for the question.
As you know.
We did our convert in 2018, we did our.
Larger convert last year, we did specifically to invest in the business and in part be ready for consolidation.
In the space, we have pointed to accelerating consolidation for the last.
18 months two years.
I think coded.
Forces the hand of a lot of.
Players that haven't found a product market fit.
And who know that they have to be part of an end to end platform like ours. So we continue to look at lots of deals.
That said good companies get bought not sold and so were fairly particular about where we go deep in looking at at organizations.
But.
The I think there is a huge opportunity our thesis is still around three pillars.
That is going to be important of back the last acquisition. We made feature labs last October.
We've already woven in their email ml engine that are there Python open source engines into both our assisted modeling.
Product.
And as part of the same platform. It is part of the predictive server that.
Provides auto modeling capabilities.
That will compete with the data robots in the two rows of the world starting next year and so.
Interesting IP buying IP is important acquirers, there's probably a lot more people that are available now so acquires might not be as critical.
But there's also opportunities to buy meaningful revenue streams.
In close proximity to our space.
Great. Thank you so much.
Thank you.
No no further questions at this time I'd like to turn the floor back over to management for any closing remarks, you may have.
Thank you operator in closing I want to thank our associates partners and customers not just for driving business performance, but for driving societal outcomes. Your efforts do not go unnoticed and we take our corporate social responsibility quite seriously.
You heard about our success with the adapt program educating nearly 10000 humans have been displaced as a result of cobot 19, and we're doing considerably more through our ultra Ics for good program. We have provided nearly 30000 free licenses of our software to more than 2300 universities around the world teaching critical data science and analytic skills.
For the 21st century, and we currently support more than 500 not for profit organizations in dozens of countries needing our help and doing good with data and analytics. Thank you for all you do.
Im looking forward to updating you on our business progress next quarter, thanks and be well.
Ladies and gentlemen. This concludes today's web conference you May now disconnect. Your lines at this time. Thank you for your participation have a great. Thanks.