Q1 2021 Alteryx Inc Earnings Call

Greetings and welcome to the Ultra ex first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded I would now like to turn this conference over to your host Mr. Chris Lal Chief Legal officer. Thank you Sir you may begin.

Thank you operator, good afternoon, and thank you for joining us today to review <unk> first quarter 2021 financial results.

With me on the call today are Mark Anderson, Chief Executive Officer, and Kevin Rubin, Chief Financial Officer. Additionally.

Additionally, the rest Vitol chief product officer will be joining us for the question and answer session after prepared remarks.

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.

Through a variety of risks and uncertainty on.

Our actual results could differ materially from expectations reflected in any forward looking statements for <unk>.

Discussion of the material risks and other important factors that could affect our actual results. Please refer to our SEC filings available on the SEC's website, and the Investor Relations section of our website as well as the risks and other important factors discussed in today's 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, Mark Anderson Mark.

Thanks, Chris and thank you all for joining us on the call today.

I'm pleased to report that our FY 'twenty one is off to a strong start with Q1 results ahead of expectations.

The team did a solid job executing against our plan around the globe.

We achieved a key milestone with <unk> crossing the $500 million, mark ending at $513 million up 27% year over year.

As we mentioned last year FY 'twenty, one as a year of transformation for ultra ex as we evolve how we innovate and deliver value to our customers and our Q1 results demonstrate the early progress we are making.

Execution begins with the right leadership and the right operating framework.

I'm confident we're putting a world class team in place and are making the right investments.

I'm quite happy with the execution against our FY 'twenty, one operating plan thus far.

And it has been translated down in an actionable way to every one of our associates.

Ultra ex the delivering unparalleled value to our customers as we scale.

Customers and prospects continue to validate our focus on high value use cases for functional and digital transformation.

A global tier one partnerships with whom we are working I've seen great traction as well I will provide more color shortly.

For the call today, I will give an update on our overall progress against the key imperatives that I outlined last quarter. Kevin will then provide specifics on our Q1 performance as well as our outlook for both Q2 and full year 2021.

Our first imperative is delivering strategic customer outcome as a reminder, at the end of last year, we began our transformation journey to simplify and streamline our go to market organization to focus on the highest value customers and prospects.

Narrowing our focus and aligning closely with our partners allows us to go after the largest total addressable market, which will help us deliver high value business outcome.

I believe these are the right changes in order to capitalize on the large market opportunity in front of us and sets us up for long term sustained growth.

Do this effectively we continue to build and scale our go to market engine as I mentioned earlier execution starts with leadership.

We're in the final stages of our search for a new Chief revenue officer, and I'm extremely excited to be able to make an announcement very soon.

We also continue to expand our sales capacity at all levels. In Q1, we have been incredibly busy hiring associates to bring the right experience and the right skills to electric.

We have ambitious hiring plans for 2021, as we look to scale ultra ex across the globe, we're off to a great start as.

As an example, we've doubled the size of our customer success team in the past four months.

I believe that under Matthew Starbucks leadership this team.

Really be able to drive important customer engagement and that over time. These investments will lead to faster expansion and larger deal sizes.

While we did see elevated sales attrition in Q1, the majority, but the majority of it was expected.

At the same time, we successfully repositioned and promoted sales resources in Q1, and I'm really proud of how this team adapt to new assignments, new relationships and a much more comprehensive operating framework.

We continue to add high quality talent with stage appropriate competencies to complement our strong internal base.

With so many moving pieces, our recruiting team and the hiring managers across the globe.

An excellent job my hat goes off for them.

Early indications are that our strategy is working evidenced by improved sales productivity in Q1.

I continue to expect sales productivity improvements as we move through 2021.

As a result of the increased operational rigor and discipline.

Transformations don't happen overnight and these changes will take time to fully take hold.

Our focus on larger companies continues and we currently have 39% of the <unk>, where we are seeing new and significant expansion opportunities. They are turning to ultra ex to help navigate these important transformation journey.

This quarter, the largest real estate online retail marketplace in the U S.

Average the power of the ultra it's API platform to deliver automated analytics and drive marketing effectiveness.

Also in Q1, we closed a seven figure renewal and expansion deal with a large global consulting firm.

This firm like many use uses us for its both internally and as a leave behind in their digital transformation projects.

Every quarter, we have great examples of how our platform is being used in different ways. This quarter U S census expanded with ultra ex.

With our analytics automation solution, they're automating a variety of manual processes related to survey collection and processing and our saving thousands of employee hours a year.

It used to take weeks now happens in.

Also this quarter, a large social media company expanded with ultra to improve its human capital experience.

Through the power of automation, they expect to save approximately 4000 employee hours per year, while delivering near real time updates on employee engagement to their C level executives.

The ultra ex community is another way, we serve our customers and partners.

We have long believed that achieving analytics outcomes is a social and collaborative experience improved the ultra ex community, we bring customers and partners together to learn share and collaborate.

This quarter, we launched a brand new ultra ex community site that makes it even easier to learn and connect and drive value.

For new community platform includes a richer experience with personalized recommendations and the new data science portal to support advanced analytics across the globe.

The feedback to date has been exceptional.

He also ex community is extremely impactful to our customers experience with the ultra ex platform.

Customers that are engaged with our community are three times more likely to expand and have significantly higher usage of advanced analytic capabilities.

In the past year, we saw on over 50% increase in activity on community.

Another key imperative for <unk> is broadening the ecosystem.

Continuing to expand key partnerships, while adding new ones is a key pillar in our success.

We believe having a robust ecosystem of strategic go to market and technology partnerships will act as a force multiplier and help accelerate our growth.

These partnerships enable more strategic engagement.

With the steel, including digital transformation initiatives and allow us to deliver more seamless integration.

For example, robotic process automation or RTA is highly complementary with our API platform and together, we can allow for swift implementation and faster time to value and outcomes.

We continue to see momentum with new iPad.

People's United Bank is leveraging the joint power review, iPad, and alts rigs to drive real time transaction processing and monitoring.

Which has enabled them to increase compliance and lower operating risk.

We're also pleased to announced partnership with Blue Prism.

Customers have a choice of RPI vendors, and we're making it easier for them to integrate with the best.

Finally, we are seeing real traction with our Snowflake Alliance and our joint go to market program.

Our first global go to market program together launched in March and we had a strong start out of the gate with snowflake influenced wins this quarter.

One of the reasons, we are successful because it.

We are agnostic to where you did it comes from and goes to as well as where your analytics are consumed for.

We're making progress around our strategic imperative to drive innovation and make ultra ex consumable anywhere.

2021 will be a year of investment in product innovation with our new Chief product Officer, Suresh Mittal, leading these efforts he joined the team last quarter and has hit the ground running and is busy driving transformation across R&D.

<unk> has been busy shaping the team to support our growth ambitions, while augmenting the strong team. We currently have in place.

I'm also excited that in two weeks for may 18th to the 20th we'll be hosting our inspire conference virtually where customers Alliance partners data fans and analytics gurus at night as a global analytics community to share and learn new ways to solve the biggest challenges facing business.

Society today.

We have an amazing lineup of customer an alliance partner presentations planned and I hope you'll join us to hear from Nike Mercedes Benz Kraft Heinz Standard Charter Bank UBS, you ipads Snowflake AWS and so many more.

We will also be hosting a financial analyst day on the afternoon on may 18th for its duration I will go into more depth on our current product strategy. So Kevin will outline in detail our financial framework.

I hope you can join us.

In closing, we're making good progress against our 2021 operating plan and strategic objectives I remain confident in our ability to successfully transform ultra ex to deliver long term value for our associates customers and shareholders.

The opportunity ahead of us is massive and growing.

As we continue to deliver significant business value to our customers.

Innovate relentlessly I believe ultra ex will be one of the winners in this highly fragmented vendor landscape.

Im incredibly energized by the opportunity we have in front of us with that let me turn the call over to Kevin Kevin.

Thank you Mark.

Overall as Mark highlighted we delivered a solid performance in the first quarter.

<unk> was $513 million, an increase of 27% year over year and revenue was $119 million up 9% year over year.

Both were ahead of expectations as we continue to see improvements in sales execution as a result of the sales strategy and operating framework transformation I walked you through last quarter.

Over $500 million and there is a significant milestone and we expect to hit another milestone within the year crossing over the $600 million Mark.

At the end of Q1, we had 70 214 customers, including 776 or 39% of the global 2000.

Well net new customer adds for the quarter were lower than historical levels, we realigned our sales team at the beginning of the year to deliver high value business outcomes and drive expansion within our largest potential customers.

Net expansion for Q1 was 120% and a stronger 129% within our global 2000 customers.

Additionally in Q1, we saw improved overall churn rates, while we continue to believe that net expansion of 120% is achievable as we pivot our go to market efforts, we may experience periods, where net expansion falls below this level due to factors first focusing on larger prospective customers and selling high value use cases may increase the.

Average initial deal sizes.

Second and as I mentioned during our call last quarter, we are transitioning our small and midsize customers to be predominantly channel supported which also may impact net expansion rates for this customer segment.

Churn rates are typically highest in smaller companies than those with a single seat of designer.

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.

As I mentioned earlier Q1 revenue was $119 million and increased 9% year over year.

While contract duration average two years for the quarter. It did decrease year over year as we sold fewer multi year deals in the quarter compared to Q1 of last year.

And as we mentioned last quarter, we expect contract duration to shorten somewhat as we align the business around <unk>, which impacts revenue, but not a R. R.

Our Q1 gross margin was 93% up 140 basis points from Q1 2020.

Our Q1 operating expenses were $113 million compared to $103 million in the same period last year.

The increase on our operating expenses is primarily attributable to increases associated with head count and other employee related expenses.

Our Q1 operating loss was $3 million.

Net loss was $5 million or a loss of <unk> <unk> per share based on $66 9 million fully diluted weighted average shares outstanding.

Turning now to the GAAP balance sheet and statement of cash flows in the first quarter, we generated $26 million in cash flow from operations. Our liquidity position remains very strong with just over $1 billion in cash cash equivalents short term and long term investments.

Now turning to the outlook for Q2 and full year, we are focused on executing against our strategic imperatives and are investing significantly in product development to accelerate innovation and in our sales and marketing efforts to better focus on larger customer and for customers and prospects with the greatest propensity to benefit from the altra ex platform.

For them.

We are encouraged by the improved sales productivity, we experienced in Q1 as evidenced that our strategy is working.

These investments are expected to drive our next phase of growth and are being made through the first half of the year, we expect to see their benefits in the second half of 2021.

Our guidance assumes the following.

First we continue to expect a modest and gradual improvement in the macro environment in 2021, specifically in the second half of the year.

Second the average duration of our subscription agreements will shorten and start trending below two years.

And third approximately 40% of <unk> booked in the quarter will be recognized upfront with the remainder recognized ratably over the time of the contract.

Finally, I'd like to remind you that our guidance is subject to various important risks and cautionary factors referenced in our call today and in today's earnings release.

For Q2, 2021, we expect GAAP revenue in the range of $111 million to a $114 million, which represents year over year growth of 15% to 18%.

We expect our non-GAAP operating loss to be in the range of 22 million to $19 million and non-GAAP non-GAAP net loss per share of 27% for 2000 and for.

This assumes 68 million weighted average shares outstanding.

For the full year 2021, we are raising GAAP revenue guidance to be in the range of 565 million to $5 $75 million, which translates into year over year growth of 14% to 16%.

We are also raising our full year 2021, and our our guidance and now expect to exit 2021 with approximately $635 million of IRR.

This represents an increase of $10 million from our prior guidance and translates to approximately 29% year over year growth.

We expect our non-GAAP operating income loss to be in the range of a $5 million operating loss to a $5 $5 million operating income.

Our non-GAAP net income loss per share is expected to range from a net loss per diluted share of <unk> to.

For a net income per diluted share of <unk>.

Our non-GAAP net loss per share assumes $68 5 million basic shares outstanding while our non-GAAP net income per diluted share assume 72 million fully diluted weighted average shares outstanding.

Finally, we expect an effective tax rate of 20%.

In summary, I am excited about our strong start to the year, we are starting to see the benefits from the operating framework. We are putting in place. We believe the transformation we are making today sets us on the right course for the future in this next phase of growth.

We have a strong product market fit significant market opportunity a powerful business model and a strong financial position with over $1 billion of cash on the balance sheet.

And with that we'll open the call for questions operator.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is another question queue. You May press star to try and move your question for Nick you for participants using speaker equipment. It may be necessary for you to pick up here.

Handset before pressing the star keys, one moment, while we poll for questions.

Our first question comes from the line of Brian Congrats on the Piper Sandler You May proceed with your question.

Thank you and good afternoon, I had one for Mark and I'll follow up for Kevin If I could.

Mark it's been I think a little over six months now since our since you've taken over.

The helm here I was hoping to get a report card as you think about the optics transformation here.

What areas are you most pleased with so far and where do you plan to double down your efforts going forward.

Hey, Brian Thanks, very much for the question.

Yes.

It has been over six months in the saddle here really Ben.

Yes.

Incredibly blessed.

For such a talented team group of people around the world that are dealing with all the things that have been swirling around for the last six months.

The pandemic and whatnot.

I would say.

Im really encouraged about.

Innovation that we're going to talk about a couple of weeks that inspire Suresh now youre going to rollout are you kind of roadmap for the future.

Pretty granular technical standpoint, and I'd also say I'm pretty pleased with the transformation that's going on in the go to market as you know.

We streamlined and.

Our repositioned a lot of people in the first quarter.

And in doing so it freed up the spending to be able to double the investment that we've made as I mentioned in the script in our customer success and what we're finding is customers have a much higher sense of urgency. These days around the departmental or or digital transformation projects that we're working on.

And having subject matter experts after the sales to help help us stick the landing I think theres going to be.

Really helpful, especially in the second half for the year.

Got it certainly sounds interesting and we'll stay tuned for for for at the inspired new next well actually in two weeks I guess, Kevin Scott.

Trying to understand the AAR Our guide the guide here you were taken up by 10 million on it implies <unk> growth is actually going to accelerate kind of exiting the year for if I just look at the net new E. R. R. It's about implies about you have to add about $122 million for the next three quarters.

If I look at the three quarters of last year, you only added about $88 million of net new accounts, it's a 40% increase.

Kevin Q1, net new <unk> was about $10 million lower than what you saw in Q1 of last year.

What gives you confidence you can add a $122 million on net new AOR for the next three quarters, just trying to understand the logic there.

On a pretty meaningful build in IRR.

No I think thanks, Brent I. Appreciate the question look I think it's a few things we obviously.

<unk> made very intentional and deliberate changes to the go to market. This year that we think.

As the year progresses will result in meaningful improvement in productivity in Q1 is kind of an early indication on early evidence that.

That is transpiring.

And I think as we look forward and.

You know just.

Consider what that means ultimately too.

Two to the go to market.

Forward and I think that's powerful the other just two components just to keep in mind is we also have very strong partnerships that as part of the transformation.

Our getting activated in a meaningful way and I think those are going to contribute.

Meaningfully in the back half of the year and then lastly, just think about product innovation and.

We're obviously going to go into more detail and inspire here in a couple of weeks, but we think that's going to be a nice stimulus to the back end of the year.

Into the business. So I mean looking across all those three dimensions. It certainly gives us confidence in the guidance.

And Brett I'll, just tack on CN.

On to that mechanically you will see productivity continue to go up through the fiscal year, and that's really going to be driven by these technology and distribution alliances that we've been forging as well as the fact that we're going to be adding more arrows into the quiver of our teams.

So it makes sense for what party here more on the details here in a couple weeks.

Great. Thanks, Matt Thanks, Brent.

Please limit yourself to one question and jump back in the queue to ask a follow up. Our next question comes from the line of Michael Swartz with Keybanc. You May proceed with your question.

Hey, guys, Hey, Martin Kevin everybody good evening.

Wonder if you could talk a little bit about what's happened what's been done what's been going on since Suresh.

It has come on.

On to the team and specifically, how he's helping that to carve your into your thinking about cloud and I know, we've got on analyst day coming up on.

Love It if we could talk about distraction.

Michael Great to hear from you if I ex hope all is well with you.

Yeah, well listen I think we were super excited to get Suraj, given his background coming from.

Adobe, where they've they've walked a mile and the shoe that we're walking and you are moving from a premise based product so that plus cloud journeys that we kind of alluded to in the past.

So what I've seen certainly for my space as you know.

<unk> is really driving specificity around kind of where we're going how we're going to get there and what we're going to need both organically and inorganically and he's sitting right here beside me so I might.

Just hand, the mic over to him and let him give you some more color.

Thanks for the question Michael Thanks, Mark So.

Super excited to be here, obviously, and I think it's exciting to be part of a company whose products are sole mission critical for our customers. We've got an amazing passionate group of customers. We've got a lot a lot planned for inspire and for the analyst day here on a couple of weeks.

And elaborate on our product strategy, so stay tuned for that.

Lots of great progress in the near term here.

Martin Thank you very much Mark could you talk to Chris again.

Okay. Thanks, Michael.

Our next question comes from the line of Tyler Radke with Citi. You May proceed with your question.

Okay. Thank you Mark I was hoping you could talk a little bit about the sales changes.

You made obviously as you mentioned there were there was a lot of turnover in the quarter largely.

To be expected, but just kind of where are we in terms of the net.

Sales transformation do you kind of feel like the worst is behind you.

But you know it did seem like the net new customer number.

Picked up a little bit versus Q4, but do you feel like I mean, you know all the changes from the sales side are behind you and.

You kind of expect.

Things from a customer add perspective to improve from here. Thank you.

Hey, Tyler Thanks, a lot for the question Yeah listen I think we roll the changes out at the very beginning of the fiscal quarter and and I really got ahead of it to the team. There was a lot of change that we imposed new assignments new territories, new quotas, we had a.

Our annual sales kickoff.

And the team has done a really nice job sort of.

I think getting getting going for the first fiscal quarter.

Listen the first few quarters of transformation as you know from covering other companies is always the bumpy as Dan and I find that.

The way I look at things, maybe six six to nine months into it and we start to see the <unk>.

Impact of these changes start to really normalize and become a lot more predictable.

That said I think we still have changes that we're making where we're.

Again going to be looking at some exciting innovations that we think will really help us drive meetings and drive pipeline got really exciting both distribution and technology partnerships that will continue.

To drive meetings in pipeline and as I mentioned on the script.

Hopefully in a few days, we will be able to announce.

A good CRO that Scott stage appropriate experience.

Large scale experienced managing thousands of people in billions of dollars. So please stay tuned on that.

Thank you.

Our next question comes from the line of Sanjay <unk>.

Organ Stanley you May proceed with your question.

Thank you for taking the questions and congrats on a nice start to 2021 on Mark I guess my question is looking through the eyes of customers, if you're sort of to read your script. It sounds like Theres a lot of exciting things happening both on the sales front, but also on the product side.

So Russia is leading the charge with.

What is being put in place in terms of giving them that sort of bridge that I imagine as we go into analyst day, when you're talking about.

A pretty significant product roadmap that might go multi years, how do you sort of convert the cash.

That's the case for our customers sort of pause ahead of big product announcements.

And just to see like where where the product portfolio is going sort of minimize that.

Sales for ex U S sales disruption dress sketchy sort of launch the next the next stage of the product portfolio.

Yes, Angie thanks for thanks for the question really I guess, a smart and important question just when we think a lot about that of course.

We never take for granted the fact, we've got hundreds of thousands of really happy Deliriously happy users that use our innovation every day.

Well over 7000 customers around the world.

And we also think it's a massive and continuing to expand Tam.

I think I've said in the past we measure it in terms of tens of billions of dollars today in the next few years I believe it will be measured in hundreds of billions of dollars because this entire space.

Explodes.

So I think one of the things, you'll you'll certainly not going to.

Spoil any surprises for next week, but I think you can count on us really doubling down on improving the experience for security.

B, the innovation Thats being applied to our our bread.

Bread and butter server and designer.

As well as making our innovation consumable everywhere as fast as we can and and so you can imagine that as we.

Worked through the beta programs, we worked through production ready.

To be super thoughtful about ensuring that we've got more and more innovation to add to our customers to drive up the lifetime value of our customers, but not take away from it.

I understand thanks, Mark looking for at the Analyst day.

Thanks Sanjay.

Our next question comes from the line of Red cells for DNA Securities. You May proceed with your question.

Oh, Great Hey, guys. Thanks for taking my question.

Wanted to ask about the snowflake wins I know it's early.

But if theres any color you can provide on how those deals look versus your traditional deals are they more pervasive throughout the organization as snowflake, bringing you guys in for just data integration into that use case do you see these types of deals as providing a bigger expansion opportunity longer term just just any.

All are on just how you guys are participating there and what's different about a cloud deal with like a snowflake for example, thank you.

Yes, Thanks, a lot for the question Brandon, maybe I'll start that off and hand, it over to Suresh or perhaps Kevin.

Yeah, it's really what we've seen with snowflake as we've discussed in the past has been just sort of on ongoing continuing to grow and build.

<unk> between snowflake in the market and their customers.

Back a few years ago, when we built the first snowflake connector, we just watch the telemetry and saw that more and more customer.

Data was being put into their terrific data warehouse solution.

So much so that we approached them last year and started working on much more a much deeper integration. So that we could actually allow our customers to be able to do.

Push workflows right into the skillfully compute I think we found pretty quickly that the snowflake folks like that because it burns consumption and that's what they that's what they care about.

I think the engagement that we started back in March was really kind of a peer to peer field based engagement that really started getting salespeople together on zoom and some places maybe in Starbucks and just sitting and strategizing on how to how to sell our respective innovations to customers to drive more.

Function and snowflake and to drive a greater need for the ability to manipulate that painted with.

<unk> is a platform.

Yes, if I may add a couple of a couple of thoughts.

We see a great opportunity for our customers as they move workloads to the cloud.

Like snowflake, Azure or AWS and so on.

And also played a big part in driving automation and analytics for our customers in the cloud both in getting the data into the cloud and then driving analytics and once the data is there and then distributing those insights to various enterprise systems, whether it's RPI environments, whether it's sales force automation or other enterprise systems. So.

We think there's tremendous opportunity as our customers embark on this data driven cloud transformation.

That's great. Thanks, so much guidance.

Thanks, Brett Yeah, Thanks, a lot Brad.

Our next question comes from the line of George <unk> with.

Oppenheimer you May proceed with your question.

Thank you for taking my questions. So.

Maybe if you look at the expansion activity you had during the quarter.

Give us maybe some color on how much was product related maybe new server.

Net net promote and how much was coming from a new seat growth and would you also maybe put that in context of the traction youre seeing with the GTK customers.

Yeah. Thanks, George appreciate the question look I mean it yet.

Basic level our expansion success.

Is is seat driven and use case, driven we certainly have opportunity to up sell the products.

Ever connect promoted as you mentioned and.

We saw some encouraging encouraging trends and in that respect, but underlying all that is fundamentally getting more users and more people within departments engaged on the altra ex platform and running more workflows. So.

We'll think about expansion is largely being driven by seats versus product upsell and cross sell.

And just on the <unk>.

Trends.

Oh, sorry.

I think we are continuing were continued to be encouraged by.

How we've been successful within that that customers segment and certainly the strategic alliances that we've talked a lot about our helpful in driving relevance and activity within within the global 2000. So that's that's a key focus I think we've been consistent net it consistently quarter after quarter growing that that's Doug.

And we've also consistently seen much higher expansion rates within the global 2000.

Yes, George if I could just add to the end of that there.

We also saw just looking back over the last few quarters pretty sizable uptick in the growth of the kind of engagement on our community.

Not only do we sort of re skin the community to make it more modern and add a bunch of features but we're really seeing especially when people are locked into their homes working on a keyboard all day.

Connecting with other people.

Socializing, what theyre doing with analytics and automation.

Has become a more and more important thing.

Thank you.

Our next question comes from the line of Jack Andrews with Needham You May proceed with your question.

Well good afternoon, and thanks for taking my question.

Mark I was wondering if maybe if you could rank order your ecosystem progress. So far you mentioned three types of.

Partners strategic go to market and technology can you maybe just talk about wherever you made the most progress where do you have a lot more work to do and maybe who could really move the needle for you from a longer term perspective.

Yeah. Thanks, a lot for the question Jack.

Listen I think they are all really important right.

For sure we started last year and a journey with Pwc on that journey has taken on substantial scale not only with pwc as a customer, but but also with pwc as an influencer and.

Using using our innovation has to leave behind for a lot of their big projects that theyre doing on functional and digital transformation.

Yes.

But to do them the right service I think we had to make sure that we have the people on the team and the processes to operationalize that partnership so that it can growth for both of US and then we.

Need to rinse and repeat that we as we announced with ACL last quarter.

A really strong partnership going after their biggest customers and going into these big multi deco or even $100 million projects that theyre doing.

Using ultra ex us to leave behind technology. So so I think I think we've we've started to build some institutional muscle around not only the people that are operationalized those partnerships, but the field teams that are now working with partners for pwc or executives from Hcl to really drive.

Our relevance up in accounts that either were working at or ones that were not working at all.

I think that will continue to be a really important avenue of focus for us.

Our new CFO brings a lot of chop in terms of working with large scale partners like that.

But the technology side, you can't underestimate how important that is either because.

Customers. These days day, one easy buttons they want.

Very clean and slick integration so that.

The work is done by the vendors not by their engineering staffs any longer and so.

Certainly key partnerships that we have with Adobe with UI path on the RPI side now with also Blue prism.

As well as snowflake and stay tuned for more on the data warehousing side because.

Customers want to be able to use us in all of these different environments, we're Switzerland, where neutral when it comes to.

Yep.

Where that where we're going to facilitate the use of our innovation and what in what environment same thing with the public cloud players. So so I think yes.

Do these right and to do them all of the right service I think we have to make sure. We don't try to go too fast so that we don't deliver the quality experience that our customers and our partners need.

And then just finally, we do have a really good long tail of regional partners around the world that we've worked with in the past.

I see having having been part of.

Tech firms in the past that have grown 10 2030 ex over a sustained period of time.

I've seen these regional partners grow and to become large multibillion dollar partners.

Im still applying the right resources to be able to facilitate facilitate those partnerships to to be successful.

Thanks, a lot.

You bet Jack.

Our next question comes from the line of Mark Murphy with J P. Morgan you May proceed with your question.

Oh, Great Hey, this is Benjamin on behalf of Mark Murphy. Thank you for taking our question.

Kevin a quick question for you I think you had said.

Last year that you had seen a big jump in adoption agreements I think maybe in Q2 Q2 Q3 ex COVID-19 head what have you seen with respect to those adoption agreements ramp so far.

In terms of the pace of ramp.

Are you seeing any conversion of those adoption agreements and new Elas as we enter <unk>.

2021, and ending Scott is a factor playing into your guidance for the year.

Yes, thanks pendulum.

Look.

As we've said.

In the past adoption licenses.

Our one tool in the tool belt of.

Many tools for sellers and how they engage with customers and how customers can consume our technology, we did see an uptick last year end.

Contracts all largely.

We're completed in last year and converted and as we've talked in the past adoption licenses tend to have a very.

High value high impact conversion, if you will.

Being able to engage deeply with.

The customer around specific use cases in populations of users with the purpose of building out successful outcomes tends to have a successful outcome. We continue to use adoptions as part of our playbook.

We've continued to see those convert quite well.

Thank you.

Thanks for Newell.

Our next question comes from the line of Derrick Wood with Cowen and company. You May proceed with your question.

Great. Thanks, Thanks for taking my question a question for you Kevin could you give us a sense for how to think about the kind of Q2 are on linearity for the year.

Are you baking in most of the new air our acceleration from improvements in sales productivity and adding sales capacity or are you expecting a newer channel efforts to also be a meaningful contributor.

Yes, Thanks, Derek Hope, you're well look I would say similar to I think my commentary last quarter.

We are going to continue to see seasonal.

Seasonal performance in the year relative to historical levels. So <unk> two is going to be seasonally stronger.

We have historically experienced.

And then H, one and so I would think about.

Our <unk> are building from a growth perspective throughout the year and then Q4.

Is typically our seasonally strong as you know look in terms of improvement in productivity.

I kind of go back to my earlier remarks, I think it's going to come from.

A lot of the changes that we've instituted in the go to market itself. It's also going to come from contributions from.

On the alliances and partnerships that we've we've talked about in an operationally on the operational I think those two.

To a much better degree.

And ultimately I think there's gonna be lift from from the product side as we get into the back half of the year. So.

All of these are important muscles that are being exercised that will.

Show benefit as we get into Q3 and Q4.

Alright, thank you.

Terrific. Thank you thanks, Eric.

Our next question comes from the line of.

Steve calling with S. M D C.

Capital You May proceed with your question.

Alright, Thank you gentlemen for taking my question.

I wanted to ask.

Mark I wanted to ask you about the enterprise selling motions that are more important part of your toolkit. This year that you've been focusing on.

Are we talking about.

Simply more capacity on a rotation back to enterprise selling after 2020 or are there qualitative differences in the sales motions are you, placing greater emphasis on certain types of buyers or C level buyers at any sort of color you can give me around that I would appreciate it and congrats on your Q1.

Well, thanks, a lot Steve.

Yeah listen I think.

If you go back and look over the last several years.

Every quarter every year there were some amazingly thoughtful campaigns, where we engaged pre sales resources to design incredible solutions post sales resources to make sure we start for landing even partner engagement. The problem is I don't think we did a great job institutionalizing that and making it.

Consistent across Asia Pac, Japan, EMEA, let alone across the United States. So I think I think the big.

Part of the Big lift was really to drive price some consistency there because in my mind driving consistency allows for more predictable scale over time, especially when you've got such a large tam and.

I think just teaching teaching the people that we have here we've got some amazing colleagues here and then overlaying resources that have stage and competency.

Experience.

These next few next few legs of the journey and I think that involves definitely dealing with.

Persona is up and down the organization functional business unit leaders CFO heads of sales operations.

For knowledge workers and the leaders within organizations that are really driving there.

Their transformations using using data to deliver insights into the business.

So really trying to do that comprehensively across the geos.

Uh huh.

So that.

Everyone has.

Predictable set of competencies and I think.

And then continuing to just attract.

Attract.

<unk> talent, we hired a lot of people in Q1, we've already hired a lot of people in Q2, and we're going to continue to do that because we think the opportunity to build out. These teams to support these customers that have a high sense of urgency is great.

Terrific. Thanks Mark.

Yeah, Thanks, a lot.

Our next question comes from the line.

Bob I'm, sorry, with William Blair You May proceed with your question.

Thank you Hey, Mark Hey team I. Appreciate you taking my call I wanted to touch on something a little higher level, you and I have talked M. I.

Can you talk about the show me about the simplicity of message simplicity of buying the simplicity of understanding the value add of complex statistics in a almost no COVID-19 environment to folks.

Just sort of sound like Youre.

You are on the board you brought on you've been there for a while how is that playing out like how are we seeing that translate or are we still early are you getting the marketing message right and getting the sales people get on that right. This is not a download there's not.

Sales, but they used to be a daily dollar two seats on expenditure just walk us through that process just backing up a second.

You bet Great question. Thanks, Kevin.

So I think.

I still talk to Ceos, and and functional business leaders Cfos every almost every day certainly every week.

And at the highest level I think what I'm hearing from them is that they can no longer tolerate knowledge workers delivering low strategic.

Output for the enterprise.

So people that are stuck on.

Spreadsheets.

Gonna have to Upskill and up level themselves.

So certainly an area that we've had tremendous traction.

With just a few days of training, helping helping get these people to become more citizen data scientists and deliver.

More professionally for them for their businesses, but also deliver much more strategic output.

So I think making.

Making sure the team understands.

Not only.

Not only the business responsibility, but I think so.

Socioeconomic responsibility of what we have the opportunity to do here at ultra ex Youre going to hear about a really exciting program that were launching it with a couple of weeks at inspire thats going to make it very easy for students around the world to be able to upskill themselves with the help of ultra.

I think in terms of.

The specific functional.

Work that we're doing we're seeing a lot more focus from from partners, especially the distribution partners that are being asked to help the largest governments the largest enterprises you would.

Do this functional in digital transformation for them because.

They don't have the people internally to manage projects. These this complex and so I think it's still fairly early days, even even are among our biggest customers. I think are still in the first few innings of really getting control of the totality of the data that swirls around their enterprise.

And I think we have.

Terrific opportunity at ultra ex just to leverage again hundreds of thousands of users that debt.

Upskill themselves using our innovation, but also the thousands of customers and increasingly the larger customers.

They're seeing the successful projects.

Put in the rearview mirror and we're there with pre sales and post sales resources now even greater numbers to be able to ask for permission to do more.

No that's super helpful.

On the follow ups. So on the most interesting things and you and I have actually talked about this which is in downturn people should invest in analytics.

Because it requires an extensive resource required software.

Requires you, making a decision implementing on decision, making sure runs through the business capturing that data and then seeing what was the ROI on the decision.

Coming out of this downturn coming out of People's concerns about COVID-19 and I'm not saying the entire world has a life channel, but we certainly new Western Europe does.

This idea of analytics coming as a tailwind now where it was a headwind because of analytics resources are expensive analytic software is extensive the outcome is not immediate I don't get to your marketing campaign and CMT by today I get to do an analysis I get to recommend an action the action happens have to analyze the data.

Make sure it it happened.

I'll take that on the accounts are you seeing people start to understand that process are you starting to see this idea that analytics should be a tailwind actually in downtown is even more than uptime, but that's another I think coming out of COVID-19 are you starting to see that play out at all.

Yes.

I remember that conversation button and.

I really do and I think some of the proof points for me are so certainly we saw some pent up demand and infrastructure to support the different construct of how workers were going to be connecting into the enterprise and that debt.

Persisted throughout the last I'd say three or four quarters.

The pandemic and it seems like that slowed down a little bit.

And we're seeing the focus being turned on how do we upskill and transformed this business much like we're doing at ultra ex but so many of our customers are doing the same thing.

And that's why we've really made investments on the marketing side you talked in the past about the re skinning of our website and the improvement of our <unk>.

Trial to win experience for customers to get.

Fewer and fewer minutes to Wow, when they download our software.

But also today, we launched a new branding campaign around ultra rigs to I'm not changing the logo not changing the name of the company, but certainly changing how we articulate what we do for customers and youre going to see a lot more of us out there in the marketplace, because we think perhaps we've under rotated a little bit in the past on that.

On a over rotate that on now because like you said the sense of urgency for these customers.

Very high and we want to help them and take advantage of that.

Got you got you I appreciate the color and I appreciate the candor. Thank you.

Thanks, Bob and thanks Cheers.

Our next question comes from the line of Pat <unk>.

Oh, great. Thank you. So Mark you had this this you know six to seven year Amazing run at Palo Alto and you're now eight months into what is hopefully going to be the same process at ultra ex.

So I'm just wondering for from a high level what are some of the takeaways that might be interesting for investors about things that are similar and things that are different about scaling these businesses.

Thanks for the kind words Pac yes.

You've been around the right people at the right time is always important.

But what I found previously in a couple of my longer term students in the past when you have a highly differentiated technology or innovation.

That is becoming increasingly more and more important to customers to do a better job of whether it's security or where load balancing or getting a handle on the data that swirls around your enterprise.

Assembling high performing teams driving consistency in terms of how we engage with customers around the world.

And.

Pay for performance across the board.

To drive innovation.

More faster and faster around where customers want to take what we do and how we do it.

I think the.

The opportunities there and the final thing is it's a massive tam.

The security side of things, we felt that the Tam was big there, but I think the Tam here is again in the early innings added growth to be absolutely massive and the team. We have on board now I think got some really special people again, it really excited to bring on.

What I think you'll find to be a real special CRO here in a matter of days.

But landing resources like Matthew stable lending resources like like Suresh Vitol, but also the people that are coming from world class companies to come and join the mission here at Ultra ex is humbling and frankly the team we're going to do an all hands call for the for all of our associates here at <unk>.

Morrow they were talking to the team. They are excited about the people that are here that want to be part of the go forward plan that ultra ex.

It's an exciting time, but as I said the first.

You are quarters of transformation are often the bumpy as we see.

Some question marks and people.

<unk> strategy I think the time for that on the debating site is over and now let's put our heads down Bang up the work and just delight customers. So that they they wanted to do more business with us.

Super Thank you.

Thanks.

Well take one more question.

Our last question comes from the line of Chris Merwin with Goldman Sachs. You May proceed with your question.

Okay. Thanks, very much for taking my question I just wanted to ask about the connect and promote products set yet not quick.

Heard as much about lately and it sounds like I think one of the prior questions.

You all mentioned that you know more of the.

Great.

It's just coming from users, but just anything you could share about how much of a focus those are.

For the sales force at the moment and how we should be thinking about the cross sell motion just in general.

Improving from here thanks.

Hey, Thanks, Chris I appreciate the question.

Look I think we suffered from the advantage that the designer as the overwhelming product leader.

Revenue in <unk> for us today.

We've had success rolling out connect and promote but the truth is the lion's share of the business continues to come from from designer followed by servers. So.

We think that there are important technologies in pieces of the Altair <unk> platform and in the right application. They are incredibly valuable to customers, but today, we're seeing the vast majority of the revenue coming from the other two products that I mentioned.

But make no mistake, Chris going forward listen, we're we're going to hang our hat on being a company that's customer focused customer centric culture will be revolving around what customers want and need and I hear. This every single customer I talked to talks about.

<unk>.

The fragmentation of this market.

There is a vendor fatigue already in this market because large enterprises large governments have to deal with a dozen or more companies in the supply chain. If you will of advanced analytics and data science for all the way from the beginning to the end and so we think theres permission out there certainly from customers. We've heard from investors is theres permission for us to do more.

More.

You can count on us with.

With the informed opinion that Suresh and his team are are giving us about what we can do organically and again, we've got $1 billion of cash on the balance sheet, we want to put that to work with the right the right inorganic.

Opportunities that exist out there in the marketplace.

Customers are really going to drive us on that and.

Hold us accountable for that in the near and long term.

Thanks, so much.

Thank you.

Ladies and gentlemen, we have reached the ending today's question and answer session I would like to turn this call back over to Mr. Mark Anderson for closing remarks.

Thank you operator, and thanks, everybody for joining us today.

Summarize we're off to a strong start for FY 'twenty, one they're doing the work to transform our business for this next stage of growth. We're doing this because our customers need us now more than ever ultra ex is an exciting place to be we have tremendous market opportunity in front of us and I really hope that you're able to.

To join us at the upcoming inspire event on May 18th to the 20th as well as our financial analyst day on May 18th.

Thanks, again for healthy and take care.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and for the rest of your evening.

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