Q3 2021 Alteryx Inc Earnings Call
[music].
Greetings and welcome to the <unk> third quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.
Did that answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
I will now turn the conference over to your host Chris Lal Chief legal. Thank you you may begin.
Thank you operator, good afternoon, and thank you for joining us today to discuss <unk> third quarter 2021.
With me on the call today are Mark Anderson, Chief Executive Officer, and Kevin Rubin, Chief Financial Officer.
Additionally, all of Hanson, our Chief revenue officer will be joining us for the question and answer session after prepared remarks.
This afternoon, we issued a press release announcing our results for the third quarter ended September 32021, if.
If you'd like a copy of the release you can access it online on our Investor Relations website.
During this call we will make forward looking statements related to our business, including statements about our financial guidance for the fourth quarter and full year 2021.
These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainty some of which are beyond our control or.
Our actual results could differ materially from expectations reflected in any forward looking statements.
For a discussion of the material risks and other important factors that could affect our actual results. Please refer to our SEC filings available on the SEC's website, and our Investor Relations 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 call.
A reconciliation of these measures to the 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 proud to report that in Q3, we delivered another solid quarter of Iran growth, beating our guidance range as we continued to drive meaningful transformation across all areas of our business achieving $579 million of <unk> in Q3, which grew 29% year over year sets us up well for Q4 seasonally our.
Largest quarter of the year, I'm, especially proud of our execution, while closing the strategic acquisitions of hyper edit and Laura I O. It's my pleasure to welcome. These teams and their incredible talent to Ultra X. Each brings us high quality cloud centric engineering and subject matter expertise that will continue to bolster our commitment to innovate.
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I've never been more confident that we have the right leadership and the right operating framework in place.
Today I will give you an update on our progress of our go to market efforts and update on our product strategy and more color on our M&A activity, including recent announcements.
We continue to focus on driving transformation and a necessary change it brings and we're doing this fast.
I believe a strong sense of urgency as necessary as we pursue this $49 billion Tam.
Which includes about 47 million advanced spreadsheet users, who would benefit from the automated advanced analytics that the ultra furnace delivers.
Today, our user base is less than 1% penetrated into this town with close to 7700 customers. Many of them are very early in their customer journeys with ultra and very early in their journeys to data centricity.
For example at one of our recent C Suite Advisory Board meetings every participant from across the globe score themselves at best at mid point in their journey to drive a data centric culture.
We maintain that there is a massive opportunity ahead of us as companies around the world realize that their need for data analytics is more important than ever.
In the future governments and enterprises that embraced data to make consistently better decisions will win hands down.
A major part of our transformation is devoted to our go to market efforts here, we've been focused on large enterprises desires to democratize analytics drive adoption and reduce friction in our customers' journey to adopt our platform and make it available in a highly scalable way.
We continue to invest in developing and expanding our global sales team as well as our customer success resources.
In the consumption of our innovation.
Our strategy is to supplement our land and expand sales motion with the complementary enterprise sales model.
We're selling higher up in the organizations to Cio's Cdos and other chief executive leaders.
A typical customer journey may start with two to three seats and a specific department and over time, using our land and expand past initially we grow our enterprise scale and ultimately expand deployment to more and more users companywide for example, Cvs launched with a handful of seats in their analytics and risk Department in 2000.
16, and within 12 months strategically launched ultra X across their revenue cycle and claims processes.
Through our engagement, we began to up level, our conversations today, the executive leadership team at CBS perceives and depends on daily analytic reports delivered through ultra its workflows.
Now have 450 seats that have automated over 3 million membership claims since 2018 Stanley.
Stanley Black <unk> Decker's started with one seat in 2018 and completed a large transformation deal with us in 2020, leading to over 450 seats across finance operations merchandising E Commerce strategy compliance and data science. Our presence of these critical functions is helping stanley's major transformative.
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To drive technology enabled productivity. The initiative is expected to drive $300 million to $500 million of value over three years by way of supply chain and productivity improvements by leveraging advanced analytics.
At the end of Q3, we had nearly 80 customers with greater than $1 million in <unk>.
Renting a 40% year over year increase what.
What we have learned is that when we have pockets of users across the organization, we have the opportunity to engage in more holistic conversations at all.
Enterprise wide scale.
These strategic conversations are targeted to go higher up in the organization.
We're hearing from customers is that this much more mature approach brings enterprise wide capabilities governance, and stabilization and how <unk> can be deployed across the organization.
Let's start with our efforts to create best in class go to market organization.
Paul Hanson, our Chief revenue Officer continues to make significant progress driving operational discipline and rigor into our go to market engine, we're making the investments where it matters such as customer success in deploying commercial structures that encourage flexible expansion.
Through these investments we are creating a scalable organization poised to go after the significant opportunity in front of us.
In Q3, we saw improvements in sales attrition and continued to see strong hiring.
She was coming together to embrace the new go to market operating framework tools and leadership.
Our numerous associates continue to ramp quickly.
Adding value is sales productivity continues to improve.
As a result, we are increasingly selling higher in.
And more strategically to customers and prospects.
We're also working hard to be the best and most flexible partner for our customers for example, our new enterprise contracts now allow for additional capacity.
Which provides customers' flexibility to grow quickly and encourages more users to leverage all tricks.
These contracts enable sellers to address multiple departments with enterprise wide capability.
Companies like sharp healthcare and separately, a fortune 100, consumer electronics company as well as a leading electric SUV and truck manufacturer are accelerating analytics adoptions across their organizations with new flexible enterprise license bundles.
Flexible bundles are part of a broader strategy to leverage pricing and packaging.
To accelerate expansion.
With this pathway business and analytics leaders can now organically and seamlessly grow transformational initiatives across departments.
I up leveling, our conversations with our customers and expanding our sales motion.
We're getting our platform into more users here at the end of the day. This is still a very fragmented analytic vendor landscape and I believe the platforms are going to win.
One aspect of old tricks that I've always found compelling is how much our customers love and depend on us for the incredible business outcomes and rois that are platforms deliver.
Illustrating this we received a handful of significant customer accolades from industry analysts in the third quarter.
<unk> was named a customer choice for 2021, and Gartner peer insights voice of the customer for data science and machine learning platforms.
<unk> was also named as one of the five solutions to know and the self service data science and machine learning by constellation Research as part of their Q3 2021 annual shortlist.
Equity exciting <unk> was named a leader in multiple G. Two reports for fall of 2021, including predictive analytics.
Finally, we were recognized as a leader in KLA S's research data and analytics platform report for 2021, we're immensely proud of these recent accolades and humbled as the voice of our customers are heavily weighted in these rankings.
No doubt these accolades validate what our customers have been saying for years.
That our unified platform.
And self service easy to use interface continues to be a market leader.
Moving now to an update on our product strategy.
Earlier this year, we unveiled <unk> designer cloud and ultra <unk> machine learning a major step in our cloud strategy.
We continue to make strides on this important journey I'm excited to share that over the last few weeks.
<unk> products have become commercially available as part of our limited availability launch for select North America customers. This is a major milestone for our cloud journey. These cloud innovations offer easy to use unified data analytics and approachable M L.
Her upper ability across on Prem and cloud and no friction adoption with minimal downtime and seamless software.
The feedback on these cloud products has been highly positive with now over 600 participants using the early release of designer cloud and Ultra machine learning.
So rest of the call our chief product officer, and his team are advancing our product roadmap.
Were actively evaluating both organic and inorganic opportunities to develop and accelerate our innovation agenda.
Our efforts are focused around three pillars of innovation cloud centricity.
Big data fluency and AI as a strategic advantage.
Cloud Centricity supports our goal of making it easier for customers to democratize access to analytics across their enterprise.
Our second innovation team Big data fluency is aligned with our customers' needs to analyze large datasets a trend in both on Prem as well as cloud data repositories.
We expect this trend will grow as data across the enterprise remains highly fragmented.
Finally, AI as a strategic advantage is aimed at democratizing insights across the business by using AI capabilities to help upskill analysts.
As I mentioned at the beginning of the call. We recently closed two acquisitions, providing capabilities as well as talent.
Hyper and it brings a cloud based platform for generating AI driven automated insights from data.
This solution enables anyone regardless of technical background to access AI driven insights. We also recently announced the acquisition of lore I O.
Laura I O brings talent and cloud based data modeling capabilities to Altra X, both acquisitions enable us to accelerate more functionality to the cloud.
And to add improved data discovery capabilities.
Finally, this morning, we announced the appointment of two new members to our board of directors.
Effective November 10th.
C C Morton President of Headspace health and Dan warm unopened, former executive chair and CEO of Netapp join us as directors, both bring innovative customer thinking and deep technology expertise.
Their experience with scale will help in our transformation journey and positioned ultra explore our next phase of growth.
I'd like to thank both Kimberly Alexy, and John <unk> for their invaluable contributions to the ultra <unk> board of directors over the past several years.
I remain confident in our abilities to successfully transform altra to deliver long term value for our customers partners associates and shareholders. The opportunity ahead of us is significant and growing at a global scale I believe <unk> will be one of the winners in this highly fragmented data analytics and automation landscape I'm stope.
Pleased at what we're doing here.
We're building an innovation powerhouse supported by a world class go to market motion with that let me turn the call over to Kevin Kevin.
Thank you Mark.
Overall, we delivered a solid performance in Q3, ending with $579 million and euro are eating guidance and representing 29% year over year growth.
In Q3, we generated net new <unk> of $31 million, increasing 79% year over year.
Revenue for Q3 was $124 million.
We continue to experience improvements in sales execution as a result of the transformation efforts. We walked you through last quarter setting us up well for Q4, which I will go into more detail in a moment.
We ended Q3 with approximately 7700 customers, including 775 or 39% of the global 2000.
This quarter, we added customers, including Dow Jones and company snap on Hormel Foods, Autonation and Blackrock financial management.
All of which has significant potential to expand with the altra X platform across their organization.
Overall, net expansion was 119% and a stronger 127% within the global 2000.
As I signaled last quarter, we expected to see a small downtick in that expansion as we continue to transform our go to market focusing on the largest customers and prospects with the greatest propensity to adopt and expand with altra.
We anticipate some volatility going forward and net expansion as we supplement our land and expand sales strategy with a strategic enterprise focus.
On last quarters call, we discussed how we experienced elevated levels of attrition in the first half of 'twenty. One as a result of the transformation journey, we are on as well as the great resignation that many companies have experienced this year.
I am pleased to report that attrition rates improved in Q3 and are trending down as the changes in our go to market take hold under <unk> leadership.
We continue to attract great talent and had another record hiring quarter.
Additionally, we completed two acquisitions in October as Mark mentioned, we closed the acquisitions of hyper Ana based in Australia, and Laura I O based in San Francisco, We expect these acquisitions will accelerate our cloud strategy by not only adding more functionality and cloud knowhow, but also adding strong talent to our teams.
From a financial point of view revenue <unk> and operating expenses associated with these acquisitions are immaterial.
<unk> expenses overall are immaterial if there is a slight increase in our operating expense run rate as a result.
Additionally, there are some onetime charges associated with the acquisitions all of this has been factored into our Q4 guidance.
We are hard at work on integration and we are excited to bring the new teams on board.
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.
Q3 revenue was $124 million, representing a decrease of 5% year over year.
This was primarily the result of average contract duration, which as expected came in just under one five years this quarter down from two years in 2020 and 2019.
As I mentioned on the call last quarter, we expect to continue to see contract durations shortened as we focus our sales efforts on account level ACB in Iowa based outcomes, while significantly reducing discounts for multiyear contracts.
While we intend to continue to offer multi year contracts and some customers will continue to elect longer contract terms. The average is coming down.
This change is intended to further streamline our go to market and further focus on ACB at the deal level.
Importantly, we believe this is increasingly the preferred buying cadence from our customers similar to what other software companies have experience.
We believe that the changes we've made in how we sell and in reducing the financial discount for three year contracts are the main factors driving shorter average contract duration.
<unk> continues to be an integral part of the modern data ecosystem, which is reinforced by our continued success with partners like Snowflake and UI path as well as our consistently strong win rates.
In Q3, we saw strong year over year growth in net new <unk>, specifically in the Americas.
Also as validation of our customers' commitment to <unk>, we had the highest renewal rates dating back to early 2019.
Our Q3 gross margin was 90% as compared to 93% in Q3 2020 due to an increased investment in customer success to drive higher product adoption and lower churn as.
As we've discussed this year investment in customer success as a strategic initiative and we believe will be a catalyst to drive net expansion over time.
Our Q3 operating expenses were $121 million compared to $90 million in the same period last year the.
The increase in our operating expenses is primarily attributable to increases related to head count and payroll related expenses.
Our Q3 operating loss was $10 million net.
Net loss was $12 million or a loss of <unk> 18 per share based on $67 3 million fully diluted weighted average shares outstanding.
Turning now to the GAAP balance sheet and statement of cash flows in the third quarter, we generated $9 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 Q4 and full year.
Our guidance assumes the following.
First we expect continued improvement in the macro environment for the remainder of 2021.
Second the average duration of our subscription agreements will continue to shorten and trend below one five years.
And third approximately 40% of <unk> booked in the quarter, but we'd be recognized upfront with the remainder recognized ratably over the time of the contract.
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 Q4 2021, we expect to end December 31st with <unk> of approximately $635 million, which represents year over year growth of 29%.
As we have discussed previously <unk> measures. The overall health of the business and is not impacted by some of the revenue mechanics, such as contract duration or upfront recognition that impact revenue.
We expect GAAP revenue to be in the range of $163 million to $168 million, which represents a year over year increase of two 5%.
We expect our non-GAAP operating income to be in the range of 2 million to $7 million and non-GAAP net income per share of 2% to seven.
This assumes $69 7 million weighted average shares outstanding.
For the full year 'twenty, one we now expect GAAP revenue to be in the range of 525 million to $530 million, which translates into year over year growth of 6% to 7%.
We expect our non-GAAP operating loss to be in the range of 18 million to $13 million.
Our non-GAAP net loss per share is expected to range from 32 to <unk> 27.
Our non-GAAP net loss per share assumes $67 2 million basic shares outstanding.
Finally, we expect an effective tax rate of 20%.
In summary, with one more quarter to go for the year I am pleased with the progress we have made on our transformation journey to position <unk> for the next phase of growth.
We have seen positive results from the transformation to our go to market strategy and advanced our product roadmap through the year, both organically and through our two recently announced acquisitions.
We believe this puts us on a path to accelerating growth in the future.
And with that we'll open up the call to questions operator.
Thank you at this time really be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad a.
A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
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Our first question comes from the line of Brent <unk> with Piper Sandler. Please proceed with your question.
Thank you and good afternoon, a couple of questions from me here, if I could mark.
Given youre approaching the one year anniversary loved.
I love to hear maybe how you're thinking about are the top one two priorities going into year, two or they're shifting a little bit now that you've kind of spent the last year really focused on the go to market overhaul just would be curious to hear that and one quick follow up for Paula.
Yes, you bet Brent How's it going good to talk to you. Thank you for the question.
Yeah listen I think after a year on the job here as I look back and I can see a.
The volume of work done.
We call it 2021 year transformation work.
Three quarters into that year, and I think the demand environment or what we do and the way that we're organized both to be able to deliver it.
Put innovation at the fingertips of our customers as well as to monetize that and earn permission to do more I think I think we've never been in better shape.
Feel like we're in a really good position right now I think FY 'twenty two is clearly going to be about.
Leveraging the efficiencies of the operating model both for go to market and then cranking out as much innovation as we possibly can I think.
As you saw in the last week and a half.
We're going to do this organically and we're going to do this inorganically.
I think theres permission for us to roll up.
Broad platform in this space and customers want fewer vendors less complexity and more automation. So we're we're heads down building that.
Totally makes sense and then I felt like there was a little bit of a pivot here with a couple of acquisitions tuck ins that you did and great to hear our plans here for 'twenty two Paula I wanted to kind of circle back you joined obviously in May are implemented a number of go to market enhancements.
How should we think about those those go to market pivot is that beginning to help expand our pipeline in the second half should we think about some of these shifts helping the pipeline build for next year really any color you can provide on just the.
The changes in and when will that kind of drive a change the pipeline would be super helpful. Thanks.
Sure you bet.
What we're definitely seeing in our engagements with our customers is that there is.
Interest in companies continuing to advance their analytic maturity they understand the value that analytics can bring their different transformation efforts and so we are continuing to work with our customers and key capacities of question.
Demand through our land and expand sales motion that very effective particularly across the lines of business and then we're supplementing that with a conversation at the executive level around them advertising analytics and bringing the capability out across the enterprise and early indications are that there is an appetite.
At four this scale and enterprise capability. We also feel that we continue to earn on the.
Our hearts and minds of the users of isolation with that.
With a lot of our high quality.
Product feedback and then when we talk to the executive level about the enterprise capability and the announcement of our enterprise agreement or making it much easier for them to income. This at scale and then we back it up with that customer success teams that drive adoption. So.
We are heading in the right direction, our customers are validating the strategy and we expect this to continue as they go into next year.
Great to hear thank you so much for the color.
Thanks, Brent Thanks, Brian.
Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.
Hey, Thanks, good afternoon, Marc you've talked about reducing friction on the sales side.
As one of your key initiatives since since taking over and and this past quarter you reference.
Some of the more flexible arrangements that youre doing with with some of your enterprise customers just to allow for faster consumption.
As we start to think about altar X being used in more cloud based use cases, where the predominant.
The measure of.
Are the predominant way of paying for things is kind of on a consumption basis. How how are you thinking about the evolution of of altering maybe towards a consumption pricing model.
And just help us understand how that would potentially play into a a R. R. Thanks.
Yeah, you bet Tyler Thanks for the question.
That's probably the sneaky is way of I've ever heard anybody asking for cloud pricing yet but.
Well listen I think just as a reminder, the.
Designer cloud is as additive to our current plan, it's not a replacement or forced migration.
It's a different product that addresses potentially.
Cohort a different personas and different use cases that we plan on using.
Aggressively.
In 2022, 2023, and beyond we think it will be a bigger and bigger part of our businesses time goes on.
But right now we're still in the in.
In the learning phase of this.
Hoping to get.
Some sense for what pricing will look like we'll announce that once <unk>.
It comes on board, Tyler and that's going to be early in.
January February timeframe of next year, but we think it's an important net new product for us to sell it.
It's piggybacked with Ultra X M L, which is really making the early stages of the machine learning.
Building ml models journey make that easy like like we have for many ultra X users. So.
We're going to continue to crank out this innovation.
Great and if I could sneak in a follow up.
Maybe for Kevin just as you think about Q4, it looks like you reiterated that the existing guidance out there for for a or maybe just help us understand the puts and takes you know Q3 came in above where where folks expected. It sounds like you clearly saw a nice growth.
And net new E. R. R and in sales attrition is trending down and in hiring is off to a good start. So so given that you have raised the full year guide and prior quarters, what kind of is leading you to just keep things as is instead.
Instead of take that a bit higher after the b. Thank you.
Yes, Thanks Tyler.
Look I mean, maybe let me describe how we think about.
The guidance for Q4, I mean, obviously.
We intend to put our guidance out there that we have a high degree of confidence that we can achieve.
I would say this as we look at Q4 in particular, we do feel like there is a strong demand for Altra X technology in the marketplace. We've talked a lot about Paul is.
Leadership and the momentum we're seeing in the go to market, which is certainly encouraging.
I think if you look at pipeline renewal rates close rates that all gives us pretty good visibility into Q4, and what to expect I would remind you that Q4 does have a disproportionate number of renewals, which is one of the strong opportunities we have to ultimately expand customer relationships.
We'd expect nothing different for this Q4 and then finally, if you look at just net new <unk> growth implied in the guide for Q4. It is very consistent with previous Q4 trend lines. So you know I think it all comes in line.
So anyway, hopefully that answered your question, but we are going into what we expect to be the largest quarter in <unk> history.
Thank you.
Thanks, guys.
Our next question comes from the line of Derrick Wood with Cowen and company. Please proceed with your question.
Oh, great. Thanks.
Just wanted to touch on the just kind of how the reaction has been with the change in discounting structure and and and.
I know you guys have kind of outlined how you thought you'd get the.
Our upside with less discounts as you go from three years to one year.
Or is that upside capture tried did in and kind of what's been the reaction by customers that.
Maybe are you don't get the kind of discounts that you're still is it got to one year.
Yeah. Thanks, Derrick appreciate appreciate that look as we've said in the in the past there there there are customers that tend.
Tend to favor longer term contracts those tend to be customers with large deployments and we're strategically embedded in those environments and the longer term contract gives them price protection for a longer period of time, and we will continue of course to to offer those to those customers.
Pricing is a little bit different than it may have been a couple of years ago is we're really trying to align the ACB of those implied contracts with the value that we're delivering but when you think about what it is that our customers.
Customers are doing as it relates to engaging with customers.
We've aligned the organization very clearly around there are and that means that sellers are focused on an ACB and we are really focused in that regard so.
Ultimately I think a lot of this is intentional and it's being driven by how we engage with customers and.
And how we talk to them about.
The pricing dynamics in their contracts.
Less about any other dynamic if you will.
Okay, Yeah, that's clear.
Nice to see the execution through those changes.
Second question, either Mark and Paul I mean, just it sounds like you've had two quarters in a row of record hiring.
Can you share what you know growth in net sales capacity it looks like year to date, and where youre attracting talent from and how we should think about your hiring attention has gone into the end of the year.
Yeah, you bet Derrick thanks for the recognition on that Yeah, I think we've built early in the year we.
Our chief people officer, Al Dk, and I kind of made the decision to double up on the recruiting team and Thats really yielded some some important benefits here as we've been able to definitely keep up with the very aggressive hiring targets at our operating plan is.
Is driving in terms of giving specific guidance on sales capacity, we don't do that Derrick, but but I can tell you that.
As a and I'll, let her give you more specific context, but she's a recruiting machine and she's got the entire organization youre talking about hiring and talking about.
Sourcing and recruiting in the same kind of language that they talk about business and opportunities and so it's a real mind shift change for the sales team here and the leaders and they've responded very well to it.
Yes.
Like that the rigor and discipline that we've put into the business around things like forecasting we have a similar rather around hiring and operating model that we run globally with a regular cadence to look at where we wanted to make investment what does the talent pool look like in that market what types of people do we.
Want to hire.
And rapidly moving them through our hiring cadence.
To your question of where we're hiring from it.
Its sapphire enterprise.
Happy to bulk companies with them.
Talent that is familiar with the with the go to market principles and approach that we have and the great News is once you get a number of those people in the door like we have and they see the opportunity that we have and they often want to bring many of their colleagues with them.
Seen quite an uptick in that as well.
Right.
Great well done congrats.
Okay. Thanks, a lot Derrick.
Thank you.
We please ask that you limit yourself to one question.
Our next question comes from the line of Michael <unk> with Keybanc. Please proceed with your question.
Hi, This is Eric Heath on for Michael.
My question for you I just wanted to ask on the Lora I O acquisition. So could you just further to talk about what that brings to the outsourced platform, especially with the push down analytics and taken aback about it of compute.
It would be a step in the direction of building out a multi tenant SaaS offering.
Well listen I think longer term certainly that that's an objective down down the path of the roadmap.
Michael Sorry, Eric but.
I think these acquisitions and Laura in particular is of the size.
More of an AR and aqua hire than a technology tuck in.
Let me tell you they've got really really smart engineers that.
I think woke up one day and realize they are building a feature.
Better belongs in a platform like ours, and that's why I think they make such a good fit for US we're there already.
Already gone through new hire orientation in already.
Plugging into the different organizations in engineering and product management, but absolutely. There is specialty is is in the pushed down area, where customers don't want to leave a user interface and we'll be able to push workflows down into an environment like snowflake or a data bricks and so.
That certainly is a feature we plan on on when taking advantage of very quickly, but I think more importantly, all of these acquisitions. In addition to bringing us really smart people that will fit into our contract really well.
They allow us to do more faster and I do think time matters and this as I said on the prepared comments.
I'm really quite pleased with kind of the way that we've been able to make these two acquisitions in the last six months.
Alright, thank you.
Thanks, Derrick Thanks, Eric.
Our next question comes from the line of anti Kedron with Oppenheimer. Please proceed with your question.
Thanks, Mark I want to follow up on the Salesforce transformation, clearly, you're making very good progress over there. So that's great, but maybe perhaps.
You can give us a baseball analogy what inning are you from your perspective getting to exactly where you want to get.
With respect to the.
The change in the talent and the alignment towards the new way you're doing things.
Yes. Thanks, a lot of time really always appreciate your thoughtful questions over the years.
Sure.
Listen we're certainly in the back half of this year, we're in the third quarter excuse me in the fourth quarter right now too.
Two fiscal months to go in the full fiscal year. It feels like we've done an awful lot and we're just working hard right now to prepare for the new fiscal year and build a plan that can allow us to be successful with customers our people and investors.
But I think a lot of the big chunks or are in the rearview mirror now I think it's now just stable.
Stabilizing the.
Both the innovation teams as well as the go to market teams.
Really.
Operator.
High performing team and we're getting pretty close I mean, we've got some amazing people that we.
I've stayed on here at <unk> and we've added as we've said a lot of really good people into the mix and it makes for a great combination.
Very good good luck.
Thanks. Thank.
Thank you Dr. <unk> later on.
Our next question comes from the line of Camille Meade Jarek with William Blair. Please proceed with your question.
Hi, all thank you for taking my question.
Graph on the quarter and the strong customer growth I think net new customer adds reached the highest level in something like seven quarters, it's great to see can.
So can you maybe break out quite some more detail on the drivers of this.
Acceleration how much is improved productivity from changes that go to market strategy. How much is corporate sales head count and how much is an improving macro environment and then bill.
Looking out the next few years, how would you rank the expected contribution from GE as drivers of new logo growth. Thank you.
Okay.
Oh, that's a great question.
Yeah, I think it I think that you hit on all of the different factors that were in play in terms of the results that we are seeing improved.
Productivity, we are investing to increase our sales capacity.
And we definitely see within the market a strong demand for our solution and customers recognizing the value that it drives their outcomes into their transformation effort, so probably too difficult today.
Specifically site each category as a percentage, but without question all three of those contributed to the success of the quarter.
Yes, Camilo I'll, just say that.
I think it's also important to acknowledge that the partnerships out there are going to be become an increasingly important.
Contributors to top line for us.
We are just starting to build the muscle now too to take advantage of these go to market and technology partnerships.
Customers are really demanding and the demand creation opportunity with that we've seen certainly with snowflake and you ipass and others.
Is terrific. So so it's creating demand for.
For demand creation events that we're doing and it's creating a lot of activity that gets us in front of a lot of customers that gets us a chance to talk about more than just the integration with those partners.
So.
Well listen.
To get this all of the orchestrate together, we all have to do a thousand.
Things every quarter and I think we've never been better suited to orchestrate those things that we are today.
Yeah, that's great color. Thanks again.
Thanks Glenn.
Question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question.
Hey, Mark Kevin and Paul are nice quarter, Congrats and thanks for taking my question.
I think this question might be either for Mike or Kevin I was looking at the in an investor deck and I noticed the long term targets in the back and they look about the same.
They are the same that we're giving back in May we updated one back in may at the Investor day, and just thinking about that you know a lot of things have changed I mean, Paula has joined the team contract duration preferences have changed and you released the designer cloud.
A couple of acquisitions in there too so I guess could you remind us about how to think about the long term targets maybe in terms of overall revenue scale or timeline of guardrails of when these long term targets might be achieved thank you.
Yeah. Thanks, <unk> I'll go ahead and take that one if you don't mind so.
When we presented the long term targets back at the Analyst Day, I think we were pretty clear that this is a long term view I would.
Frame that in four to six years on the basis that we are running the business for scale and leverage to achieve the profitability targets I think as we've said over the last many quarters pretty consistently we believe that investors are best served to focus on really growing this business.
At a high rate, which hopefully we have continued to demonstrate and so as long as we are focused on growth versus profitability.
We're somewhat differing period to period.
The achievement of that long term target what I think is important to understand is as we do ultimately introduce more of a cloud set of products to the portfolio and move over time, you are going to see impacts to gross margin.
We think that this business is highly profitable in the long term as a result.
Hey, Kevin just one quick follow up there just wanted to be absolutely clear on that.
When you say 46 years from the point in time, where you want to start focusing on scale on leverage versus growth did I hear that correctly.
Yes, that's right.
Okay got it. Thank you so much thank you.
Thanks Koji.
Our next question comes from the line of Sanjay Singh with Morgan Stanley. Please proceed with your question.
Thank you for taking my question and it was really nice to see.
Cloud designer come out in limited release and I guess my question is in terms of thinking about the sequencing of the product roadmap as we think of as we think about going into 2022 is that really about scaling the go to market and the sales motion for cloud.
Cloud designer, which Mike as you sort of said Mark target different persona is maybe even a different target customer correct me if I'm wrong, there and then looking beyond cloud designer what how do you think about the other pieces of the 18th vision that was sort of hinted at last year on that coming together, if you see the sort of speak to the sequencing of the.
Product without that would be great.
Yes, you bet <unk>. Thanks, so much for the question.
Listen I think for the last few quarters, we've been pretty clear about wanting to build a real platform with the backend in the cloud and.
Front end that can be exposed to customers in any environment Mac windows.
<unk> multi tenant SaaS, whatever that's where we're going in and customers won't that because more and.
More and more of that.
And then the power users want to use <unk>.
In these environments and we've got to respond to that so so we're going to we're going to continue to build more capabilities more data sources more.
More tools that people can use on both our premise based solution as well as our cloud based solution.
But we're going to build more products like ultra XML and wood product ties hyper into an <unk>.
Designer desktop so that we can help customers get.
Automated insights from their machine learning journey with that amazing technology and the amazing team from my perennial. So so I think what youll see going forward <unk> is just you know.
Ongoing every three to six months new products, new features new capabilities that will continue to make.
Our solution stickier and stickier not only to the analysts and the users but to the CIO and the CFO is in the.
And the chief data officers that are driving the budgets on these larger.
Transformational projects and Thats why partnerships become really important to us so I think in terms of.
In terms of getting to a point where.
You might have.
Data or excuse me feature feature parity between designer and designer cloud, it's not even in the near term future. So so it needs to be thought of as a separate product.
Understood. Thank you very much.
Thanks, Lindsay Thanks Sanjay.
Our next question comes from the line of Steve Koenig with F. N B C. Mizuho. Please proceed with your question.
Hi, <unk>. Thanks for taking my question and congrats on a solid quarter.
Steve Yeah.
Yeah, So mark.
When pre pandemic. So we we had seen situations where.
For the for the sales motions for all tricks.
That we're focused on higher level executives, which clearly were probably more limited than the focus you're giving it now, but but we have seen situations where.
They all had resulted in a fair amount of shelf ware.
Particular accounts and maybe not widespread but we did run into that and I'm.
I'm wondering you know with your flexible bundles et cetera, how do you avoid the situation where you end up creating.
An overhang.
Of software that is let's say sponsored by a chief data officer, but.
They haven't really found that people to use that software yet how do you avoid kind of falling into that trap and getting stuff used at a pace that is commensurate with the pace that you are able to sell it to the executive level.
Yes, Great question. There is do you have a I was wondering where youre going on it but I think it's a very thoughtful question around for US our success is going to be tied to <unk>.
Building, a strong operating plan, making our salespeople more productive.
For the foreseeable future probably through the long run and.
And ensuring that our customers consume our innovation.
That's right up there.
Number one most important thing and so.
It's one thing to say it it's another thing to put sort of some organizational muscle behind it which is why we've almost tripled the size of the customer success team and are building out enterprise class customer support.
So that we've got resources.
No.
Call It our stack of resources that we put in front of customers that are that are not just there to sell them something and move on to the next customer but to help them consume it.
And that's why we're building a library of use cases that will be really like easy buttons for customers to be able to use to get to value faster and so these are a lot of the things that Paul is sort of introducing into the mix here, but Paul you might have some more context on this I think is a really thoughtful question and it's a mall.
Pronged approach to making sure that our customers.
Elisa value behind the investments that they're making and I think there's three areas, where I feel that we're going to help deliver on that first is just a focus that we're playing in and.
From a resource perspective to the set of customers that we support them to really ensure that it's much more than the technology transaction and it really is about that adoption on the other side.
The second piece is this flexible consumption models that we're now supporting with our enterprise agreements that are going to help our customers grow as needed.
Predictable way, so that it's not asking them to make two larger investments upfront, but giving them the flexibility to grow as as they consume and then thirdly as Mark mentioned on the customer success side. We have so many tools now available to help our customers with enablement and adoption.
Best practices and change management, and all the operational things that come with them, helping them to actually turn their investments into value. So it's really exciting.
And I think we're only getting started on this there's going to be some more.
More exciting.
Exciting capabilities in this next year as we think about things like assessments and benchmarking and other capabilities, but yes.
And we're in it for the long term with our customers and that means they have to realize the value of the investment.
And just maybe one closing comment on this Steve.
Think shelf, where is pretty common notion in the old days pre pandemic I think with the attention and scrutiny that's being applied to all things digital transformation I think I think over time.
It will be excised out by better vendors by better partners and that's why we're working so hard to evolve and get better.
Because that's what our customers deserve.
Great. Thank you very much Mark and Paul.
Thank you thanks, Steve.
Our next question comes from the line of pendulum Bora with Jpmorgan. Please proceed with your question.
Oh, Great Hey, Thank you for taking my question.
Mark.
<unk> about the <unk> opportunity I mean is there a way to understand that all of which can be how big is it I mean I look at the retention rate on GTK that has kind of come down a little bit but seems like.
It's about 10% of your customers 1 million, 10% of U K customers.
Yes, still a lot of these customers that can expand that hopefully in that seven figure range. So I'm trying to understand what is the gating factor that is that is that mainly related to these contracting changes, making it easy to adopt that you're already doing as cloud be answer or something else.
So we're just we're getting factored to what pendulum.
Gating factor for the 90% of the <unk> customers to reach like a seven figure ACB.
Ah, Yes, do we think that number is right. Okay, yes, it's roughly roughly.
Of your customers are wanting.
Right and you have 70 75, <unk>. So I'm just correct. The pendulum just to clarify that's across all of our customer segment, that's not specific.
To the GTK, but nonetheless, I think we understand the spirit of your question. So yeah listen I think in the press.
Fair statements.
I replayed some comments were made at a recent.
Global <unk>.
C suite advisory.
Uh huh.
Session that we had with customers did a self analysis of where they thought they were in their journey to become a data centric culture in and most of them thought they were at the beginning at the very best the most mature companies thought they were mid term and so we think.
Focusing where the vast majority of the total addressable market is in most markets. It's in the G 2000, or maybe the <unk> 5000.
And that's where we think we're going to get the best return on our resources for the next three to five years, because with 1% penetration into a market that is companies are just waking up and realizing that they've got to get their act together to make better decisions with data.
Yep.
Yeah understood, Okay, one what follow up Kevin.
Investment.
It seems like the operating income guidance is a little bit lower and it seems like you were saying, it's mostly related to acquisitions is it.
Is it entirely related to acquisition is there any incremental investments that you're doing.
No real relative to the guide my commentary was that we obviously now are consuming these both of these two.
Acquisitions, and they did increase our run rate. So I was just trying to provide some color around why you know.
Operating expenses were a bit higher in Q4.
Okay got it thank you.
Thanks Angela.
Our next question comes from the line of Chase Donovan with Raymond James. Please proceed with your question.
Hey, Thanks for taking the question just wanted to kind of piggyback on <unk> question there on the M&A.
[noise] announced the hyper or I O acquisitions, Skeena, just talk about your appetite for future M&A, and maybe where you see the most pressing need alright, and biggest opportunity to add personality to your platform and kind of achieve that work towards achieving the proper claims analytics platform vision.
Yes, you bet Jay Thanks for the question.
Let's say I think we've talked about this market before there's well over 400 vendors in this space and a lot of them sound like they do the exact same thing.
I think there's confusion from customers of what who does what and and and the fact that most companies are earlier in their journey means that it's going to stay fragmented for some time.
We think.
We think that that's the obvious go signal for for all tricks to go build a platform.
Okay. Thanks.
Our next question comes from the line of Bryan Blair Abernethy with Rosenblatt Securities. Please proceed with your question.
Thank you and nice quarter guys.
Thanks.
Just wanted to ask you a little bit about your thoughts.
2022 in terms of your go to market partnerships, you've had obviously a long standing strong.
Relationship with Pwc, how are you looking at some of the other major.
Size, and how youre positioned today, and where you'd like to be say another year or two years.
Yeah, Great question. Thank you and so we're very committed to partnerships, we've talked a lot about how we see that as a major lever for growth as we go forward.
As we think about Pwc as an example, or a couple of years now into that relationship and we see them.
Increase in acceleration in terms of unlocking new new conversations with customers with the.
Transformation projects that they leave it lead in the areas of finance and supply chain. There's just so much.
We're still getting started on with with Pwc and others. So I'm confident that we're going to continue to see great growth opportunity. There. We're also really excited about many of our technical relationships that.
We've had like Snowflake you iPad.
Know that our customers are expecting us to be a leader in the data landscape and partnering with the other ecosystem players and we're seeing great traction there.
And our snowflake relationship over 600 joint customers.
Well, we're really partnering together to help them with many transformation efforts. So I would say as we look into 2022, you're going to see us double down and many of those areas in terms of.
The number of customers and the number of success stories that we'll be able to share and then you'll also see us expanding out.
Into other partnerships, where we know that there will be benefit for our customers, who want to be able to get access to our solutions and have a partner in the ecosystem and support out there in support of their needs.
Great. Thank you.
Thank you ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to Mark Anderson for closing remarks.
Great. Thank you operator, and thank you so much everyone for your time today I'm really excited about the progress that we've made in FY 'twenty, one and really excited about the opportunity to make history in Q4, and 2022 and beyond so thank you all for your time and attention looking forward to seeing you out there in the field.
Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.