Q2 2022 Alteryx Inc Earnings Call
Greetings and welcome to second quarter 'twenty to chew on here.
Cool.
Yeah.
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Now like to turn the conference over to Yelp I'm.
I'm the head of Investor Relations, Please go and XL.
Thank you operator, good afternoon, and thank you for joining us today for all trade since second quarter 2022 earnings conference call.
I'm, Ryan Goodman, <unk> head of Investor Relations with me on the call today are Mark Anderson, Chief Executive Officer, and Kevin Rubin, Chief Financial Officer. Additionally, Paula Hansen, our President and Chief revenue Officer, and Suresh Patel, our chief product 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 second quarter ended June 30th 2022.
If you would 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 third quarter and full year 2022. These statements are not guarantees of future performance. They are subject to a vote.
Righty of risk and uncertainty some of which are beyond our control our actual results could differ materially from expectations reflected in any forward looking statement for.
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.
Additionally, non-GAAP financial measures will be discussed on today's 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 Chief Executive Officer, Mark Anderson.
Thank you Ryan and thank you all for joining us on the call today, we delivered a great Q2 with annual recurring revenue or <unk> of $727 million up 33% year over year.
And revenue of $181 million up 50% year over year, both exceeding the high end of our guidance range.
We're seeing healthy demand trends as evidenced by a multiyear high for our renewal rates and solid year over year girls can pipeline generation.
Our value driven sales motion is resonating in the current market environment.
Sales execution continues to be strong.
In fact in Q2, we closed our two largest HCV deals ever.
I spent much of the last quarter traveling to visit customers partners prospects and our people.
Across all three geographic theaters customers are asking for our help to democratize access to data and analytics across all areas of their business.
Every meeting the high priority at this critical need was apparent.
Companies and governments are realizing that manual processes must be automated and data analytics needs to be fully leveraged.
Having a third party come in and do this can only be a short term solution.
Enabling one's knowledge workforce is the only viable long term answer.
As businesses look to optimize profitability and streamline supply chains in the face of uncertainty.
They are increasingly looking to leading platform solutions like all tricks to drive forward, they're automation analytic initiatives.
I'll begin with some highlights from the quarter and then provide updates on the market opportunity our go to market strategic initiatives and our platform innovation momentum.
Kevin will then provide more details on the Q2 financial results.
First some highlights.
We hosted our inspire user conference in May with well over 4000 attendees.
So energizing to engage with our growing community of users and partners, where we saw strong validation that data analytics are now table stakes to effectively compete enhanced performance and navigate the current macro environment.
On the go to market front, we expanded on the early success, we've seen with our <unk> strategy by introducing a new cloud L. A in June .
We believe this will provide companies with a frictionless path to more broadly leverage cloud opportunities within the ultra <unk> analytics platform.
We also rolled out our updated partner program, which is already having a positive impact on both ecosystem expansion and field based engagement.
We had a productive quarter of innovation as well with particular focus on enabling scale with governance.
We announced a new version of ultra designer aligned with federal information processing standards, or Phipps, which opens up a large addressable opportunity for us in the public sector.
And for cloud, we introduced designer cloud powered by Tri factor at our inspire user conference.
This all ties back to our core mission of empowering every person to transform data into a breakthrough.
We're committed to driving this democratization on a global scale with low code No code automation advanced analytic workflows and operational processes.
Our rapid innovation is creating new use cases for new for someone who's in our go to market strategy enables us to effectively scale, our ability to support our customers and capture the large market opportunity ahead of us.
We think of this addressable market across three components potentially users tangible budget and underlying business demand.
On the first item potential users are commission study with IDC indicates that there are roughly 80 million advanced spreadsheet users wasting more than 60 billion hours annually on manual repetitive data analytic tasks. This creates a growing pool of potential citizen data scientists, who would benefit from <unk>.
Tricks is low code advanced analytics and automation capabilities.
As for tangible budget. According to IDC roughly $65 billion is spent on data analytic tools today and that number is expected to grow to <unk>.
Over $110 billion by 2025.
I'm increasingly hearing from customers that analytic enablement for the masses as one of the top two budget priorities today.
And third business demand, which brings it altogether digi.
Digital transformation is unlocking a vast amount of data and opportunities and business leaders increasingly require solutions that empower all employees to leverage this data.
As for how we address this market opportunity we've defined our go to market strategy across three pillars entropy.
Enterprise partners and customer success.
We continue to see success with our amplified sales focus on larger enterprises, we've effectively upscaled, our enterprise focused sales force by adding many well tenured reps that bring over a decade of enterprise sales experience coming from multibillion dollar software companies.
The quality of our wins speaks for itself, we had a record Q2 for a number of $1 million plus a C V deals, which more than doubled compared to Q2 last year.
We added many new marquee global 2000 customers, including Aramco.
Ralph.
Suncor Lithia Motors and Mongo DB to name a few.
Our penetration into the global 2000 is now at 46% up seven points year over year.
With a global 2000 net expansion rate of 128%. We believe these large enterprise wins provide us with a long runway of opportunities for years ahead.
We had a fantastic expansion win with a major pharmaceutical company in Q2.
This multi year customer increase their designer implementation by over 60% to 2500 users.
They added several hundred intelligence suite licenses and all tricks machine learning.
The company is leveraging designer to orchestrate data management optimize supply chain management models, and more effectively calibrate pricing and merchandising decisions.
And now with the addition of cloud delivered ultra machine learning business users can explore new use cases, such as predictive modeling analysis that can be leveraged across the organization.
We're also seeing impressive momentum with our E. L. A strategy, we believe elas provide a more flexible path for new customers to embrace the <unk> platform and for existing customers to explore more broad based implementations.
Now the Digitization and automation are being prioritized.
We are meeting the needs of our customers accelerated transformation agenda as we introduced our cloud E. L. A near the end of the quarter and it's already garnering strong interests.
We believe this sets us up for positive expansion momentum for the for renewals for the coming year.
Yeah.
E L. A structure enabled a great win with P. D O <unk>.
A leading professional services firm.
The L. A construct allowed BDO to approach analytics with a more comprehensive enterprise wide strategy.
This led to a better realization of potential ROI capture across multiple lines of business that ultimately drove a quadrupling of their old tricks implementation.
As for the second pillar of our go to market our partner ecosystem, it's enhancing our ability to rapidly scale our market reach.
Rolled out the updated partner program early in Q2 to better empower this community to effectively bring ultra solutions to global markets deliver value added services and elevate user engagement.
We subsequently saw an increase in new partners, joining the program, including marquee organizations like Presidio.
Partner engagement, which contributed to strong growth in partner sourced new bookings.
We continue to see many of our partners embracing the solutions as customers.
One of our larger partners renewed this quarter across a multi thousand user implementation now with additional ultra <unk> offerings.
We view this deepening engagement by our leading partners is a strong endorsement of the value. All tricks provides and this is a validation that breakthrough is can come from anyone.
I dropped by a new hire orientation for this partner in June up in Canada, where ultra ex trading was embedded into the curriculum.
We trained over 200, new hires to use designer in their day to day roles for this important customer and partner.
Our partner community is also one of the key contributors to our third go to market pillar customer success.
We are committed to ensuring our customers fully leverage our solutions and unlock a positive return on their investment.
Active customer engagement, often seeds future up sell with new use cases and new personas.
The magnitude of this opportunity is even more prominent in large enterprise companies with Elas.
A great example of this is with Tumours are global specialty chemicals company, which began with a smaller implementation of designer.
In collaboration with one of our partners, we hosted nearly 100 enablement sessions and weekly user groups examining business processes and exploring opportunities to automate and optimize with all tricks.
The teams ultimately came up with some innovative workflows and Hinging inventory management and forecasting resulting in a more pervasive E. L. A with over 250 designer users plus intelligence suite.
While scaling our go to market reach in parallel we are rapidly innovating our platform offerings and capabilities.
Cloud is a key focus on our innovation roadmap and we are making solid progress integrating our portfolio of offerings onto try factors well established cloud architecture.
At inspire we announced designer cloud powered by Tri factor.
Which accelerates the integration of Tri factor with designers industry, leading user interface capabilities.
We are proud to have an early version of this offering available to customers. So quickly after the close the acquisition over.
Over the coming quarters, we plan to layer in incremental designer functionality.
And adjacent platform integrations with ultra if machine learning and ultra ex auto insights.
It's early days and we're pleased with the significant customer traction in our old tricks analytics cloud.
<unk> been such a thrill to see our customers embracing cloud offerings as they empower new users with new use cases.
We're also finding that the addition of our cloud solutions in many cases expands our abilities to secure designer wins with larger enterprises.
Our new customer embracing both our flagship solutions and cloud is medallion, a global leader in customer and employee experience.
In addition to leveraging designer to optimize analytics across marketing sales ops and finance all tricks auto insights will provide business users with AI driven real time insights across the organization.
We're also seeing early adoption of cloud with several existing customers upon renewal.
For example.
A leading recreational sport retailer both expanded its designer implementation and added ultra ex auto insight capabilities across its stores.
Leveraging the two solutions together the customer will empower business leaders district managers and store managers with fast AI driven insights on key workflows, such as sales trends and inventory management.
Yeah.
That's for our flagship solutions, we announced several UI and governance enhancements at inspire.
Along with expanded partnerships with snowflakes data bricks and Google.
Also we're very excited to have introduced a new designer that as skips compliant.
This creates new opportunities within the public sector and is a strong validation of our commitment to trust and security in our core solutions.
In closing it was a great quarter and I'm increasingly confident in the opportunity ahead of us.
Leaders are prioritizing analytics and embracing tomography station of data to scale their analytics and upskill their workforces.
Yeah.
And with the macro environment, serving as a fortunate function for businesses to optimize and automate analytics. The market is coming to us with greater urgency and demanding solutions that ultra is uniquely positioned to provide.
To take advantage of this reality, we've been working hard to train our people onboard people with the right competencies and experiences and build partnerships that will last decades.
I'm so proud of what the team has accomplished and can't wait to keep up the momentum in the coming quarters.
With that I'll turn the call over to Kevin.
Kevin.
Thanks Mark.
Q2 was a strong financial quarter across the board with key growth and profitability metrics exceeding our expectations entering the quarter.
A R. R of $727 million grew 33% year over year above the high end of our guided range.
Ara growth would've been approximately two points higher excluding the incremental impact of currency since the end of Q1.
Revenue of $181 million grew 50% year over year and also exceeded the high end of our guided range.
Revenue upside was driven by strong renewal rates as well as a slight uptick in contract duration as some of our larger customers opted for multiyear renewals.
non-GAAP operating loss of $30 million was better than guided with much of the revenue upsides falling through to profitability.
We continue to benefit from positive growth trends across customers of all sizes with increasing air our growth contributions in our large enterprise cohort in Q2, our AOR growth was led by our 1 million dollar plus are our customers.
This demonstrates our ability to win with large global organizations, which is where we believe the lion's share of the Tam lips and provides a substantial addressable market for us to grow in the years to come.
Our customers with a 100000 or greater in air or saw an acceleration in year over year growth and continue to track well above the total air growth.
This growing traction with large organizations is driving positive <unk> net expansion trends.
In Q2, our net expansion rate ticked up to 120% contributing to a strong sequential increase in average <unk> per customer, bringing air or per customer to 88000 in Q2.
As a CFO that leverages the alternatives platform across my organization I can tell you that my team is constantly finding ways to meaningfully improve business performance through the use of altering solutions.
With the growing volume of data across the company and the broad scope of analytics, we need the Altair <unk> analytics platform is a key enabler in our efforts to deliver best in class execution.
With strong performance on the go to market front, we are getting better and better at demonstrating the business value of our platform to our growing customer base.
For example, our E L. A strategy is especially resonating with our larger customers who value the access to alter it says multi product platform predictable pricing and flexibility to seamlessly expand throughout the enterprise.
These elas are driving substantially bigger deals.
New Elas closed in Q2 averaged approximately $1 million and a C D.
We are seeing positive trends with the number of customers leveraging elas customers leveraging flexible burst capacity and total volume of burst capacity being used.
We are just now starting to see the benefits of burst capacity usage converting to incremental <unk>.
Elas are proving to be an excellent go to market vehicle in terms of nurturing a healthy land and expand cadence with our customers. While also improving our forward looking visibility.
We are also seeing positive tailwind from our expanded partnership coverage.
Partnership ecosystem growth and higher partner engagement generated partner influence business of approximately 50% of new ACB bookings in Q2.
We continue to see partners as an efficient path to rapidly scaling our market reach and customer success initiatives.
International markets are also an important growth driver for our business as we've only just begun to tap into the meaningful opportunity for enterprise growth.
We have a strong foothold in EMEA, where we saw an increase in renewal rates and continue to win sizable new customers.
We had a great win with three U K British mobile network, operator, who initially engage with old tricks as part of an ERP transformation project in 2020.
In Q2, the customer expanded with 150 user altering E L. A to bring designer to additional lines of business and with expanded capabilities.
In Q2, we hired a new executive sales leadership in both EMEA and a P. J and we see a meaningful opportunity to catalyze new business growth in coming quarters.
I've spent time with both of them and and impressed with their capabilities.
The company is establishing a strong track record for durable growth and this remains a focus given the size of the market opportunity and our differentiated position.
We are also demonstrating discipline and rigor in the financial model on a return to non-GAAP profitability.
This is demonstrated by Q2 coming in $17 million better than the high end of our guided operating profitability range.
We believe this outperformance will enable us to accelerate our path to profitability, while also providing additional flexibility to selectively invest where we can generate a favorable rois.
We also see several opportunities to drive incremental efficiencies in the model in years ahead.
For example, we saw a double digit year over year increase in Q2 sales rep productivity trends and we expect productivity to further increase as recent hires continue to ramp.
Our growing partner ecosystem provides us additional leverage in our go to market motion.
And from a cost perspective, with our employee retention at a multi year high we have greater flexibility in the pacing of the back half of 2022.
In summary, the company is executing at a high level with positive growth trends and improving profitability.
Our subscription based and well diversified business model has us on solid footing entering the second half.
Nonetheless, we are mindful of the current macro environment.
We are leveraging alternative data analytic capabilities to help navigate the current macro environment and are closely monitoring a breath of key performance indicators.
Pipeline generation is a metric that we track closely.
We saw solid year over year growth in Q2, resulting in the highest Q3 opening pipeline we've seen in many years.
Sales cycles are another key metric, where we saw a slight improvement in Q2.
And finally renewal rates provide us a clear lens on the market demand and as Mark mentioned this was at a multiyear high in Q2.
With this backdrop, let's now turn to the outlook.
While our visibility remains high and demand remains robust we are prudently taking into account the macroeconomic dynamics and our outlook.
For Q3, 2022 we expect <unk> to be in the range of $761 million to $764 million representing year over year growth of 32%.
Our <unk> guidance assumes FX rates remain at the current levels.
We expect GAAP revenue to be in the range of $191 million to $194 million representing year over year growth of 55% to 57%.
This assumes contract duration tracks more in line with recent quarters at roughly one and a half years.
We expect our non-GAAP operating loss to be in the range of 8 million to $5 million.
We expect our non-GAAP net loss per share to be in the range of 12 to nine cents.
This assumes $68 8 million weighted average shares outstanding and an effective tax rate of 20%.
For the full year 2022, we are increasing our air our range to $820 million to $830 million representing year over year growth of 29% to 30%.
This is up from the prior growth range of 27% to 29%.
We are increasing our GAAP revenue range to $770 million to $780 million representing year over year growth of 44% to 45%.
This is up from the prior growth range of 36% to 38%.
We expect non-GAAP operating loss to be in the range of $30 million to $20 million an improvement from our prior outlook for a loss of 40 million to $30 million.
While we expect profitability linearity to be mostly consistent with historical trends, our Q3 cash flow will reflect a shift to semiannual payouts for employee bonuses.
Finally, we expect non-GAAP loss per share to be in the range of 56 to 46 cents.
Which assumes $68 6 million basic shares outstanding and an effective tax rate of 20%.
Our non-GAAP EPS outlook incorporates an incremental non operating FX impact.
In closing Q2 was a great quarter.
<unk> demonstrated strong durability in our topline growth metrics with disciplined and balanced in our path to profitability.
Our value focused sales motion continues to prove successful in the current macro environment.
We've entered the second half of the year with strong momentum and with incremental growth tailwind on the horizon. We believe we are well on our way to becoming a billion dollar plus a or our company.
With that thank you all for joining us today, and I'll turn the call back to the operator for Q&A.
Later.
Mhm.
At this time, we will be conducting a question and answer session.
We would like to ask a question.
And then one on your telephone keypad.
Paul.
Your line is in the question queue.
Maybe you could start.
We'd like to move your question for me.
Okay.
Equipment.
So you can pick up your concept before printing with Boston.
The first question.
But they came from.
Hypersound.
Yeah.
Yep.
Hey, Brent do you there.
That's cool.
My apologies, we do not see how bad the first question at that.
Yeah.
Please go ahead.
Hey, good afternoon, thanks for taking the question.
So maybe just a couple on the L. A motion so.
First if if maybe pause on the on the call.
What's kind of surprising you most in terms of.
The the upside potential and in these yellow emotions I know you talked a little bit about the.
Burst capacity in that converting that to a RR, but where it's kind of the biggest upside surprise coming and then secondly, as you look at your install base. How do you just think about the.
Percentage or number of customers, where this E. L E motion could make sense and how far through that opportunity are you. Thank you.
Oh, great. Thank you Tyler for the question, we're really excited about the quarter's results as well as the role that E. L. F has played in those resolved.
So you know I think the upside for L. A as in a couple of different areas and one is just how.
How it supports our customers with their desired accelerated expansion.
Opportunity, whether it's expanding tomorrow users more easily through the burst capacity or.
Or whether it's getting.
Experience with some of the newer products in our portfolio that maybe they havent worked with in the past so it.
It's both an increase in more users and as well as access to a broader set of the portfolio, we see very high utilization across the only customers that we already sold well over a third of them are in burst capacity today and that's even with the increased number of new Elas that we've added in just the last two core.
Erez.
So to be totally honest I don't see any customer that wouldn't be a great candidate for an E. L. A and the customer conversations that we've had have validated that and they like to predictable pricing. They like the ease of use and they loved the access to the product percentage.
Our set of our products and now we're really excited about the cloud E. L. A that we launched in June already have our first customer on boarded and several more in the pipeline.
And then Tyler Kevin Kevin likes them, because they're much bigger deals.
I'm sure he's not the only one that likes that.
Yes.
Thanks, just a quick.
Yeah, Yeah go ahead Mike.
Sorry, just to just a quick follow up for <unk>.
For Kevin.
You talked about some moving pieces on contract duration and.
Obviously this year, we're seeing a higher upfront revenue recognition.
I know, you're it's way premature to think about 2023, but could you just give us a sense on how youre thinking about some of the accounting dynamics and and just how we should think about the durability of <unk> versus revenue growth next year. Thank you.
Yeah. Thanks Tyler.
So I would anticipate that over the next you know I would say four to six quarters, we're going to continue to see somewhat of a stabilization that we've seen in the last several quarters around the inputs to revenue there is always going to be some minor fluctuations quarter to quarter like we saw this.
Quarter with respect to our larger customers electing to continue on multi year contracts, which ultimately provides I think more durability to air are over time.
The only thing I would caveat as.
As we get further into cloud into 'twenty three 'twenty four that.
That is likely ratable recognition so long as we're hosting in providing that service so that would be the only anticipated change overtime that I would anticipate.
Great. Thank you. Thanks.
Thanks, Tyler Thanks, Alex.
Hmm.
Next question Kevin <unk>.
From Piper Sandler. Please go ahead.
Please go ahead Sir.
Thank you Mark can you hear me now.
Yes, Hey, Brian how are you.
Good good good afternoon, guys, you know Mark I know you've been hard at work overhauling. The go to market strategy layering in this customer success team for the better part of the last year, I guess little surprised to see the the.
Piece of improvement some of the momentum in our growth exceeding 30% for the second straight quarter in a tougher macro are be it that much. So my question here how much of the momentum in Q2 would you attribute to just an internal sales execution productivity versus some material.
Change for enterprise demand for data and analytics. It it feels like it's maybe more company specific and internal but love to get your view around the momentum you're having in what's driving at here near term. Thanks, Yeah. Appreciate the question Brian .
I mentioned on the prepared comments.
But a good chunk of the quarter traveling really the last five weeks on the road across all three geographic theaters.
And Oh gosh, it really feels like the.
The motion that we've been driving around democratization of data and analytics is is really coming to all tricks.
I felt it in every meeting every every customer was telling us that that's their strategy for going forward and they need to upskill their workforce.
But you can't deny the job of Paula has done on on kind of outfitting their sales organization all across the board with discipline and rigor.
And focus and really building relationships at the executive levels. In addition to you know people at the analyst level. So so I think it's a combination of both things but.
Question, It does feel like the market's coming to us.
Helpful Color and then Kevin just as a follow up as you think about the appetite.
Tight to further broaden our product portfolio.
Obviously valuations have come in here across the whole entire space.
Continue to have.
And appetite to kind of leverage M&A to expand the product portfolio. What's your thoughts now just given that the valuation reset in the public markets and potentially are you seeing any sort of valuation reset and privates.
Yes, certainly private markets as you know Brent follow six 810 12 months behind the public ones.
So we're certainly watching that I think the team now on the product and engineering side is busy knitting together our applications, you'll ultra ex auto insights <unk> machine learning and designer cloud powered by Tri factor into the Tri factor backend platform and in the Trifecta platform really is.
As the starting point for us to be able to add more functionality to the platform because.
I continue to hear it from customers they want fewer vendors less complexity.
More consolidation in this space, and we think who better than us to go do that.
Given the zealotry that exists with the the user base in the community that we have today so.
Busy at work right now certainly keeping an eye on the markets and we're always going to be looking to.
To add more capability, both organically and inorganically.
Very helpful color and obviously, an impressive to see the strength here. Thank you.
Thanks, a lot Brad I appreciate it.
Yeah.
Thank you.
Question from Michael Kim.
Capital market.
Hey, Eric.
Michael.
Nice set of results in a I guess a question for Mark and Paul So I mean, it sounds like you guys arent seeing much on the macro I know, Kevin kind of laid out a lot.
As a data point the pipeline and so forth, but curious just to get your both your insights on what you're seeing from the field and.
Bass, either by geography or customers that comes to the sales cycle for budgets group.
Yes, thanks for the thanks for the Kudos Eric.
Michael for Us.
Yes.
Thank you clearly.
And talking to customers, we're hearing that that there.
Yes, theyre going to be very careful about their enterprise spending.
I think that's an environment that I believe <unk> should be able to thrive in because it's.
If you're looking to run a tighter ship if youre looking to recapture margin if youre looking to.
Refine and streamline your supply chain, you need to use ultra X too to get a handle of the data that swirls around your business and so so that's how frankly, we've been kitting out our sales team over the last two years to go sell and because that's what cfos and Ceos are buying today theyre buying business outcome.
They are not buying seats in licenses and so so that's very much aligned with how Paul has been running the field, but Kevin I don't know if you have any additional comments.
Oh, I think I think that's right.
We've done a very good job of.
Giving customers an opportunity to think about how old tricks can orientate their business and performed better than that.
Certainly what my organization has leverage all tricks for internally and we continue to kind of beat that drum as you know we have a higher level more more substantive conversations.
Okay, and then just one follow up.
I might just add on to it a little bit because it at <unk>.
Got it from the field as you as you alluded to.
You know it feels good in the customer conversations that we're having globally and in our three theaters.
In addition to the business executive conversations that we're having we're now having more CIO conversations is Wow, Cleveland keenly C. N CIO surveys that data analytics is coming out in the top two or three spend categories and you know even with respect to the current macro.
So all of that and it's showing up in terms of our pipeline and the conversations that we're having with customers.
Okay, and then Kevin just to clarify I appreciate the color on both FX and duration had on revenue and are in the court.
What your assumptions are on duration for the year as our revenue and then relative to 2021.
Then on FX, if that's having any impact to your full year guide relative quarter.
Yes. Thanks for the question so with respect to FX I.
I've commented as I went through guidance, our guidance assumes that FX FX rates stay consistent where we see them today.
So obviously any material deviation is not in the B assumption today in terms of duration, we did see a slight tick back in Q2, and my my guidance or direction was that we'll expect to see the rest of the year kind of settled back to you know about one and a half which is consistent with what we've seen in the last several quarters.
Okay.
Yeah.
Thanks.
Thanks, Eric.
Thank you.
Mhm.
And gentlemen, just a reminder, if you would like to ask a question.
No.
Christian.
From Morgan Stanley .
Okay.
Thank you for taking the questions and really impressive Q2, so congrats congrats to the team I actually wanted to pick up on brents question around sort of the valuation we set in the market and what that could imply in terms of the competitive environment. When we look at sort of the competitive landscape for Altera X a portion of that is related to some of the pre.
<unk> startup community, particularly around the guys focused on cloud.
In terms of like you know the battle for cloud and sort of that land grab opportunity with some of that valuation reset and sort of a less focus on growth and all costs, what kind of opportunities could that mean for you guys heading into a slower slower macro environment, where spend may have to be rationalized.
Yes.
Thanks for the question.
Gosh, I really don't think of it as a land grab in cloud per se because we're building.
Building out the trifecta architecture in the cloud so that we can be a lot easier to do business with so it's a lot easier to go from.
Having an idea to use all tricks to getting fingertips on keyboards from any any set of keyboards anywhere in the world and that's really the driver to eliminate friction and and just make it dead simple to a provisional tricks to go get breakthroughs with data.
So as far as competition goes.
Yes, listen I think it's going to be a tough fundraising environment and in the private markets in the next couple of years and the other companies that don't have a long runway of cash.
We're going to are going to get stuck in and Theres already a few very very very sort of.
Out there.
Examples of that but honestly from a competition standpoint, we don't see a ton of competitors we.
We're really looking to leverage our giant install base and and and and go sell them more services and.
Or capabilities.
Yeah.
Sorry.
There are more capabilities.
Real time and Thats why Paul has been so successful building out these annual plans in the second half of last year and this year is because we've got a great cohort of renewables that we can expand pretty predictably upon and it allows us to have quarters like this.
I appreciate I appreciate the thoughts and then I guess, that's sort of my main question is just sort of you know the strategy going into a downturn and as Paula mentioned analytics does show up as a top three category. However, if you looked at sort of the space over the last you know.
Decade, plus and figured downturn, it's typically been hard for customers to justify expanding seats at least entering a downturn, whether it's sort of the tableau market I mean, you guys slow down.
In the beginning parts of the pandemic and so I wanted to get a sense of why.
During the slower demand environment things might be different is it because of the L. L. A strategy is it because in fact, you're not pricing.
Proceed as much as you were.
A couple of years ago I, just don't understand why the the incentive for customers to do that expansion deal will sort of sustain them going into a tougher budget environment.
Yes, Indeed, I think Theres, a few factors that give us confidence that we can expect to continue to see this from the market from both existing and new customers and you know we've we've done a lot of things to make it easier for our customers to expand with us that werent in place.
In the past so the L. A as an example of a commercial contract that makes it easier for people to expand they don't have to manage licenses nearly as closely as they had to manage them when when they were buying them Ala carte.
Another example is that we've we've invested in value engineering, we can now quantify for our customers. The return on investment are at the top.
Topline and Bottomline impact that our solutions are driving for their business customer references that back it up and then the last thing is on customer success. So we just turned on in the last quarter, a global digital Onboarding platform for our customers said the minute of licenses purchase their items.
Likely activated on this digital platform and immediately are guided to where they can find the resources to make use of that software and get up and running and drive adoption and proliferation. So the reality is that I think the market opportunity is.
I've been there for quite some time, we werent necessarily approaching our customers with all the different levers that demonstrate the value make it easy for them to expand and drive drive the democratization that they agree with is is that answer to becoming a data driven enterprise.
And Sanjay just tag onto that and say, we're a very very different company completely different leadership a lot of different people are focused in very different ways. We were.
It will likely over over rotated on small medium business two years ago and that it was.
Certainly was one of the first markets to kind of fall.
Before the pandemic so.
I think you can hear in our voices the confidence we have in it and not only the team, but the operating plan that we have.
Yep very exciting I appreciate the thoughts polymer Keith thank.
Thank you.
Hum.
<unk>.
Mhm.
Participants are limited to one question each time.
The next question.
What we did.
Please go ahead.
Yeah.
Hi, Congrats on the strong quarter and thanks for taking my question.
Your sales and marketing investments are up more than 70% year over year in the June quarter.
No.
Its pumping some changes in the organization, but can you talk about the sustainable sales and marketing growth going forward and given the rate this quarter nearly double the sales of investment growth rates achieved in the prior two years, how should how should we think about the potential for acceleration in outer years as new sales reps reachable.
Productivity.
Yeah.
Yeah. Thanks, Thanks, Kevin I. Appreciate the question. So just a couple of things first of all keep in mind seasonality. So as we think about sales and marketing at least in the second quarter. We do have you know inspire conference. We had the full quarter of Tri factor, we typically will front load a lot of the hiring that we.
Due for the year and so that certainly gets more burden in the second quarter and then when we think about seasonality of the business and look at the growth implied by guidance. The back half of the year is much stronger for us than the than the first half of the year. So you know from a relative perspective sales and marketing has been at relative.
Consistent levels over the last couple of quarters, and we obviously expect to see the business to continue to expand as evidenced by guidance. So we should see improvement in those metrics for the remainder of this year.
Yeah, that's great. Thank you.
Thank you thanks a lot.
Yeah.
Thank you. The next question we have is from Joel Fishbein countries. Please go ahead.
Thanks for taking my question I, just had a follow up mark on some of your prepared remarks with regards to the partnerships I wanted to see if you'd give us some more color around snowflake and data bricks and even GGP as a as a channel for you guys and how that maybe helping drive some of the deal sizes and some of the Uh huh.
Good success that you've been having recently.
Yeah, you bet Joel Thanks for the question, Yeah, I think I think one of the things we set out to do a couple of years ago was to become a world class partner in this ecosystem because we knew this ecosystem is bigger than any one company can do anything by themselves.
And we recognize very quickly.
These like Snowflake data bricks Google.
Google.
AWS, Microsoft Azure will become very important.
Both technology partners in the cloud providers will become very important distribution partners for us going forward and bringing on Suresh Patel, who will.
Pass this along to in a second.
We brought on somebody that Stewart at those kinds of partnerships.
Previously in his career and he has really been heads down in the last year and a half building out the various but I think it's very clever technical integration to make it much easier for customers.
Sure.
Ultra and data bricks or ultra <unk>, and snowflake, but particularly the last quarter, we had some great momentum with those partners.
Yeah. Thanks Mark.
We've got a focused deliberately on on some of these partners with the intention of making sure our customers benefit from these join integrations on database.
If you were to inspire you heard the VP of product data break is going to share some of his excitement for the integration between all the tricks and Delta Lake.
So we our connectors now support the Delta Lake Technology database equal as well as the cloud fetch similarly in previous quarters, you heard us talk and you heard snowflake talk about the strength of integration. This past quarter, we delivered a lot of innovation on our bulk loading of data into snowflake.
Continue to believe that as in the cloud data gravity accelerates, we seek and a great opportunity for us to help.
<unk> business users get access to those cloud data and cloud insights.
And a lot of fun integrations are designed to do exactly that.
And then from a go to market perspective that shows up in the way that we support our customers and we're building blueprint with many of these partners. So they understand our customers understand how to.
Integrate our technologies together how to implement.
Best practices et cetera, we were awarded for a different industry vertical competencies by Snowflake last quarter across financial services retail healthcare and media and will continue to invest to make sure that these things show up as value to our customers.
Great. Thank you.
Thanks, a lot Joel thanks.
Thank you next question is from Mike <unk>.
Thank you Kevin.
Hey, guys. Thanks for taking the questions here and congratulations on what was a much much stronger quarter than we had anticipated on our side. So kudos on that thanks, Mike if I could.
Absolutely absolutely if I could.
Ask a two part question here, primarily going to Kevin. The first question I had I think in Mark's prepared remarks to open the call. There was a comment that you guys closed two of your largest E. C. V deals on record is it possible for you guys to size up the impact from the accidents it'll obviously.
Act as a headwind as we start to think about too cute comps for next year for revenue when they are and then the second component to the question.
Not to nitpick here, I think and Kevin in your remarks actually you said that the upside in <unk> actually provided increased flexibility for investing in high ROI projects. So if I look you guys beat to queue.
At the midpoint by $18 3 million, you're taking up the full year by $10 million. So those those incremental dollars that are being redeployed elsewhere can you just help us think about where those are being.
Invested or whether it was accelerated projects are taking place.
Yes, thanks for the questions, Michael but I'll do my best to answer so I can't really quantify the ACB deals, but you know we've talked in the past about orders of magnitude of deal sizes, and you know to be able to close the two largest ACB deals and in our history and in this particular quarter with this backdrop.
I thought was pretty pretty impressive and it really does go to.
The team that Paula has put on the field and how they engage with customers and how they sell value.
For sure in terms of how we think about the trade off between the beat and where we're going to invest going forward.
We are going to make very disciplined selective investments. If you look at guidance. It does imply that a portion of the beat is going to go continue to go into primarily go to market and product as we continue to focus and work through those teams.
But if you look at the profitability profile from where we started the year to where we are today.
Have provided a significant improvement in the profitability profile and we are committed to that path to profitability.
Yeah, and just on large deals.
These both of these deals were existing customers that we expanded and we've expanded them dramatically in the last couple of years by selling them more of our designer product, but also selling them more of.
The new products that we've added just in the last year year and a half so so thats emotion that that I'm expecting every quarter.
<unk> big deals every quarter.
Monitoring all the big deals all of us exact so.
Big deals that we babysit and get involved and it's a focus of the go to market motion to Paula is built.
That's terrific I appreciate the babysitting analogy and and thanks, a lot for the color guys really really helps you spike.
Yeah.
Thank you next question.
Tien Tsin Huang from Jpmorgan.
Hi, everyone. This is no on for pendulum. Thanks, Thanks for taking my question.
I'm just curious you know how it's cloud.
Having some of the unified cloud deals and can you just help parse through any contribution from tried back then, but I mean, you or <unk>. Thanks.
Yeah.
So cloud Elas.
Our and being very well received with our customers. It's it's still early in that we only announced this in June but we talk about cloud with virtually every customer that we meet with and what they like about the cloudy L. A is very similar to what they like about the at the premiere languages they not only.
We get the benefit of designer cloud powered by Tri factor, but they get to play with auto insight and Opex machine learning, we provide flexibility for them to mix and match across the different cloud asset so that they can consume the platform and drive adoption and expansion across their.
As they see fit so it's.
It's it's very encouraging what their response has been from our customers on quality L. A and we expect that continued great progress there and look forward to sharing more with you about it I on quarters as they continue to be a big focus for us.
Yeah no. It just with respect to the question on <unk>, we went into the acquisition and commented that we expected them to to add about $20 million in IRR for the year are at any given quarter. The contribution is really not material to the overall results.
Got it thank you.
Thanks, a lot.
The next question is from cultural upheaval from Bank of America.
Yeah.
Hey, guys. Thanks for taking the question.
Just one from me I wanted to ask a question on the guidance here and with all the commentary and the answer to all those thoughtful questions before me.
It sounds like the end market is pretty good for you guys. You know you haven't mentioned the sales cycles were improving.
That's clearly excellent.
There are other software companies talking about a long dated sales cycles. So I guess the question here on the guidance as you know are you baking in any sort of assumptions for a worsening macro in the guide you know maybe for the low end or just kind of walk US walk me through maybe any sort of assumptions for a worsening macro on the guidance. Thanks guys. Yeah. Thanks.
For the question Koji.
I'll, let Kevin answer this but I don't want to proceed it by just reminding you money you that we've got a very strong very granular controls on this business and we watch it like a hawk, we get pretty low cost of a tool called designer to be able to use this across the business to help us see around corners.
Like our customers due to predict how much inflation is going to hurt their supply chain or to <unk>.
Predict when.
If.
Some uncertainties come into macroeconomic environment, and we've got a watch those controls like a hawk.
That said, we take our forecasting very seriously and.
We've built a really disciplined process that does weekly forecast right down to every individual sales territory in the company and it rolls up to all of US exact sitting around this table on a Monday afternoon talking about the granular controls that we have on the business and so so I think we.
We reflect that in our guidance.
I think most of US here have built a pretty good reputation of doing what we say we're going to do in <unk>.
And we assume that the macroeconomic market might get worse, but the demand for our innovation has never been stronger.
Yeah. Thanks, Mark so the only thing I guess I will add on top of that.
As you know we did take some prudence and conservatism into the guide, which I commented in the prepared remarks, so we're not.
You know, we're not expecting that we're gonna be operating in a different macro than than others.
In the environment.
Yes, and we're really not focused on the on the low end SMB as we had been in prior.
Prior year's Koji, we're really primarily focused on the largest.
Roughly two to 3000 government and enterprise customers out there.
Got it. Thank you so much guys. Thank you. Thank you.
Yeah.
Next question.
Jonathan.
Please go ahead.
Hey, Thanks for squeezing me in here just had one on the net revenue retention.
Good to see kind of a future or that kind of continued stabilization and actually uptick back up into the 120 level. Kevin can you just help unpack the drivers of the improvement and how durable do you think about those drivers as we head into the back half of the year that tends to be a little bit heavier from a renewal perspective.
Yes. Thanks Chase, it's many of the things that I think we've we've already touched on and highlighted we obviously had very strong execution with large customers in L. A that drive strong expansion. It also gives us.
Quite a bit of visibility.
Future expansion as we go back to the comments that pollo made around burst capacity and in our view into that it also is a function of the fact that we're focusing on larger customers and that's where we saw a lot of the strength in the quarter with $1 billion plus customers when you're selling elas that average.
That $1 million per deal those have the tendency of driving really strong expansion. So I think everything that you saw from US this quarter sets us up really well as we think about growth in that expansion in the business for the rest of the for the rest of the year.
Okay.
Alright. Thanks.
So lot chase.
Yeah.
Thank you the last question.
Thank you.
The multifamily can block the Cherokee.
Thank you and nice quarter guys.
Thanks, Derrick just to just a quick question on on your new customer adds so so you added.
101 customers this quarter, so it's lower than it has been for quite some time and I'm. Just wondering is this really reflecting your shift to alert to larger targets and and what is it what's sort of the average landing size of the deals now with them. If you can do.
Your customers are they getting larger.
Thank you Blair for the question so you're right in terms of what is reflected in that.
That new customer add count we are very focused where the market opportunity is greatest.
Which is clearly at the large enterprise level of the global 2000, and so we'd rather add very high quality companies to our logo list rather than any company as for the sake of having meso count.
Well keep the focus on adding new logos, but they will be quality enterprise logos.
And then in terms of the land size, we don't add.
Sure that value publicly but yeah. It is it is growing at it is we are landing at a higher level now that we have in years past.
I would just add to that if you look at where we're actually landing we saw a seven point improvement in the global 2000, So really saw strengths in in landing with larger better quality Ah prospects, who are now in new customers.
Great. Thanks very much.
Thank you ladies and gentlemen.
At the end of our question and answer session and I would like to turn the call back to T O.
I'm looking for closing remarks.
Thank you operator, and I'd like to say, thank you again to our customers partners shareholders and our team here at <unk>, We had a fantastic first half of 2022 and we're still excited at the opportunity ahead, we got the <unk>.
Leaders in place the right go to market strategy and an expanded platform based portfolio of offerings that can unlock so much value for our customers. The company is executing at a high level and we look forward to closing out the year with strong momentum.
Thank you all again for joining us look forward to seeing you over the road.
Thank you Phil.
Ladies and gentlemen that concludes today's conference. Thank you for joining US now disconnect your lines.
Yeah.