Q3 2022 Alteryx Inc Earnings Call

[music].

Good afternoon, and welcome to the <unk> third quarter 2022 earnings conference call.

All participants will be in listen only mode.

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After todays presentation, there will be an opportunity to ask questions.

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The jaw your question Keith.

Start building too.

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Please note that this event is being recorded.

I'd now like to turn the conference over to Mr. Ryan Goodman head of Investor Relations. Please go ahead.

Thank you operator, good afternoon, and thank you for joining us today for old tricks is third quarter 2022 earnings conference call.

I'm, Ryan Goodman, <unk> head of Investor Relations.

Being 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 third quarter ended September 32022.

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 2022.

These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties some of which are beyond our control our actual results could differ materially from expectations reflected in any forward looking statements.

For a discussion of additional forward looking statements made during this call and 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 metrics 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 our call today.

We continued to execute at a high level in Q3 and are seeing more and more companies embraced data analytics across their organizations.

Our Q3 revenue of 216 million up 75% year over year came in above our guided range.

This drove our non-GAAP operating profit also beating guidance.

Our annual recurring revenue or <unk> came in at 758 million up 31% year over year.

Like many global businesses, we saw a meaningful currency headwinds in Q3.

Normalizing for this $12 million impact.

Our our would've been hindley above our guided range and up.

Up 33% year over year.

We are tracking well across our key performance metrics.

Sales productivity continued to improve year over year.

Renewal rates held near multi year highs.

And our net expansion rate improved for the second straight quarter to 121%.

Our value based go to market motion continues to resonate in this market environment.

And our results demonstrate the strong execution across our meaningfully up level sales force.

In fact, we closed our largest new logo ACB deal ever in Q3.

We are pleased with our Q3 results, while we are mindful of the macroeconomic dynamics and challenges facing many companies.

We are fortunate to see data analytics continue to be a top budget priority.

Companies are pushing ahead with multi year digital transformation projects.

<unk> decision intelligence and decision automation.

Every business and government needs to run it type of ship predict.

Predict how inflation will affect their environments.

And make better data driven decisions faster.

A recent IDC survey indicated that over 70% of organization is planning to spend more on analytics and other software investments in the next 12 to 18 months.

Yeah.

And it's not just about buying additional tools, it's about empowering knowledge workers with data analytics capabilities.

The study found that enterprises have deployed solutions and less than half of the departments that actually need them.

Less than half of the nearly all responded knowledge workers are absolutely using any analytic software.

These companies need a platform that enables them to empower business users across the organization to incorporate data analytics into everything that they do.

This is what we refer to as democratization of analytics.

We are humbled to find yourself in a unique position to help our customers embrace data analytics. We also take great pride in the fact that our favorable market position today.

As a result of the strategic initiatives, we've put in place over the past two years.

We've established a forward looking <unk> analytics cloud platform innovation roadmap.

We've designed our go to market to better deliver value to our customers.

We've updated our partner program and expanded our partner ecosystem.

And we've invested in our customer success organization to help customers achieve desired business outcomes.

We take nothing for granted we are fully aware of the economic environment out there and we are effectively executing through an elevated level of deal scrutiny as customers demonstrate greater spending discipline.

I'm so proud of the team for their commitment to these initiatives that have enabled us to deliver another strong quarter.

Let me share a few highlights from the quarter.

We hosted our inspire EMEA user conference in Amsterdam last month with over 1300 attendees from nearly 30 countries.

I was there and witnessed incredible energy and excitement in the general sessions workshops training and so much more.

To me this demonstrates how data analytics is happening in these times and on a global scale.

Our global 2000 penetration increased to 46%.

Up seven points from this time last year as top brands across the globe are aligning with <unk> on their digital transformation journeys.

We went to $1 million plus deals that deeply incorporate ultra analytics cloud.

One of which leverage our new cloud L. A bundle.

Cloud momentum is picking up with multiple wins for use cases across the <unk> analytics cloud platform.

We achieved a major milestone on the cloud innovation roadmap with Ultra machine learning now being integrated on the ultra rich analytics cloud platform.

And finally, we further scaled our governance capabilities with a new version of server aligned with federal information processing standards offence.

Our strong execution rapid innovation and all of our successes.

When it comes back to our people I'm.

I'm pleased to share that our employee retention rate remains at a multiyear high.

Yeah.

We're executing well across all of our key strategic initiatives, we are particularly excited about early successes in club.

As we gain traction with larger enterprise customers. The ultra <unk> analytics cloud platform is unlocking incremental opportunities for us with more personas and new use cases.

We went to seven figure deals during the quarter with a significant cloud element one of which was with a fortune 100 auto manufacturer.

This multiyear ultra <unk> customer not only meaningfully expanded its designer and server license count.

But also signed on for several thousand designer cloud licenses to enable cloud native access to data and Google Big query.

In addition by leveraging our cloud E. L. A this customer can engage with machine learning and auto insights as they move forward with cloud transformation.

We had another significant cloud win with a global management consulting firm.

This company Leverages, all tricks designer to empower its consultants.

And their work with their customers.

As well as its own back office operations.

In Q3, they significantly expanded their multi thousand user license agreement with more designer seats as well as club.

Designer cloud will provide this customer with greater flexibility and agility and expanding their usage of all tricks in coming years.

And the list goes on.

England, a U K based health care organization that was already using trifecta adopted a cloudy L. A to expand usage of designer cloud and explore potential use cases with machine learning and auto insights.

A leading entertainment and media company adopted auto insights to optimize contact center operations.

And they're very well known as social media company adopted auto insights to enhance analytics tax data.

The early momentum is great to see and it's a reflection of the platform innovation market demand sales execution and value that customers find in our solutions.

On that note with Altra machine learning now available on the ultra <unk> analytics cloud platform, we are accelerating our multi tenant multi cloud architecture.

This was a key strategic driver for the Tri factor acquisition earlier this year.

We're excited to achieve milestone after milestone.

New innovation is resonating within our community.

Suresh highlighted several newer offerings at inspire EMEA.

<unk> metric store App builder and location intelligence.

We are seeing positive early feedback and expect all of these to be available next year as part of our cloud platform.

As for our flagship solutions governance continues to be a key focus for us.

As I mentioned earlier following our Q2 launch of designer Phipps, We introduced server chips in Q3.

This expands on our commitment to best in class governance capabilities and enhances our ability to win new opportunities in the public sector.

We have the most comprehensive differentiated platform of solutions in the company's history, and the timing could not be better.

As our increasing traction with larger organizations is creating a broad range of incremental opportunities.

So that is we secured approximately $51 million plus HCV wins over the last 12 months, bringing us now to over $101 million plus customers.

Our executive level sales approach is driving more productive engagement with our customers.

And validating that data analytics is a current spending priority.

Our customer success initiatives, such as delivery of hundreds of use cases and solutions blueprints are driving scalable and repeatable outcomes in which customers can deliver higher ROI.

And our E. L. A construct is garnering favorable customer response.

As evidenced by roughly doubling our EMEA business year over year in Q3.

Additionally, we saw customers with burst capacity renew and upsell to a higher tier.

This gives us confidence that our 2022 E. L. A success will offer more predictable and actionable upsell opportunities in 2023 and beyond.

A great example that demonstrates how all of these initiatives come together with a Q3 win with one of the largest U S based airlines.

This customer was one of our first U L a wins last year.

Customer success team engaged with a regular cadence of enablement programs.

Exploring incremental opportunities to deploy data analytics across the enterprise.

This simply would not have been possible with the sales motion focused on a single line of business.

We found new unique opportunities to create value such as optimization of aircraft maintenance schedules and audits on service logistics.

After fully exhausting its first capacity earlier this year.

This customer signed on for a new E. L. A in Q3 that was more than double the original capacity, increasing the total HCV to well over $1 million.

Our customer success team has done a fantastic job in creating value for our customers.

And of course, Bernie upsell opportunities for Altra.

And this becomes even more important as we continue to win with large enterprise customers that offer significant long term expansion opportunities.

We're also seeing strong success with our ability to sign new logo wins.

In addition to one of our largest new logo wins in the history of the company, we're establishing many new customer relationships with companies as they continue on their digital transformation journey.

For example, after a leading independent identity provider adopted all trips designer and server to automate data analytics in both the sales operations and finance organizations.

One of the largest food and drug retailers in the United States adopted all trips designer to run geospatial analysis and enhance their store placement decision process.

I'd also like to take a moment to highlight our growing partner ecosystem.

This has been a huge focus for all trips over the past year as we see partners as a means to both efficiently scale our go to market reach.

As well as enhance our customer success efforts.

Since updating the partner program earlier this year, we are seeing positive trends.

With partners influencing over half of the new <unk> wins in Q3.

We continue to expand our ecosystem with new partnerships and increased partner engagement momentum.

We had a great partner when a truism.

Top 10 U S commercial bank.

We leveraged our partnership with Thomson Reuters to help engage closely with the customer to a steady cadence of workshops and training sessions.

This allowed us to identify a breath of incremental use cases in finance and tax ultimately, resulting in the customer increasing its license count by approximately 300%.

Okay.

In closing we are pleased with our execution in Q3.

We are appreciative of the favorable position, we find ourselves in and are increasingly confident in the strategic direction of this company.

We are very focused on managing our business to balance the growth opportunity. We feel exists in this very important market with the requisite discipline and rigor on spending to optimize profitability in 'twenty, two 'twenty three and beyond.

I'd like to thank the entire ultra X team for their fantastic work.

And with that I'll turn the call over to Kevin for a closer look at the financials.

Kevin.

Thanks, Mark Q3 was a strong financial quarter across the board.

Our growing traction with large enterprise customers and our disciplined investment philosophy is evident in our results.

$758 million grew 31% year over year.

Excluding a $12 million currency headwind versus what we assumed in our guidance he or would have been 33% year over year two points of growth higher and above the high end of our guidance range.

As a reminder, we provided our Q3 guidance in August we incorporated exchange rates at the then current levels.

Since then the British pound declined at 9% the euro declined 4% and dynamics have been similar with other currencies.

Because we adjust our entire air are using end of quarter rates with approximately 20% of our air are denominated in foreign currency FX can have a meaningful impact on air or in times of higher volatility like we saw towards the end of September .

Revenue of $216 million grew 75% year over year exceeding the high end of our guided range benefiting from better than expected bookings and robust renewal rates with.

With the revenue upside in our disciplined spending mindset the business delivered a non-GAAP operating profit of $5 million, which is $10 million better than the high end of our guided range.

Over the past several quarters, we've communicated our intent to increase traction with larger organizations, given a higher customer lifetime value.

This quarter I hosted our first Altair CFO event in New York for dozens of Cfos and senior financial leaders from global 2000 companies.

These financial leaders face the challenge of balancing cost optimization with selective investments in their business.

The common theme across these leaders was that Upskilling workforces with data analytics and digital transformation initiatives, where top priorities to create operational agility and further enabling data driven decisions to drive long term rois and shareholder value.

We had a great response to the event and I look forward to hosting more in the future as we find that democratization of analytics often begins in the office of finance of large companies.

As part of our strategic enterprise go to market and go to market motion. We've invested in our sales force our partner ecosystem, our customer success team and our product roadmap.

We are pleased to see clear evidence in our results that these investments are effectively driving forward. This initiative.

We are seeing our strongest AOR growth with our 1 million dollar plus are our customer cohort with over 10 points of acceleration in growth versus Q3 of last year.

Our average deal size saw a 30% plus year over year growth with both new logos and expansion wins.

Our average <unk> per customer continues to see strong sequential and year over year growth coming in at 91000 in Q3.

And on the L. A front, we continued to see strong momentum closing approximately as many L. A deals in Q3 as the entire first half of this year.

This positive momentum with large enterprise companies is driving favorable dynamics in our financials.

First as our larger customer cohort has our highest retention rate, we are seeing renewal rates near multiyear highs and up significantly year over year.

Moreover, our average <unk> per customer is more than four times, the average size of customers that churned out this quarter.

Second as we are identifying and winning a breadth of opportunities within larger customers. We are seeing sequential improvements in our net expansion rate of 121% and a global 2000 net expansion rate of 129%.

And third with an expanding portfolio of cloud solutions, we're better equipped than ever to meet the growing demand for data analytics throughout the organization.

In fact more than half of our early cloud ACB bookings was with our 1 million dollar plus customers.

We are pleased to see the resilience in the growth dynamics of our business. Moreover, the true earnings power of our financial model is becoming increasingly evident in the numbers.

In Q3, we captured over $10 million of upside to our non-GAAP operating profit guidance with approximately 50% of the revenue upside following through to the operating level sale.

Sales force productivity was a key driver to profitability with sales and marketing as a percentage of revenue improving by 10 points versus Q2.

We benefited from both higher productivity year over year and increased number of ramped reps.

Looking ahead, we are committed to a disciplined investment philosophy as we strive to unlock further leverage in our model.

We're also focused on ensuring our pace of investment is appropriately aligned with the current market dynamics.

For example, our high level of employee retention enabled us to temper our hiring in Q3.

And with growing ranks of fully ramped reps and improve productivity, we expect to further moderate hiring in coming quarters. In addition, with an increasingly distributed workforce, we are evaluating and implementing the future of work and all tricks and plan to execute a real estate rationalization initiative in Q4.

In summary, we are pleased with the Q3 results in which we demonstrated durable profitable growth driven by strong execution and saw continued evidence that data and analytics remains a top spend priority for business leaders across the globe.

In addition, we are confident in the incremental growth drivers ahead in 2023.

First we expect to have a meaningfully larger renewal base relative to 2022 which consists of both 2020 three year renewals and the increasing cohort of one year renewals.

Second.

We have a growing book of Elas with burst capacity, creating upsell opportunities for large enterprise customers with high visibility in coming quarters.

Third we have a growing international presence with significant opportunity to further expand.

Fourth we have an expanding ecosystem of partners to accelerate our global market reach and last but not least we have our ultra <unk> analytics cloud, which we expect will continue to build momentum and increasingly become more meaningful to the financials next year and beyond.

And with the strategic investments we've made in recent years, coupled with our disciplined operational rigor the business is well aligned to demonstrate improving profitability.

As for the Q4, 2022 outlook.

We expect <unk> to be in the range of $820 million to $825 million representing year over year growth of 29%.

Keep in mind, we experienced a $12 million FX headwind to Q3 that I mentioned earlier and excluding this headwind we beat Q3 by $7 million.

So this guidance reflects a 2 million dollar plus raise versus our prior implied Q4 outlook.

Our guidance assumes FX rates remain at current levels.

We've provided additional color in the Q3 earnings deck available on our Investor Relations website.

We expect GAAP revenue to be in the range of 276 million to $281 million representing year over year growth of 59% to 62%.

This also assumes FX rates at current levels and assumes no material change in contract duration.

We expect our non-GAAP operating profit to be in the range of $50 million to $55 million and we expect non-GAAP net profit per share to be in the range of 48 to 53.

This assumes $76 7 million weighted average shares outstanding and an effective tax rate of 20%.

For the full year of 2022, we are increasing our GAAP revenue range to $830 million to $835 million representing year over year growth of 55% to 56%. This is up from the prior growth range of 44% to 45%.

We expect non-GAAP operating profit to be negative 5 million to breakeven and improvement from our prior outlook for a loss of 30 million to $20 million.

Finally, we expect non-GAAP loss per share to be in the range of 37 to 32 cents an improvement from the prior outlook for 56% to 46. This assumes $68 5 million basic shares outstanding and an effective tax rate of 20%.

In closing Q3 was a great quarter, the durable growth trends continue to validate the go to market and innovation investments. We've made over the past couple of years and our disciplined approach to spending is increasingly apparent in our improving profitability.

Well, we are certainly mindful of the macro environment and proceeding with a high level of rigor. We are confident in our ability to close out the year with strong momentum and we believe we are well on our way to becoming a $1 billion plus air our company.

With that thank you all for joining us today, and I'll turn the call back to the operator.

Thank you very much we will now begin the question and answer session.

It's a good question you May press Star and then one on your telephone keypad.

If you are using a speakerphone please pick up your handset before pressing the star Keith.

Any time your question has been a dream and you would like to reschedule. Your question. Please.

And then too.

May I ask that you only ask one question.

At this time, we will pause momentarily to assemble them.

Hum.

The first question comes from Derrick Wood from Cowen. Please proceed with your question.

Okay.

That's on a solid quarter, everybody, maybe just to kind of start with the just.

Just to kind of drill down on the macro a little bit.

Have you seen much change in sales cycle or buying behavior out there when you look across geographies or verticals you know what what's the tone of demand in budget priority for analytics and I guess, just how are you feeling about your your sales force's ability to navigate some of the macro dynamics, particularly as you enter a very bad Q.

Four.

Yeah, Hey, Derrick it's mark here, Thanks for the question.

Yeah.

Been travelling nonstop for the last six seven months with hundreds of customers.

And I.

I would say that the.

The demand for data analytics is quite high it's still a massive spending priority for the people I talk to.

Hmm.

Almost every meeting I have customers are asking for help because it's such a fragmented market and I'm really really thankful frankly, we made the changes that we did in the go to market to really moved from a bottoms up motion to a top down motion because that gives us visibility to the cause of the CFO level spending priorities that allows us to do a better.

The job of forecasting and we saw a small number of deals.

You'll get a additional kind of stages are added into the cycle, but we were able to obviously close out a really good solid quarter and I think a pretty solid print and I don't think our our sales team has been more ready than it is today you know we've got a lot of people that are moving from ramping to ramped.

And are really excited about the quarter ahead in FY 'twenty three.

Great well done thank you yeah. Thanks Derrick.

Yeah.

Thank you. The next question comes from Joel Fishbein from Twist Securities. Please proceed with your question.

Congrats on the strong execution.

A question for you is there any early renewals from Q3 that renewed in.

And in <unk> from <unk> to <unk> and also I know you're not guiding to 'twenty three but can you provide any color on how we should be thinking about seasonal trends next year clearly the business has some seasonality this year, but there are dynamics around revenue rec that impacted sequential growth in <unk> any thoughts there would be really helpful. Thank you, yeah, Joel hey, thanks for that.

And thanks for the well wishes as well.

Listen I think in any quarter, you get some customers that wanted to do a deal early and and some that ask for a little more time, frankly, and you know this quarter was no different than any other quarter we've seen.

Yeah, I'll tell you, though we we know well in advance that when the rules coming.

And as we talked about you know over the last you know three or four quarters. We have a large cohort of 2018 in 2019 three year renewals are coming in in this full four quarter period.

And we've been tracking those especially the large account once end and working on plans to not only get the renewal, but earn the permission to do a lot more either seltzer more personas or or sell more seats or ideally both and so Paul has just done a great job prepping the team in and frankly, bringing on people that.

Can lead in and and drive that motion.

Yeah, and Joe I'll, just add a little bit under that in terms of either the ongoing opportunity as it relates to expanding with our customers through our renewal.

Programs as well as through our enterprise license agreements so.

We see that as being an ongoing in healthy opportunity for us as we go into 2023.

Look at the enterprise license agreements that we've put in place.

Gives us great visibility into a consumption and utilization against the sales team a chance to go back and move them to the next tier of the enterprise license agreement or expand across the balance of the portfolio. So this is a notion that we are we're committed to that day is in place and healthy.

And we will continue to be an engine for growth for us that into the future.

Yeah, I mean in the prepared comments are also draw we we referenced the the burst ability in our L. A is that it's really a tell to how strong the renewal opportunity can be for next year.

And so when we give you know next year guidance.

On our Q4 earnings call, you'll see you'll see what we see there as well but.

So I think we're.

We're in a really good spot.

Thank you very much yeah, Joe Let me, let me comment on I guess your linearity question and I appreciate that.

The question. So as you alluded to I, obviously cant give any guidance on 2023, yet, but as you guys think about your models just a few things to keep in mind.

So in terms of revenue, we tend to see 40% the first half, 60% kind of the back half and I think that's what you're seeing play out again this year and so I would you know.

Think about that distribution as you guys are looking at linearity.

We also see a pretty significant decline Q1 to Q in Q1 relative to Q4 for the obvious reasons. So thinking about back half of the year I think would be would be helpful. If.

If you actually looked at Q1 of 'twenty relative to 'twenty. One it was about a 30% sequential decline. So that should help I think guide you Directionally as you think about your twenty-three linearity in terms of operating profit.

You're seeing this year, we tend to get most of the profit towards the back end of the year. So I wouldn't expect anything different there and then maybe lastly on the IRR just keep in mind that Q1 of 'twenty three will be the first quarter that we lap. The addition of Tri factor. So think about that in your net new <unk> growth assumptions as well so anyway I appreciate it.

A question and thanks again for participating.

Thanks.

Thank you. The next question comes from Brent <unk> from Piper Sandler. Please proceed with your question Bank.

Thank you good afternoon, I guess, mark or Paul there's no doubt, we're seeing increasing levels of scrutiny across the broader enterprise. Mike. My question for you is what's resonating the most with customers that's helping drive the continued momentum and they are or is it workflow automation.

<unk> just being a feature must have feature right now is it just the broader analytics category is it are you.

L a pricing and packaging and burst ability, that's really resonating any color to help us explain the strength that youre seeing in the business today given it is a challenging backdrop. Thanks, Yeah, you bet you bet, Brent Oh listen the customers that I speak to every day.

They want to be able to make better decisions faster and to do that they need they realize they need to really.

Garner the totality of the data that swirls around the enterprise.

To be able to do so and and so and frankly, so many of them are still very very early in this journey and what I think we have going for US is we've made what I think is the hardest part of the journey getting going easy it's relatively easy to obscure year people a couple of weeks of training.

And they can start building automated workflows to your point to be able to turnaround manual processes and that that is a big leap I think people are are understandably freaked out coming out of a pandemic seeing the nightmare, if they're in manufacturing of the supply chain in the law.

Last year, and and and trying to deal with inflation and the potential impact of a recession people need to see around corners more now than ever before and then and we help them do that and we wish our entire sales motion is built around use cases.

And and examples of how we can deliver specific business outcomes, not just sling and licenses.

Yeah, and I would add a brand to the market opportunity that Mark just explained very very well in and out here and all of the conversations that I have it.

Traveling a lot in Q3 I was in eight countries outside of the U S. Just in Q3 alone and that that market opportunity is reality kind of all the reasons that he cited.

Then I would just add to that that what we've been building for the last 10 years now on the go to market side, it's been about a value based go to market them, which really resonate in times when there's extra scrutiny.

Our sales team was able to show up with comprehensive use cases and blueprint are return on investment model.

Clear operating models are for customers that want to scale quickly. So they can see that return on the investment quickly.

So all of that work that we've done over the last two years and they go to America and focus on value value Westin St partners value with them through our customer success team is certainly helping us.

There's extra scrutiny conversations with customers.

Yeah, and then the specifics that we've rolled out, especially in the last you know quarter Brent around our our platform in the cloud are really.

It's really resonated with people because they do want to be able to provide more people access.

With less friction right in and we want them, we want to appeal to those personas and and and that's really given us.

A little extra wind behind our sails with our cloud products in Q3.

Super Super helpful color here.

Thanks for the color and great to see a moment of the business. Thank you okay. Thanks Brent.

Yeah.

Thank you. The next question comes from Tyler Radke from Citi. Please proceed with your question Tyler.

Thanks for taking the question Kevin I wanted to ask you just about cash flow. So it was.

Down quite a bit relative to a year ago and certainly if we look at the last nine months, it's below where it was for the last nine months. So can you just help us understand what's driving that and should we think about.

Next year as being a cash flow positive year, it sounded like there's kind of some incremental expense.

Expense efficiencies that you're targeting between the real estate.

Footprint reduction and some other factors, but just talk us through the factors behind this year and how you kind of see that trajectory towards your targets that you laid out at the analyst day. Thank you.

Yeah. Thanks, Tyler I appreciate the question. So just a few comments in that regard first of all you know we've talked for a number of quarters now about the investments that we've made in go to market and end product in particular, and if you think about just the cadence of hiring a lot of those hires came oh.

Early in the year and so Q3 is going to be the first real.

Full quarter that we have that employee base on onboard and so that's going to burn a little bit more cash. We also had a meaningful portion attributable to the semi Emily bone semiannual bonus payout that we introduced this year and then when you just think about seasonality.

As we go through the year, we tend to have the strongest collections in Q1, which you're collecting off of the prior Q4. So that should just give you a little bit of a sense of how we think about operating cash flow for this year I can't comment with respect to operating cash flow in 2023, we don't guide to that and we haven't provided guidance for 'twenty three but we obviously provided.

A bunch of commentary around how we think about the expense levels of the business as you indicated that going forward. So hopefully that gives you a little more color.

It does thank you.

Thanks Tyler.

Yeah.

Thank you. The next question comes from <unk> Singh from Morgan Stanley . Please proceed with your question. Thank you.

Thank you for taking the questions and executing very well guys, a very nice to see I wanted to come back to some comments that Kevin mentioned around 2023 renewal base dynamics, you mentioned I think two factors Kevin.

One the 2023.

Three year renewal cycle, and then also the impact of Elas could you just give us some more color on why we think the renewal base is going to.

The E tailwind going into next year, given that I think 2020 was you know the middle of the pandemic. It was a tougher year for the company.

To that extent could you give us a sense of what percentage of the business is now or what was the customer bases on what your deals any color until 'twenty three when it will based on yeah that'd be very helpful.

Yeah I appreciate it I'm not sure what more I can offer than in the prepared remarks as it relates to <unk> to 2020 three as you as you know over the last couple of years, we've moved pretty significantly to align pricing.

And value are closer as opposed to pricing and duration. So we've seen a bunch of of customers both elect to maintain on three years and in others moved to one year as we project out and look at our renewal base into 2023, we do expect it to be significantly larger than.

The renewal base in 2022 for those for those reasons. Additionally, I guess I would point back to during the pandemic. We saw the most significant churn in the highest impacted our verticals that we had at that time and still a lot of those customers.

It had gone through whatever dynamics of their business and adjustments that have had we've had.

Significant improvement in renewal rates to multi year.

To multiyear highs this year, so we're seeing.

Significant improvement in that respect and then just again, calling back to the commentary that I had with the mix of three year and one year, we intentionally drove duration through our pricing decisions in 2021 down and we've seen it stabilize and you know it's sitting at about one and a half now so we're getting.

You know a significantly larger number of one year deals proportionate to what we had seen in the past.

Sandeep I'll add on to that relative T E. L. E. N E. Obviously, we've been talking for a number of partners about the opportunity that presents for us too.

Customer up and create an expansion opportunity inside the term is.

So while we have one and three year contract.

Gave an example in the script about an airline that before they even hit their one year anniversary. It was an opportunity for us to expand to them to the next tier of yellow and red.

We're seeing that.

Distantly without yeah like customers that it's reducing friction, it's giving them confidence to expand with that and it creates opportunity for us inside the term of the E. L. A to go back for expansion and last quarter, we did more in Q3 and the Leds and we did the whole first half.

You can imagine we'll be talking about.

Again at the end of Q4.

It makes total sense. Thank you so much for the color.

Yeah, Thanks, a lot sanjiv.

Thank you. The next question comes from <unk> Kidron from Oppenheimer. Please proceed with your question anytime.

Thanks, I guess, Kevin I'm trying to tie your answer now to a previous question regarding early renewals.

Maybe you can help us reconcile the significant beat on the revenue and a slight miss on the E. R. R. I understand the FX element, but revenue came in well above our expectations that usually happens when you have early renewals or have increasing durations, where you recognize much more upfront than it does it doesn't sound like that's the case. So maybe you can kind of explain to gal.

Between the two and then a second question you know.

I'm trying to figure out I mean, one of the questions. We're getting from investors. All the time is how do I think about the business in the context of your core designer desktop and server business versus all the rest you printed just tremendous amount of content over the past year year, and a half and we have no qualification on how that's doing how is that contributing is there any qualitative data.

The points that you can provide that.

Share some light on the relative adoption of the new solutions that you've introduced over the next 12 to 18 months. Thank you.

Yeah. Thanks to tight let me let me start with the question about revenue and there are and then I'll hand, it off for the commentary around the designer server and cloud so just for clarification.

Market and pause earlier point, we certainly have customers a quarter to quarter that would look to early renew contracts.

Early renewals do not create any revenue those the revenue attributable to those continue to be recognized in the period of the renewal are excuse me the period that the renewal expires. So early renewing as really an accommodation to the customer and potentially their budget needs and doesn't contribute to the upside for us.

To your point around revenue and N E. R. R. I mean AOR was completely affected by FX had it not been for FX, we would have put up a pretty nice beat on air or our revenue has a lesser effect given the.

Just the way that FX translation work, so I would attribute the strong revenue growth to strong bookings in the quarter strong renewal rates and <unk> was affected by FX.

On the on the product lessons and I. Thank you for acknowledging the amount of innovation.

Let out this year.

Obviously earlier in the year, we didn't do you all think about it like cloud, which is designer cloud analytics machine learning and auto inside we introduced cloud E. L. As at the end of Q2 to make it easier for our customers to adopt cloud portfolio and to scale them up we started to see strong traction.

Q3 was that two of our largest deals.

They include a seven figure cloud expansion. So that's tracking along nicely, we see early wins and momentum with auto insights, it's largely being driven with customers renewing but also our designer.

So if a customer is expanding.

All of this in the cloud side, while also adding tremendous amount of innovation onto designer desktop and server Mark kind of talked about the Fitzwilliam then all the work we did there that gives us the opportunity.

To address the customer of the public sector needs.

All of this machine learning we continue to see.

Real interest in the product, particularly as teams.

Start to Upskill their analysts on machine learning and AI capabilities to the platform mentioned Ty is really resonating with our customers the cloud offering that mark talked about that's going.

We are building a platform for everybody for all our products every persona.

Teams are thinking about their data engineering needs.

Business analysts as they think about upselling and going beyond designer and server for business users to get access to insight betting readily.

Without having to rely on basketball, it's two auto inside.

So it's really resonating with a variety of persona.

This is the this is the kind of innovation.

I expect to see from us.

As we keep rolling out of the cloud products and we referenced that the $2 million plus cloud wins in this quarter with our largest customer so that innovation that Suresh and team have built.

Like the opportunity.

And that's pretty nice tranches with our customers because they are personas that we've not historically been able to see in the graph. So we're really excited as a sales organization to have that in our in our bad as we're partnering with our customers on their analytics journey.

Thank you.

Thanks, a lot of the time.

Thank you. The next question comes from Mike <unk> from Needham. Please proceed with your question Mike.

Hey, guys. Thanks, Thanks for taking the questions here I appreciate the commentary on the disclosure specifically around the FX for a are.

Pretty impressive to see the beat here, especially when thinking about some of the macro volatility we've all been hunkered down and I'm thinking about with respect to the broader market.

A two parter if I could go first again appreciate you calling out that FX headwind to a or for Q3 can you specifically quantify the FX rates, you're assuming when thinking about Q4 with respect to the pound and the Euro and then the second question I had for you again appreciate.

The broad brush strokes for the growth levers when thinking about calendar 'twenty three.

But can you discuss maybe the percentage of your your yearly customers today that are currently utilizing that that burst capacity in what.

What that up hearing dynamic has been like thus far I know, we're calling out those those two.

I guess seven figure deals, but just curious what you've seen in the broader customer base.

To provide some more context there. Thank you.

Yeah. Thanks, I mean, let me hit the guidance when quickly then I'll hand off to Paula.

So with respect to FX in the current guidance for Q4 and the full year Q4, we are assuming rates as they are today across our major currencies. So there's obviously a variety of them, but we're looking at current rates for that portion.

Similar to what you saw in Q3.

And then from a burst.

There's capacity with an R E L. A.

We see really high utilization of the Bay licensing.

And then roughly 40%.

Of our customers are already utilizing burst capacity.

Hum.

Four years into this now so every corner, we see accretive customers living into the nurse.

And that always gives us you know.

Little bit of extra visibility into what the renewal opportunity could be as you know, we're really motivating and incentivizing customers to go faster and in times like these I think.

So most of the customers we talked to they they wanted to do more and they want to be able to have better visibility and see around corners.

Terrific. Thank you again for the color guys.

Thanks, a lot Mike.

Thank you. The next question comes from Kunal Luketic from William Blair. Please proceed with your question come milk.

Hey, everyone. Congrats on the strong quarter and taking my questions.

I just wanted to double click on some of the macro commentary so net new customer adds have come down over the past few quarters I realize that this is largely.

Largely driven by shifting focus to larger more strategic customers.

However, he is there any noticeable macro accident metric or are there any geographies or industries, where.

Where are you calling out by slowdown in demand and can you update us on how customer churn trended through the quarter. Thank you.

Thank you Camille so on the net new logo.

We've consistently talked about the strategy of being focused on quality of the ads of customer logos versus quantity.

See the opportunity in the global 2000, even though cigna.

Significant.

Whether it's expansion within the existing customers that we have in the global 2000 or net new customers in the global 2000. So there's nothing about Q3 in terms of net new logos that was unique to Q3 are linked to anything on a macro economic level I will make a comment about our <unk>.

International business, because I think that's implied in there as well yeah that is a big focus for US has been we play.

Two new leaders in place a quarter and a half ago in both EMEA and a P. J.

I'm really pleased with their leadership and we saw in Q3 a growth in both new logo ACB as well as expansion in our international business. So we did not see material impact from the macro perspective, there and we're starting Q4 wins.

With a solid pipeline in that part of our business as well from a year on year for a second.

Camille regarding customer churn.

Thing really new there is as you might remember we've got our sales team focused on the largest customers mid market and above.

We've Ah can.

And we've signed up a few partners to focus on the mid market and below and so we said previously the whatever nominal churn we do get it tends to happen in much smaller cohorts of customers.

And that's just a direct result from the focus the pall out and her team are putting on large enterprise large government.

But I would I would just point out I mentioned a metric in my prepared remarks, you know average revenue per customer was about 91000, this quarter, which is up.

This quarter and if you look at those customers that churned their value was about a fourth of that so again, when we're seeing you know customer churns they tend to be much smaller less penetrated customers.

That's really helpful. Thanks, again and congrats on this thing.

No.

Okay.

Thank you. The next question comes from Michael <unk> from Keybanc. Please proceed with your question, Michael Hey, guys. Congrats on a solid quarter in a tough environment. So.

I'd like to come back to <unk> question about revenue versus <unk>.

I know you said that the revenue renewals.

Strong renewals in the bookings.

Was there a greater than expected either duration or the percentage of upfront Rev. Rec than you had originally planned in the quarter that helped drive the revenue outperformance.

Yeah I appreciate the question, Michael we did not see any material shift in duration and I would just I guess remind us that going into 2022, we did comment that there would be a slightly greater upfront portion. So when you're looking at you know year over year revenue trends. This year is benefiting from.

You know recognizing about 50% upfront, whereas last year was about 40%. So that certainly is creating some of that dynamic that you may be seeing is obviously unaffected by both of those dynamics.

And part of that or follow ups and some squeezing some in here.

It's hard to tell given the EBIT of course is based on revenue and we're more focused on <unk>, but if you look.

<unk> decreased the EBIT loss for the year.

Here from last quarter's guide to this quarter's guide, but and I know you don't guide to cash flow, but would you say that the cash flow that you are looking for is now higher or lower than this year and what you were looking for previous to this quarter.

Well I guess to answer that Michael I would just point to we've seen a meaningful change.

And where we saw profitability.

Would be for the full year from the beginning of the year until today.

But for the change in paying out bonuses in Q3, and a half of the bonus in Q3.

Versus paying it all at the end of the year, which we have historically done I would expect cash flow to trend upward to operating expenses.

Okay. Thank you very much thanks, Mike Thanks, a lot Michael.

Yeah.

Thank you. The next question comes from Jonathan <unk> from J P. Morgan. Please proceed with your question Jonathan.

Hey, guys. This is Noah Herman on for Pinzon on congrats on the quarter and thanks for taking the questions.

For all the tricks auto insight is that driving any tableau licensed consolidation opportunities in it.

It may have missed it but what was the FX impact to the net new <unk> during the quarter.

Thanks Miller.

A question on auto and site.

So.

Definitely see great interest in the market on this because.

Today aren't necessarily getting at the insights from static dashboard that said theyre looking for particularly in this uncertain economic times so.

I would not say that we're at.

Or stealing tableau replacement sales campaign.

Rather it is a supplemental capability.

It handles real time timely data very well served up in a very automated way and say an anonymous.

Anomalies and trends within the data so it's a very very powerful capability for our business owners in particular and really our customers when they talk about auto inside.

They describe it as having a AI powered analysts at their fingertips.

Shows inside they didn't know that asked about.

So the yields kind of hidden insights.

Beyond the dashboard, if you will.

And so it's not really about tableau.

Tableau consolidation exercise, it's about making analytics accessible to all.

And all the insights and a great way to get business users.

Business owners, not deepen the data access to need them.

Yeah, No I mean, just.

What I love about it it's a it's a whole new persona for whom we can sell to.

To whom we can sell.

Okay.

Yeah.

Thanks, Matt Okay. Thank you.

Thank you. The next question comes from Shelby, She Rafi from XP and Securities. Please proceed with your question Shelby.

Thank you very much. So my question is on the federal or public sector.

We just completed the major federal quarter Q3.

Can you talk about the rough size of the public or federal part of your business. Now I think you were working on getting more fed ramp certified where are you in that process and you have these fixed products for a designer or now server.

How much of a driver do you think there'll be fewer public and federal business going forward.

Or was that Steve our chablis <unk>.

<unk>, Oh, Hey, Chablis, I remember I mispronounced your name.

About 10 years ago, and I know Mark it's been a wild made fun of me for it.

Hey, great to hear from you.

Listen, we're just ramping up or no pun intended ramping up our federal presence, we've got a small but very good team <unk> got really good government relations lead now and with the fifth certification both on designer and server that that Suresh and team have delivered.

We now have a hunting license to go hunting, but it's not really a very meaningful percentage of our business get as you heard from surface now last week, it's a massive part of their business and then in our more mature altra ex youre going to see the same thing from us, but but I'd give us a couple of years before we start breaking into the multiple percentage points.

For federal but really I think the bigger bigger picture the Pip Springs is.

And every customer is asking for this is.

Focus on building, a great governance and security in our desktop products of course, we're going to do that in our cloud based products, but on our desktop products you could argue that in the past, we havent and and that's been a massive focus, especially in the last year and in the next few releases for the team around governance.

Okay. Thank you.

Thanks Kelly.

Thank you at this time this concludes our question and answer session.

I would now like to turn the conference back over to Mark Anderson for closing remarks, Thank you Seth.

Thank you operator, and I'd like to say, thank you again to our customers partners shareholders and our team here at all tricks I.

I believe we had a great Q3, and we're committed to the opportunity ahead.

This team is executing at a very high level and we have a really strong product roadmap and I'm confident in the strategic direction of this company, we look forward to closing out the year with strong momentum.

So much.

Yeah.

Thank you very much that concludes today's conference. Thank you very much for your participation people now.

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