Q2 2023 Alteryx Inc Earnings Call
Greetings and welcome to the Altra second quarter 2023 earnings Conference call.
This time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation if anyone.
Our operators during the conference Please press Star zero.
Okay.
Binder.
Okay recorded it is now my pleasure to introduce your host Ryan Goodman.
The relation.
Ryan you may begin.
Thank you operator, good afternoon, and thank you for joining us today for <unk> second quarter 2023 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 our prepared remarks.
This afternoon, we issued a press release announcing our results for the second quarter ended June 30th 2023, as well as our shareholder letter with key metrics and commentary on the results. If you would like a copy of the release and shareholder letter you can access both online and at 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 2023.
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 statement.
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 S. T. 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.
The earnings release.
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 our Chief Executive Officer, Mark Anderson.
Thank you Ryan and thank you all for joining us today.
We delivered Q2 revenue of $188 million.
4% year over year.
non-GAAP operating loss of three.
$30 million.
Both better than our guided range.
However, annualized recurring revenue or a R. R came in at $890 million up 22% year over year below our guided range.
While we exceeded our outlook on both revenue and non-GAAP operating loss, our Q2 financial results fell short of our expectations.
We've taken Swift action to identify areas for improvement.
As well as opportunities to enhance execution going forward.
And I'll discuss some of these initiatives underway shortly.
But first I'd like to start with what's most important to our customers, which is our product innovation momentum.
Typically generative AI and cloud connected experiences as well as other Q2 highlights.
First even our broad set of generative AI technologies that we're infusing throughout our platform.
We introduced new generative AI offerings that we believe will enable our customers to significantly accelerate and scale data analytics throughout their organization with proper governance and security.
Second cloud connected experiences with cloud execution for desktop designer users can now published workflows to the cloud, bringing the ubiquity of the cloud to ultra workflows.
Third customer commitment remains high we saw robust customer retention and engagement metrics again in Q2 as customers continue to leverage our unique platform scale analytic enablement across the employee base customers everywhere are using ultra could tighten their belts and to do more with less.
Fourth we're seeing positive international booking trends in both Europe and Asia.
The pillars of our growing global business.
Fifth we continue to see strong.
Strong success with large enterprise organizations, our global 2000 penetration came in at 48% up two points year over year with a steady net expansion rate of 131%.
We are at a pivotal moment in this market.
In its formative technologies like generative AI create enormous opportunities.
These technologies have the potential to change how companies operate well they analyzed data and how they win ultra.
<unk> is uniquely positioned as the data analytics orchestration layer at the heart of it. All this is how we've won for years.
Drafting and increasingly complex data ecosystems with easy to learn easy to use solutions, enabling our customers to scale data analytics across the enterprise.
With Aden, we believe we are well on our path to reinforcing this differentiated market position in the era of generative AI.
Now, let's take a moment to discuss the Q2 performance and what we need to do better.
Well, we had incorporated a tougher macro into our Q2 guidance.
We encountered a pronounced change in customer buying behavior in the last two weeks of the quarter.
This was especially apparent with larger customer expansion projects.
Sorry, that's the normal renewal cycle as a result, many large customer upsell opportunities to which we thought we had clear line of sight ultimately pushed out of the quarter or closed with a reduced size.
We recognize that we need to improve our execution on deals like days, particularly in North America. These are significant opportunities and they require a higher level of engagement and diligence in the current macro backdrop, we're implementing a significantly higher regiment Abdul scrutiny and discipline going forward.
Enhancing sales enablement, which should in turn improve our pipeline quality and conversion rates.
We're also focused on identifying higher probability win opportunities with our strategy more attuned to the current macro.
This is absolutely key to driving improvements in our sales productivity.
The business has grown substantially in the last couple of years. The market is moving quickly and there will be learnings along the way.
Teams through several economic cycles at both the executive and board level.
I found the one consistency in times like this.
Is that they create opportunities to adapt the business model and strengthened execution.
With that in mind, we've identified several opportunities to improve operationally.
First we've made some key leadership changes within our sales organization, we have an exceptional team that it's important to make sure. We continue to have proper stage experiences for each leg of the journey ahead.
And we are bringing in new sales leaders for North America sales as well as our partner in alliances team both reporting to our president and CFO Paula Hansen. These.
These two new leaders will have the unique opportunity to ramp together it'd be very aligned on process and productivity improvements to meet this moment.
Second we are driving improved sales linearity within the quarter and are also incorporating additional appeal scrutiny into the sales process.
Our increasing enterprise traction and expanding average new booking deal size.
These efforts are key and should meaningfully improve our visibility and results.
Third we are redoubling, our focus on sales enablement to accelerate the path to higher productivity.
This includes additional coaching and training on how to navigate deals in the current economic environment.
And finally, we are implementing additional cost saving initiatives across the business.
An agile business model in which we can quickly adapt spending.
And we are committed to upholding profitability as we work to improve our sales execution.
It has never been more important to have a customer centric mindset.
Our customers depend on the ultra analytics platform to better understand their data and drive more informed mission critical business decisions.
Our telemetry data shows robust engagement for activated users across the all tricks analytics Glenn.
Designer workflows are trending towards increased complexity and automation with approximately 65% of workflow runs now automated we.
We believe this indicates a higher level of repeatable value add and stronger customer retention.
Our customer and partner community enthusiasm was palpable at our recent inspire user conference over 4000 attendees joined us at our U S. Inspire cohorts in May and our international tour is well underway across Sydney, Tokyo and London.
This elevated level of engagement with our customers. It gives me confidence that the recent upsell moderation is cyclical and not structural and that ultra <unk> remains well positioned for durable.
Profitable long term growth.
I am a steadfast believer that discipline and focus on strategic initiatives are key to delivering long term success.
While we are focused on improving our sales execution. We are also committed to delivering an unrelenting pace of platform innovation and driving ahead with our go to market strategy.
I'm incredibly proud of the initiatives, we announced in Q2.
First Aden, our brand of generative AI and machine learning technologies.
This includes new transformative offerings backing for early availability later this year as well as several offerings in customers' hands today.
The first is AI workbench, which is designed to leverage our data analytics expertise to help our customers respond we introduced generative AI enlarged language models into their enterprise.
Yes, workbench is designed to effectively train these models with their customer data and proper governance and security.
Next is multimodal.
This solution facilitates collaboration between multiple personas by a different interfaces, including designer coding or simplified whiteboard.
We see this as a meaningful accelerator for our customers in there David democratization journey as it removes barriers between stakeholders and nurtures an unprecedented collaboration experience.
We're developing these offerings with input from several global 2000 companies and in digital AI workbench and multimodal to be monetized the bowl.
Complementary elements, but in the platform.
Three adas capabilities are already incorporated into our platform, including magic documents.
For summary for ultra designer.
And an open AI connector.
These are all examples of how we're incorporating generative AI to accelerate the path from data analytics and insights for our customers.
We're already seeing signs of interest and early engagement across all three tools.
Another key area of innovation focus is cloud, where we had several exciting announcements in Q2.
First execution for desktop a major step forward in angry and integrating our on premise and cloud platform environments, with which customers can create workflows in desktop designer.
And then save share and execute those workflows in the cloud.
Second location intelligence.
Introduces visualization and analysis of geospatial data to identify patterns and trends that cannot cannot typically be found it in spreadsheets.
Cloud is resonating with our current customers with approximately two thirds of our Q2 cloud wins coming as upsells to existing customers.
Clinton Racing for example, as leverage designer across a breadth of use cases, ranging from production workflow optimization to social media monitoring to real time racing analytics.
In Q2, Mclaren signed on for both auto insides into machine learning.
As they look to further abstract analytics for new personas.
And explore new operational use cases.
We're also seeing positive early trends for our cloud elas with new customers.
We signed a cloudy L. A with a multibillion dollar oil and gas customer as they look to automate and optimize their office of the CFO with a modern cloud based platform plus establish an analytical framework for new strategic initiatives.
We had a cloud driven win with a leading provider of online real estate marketplaces information and analytics.
This customer will leverage ultra to automate and optimize key data intake processes for real estate industry benchmarks and surfaces.
The cloud momentum is encouraging and we are excited to soon rollout regional support to handle international data residency requirements, but the ultra analytics cloud platform later in Q3.
Well it has become an important underlying pillar of our go to market strategy.
This is complemented our strategic initiatives around enterprise partners and customer success, our ability to continue to expand within the global 2000, and with many of our existing large enterprise customers is key to our long term growth trajectory as I mentioned earlier in Q2, we increased our global too.
Thousand penetration to 48% up from 46% last year.
With our strongest <unk> growth coming from our largest customers.
Our global 2000 that expansion rate was solid at 131% with our overall net expansion rate coming in at 120%.
We had an inspiring 1 million dollar plus <unk> win with a large nonprofit health organization, expanding with designer and adopting auto insights and machine learning.
This customer's nursing team has created workflows to track and forecast.
Cold flu and Covid trends across its network of hospitals, plus optimized P. P E inventory and distribution.
Humbling to see all tricks empowering these frontline workers to actually save lives with their own data.
<unk> continues to gain traction with solid year over year growth in numbers of Eli soul.
The <unk> is an excellent example of this and they signed on for their initial Ely in Q2 2022.
They have since implemented a broad range of use cases, driving tangible ROI across multiple lines of business.
Finance procurement I T digital marketing and more.
And just one case, a single ultra workflow unlock over $2 million of identifiable value.
They lap one year Mark in Q2 of this year they signed on for an expansion to their E. L. A more than doubling the size of the original implementation.
Partners continues to be a core pillar of our go to market strategy unlucky access to decision makers and I T and reducing friction in the sales motion.
Partners played a role in over three quarters of our top 20, new logo and expansion deals with key contributions from Presidio slalom and E Y among others with our new leadership, we look forward to working even closer with our partners to build tighter and more consistent engagement programs.
We had a great.
Partner supported win with a global property and casualty insurance company.
Provided training to bring on new personas.
And hosted working sessions to explore new use cases and opportunities to drive value.
This customer ultimately expanded its ultra implementation by approximately seven X with a new E. L. A as they look to further optimize processes throughout the financial organization and enhance overall corporate governance.
In closing we have an incredible opportunity ahead of this company.
Our market position as an analytics orchestrator across an increasingly fragmented data ecosystem is highly differentiated and the need for data analytics at scale with government governance and security is rising.
We're delivering on our innovation roadmap and enhancing our value proposition with new cloud connected experiences and generative AI.
We're taking quick and decisive steps to improve certain pockets of our sales execution and diligently calibrating spending to maintain our improving profitability moment.
Most importantly, our customers are demonstrating a strong commitment to all trades.
Near term environment notwithstanding.
We have our eyes set on a significant addressable market opportunity and we are positioning this company for long term durable and profitable growth.
With that I'll turn the call over to Kevin.
Sure.
Thanks Mark.
I'll begin today with a closer look at some of the key Q2 financial metrics and then we'll discuss our philosophy around growth and profitability for the remainder of 2023.
First revenue came in at $188 million above our guided range.
We saw contract duration increased sequentially to approximately 1.5 years, another important indicator of our customers' long term commitment of tall tricks.
The revenue upside along with strong spending discipline drove non-GAAP operating loss of $30 million $18 million better than the high end of our guided range.
<unk> came in at $890 million up 22% year over year, but was below our guided range, while we had incorporated a weaker macro environment and our prior financial outlook. We did not anticipate the significant change in customer buying behavior that we experienced at the end of Q2.
And as roughly two thirds of the business historically lands in month three with many deals closing in the final weeks of the quarter. The shifting market dynamics were not apparent until very late in June .
Our existing customer base provides three key underlying drivers that are each important to sustaining our growth momentum.
Customer renewals expansion upsells at the time of renewal and the independent expansions outside of the renewal cycle.
We saw healthy trends in both renewals and corresponding up sells but it was the third element expansion deals independent of the renewal event, where we encountered challenges.
In the last two weeks of the quarter, we saw a significant divergence from historical conversion rates in which customers opted to delay or meaningfully reduce new initiatives until the time of renewal.
For example, we had over 10 large opportunities, which included both six and seven figure deals outside of the renewal cycle that delayed or closed at less than 50% of our expectation.
This dynamic was particularly pronounced in the U S region and resulted in a significant year over year decline in U S bookings.
While we attribute the change in part to macro pressures as Mark described we are taking measures to quickly adapt and improve our sales execution.
In terms of the financial model, we have two clear initiatives for the second half of 2023.
First we're calibrating the business model to preserve our improving profitability momentum, which assumes this phase of moderated growth persist through the remainder of the year and second we're ensuring key investment areas are well funded to drive the long term success of the business, including generative AI and cloud.
Let's begin with our strategy for balancing growth and profitability over the coming quarters.
With the softer macro backdrop persisting into the second half we are adapting our spending plans to continue on the path to higher profitability.
We've highlighted several cost savings initiatives in recent quarters, such as real estate rationalization and optimization of head count in both sales and marketing and G&A. Looking ahead, we will continue to focus cost saving efforts in these areas.
When we decided to meaningfully expand our go to market motion in early 2022, we anticipated a very different macro environment. We've since tapered that back is the growth environment has waned and given what we saw late in Q2, we are initiating additional cost savings initiatives in the second half of the year.
This includes elimination of most open positions scaling back spending areas of reorganization additional performance management and head count reductions. We expect these cost saving efforts to generate an annualized cost savings of over $30 million.
As we closely scrutinize our spending we've also identified key investment areas that we are committed to these are areas that present significant opportunities for all tricks to both differentiate and drive long term durable growth.
The first is generative AI and machine learning.
As Mark mentioned, we recently introduced eight in our brand of generative AI and machine learning technologies.
We've recently announced several enhancements to the platform that are seeing early user engagement and interest and we see eight and there's an opportunity for additional revenue streams in the years ahead.
The second is cloud our cloud portfolio has now been generally available since February 2023, and we're encouraged with the early traction.
We're delivering an incredible pace of innovation here with new offerings like location intelligence as well as incremental cloud connected capabilities that moved to converge our portfolio of offerings.
At our Investor day in May I presented our long term model for 25% to 30% non-GAAP operating margin by FY 'twenty 'twenty eight.
Framework to achieving this model is through three to four points of margin expansion per year and this assumes we maintain 20% plus of Bayer are growth per year.
We continue to believe this model is an appropriate long term balance of growth and profitability.
In the intermediate term, we are committed to delivering improved profitability and an accelerated rate in a sense. This is an extension of the actions taken in late 2022 in early 2023 and is incorporated in our in our plan to improve non-GAAP operating margins by over six points in 2023.
Looking ahead to 'twenty 'twenty four as we capture the full annualized benefit of recent cost savings initiatives, we expect to drive five points plus of margin expansion, which is faster than the long term framework would suggest.
As for growth in the remainder of 2023, we're assuming no improvement in customer buying behavior from what we saw in the last two weeks of Q2.
The growth drivers. We previously discussed are still in place we have a record level of Q4 renewal opportunities that provide tangible selling events.
We continued to demonstrate strong momentum and have significant upsell opportunities in Q4.
We believe our comprehensive portfolio of cloud offerings is gaining traction.
And we have a ramping sales force supported with an expanded partner ecosystem and customer success team.
And while we continue to see robust customer retention trends, we are taking a much more conservative posture on the pacing and magnitude of upsell and expansion projects not attached to a specific renewal event this year.
We believe the business is positioned to deliver progress towards rule of 40 next year defined as a combination of our growth in non-GAAP operating margin.
With this in mind, let's turn to the Q3 2023 outlook.
We expect <unk> to be in the range of $901 million to $905 million representing year over year growth of 19%.
We expect GAAP revenue to be in the range of $208 million to $212 million, representing a year over year decline of 4% to 2%.
We expect non-GAAP operating profit to be in the range of 2 million to $6 million.
We expect non-GAAP net loss per share to be in the range of eight cents to four cents. This assumes 71 4 million weighted average shares outstanding and an effective tax rate of 20%.
For the full year 2023, we expect <unk> to be in the range of $930 million to $940 million representing growth of 12% to 13%.
We expect GAAP revenue to be in the range of $930 million to $940 million representing year over year growth of 9% to 10%.
We expect non-GAAP operating profit to be in the range of $70 million to $80 million, reflecting additional cost saving initiatives and spending discipline.
We expect non-GAAP net profit per share to be in the range of 62 cents to 72 cents, which assumes 76 7 million weighted average shares outstanding and an effective tax rate of 20%.
In closing, while Q2 did not pan out as we would have expected. We are quickly adapting to the current macro environment. We are executing on multiple strategic initiatives to drive improved sales productivity enhance our pipeline visibility and position the company for long term durable profitable growth.
Our robust for gross retention and renewal rates demonstrates the value, we drive with our customers and their commitments to the altar X platform.
We are supporting our profitability framework with more disciplined cost management.
And we expect to deliver an incredible level of platform innovation with particular focus on generative AI and cloud convergence.
We are confident in our ability to capitalize on this significant addressable market opportunity and our ability to achieve our long term financial model.
With that thank you all for joining us today, and I'll turn the call back to the operator.
Thank you well now be conducting a question and answer session if.
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Thank you. Our first question is from Tyler Radke with Citi. Please proceed with your question.
Yeah. Good afternoon. Thanks for taking the question. So I just wanted to start off on the guidance reduction. So if we look at the <unk>.
Implied net new E. R. R reduction I think you're you're taking it down by at least $50 million for the second half, which is which is pretty substantial.
Substantial cut it it seemed like you didn't see any big changes in renewal rates.
Was just hoping you could unpack that a little bit better I mean or are you just kind of throwing out the worst case scenario. Obviously this was a one of the first quarters you actually missed the E. R. Our guide and kind of change in guidance philosophy, or if you could just help us understand like what's embedded in the guidance because honestly it seems to be even worse.
And then kind of the dynamics that you saw here in the quarter. Thank you.
Yeah.
Yeah, Hey, Tyler it's Mark here. Thanks for the question and I get where you're coming from I think from our perspective Q2.
As we discussed in the prepared comments, we were surprised at.
At the change in behavior, especially in the last couple of weeks.
And so and we missed there are this is the first time I Miss here are in 10 quarters I think maybe.
A long time, and we don't we don't want to Miss we want to build a business in the second half that that is his resource properly for the times that we're in and are assuming.
Assuming that customer buying behavior persists, because sometimes you know some of these execution changes are going to take some time and I wanted to be conservative on a standalone basis to be in.
To say.
We're good at we're going to make our Q3 numbers based on.
Our confidence in the deals and the way that we constructed the.
The final number.
Great. Thanks for that Mark and a follow up just in terms of the the re org that you announce it seemed like there was a couple of pieces to it one was the cost reductions I guess, yeah. Obviously, you did a reduction in force last quarter. So just talk about kind of what what role.
<unk>, where were eliminated and then secondarily it sounds like there's there's more further refinement of the go to market under under Paula just talk about maybe some of the pain points that you discovered over the last couple of quarters and you know specifically what these new leadership roles are going to replace an and.
Problems Youre looking at yourself. Thank you.
Yeah, Yeah no no.
Another good question listen I don't think we're alone as an enterprise that's looking in the mirror and saying it.
What do we need to look like a year from now when technologies that are going to have an impact on how we run our business like generative AI.
Are gonna be in full swing and so are we doing the things today that we need to do need to need to do to be able to get to that future state and I think a lot of the.
He was the head count expense.
Expense reduction is going to be in go to market. It's in.
Frankly, a low performing territories or organizations that just sort of get consolidated and theres, an organizational impact to a consolidation of people to make sure that we've got you know proper span of control and whatnot. So.
So I think were were focused on the right things polygon and drill down if you need any more details.
Yeah, Hi, Tyler I think I think mark hit on it we're looking to simplify the organization in some places you know make sure that we're doing the right things to continue to drive that transformation and the execution of the strategy efficiently and preparing for the next leg of it.
Ernie, which and we certainly are interested in in preparing for here in second half and as we go into 'twenty four.
Thank you.
Thank you. Our next question is from Koji Ikeda with Bank of America. Please proceed with your question.
Hey, guys.
Thanks for taking the question.
I wanted to ask you a question on kind of a sales disruption out there and.
Just wanted to be sure. It's it's you called out macro a bunch of times and I wanted to be sure that its not a competitive aspect to it.
They're there sure is a lot of noise out there from analytics competitors and and yellow and vendors out there. So you did call out macro but not a lot from the competitive side and just wanted to kind of get your thoughts on the on the competition and is that may be filling it.
A factor.
And to the elongated sales cycles. Thank you.
Hi, Kevin It's Paul I'll take that one.
We don't feel it's competitive our customers your steel now really highly engaged in our discussions relative to their analytics maturity.
We still saw high levels of renewals and expansions within those renewals.
We arent really hearing anything that suggest a shift in the competitive dynamic no change to that number of rfps out in the market. That's always been a small percentage of our volume so it.
It feels at fairly consistent competitively quarter on quarter and <unk>.
And really it's just I are adjusting to the Mac rolling and doubling down on our execution.
Yeah, I'll also say the four of us here.
Well also see could you the four of US here travel a lot and visit with customers and so you are a customer perspective is based on on on face to face oftentimes, sometimes computer screen to computer screen interaction with customers and we're hearing that they want help and they're in a rush to do.
Italy transform but they just can't wave a magic wand.
And I think in particular some of the deals that we worked on that ended up pushing.
That's where we're at we're in attached to a renewal.
Because some of these deals.
Well just happen in another couple of quarters those to be big numbers, because customers really really need to automate and digitize.
Cause you the product telemetry also this is the rash the product elementary also shows high degree of engagement with the platform.
Over 70% of our customers activate within the first 30 days over 65% automate workflows.
We've doubled the number of customers connecting to different data multiple databases inside the workflow.
Mark talked in the prepared remarks about engagement with our agenda to about news yesterday I capabilities, we saw about a 35% of our auto insights customers using our agenda to be added capabilities. We couldn't use the high degree of engagement with the platform with the kinds of work.
Those we helped them build and execute against.
Got it and just one follow up here maybe for Kevin.
Looking at the framework here, the 2023 framework and beyond into the.
The 'twenty 'twenty framework that you presented at the Investor Day, you did mentioned operating margins are somewhat 10% to 20% growth in you know Kevin I did appreciate the comment on the five points of margin expansion of five points plus of margin expansion for 2024.
But what about beyond that and just really thinking about you know if the demand environment has changed in that 20% plus growth is not achievable should we still assume that you guys are going to push forward and try and achieve that operating margin target for 2028, or maybe does that get pushed out by several years.
Yes, I think thanks Koji. So I appreciate you calling out my comments in the prepared remarks. So look we still believe very confidently that this is a very large opportunity. The Tam is is.
Is large and we we have a very low penetration into a very large opportunities. So what we're seeing here in the intermediate term you know it is what it is and we're guiding to an acceleration in the profitability framework as a result, but over the longer term, we would expect that as a growth.
Zooms that we would be in that three to 0.3 to four points of leverage that we talked to you at the Investor day, but if not then you should expect us to continue to appropriately balance growth and profitability as a result.
Thanks, Kevin Thank you for taking the questions. Thanks country. Thanks George.
Thank you. Our next question is been Derrick Wood with PD Cowen. Please proceed with your question.
Thanks.
Kevin I'll kind of dovetail off of that question.
It seems like you're implying.
And of a 13% operating margin in 2024, and you mentioned that you'll be trending towards a rule of 40.
Suspect youre not expecting.
<unk> growth to be in the mid Twenty's next year.
But just curious what that comment kind of.
How that.
How we should take that comment and think about you know kind of a base level of a starting point of revenue growth in 2024, specifically, if the environment stays where it is.
Yeah. Thanks, Thanks, Derrick I appreciate the question no I was not trying to signal that we would be rule of 40 next year. It was really a a tag along comment to the five points plus margin expansion that are if we don't see appropriate levels of growth.
To the long term target that we put out there that we would be seeking to drive an acceleration in operating margin as a result.
Okay, Yeah yeah.
Too early to give guidance on top line this year I get that.
So mark I mean, Mark and Paul I guess.
I mean, a few things come to mind in terms of like what could be the underlying root cause that I wanted to tease out.
You already addressed competition, but I guess I'd start with like cloud.
And then just pricing.
I mean, you guys are still kind of selling mostly on prem licenses I'm. Just wondering if you feel like theres more budget constraints. There then in cloud and you are just still so early with your cloud offerings, maybe thats an element out there and then pricing I think when when Covid hit.
Yeah.
Pricing became a little bit more of a friction point.
Is that coming up in terms of more scrutiny than any change in thoughts on pricing and go to market just was hoping to tease out those two things.
Sure Derrick I'll take that so I don't feel as though cloud is having any impact on the results that we delivered and we are very clear with our customers that Anthony and strategy that won't go whatever direction. They want to go depending on where they are in there.
Cloud journey.
And you know a lot of our customers are doing both with US right now so I don't I don't think that's a factor here.
Relative to pricing and of course like everybody are there you know a little bit more scrutiny from customers negotiating and you know lots of sort of bank budget envelope that that people were working towards but I don't think that and it's manifesting itself in <unk>.
Major pricing changes that we need to make and you know we've been pretty successfully and reducing discounts for the last six seven quarters in a row, which feels like the market supports it and that customers are you know still seeing the opportunity and the value.
In our solutions.
Okay. Thank you.
Yeah.
Thanks, Eric.
Thank you. Our next question is from Joel Fishbein with <unk> Securities. Please proceed with your question.
Thanks for taking my questions I have a two parter as well first one.
Thank you Paula.
Are you seeing any unwanted sales attrition as it relates to some of the woes that are going on and the second one is I would love to hear about.
And data broker partnerships and when we could potentially see some revenue from those that'd be really helpful. Thanks.
Sure. Thanks Joel.
We actually have not experienced any increase in sales attrition and it sort of remains at a pretty low level right now and certainly at since Ah and Nash.
Nine quarters that I've been here, it's one of the lowest levels.
And relative to our partnerships with Snowflake and data break you know really excited.
With the progress on the Snowflake relationship we announced a lot of innovation at summit at the end of June we have we continue to have a you know nearing 1000 joint customers, we demo and demo some exciting integration.
And for the manufacturing vertical so it feels like we're still still in the early days of momentum, but a lots of opportunity ahead data breaks a similar types of integration efforts and you know not as far along in that partnership just we got a little bit later start there, but that's still.
Having a positive market reaction to the partnership.
Great. Thank you so much.
Yeah.
Thanks.
Our next thank you. Our next question is from Brent <unk> with Piper Sandler. Please proceed with your question.
Hi, all this is Hanna Rudolph on for Brent today, Thanks for taking my question.
Just the first one for me.
We saw testing and plans to implement generative AI like in a recent CIO survey. So are you getting any sense that enterprises are putting a hold on new deals or putting a hold on large renewals as they evaluate this new fields.
Yeah, Hey, Dan, it's Mark here and I'm, not getting any sense at all from customers that they're wanting to park our projects I think it's really the opposite I think generative AI.
How's ought to be able to get in and even on even more green and even less experience.
Spreadsheet users.
And give them tools to be able to to be able to be a good data in ninja and and in general. They are just really helps us do that faster and better with less hair and so lots of examples that Suresh can talk about there.
Yeah.
Just picking up on on Mark's comments, there we found the regenerative technologies that we announced are really a tailwind and adoption.
We saw as I said earlier with auto insights, we call it 35% of our customer base latch onto magic documents, we're seeing we've seen great adoption of our workflow summary capabilities with his agenda to be a high powered capability that helps our customers manage documentation governance and workflow.
Insights.
We saw as we announce the AI workbench agenda debate I workbench, Oh that enables our customers to build AI powered workflows and applications. We launched the initial design partner program earlier this month.
And we already saw nine out of our 10 largest customers enrolled into the design partner program.
So everything we're seeing is a positive adoption of the agenda to be capabilities have been introducing too much.
Okay. That's super helpful and good to hear and then second one for me.
Kevin I guess, what is contemplated in are our guide down from a renewal perspective are you doing smaller renewals are downgrades are you factoring in deal push outs and the normal renewal cycle.
Yeah. Thanks, Ian I would say, it's a couple of things. So one we're certainly taking a more conservative posture around any expansion that is not tied to a renewal event in the back half of the year as we said in the prepared remarks, we actually saw pretty strong.
Tension and our renewal rates as it related to the business in the first half. So we're expecting that the macro continues to be challenging as as we've experienced thus far but we really took a much more <unk>.
Conservative approach to any expansion or up cells that are not attached to a renewal event. This year.
Okay, great. Thanks.
Thanks.
Okay.
Thank you.
Our next question is from Sandeep Singh with Morgan Stanley . Please proceed with your question.
Yeah.
And I want to take a maybe just a quick couple of second break on on the on sort of the macro and some of these sales execution that you can talk about eating a little bit mark from your perspective, like which aspects of the eat in platform are sort of more table Stakes increases the overall competitiveness of the Pla.
For them. They can make you more sticky versus kind of discrete monetization pricing opportunities unto themselves.
Hum.
I'll take that Sandeep. This is rich so we as we described our agent strategy. We said there's opportunity for us in three big domains, one in helping make everybody a more productive analysts inside the enterprise by allowing us to help them automate a lot of the rote tasks through generative AI capabilities.
You saw evidence of that with some of the announcements. We've made second we said we could help our customers do more advanced analytics do agenda to be I Howard workflows.
<unk> analytical applications.
And most importantly train these generative AI models Lodge language models using their unique datasets are without having the data is leave their four walls.
We think that's a significant opportunity of bringing large language models training Lodge language models deploying them inside the enterprise that's what our AI workbench was aimed at is aimed at it's why when we launched it earlier early in August we saw some of our largest customers immediately engage into the design.
Partner program and start to use it.
So that's how we think about the opportunity we think there's a clear opportunity to take make every analyst's more productive inside the company in and help them do more with less using generative technologies, but we also see significant opportunity to help them introduce large language models. The agenda debate, whether they're building chat bots or theyre doing other.
Experiences that are powered by age under to me I, We think there's a fertile opportunity to introduce that into the enterprise with the right degree of governance.
And compliance.
Understood I appreciate the thoughts of threats and then as my follow up question I'm sort of going back to some of the issues that you saw at the end of June .
You know market Paula the nature of these expansion deals that are not tied to the renewal.
What's sort of the core essence of these deals relative to renewals or renewals plus expansions either in terms of the customer profile with a mix of products and you can sort of call out there.
Yeah.
Alright. Thank you Sandy so if you think about these are some of our largest customers and we are engaging in multi department multi team enterprise wide initiatives and so the demand Ah can come from various different depart.
<unk> across the various different timelines and so when we see opportunity to execute on some and demand outside of a renewal cycle within an existing account, we pursue that at that time and customers often engage with us in that way and we've seen that.
In our past.
This quarter. It was it was unique where several of those conversations with existing customers.
Around us expansion opportunities in the last couple of week and you know the behavior was just they didn't think the timing was right for their budgets and the deals pushed them. It's important to know that were still actively engaged with all of these customers on this demand.
On these expansion opportunities so they're they're not lost.
A lot of them will align with their renewal timeline into second half.
Others might still you know continue to build on a standalone basis. How it is that just the journey that they're on and various departments and teams engaged.
I appreciate the thoughts thank.
Thank you.
Yeah.
Thank you. Our next question is from Mike <unk> with Needham <unk> Company. Please proceed with your question.
Hey, guys. Thanks for taking the questions here just to build off tangent question around those those expansion deals independent of the renewal, but I wanted to get a better sense I think Kevin in your prepared remarks you'd cited over.
10, large existing customers with six or seven figure deals.
They either.
It came in at 50% below expectations that reduced size, you called out versus deals pushing out a quarter and.
And I just wanted to clean up my understanding there can you help us think through the mix between those deals that came in at a smaller size versus the deals that pushed and I guess what would be helpful. As well I know this is the second time or second consecutive quarter, we're talking about deals pushing.
Last quarter, we had some disruption from SBB and get all those deals come in during Q2 or some of those still outstanding as well.
Sure Mike I'll take those so I wouldn't say that it was about <unk> 50.
50, 50 in terms of deals that executed at a reduced size from what we expected and we are and those got pushed out. These are large deals are a small number of large deals and so they move the needle when they are reduced or when they push.
Hum.
Miami the second part of your question.
We had the deals that pushed from Q1 right related to S you'd be in their nervousness, we'd seen in the market at that time did most of those deals if not all of them come in during Q2 or I'm trying to get a sense of what's the magnitude of these deals getting pushed.
Yeah, I think what executed in Q2 against the Q1.
Deals pushed were consistent with what we see them kind of quarter on quarter. So nothing unique about Q1, those Q1 deals.
Okay, and then another if I could just thinking about the cost savings that you guys are calling out in the the sales enablement one of the things I'm getting pinged on is with respect to that.
I guess, a key driver for the profitability is.
I guess some of the scale efficiencies you guys are driving.
Obviously working on the execution pipeline quality conversion rates.
But the the sales enablement initiatives are actually coming at the same time, where you guys are scaled back meaningfully and Greg we had 11% rich in April .
Can you just help us think about how how those initiatives are playing out and I imagine it's increased workload on those those remaining folks in the seat, but anything there would be helpful. As far as understanding what's put in place given the reduced support functions around some of those quota carrying reps.
Sure.
As you know we had a lot of quota carrier hiring that happened in the second half of 2022, and so we started the year with with more ramped reps and every quarter, we have more ramped reps. The enablement is an ongoing a function for us.
We had much of the enablement that we are launching in development and planned it's sort of a doubling down of enablement that we've built around coaching salespeople around the expectations of managers around deal scrutiny as well as just revisiting all the elements of.
Our value driven sales motion. So it's not a huge enablement left on our supporting functions are it is you know are revisiting and an increased <unk>.
The focus on these areas of of the sales team that is here and and executing with us for second half.
Got it thank you very much Paul.
Thank you.
Thank you. Our next question is from pendulum Bora with J P. Morgan. Please proceed with your question.
Oh, great Hey.
Thank you very much for taking the questions I wanted to ask you on the on the customer behavior change that you saw was that completely outside of GTK. Because you took a net expansion. It seems like it's still holding on steady maybe talk about just the behavior from the GTK piece and then just a follow up on that what portion of the GTK MBR today is driven by <unk>.
<unk> growth versus growth in unit price driven by expanding into other modules or any other pricing leverage.
Sure. So the majority of growth within global two.
<unk> thousand is C growth followed by product expansion.
Pricing changes would be would be third to those categories.
In terms of the behavior that we saw that in the final weeks I would not say it was unique to G. T. K R outside of G. T. K what was what was specific about it was that it was customers outside of their renewal timeline.
Understood. Thank you.
Thank you.
Thank you. Our next question is from Michael <unk> with <unk>.
Key Banc capital markets. Please proceed with your question. Thanks. So.
So first of all what portion of your expansion.
Is typically.
Renewal.
<unk> versus.
Not all the time and I guess I'm just trying to.
And most of the time that people.
Challenges on expansions, it's just expansion.
Overall.
With our outside of the renewal cycle unless there are other structural issues within the company. So I'm just trying to understand two things one just that stat of what the split is usually.
What your analysis is of why it would've hits you on the non renewal of a question, but okay on the golf course.
Yeah.
Yeah. So we've seen our renewal base year on year continue to shift into the second half and so we have 72% of our renewal base for this year in the second half.
So what that meant for first half and for Q2 as we were.
You know certainly having conversations with customers outside of their renewal base to have the expansion opportunities.
Come to surface to to have.
And you know them to move forward on those.
So really I think that we still do see a very big growth opportunity of expansion on the renewal base, but to my earlier point as different departments and teams within an existing customer that may not be on the contract that we're renewing come up with increased.
Demand, we will move forward with the timelines that we think we can execute with the customer.
So far in finance, and we're expanding the supply chain or sales and marketing and those create new expansion opportunities and in some cases customers because they're separate buying centers separate budgets, it's easy for them to execute those independently and in other cases, where they're starting to either centralized.
Are they buying or are we've risen to the level of becoming a strategic vendor then the customer says I want to have this as a unifying discussion because I want you know pricing power I want less contracts to manage let's let's try and negotiate this all at once.
So we're trying to differentiate between what worked and what didn't.
I don't understand why it was outside of the renewal cycle that didn't perhaps that's because it was into separate client centric.
Yeah.
Motion is that.
Maybe an analysis of it well I think when customers are budgeting, it's very natural for them to budget for the renewal and the their expectation of expansion around that renewal timeframe.
As opportunities come up you know before that are outside of that band you know sometimes that a different budget that has to be has to be a locked down and so that's the way I would describe it it's still very common that analytics is.
Lines of business by Jets, as well as a T budgets and my teams responsibility is to land and expand and accelerate that expansion across all of those.
That's an budgets okay. Thanks Paul.
Thanks, Mike.
Yeah.
Thank you there are no further questions at this time I would like to turn the floor back over to Mark Anderson for any closing comments.
Thank you operator.
I'd like to say, thank you again to our customers partners shareholders.
And our team here at old tricks this cause.
Company has an incredible opportunity to reinforce a highly differentiated market position in the era of generative AI, we're delivering on our innovation roadmap, we're taking quick and decisive steps to improve our sales execution and we are committed to our targets for improving profitability. Thank.
Thank you.
Yeah.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Yeah.