Q2 2019 Earnings Call
Greetings and welcome to the <unk> second quarter 2019 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Chris well. Please go ahead.
Thank you operator, good afternoon, and thank you for joining us today to review all tricks in second quarter 2019 financial results.
With me on the call today are deemed Joker, Chairman and Chief Executive Officer, and Kevin Rubin, Chief Financial Officer.
Additionally, Scott Jones, President and Chief revenue Officer will be joining us for the question and answer session after prepared remarks.
During this call we may make statements related to our business that are forward looking statements under federal Securities laws.
These statements are not guarantees of future performance.
But rather are subject to a variety of risks and uncertainty.
Our actual results could differ materially from expectations reflected in any forward looking statements.
For a discussion of the material risks and other important factors that could affect our actual results. Please refer to our SEC filings available on the FCC Edgar system.
And our website as well as the risks and other important factors discussed in todays earnings release.
Additionally, non-GAAP financial measures will be discussed on this conference call.
Please refer to the table in our earnings release in the Investor section of our website.
For a reconciliation of these measures to their most directly comparable GAAP financial measure.
With that I'd like to turn the call over to our Chief Executive Officer, Dean's Joker Deane.
Thanks, Chris and thank you to everyone joining us today.
Altria delivered excellent Q2 results driven by continued industry Tailwinds and strong execution.
Here are a few highlights for the quarter.
Revenue was $82 million up 59% year over year.
We achieved net expansion of 133%.
Illustrating our customers continue to invest more in the Ultramax platform overtime.
We saw a doubling of seven figure deals and an over 50% increase in year over year in deals larger than $250000, both consistent with our expectations as we focus on the global 2000.
And finally, our land and expand business model continues to perform.
Our 2014 customer cohort increased our investment in ultra rich, 270% over four years.
Our data shows that our 2015 and 2016 cohorts performed better.
In Q2, we added 305 net new customers and now have approximately 5300 customers, including 656 were 33% of the global 2000.
Notable customers that transacted with all three weeks during the quarter included general dynamics Ikea limited.
Informatica KKR Capstone Loreal.
Raytheon Salesforce dot Com Sequoia capital solar wind.
Soft spot Tiger capital and Viking cruises.
We said at the crossroads of a number of key market trends that we believe will enable us to deliver strong growth for many years to come.
In our view the recent business consolidation in the space is simply validation of what Weve communicated for a long time, the data and analytics are core to every business worldwide.
And while ultra which has grown significantly in a relatively short period of time, where as I like to say, we're a great 20 year old overnight success. We believe that we are still in the early stages of our maturity to fully capitalize on this massive opportunity.
For example, based on our analysis. We believe there are approximately eight to 9 million potential ultrabooks designer users within the global 2000, and we currently have less than 1% penetration within that population.
We have long believed that analytics is a social experience in fact, a big part of our success is the ultra its community and during Q2, we hosted our 10 U.S. inspire conference the largest gathering in our history.
Bringing together approximately 4500 customers partners and ultra its associates in Nashville to celebrate analytics.
These gatherings are an important way to deepen our engagement with our customers and partners.
They are also important because customers that are engaged in community have significantly higher expansion rates that are three times more likely to use the advanced analytic capabilities within the altar IX platform.
For those of you who are able to join us in Nashville, you heard a variety of altrus customer share their individual journeys.
Some of the notable ones include CBR read the worldwide leader in real estate services automated data pipeline and enable data workers with advanced analytic capabilities in all three to build sentiment analysis and tenant churn models to predict business opportunities.
Advent health a leader in whole person healthcare reported they leveraged 1 billion data points from various clinical data sources to vote to deliver more than $100 million in ROI.
Tax and accounting software maker into it started their ultra its journey with one analyst who eliminated 20 hours a week of burdensome operational work and a scale. These results across the global analytics team and demonstrated that ultra acts as a critical business necessity.
Global investment Bank JP Morgan organically expanded their ultramax usage from a couple of users to over 1000 in just over two years.
And American Airlines, which operates more than 6700 daily flights to 30 350 destinations in 50 countries around the world reduced processing times by 99% in their line maintenance strategic planning Department and allowed analysis of data that was nearly impossible before older rigs.
Last quarter, we told you about Western Australia based horizon power that started their evaluation of all tricks with connect but ultimately purchase the entire ultra X platform.
That inspire they described how old tricks is helping them with their key imperatives of improving customer and employee experience, while improving operational efficiency across the company.
The invested in ultra is to provide a knowledge base with connect and a devops lifecycle with promote.
The invested in server to provide governance security and production performance and of course with designer. They built a 130 apps supporting six different business units in just four months.
We continued to gain traction in our vertical go to market teams as well this quarter in North American healthcare provider.
We're seeking a better way to manage nurse staffing ratios to increase profitability.
The data science team SATA solution to help with model deployment and began an evaluation of promote.
During their evaluation process. They came to the approach to appreciate the value of the entire alter its platform and ended up purchasing promote designer end server to bring data science capabilities to data analysts effectively creating citizen data scientists and scale analytics across the organization.
International performance was also strong in Q2 with international revenue of $24 million up 58% year over year, and representing approximately 30% of total revenue.
We did business with companies like AI National lab in the UAE American Express, India, Private limited Cisco systems, Poland, DFS venture, Singapore, Ingersoll Rand Latin America in Panama, various bank in Greece Scotia, Peru Holdings.
She has eight oak company in Japan and Viacom.
Ltd in South Africa, our customer footprint spans over 80 countries.
Data and analytic strategies continue to garner more attention at the C suite level and we believe that data driven strategies will continue to evolve from basic descriptive analytics, such as Visualizations to more advanced analytic used cases powered by altering.
Today, we are engaging the chief data officer is more frequently than a year ago.
This is driven by both increasing C level involvement in data and analytics discussions as well as our sales teams focusing more on cheap data and analytics officer engagement.
An example of this is a conversation I recently had with the Chief analytics officer for one of the largest banks in North America, who have spent the last two years democratizing data and creating a data science and analytics culture that is from.
With the Ultra IX platform analysts across the bank in nearly every function have operationalized more than 500 workflows saving tens of thousands of hours freeing the teams up to tackle more challenging opportunities.
And now clearly see the opportunity to modernize their stack by eliminating redundant systems, deepen ICTI and have ambitions to reduce the dependency on excel retire tools like data mirror and Cognos, all while leveraging our Python and all trips to migrate thousands of predictive models currently found in south.
This conversation is illustrative of what I have said since our IPO.
The winner of the $24 billion Tam in the line of business will be the natural beneficiary of the $20 billion share shift of legacy tools locked up and it organizations around the world.
We are starting to see.
The early days of the shift starting to emerge.
As we continue to scale, we also see an opportunity to activate our ecosystem and create even more avenues for future growth.
With that.
Let me turn the call over to Kevin to discuss our Q2 financials and outlook for Q3, and the second half of 2019, Kevin.
Thank you Dean.
As Dean noted we had a very strong second quarter highlighted by revenue of $82 million, an increase of 59% year over year.
Similar to what we saw on Q1 revenue benefited from a more favorable product mix, which resulted in the upfront percentage of our revenue being once again at the high end of the 35% to 40% range.
We did see some of our larger customers enter into longer commitments with us in Q2, which we believe is continued validation of the strategic importance of the alter its platform. Although overall contract duration remained at about two years.
International revenue was $24.3 million up 58% year over year as we continue to benefit from the strong global demand for analytics.
Before moving on I want to remind everyone that unless otherwise stated I will be discussing non-GAAP results.
Please refer to our press release for a full reconciliation of GAAP to non-GAAP results.
Our Q2 gross margin was 91% consistent with last quarter in Q2 of 2018.
Our Q2 operating expenses were $73.4 million compared to $45.7 million in the same period last year.
The year over year increase in operating expenses would do was due primarily to additional headcount and other investments in scaling our international operations.
As a reminder, our Q2 expenses included the cost of hosting inspire.
Our Q2 operating income was $813000 or an operating margin of 1%.
Net income was $896000 or one cents per share based on 68.5 million non-GAAP fully diluted weighted average shares outstanding.
Our net income assumes a non-GAAP effective tax rate of 20%.
Turning now to the GAAP balance sheet as of June Thirtyth, we had cash cash equivalents short term and long term investments of $426.8 million compared with $461.3 million as of the end of Q1 2019.
The decrease in cash is largely related to the purchase of clear story, which was completed in early Q2 as well as seasonally higher operating expenses driven by hosting inspire in June .
Finally, we ended the quarter with 1076 associates up from 936 associates at the end of Q1, 2019, and 674 associates at the end of Q2 2018.
Our increase in head count is reflective of the pace of investments, we're making and we expect to continue to make to capture the meaningful opportunity we see globally.
Now turning to our outlook for Q3 and full year 2019.
As a reminder, please note that our guidance assumes the following.
Average duration of our subscription terms remains constant at approximately two years.
Approximately approximately 35% to 40% of our TCV booked in the quarter will be recognized upfront with the remainder recognized ratably over time.
Quarterly revenue seasonality is expected to be consistent with what we experienced in 2018.
For Q3, 2019, we expect GAAP revenue in the range of 88 million to $91 million representing year over year growth of approximately 41% to 45%.
We expect our non-GAAP operating income to be in the range of 5 million to $8 million in non-GAAP net income per share fully diluted of six to nine cents.
This assumes 70 million non-GAAP weighted average shares outstanding fully diluted.
For the full year 2019, we are raising our revenue outlook and now expect GAAP revenue in the range of $370 million to $375 million representing year over year growth of approximately 46% to 48%.
We expect our non-GAAP operating income to be in the range of $35 million to $40 million and non-GAAP net income per share.
Per diluted share of 44 to 50 cents. This assumes 69.5 million non-GAAP weighted average shares outstanding on a fully diluted basis, and an effective tax rate of 20%.
And with that we'll open up the call to questions operator.
Thank you at this time, we'll be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
The confirmation tone will indicate your line is in the question queue. You May press Star too if you would like to move your questions from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star Keith.
Our first question comes from the line of Tyler Radke with Citi. Please proceed with your question.
Hey, great. Thanks, a lot for taking the question. So obviously that the large deals.
Yes grew at a really strong pace here and.
Q2, and if I look back at the analyst day, and kind of where your recent commentary has been been headed it seems like you are really doubling down on the global 2000.
And I guess my question is how how are you thinking about investing in sales capacity from a global 2000 perspective.
It looks like margins for the for the rest of the year.
You're not really passing along much.
Margin expansion, despite the topline race I'm just curious if you're.
See the success here with the large deals as a sign to.
Incrementally invest in the global 2000 opportunity. Thank you.
Thanks, Tyler for the question I don't actually think it changes our investment thesis on on.
Quota capacity.
We clearly are going after where the analyst hanging out.
We know with eight or 9 million potential analysts in the global 2000, I think we're just focused on making sure that we land there with our traditional land motion that we make sure that our teams are executing the expansion playbook.
Very quickly.
We see a $4 billion to $5 billion Tam in that space by itself, but I don't think it actually changes.
Any of our thesis we're investing we're investing across the board.
I think it has probably more to do with our enablement.
For those that are tackling the strategic accounts and the global 2000.
And as a reminder.
For those of you who have not met Scott Jones. He is on the call today, President and COO and he can.
Opine on some of these questions as well.
Great then maybe a question and then for.
Scott or are you doing.
I think Kevin actually mentioned.
Some of the additional opex in the quarter reflected the international International head Count and it looks like international revenue grew 58%, which was in line with.
That's the total company revenues or not.
Got you to underperformance by any means but that down pretty significantly compared to a year ago. I guess is there is there anything that you're.
You're focused on internationally to to maybe get those growth rates up to their smaller numbers are.
Are you pretty happy with that performance.
Hey, Tyler just want to remind you that the growth rates under six so five for international were a little bit different under six so six so some of that is the nature of the changing revenue model.
But I'll, let these guys go ahead and answer the rest of the question will also point out that that over 50% of our.
Growth in G. Two k. happened internationally. This last quarter. So the investments that we're making internationally are paying off when it comes to the.
Larger opportunities and GSK around the world.
Yes, Tyler this is Scott just to follow up on Kevin and Dean's comments, we're still very early in our entry into the Asia and Latin American markets.
In EMEA were a little bit.
A little bit more mature and starting to focus our sales efforts a little bit more on the enterprise side.
And as Dean just mentioned over half of our.
Our our new lands in the Fortune 2000, this past quarter were in international markets. So we feel really really good about the investments, we're making we're constantly evaluating them, but we're bullish on the opportunities moving forward.
Thank you.
Our next question comes from the line of Brent Bracelin with Keybanc capital markets. Please proceed with your question.
Hi, This is Clark on for Brent.
Dino I wanted to maybe.
Focusing on that commentary that you gave around.
Half of the GDP Kay ads were from international and I guess just stepping back.
I'm, a little bit surprised by the at the rate of sheets UK ads.
Looking at.
A year ago at 500 G.
GTK customers and then 560 last quarter and then now at 656.
That that comment that you made about half was that the historical trend and this is kind of.
All G two k. focus.
Rises all boats and you.
Domestic ad.
Just very strong for the quarter, just trying to parse it where these investments are happening so for such a stark increase in sheet UK customers this quarter.
Well.
There's two parts to this one one is the net new adds that we had in the quarter and then the second part of it was the change in definitions from prior years.
So we did incorporate that.
There were a total of I think reported 99.
New GE to Cais.
There were 40.
46, I believe.
Net new firm sales and the other remainder was from a redefinition on okay you to get.
Okay.
And then another thing that I noticed.
Just wondering if this held true for you is.
You had some customer activity with some other analytic vendors from software vendors in the ecosystem.
Do you feel that you are reaching a scale where.
Certain new alliances or new bonds are being created and they're seeing kind of existing old tricks user base has something they want to tap into with their solutions.
We absolutely do.
I think that people are beginning to understand the power of our platform. The fact that they can add new components to the platform. They can create new tools, new macros, new apps new leap.
Yes.
Provide embedded analytics as part of their their own systems.
Last quarter, we talked about the new opportunities that emerge with Thomson Reuters.
To allow their one source customers to live in one source longer.
And that requires all tricks to be in the mix and so.
We've seen pretty healthy pipeline build from TR and there's a number of other partnerships that we'll be talking about in future quarters as we begin to establish those relationships in a very similar way.
As we have done with the TR.
Perfect. Thank you.
Our next question comes from the line of Derrick Wood with Cowen. Please proceed with your question.
Great. Thanks for taking my questions.
You asked you recently had some feature upgrades to your server product is there anything incremental to call out and the upgrade and would you expect that to potentially drive greater server adoption or be an incremental revenue driver as you look out over the next year or so.
Well, we're always listening to two customers Derek.
We have a long list of of incremental improvements on server, we have a whole bunch of new things, we want to add that will move the needle we believe in server in future releases.
I think the real key to server adoption is making sure that we were hanging out with where the analysts are I think we've said in the past that when you get to 15 or 20 designers that you typically move to server.
That's just easier to achieve one year youre sell into the G. to Kay.
That said I Wouldnt limited just to innovation on server I think it's we're clearly listening to what customers need us to do to appease the.
The scalability the governance the security kinds of issues that he has but across the entire platform from new features and capabilities in designer for both Q3 and Q4 in our plant releases.
The improvements to.
You why in promote.
A bunch of of new assets that are going to be harvested for connect.
Unification of connect more with server so that we we simplify the the user experience in the in the platform. So it's not just a server issue it's across the platform we continue to innovate.
And we have pretty good visibility into what customers want our community as a.
A great playground for people to provide us with.
The that the tech list of what they want in the platform.
We have the opportunity to debate those issues within our product management team.
And engineering teams and.
We're never going to stop listening to what customers need as we build out this platform further.
Great. Thanks, and then.
You guys brought in a new chief marketing officer, a number of months ago I'd just be curious to hear what initiatives. He has on his plate and then anything to date in terms of.
New marketing positioning and what the market reception is bad.
Hey, Derek this is Scott how are you.
Hey, Scott first of all he is a show me, it's the Amy Hydro's Bach and she joined US about a month ago, and we're really really thrilled to welcome her to the company.
A lot of really great experience in her background in specifically can be very focused on.
Bringing specific use case solutions to market opening up new buying centers within our customers and we're really excited about what she is going to bring to the entire team and to our customers.
Great Congrats guys everyone on the quarter.
Great. Thank you.
Our next question comes from the line of David Griffin with William Blair. Please proceed with your question.
Hey, good afternoon, thanks for taking the questions.
Two if I could the first one for Dean just quickly wanted to touch on the tablet and look or acquisitions I know, that's something we talked pretty extensively about at the customer conference in terms of getting your take on the competitive implications there.
But it is something that is still kind of front and center for investors. So I wanted to circle back and just get an update on whether you saw any of those transactions may be influenced customer conversations are sales cycles really in any way during the quarter.
Not at all in fact, I think in both cases it's.
Clear affirmation that the space that weve.
Built and seem to be winning in today.
Is headed down the right path I.
It hasn't changed any of the sales cycles that hasnt slowed anything down it has sped it anything up.
We are particularly excited about the the Salesforce tablo deal both are our valuable customers of ours.
Not really sure what what Google intends to do with Looker.
That probably fires up some other competitive conversations outside of our world but.
Again I think it's.
Affirmation that the markets.
Beginning to consolidate even faster than we imagined.
A year year, and a half ago and its affirmation that we are doing the right things.
Got it Thats helpful.
And then just one more if I could circling back and expanding on your thoughts on hiring activity given that we're halfway through the year now and do you tend to kind of front loaded hiring can you just give us a progress update on where overall hiring activity came in relative to plan and whether or not you feel like you're attracting the level of talent that you would hope and then specifically on the sales organization as we think about potential growth in headcount. This year would it be fair to assume that the growth rate could be something approximately in line with revenue growth or would you expect it to be materially different.
Yes. Thanks, Thanks, David I mean, I would say, we're pretty pleased with hiring I think we've commented previously that as we've gotten larger and more recognized it has facilitated.
Hiring and quality of attracting better talent.
In terms of sales obviously, that's been an area sales marketing combined has been an area that we are heavily focused our investment divestment efforts on.
If we just look year over year.
Those teams have grown.
Little over 60% and so it's pretty consistent with.
What we've seen on the revenue growth based revenue growth basis.
Great. Thank you.
Our next question comes from the line of Jack Andrews with Needham and company. Please proceed with your question.
Hi, good afternoon, Thanks for taking my question.
I feel like one of the common themes from your inspire conference was that many customers seem to be on this journey of large and increasingly rapid seat expansions over a sustained period of time. So I was just wondering can you shed some light on whether this is still mainly happening organically just through the success of your product or is there something else that youve refined in your sales or customer service process. That's really encouraging these types of expansions.
Well I think it's a little bit of both just anecdotally.
At in supplier I personally.
Add probably 12 or 13, one on one meetings with customers in every single one of my meetings as either a customer trying to go from 50 seats to 500 and wanted to know how to influence that were from 500 seats to 5000. So some of this is just the.
The awareness of executives on the importance of data science and analytics and.
The importance of driving a data science and analytics culture in there.
Path to digital transformation success.
I I do believe that.
Quarter after quarter.
We continue to improve our playbooks, we take out as much friction in the processes as possible.
We have a time tested land and expand model that just simply works.
So we just need to make sure that we continue to generate where wherever possible, but a lot of it are the tailwinds just coming from.
Ceos in proxies for Ceos that are.
Recognizing the importance of of data science and analytics cultures for their success.
Great I appreciate that and just as a follow up I wanted to ask about your.
Assisted modeling product our understanding is that this is on track to be I believe is the most downloaded beta in your company history. So I was wondering you just talk about the significance of this when do you think it might be released and how do we think about the the ramifications around this.
Well I'm not sure where you heard it was the most successfully downloaded of beta we are in beta one.
There are several betas before we GA this.
There is no date on the specific date on the GA.
There are quite a few downloads we what we believe is important is the as you train statisticians have easier to use tools like ultrabooks with Python, and and Jupiter notebook support to build models and deploy models on promote the citizen data scientist needs to have a clear path to success and understanding.
What models might influence a a question they are tending to asking how to decision off of whatever the result of whatever model is optimized for for that question.
That said we were were.
Confident in and the results that will probably play out next year on assisted modeling.
I think its ramping up the skills of the citizen scientists are equally important to providing.
Okay code friendly approach for the scientists.
I couldn't tell you off the top my head, how many downloads or have been but I do know that.
I see beta reports and see the kind of feedback that were getting both internally as well as externally with customers and.
We're pretty excited about.
The assist modeling effort.
Great. Thanks for taking my questions.
Sure.
Our next question comes from the line of George.
You wanted with Oppenheimer. Please proceed with your question.
Thank you for taking my question. So again following up on those comments on the system not only can you maybe give us a sense of longer term.
Whether their monetization opportunities with.
Hey, I am Alan automation.
Well clearly clearly there's.
Opportunities for monetization.
I think that.
Well today, we have a fairly limited number of skews that.
Our teams sell.
There might be opportunities in the future too.
Add additional skews that target specific use cases or specific horizontal.
Functional areas or specific vertical markets.
Theres clearly going to be an opportunity to leverage our platform to build vertical solutions that leverage.
Data science and machine learning and the full breadth of predictive capabilities.
Within our Python and also works in general.
How that emerges we're still seeing the market unfold around this there's a lot of point solutions that do one industry very well they might do price optimization, but you can't weave that into a a vertical solution very easily so with our platform, we see lots of avenues both in designer.
Outside of designer as pure.
Cloud services in new SAP services that could disrupt thousands of point solutions that exist today in various verticals.
And even down to the building new companies, where data science and machine learning.
We'll we'll move the needle on the value of these these businesses.
And one other question with the strong and our large larger enterprise traction you're seeing can you give us a sense of.
Attach rates for connecting promote with the deals overall and especially with the larger customers.
Well we haven't.
Divulged any attach rates yet we're actually very excited about the progress, we're making with both connect and promote.
We included two of those stories.
In the prepared remarks.
And when we heard many of these stories at.
At inspire and I think what's happening is the line of business.
Gets more alignment with the chief data officer and in many cases.
The self service data science and analytics got ahead of Ceos are proxies for Ceos and now that the Ceos are in the mix. They are beginning to recognize the real challenges in the future and that is.
Harvesting all the assets that are now being treated by all of these analysts.
So therefore connect becomes critical to.
The the first mile of their analytic journey.
And we're hearing those organizations that have been struggling deploying algorithms for years, even though.
It's pretty easy for them to build a model and it's getting perhaps easier to build models with auto modeling capabilities. The real challenge is in building the model that is deploying the model and so promote becomes.
Infinitely more.
Important to our customers in the long haul and so we're excited that we don't have just one entry point for our platform. We've typically entered with designers that skate to servers that then lead to connect and then promote but.
As you saw in our healthcare example, customers start with promoting they realize that.
All of the other parts of the platform accelerate this journey to success and so.
At some point down the road, we will perhaps share some some attach rates, but we won't do that today.
Thank you.
Our next question comes from the line of Taz Koujalgi with Guggenheim Partners. Please proceed with your question.
Hi, guys. Thanks for taking my question.
A question on the written net expansion rate Thats been consistent for the last few quarters can you guys comment on how much of that.
Yes, it was driven this quarter by seat sources.
I'm sort of new products into the installed base.
We don't break it down.
But the reality is most of the expansions occur with additional designers in the same department additional designers and adjacent departments.
And.
Again, 15, or 20 designers lead to a server that.
Sparks the interest in connected promote so it's a combination of both.
He'd expansion designer and then the the necessity to get to scaling and security and governance and automation.
Yes.
Yes, thats no different than historical we haven't seen any any fundamental shift in how expansion has been generated yep.
Got it thanks, and then one all one for Kevin If I do my if I'm doing my math wide I get your business that you disclosed Tonight.
Hi, good to bookings growing sequentially by 60%.
From Q1 to Q2 is that I'm doing my math right, but was it in different this is out of the of your bookings growth. This year versus last year. One of last just numbers. So I'm trying to get a sense of if this seasonal growth from Q1 to Q2. This year was well in line with the typical says Dr was something different.
Given that strong number that I'm getting.
Yes, I mean, I think directionally, you're you're seeing the appropriate trend I think if you look at our six of five reported quarters last year.
You will see a similar acceleration from Q1 to Q2.
We've talked about our seasonality quarter to quarter.
Q2 tends to be a strong quarter for us like many software companies.
Given that duration of contracts have not really moved from two years I think thats a reasonable proxy.
For comparison.
So but to your point, we did see a notable increase.
This.
This quarter.
Got it thank you.
Our next question comes from the line of Chris Merwin with Goldman Sachs. Please proceed with your question.
Okay. Thanks for taking my questions.
I just had a couple actually.
I think Dan you talked about increased traction with vertical go to market teams curious if you plan to invest further in that vertical go to market opportunity either from a sales or a product perspective, and then I had a quick follow up thanks.
Great question, we are seeing success in our our healthcare public sector team as well.
Even in education.
And we're beginning to see additional avenues in some cases, they're not necessarily vertical buildouts, but.
There.
Horizontal buildouts that could have an enormous impact on on the opportunities in the future for example.
With all the work that we're doing with.
The accounting firms, we are seeing a huge opportunity in a big void in the office of finance and so we've been doing a lot of work around how we might be able to move the needle there. So it's not necessarily a vertical but but a horizontal play and we're beginning to see everything from.
Tax and accounting and audit and.
PNM and.
The whole swath of opportunities.
For example, just in the tax world.
They are spot on a 16 17 18 different high value use cases that we've we've.
Begun to learn about across the the finance teams that we sell to.
Everything from sales and use tax compliance tax apportionment transfer pricing that tax declarations property taxes and its something that every business has to go through that thankless task that that's that's required by the regulatory bodies.
And so we don't look at it just as a vertical we are looking at some verticals, but we see the horizontal plays.
Potentially leaving us to something in the office of finance.
Possibly even supply chain, we're starting to see some really great use cases around supply chain optimization.
Okay, Great and then just a follow up on that expansion has been north of 130% now for four quarters and there I think the long term guidance, there's 120% and yes, you heard that the anecdote from the customer conference and we heard that really strong feedback as well from customers about near term plans to significantly increase deployment. So just curious I mean, how am I thinking about the trajectory of that expansion going forward either in the context of this year's guidance or even beyond that.
Well, we don't we don't forecast on on this but.
If we're successful at tackling greater penetration of the.
G. Two k. we're now.
33% of the total.
With less than 1% penetration of the potential users of of just designer.
There is an enormous opportunity there I think that at the Investor conference at its fire we identified the.
It's net expansion of the global 2000 customers at a 100 and.
43% I believe and so the net expansion of the GE to Kay is is demonstrably higher than net expansion of all customers in general so.
We think this could continue for quite some time.
Thanks very much.
Our next question comes from the line of Pat Walravens with JMP Securities. Please proceed with your question.
Hi, This is Joe on for Pat Congrats congrats on the quarter internationally did you notice any areas of weakness. Thank you.
In general no.
Obviously, we look at every quarter, perhaps a bit differently than others. We have 60 seconds policy here about how good our quarter.
Yes, and then we turn our focus to the half the glass half full try to figure out what we could have done better what marbles, we left on the table.
What processes to improve.
Scott probably can add some additional color to what we are early on in in some of the markets that we built out internationally.
But.
I think in generally we're we're happy with what we're doing internationally, yes, I agree Dean.
We're pleased with the quarter pleased with the results.
We have been able to add some really great new customers and all of our international markets.
But continue to have room for improvement and room for continued investments to take advantage of the significant opportunity lays in front of it.
Thank you.
Our next question comes from the line of Michael Turits with Raymond James. Please proceed with your question.
Hi, guys. Good evening first on the on the Threeq Guide obviously, you raised the EBIT guide for the year, but it came in below the street granted.
You don't.
Got it three cubic capable of the street on EBIT for the third quarter anything around timing of expenses that would help us explain them.
Well, Michael I think.
As we think about Q3 and the full year.
We are continuing to invest as we've kind of described.
Previously around building out the global operations and taking advantage of opportunities, we see outside North America, and I think thats going to continue as reflected in the guidance.
Okay and then.
And there was another question earlier about attach and success.
Tractions central connection for one of the things you mentioned a couple of quarters ago is that you're starting to see lands with connect.
Are you still seeing that or is it primarily attach or or expands.
It's predominantly expands although as we.
Deal more with the global 2000 the conversation.
With connect and promote happens a lot earlier.
And it's not a forced conversation it's the the Ceos are proxies need different things and what the analysts cares about and the analysts just wants to love their job again and manage a bunch of data to get some outcomes and I think that the the Ceos care about things that protect the enterprise they want.
Governance and security and collaboration they you heard this at the conference from the customers who.
Spoke about their their connect efforts and we're seeing the.
The machine learning is going to lead the world. Most of these Ceos, who recognize that clearly see the the risk of not having something like promote to allow them to deploy and manage models. So these end caps as weve talked about many quarters ago. After the acquisitions, we said in the long haul these could be the most valuable parts of our platform and.
I think that might.
Come through in the not too distant future.
Okay. Thanks, Tim Thanks, Kevin.
Sure.
Our next question comes from the line of Mark Murphy with JP Morgan. Please proceed with your question.
Hi, Good afternoon. This is Matt costs on behalf of Mark Murphy. Thank you for taking my question. Scott You mentioned, you're still in the very early stages of your entry into the Asian, and Latin American markets.
I'm curious what do you replace in those markets versus in the us in EMEA.
Ended a possible there is less adoption of legacy tools in those markets that would make for.
Sales cycle with a little bit less friction.
Yes, I'd say to the buying patterns are very similar across all of those markets to what we see in North America I would say in certain sub regions.
Like Japan for instance, it maybe a little bit more heavily involved.
You work with them and partner with.
Channel partners.
More often in a market like that but I think.
Generally we have the same sort of traction in.
In the international markets that we do in North America and.
The competitive products that we may either replace or more often complement or.
And often times, just greenfield opportunity in Greenfield type of projects that were working on are very similar.
Okay and have you seen any increase in Japan ahead of the implementation of the consumption tax there.
No.
No impact at all.
All right and then finally.
With clear story, you acquired that if a couple of months ago has has that improved our notice has there been a noticeable improvement in your ability to hire and silicon valley in with the present here now.
It's still too early for that we.
We are in the process of consolidating our offices there we have.
Made all of our.
Engineering Rex available to both Broomfield as well as Silicon Valley.
When we're at full employment as an economy. It does become tougher so we're moving into.
Higher cost territory.
But at the same time, we continue to add.
Engineering talent in our European Development Center, both in Kevin Prague.
I think that that with the clear story team. It is a talented bunch of folks I think that that we will be able to attract a lot of talent in in the Bay area.
And time will tell.
Thank you.
Our next question comes from the line of Brad Sills with Dan. Please proceed with your question.
Oh, Hey, guys. Thanks for taking my question.
I wanted to ask a similar question just around some of these larger expansion deals as you get into these deals are you noticing any change in kind of the environment from which these organizations are coming from is it more replacement.
As you get into these bigger.
Expand deals in the global 2000 versus say Greenfield and if so where are they coming from what kind of environment are you seeing.
Well I I.
We don't necessarily go in with any.
Pre determined replacement, we almost always go in net new.
You remember, our even with GE to K.. Our land motion is the same we typically land with two or three seats a designer its 10 or 12000 Bucks. It's the same 45 day sales cycle and then.
In Chief Ukase, that's often a plc.
Play it safe.
Single use case that has high value returned to prove the value of having a platform like ours.
We do see once we get to scale with larger organizations.
As I said in the prepared remarks, we do start to replace legacy technology, that's deep in it.
And we hear this quite a bit where customers begin to wind down there there.
Legacy platforms, they're reporting platforms their data quality platforms and so.
We attempt not to insert friction in the process, we don't elephant I think Scott's team has done a phenomenal job at making sure. The the land model works, regardless of where.
The head count is of these analysts that live in enterprises around the world.
I think if I could just make one final comment I think.
Organizations and Ceos are just now starting to understand and appreciate the opportunity to have a full end to end analytic platform to manage the entire analytic work flow and so those conversations are really in the very early stages, but theres certainly interest in appreciation for what that would mean too.
Too complex organizations solving problems.
That's great. Thank you and then one more if I may please just.
Any changes you're noticing on kind of business drivers here with the whole move to cloud based data warehouses I think in the past you said it hasn't had a big impact is that this intermediation of data with alternative databases and cloud based data warehouses is that is that having any impact on the business.
A positive in fact, we see that again as a tailwind where you have more and more data sets and more and more locations.
It plays right into our our strength and.
No because we can deploy anywhere it doesn't really matter, where the runtime compute.
Occurs whether it's on premise in the cloud.
It's pretty important to recognize that.
Process complexity and data complexity continues and in large enterprises and both of those are tailwinds for us.
Thank you.
Our next question comes from the line of Steve Koenig with Wedbush Securities. Please proceed with your question.
Hi, there thanks for taking my questions I appreciate it.
Wanted to get into the weeds, a little bit here on that on the financials.
So first question is simply.
Can you give us a little color on the products product mix shift that favorite upfront Rev Rec in the quarter.
Yes, sure. So I think as we can as we signaled last quarter and maybe as is evident of the conversations.
Throughout a lot of this Q in a around and enterprise slant to the business.
It does typically result in more servers connect and promote being sold into these organizations.
And those are favorable mixes to the upfront portion of the revenue.
Got it got it Okay and then.
My follow up here, a little bit longer winded, but if you bear with me for a second here.
So under six so five it was it was easy and transparent to understand how recurring revenue was growing.
Six or six it's hard to get to underlying growth trends, it's partly a function of the accounting standard but also the detail at least to date and your RPR disclosures don't really help bridge that gap. So I guess, if you factor in all the puts and takes duration upfront Rev mix shift.
Anything else.
How does your underlying air our growth how is that comparing to your revenue growth. Both both kind of this quarter and maybe longer term. If you could give any color that would be great.
Yes, thanks, Steve So I mean, obviously the change in the revenue and the mechanics of the revenue do make it a little bit harder to compare six so five to six of six.
And candidly, a R.R. and door.
You know the similar metrics are no longer actual drivers to our revenues. So I mean, it's hard for me to comment other than to say I think the results in Q2 kind of speak for themselves I mean.
We've continued to see very very strong momentum in the business.
Revenue did grow 59%.
Whit with a relatively constant average duration and we saw the upfront portion similar to last quarter. So.
I know that doesn't exactly answer your question, but I think we want to focus on those drivers that actually impact revenue in the current model.
Okay, great well I appreciate your help thank you.
Yes.
Our last question comes from the line of Rishi Jaluria with D.A. Davidson. Please proceed with your question.
Hey, guys. Thanks for squeezing me in.
First I wanted to start off more with the market type question. So I believe there was recently a Deloitte survey.
Saying that something like two thirds of companies are still relying on spreadsheets for their analytics and that tells me, there's clearly a big market opportunity.
For you to go after or help me understand what what what are you seeing out there and what needs to happen.
Is it a cultural thing is it a skills gap thing to to be able to replace a lot of those manual processes in a lot of that kind of.
Lack of analytical maturity so to speak at at these businesses and really increase your penetration there and then I've got a follow up.
Sure.
Ritchie <unk>. Thanks for the question I think it's important to recognize that almost all the research is pointing to the same thing we commissioned our ITC study earlier this year to try and understand this ourselves.
The truth is the data workers spend 90% of their time each week in data 44% of their time is completely wasted 18 hours a week for analysts is wasted doing all the things that should be pretty easy to do searching for data getting it ready for analysis analyzing it performing.
No model building, an app development and trying to deploy these these analytic processes and the systems just completely broken and it's it's waste across the board.
And.
So I think it's a combination of.
The.
People skills deep technology that they're they're leveraging most of which is just spreadsheets excel largely.
And internal awareness around where data lives how it can be leveraged to eightys willingness to open it up to more people again, which is why they are interested in.
Parts of our platform like like connect.
So I think that that we're overcoming it by providing a self service environment that is an end to end process code free for the citizens scientist, who doesn't know how to code or may do some lights equal coating or light.
Our Python coding and it's the same platform that would do we delivered to the scientist in a code friendly approach. So that they can write code all day long and the comfort that that.
The C suite has now is that everyone's leveraging a single platform to amp up the skills. So that they can get rid of this.
Tens of billions of dollars of waste wasted effort, that's sitting in spreadsheets today.
We are in the.
The.
Perfect Storm and Ultramaxes, there to pick up the pieces and most most organizations.
Got it great. That's that's really helpful.
And then just as a follow up at add inspiring talked to a number of customers who are new to all traction already looking to expand not just in terms of seats, but.
More products.
Maybe can you give us a sense and I know this is kind of going on top of some of the earlier questions about this topic, but are you seeing new customers to alteration landing with more products than you used to see in the past or at the very least ramping more quickly in terms of how they go from one to two to three products. Thanks.
I think in both cases, yes.
Adding additional skews happens typically with the larger organizations because they have a.
A focused effort around digital transformation.
But we actually see the expansion occurring.
With more seats of designer for example in almost every customer and I heard the same thing at inspire were brand new customers came up right. After the keynote and said they've been using all tricks for three weeks and already have four more use cases, and six were potential seats of designer.
So I again, I think it's perfect timing for us too.
To activate.
This audience of $47 million disenfranchised analysts, who heat their jobs because they're living in complex. If you look ups and excel and we're helping the digital transformation efforts of the C suite, who truly understand the benefit of driving a data science and analytics culture.
To see success in that transformation.
Got it great. Thank you so much.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Dean Stoker for closing remarks.
Thank you operator in closing, let me just remind everyone that on the call today that that we had all three it's truly believe that the customer trust defines the integrity of our company and I want to thank our 5300 customers now around the world for trusting us with what we believe is their most valuable asset analytics.
I also want to thank our dedicated engaged associates and partners for working tirelessly to help us earn that trust.
Thank you for attending today and I look forward to updating you on our progress next quarter.
Okay.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.