Q2 2019 Earnings Call
Welcome to the Microstrategy Q2, 2018 earnings call at this time all participants are in a listen only mode. Later, we will conduct a question answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference call is being recorded.
I would now like to turn the conference over to your host Mr., Michael Saylor, Chairman President and CEO . Sir you May begin your conference.
Hello.
Michael Saylor, I'm, the chairman President and CEO of Microstrategy.
I want to welcome all of you today to today's conference call regarding our 2019 second quarter financial results.
I'm here with our Chief operating officer and CFO formally.
First I'd like to pass the floor to fall who's going to read the safe Harbor statement and make some comments on our results for the second quarter.
Thank you Michael and good evening everyone.
Various remarks that we may make about our future expectations plans and prospects may constitute forward looking statements for the purposes.
Safe Harbor provision under the private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in our most recent quarterly report on Form 10-Q filed with yet.
These statements reflect our views only as of today and should not be reply to Paul relied upon as representing our views as of any subsequent date.
We anticipate that subsequent events and developments may cause the company's views to change while the company may elect to update these forward looking statements at some point in the future the company specifically disclaims any obligation to do so.
Also during the course of today's call, we will refer to certain non-GAAP financial measures reconciliation schedule showing GAAP versus non-GAAP results are available in the Form 10-Q , we filed with the FTC. After the close of market today and in our press release that was also issued today, which is located on our website at www Dot Microstrategy dotcom.
We were generally pleased with our performance in the second quarter, which demonstrated continued progress executing on our strategic objectives.
Microstrategy 2019 is driving demand for our software a redesign of repackage Microstrategy cloud enterprise products is showing initial signs of success and our proactive enterprise support offering its increasing customer engagement.
Internally, our executive team employees into apartments or is tightly aligned as we've ever been.
The consolidation our competitive environment and these will be the largest independent business intelligence platform company in the world.
We believe this is an advantage for customers who want open platforms that are not tied to a particular enterprise software stuff.
As a reminder, microstrategy 20, I'd seen as a modern open enterprise platform.
Right customers, who on the most powerful flexible enterprise analytics and mobility platforms on the market.
New innovations and Microstrategy 2019, like Federated analytics, and hyper intelligence address some of the most pressing analytics problems facing enterprises.
For example, hyper intelligent sold to keep problem facing many enterprises, how to get actionable insights into the hands of knowledge workers with minimal friction with the productivity tools they already used to do their jobs.
I for intelligence card on the web and mobile and all Microsoft outlook provide real time answer is with existing workflows.
Hyper intelligence allows entire workforces access curated secure govern data and second an actionable trusted decisions with this deal.
We saw strong demand for hyper intelligence during the quarter highlighted by 50 hyper intelligence deals.
As a reminder, purchasing hyper intelligence and Federated analytics requires upgrading the microstructure 2019 through the end of the second quarter more than 400 customers have already upgraded to Microstrategy 2019, and we have a targeted program in place to upgrade most remaining customers over the next six to 12 months.
Before I review, our financial performance in detail what to provide some high level takeaways for investors.
One total revenues increased 0.4% year over year on a constant currency basis.
It's their first constant currency total revenues increased in nine quarters.
Two we delivered 7.5% year over year product license revenue growth on a constant currency basis against the challenging comp.
This is the third consecutive quarter year over year constant currency product license growth and reflects the momentum in our business and the positive impact of Microstrategy 2019.
We are pleased with our product license performance and believe that we are on track to achieve our goal of product license growth for the full year in 2019.
Product support revenues increased 1.9% year over year on a constant currency basis, we continue to have industry, leading maintenance renewal rates and we're finding that our efforts to upgrade our customers and provide them proactive enterprise support our increasing customer engagement and satisfaction.
Other services revenues declined 9.5% year over year on a constant currency basis. This is the less strategic lower margin business for us.
Typically lag product license revenue performance for several quarters.
Looking ahead, we are optimistic that other services revenue performance will improve in the second half of the year.
We're delivering on our target of leveraging our operating cost structure, which was essentially flat year over year. We're pleased with the cost discipline and productivity improvements were driving across the business, even as we continue to make targeted investments to drive future growth.
Finally, the recently announced changes to our senior management team are designed to deliver even better performance overtime.
As you can see from our second quarter performance. The changes were not made in reaction to our financial results for the quarter, which were solid.
Rather we believe a flat and more streamlined go to market leadership will enable us to be more responsive to market trends and drive further productivity improvements across our sales organization.
I've been intimately involved in the day to day operations as a go to market team as CEO over the past year looking forward to focusing on that role in bringing the sales and services closer together full time going forward.
We've begun a national search process for a new CFO .
Our priority in a new CFO is one that has experienced in the finance leadership role in a public b to B company.
A proven track record of driving profitable growth.
As a hands on business partner that equally comfortable with employees customers and investors.
Well that search is ongoing I will continue to serve as CFO .
Turning to our financial results in more detail total product licenses revenue were $20.1 million in Q2 2019.
As your point million dollar or 4.3% increase year over year.
Foreign currency effects negatively impacted product licenses revenue by $4.6 million or 3.0%.
Product support revenues were $73.0 million in Q2, 2019, 0.9% decrease year over year with foreign currency effects negatively impacting such revenues by $2.1 million or 2.8%.
Overall, we continue to see strong customer renewal rates, which reflects the value customers generate for microstrategy products. We continue to anticipate product support revenues to generate growth for the full year on a constant currency basis.
Deferred revenues at June Thirtyth 2019 were $181.0 million. This is essentially flat year over year and it's the best deferred revenue performance in five quarters.
As expected we have resolved the previously discussed issues related to the move to a new quoting system.
Other services revenues were $17.5 million in Q2, 2019 at 12.5% decrease year over year foreign currency effects negatively impacting such revenues, but to your point $6 million or 3.3%.
As mentioned earlier, we would expect improved performance from other services revenue overtime due to consistent growth and product license revenues and focused on engaging our customers.
Turning to costs total operating expenses of $97.2 million were essentially flat year over year down 2.4% quarter over quarter.
While we continue to make material investments in our product development efforts, we are driving meaningful efficiency improvements in our sales and marketing spend.
We believe there are additional opportunities to drive further leverage which will be a key focus in the second half of 2019.
Our operating loss for Q2, 2019 was $4.8 million compared to $1.8 million in a tiered prior period prior year period.
We had net income of $20.4 million in Q2, 2019, and diluted income per share of $1.98 cents with net interest income of $3.0 million in other income net.
$29.4 million.
Net income was positively impacted by the sale of the voice Dot com.
Main name for $30 million in cash, which results in a $21.8 million gain net of tax and minor transaction costs.
This was an opportunistic transaction to monetize a long held noncore asset.
Well more than a dozen evocative and powerful domain names and are open to leveraging these domain names in equity or other strategic transactions with well funded parties to generate value for shareholders.
Excluding the impact from the gain on the voice dotcom domain name to non-GAAP net loss was $1.4 million or 14 cents per share.
During the quarter, we did not repurchase any shares under our existing buyback authorization.
In the prior two quarters, we repurchased approximately $160 million and stuff. This is well in excess of what we had anticipated being able to repurchase in such a short period of time.
We believe buybacks can be useful way to opportunistically generate value for shareholders. However is just one component as we evaluate our broader long term capital allocation strategy.
We continue to believe keeping a substantial cash balance on the balance sheet is prudent.
To be clear is our intention to consistently be profitable and generate cash flow on an annual basis.
Before I turn the call back to Michael Saylor, I want to finish by reiterating that we're generally pleased with the performance of the business in the first half of 2019.
Customer interest in Microstrategy 2019 has been strong.
And we're excited about our opportunity to continue driving product license revenue growth.
Well there are increased focus in generating leverage from our cost structure. We are optimistic about our ability to deliver improved profitability increased cash flow overtime.
Now I would like to turn it back to Michael sale.
Thank you Tom.
I'd like to touch on a few areas.
Our venture instrument.
I'm incredibly excited about where we are as we.
Moving to the second half of 2019 on the marketing from.
Our hyper intelligence in our Federated analytics messaging.
And messages are resonating really well with customers and partners.
And prospects.
I feel like they have repositioned the company from being a legacy enterprise platform vendor to being a modern analytics and intelligence architecture and so they are helping us a lot with new business development as well as.
Recruiting more Raul.
It's really been a big shot in the arm for our existing customers as they work to build excitement for microstrategy deployments within their enterprises.
And.
And.
They allow us to work really really effectively with other tools like power beyond tableau and excel.
And the like as well as.
Lot of the data science platforms like Jupiter.
And an SDK is like ex code and Swift et cetera, So activating the analyst community the data scientist community and the software application developer community is a big part of Microstrategys enterprise platform strategy.
And.
Microstrategy 2019 really dramatically upgraded our ability to do this we really started.
Hammering on these messages the beginning of the year. We've now got enough feedback from the market to have a high comfort level that they are working and they are the right decisions.
Following the Tablo acquisition by Salesforce, but there are now five major full stack vendors and the business intelligence space.
Sep I B M Oracle.
Salesforce and Microsoft.
The market needs and desires and independent intelligence platform vendor.
Microstrategys now leading independent platform in this space and we have good support from the analyst community and a strong set of assets offer the market.
I think if you if you move around the industry you see Oracle Scott a commitment to their database and and they've got a very hostile relationship with both Microsoft.
Antagonistic relation with Microsoft and with Amazon.
And with S&P and with Salesforce, so, they're not terribly enthusiastic about supporting AWB or issue or or the Sep architecture. This sales force architecture and.
And that's been the case for a while.
S&P following their acquisition of business objects has has.
Promoted their own database holiday their own application architecture and they have consistently.
Let's put it into our division and focus that.
On an operating in a very narrow scope.
And consequently, its very difficult for someone in the Cognos B.I. division to support the Amazon cloud, the Microsoft cloud or the R&D applications from S&P and Oracle. It's also been difficult for them to migrate into the AI space because of mission is claimed by Watson, which is a different part of IBCM and it's difficult for them to migrate.
Into into the mobile space for similar reasons. So one of the dangers of being on a division of a conglomerate is your capital budget and your aspirations are are.
Constrained.
By the strategic plan of a CEO that is juggling. Many many other priorities so although it might be a rational thing for.
Oracle to favour their own database over hadoop or or big data and I might be rational for S&P to four to favour their own apps their own database that it might be rational for I.B.M. to favor their own stacks of technology. It isn't in the best interest of the customer.
Who like choice with.
Tablo was.
Before this acquisition pretty strong competitor.
But.
But now that they are part of the Salesforce stack.
It's going to change the dynamics and it's going to change the incentives and clearly what's in the best interest of sales force now is not necessarily in the best interest of S&P and you can't imagine as much enthusiasm supporting.
S&P, Microsoft Oracle and IBCM coming out of the tableau technology.
Organization following the acquisition before the acquisition.
Not not leaps, Microsoft and Microsoft itself has a full stack vendor.
And and power B. I suppose is emerging as as probably the.
More.
Notable competitor for us, but even as Microsoft is probably the lowest cost and the and the most ubiquitous of the full stack vendors. They are still a full stack and if you commit to Microsoft power be ironically, you're precluded from running on Windows and your own data center and you're precluded from running on Linux and you're you're going to be precluded from running on Amazon's AWB switches.
Of course, the leading public cloud provider.
And so.
All of these things create an interesting.
Vendor lock in dilemma.
No vendor lock in as.
It's something no CIO once and.
In a world, where the largest vendors or selling you your application functionality all your software components. All your hardware components, all your net networking and literally the electricity to operate these things via a term license.
Big corporations are little repurchasing their oxygen from a single vendor if they lock into a big stack.
And.
They don't unlike the World, where you bought enterprise software to deploying your data center perpetual license. They don't have the option to go off of maintenance and switch vendors over a three year time period, if they have a dispute with a vendor or they need to do something different or they have a financial problems.
A dispute with a major stock vendor in the cloud results in immediate bill with known negotiating leverage and if you don't pay the bill they can literally turn off your business. So.
Not that.
Creates an interesting dynamic.
Any reasonable executive would prefer to have more than one source for something so critical and we've noticed that the public cloud.
Migration in the public cloud business in general has accelerated for us when we delivered micro strategy on a shore along with micro Shujaat AWB us having parity between the two and having a choice between the two is a big deal.
And I believe actually that the arrival of as Youre as as a credible alternative to AAMC US probably has accelerated the overall industry migration from datacenters to the public cloud, perhaps to the benefit of Amazon as well as to the benefit of Microsoft because theres only one supply it's very difficult for a reasonable executive to put all their business eggs in that basket everyone's going to want to have more than one choice.
One of our key.
Value propositions to customers is that when you deploy microstrategy applications on AWB us.
If you were to deploy dozens of applications to 10000 users in a WCS environment and if you decided or found out that you could purchase the same software and hardware services from Microsoft at half price.
You could turn off the application on a Monday night at midnight and turn it on.
And as Youre or switch from Amazon to Microsoft within minutes without service loss. So the ability to move seamlessly between the environments is a big benefit that micro strategy offers.
You won't see a similar benefit from the full stack vendors are not really in that situation.
So.
I think that.
I think that we're well positioned as an independent platform.
The world's not ready to trust all of their mission critical operations to one cloud vendor, they're probably not ready to trust them all to two cloud vendors.
But the world is interested and being able to integrate multiple data sources multiple applications and multiple platform environments into in order to deploy mission critical apps and micro strategy is offering that.
We have been delivering the microstrategy cloud platform onshore enabled us in 2019.
And as the market shifts toward these public cloud deployments at an increasing rate.
Now our timing is good our messaging is resonating and we're starting to see a deal activity pickup.
As a result of this so I believe that these developments in the market our auspicious for us.
And I believe that.
We will continue to build momentum based upon them.
With regard to sales activity and sales execution.
I'm excited about our management changes and the combination of our sales in our services leadership under formally.
It's always been our plan for him to take on increasing amounts of responsibility at the firm and we're committed to precise very hands on execution in order to serve our customers and grow our business. So a single leader of all the sales and the services operation is going to aid us in achieving that objective.
To that to that effect, we pursued a number of business initiatives in the past quarter to improve our sales results.
We have simplified and streamlined our licensing terms, we've introduced a new rationalized product catalog.
We've implemented Universal order forms we've streamlined and a set of international price books.
Weve streamlined and improved our education offerings.
We have upgraded and streamlined our support offerings.
We have created more competitive consulting pricing and.
And easier to sell our competitive software are re easier to sell consulting packages.
We have our own.
We have improved the sales compensation schemes.
With regard to consulting in order to drive more sales focus on consulting.
We have improved our services compensation schemes in order to better integrate our support initiatives and incentivize them in the right way.
We've made some major systems upgrades to our to our sales organization and our sales systems in order to make things faster and quicker and more transparent and precise.
And Weve reorganized our sales operations teams in order to be more efficient and higher.
More rapid and increase the quality of the work we're doing.
So they're very hands on things that are touching.
Touching every person in sales and services and touching our corporate systems, but I have confidence that they're all going to result in improvements in our sales process as we move forward.
In the area of services.
Our enterprise support programs beginning to take hold.
And impacting hundreds of accounts.
We delivered on the order of a thousand enterprise support projects in the past year.
There were proactive activities to improve.
The deployments of our customers and the environments our customers are working with.
We expect to assist about 500 or more of our customers from upgrades. This year via the enterprise support program.
So this is a broad based proactive engagement to elevate our level of of enterprise supports.
To a place that is above and beyond what what traditional vendors in our space would deliver we're very proud of it we think it's a great investments in the business and it will yield long term dividends for us.
We're about through the first year year and a quarter. This it's a three year plan and I expect that we will continue to enhance our technique our effectiveness in our coverage for the next 24 months as the organization.
Grows and becomes more sophisticated.
We upgraded in overhauled our 2019 education courses and certifications and we're publishing them all online and using that to drive value and demand for our education passes we're really excited about that initiative as well.
We're going to be focused upon delivering more and better education for all of our customers and all of our partners and if we combine this with our focus upon providing more and better support and bye.
By providing more.
And more competitive and armed.
More comprehensive consulting offerings.
You can see that we're really committed to improving the services that we're bringing to the market.
I'm I'm really enthusiastic about an emerging version of Sir emerging area of services, which is our cloud environment business.
We have streamlined and and overhauled our cloud offering so now that we're offering.
Cloud environments, and production and nonproduction nodes throughout our customer base.
And we're offering tailored cloud support packages and were doing this on both as Youre and ADW assets.
This allows our customers to ask for a very particular cloud environment that meets their needs were offering them with a standardized set of administration and and.
Maintenance and optimization services for their cloud environment, but we're also offering them a package of customization and integration services. So that they can implement a hybrid cloud if they like or they can integrate into their other databases.
We've really seen a dramatic increase in the interest.
And the demand for us to begin to host and and manage cloud environments for customers.
I think it's a great a great under appreciated story and micro strategy and and as we move forward I think the combination of a stronger microstrategy cloud platform combined with.
Stronger set of cloud environment offerings and.
And more effective sales and marketing and the cloud is going to help us to grow that business and so that's a another exciting area for the firm.
Shifting to technology.
If you take notes.
I think we're making great progress improving our federated alloys connectors and our hyper intelligence apps. These are really opening up a lot of new opportunities with our customers and partners as I said, they are really repositioning us in a good light.
And.
They converted a lot of discussions from a head to head competition to a co op petition embrace and extend dynamic.
I think that'll continue.
I mean, we we seem to be taking a leadership position in the industry with regard to supporting all of the tools on the front end all of the database on the back end all of the platforms.
The you might want to deploy on in the middle of an architecture.
Our overall tech.
Strategy is.
To focus upon AWB, EPS and as Youre parity with regard to the cloud.
We focus upon the iOS and Android parity with regard to our mobile features.
We work hard to develop Mac and windows parity with regard to desktop and workstation features and and to focus upon chromium HTML support for the chrome an edge browser family.
To be able to offer support for all of these various interfaces and platforms.
Gives us I think a leg up and it's exactly what large enterprises are looking for.
We will deliver some notable improvements and stability scalability portability and usability for that platform in the coming few quarters.
We're really focused on getting the basics right and delivering solid value for our customers. So we have been doing some exciting things like integrating assets. So it directly into various parts of our apps and working hard to eliminate.
Clicks unnecessary friction and then find ways to put more fault tolerance right into the platform.
So as to make the administration and the deployment of our product that much easier.
On a final note on the voice stock comp sale.
Now.
I think there is an emerging awareness that.
That crypto assets or digital assets are real.
There is never going to be more than 21 million bit coin in the world and and as people start to think about that and the fact that they can't be inflated and Thats a limited it gives value to that cryptocurrency argument.
I think if we consider the domain as an asset class.
Once upon a time people thought that.
That.
Voice dot TV or voice dot Bu or voice dot something else would matter.
And it turns out it doesn't voice dot com matters and.
We have pretty good evidence here that the difference between voice dot com and voice Dot I O or voice dot iced tea or voice Dot net was $30 million. That's the difference because that's where we sold it for.
If it had been in open auction with multiple various bidders that might have been more so.
When you go on to Google and Yahoo, Google something like voice, you get 2.4 billion hits, if you Google Nike you get 2 billion heads.
The value of a great name, especially a dot com name is amazing because the catapult you above 2 billion other pages anybody.
That ever saw an AD that said voice dot com on it would remember immediately.
How to find that brand and so these things are great. They are great assets for branding a network or branding a mobile app or branding consumer application.
And we own.
We literally own hope in the English language I mean, how would you like to own hope, we own hope Dot Com H O P E.
It is now.
It's a verb.
It's a name you could use it the brand all sorts of things, we own Emma and Usher and strategy and speaker.
We own Michael we own William most of these generate multiple billion hits you tight them into the to the Google search machine.
And.
You know our strategy and I will get you billions of hits, So I have a belief that at some point.
Some time in the future we'll find.
Well endowed well capitalized companies that wish to rebrand themselves for which to rebrand the product or a service with a really compelling name.
And when they do then we'll monetize some of these other assets until then.
We're very patient with regard to these investments and just like with the other things we're doing on our business we.
Take the long view.
And we just focus upon making sure that we provide value to the customer.
So with that I want to thank everybody for your support and I think we'll go ahead and open the floor for questions.
From the analyst.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one on you touched on the telephone. If your question is being answered are you extremely for yourself from the queue. Please press the pound key.
Your first question comes from the line of course, some form from BW ethylene and Sir Your line is now open.
Could you first off talk about the head count reduction in sales and marketing and how that actually does not impact any kind of future revenue growth potential.
Hi animated Fung. It's a good question as you probably know noted over the last couple of years, we added quite a few head count to sales and marketing in some cases these were overlay folks in the sales teams.
In some cases these are adding two regions that were.
Sort of growth region, the second and third world countries and in some cases. These were marketing heads to a further some of our digital marketing work and some of our business development and I think what we've observed over the last year or so is that they were not adding the level of revenue or productivity that we expected or needed and so we were able to reduce them, while still increasing revenue and overall productivity and we looked at each of those very closely and worked very closely with our field teams to make sure we're making the right decisions, but ultimately for the kind of growth we need there's still a lot of room in the head count we have and so I don't think headcount is really the lever to grow I think it's more productivity out of our existing high performance reps.
Okay, and then could you just talk about this a hyper intelligence I mean last quarter you were talking about.
Having dozens now you're talking about 50.
How fast can you get these customers upgraded this year.
As far as those 500 that you are targeting.
Yes, so theres a couple that sort of things in that question. There first just in terms of our upgrade activity. We've had pretty good traction. We had entered the year knowing that we wanted to upgrade the vast majority of our enterprise customers by the middle of 2000.
2020, and we're on pace for that.
Upgrading the customers than results in potential up sell and as you mentioned, we did about 30, a revenue generating hyper intelligence deals in Q1, and we saw about 50 this quarter and we expect to continue to accelerate that and the nice thing is as customers take 2019.
They tend to get a demo or proof of concept of hyper intelligence and we find everyone that.
Does that demo proof of concept is instantly enamored with the product and then it's a matter them figuring out what are the right use cases for hyper intelligence and so there is a bit of a snowball effect as we see certain customers at certain use cases were able to share it with other prospects and customers.
We continue to see a lot of good traction the other nice thing about hyper intelligent that Mike talked about a little bit is it's really a new product wage and it positions us as an innovative VI company again, so our sales people get excited about it our customers get excited about it. It creates this aura of innovation in the company and that our marketing folks get excited about it at our prospects get excited about it. So it still continues to go really well and we add product features every quarter right. We launched hyper intelligence in Q4 as a web based product in Q1, we added a mobile capability I know Q2, we've added an outlook based capability. So we're able to continue to add feature functionality every quarter.
Okay, and then as far as the customers that have upgraded so far this year, what are you seeing as far as incremental revenue coming from them.
Are they broadening their the usage within the workforce.
Yeah, I think when we see customers upgrade they tend to do so with the with the expectation that they're either going to increase their footprint microstrategy at the current enterprise that theyre in or they increase the usage of additional tools like our mobility tools library, and dossier or hyper intelligence or Federated analytics, we havent, we havent published and we're not going to report on sort of the incremental revenue that comes from customers upgrading but were seeing a positive trend there and of course, you can imagine it's not immediate revenue.
Great like a customer may upgrade to Microstrategy 2019 in Q1, which that initiate that sales cycle, which are typical sales cycle of six to 12 months.
Okay. Thank you.
The second question comes from the line of Tyler Radke. Your line is now open.
Thank you good afternoon.
Could you talk about the contribution from hybrid intelligence in the quarter I know you talked about.
50 deals that included that but just give us a sense on the magnitude of the revenue contribution.
Yes, Tyler it's a it's a good question we are not yet prepared to breakout revenue associated with high for intelligence.
I would say, it's not a significantly material amount of our product license revenue yet.
You know, it's a noticeable contribution.
And more so than just a specific set of revenue coming from hyper intelligence is the fact that a customer is interested in buying more overall licenses that microstrategy of which they attach hyper intelligent. So hyper intelligence is creating a like as I mentioned is sort of an or of innovation and confidence in microstrategy to product overall.
Also I'm not sure we'll ever really be able to breakout products specific revenue and things like hyper intelligence or Federated analytics as you probably know we tend to sell the products together and then discount them together. So it's hard to break out product revenue contribution from any particular product.
Great and then maybe a question for Michael you talked about how the composition of tableau by Salesforce that kind of creating an opportunity have you seen any signs that are either.
Changes in win rates or just anything competitively that that gives you that confidence or.
Any other color that.
You've seen along the competitive front that gives you more confidence here would be great.
No well recently as recently as about a year and a half ago.
The usual suspects were tableau and Qlik and they were the hot cool new comers spending huge amounts of money with new technology.
And.
As soon as quick got taken private we notice that they lost a step and a year after that.
That privatisation.
The consensus across our entire sales organization as quick as not nearly so competitive or aggressive anymore, nor are they being taken seriously, but they've got an enormous brain drain of sales marketing and technology talent and kind of the energy has led out of it.
Todd blows acquisition with Salesforce acknowledge a newer thing and it won't it's not even yet closed I assume so if we look out a year from now I think that will be in a position to give you some concrete.
Hi.
Takeaways from that but.
It's already having an impact on analyst perceptions and customer perceptions everybody's got to just go through the calculation of what does this mean for support for the sales force cloud versus the Ws cloud versus the as Youre clown.
And there are different you know very different cultures Salesforce of course famous has been very successful with a very famous slogan that they ran for 20 years and advertising and it was no software.
Like they don't ship it you can't buy it you can download it there is not and tableau is almost diametrically opposed success, which is they created a very nice piece of software running on a PC workstation for an analyst who is fatigue from excel and wanted to download something pay for where the credit card and build something cooler.
So there's there's two different technical strategies, there and then how is that going to morph into the future nobody knows but a lot of uncertainty.
We don't have so much uncertainty about what generally happens with acquisitions, because I've now seen about a 100 of them and I've seen what happened to ask space and Breo, an information advantage and STG and Cognos and excel CR and Crystal reports and business objects and the general thing that happens is that the very very passionate.
Committed.
Founding executive team typically goes off somewhere else to do the next thing whatever that next thing might be and.
And the organization starts getting Ron.
And on.
And I'm more.
Corporate fashion and that there are some examples where that works well, but in any event, where there are conflicting tools that do the same thing.
You know an Oracle ended up buying you know nine conflicting VI tools in IBCM had a host of conflicting VI tools et cetera, when that happens they have to pick who they are going to invest and who they are not going to invest in and then they started to.
Emphasize fusion type projects and integration projects and.
And all of that complete creates a lot of uncertainty for the customer and a lot of.
Complex across the sales organization and the result is that.
Normally the momentum of the particular platform slows down and they get more drag and turbulent. So so I think after seeing the entire.
Story play out about 100 times, you can reasonably predict how this will play out.
By the way.
One could argue you know.
Say p. made some money off of business objects by merchandising business objects through their install base and then.
I B M for awhile merchandise Cognos and Oracle for Awhile Merchandised Ob E.
And so for a while there is.
There is a a good financial impact, but then once you get past that initial push which is good for financially for the organization.
You tend to have a lot of drag and and then.
Then a lot of innovation leaves the platform.
The one thing Thats.
Essential I think to stay viable and vital in this business is you have to be able to shed your skin every five to seven years and re architect and rebuild.
And for a while it was you have to support three tier Windows and then it was you have to rebuild for Linux and then it was you have to throw away the desktop and support the web and then it was you have to throw you off to build a new skin for mobile and after that it was now you have to rebuild the platform for eight up yes, and then it became have to rebuild the platform for AWB us and as Youre and next it will be docker.
Right and these things go on.
If you have the ability.
To direct a huge amount of capital into your R&D function and if you don't have any religious.
Religious constraints.
That prevents you from pursuing a certain idea like a religious constraint. For example is IBCM is in no way shape or form interested and supporting a competing companies AI platform. They want to support Watson Oracle doesn't want to support Amazons eight of the us. So when you have those kind of constraints religiously and then our dogmatically and then you have capital constraints you tend to not want to re architect the product you tend to get run as a cash cow and if you get run as a cash cow then whatever you will evolve to be at the point of the acquisition is pretty much. What you are locked into for the next 20 years. If you are lucky enough to be a perfect complete product at the point of acquisition and maybe are okay, but if the market is evolving dynamically than than the success rate of those things is less.
I think it's.
It's quite possible and likely that.
Salesforce will turn this into a success for salesforce, while at the same time it wont be an ideal situation for a customer of tableau that want an independent enterprise intelligence tool.
So that's what I think about this in particular and in my my forecast is really based upon observing how all of this similar companies in this space performed in the years following the acquisitions.
Great appreciate the perspective, and if I could just ask one more for bonds.
Maybe talk a little bit more about your.
Expectations for the back half of this year I think.
Nice to see.
Kind of the first quarter and.
Growth on on growth.
In a while here comps are easier in the second half of this year.
What are you thinking in terms of.
Overall license.
Revenue or license revenue growth and overall revenue growth as we get second half. Thank you.
Yes, Thanks, Tyler as I mentioned in my prepared remarks.
I think we saw reasonably good product license revenue growth on a constant currency basis in the first half of the year and we'd like to see that continue trend in the second half of the year.
I think our support business has been chugging, along and it's been consistently growing in that 1% to 2% range on a constant currency basis, and I think that's a good run rate for that business, given our product license revenue growth.
I think on a services basis, that's been an area of decline as we.
Refocused that business and I think with some of the actions that Mike had mentioned around more competitive rates.
And with them.
Consolidating and rebranding a repackaging of our services business, we should start to see that business turned around.
And our goal as I mentioned before is to continue to streamline the business and cut some costs and generate some positive operating margin. So.
My expectation is that second half of the year is more the same as the first half if not better.
Thank you.
Again, ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your question telephone. If your question has been answered are you wish to remove yourself from the queue. Please press the pound key.
We have a follow up question from Hamed Khorsand. Your line is now open.
Hey, just wanted to understand your <unk> as far as your your confidence here in the business.
What are you seeing in the pipeline and bookings that's giving you this kind of confidence and here you are talking about click and tableau, but are you you know.
Picking any of the people from there are you taking advantage of the sales slip up and could you just provide a little bit more granular color towards that commentary, you're making on the call.
Yeah, Matt I mean first of all just from a pure pipeline perspective, I think March has been here for about a year now or half of which she has been able to leverage the success of between 19 platform and a lot of their operational changes. She is put in place to the marketing team and the business development.
So we are seeing a material increase in our pipeline and further increase the quality of the pipeline our ability of the sales team to convert the pipeline.
As far as our observation vis-a-vis competitors like quick I think it's less so that we're seeing more and more wins against some of our competitors, but we are seeing fewer those competitors in the marketplace. So that gives us a more strength.
That said you know power Beinn Tablo continued to be very strong competitors and would go against them more and more so the competitive environment I wouldn't phase getting stronger or weaker it's about the same as far as Mike's comments about the consolidation in the marketplace. I think those are more longer term views into where this business may go overtime.
Okay. My last question is this a voice stock comp sale was this just a one time event or are you looking to liquidate your entire portfolio now or is it just purely from a solicitation standpoint as someone coming to you.
Oh Wow, we're opportunistic on these sort of transactions, we certainly would never be in a rush and we've held some of these domains for 20 years and.
We are prepared to hold them for many more years.
Until we find someone that at values that more than we value them. So.
Thank God.
I think we're willing to enter into strategic transactions, if we find the right partner and if we think it's it's a worthwhile endeavor, but were in no hurry.
All right. Thank you.
[noise].
Ladies and gentlemen.
I'm showing no further questions at this time I would now like to turn the conference back to Mr., Michael Saylor, Sir you May proceed.
Well I want to thank everybody for their support we appreciate it.
We're looking forward to the third quarter and we'll speak to you all again in 12 weeks I enjoy the rest of your summer.
This concludes today's conference. Thank you for your participation and have a wonderful day you may now all disconnect.