Q2 2020 Earnings Call
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With that I would now like to introduce Peter Lowry Dunlap, Vice President of Investor Relations, Sir you may begin.
Okay. Good afternoon, and welcome on the call today, we have just to add to our founder and CEO .
Bruce Bell, our CFO and Julie T O or Chief Communications Officer, Julie will lead off their safe Harbor statement and then on the call.
Everyone. Our press release was issued after market close and is posted on the Investor Relations section of our website, where this call is also being webcast.
Statements made on this call include forward looking statements related to our business under federal Securities laws, including statements about financial projections.
The plans and expectations for our go to market strategy and our financial condition.
These statements are subject to a variety of risks uncertainties and assumptions.
For a discussion of these risks and uncertainties. Please refer to documents we file with the FCC in particular today's press release and our most recently filed annual report on Form 10-K , and our most recently filed quarterly report on Form 10-Q . These documents contain and identify important risk factors and other information that may cause our actual results could differ materially from those contained in our forward looking statements.
In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful supplemental measures of demos performance other than revenue unless otherwise stated we will be discussing our results of operations on a non-GAAP basis. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.
Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measure with that let me hand, it over to Josh Josh.
Thank you Julie Hello, everyone.
Thanks for joining us on our Q2 fiscal year 2020 earnings call.
For today's call I will cover two things.
First our quarterly results with an update on our continued refinement of our go to market plans and second some insights into our customers are leveraging the power of our platform and advanced data solutions to transform transform their businesses.
Although we were looking for more growth.
In Q2, we posted a 22% year over year increase in revenue and a 9% year over year increase in billings.
We delivered this growth, while decreasing sales and marketing expense year over year by 9% and also decreasing overall operating expenses by 7%.
We were once again able to make meaningful progress on reducing our cash burn coming in nearly $2 million ahead of our guidance and about half of what it was a year ago.
And we remain committed to achieving cash flow positive status with the cash on our balance sheet.
We continue to refine our go to market model to accelerate or new business. We're enthusiastic about the transformational impact or product is having on some of the largest companies in the world.
We believe this will become more self evident to the market as the number of these successes grow and become more public that said.
The kind of impact we have a suit transformational and so widespread that it cuts across a significant number of functions. This requires us to cross many checkpoints along the way, which affects the length of the sales cycle.
I bring this up because Q2 was definitely impacted by our pursuit of larger enterprise transactions.
Many of which were many of which we were not able to get to the final point of closure.
Although historically our international business is health care today. This quarter. It was similarly impacted particularly Asia Pac not including Japan.
Lastly, we spoke on our Q1 earnings call about announced acquisitions offering proof of the value in our space.
Those acquisitions led to many customer conversations which extended sales process that said, we didn't lose a single deal because of the acquisitions and I'll talk about this more in a minute.
Well, it's true that we're more excited than ever about our pipeline. We were overly focused in pursuing larger enterprise transactions, which had an impact on Q2 billings in new logos.
However, early in Q3, we've already closed one of these customers and almost seven figure annual deal with a large aftermarket automotive retailer that said the timing of larger enterprise closings has been hard to predict.
We're making significant moves in favor of landing new customers more quickly.
Keep a healthy pace of new opportunities and to grow new business, while the larger transactions at all.
Let me summarize the most important moves we're making.
First everyone knows and Youve recounted back to us that our offering in space have been difficult to explain it's also been the number one complaint from our reps.
The recent round of acquisitions have brought more attention and structure to our space and how people describe it and think about it it's creating an opportunity to simplify our message after talking to the leaders of many of the largest largest SaaS companies also and testing messages on how to define a space.
About what we do particularly how we fit into digital transformation and the major cloud platforms, we've come up with a better way to describe a product that seems to be resonating well.
We've also very recently found that customers who've used our products while in our sales pipeline.
Buy it at a significantly higher rate than those who haven't.
So we are expanding our focus on self service person proof of concepts. So worn users can experience our products first hand.
And we believe that will result in landing more new customers.
Second.
I guess third.
John Miller is now onboard as our Chief strategy Officer and is one of the most talented people with whom I had worked at Omniture for over seven years and it had been recruiting to double every year for the last several years. In addition to strategy. John has worked is treating.
Focused repeatable sales plays to target prospects in land new business more quickly.
With such a broad platform that can do almost anything a customer would want to do with their data we plan to narrow the focus of how we apply it to new customers in the sales process. So they're able to understand the value in a doctor technology more quickly and more easily.
Fourth we are expanding our partnerships that focused on helping us that focus on help us go to helping us go to market.
In particular, we are finding significant interest from other technology companies that can expand their footprint deal size and its strategic relevance by promoting docomo as part of their solution.
And you should expect several related partnership announcements from us in the next few months.
One of the drivers of some of these partnerships is the recent acquisitions in the market, which has left the void for an independent platform, that's agnostic as to what cloud or soccer platform customers have adopted.
Don't know is an independent pure play platform that's open to all the major players.
Not the same time these acquisition and announcements validated the difficulty in providing data to companies and business users.
Large players have now spent over $25 billion in acquisitions in the last 18 months to enhance their data capabilities that we believe only fractionally helps them do what we do.
A few companies can afford to acquire companies to make up all the product gaps, but most will need to partner as well.
We don't see any new competitive threats to change or our momentum.
Our customer feedback on our new platform pricing model has also been very positive and we think this will be another tailwind to landing and expanding business with new and existing customers.
Another bright spot in Q2 was our gross retention rate approaching 90%.
As our customers use our products and more strategic ways.
And commit to more multiyear deals.
We have an opportunity to achieve even higher rates.
Our corporate business remains solid.
Although enterprise like in retention technology needs and ability to drive value. We have found that customers under a billion dollars or less complex in regards to buying processes approvals and they're competing internal legacy installations.
Our easy to use fully integrated platform continues to resonate with the segment, which often lack the infrastructure or even resources to attempt to put together an alternative from scratch that would address the problem that docomo solves.
During the quarter we added.
New lighthouse customers, including one of the world's best know makers of luxury Timepieces.
We also signed ATP, a global energy company and Inditex, one of the world's largest fashion retailers with international brands such as our.
We signed a key expansion deals with notable customers, including CPG giant l'oreal.
Also with a well known manufacturer of electronic household products.
And with the real estate services company Zillow.
We do well whenever there is significant amount of fast moving cross departmental data that needs to get into the hands of business decision makers across the enterprise.
We recently announced our Taylormade golf, which uses Docomo in North America and in Japan recently expanded its use of docomo across all of its Japanese operations.
Now the company is putting real time data from a key retail metrics such as traffic sales and inventory into the hands of every store employee helping them understand how to better perform their jobs and have a better understanding of their customers, which they say has led to increased sales across the country.
I'm proud of our team for the innovation, they keep delivering and their unwavering focus on customer success.
And we continue to be encouraged by the validation our product receives from industry analysts the best quarter in Forresters wave for vendor managed beinn analytics platforms.
Don't receive the highest marks for customer satisfaction.
Domain was also named an overall leader in the Dresner Advisory services industry Excellence awards for the third consecutive year based on high customer ratings for product quality value delivered sales and services.
And constellation Research also announced that don't when we'd constellation shortlist for both be eye and analytics as well as marketing analytics solutions.
To conclude we're working hard to improve the pace of new business.
We continue to execute well on cost controls and manage our cost structure to maintain our commitment to having a fully funded business plan.
We remain extremely optimistic about the opportunity in front of us with that I'll turn it over to the Bruce Bruce. Thank you Josh I'll begin with our second quarter performance, followed by our third quarter of fiscal playing playing on your guidance.
As Josh mentioned, the Overweighting of our efforts on large deals with large customers resulted in decreased productivity from our enterprise reps.
There was insufficient new customer activity to compensate for those efforts.
Our enterprise customer count is now over four 416, and these bonds were applying more resource for acquiring customers and at the same time reallocating some of our large enterprise sales resources toward smaller enterprise customer.
We have historically experienced good productivity from our corporate reps and we've seen that some of the things arent motion that is working for the corporate segment has also worked for the smaller enterprise customer.
Expect this to help our total new business and also help our new logo count.
I'd like to highlight that the new deal sizes of our corporate business have been averaging over $50000 on the gross renewal rates have been approaching 90%.
Many software companies equate with the enterprise category as a reminder, we have historically defined enterprise as customers with revenue greater than 1 billion and revenue in corporate as everything less than that.
In addition, we continue to target high more quota carrying reps, but have now directed those efforts and favor the corporate business.
Given how productive they have continued to be even in the face of a 29% year over year decrease.
In marketing spending the carpet business also has a much shorter sales cycle sales rep ramping history, which provides the ability to more immediately impact our short term new business.
Lastly, the CAC for our corporate business is lower than the enterprise business.
For our enterprise business, our focus is on improving their overall productivity by closing larger transactions and by increasing the new logo counts.
Our dollar based net revenue retention rate continues to be greater than a 100%.
We also continue to see more customers entering into multiyear contracts with 49% of our customers now under multiyear contracts at the end of Q2 compared to 38% at the end of Q2 last year. This drove our remaining performance obligations or RPL to grow 28% compared to the same quarter last year remaining performance obligations includes billed and Unbilled revenue under contract that is yet to be recognized.
Our Q2 revenue was $41.7 million a year over year increase at 22% subscription revenue grew 24% represented 84% of total revenue.
Year over year subscription revenue growth was driven primarily by new customers and a national revenue represented 26% of total revenue consistent with Q1.
Our subscription gross margin was 74.9% for full percentage points from 70.9% in Q2 of last year.
We plan to get additional leverage out of our subscription cost of revenue over time as we continue to effectively manage our datacenter our datacenter operations through finding efficiencies better utilizing certain services and continuing to optimize the demo platform. We believe we can get subscription gross margins over 80% over the long term.
Including our services business. Our total gross margin was 66.2% to 240 basis point improvement compared to 63.8% gross margin in the second quarter of last year.
We were able to deliver these results once again with a further decrease in operating expenses in Q2, we were able to decrease operating expenses by 7% from last year, even though revenue increased by 22% year over year decrease came primarily from lower marketing and R&D costs. The net effect of increased revenue effect effectively managing costs allowed us to improve our operating margin by 44 percentage points from the same quarter last year.
Our net loss was 26.4 million and net loss per share was 96 cents. This is based on 27.4 million weighted average shares outstanding basic and diluted.
Turning now to our balance sheet as of July 31, we had cash cash equivalent and short term investments of approximately $134 million an amount. We believe is adequate to allow us to manage the business efficiently until we reach cash flow positive position. Our net cash used in operations was 18.7 million an improvement of 3.4 million over the prior quarter and a 14% reduction compared to Q2 in the prior year.
Now to discuss what we expect in Q3 and fiscal 20.
We expect Q3 billings of about 36.5 million.
We now expect fiscal year 20 billings to be about $172 million.
Our billings guidance assumes the same business and operating conditions, we experienced in Q2.
We will continue in Q3 and Q4.
And we're not factoring in all the new initiatives, we have undertaken given it takes time to implement them.
And also to provide for a we provide for a low weighting factor for large deals given the unpredictability of their closing.
This approach is not to be interpreted as anything other than us being prudent in our approach to providing guidance.
We're planning on our Q3 operating expenses to be up slightly from Q2.
For the year, we expect operating expenses to be down slightly in fiscal year 19.
We plan to execute on our plan to decrease cash burn sequentially each quarter of fiscal year 20, and we expect Q3 adjusted cash used in operations of about $17.5 million and $74.5 million for the year going forward, we will manage our ongoing cash burn to achieve our cash flow positive position with the cash on hand.
Now the formal guidance for the third quarter fiscal year 20, we expect GAAP revenue to be in the range of 41, and a half to 42 and a half million. We expect non-GAAP net loss per share basic and diluted of one dollar and zero cents to $1.40 cents. This assumes 27.7 million weighted average shares outstanding basic and diluted for the full year fiscal 20, we expect GAAP revenue to be in the range of 168 to 169 million representing year over year growth of approximately 18%. We expect non-GAAP net loss per share basic and diluted a $4 in zero cents to $4.10. This assumes 2020 7.5 million weighted average shares outstanding basic and diluted and closing as we exit our quiet period, we will be participating in as many investor conferences and non deal road shows as possible as we believe there is a substantial amount of information, we like to convey to investors about our initiatives with that well.
Open up the call for questions operator.
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Our first question comes from Sangita Singh with Morgan Stanley . Your line is now open.
Hi, Thank you for taking the questions I wanted to go and ask a couple of questions on.
Go to market strategy.
So coming out of IPO I think the message that we're all hearing is that we need to move up market to larger enterprise customers and.
Thus far in the first half of the year it seems like Thats going below plan.
Well cycles are longer some issues some confusion on the competitive environment and so what I'm hearing today is what we need to go toggle back to commercial which I thought was.
Part of the issue you know coming out at the IPO. So just trying to understand.
What.
Right go to market strategy is for the products that you have because it seems like its going back and forth.
Yes so.
The we certainly have been able to keep customers happy in both segments and in the enterprise this quarter in particular, especially the bigger deals that we have in our pipeline, we've talked about our pipeline and theres real customers. There, we didnt lose any of those deals.
They mostly just taking longer than what we had hoped for but.
We have proof points in those in those segments, where we have very happy customers that are that are growing and expanding their business with us.
We've been trying to figure out how to effectively and efficiently find those new logos.
At a pace that makes sense and is predictable, but it's a good business for us and what we are saying is we've got to we probably over indexed on how fast we were trying to grow that enterprise and at the same time.
With our with our corporate business, which Bruce and I. Both mentioned is more enterprise like I think I think we've done ourselves a little bit of a disservice by drawing the definition, where we draw on it.
We have customers there that new deals are about $50000 a year.
The retention gross retention is very similar.
To our enterprise business.
It doesn't have they don't have as much upside potential as an enterprise business, which is partly why we're interested in enterprise.
And also the more enterprise customers you have the more.
Conflux your product gets in terms of not complex, but more breadth you get to your product and more if you're able to solve all the needs that are out there in the marketplace, but I think what we're saying right now is we're going to take.
A chunk of those reps and haven't focused on the lower end of the enterprise space.
And we'll still have some out there that are out there hunting the big the really big logos and continuing to do what we've been doing but we're going to take the extra resources and the new head.
And really focus them on the businesses in that one to 5 billion dollar.
Revenue range, where we've seen corporate reps.
That are pounding the phones.
That are managing their pipes and looking at numbers and looking at leads and contacts that process has worked really well and it's actually scaled up beyond a $1 billion in many cases and so since weve been seeing success, there and since our corporate businesses really successful.
More so than we thought it was going to be when we are going public we said, let's make sure that we allocate these resources appropriately and then the second piece that we talked about in Asia Pac.
In APAC was growing really well last year, and we put a lot of extra heads there and it just didnt take the weight had the way that had been performing the first three years.
The incremental dollars that we put there and it takes a while to figure out if they can perform they didnt perform so.
We're that's another area, where we're not going to continue to invest more dollars, we'll invest those dollars those incremental dollars back into the lower the lower enterprise space and to the upper corporate space.
Got it and then.
Maybe for.
Bruce.
The gross retention rates it sounds like they are improving their overall, 90% so try to put that.
The improvement in gross retention.
In context.
With the decelerating, telling SaaS billings growth was growing right around plus or minus 30% for most of your last year and now we're down to below low 10% by Q2 and yet gross retention is up can you sort of connect the dots for me. There is it just new business that's declining negative.
Just wanted to get an understanding what the what the dynamics between the renewal portfolio than the new businesses.
Yes, I mean, well first of all of the.
The high renewal rates across the board, including what we characterize as corporate approaching 90% we think is.
Very healthy side of the business very healthy sign of how much we developed the platform how our customers use it across the board.
Across every segment caused any kind of customer side. So thats really we think a very positive sign and a great foundation, the kind of continuing to kind of.
You know grow our footprint within these businesses.
But yes, the the is the new business.
Is where we've come up short.
Where we wanted to be.
And.
That's why we are.
Have all these initiatives.
That really focus on.
You know accelerating.
The adoption of a really accelerating in new business in particularly getting new customers on board.
With the number one priority given what we just said as the number one priority getting new enterprise customers onboard so.
We want to make sure we are.
Indicating that we are really deemphasizing that a price opportunity is still there, we're just being a little bit more precise and how we're segmenting segmenting and how we're going after it.
And taking some of the you know the learnings that we found them.
The smaller company and applying it to smaller enterprises, but they are still enterprises.
And I'll say what happened this quarter is.
We are so strong at the largest enterprises in the world. We're so unique in our ability to solve problems that frankly are solvable.
It's very hard to not pursue those because it's so unique.
The problem is as we found out is there just extremely comp complex institutions and we have a requirement here to grow Nevertheless, and so we will continue to pursue those.
They will be.
Transformational as we announced though they will help us.
Across every segment, but first things first.
Let's get more new customers, let's get new business accelerating those customers were still attacking them, but we're going to be a little bit more discreet and how we are targeting these segments. So that we can still achieve that but have high growth across the board at the same time and then I'll just add I think we saw that in the prepared remarks, we talked about one of the deals that slipped last quarter that we have already signed this quarter that was almost a seven figure annual deal. So as enterprise deals work. They just there.
So far they haven't worked on our timeline.
But they are there and they work and our successful.
The second thing is.
Especially in the core business.
We we've done this with decreasing marketing expense pretty meaningfully and so we weren't sure exactly how that was going to play out but you look at the numbers with corporate in particular and with a meaningful decrease in marketing expense there they figured out how to still performing and just cows and his team they've done a great job continuing to execute there and so in addition to.
A lot of new reps that we've talked about hiring this year remember, they're all still knew they havent really.
I had an opportunity to completely cure yet and get through.
The full ramp so that's out there as you know as a tailwind we think.
But seeing the performance with the with the lower marketing spend is also really encouraging and that's why we're looking at what they're doing and reallocating some of the investment.
The lower end of the enterprise space, which we think is going to behave very similar to the corporate space and then the other thing I really want to touch on I mentioned in the prepared remarks, but I don't think I can overstate.
How excited we are and how encouraged we are this is brand new data.
Literally as of as of a week ago and that is.
You mentioned, the IPO, we're going public and gosh, even a few years before we've gone public we've been talking about trying to find ways to decrease our customer acquisition costs.
And we've been looking and searching and turning over over every rock and trying to find how to do this more efficiently and effectively.
While bringing down marketing expense and we found in the data as we went through we looked at all the new logos that we signed up that there was one element that had a dramatic impact on close rates.
And that was if customers are using a plc and not just log in once but really using it.
Their close rates are dramatically multiples difference of.
Qualified opportunity that is in our pipeline, that's not using a plc with us.
So we knew was better but we didn't know it was better to the point, where tell every all the reps too.
Push everyone in the PRC, even if the customer doesn't want to get into if you will see I think we are changing our stance seem that if more multiples of better we need to do anything and everything we can to get everyone in our product because when they get in our product they converge and they convert at higher rates than industry averages.
For leads to close so that's probably the most exciting piece of news that we've seen in a long time. Unfortunately, it's only a week old and we're just really getting into that we think that at some point, that's going to make an impact as well.
Got it appreciate the comments thank you.
Thank you and our next question comes from Bhavan, Suri with William Blair and company. Your line is now open.
Hey, guys. Thanks for taking my question.
I guess I just wanted to touch first Josh maybe maybe for you.
Isn't it any change, especially in the larger businesses on the competitive environment.
Is it sort of the hey, I can use glue and snowflake and.
Red shift and other things combination potentially slowing things down is it.
That lockers out there with Google or tablets or any of that just maybe impacting anything at all do you see your and when you look at your analysis of what's happening enterprise from the delays of the slow down a long sales cycle.
I mean, it definitely impacted last quarter. It seems like it was a onetime impact.
Yes, it's because.
All those acquisitions happened at the same time and so it kind of threw a bunch of.
Just.
Questions into the air for for most of our deals and you hear about the reps that needed to have a call just to address the the Google Looker combination and other customers that Werent look Warner Google shop, but.
They were big sales were shop, and they just want to understand like what does this mean relative to tablo in our tablet mule soft.
But like we said a few times, we didn't lose any deals because of that but we did have to have phone calls and what's kind of the dust settled.
It didn't seem like it is causing any any deals to to be lost and we're better at the messaging now and its not brand new news. So other executives and our customers aren't asking the CIO or the business leader, who is buying our product what about this deal that I just read about.
But it did it did cause some confusion out there certainly what it does seem to be doing in your you you through some names out there combinations of different things some of those folks were partners with.
The PTAB lows and lookers of the world, who aren't interested in being partners with them anymore.
At least not the same way and.
That's created some real opportunities for us and as we get into those opportunities. We found that not only do we not have a partnership with someone who we wanted to have a partnership with but may have been affecting us more negatively than we had realised before that so.
We also said in the call that you expect some announcements coming out over the next few months.
We have partnerships that.
Assigned and working out details of announcements in that and that that kind of thing, where we think they're going to have a really positive impact on our ability to be successful out there in the marketplace. So definitely caused some confusion temporarily it doesn't seem like it's had any kind of material negative impact for the long haul into the country. It actually seems like it's going to help us because.
Our ecosystem is strengthening and we're getting more people in our corner.
Got it Thats helpful color I guess I want to touch one other you know when when sort of.
Jim Dean came on board and some of the idea of not ripping out an entire implementation at a large customer a large.
Good fortune 500, but saying, okay, we're not going to rip them out right away, but we're going to sit and tell them. We cannot really quickly do pieces of that architecture, they can't fully flushed out themselves.
I guess you look about strategy do you think that strategy isn't working out or do you think that strategy something it's going to take time to play out.
Obviously in the sort of commercial side, it's simpler because in many ways you don't have the complexity of the historical legacy infrastructure.
How much of that idea and that approach and it may be that that's not the way we do it I don't know just wondering how you guys are sort of thinking about that or is that that continues to at least for the enterprise why did you emphasizing its still how could just be the way to go.
After that market.
No that's not the right question for sure I mean, you go when you look at.
These these different accounts and some of the magic is when we can walk in and a customer does have a data element they want to connect to and we can literally in the conference room rate then there connect and they're looking at data that would have taken him weeks to be able to get access to any other way and it does have an impact I think one of the challenges that we've had here.
And this isn't this is this hasn't been a secret.
We've said that we've been trying to figure it out, but if you went and looked at our top customers.
Go look at our top 20 customers. It wasn't 20 case studies that were similar 20 different case studies, so going to figure out how to find what are some stories that we can tell and repeat what could we make repeatable rinse and repeat what we make more cost effective and so we've been.
Really trying to get through that finding repeatable sales play and we feel like we're in we're in a good position. We have the assets. We have customers that are starting to do the same things we have apps, where now we can go in and be prescriptive to customers. If they're interested in sales analytics, and ops or marketing analytics, and ops or finance finance and operations.
And.
But we didn't go in to those enterprises and lead with that.
And it's been.
Frustrating for us because.
Many executives that our company will go on sales calls and will either leave the sales call.
And shame on us for the rest will be leading the sales call and you get halfway through it like where is this going we don't when we don't have a point that we want to take this customer in it if it wasn't surface in that call. What they wanted to do we were not being nearly prescriptive enough. So over the last over the last several months, we've been trying to figure out sales plays to really focus in on and it was great timing because we knew John was coming and this is what he's done it adobe for the last several years and he is really good at it and so you know now taking looking at what we're doing across all customer segments, creating.
People that come from our marketing group from our lead group from.
Our our ATM group to our sales group to people in marketing to people and product and having standex twice a week for a very particular sales play. So that next time, we walk into an enterprise we walk in and we are very focused on delivering one message. This is the journey. We're taking you on this is the prescription that we're going to give to you and.
But we feel very strongly that its going to and it's just going to work on those things as fast as we possibly can.
Thank you I appreciate the color thanks, gentlemen, yes.
Thank you and our next question comes from Brad Zelnick with Credit Suisse. Your line is now open.
This is signed on for Brad.
Josh we came over from last quarter thinking the locker on W. acquisitions, well validation of your modern architecture and were even optimistic that some of the disruption in the near term could actually be an opportunity for you to gain share mattera can you actually give us some insight why are you seeing issues with closing large enterprise deals and is this geographically concentrated is this wonderfully concentrated and to what extent is just the overall environment getting tougher how about yourself.
No. The overall environment is not getting tougher for what we sell.
I think.
Those you know like we talked about the enterprise deals. It's they just didn't close and we wanted them to close we still think that many of them are going to close.
But they just pushed in that acquisition all those acquisitions, taking place at the same time.
In a matter of weeks didn't you know help in terms of having a clean environment definitely caused some questions and and conversations that needed to be had.
But I I do think that.
You know over the over the mid term over the short term even over the next few quarters.
Well it is going to be a positive impact for us because.
Not everyone feels the same about Google as they might have felt about look or independently and I'm sure. He will get some business because they have looker.
You know as well for some people that are hard core Google, but there's just a lot more.
Pieces to the ecosystem and a lot more people that were partners with looker and partners with tableau that don't feel as strongly about.
Google and sales force and so I think there's a real opportunity for us to jump in there and we're already seeing that we've already seen.
Transactions.
With with new partners that we've signed over the last quarter.
Where we're influencing deals for them. They are influencing deals for us and we think there is a lot more of that to come.
Thanks for that and I guess, one more question for Bruce Let me start that more customers are signing multiyear deals can you give us an idea on why is this happening and is the sales for sales force being incentivized for longer duration deals right now.
Well I think it is Matt nice a too.
The experience our customers are having with the platform.
It's making its much more strategic use cases that we have now at any size customer than we've ever had.
And when that's pretty clear and our customers committed.
It also means on the front and the customers are pretty much committing to the platform because they are using it at a much more strategic way and I contrast that were maybe three years ago and it's just the reporting tool.
Just replacing spreadsheets.
But now that help them run their business it helps them save time and money it helps give them inside.
And where we are collectively as an organization is getting much much better at.
Having that conversation with customers and they were off a much much better at delivering on the back end and the product of course keeps getting better and better customers are just willing to sign up to multi year deals.
And we are finding that at every site customer even at the small companies, which we find again.
Very interesting is small companies don't tend to do that.
Yes, there is an incentive for our reps to do that.
No probably even less so than what weve seen had in prior years.
Less so, but we're still seeing an increase in the multi year deals. So I think it's more driven by the way our customers using the product and how we're talking to about the U.S.
That is about any kind of incentive plan and.
We think it's going to continue and we also think there is still upside to the retention rates just because as companies are probably more strategically we're going to keep it longer as well.
Thank you.
Thank you.
And our next question comes from Pat Walravens with JMP Securities. Your line is now open.
Hi, This is Joe good went on for Pat.
Just quick question from US given the message is tough right now should you really be cutting back on marketing spending and then I've a follow up.
Should we be cutting back on marketing spending no I think we're still encouraged by the opportunity that's there for us.
Hopefully this will be this is a kind of one quarter mobile here.
We are going to be cautious about what we do but we feel like we've been cutting the marketing expense back and getting becoming as efficient as possible.
And we're definitely continuing to refine and reroute and look for the most efficient way to spend that money as possible.
But.
With the sales plays that we have coming.
That shouldn't increased marketing expense.
With the opportunity I think the real opportunity, though is what I talked about.
Not worrying so much about the top of the funnel, but once they are in the funnel what can we do to convert them more effectively and that's that data that's new.
Instead of.
When you look at the whole conversion funnel, obviously, our cost customer acquisition costs have been higher than industry average, but if you look at the segment of customers that are in a PEO see where they are using the product that segment of customers and that conversion funnel converts at higher than industry averages. So we need to do everything we can to focus on that and Thats, where the focus is going to be over the next few months certainly in a very meaningful and and massive way internally.
Understood and then.
What is the what does the new way of explaining what you do you where do you where do you where do you guys say you fit into this digital transformation of these companies.
Yes, so we're still refining it and we'll roll it out.
And kind of make sure that everyone is aware of it will be reflective on our website et cetera, but the quick messages everybody's out there looking for digital transformation everyone's talking about it everyone is trying to figure out what's my digital relationship with my customer with my employee and how can I get digital productivity increases and everyone gets that part of that is going to be with the cloud, but CIO is look around and you go talk to thousands of CIO isn't there, saying I'm looking around I've got.
Hundreds of different cloud platforms, and I know I need is the cloud because of more efficient it's more scalable it's easier to manage but I got 100, plus different cloud vendors in here, so I want to get that down to.
A handful of cloud platforms, and so you're seeing people standardize on on companies like Officethree hundred 65, and Salesforce and Workday service now Adobe marketing cloud, but then you look at those platforms, which one of those platforms helps you make money off all the data you have in your organization, which one of those platforms gets data in every employee is hands.
Well, there isn't one and Thats, what we do and we do it three ways.
We do it by doing three things I should say first we help you connect and transform your data and you know lot of people probably recognize me will soft to know about that acquisition.
But we built this from the ground up have over 1000 connectors and we built it with the next step in mind.
So then you take that data and we don't care, where you put it you pull any of the public cloud you can put it it's no Blake.
You can store behind your own firewall or we can manage it for you, but the second thing we do once you connected and transform that data. It will help you visualize and analyze that data and everyone's probably heard of tableau.
When were like tableau in that area, except we're in the cloud we're much more scalable it automatically connected to the first piece that we talked about and we have customers where.
Before they were using tableau. They can only look at 20 million rows of data that they start using us and they can look at over 100 billion rows of data before they were using tableau. They hadnt L.A. and they might have had 200 or 300 users that were actually using the product they use us they get an email a six months later they have over 10000 active users using the product and so it's just very different and once you do step one and step. Two then you get the payoff and the payoff is now you can get an app framework in apps that have machine learning and AI automatically built into them and then we can take our customer through these demos of applications that are being used as some of the largest organizations and the delivering that data to employees hands and being able to do significant things that they would not be able to do any other way unless there were getting custom software application and spending fives or tens of millions of dollars or they can just come by domo and they have access to all the data.
Because we connect and transform it visualize and analyze it and we provide this app framework. So that's the piece that we do and then right on the heels of that.
You follow up with the sales play and you talk to them based on what you know about them before you walked into the room and you talk to them about sales operations and analytics or marketing operations and analytics, because you know that customer and you know what theyre looking for and then you take them into appeal see because guess what if we get you and you'll see we're going to close a higher than average industry average for anybody in a conversion funnel. So that's.
Dramatically different than where we were three months ago.
I wish we'd have figured that out two years ago five years ago.
But we have figured it out and we're really excited about seeing what it does to our business.
Thank you.
Thank you and our next question comes from Derrick Wood with Cowen and company. Your line is now open.
Thanks first question. So you guys had been through a full quarter of the change in the pricing strategy do you think that spent disruptive.
Maybe could you just talk about the puts and takes and how that rollout has gone from an internal standpoint, and just an external customer reception and do you think that that's the right product pricing strategy for the corporate segment.
Yes. It is the bright pricing strategy I mean, a big part of what we're trying to do there is get the product into more people's hands. So it's been.
We are tentative first because you don't want to go and disrupt the business in the script pipeline et cetera.
But we've we've been able to roll it out in a meaningful way with with enough customers that we know that it's working and it's helping us get in some cases larger deals than we were getting before.
In almost all cases at least what we are getting before but in addition to that.
We have a lot more users using the product because as we discovered also in the PEO sees the more people using the product the higher retention is going to be the more likely they are going to buy the product the more likely they are gonna buy more product down the road and that's the real thing that we were trying to accomplish with the pricing.
It was just getting higher adoption rates and having more opportunity to sell additional products down the road and increasing the the the pace that we can get upsells.
Okay. So that's still the plan going forward.
Sure.
And second question could you give a sense of where you are in terms of your sales rep hiring goals and.
What we should expect for the rest of the year.
And I guess can you remind us what what a sales cycle looks like and the.
Corporate customer versus what it is with the enterprise opportunity.
Sure well we.
Phil are firm believers and you have to have feet on the street. So were continuing to hire them we are.
Allocating more toward the smaller enterprise and corporate.
And Thats, because we think we can get traction so much quicker.
We we will also feed enterprise as we see fit but.
The same pace of hiring.
That we have been doing and we're going to continue to do that because we really do think that we can turn that into.
Proto productive salespeople.
Quickly start contributing to grow the sooner we get them on board.
On sales cycle, the corporate has been in the really the 50 to 60 day range. So.
Very fast a lot of business that we get there.
In the quarter.
Again pointing to.
The math works better if you put them out in the short term math works better if you put some resources there sooner rather later and the early indications are that it also works in the smaller enterprises.
So thats, where we are and that's one of the reasons why we're focusing there as well and and as we've also found out it doesn't have to be a very large customer to get a very large deal.
I mean, we can get three four or $500000 deals out of the corporate segment.
We don't know that we can get the 10 million dollar deal out there that we get out of the Mega enterprise.
Again, thats very attractive to us because we can do with nobody else can do so why don't we just build a portfolio. That's very balanced here that de risks every segment that gives us a better shot at getting growth short term and long term and that's kind of what the play is right now.
Okay. Thank you.
Thank you.
And our next question comes from Jennifer Lowe with you.
Your line is now open.
Great. Thank you.
Maybe the first question for me is.
You know looking at at sort of the conservative or the down tick in spending on marketing it seemed like that was.
More focused on the corporate business, which also can see the better performing.
Is there a chance that that could have been in any way responsible for some of the challenges you saw on the enterprise side. It seems like there are other challenges there too but I'm.
Is there any sort of risk that the constraint on sales and marketing expenditures is also contributing to some of the challenges you saw in the quarter.
Well on the.
No. We don't think so the biggest deals in the enterprise just happened to be with current customers. That's why we're still confident they will close thats why we have a lot of visibility into them and we know it's not competitive it's more internal operations.
So it certainly could not have affected that.
Our our our basic observation and assessment as we focused on a lot of the very interesting opportunities that current customers just because they were large and significant had significant impacts on these customers. So we focused on it.
And.
We the other side of the coin is with more resources, but there is less put on.
Going after kind of new business, so it's less of.
A function of the marketing spend the more a function of the focus having said that what we are doing is we are putting the focus back on it so let's.
If we can run plays right at the enterprise.
With simpler messaging with very very tight focus very focused effort that we think every rep can actually learn from and do.
And take 1800 use cases or bring it down to four.
Just for now to get new customers, we think that that's the right approach it will require some marketing spending to do so.
We think we have enough.
It doesn't have to change substantially but I think the focus is what will really yield great results not so much upping our downing spending.
Okay, and then just to just circle back on the guide when we're going through and looking at at the billings guidance it seems to imply.
Pretty sharp drop off on a new idea activity and I know on the.
Our prepared remarks, you said it assumes no change to the conditions that you saw in this quarter, but.
I guess.
Hard to what exactly that means is the assumption that somebody pushed out deals landing Q3 based on sort of similar.
Push out or sorry in Q.
Land, but some of the things get pushed out further or anything like that or is it just everything keeps pushing it definitely can you just be a bit more specific around what exactly you mean by current conditions persist.
Yes, well, let me start with a general comment I'm like you guys. You give me one data point I extrapolate.
So I'm extrapolating and saying what that would have what I'm, saying right. This minute.
Exist forever, and Thats, the guidance and Thats totally probably unrealistic, but I think extremely prudent.
And with that means is because the big deals going to close the they are going to close.
That's not realistic, but thats kind of the way the guidances.
And the way we saw conversion work in the pipeline.
They are going to happen again.
Which I think is probably a little bit unrealistic, but I think it's safe for the moment. So that's that's what we're saying, we're just saying that the rest of our future is where we just saw from a guidance point of view and that's why I made the comment. Please don't please don't over read that to mean anything more about the business of the them extrapolating one data point out a long way and I'm just being very clear to you that's what I'm doing and we certainly don't.
Don't want it to play out that way by any means but that's what we think we should do right now.
Okay, great. Thank you.
Thank you.
A reminder, ladies and gentlemen that Star then one to ask a question.
Our next question comes from Jack Andrews with Needham and company. Your line is now open.
Hi, Good afternoon. Thanks for taking my question, Josh I wanted to ask you I guess, where do you think you are in terms of finding coding a killer app or a killer use case.
For Docomo I mean, do you think it's.
More on the platform side do you think it could be you know vertical use cases, I mean are there is there enough sort of customer behavior that you are starting to coalesce around some particular themes that would drive towards this repeatable sales process.
Yes, I think we're pretty close.
With the.
And Thats why were restarting run these sales plays.
I don't feel like we're guessing with sales plays we're looking at information from customers.
We're seeing similar behaviors.
And not only releasing similarly, similar behaviors, we're seeing similar solutions that we're offering up to them to fulfill their needs and when we started seeing the similar similarities in the solutions that we were providing to them. That's when we started saying okay. Here is something that we can go be little more prescriptive about and we can walk into a customer and instead of them guiding us. We can say hey, we can guide you hear you guys want to do something in and in marketing analytics, Here's exactly what you should do this will get you 90% of the way there and then you can you know it's a platform. It can do anything you want to after that.
But that gets you started once these customers get started on normal and then it seems to take on a life of their own. We just had a heck of a time figuring out that initial starting point.
So I feel like we do we are getting close to identifying what those were those killer apps can be and not only that we have the the muscle memory, that's getting developed now.
And this and the motions that we can go through with with with John leading that team with all the senior sales leaders being on board.
With some things that we.
Brought to market recently also for not just sales plays but also some overlay teams.
Associate is a specialized teams associated with things like with like data science like double everywhere, we've been having a tremendous amount of success.
And so we've been running these experiments weve been finding solutions that are working and now its product pricing and operationalizing that process. It feels it feels really close and I haven't said that before.
It does feel really close.
Okay. I appreciate your comments there just as a follow up you talked about expanding focus on self service capabilities. I was wondering what would sort of use cases do you envision.
Falling out of that initiative.
Yes, so what I mean by that is just.
Being able to do it but do a bunch of Pcs we.
A little over two years ago kind of created our first premium product.
And we we were proud of the fact that basically over that next year. We finally got to the point, where someone can go to our website and they can sign up for Docomo and do a free trial and they don't have to talk to anybody and they can connect and.
Put in put in billions of rows of data and connect to.
50 different data sources and build out all these cards and out of these users. They can do it on their own is self service.
And I guess the reason that we're calling out that word is when we do a bunch more ptcs. It doesn't necessarily mean that we're going to have a ton of a kind of man hours associated with each one of those it's just building the processes around that very first call you have with the customer okay. I'm glad you're interested I'd like I'd like to get you in touch with our sales executive Julie and when you get on the phone with Julie.
She'll take your call, but you need to be prepared to jump into a plc. After that because that's part of the the interaction that youre going to have with US. It's all about the PRC here. We can talk to you two are blue in the face, but youre not going understand to use the product so setting it up that way in the very first called the ATM and then Julie gets on the phone and she's like yeah, well come on site, but we need to make sure that right identifying who is going to help us out with his plc, who internally on your side is going to do the plc. The self service plc will be here to guide you on hold your hand and gets you.
We will take up the training those at the appropriate time, but we're going to make sure that everyone is geared towards thinking about those policies. Because we just found out that we have a multiple better.
Conversion rate when you do up you will see an actively use it compared to when you don't do a PSC at all or are you barely use it.
So that's just data we didnt have we thought it might be like a 25% increase if you do a plc, it's dramatically different than that and so we need to be very focused on that as a company.
Great appreciate the color. Thanks for taking my questions you bet. Thanks for the question.
Thank you I'm not showing any further questions. At this time. This concludes today's question and answer session.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude todays program and you may all disconnect everyone have a wonderful day.