Economy Processed transcript of the conference call or presentation on...

Processed transcript of the conference call or presentation on the AYX.N result 13-Feb-20, 22:00 GMT

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IRVINE February 14, 2020 (Thomson StreetEvents) – Released minutes of the conference call or presentation of Alteryx Inc results Thursday, February 13, 2020, 10:00 PM GMT

* Christopher M. Lal

Alteryx, Inc. – Chief Legal Officer

* Dean A. Stoecker

Alteryx, Inc. – Co-Founder, Chairman and CEO

Alteryx, Inc. – CFO

* David A. Griffin

Guggenheim Securities, LLC, Research Department – Director of Technology, Media & Telecommunications and Analyst

Oppenheimer & Co. Inc., Research Department – MD

Raymond James & Associates, Inc., Research Division – General Manager of Equity Research & Infrastructure Software Analyst

THERE. Davidson & Co., Research Department – Senior VP & Senior Research Analyst

Best regards. Welcome to Alteryx’s fourth quarter and full year 2019 financial results. (Operating Instructions) Please note that this conference is being recorded.

At this point, I will hand over the conference to Chris Lal from Investor Relations. Please continue.

Christopher M. Lal, Alteryx, Inc. – Chief Legal Officer [2]

Thank you very much, operator.

Hello and thank you for coming to us today to review Alteryx’s fourth quarter and full year 2019 financial results.

With me on the call today are Dean Stoecker, Chairman and Chief Executive Officer; and Kevin Rubin, CFO.

During this request, we can make statements about our business that are forward-looking statements within the meaning of the Federal Securities Act. These statements are not guarantees of future performance, but are subject to a number of risks and uncertainties. Our actual results may differ materially from expectations, which are reflected in forward-looking statements. A discussion of the material risks and other important factors that could affect our actual results can be found in our SEC filings, which are available in the EDGAR system of the SEC and on our website, as well as in the risks and other important factors described in today’s publication of the results were discussed. In addition, non-GAAP financial measures are discussed in this conference call. In the tables in our profit announcement and in the “Investors” section of our website, you will find a reconciliation of these metrics to their most comparable GAAP financial measure.

I would like to forward the call to our Chief Executive Officer Dean Stoecker. Dean?

Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman and CEO [3]

Thanks, Chris.

Alteryx had a strong year with remarkable growth, supported by both favorable market trends and excellent execution. Today’s call will give you an overview of these results and the key factors that triggered them, as well as additional color for key trends that we believe will benefit Alteryx in 2020 and beyond. Kevin will then explain our fourth quarter and 2019 financial performance as well as our outlook for 2020 as a whole.

We have raised the bar again and set many new records in 2019. We had record fourth quarter sales of $ 156.5 million, an increase of 75% over the previous year. We booked a total contract value of approximately $ 290 million, an 81% increase over the previous year. Generated an operating margin of 33% and a positive operating cash flow of $ 21 million. The net expansion remains strong at 130%. We have added 474 net new customers, including 36 of the Global 2000, and now have approximately 6,100 customers, including 36% of the Global 2000. Some notable fourth quarter 2000 countries include: Caesars Entertainment; Canadian Pacific Railway; Emerson Electric; Halliburton; Komatsu; and NASDAQ.

For 2019 as a whole, we saw sales increase 65% year over year to $ 418 million and the total contract value grew 70% to approximately $ 600 million. In addition, we won almost 1,400 net new customers and achieved positive operating margins of 18%. Finally, we generated positive cash flow from operating activities of $ 34 million. The strength of the quarter was due to both strong global execution and continued favorable market trends.

To compete or even win in this data-driven world, global companies must either disrupt themselves or be disrupted by others. It requires a redesign that values ​​data as assets and analyzes as performance. This is not achieved by using established technologies and existing processes that have made them great in the first place. In our view, this cannot be achieved by recommending the analysis only to trained statisticians working on marginal cases, even with the best AI and ML skills. This can only be achieved effectively by leveraging the network effects of people, data and technologies that enable companies to build a culture of data science and analysis that adds value in all functional areas of the company. We believe this can best be achieved with a human-centered platform that is code-free and code-friendly, that frees thought, enables creativity, and tracks analytics to address hundreds of use cases in any company. We believe that this next wave of digital transformation efforts by global organizations will help drive our growth in the coming years.

In the last quarter, we discussed the convergence of analytical personas that we believe are a positive trend favoring Alteryx. We have long spoken about the two main analytical personalities: the 47 million citizen data scientists who work in the industry and have limited or no analytical training; and the 2 million data scientists with extensive quantitative and coding expertise. The boundaries between these two categories continue to blur as citizen data scientists raise the bar to meet today’s business challenges through more sophisticated analysis, and data scientists are looking for more efficient ways to create automated data pipelines are driving their models. With our strong net expansion rates that bring us closer to IT over time, a third person showed up. These are the data engineers who normally do a lot of data work for IT.

Over time, these three people transform into a category of workers that drive significant business change and, according to PwC’s latest global Artificial Intelligence study, unlock the $ 15 trillion value currently in data in companies around the world is saved. We believe this convergence will accelerate further in the coming years due to thoughtful leadership in large global organizations and will benefit Alteryx. We believe that our platform is well suited to deliver tremendous business value to these analytical people.

As a reminder, you can identify the hundreds of use cases where this value is found at community.alteryx.com. You will find examples such as British American Tobacco, which expanded their presence at Alteryx with servers last year and generated a return of $ 9 million in just one year by automating analysis processes.

We also believe that another positive movement is underway, namely hyperfocused and automated data pipelines, intelligent algorithms and business processes. Previously, these were discrete processes that were performed by multiple tools from multiple vendors with multiple employees in multiple departments. We have long said that Alteryx has not changed the analysis process. We simply unified the experience in a consistent, user-friendly platform.

With the beginning of the era of digital transformation 2.0, the focus shifts from simply improving efficiency to improving results. You can achieve better results by combining human imagination and ingenuity, the power of data and the speed of modern computing. Every day, Alteryx expands human intelligence and businesses around the world, which in turn delivers better results for our customers.

For example, a major global bank has set up an Alteryx Competence Center as part of its digital transformation efforts and is achieving a significant ROI, with each designer’s seat saving 400 hours per employee per year. They optimize millions of square meters of office space, enable better cost control and drive the replacement of expensive older analysis solutions. Enormous efficiency gains are achieved at lower overall costs.

In the last quarter, we also talked about our expanding ecosystem. We are pleased to recognize PwC as our first global elite partner and are working closely with them to accelerate digital transformation throughout the global year 2000. PwC will advise customers on defining strategies and governance for their automation program and develop solutions on the Alteryx platform through practical, business-oriented training, process evaluation, data design and a variety of other means. In this way, PwC helps customers in various industries get an introduction to the practice of automation, analysis and transformation, and enables them to solve complex data processing problems with the Alteryx platform. We are excited about the strategic relationship with PwC to accelerate digital transformation throughout the global year 2000. They are uniquely equipped to help customers leverage the full capabilities of analytics, data science and process automation with the Alteryx platform.

As the leading independent end-to-end platform for data science and analysis in today’s market, we have a unique value proposition for a variety of partners, including independent software providers, large system integrators, and global consulting and analysis consultants. Given the diverse growth opportunities available to us, we plan to continue investing in our platform and launch model to take advantage of the significant opportunities ahead. We have the right team and platform to scale Alteryx for many years to come.

Regarding the right team, I would like to thank the expanded Alteryx community, our customers, our partners and all our employees around the world for making 2019 a great success. As we have long said, analytics is a social experience and we are all better together.

So let me call Kevin to discuss our fourth quarter and full year 2019 financial performance and outlook for 2020. Kevin?

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Kevin Rubin, Alteryx, Inc. – CFO [4]

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Thanks, Dean.

As Dean mentioned at the start of the call, the fourth quarter was a strong end to 2019. Fourth quarter sales were $ 156.5 million, an increase of 75% over the previous year, and the net expansion remains strong at 130%. The increase in sales in the fourth quarter was due to the following factors: First, we had another quarter with strong execution. As previously mentioned, our fourth quarter bookings grew 81% year over year. Second, we’ve completed a record number of large deals, with growth of over 150% for deals over USD 1 million and an increase of over 80% for deals over USD 500,000. Third, we have seen a modest sequential extension of the contract period. For the full year 2019, our average contract duration was exactly 2.0 years.

I would like to remind investors once again how our income is calculated under ASC 606. Revenue is determined based on the total number of bookings in the period, the total order value or the TCV. As a reminder, we usually have 1 or 3 year contracts with our customers. TCV includes the full dollar value of multi-year contracts. From our TCV booked in the quarter, we collect between 35% and 40% of this amount in advance. The percentage recognized in advance is based solely on the product mix.

Sales of our designer product tended towards the lower end of the range, while sales of Server, Connect and Promotion tended towards the upper end. As we experience more company-wide deployments that include servers, connect and / or promotions, our percentage tends to advance to the top of the range. We record sales at the later point in time when the contract is signed or the contract begins. As we discussed in previous earnings calls, it is important to consider this factor as we have a number of renewal contracts that expire on December 31st but will be renewed on January 1st. This dynamic leads to TCV bookings in the fourth quarter that are not translated. This impact was also noticeable last year.

Finally, sales include recording the proportionate portion of our bookings. Fourth quarter international sales were $ 45.9 million, an increase of 84% year over year as we continue to benefit from strong global demand for analytics. Of our 719 Global 2000 customers, approximately half are non-U. S. based. This confirms our continued investment in our global launch and support organizations.

We added 474 net new customers in the fourth quarter and now have a total of 6,087 customers, including 719 or 36% of the global year 2000. Notable customers who did business with Alteryx in the fourth quarter included: Chevron Corporation; Federal National Mortgage Association, Fannie Mae; Salesforce.com; Splunk, Inc .; Ulta Beauty; and Xerox Corporation.

Before continuing, I would like to remind everyone that unless otherwise stated, I will be discussing non-GAAP results. Our press release provides a complete reconciliation of GAAP to non-GAAP results.

Our fourth quarter gross margin was 93%, which is consistent with the fourth quarter of 2018. The gross margin was positively impacted by our strong sales performance in the fourth quarter. Our fourth quarter operating expenses were $ 94.8 million, compared to $ 56.7 million in the same period last year. The year-over-year increase in operating expenses was mainly due to additional employees and other investments in scaling our global business.

Our fourth quarter operating income was $ 51 million, or an operating margin of 33%. Net income was $ 44.2 million, or $ 0.64 per share, based on 69 million non-diluted, fully diluted weighted average outstanding non-GAAP shares. Our net result assumes a non-GAAP effective tax rate of 20%.

Briefly summarize the results for the full year. Revenue was $ 418 million, an increase of 65% over the previous year. The gross margin for 2019 was 92% in line with 2018. Operating expenses for the year were $ 309 million compared to $ 184 million in the same period last year. Operating income for the full year was $ 75 million, or an operating margin of 18%. Net income was $ 65 million, or $ 0.94 per share, based on 68.7 million non-GAAP fully diluted weighted average outstanding shares.

Let us now turn to the GAAP balance sheet. As of December 31, we had cash, short-term and long-term investments of $ 975 million compared to $ 986 million at the end of the third quarter of 2019. Cash and cash equivalents as of December 31 reflect those paid for the feature purchase cash against labs that closed in October.

Finally, we ended the quarter with 1,291 employees, compared to 1,176 employees at the end of the third quarter of 2019 and 817 employees at the end of the fourth quarter of 2018. Our increase in the number of employees reflects the pace of the investments that we are making and are expected to continue using to use the sensible opportunity that we see worldwide.

Let us now turn to the leadership. Reminder: Please note that our guidelines assume the following: The average term of our subscription contracts is 2 years and corresponds to the status of 2019. Approximately 35% to 40% of our TCV booked in the quarter are recognized in advance. The rest is prorated over the contract term accepted. The quarterly sales seasonality will match what we experienced in 2019. Investments of approximately $ 45 million, including the cost of expanding our new headquarters and additional offices worldwide. No significant changes in the overall economic conditions.

For the first quarter of 2020, we expect GAAP sales to range between $ 105 million and $ 108 million, an increase of approximately 38 percent to 42 percent year over year. We expect a non-GAAP operating loss in the range of $ 6 to $ 9 million and a non-GAAP net loss per share (basic and diluted) of $ 0.07 to $ 0.11. This requires 66 million non-GAAP weighted average outstanding, basic and diluted shares.

For 2020 as a whole, we expect GAAP sales to range between $ 555 million and $ 565 million, an increase of approximately 33 percent to 35 percent year over year. We expect non-GAAP operating income to be in the range of $ 71 to $ 81 million and net non-GAAP earnings per diluted share of $ 0.80 to $ 0.91. This requires 71.5 million fully diluted weighted average non-GAAP shares outstanding and an effective tax rate of 20%.

And with that we open the call for the questions. Operator?

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questions and answers

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operator [1]

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(Instruction manual) And our first question comes from Brent Bracelin with Piper Sandler.

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Brent Alan Bracelin, Piper Sandler & Co., Research Department – MD & Senior Research Analyst [2]

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I will start with Dean and then I will have a follow up for Kevin. Dean, can you provide additional colors for wider Alteryx engagement with some of these larger global SIs? I know you announced the strategic alliance with PwC last week, but our reviews also show a fairly healthy commitment to Accenture, IBM, and Deloitte. I think the question here is why do you see these big global SIs broader? What are the drivers and why now?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman and CEO [3]

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Thanks for the question, Brent. I think there are a couple of vectors that somehow appear here at the same time. I think the quarter and year were mostly characterized by improved execution by the company. We have spent quite a bit of time on our top-down sales movement, and I think that is reflected in the strategic alliances that we have entered into in executing the G2Ks we have set up.

The second thing, I think, that drives this is all the factors that come under the roof of what we have recently called Digital Transformation 2.0. I think in the decade between 2010 and 2020, a lot of money was spent on digital transformation, a lot of things weren’t going well. Most organizations saw no success or at least no sustainable success. And for various reasons. Many companies had an outward-looking approach and thought they could digitally transform others before they digitally transform, a sort of sell-out of people in their digital transformation efforts, and probably an excessive reliance on machines.

And I think that has changed completely. We are now seeing an inside-out approach, we see the demands on data workers’ skills, the inclusion of people in the mix, which means that they have to have a human-focused platform at their disposal, and we believe that we can doing this is the best human-centered platform.

And the emergence of CDOs or their representatives, which we have been talking about in these calls for more than a year. And these people in the organizations see and understand this network effect of people, data, technologies and processes in organizations. And it turns out that the global analytical consulting firms and the Big 4 are gradually realizing that the digital transformation must take place from the inside out. We see that these companies are focusing more on automation, and that they are focusing more on the convergence between the people who are important for digital success, such as the convergence of the Citizen Data Scientist, the trained statistician and this new profile The data engineer has always had a sequel that was largely closer to IT. And as we work with more companies in a net expansion model – or with a net expansion number of 130 – data engineers will arrive more and more often.

We also talked about the other factor that is extremely important, and that is the fact that analytics is a social experience and is at the heart of digital transformation. So community is extremely important. And that is exactly what drives this construction of the ecosystem that we have run, and the time is now. We see how Digital Transformation 2.0 is received in an extraordinary way.

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Brent Alan Bracelin, Piper Sandler & Co., Research Department – MD & Senior Research Analyst [4]

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Helpful color there. It sounds like we need to spend a little more time understanding what is happening there, but certainly interesting. Kevin, just for you here at RPO, we now have the first year-over-year growth metric that was over 80%, which is slightly higher than – quite a bit higher than I expected. Can you help us understand the puts and takes when you think about this really strong RPO number versus duration? Or other factors that may be driving this beyond the company’s true growth rate?

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Kevin Rubin, Alteryx, Inc. – CFO [5]

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Yes, thanks, Brent. So a couple of things. I think if you look at the RPO growth rate, it was obviously very consistent with the growth rate for bookings. And you would expect them to be somewhat similar. As I mentioned in our prepared remarks, we saw a slight increase in duration in the quarter. And I also shared a similar set of colors in the third quarter. Therefore, the duration was generally a cheap part of our bookings. And then I probably made it clear with regard to – for 2019 the average duration was exactly 2.0.

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operator [6]

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Our next question comes from Brad Sills with BofA Securities.

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Bradley Hartwell Sills, BofA Merrill Lynch, Research Department – VP [7]

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Big. I wanted to ask about the net dollar-based expansion, the number of 130% has held up very well in this area of ​​130%, over 130%. How much does Connect and Promote now contribute to this metric? Is it getting in more and more? I think is there a color for how these 2 and the cross-selling movement went there other than Connect and Promot?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman and CEO [8]

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To date, Brad, Connect and Promote has had very little impact. I think we – at the time of the acquisitions and product launches – and we indicated that it will take some time before we start to see any impact on them. I would imagine that if we continue to get global consulting firms to make digital transformation efforts that may increase in the future.

It’s still unknown, much of the expansion is still with designers. We start to focus on automation and drive more servers as we become part of the analytical structure of large global companies. I will say that the talks about Connect and Promot are the end caps for the platform to continue to increase. They happen earlier. However, the digital journeys that businesses build usually start with the same ones that we’ve always had. It’s a couple of places for designers, it’s $ 10,000 or $ 12,000, it’s 45 days, and you get 20 designers, you get a server.

And at some point there is a turning point when people decide that they don’t want to lose sight of the assets created by this new class of scientists, the civil scientists. This is how Connect comes into the picture. And if our thesis is true a long time ago when we bought Yhat, all of these civic scientists will eventually develop machine learning algorithms, and deployment will be critical.

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Bradley Hartwell Sills, BofA Merrill Lynch, Research Department – VP [9]

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That’s great. Very helpful. And then I wanted to ask one last thing about this new person, the data engineer. If you could go a little closer to what drives this? Why now? What was different in their needs than the data scientists and the civil scientists?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman and CEO [10]

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Well, I think if you think back to record, depth, and IT systems, scientists usually need access to records to drive algorithmic processes, and they usually rely on data engineers to do the job. RIGHT and SQL typically use SSIS, other types of functions that require encoding. And I think companies are beginning to realize that these data engineers, I believe, are turning into DevOps. People are becoming a really critical component in making digital transformation a success faster, rather than the convergence between the citizen and the trained statistician, I think it will accelerate with the advent of data engineers.

Yes. And let’s not forget that. Digital – A core component of digital transformation is the need for companies to view data as an asset and analytics as a competence. These data engineers typically understand data as an asset first. And so they will be able to help doctoral students be more productive, and they will help scientists to learn more about data as an asset for citizen data.

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operator [11]

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Our next question comes from Tyler Radke with Citi.

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Tyler Maverick Radke, Citigroup Inc, Research Department – Senior Associate [12]

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Ich entschuldige mich, wenn ich früher einen Kommentar dazu verpasst habe, aber ich wollte ein paar Dinge ansprechen. Erstens, Dean, scheint es, als hätten Sie in der Vergangenheit und auf den jüngsten Investorenkonferenzen viel mehr über digitale Transformation und Automatisierung als über Daten und Analysen gesprochen. Ich bin gespannt, ob dies auf eine Änderung der Anwendungsfälle zurückzuführen ist, die Sie bei Ihrem Kunden sehen.

Und dann wäre ich natürlich neugierig auf die Änderung zu Beginn des Jahres, um den Preis für Alteryx Server zu erhöhen. Ich bin neugierig, ob dies ein Spiegelbild einiger der ausgereifteren Anwendungsfälle war, die Sie gesehen haben, und vielleicht helfen Sie uns nur, die Puts und Takes davon zu verstehen. Und dann vielleicht, Kevin, wenn Sie uns helfen möchten, die finanziellen Rahmenbedingungen im Hinblick auf die Auswirkungen auf 2020 zu verstehen, die die Preiserhöhung haben könnte.

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Dean A. Stoecker, Alteryx, Inc. – Mitbegründer, Vorsitzender und CEO [13]

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Gute Frage. Ich bin der festen Überzeugung, dass der Fokus auf Automatisierung alles mit dem Erfolg in den Bereichen Data Science und Analytics zu tun hat. Ich denke, Unternehmen beginnen zu erkennen, dass die Automatisierung von Prozessen, die jetzt problemlos von mehr Mitarbeitern in allen Funktionsbereichen von Organisationen erstellt werden können, so viel Wert hat, dass sie nicht darauf warten, dass Analysten jeden Morgen um 8 Uhr die Go-Taste drücken : 00 oder 22 Uhr oder was auch immer es ist, um ihre Berichte und Analysen sowie KPIs und Dashboards und Modelle zu erstellen, diese Automatisierung ist entscheidend. Das ist also die Bestätigung, dass wir tatsächlich die menschliche Intelligenz verstärkt und die Fähigkeiten in die Hände von mehr Menschen gelegt haben.

Und der zweite Teil Ihrer Frage ist, warum der Preis steigt. Ich denke zur Veranschaulichung, wenn Sie durch community.alteryx.com gehen. Sie werden unzählige Anwendungsfälle und Kunden sehen, die über den Wert schreiben, den sie erhalten haben, ähnlich wie das Beispiel .bat, das 9 Millionen US-Dollar für die Automatisierung selbst routinemäßiger Prozesse einbringt. Wir sind uns nicht sicher, wie sich dies auswirken wird, aber wir sehen, dass wir mit unserem Server-Produkt einen echten Mehrwert für die Kunden schaffen und dass die Preisimplementierung tatsächlich hier im ersten Quartal stattgefunden hat.

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Tyler Maverick Radke, Citigroup Inc, Forschungsabteilung – Senior Associate [14]

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Big. Und vielleicht, wenn ich Kevin um ein Follow-up bitten könnte. Sie haben hier also über das sehr starke Buchungswachstum im vierten Quartal gesprochen. Wir haben offensichtlich ein Umsatzwachstum von 75%. Und ich schätze die Granularität für die Dauer von 2,0, aber vielleicht – können Sie uns helfen, zu verstehen, wie lange die Granularität vor einem Jahr war? Und es gibt nur eine Möglichkeit, über ein an die Duration angepasstes oder annualisiertes Buchungswachstum für das gesamte Jahr 2019 nachzudenken, um die Auswirkungen der Duration auf das gesamte Buchungswachstum zu verstehen.

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Dean A. Stoecker, Alteryx, Inc. – Mitbegründer, Vorsitzender und CEO [15]

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Yes. Danke, Tyler. Wir haben uns also unterhalten, während wir uns auf den Börsengang vorbereiteten und Gespräche führten, dass die durchschnittliche Vertragsdauer 2 Jahre betrug. Das ist natürlich ein Durchschnitt. Wir dachten daher, es wäre hilfreich, für 2019 etwas mehr Präzision bereitzustellen. Aber ich denke, der Punkt ist, dass unsere durchschnittliche Dauer bereits 2016 noch in diesem Bereich lag. Jetzt haben wir in der zweiten Jahreshälfte 2019 eine gewisse Verbesserung festgestellt. Aber nicht in dem Maße, wie dies tatsächlich die Durchschnittswerte beeinflusste. Ich denke auf jeden Fall, dass dies zumindest die Stabilität der Kundenentscheidung über die Dauer veranschaulicht, die wir über 3 oder 4 Jahre gesehen haben.

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Kevin Rubin, Alteryx, Inc. – CFO [16]

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Lassen Sie mich auch hinzufügen, dass es ein erwarteter Effekt ist, ein kritischer Bestandteil ihres Analyserahmens in Organisationen zu werden. Sie können davon ausgehen, dass sie immer mehr Wert darauf legen, sich für längerfristige Geschäfte anzumelden. Again, affirmation that strategy we’ve put together for many, many years now is paying off in space.

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Tyler Maverick Radke, Citigroup Inc, Research Division – Senior Associate [17]

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And Kevin, sorry, just to jump in real quick. So the 2.0, is that a kind of total contract duration of everything on the books? Or was that — is that a bookings duration for the renewals and new deals signed in Q4?

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Kevin Rubin, Alteryx, Inc. – CFO [18]

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No, that’s an average for the whole business.

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Operator [19]

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Our next question is from the line of Derrick Wood with Cowen & Company. Big.

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James Derrick Wood, Cowen and Company, LLC, Research Division – MD & Senior Software Analyst [20]

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I guess, I’ll pick up on that topic. So the spread Kevin, between reported revenue growth and reported billings growth has really expanded in Q3 and more in Q4. Sounds like it’s mostly due to duration and product mix. But you did make a comment that you have more bookings that have invoices in on January 1. I guess, was there kind of an unusual mix that caused a higher percentage of bookings that didn’t get invoiced until January 1, and we should see that in deferred revenue in Q1? Any way to provide some more color on that?

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Kevin Rubin, Alteryx, Inc. – CFO [21]

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Yes. Thanks, Derrick. So as we’ve mentioned before, the calculated billings number that I think you’re referring to, has noise in it. One of the dynamics that you described is, in fact, correct. We have contracts that their billing schedule are different, if you will, or fall over into the next into the next quarter. So it does provide a difference in — between the billings growth count that you’re looking at and the actual revenue growth. We have coterminous contracts where customers are adding on mid-cycle, that often will drive a less than an annual billing, because you’re billing them just through the next period.

So there’s a number of reasons why those numbers may be different. There wasn’t anything per se in Q4 that was unique other than, as we’ve called out both last quarter, and this quarter, just the dynamic that we do have a large number of year-end deals that ultimately trigger in January.

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James Derrick Wood, Cowen and Company, LLC, Research Division – MD & Senior Software Analyst [22]

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And just to clarify, the 35% to 40% recognized upfront, it was, again, at the high end of that range?

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Kevin Rubin, Alteryx, Inc. – CFO [23]

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I didn’t actually provide any color on that in the prepared remarks, but it did skew to the high end of the range.

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James Derrick Wood, Cowen and Company, LLC, Research Division – MD & Senior Software Analyst [24]

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Okay. And then, Dean, one for you. How should we think about how you guys are going to roll out assisted modeling this year? And what kind of monetization strategy that could come with that?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [25]

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Those plans are all in the works today. We’re in a final beta of assisted modeling. We are confident in the value that it will drive for our customers, particularly the citizen data scientists who we need to understand in a transparent way, what modeling is all about and how to prepare data and how to decision off of it.

It would be premature for me to tell you how we’re going to do it on this call. We haven’t notified customers of what we’re going to do. But in the next couple of months, you’ll see some materials that describe one, the value that we’re going to provide and how we’re going to package this modeling. We see it as a much better approach to amplifying the skills of the non-trained statisticians and it will give us a springboard into an auto modeling capability at some point into the future.

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Operator [26]

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Next question is from the line of Chris Merwin with Goldman Sachs.

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Kevin Kumar, Goldman Sachs Group Inc., Research Division – Associate [27]

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This is Kevin on for Chris. International saw strong growth this quarter. Was the performance broad-based? And can you talk a bit about adoption trends that you’re seeing across the different regions?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [28]

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Well, the adoption trends are pretty consistent. I think the only factor that changes any of it is the duration of our time in market. But it’s clear that the Global 2000, in particular, have the same challenges worldwide, whether you’re an alpha team in Dubai or your ANA and Tokyo. It really doesn’t matter. Everyone’s got the same issues around Eaton out the estimated $10 trillion to $15 trillion of value that’s locked up in data. So our teams are executing almost identical playbook. There are cultural differences, both bottoms up-selling and top-down selling the engagement models with the global advisory firms is pretty consistent internationally. And we continue to see good traction pretty much everywhere we go.

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Kevin Kumar, Goldman Sachs Group Inc., Research Division – Associate [29]

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Big. And can you talk about hiring trends as you enter 2020? Is sales capacity where you’d like it to be? And how are you thinking about incremental go-to-market investments this year?

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Kevin Rubin, Alteryx, Inc. – CFO [30]

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Yes. So I mean, as we’ve talked about in the past, we do tend to front-load our hiring as we enter into a new calendar year. So we are expecting to see that dynamic, again, continue here in Q1. We have continued to focus our investments, as I think is evident through kind of our guidance, on continuing to invest in go-to-market as our kind of primary focus. There’s still a tremendous opportunity within the Global 2000 around the world. We only have 36% of them today. So being able to continue to build out that global infrastructure, and then we’ll continue to also invest in other areas of business, including specifically product and engineering.

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Operator [31]

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(Operator Instructions) Your next question comes from the line of Steve Koenig with Wedbush Securities.

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Steven Richard Koenig, Wedbush Securities Inc., Research Division – MD [32]

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I had 2, but I’ll save 1 for the call back. So I guess I’ll ask you, I’m intrigued by the comments about the data engineer persona. And I’m wondering to what extent could the increasing visibility of that persona to Alteryx? Be it a function of you guys really breaching the IT fortress and taking over from EPL from other IT-centric tools, from custom programming? And how big could that opportunity be for you guys?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [33]

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Well, we’re actually going through the process now of sort of sizing that aspect of the market. We don’t really have tons of detail. We do see the persona emerging more often. I think it’s a critical element they are using other tools. I don’t think you’re going to see a sea change in our approach. You’re not going to see — we’re not going to wake up one day and see a gigantic shift in their adoption. I think it’s — for the firms that are in the digital transformation effort, I think it will happen a bit faster as CDOs or proxies begin to really understand the importance of data engineers.

I don’t think it necessarily increases the TAM. I think it actually allows the TAM to occur in a more seamless fashion. We’ve always talked about the 47 million disenfranchised analysts in the line of business and the $25 billion that sits over in IT and that the winner of a parts and line of the line of business would be the natural beneficiary of the share shift. I think they aid in that share shift, and perhaps we’ll see us sooner.

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Operator [34]

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Your next question comes from the line of Ittai Kidron with Oppenheimer.

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Ittai Kidron, Oppenheimer & Co. Inc., Research Division – MD [35]

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Kevin, I wanted to dig into the expansion rate, still holding up quite nicely. But maybe can you give us at least qualitatively, some color on how much of the movement there is tied in the Designer seat expansion versus new product sales, like Server or Promote or Compose — or Connect, I’m sorry?

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Kevin Rubin, Alteryx, Inc. – CFO [36]

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Ittai, so continuing on some of the comments that Dean had made, we still continue to see the lion’s share of expansion through seat expansion. So that’s it is a combination of designers and servers, but it is fundamentally more use cases, more users, greater use of automation within accounts. Connect and Promote on their own are still contributors, but the success that we’re continuing to see with the Designer Server products is certainly driving the lion’s share of expansion.

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Operator [37]

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Our next question is from the line of Michael Turits with Raymond James.

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Michael Turits, Raymond James & Associates, Inc., Research Division – MD of Equity Research & Infrastructure Software Analyst [38]

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Dean, could you talk about competition among other data science platforms. Oracle made an announcement today. Databricks has been more visible companies like data robots are out there. So a bunch of private companies. But maybe you could just schematize it and tell us what the key components you think are in that platform? Whether it’s auto ML, prep, putting production tools, and where you think you stand up against some of those competitors?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [39]

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Yes, it’s a great question. I think what we’re beginning to see is a rapid consolidation in the space and it’s because of the need of organizations to have a platform. So everyone wants to be a platform, and everyone wants to be a platform today in what I think is inarguably the largest sector of the tech sector that we’ve ever seen, data science and analytics.

So we’ve long said that analytics is a continuum. The foundation of the continuum is built around expert data prep and blending capabilities, something we did extraordinarily well and continue to do very well. But it is the on-ramp for everything else. And so if there are players out there that want to call themselves platforms and their — these vendors at the lowest value chain in the continuum, descriptive and diagnostic analytics. There’s those that are involved in predictive modeling, there’s those that are providing AI and ML capabilities that almost, in all cases, are requiring trained statisticians.

So we see everyone kind of jumping into the space. It’s affirmation that what we’ve built is, in fact, what people need. And I believe that when — we don’t really do bake-offs. We don’t really compete other than with staff, and it’s kind of an incumbent compete more than anything. But it’s clear to us that everyone wants to be a platform, and they have to have the entire continuum. They’ve got to have data prep and blending. They’ve got to be able to touch any database living anywhere in any container. They’ve got to be able to clean it, organize it, standardize it, prosecute the entire spectrum of predictive machine learning processes. They need to be able to play their algorithms. And if they have that, we haven’t seen it. But you’ll — I’m sure there’s a lot more noise from all kinds of vendors about having a platform. We welcome them to the mix.

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Operator [40]

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The next question is from the line of David Griffin, William Blair.

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David A. Griffin, William Blair & Company L.L.C., Research Division – Analyst [41]

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I wanted to quickly touch on the product road map. So you’ve recently started to talk more about the opportunity to introduce new vertical solutions, which, I think, makes a lot of sense. But it also looks like there’s still some work to be done in the near-term around integrating some of the recently acquired technologies and bringing some of the recently announced capabilities from beta to kind of GA. So it would be great if you could just talk a little bit about the innovation road map here and whether we could potentially see any of the new vertical solutions rolled out this year? Or is that something that’s a little bit further down the road?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [42]

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Sure. So when we talked about vertical solutions over the past few quarters, we addressed the first — I guess, first wave of verticalization, and that was a go-to-market motion, that was selling and marketing. So we’ve stood up teams for CPG flash retail, we’ve done it for public sector, we’ve done it for health care.

The verticalization beyond that has been things like what we call kit. These are starter kits that allow an analyst in health care to be able to see 4, 5, 6 use cases within health care that are pretty typical across the provider community within health care. The next wave, though, of vertical solutions is not just us building pure vertical solutions as SaaS services, but when — I guess, the ultimate value of the platform is when other people innovate on it, so the innovation isn’t necessarily restricted to us.

And we’re beginning to see that around the world where customers are standing up solutions of their own, whether they’re in the advisory business or they’re in a vertical that just needs to have a tailored best practice for themselves.

Many of them are doing this on Server. So remember, Server doesn’t allow you just to have a scheduler. Server allows you to deploy apps and APIs that can be controlled through a UI in another app or via a mobile device or a browser. And we’re beginning to see a lot of these start to appear. At Alteryx, we’ll begin to produce more of these vertical apps going forward. Some of the verticalization is just repackaging our existing offerings that are going to be a little bit more tailored to vertical spaces. And again, later this year, you’ll begin to see early days of that next wave of verticalization.

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Operator [43]

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Our next question is from the line of Pat Walravens with JMP Securities.

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Joey Marincek, JMP Securities LLC, Research Division – Research Analyst [44]

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This is Joey on for Pat. How should we think about your strategy for M&A moving forward?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [45]

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Great question. As you know, we did our convertible back in — I think it was August of this last year. And we saw the dynamics in the space, and we recognize that a lot of really great technologies and teams aren’t going to make it or going to be — going to point to be wanting to be part of a broader platform like ours.

Our pillars for M&A are pretty consistent with what we said when we did our first convertible 1.5 years ago, and that is IP first. If we can find an IP that’s written in an environment that makes it easier to integrate into both current and future technologies that we have, and it builds out where we believe this market is going around data science and machine learning, we’ll look at those companies.

Second, in a full employment economy, especially in the data science world, we’re always looking for acqui hires. Sometimes you get both acqui hires and IP. We believe that most of our acquisitions have those 2 dimensions, for sure.

And then the third is, the acquisition of revenue and customers that we can put into a debt expansion number of 1 30. I haven’t found those yet. Those would likely be sincerely more money. But we’re seeing lots of activity where people want to be part of the Alteryx platform, again, affirmation that what we set out to create many years ago is, in fact, being embraced by the broader market.

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Operator [46]

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Our next question is from the line of Rishi Galeria with D.A. Davidson.

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Rishi Nitya Jaluria, D.A. Davidson & Co., Research Division – Senior VP & Senior Research Analyst [47]

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Dean, just wanted to ask if you could maybe expand a little bit on the PwC partnership? And with them — the broadening relationship with them? What do you expect maybe incremental out of that partnership that hasn’t been there before?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [48]

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Well, first of all, I don’t know if I’d classify it as a partnership. I would classify it as a strategic alliance. They obviously signed up as our first global elite partner. That may not adequately describe the opportunity for either PwC or Alteryx or our customers. And so this alliance will allow PwC’s go-to-market and really take digital transformation, what we would refer to as 2.0, to the broader Global 2000 community.

We don’t know exactly what we will expect. I think we’re working hard to align ourselves in the 2 teams to make sure that, first and foremost, we provide offerings to customers that provide tremendous value as they try to understand the data landscape that they have and trying to upscale the capabilities of organizations who actually do need to digitally transform or get disrupted by other people.

This is a new program. We put it together last fall. It’s part of a broader alliance program that we’ve always had a great channel program. 20% of our revenue is coming from resellers. A lot more of our revenue — is from influence revenue coming from the advisory firms, and we just never formalized it. And this last fall, we put together a team that created a work — programmatic approach for alliances. So we’ve got a global elite program, and it’s then anticipated to generate $1 billion in bookings to us over a 5-year period. An elite alliance program that is expected to deliver $300 million in bookings to us over a 3-year period, and a principal program that’s expected to deliver $100 million to us over a 3-year program.

It’s early days for the program. We’re super excited that PwC stepped up to our global elite, and we’re engaged with them now, and we’re very excited about prospects of helping customers around the world see success in digital transformation.

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Operator [49]

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Our next question comes from the line of Mark Murphy with JPMorgan.

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Pinjalim Bora, JP Morgan Chase & Co, Research Division – Analyst [50]

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This is Pinjalim filling in for Mark. Dean, 2-part question for you. I think you have disclosed before that 60% of your customers have been involved in advanced analytics kind of use cases, has that kind of picked up at the end of the year? And is it possible to understand, excluding the special analytics, what is that number?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [51]

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Well, we’ve not divulged that before. Off the top of my head, I couldn’t tell you what it is. I’m not sure if it’s necessarily appropriate to separate one form of advanced analytics from another form of advanced analytics. We do have telemetries, so we do know, for a large part of the user base, what they do engage in. We are beginning to see — we’ve had our Python tools out there for about a year now, and we’re beginning to see more and more people leverage Python on for much more complex use cases. But I still think it’s pretty early in that transition.

What we do know for certain is that we are amplifying the skills of our customers, and we’re seeing it in the way they react, then we’re seeing it in the motive feedback that we get. And we see these use cases being far more strategic, particularly in the G2K. So it might be presumptuous for us to define what advanced analytics are. What we do know is that we become much more of a critical fabric for the analytic framework of organizations in using any of the advanced analytic capabilities of the platform.

Let’s not forget that there’s 270-some-odd tools within the platform. With Python, you have the ability for an infinite number of new tools. And for those tools, we actually don’t have visibility in telemetry. We know that they use the tool. We don’t know the extent of the advanced notion that’s created in those tools.

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Pinjalim Bora, JP Morgan Chase & Co, Research Division – Analyst [52]

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Right. Understood. And just to follow-up with that. In that vein, how should we think or how do you think about Alteryx versus some of the cloud providers that are providing something like a SageMaker or Azure ML. Is that more of a very complementary product in your opinion to Alteryx?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [53]

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Well, we’ve always sustained the ecosystem as complementary. It would be somewhat silly to think that everyone is going to use only our product. And so we have partnerships with the folks like a DataRobot or an H2O or an Azure ML, while we don’t have a formal relationship with SageMaker and the folks over there at AWS, we see the benefits of Alteryx in that rarely do our customers have all their data in 1 place. In fact, I think the motivations of the cloud vendors is to get your data into their place, and the reality is most customers aren’t going to do that. They’re going to be multi-cloud forever. They’re going to be on-premise for a very, very long time. In fact, I think a lot of the narrative that we see out there now is that the data hasn’t moved nearly as fast as people once thought it would.

So having a set of partners in this ecosystem of data science and analytics, we find very, very helpful. In fact, one of the things that you might have seen in just recent days is the renaming of our conference call, it used to be called INSPIRE, it’s now called Analyticon or Global Conference. And the whole purpose of Analyticon is to invite in this diverse and inclusive community of, not just users, users of Alteryx and users of other capabilities from other vendors, but to bring in those other vendors. Because I think one of the challenges the business has faced is that the market for data science and analysts is so fragmented, people get so confused, they waste so much time and money trying to get to meaningful outcomes. We’re trying to bring that all back together in a cohesive environment. And I think you’ll find that if you come to join us at Analyticon in June, in New Orleans, you’ll see the camaraderie, even amongst the vendors who, on surface, might look like they compete. They actually are far more friendly.

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Operator [54]

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Our final question is from the line of Taz Koujalgi with Guggenheim partners.

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Imtiaz Ahmed Koujalgi, Guggenheim Securities, LLC, Research Division – Director of Technology, Media & Telecom and Analyst [55]

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Can you just give some more color on the price increase? I believe there was a price increase on the Server product. Were there price increases in other products? And if you guys can give some more details on how much lift will that give in fiscal ’20?

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [56]

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Well, that price increase went into effect this quarter. So we don’t know the full impact. I think the price increase was truly a reflection of the value that we’re driving for customers more than anything else that you might think. I’ll let Kevin address the impact on the model that we’ve presented to you for 2020. But the reality is, we become an integral part of the strategic analytic framework for organizations and we believe that there’s value in the Server product that we have.

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Kevin Rubin, Alteryx, Inc. – CFO [57]

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Yes, just to touch on the model for a moment. So to Dean’s point, I mean, and as we’ve mentioned, as you know, the deeper that we penetrate organizations and the more that they’re leveraging Alteryx for automating their analytic pipelines, that is all being done on Server. And so Server is a key piece of that expansion cycle, and it’s an incredibly valuable piece. And so I would just say that we expect to continue to see Server as a meaningful piece of expansion and overall revenue, and any impact of price changes would obviously be included in the guidance we provided.

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Operator [58]

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At this time, I’ll turn — we reached the end of our question-and-answer session. I’ll turn the call back to Dean Stoecker for closing remarks.

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Dean A. Stoecker, Alteryx, Inc. – Co-Founder, Chairman & CEO [59]

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Big. Thank you, operator. Thanks, everyone, for joining us today. We look forward to updating you on our continued success throughout 2020. Thanks for your time.

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Operator [60]

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Thank you very much. This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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