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spk00: Greetings and welcome to the AlterX fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Lowe. Please go ahead.
spk01: Thank you, Operator. Good afternoon, and thank you for joining us today to review Alteryx's fourth quarter and full year 2020 financial results. With me on the call today are Mark Anderson, Chief Executive Officer, and Kevin Rubin, Chief Financial Officer. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance. They are subject to a variety of risk and uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statements. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and the investor relations section of our website, as well as the risks and other important factors discussed in today's earnings release. Additionally, non-GAAP financial measures will be discussed on today's conference call. A reconciliation of these measures to their most directly comparable GAAP financial measures can be found in today's earnings release. With that, I'd like to turn the call over to our Chief Executive Officer, Mark Anderson. Mark?
spk07: Thanks, Chris, and thank you all for joining us on the call today. Like most of us, I'm happy that 2020 is now solidly in the rearview mirror. It was a challenging year for so many. Here at Alteryx, We welcome 2021 and are excited to see that the digital transformation of everything continues to accelerate. We are seeing enterprises around the world adapt and transform with a sense of urgency that I haven't seen before. Not coincidentally, we expect 2021 will be a year of transformation for Alteryx as well, as we continue to scale and evolve to meet the needs of our customers. I submit that one cannot transform without harnessing control of one's data. And our 7,100 customers and several hundred thousand delighted users leverage the simplicity and power of Alteryx's APA platform. We have become the instrumentation layer of their transformation initiatives and deliver significant business value with the power of analytics and automation. On today's call, I'll walk you through our 2021 operating framework, And Kevin will then provide specifics on our Q4 and full year 2020 performance, as well as our outlook for both Q1 and full year 2021. As many companies do, we started 2021 by defining our strategic imperatives. These guiding principles are currently being federated down to each Alteryx associate globally. With an achievable operating framework rolled out in the first few weeks of the fiscal year, Our first ever virtual sales kickoff delivered thoughtfully last week. We stand ready to execute in 2021. For us, that means delivering unparalleled value to our customers as we scale. One of my fundamental leadership tenets is clear and open communications. I believe clarity is critical to help us all assimilate and embrace the evolutionary path that we're on. That said, change isn't always easy and requires increased effort and focus. but I'm proud of how the organization has adapted in my first 120 days, and I believe we are setting the right course for many years to come. Our first imperative is delivering strategic customer outcomes. In 2021, we intend to evolve our go-to-market approach to focus on targets that spend the most and need our innovation the most, to firmly double down on customer success, and to market more collaboratively with strategic partners. I believe this is the right strategy to drive predictable, accelerating, and durable growth. We do this well with many customers today, just not consistently. Throughout the year, I expect our sales productivity to improve as a result of the increased focus and discipline of this operating framework. To fully capitalize on the market opportunity in front of us, we've made some necessary stage appropriate changes up and down the organization. And we expect to continue to add high-quality talent throughout 2021. As you know, Dean Darwin has joined us as Chief Revenue Officer and Matthew Stauble as Chief Customer Officer. Both Dean and Matthew have jumped in with both feet and come with extensive domain expertise in their respective areas. I believe both will help us build even deeper, stronger relationships with our customers and will provide strong leadership during this stage. In 2021, our direct sales team will be primarily focused on the largest customers and prospective customers, which generally tend to be global 2000 companies in government. We will leverage technology and distribution partnerships in a much more pragmatic way, tapping into large outcome oriented projects. I'll talk more about how we're leveraging the ecosystem shortly. Our second strategic imperative is our continued commitment to innovation and flexibility. 2021 will be a year of investment in product innovation. I'm thrilled to announce our new chief product officer, Suresh Patel. Suresh's recent experience leading key parts of Adobe's product journey to the cloud will serve our company well. We intend to extend the security and scalability of the Alteryx APA platform to work in many environments. So we will be increasing our investments in data governance and modern application development. Our third strategic imperative is broadening the ecosystem. As we expand our leadership position within the analytics market, we recognize that we can't do it alone. We believe having a vibrant and robust ecosystem of partners will function as a force multiplier. This opportunity is global, and it's now, so we must broaden our reach with technology and distribution partners. Last year, we embarked on this mission with PwC as our first global elite partner. We're working well together to accelerate transformation projects at innovative companies such as Zoom and Chewy. This quarter, for example, a Fortune 500 telecommunications provider has partnered with AlterX and PwC to fully automate and improve the accuracy of their regulatory financial statements and expects to significantly lower the cost of compliance by tens of millions of dollars. Internally, we've been building the framework to support strategic relationships And today, I'm excited to announce that the PwC relationship has been expanded globally. Last week, we announced HCL as an elite partner and are already working closely with them to deliver digital transformation projects around the globe. Beyond go-to-market partnerships, we continue to execute on key technology partnerships. With the explosion of data accelerating Technical integration and business partnerships with market leaders such as Adobe, UiPath, and Snowflake allow for swift implementation and faster time to value and outcomes. Our recently announced partnership with Snowflake is a great example. Today, Alteryx is part of the Snowflake Ready technology partner program, allowing Alteryx customers to leverage Snowflake for in-database processing. The interest from both of our teams, as well as customers and prospects, is incredible. For example, Mr. Price, a top-performing omnichannel retailer based in South Africa, is leveraging the power of Alteryx plus Snowflakes to automate analytics and run merchandise allocations and inventory planning across 1,300 stores and 5 million SKUs. According to Mark Sturton, Group CFO, they've used Alteryx to create analytic applications authored by merchandising managers and accountants, hosted on the Alteryx server in Snowflake, where users get near real-time results. He also notes that this type of response is not possible from any typical database. Also, I hear consistently from partners and customers that upskilling their knowledge workers is a critical priority. Let's face it, people deserve to be freed from the limitations of disconnected systems and data sources. To be employable in this new world, workers have to develop and deliver more valuable output. Our fourth strategic imperative is to help upskill data workers globally by providing our software to educational institutions around the world so that they can deliver data science and analytics curriculum for free. We started this in a meaningful way last year with the ADAPT program. Over 12,000 people from all over the world participated in this COVID-related program to upskill. These outcomes are near and dear to my heart, as I've seen firsthand how education and upskilling can transform people's lives. The team is being built out as we speak, and I'm excited that our co-founder, Libby Duane-Adams, will lead this program as our new chief advocacy officer. Libby remains passionate, excited, and dedicated to the Alteryx community. In closing, I'm confident about our 2021 plan. Our own transformation journey will ramp throughout the year, and I look forward to providing you with more color on our progress at our upcoming analyst day later this year. In this highly fragmented market, I believe there is customer permission for one or two very large platforms to emerge. We believe that if we can continue to deliver significant business value to our customers, Alteryx can be one of these winners. We have a clear plan for success and relentless focus on customer feedback, product innovation, professional development, and process improvement. As I've mentioned, our customers need us now more than ever. I am incredibly energized by the opportunity we have in front of us. With that, let me turn the call over to Kevin.
spk10: Thank you, Mark. Before diving into the details, and as we all experienced, 2020 proved to be a challenging year. However, in Q4, we saw enterprise customer spending improve as larger, more stable companies appeared to resume spending especially on digital transformation initiatives, while smaller companies continue to be cautious. We continue to see big deals getting bigger, including multimillion-dollar deals. For 2021, we are making a series of changes to our business designed to accelerate ARR growth. Some of these changes include bringing in new leadership into our go-to-market organization. I'm excited for what both Dean and Matthew will bring to Alteryx, specifically operational rigor and stage appropriate experience in leading world-class teams. Focusing our sales efforts on customers and prospects with a large propensity to buy, continuing to build strategic alliances as a force multiplier, we plan to increasingly leverage distribution partners for our smaller commercial customers where we believe these customers will be better served, and increasing investments in innovation to accelerate our product roadmap. We believe these changes are appropriate and will ultimately benefit our customers through greater focus on business outcomes. Now turning to the numbers. As mentioned, we ended the quarter with approximately $493 million in ARR, up 32% year over year. However, ARR did come in under our $500 million guide due to these three factors. First, contract duration was stronger than we anticipated. This means that we executed more three-year contracts that generally have lower ACV relative to one-year contracts. Second, we didn't execute in the quarter as well as we expected, specifically on the expansion business, and we are making appropriate operational changes. And third, continued effects of COVID in customer buying trends. Renewals, a significant component of ARR, remain strong within our enterprise segment. While the trend of higher churn within smaller customers impacted verticals, and those with single seats of designer continued. This slightly elevated churn was most notable in Q2 of this year, but subsequently improved throughout the second half of 2020. Our net new customer ads for the quarter were 128, which is lower than historical levels, as our sales teams focused on expansion in our larger customers, particularly in our global 2,000 customers. Additionally, we continue to see higher logo churn in smaller companies. At the same time, we are seeing average deal sizes of new business increasing, which we believe is validation of our strategy to focus on customers with the greatest propensity to spend. We now have 7,083 customers, including 768 or 38% of the global 2,000. Net expansion for Q4 was 122% and a stronger 132% within our global 2,000 customers. Some of the key wins for the quarter included Artisan Partners, Bell Canada, BT Group, Danaher Corporation, Fidelity Investment, Kraft Heinz Food Company, and Pfizer. Q4 revenue was $161 million, an increase of 3% year over year. While contract duration did tick down slightly when compared to Q4 2019, it remained at approximately two years, and as I mentioned, was stronger than anticipated. Consistent with what we saw throughout 2020, product mix had a favorable impact. and the upfront percentage was at the higher end of the range. Before moving on, I want to remind everyone that unless otherwise stated, I will be discussing non-GAAP results. Please refer to our press release for a full reconciliation of GAAP to non-GAAP results. Our Q4 gross margin was 94%, up 120 basis points from Q4 2019. Our Q4 operating expenses were $103 million compared to $95 million in the same period last year. The increase in our operating expenses is primarily attributable to increases in our overall headcount levels. Our Q4 operating income was $49 million, or an operating margin of 31%. Net income was $43 million, or 62 cents per share, based on 69.8 million fully diluted weighted average shares outstanding. Let me briefly summarize the results for the year. ARR grew 32% for the year. and revenue increased 19% to $495 million. Gross margin for 2020 was 93%, which was 90 basis points higher than 2019. Operating expenses for the year were $383 million, as compared to $309 million last year. Full-year operating income was $77 million, or an operating margin of 16%. Net income was $66 million, or 94 cents per share, based on 69.6 million fully diluted weighted average shares outstanding. Turning now to the GAAP balance sheet and statement of cash flows, in the fourth quarter we generated $58 million in cash flow from operations, and as of December 31st, we had just over $1 billion in cash, cash equivalents, short-term and long-term investments. Before turning to our outlook for 2021, I'd like to share with you the high-level framework of how we are approaching this year, where we expect to invest, and the implications to our financial model. We are focused on executing against the strategic imperatives that Mark outlined, and this means we will be investing now to drive the next phase of growth. This includes making significant investments in product development to accelerate innovation and in sales and marketing to better focus on larger customers and prospects. This includes greater levels of customer support and engaging strategic partners. We expect a modest and gradual improvement in the macro environment as we move through 2021. However, the changes that we are making in our go-to-market will take effect throughout Q1 and while we expect to see the benefits of this transformation begin as early as Q2, they won't be meaningfully evident until the second half of the year. In terms of seasonality, Q1 is our lightest quarter of the year in terms of bookings, revenue, and ARR growth, and tends to be a heavy investment quarter as we put the necessary resources in place to capitalize on our seasonally stronger second half of the year, particularly the fourth quarter. Given the shape of our typical revenue curve and the ramping of expenses, especially this year, we expect our bottom line to be weaker in the first half of the year and stronger in the second. Now turning to our outlook for Q1 and full year 2021, our guidance assumes the following. As mentioned, no material improvements in the macro environment in Q1, but a modest and gradual improvement throughout 2021. The average duration of our subscription agreements will shorten and start trending below two years, and approximately 40% of TCV booked in the quarter will be recognized up front, with the remainder recognized ratably over the time of the contract. Finally, I'd like to remind you that our guidance is subject to various important risk and cautionary factors referenced in our call today and in today's earnings release. For Q1, approximately 75% of revenue will be recognized from deferred revenue and scheduled multi-year billings. Approximately 10% is expected from contract renewals, with the remainder expected to come from net new business closed in the quarter. For Q1 2021, we expect our GAAP revenue in the range of $104 million to $107 million. We expect our non-GAAP operating loss to be in the range of $21 million to $18 million, and non-GAAP net loss per share of 25 to 22 cents. This assumes 67.5 million weighted average shares outstanding. For the full year 2021, we now expect GAAP revenue in the range of $555 million to $565 million. We expect to exit 2021 with approximately $625 million of ARR, which translates to over 25% year-over-year growth. We expect our non-GAAP operating income loss to be in the range of a $5 million operating loss to a $5 million operating income. Our non-GAAP net income loss per share is expected to be in the range of a net loss per share of 7 cents to net income per diluted share of 7 cents. Our non-GAAP net loss per share assumes 68.5 million basic shares outstanding, while our non-GAAP net income per diluted share assumes 72 million fully diluted weighted average shares outstanding. Finally, we expect an effective tax rate of 20 percent. In summary, I'm excited about what's to come in 2021. We believe the operating framework we are putting in place sets us up on the right course for years to come. We have a strong product market fit, significant market opportunity, a powerful business model, and a strong financial position with over $1 billion of cash on the balance sheet. And with that, we'll open up the call for questions. Operator?
spk00: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please limit yourself to one question and re-queue for any follow-up questions. Our first question comes from Michael Toritz with KeyBank Capital Markets. Please go ahead.
spk04: Hey, guys. I'll try to keep it to one, and I'll keep it high level. And for Mark, Mark, good to talk to you the first time in a while, so welcome. Thanks a lot, Michael. Hey, I was wondering if you could just talk about your view of the broader data science market right now and where you're thinking about where Alteryx is fitting in, where you feel like your strengths are, and where you feel like there's room for expansion in terms of fitting in strategically into that market.
spk07: You bet, Michael. And, you know, gosh, I feel like my opinion today is a little more informed or maybe a lot more informed than it was 90 days ago. We've talked to a lot more customers, a lot more partners, including the HCL partnership that we announced last week. And, you know, here's what I think, Michael. I think people love our technology for what it's helped them do. And in some cases that deliver more valuable output for their enterprise than they were doing before, you know, with one hand on, on two separate keyboards, different versions of Excel, trying to gather some insight from the proliferation of data. So as I talk to customers, they want to be able to consume that innovation everywhere, because they're moving data into, you know, Snowflake data warehouses, moving data into public cloud. Even the big banks are going to start moving data into public cloud over the next few years. So they want to... I mean, the hard questions I'm getting is we want ubiquity of use in your innovation. And I think there's tremendous opportunity there. The other thing I hear from customers is, you know, and honestly, I heard this a lot in network security. far too fragmented marketplace. The supply chain of vendors is a hot mess. Some customers deal with upwards of 40 or 50 vendors, 10 on the way in any year, 10 on the way out, and they want fewer vendors. They want less complexity. They want a lot more automation. That's the whole point of this. And so I think, like I said in the script, Michael, I think there's permission for us to leverage our relevance from a tech standpoint and really build machine-like capabilities in both delivering organic innovation, but also integrating inorganic innovation as fast as we can while transforming the business, right, and evolving to go to market. And as you're hearing, you know, the team here is trying to do all of this at the same time. You know, it's certainly no trivial task, but, you know, not a lot of our first goat rodeos here. So really, really, really pleased with the progress that we've made so far. I mean, just a tremendous amount of really positive progress. And I think the team that we have here is excited about, you know, some of the stage appropriate changes that we're making. And we really try to do everything that we can based on our experience, taking advantage of this massive opportunity. Because I think in three or four years, there's going to be a couple of very large domain vendors in this space, and it's going to be someone that does the best job of delivering the right customer experience at the right cost with the right sense of urgency, and do it in such a way that you earn permission to come back again. So, all right.
spk04: Yeah, sure. So, welcome. I'll keep it to the discipline. It is one question. Thanks very much.
spk07: Thank you, Michael. Thanks, Michael.
spk00: Next question comes from Brent Braceland with Piper Sandler. Please go ahead.
spk05: Thank you. I guess, first off, for Mark here, really encouraged by your ability to continue to attract the quality of new hires here. Dean Matthew, Jeffrey, Bill, now Suresh today, great job. in a short period of time, you know, attracting high-quality leaders. My question is for Kevin here. I wanted to circle back on the ARR guide, which does imply, I think, 27% ARR growth. I think that is above the 25% outlook that you guided to initially last quarter. Rarely do we see CFOs raise guidance, particularly after a miss, and so just given the leading metrics and RPO looks pretty weak here, what gives you confidence after missing that ARR outlook for Q4 that warrants a slightly more bullish view on ARR growth going into 2021. What am I missing here?
spk10: Yeah, no, thanks, Brent, and Happy New Year. Good to talk to you. Look, I mean, as we look at, you know, where we're sitting, you know, for the year relative to the renewal base we have, customer conversations, And frankly, more importantly, some of the stage-appropriate, you know, changes that we've made. You mentioned introducing Dean and Matthew to the team and, you know, what they, you know, will bring to the organization as, you know, they push through their changes through their organizations. You know, we have confidence that we'll exit this year, you know, at 625 million in ARR.
spk07: And, Brandon, if I could just say one thing. Firstly, thank you for the thoughts. I appreciated your research earlier this week. But I want you to know definitively it's not just senior leaders, right? As you know, it takes a village to get something really important like helping customers transform their businesses. And so I'm just very humbled by the volumes of people that are coming up and down the organization to do things like Python automation for customer success to do things like deal desk formulations. So up and down the machinery that people want to come to a place where there's clarity of purpose and where there's just a tremendous opportunity with that clarity of purpose to go do something fantastic. And that's what we think we're going to do.
spk05: Great. Well, thank you. I'll leave it there.
spk10: Thanks, Brent.
spk00: Next question comes from Jack Andrews with Needham. Please go ahead.
spk13: Well, good afternoon. Thanks for taking my question. I wanted to touch on the way you view your ecosystem partners, particularly as it relates to the HCL relationship. To me, HCL is a company that engages with technology executives rather than, I guess, line of business users. And so I just wanted to better understand, how do you think about the different personas that you need to address as you build this ecosystem? Should we think about multiple personas now in terms of maybe line of business versus data scientists versus IT as well?
spk07: Yeah, well, let me tackle the last part of your question, Jack, because I think very thoughtful questions, so thank you. On the personae that we're targeting, I think they're changing. I think the personae of the knowledge worker that is making decisions on business transformation They're like my 25 and 28-year-old daughters, knowledge workers, engineer or salesperson. They're making decisions, and they're interacting with us electronically, interacting with bots on our website and trying this. So I think we've got to evolve the persona that we target and the way that we go target them. CFO is another example of, I think in the past, We may have tried to deal with knowledge workers at a lower level, but absolutely, CFOs are making budget decisions on transformational priorities, and they're looking to big domain partnerships, the first part of your question, to help them with that. So, firstly, I break up partnerships into two different categories. One, distribution slash influence partners. Super important for us that I can tell you that we purposely waited with PWC just to make sure that we built the capabilities within Alteryx and then out in the field to be able to federate this relationship and make the most of it, as well as have the right kind of resources that can walk into a CFO appointment with a partner from PWC in Zurich and be part of a $100 million transformation deal. a few things to unpack there. With HCL, I think this is just the beginning of the partnership with HCL. And I think any transformation that's happening these days is happening, you know, of course, across the executive team, but absolutely with the support and partnership from the CIO. And so HCL has long done very well in the office of the CIO. But if you think about the The work, the projects that they're integrating in right now and becoming a large and growing part of their business, this digital transformation is taking them beyond the office of the CIO and into the functional executive leadership. So, you know, I think these give you a representation of what the partnerships, this distribution partnerships might look like in the future, Jack, that they're going to be large, they're going to be domain, tier one, and We're going to make sure we build capabilities with our teams to be able to work with these important partners and influencers. Secondly, we've got technology partnerships like we have with Adobe, like we have with Snowflake. You know, again, customers are open to multi-vendor solutions. They want the integration of those solutions to be seamless. And guess what? They don't want to do any work on that regard. They want the vendors to abstract the complexities. So absolutely, Sharmila and her team are working with Dean and the sales teams to identify the kind of partners that customers are asking us to integrate with so that the multitude of connectors that we have, the multitude of APIs that we build, and the software developer kits that we build down the road will make us a really easy company to partner with and do business with. And that's That's the future state of what customers are expecting, absolute integration and specific business outcomes. So I appreciate the question, Jack. Hopefully that was a comprehensive answer.
spk13: It does. Thanks for your perspective.
spk00: Next question comes from Pavan Suri with William Blair. Please go ahead.
spk15: Hey, guys, and thanks for taking my question. Markets are going to be – look, I'm a big fan of the space, what you did at Palo Alto, but But just, I guess, a tougher question here. Analytics has historically never been sold by partners that much. Like system integrated partners, sure, but not the partner model that was employed at Palo Alto. Right. And you are bringing on a sales team that is very much Palo Alto and a VAR distributor sales team. So help us and investors, because this question has come up multiple times, understand how that transition plays out. How do you get someone who used to get to sell to VARS and CDW and, you know, WestCon, and we can pick all of them, Citrix, VMware, other Palo Alto partners, to committing to driving enterprise sales growth with large organizations, the complexity of what analytics is, and that approach. I'd just love to understand a little more color on how you think about that and how that plays out over the next, you know, again, not even the next couple of quarters, but the next 24, 36 months.
spk07: Yeah. Thank you so much for the question. Appreciate it. I agree to a certain extent. I think this space is a relatively young space. I think that's why I'm so excited about the opportunity that we have in front of us. I think we're in early innings as this plays out, and I think we've defined the TAM these days in terms of tens of billions. I think in the future, sometime down the road, not too far down the road, it'll be expressed in hundreds of billions. And it's going to come with thoughtful technology that gets proliferated and federated so that it's easy to consume and it adds value for customers. And that value is a priority for that business so that they spend money this quarter, not two years from now on that innovation. And it's going to come with technology. the influence of key domain partners in almost every technology that I've been involved in networking, certainly 25 years ago with Cisco and application delivery controllers and security. Partners play a variety of roles. Some are just pure distribution. We don't need distribution partnerships. We sell software. The distribution part, the peer distribution partnerships that I see from the future, they're going to be the likes of Amazon, Google, Microsoft because they're going to facilitate our customers using our innovation in their environments where they have data. I think the kinds of partnerships that will continue to grow are the regional partnerships because data is continuing to grow a lot and it's only getting more obvious that the companies that are going to have some success of getting deterministic priorities from their data are going to be the more successful ones. So, you know, listen, and I sure hope you give me more credit than your first statement. I do. I do. But listen, listen.
spk15: It's not the lack of credit, Mark.
spk07: But we're not just hiring a bunch of security salespeople. They'll represent the minority of the salespeople we have. I'll share with you and the extended team at the analyst, Dave, the volume of inbounds we're getting from people all around is quite humbling. And what I'm mostly looking for is people that have stage-appropriate experience in an area where technology is being used to provide important, prioritized solutions for customers. And then training the amazing team of people that we already have here. We've got some terrific people all across the board. And just giving them some stage-appropriate training to get them on their journey. So it's not going to happen overnight, Bhavat, but definitely feel like partner influence will become more and more important. And over time, that will show up in the productivity line of our salespeople.
spk15: And I appreciate that, right? I think that's totally true. When I look at your customers like McKinsey and BCG and Bain, and I think about the strategy they do and how they're all massively, et cetera, invested in AlterX, it makes sense that the partnerships are going to be different. But, you know, it's great just to hear your color and your thoughts on how that might change, right? It's a different partnership than a bar, and I think you spoke to that. So I appreciate that. I just want to make sure that was clear. So absolutely not negative at all. But there is a shift. No, no, I got it. I'll alter operate it and alter its operating. So I just want to make clear. But no, I appreciate it. I appreciate the call. Thank you. I'll jump back in the queue.
spk00: Next question comes from Pat Walravens with JMP Group. Please go ahead.
spk14: Oh, great. Thank you. And Mark, congratulations on hiring Suresh. This question will be in that vein. I mean, is it fair to say that, yeah, that should be a good one. We'll see. Is it fair to say that Alteryx is sort of late in getting to the cloud? I think that's sort of a pretty common view among investors. And if so, where does that hurt and where does that maybe not hurt so much?
spk07: Well, you know, listen, I think I don't like to think of it, Pat, in terms of early or late. Honestly, I think if we had rotated to the cloud a year ago, we'd be in trouble. Because the vast majority of large data, our largest customers, you know, I was talking to one chief data officer of a tier one bank in the U.S. a few weeks back, and he said that 1% of his data is in public cloud. It's going to go there over the next five to ten years. Maybe it will go fast. It depends on a lot of things. But he was asking for me to help our innovation teams spin up the capability so that it can be you know, delivered in a VPC or from a browser. And so, you know, I think what Alteryx chose to do, and I'm not going to second-guess Dean and the team's decision, was, you know, to apply innovation to the amazing set of tools that we have that were, you know, transforming, you know, the output for citizen data scientists. And as I sort of quickly learned from customers and, you know, from analysts, technical analysts I spoke with, you know, made it very clear to me that, you know, flexibility has got to be something that we've got to get better at and removing friction. And, you know, so being able to spin up in those environments or in a multi-tenant SaaS environment absolutely will be priorities. You'll see dates and a roadmap from Suresh in a few months at the analyst day. So I've been spending a lot of time with him on that recently. So we're going to the cloud because our customers have told us they're definitely going to the cloud. And our plan is to, you know, to be fully functional at the time when the market is mature. And I think that's still, you know, some time from now.
spk14: Great. Thank you for that perspective.
spk07: Sure.
spk00: Next question comes from Tyler Radke.
spk07: Oh, sorry. If I can just add. But I will tell you, the hiring of Suresh was a targeted hire. We looked for companies that had made the journey from on-prem, multi-versions of their different solutions to make it more available, to be more friction-free. And, you know, what I found with a lot of candidates, but blew me away with Suresh was the involvement that he had in a number of products from Adobe, who really is, I think, you know, Shantanu and the team did, I think, the still to this day, the best job of migrating this journey. And I think we have a lot to learn from Shantanu, and certainly I'm looking forward to learning a lot from Suresh on this, but I think he'll be a game changer for us.
spk00: Tyler Radke with Citi. Your line is live. You may proceed.
spk11: Hey, thanks. Mark, a question for you. You talked about investing more specifically in product development in 2021, and I'm curious if you could talk specifically on the areas that you're going to be building out. And do you think there were some, you know, maybe product issues that contributed to the quarterly performance? And then I just wanted to ask from a packaging or pricing perspective, you know, now that you've been in the seat for a couple quarters, are there any changes that you're contemplating making with regards to pricing? Thank you.
spk07: Thanks, Tyler. Yeah, I'll handle the first one, sorry, the second one first. You know, absolutely, we look at pricing every year, and Kevin, as running a Tiger team right now, just taking a hard look at, you know, ways that we can demonstrate more flexibility and reduce friction in our pricing. So we're definitely taking a look at that and, you know, expect more, again, expect more at the end, let's say, Tyler, on that. In terms of, did we see the impact in the quarters from the product? I don't think so. I think a lot of companies were affected by, you know, spending habits. And I think the thing that particularly hurt us that we've talked about before is, you know, in retrospect, we probably rotated a little too heavily in mid-market at the absolute wrong time. And it turned out that a lot of those hires were before COVID. And I was just on the board at the time and supported the notion, but I wanted to invest a lot more in G2000, which is what we're doing now. And I think, you know, so really repurposing the resources so that we've got the right resources in front of the right customers at the right time, delivering the right outcomes. And that's where, you know, I think you're going to see us. And, again, this will be measured in productivity and sales productivity, but you'll see us – You know, improving throughout the year there.
spk02: Thank you.
spk00: Our next question comes from Steve Cowing with Wedbush Securities. Please go ahead.
spk08: Hi, gentlemen. Thanks for squeezing me in. I appreciate it. And nice to be able to chat with you. So, my question is for Mark. You know, Mark, rewinding a little bit. to some of Dean's commentary over the last, you know, 12 to 18 months, you know, Dean had talked about the need for Alteryx to continue to transform itself to becoming a provider of a complete solution, you know, as opposed to analytic middleware. And I'm not characterizing Alteryx that way as an analytic middleware company, but But Dean did speak a lot about, you know, about the work to transition to be a complete solution company. And to that end, we, you know, we saw and still see Alteryx doing work in the area of data science solutions to operational and data science. And now we see Alteryx doing work on, you know, analytic process workflows and embedding yourself in workflows, almost a la Informatica, but I wouldn't want to compare. I mean, a very self-serve product of that serves, you know, citizen data analysts, you know, so very, very innovative that way. So I'm wondering, you know, kind of which of these pivots do you see as being most instrumental in the short-term or long-term, and are there more pivots to come? And you've spoken about cloud a little bit. How does cloud play into that as well? Thank you very much.
spk07: Yeah, well, thanks. A lot to unpack there, Steve, but, you know, I think Dean's previous comments about, you know, continuing to transform you know, the business and trend more towards a platform company. You know, I think we made moves to, you know, to move along that path, you know, developing, you know, new products with Connect and Promote and Analytics Hub, as well as, you know, making a lot of refinements to the innovation over the last year. But I think, again, So much has happened in the last year that has caused at least every executive I know and talk to on a regular basis, board members, CEOs, you know, it's just a very different world. And the construct of what it's going to take to be a successful business partner in the future, I think, is going to depend on having more capability in a platform, especially in a fragmented market like, you know, data analytics and data science and advanced analytics and, you know, So, you know, we're really focused on, in the near term, focused on capitalizing on the really important outcomes that we deliver for our customers, you know, that get represented by some of them. I was talking to a CFO yesterday morning of a large consumer packaged goods company, and He talked about saving somewhere between $100 and $150 million with their transformation initiatives, largely riding on Alteryx. So we're going to capitalize on building a library of these either workflows or specific business outcomes. that can be replicated either in an automated way or can be replicated with, you know, a smart group of customer success managers around the field working closely with the team of resources that Dean is going to build to take advantage of the new dynamics and the new persona. So, you know, I sure hope you believe that, you know, the work that's gone into building the fiscal year plan to putting the new resources in the right places And then rolling this out over the last three weeks to the extent, or three, four weeks to the extended team in a series of, you know, all-hand sessions or sales kickoff or all-company kickoffs. You know, I really feel like we're providing the contacts that our associates need, that our customers need, you know, to be comfortable about investing, either staying with Alteryx in the future or investing even more with us in the future. And I think Suresh brings to the table the ability to, you know, help us with this transformation to the cloud. We have to go to the cloud because that's where data is going. And if we want our innovation to be able to access data there, we're going to have to, you know, deliver capability there. And Suresh is really going to be helpful there, not just him as one person, but him as a leader and a recruiter.
spk08: Awesome. Well, thank you very much, Mark. Thank you, Steve. Appreciate the question.
spk00: Next question comes from Derek Wood with Cowan & Company. Please go ahead.
spk02: Great, thanks for taking my question. Mark, you mentioned that you're making changes up and down the organization, and we've heard about some of the leadership, new leadership you put in place. I wanted to get a sense for how much change is taking place at the field level and perhaps what degree of turn or change is taking place at the sales rep level. What are some of the bigger changes you and Dean will be making on the go-to-market side? and whether you have anything to share around how much growth and sales capacity you're striving for by the end of the year.
spk07: Yeah. Well, thanks for the question, Derek. You know, I think any technology company that has exhibited growth over the years, I would submit that every one of us, you know, takes a look at things like the sales construct and comp plans and all that stuff and makes necessary tweaks, depending on what we've learned in the last year. And certainly, you know, there is a culture of doing that here at Alteryx. You know, I bring a little more of an operational rigor focus because I think that's necessary at this stage and beyond, really, too. be able to harness, you know, eventually thousands of people to, you know, do the right things before and after the purchase order is cut, the devil's in the details there. And having people with stage experience really matters. And so, you know, I think you're always sort of tinkering and always developing and always evolving. And so, you know, what I've seen happen in the past is You really start to see my daughter just texted me. Thanks, Monica. You really have to take a look at living in the details. And I think part of what makes the information that I get as CEO here fascinating is we run a lot of the business on Alteryx. And so really getting a lot of insights from all the different data sources that our sales teams use here. to be effective. But, you know, at the end of the day, you know, a year from now, honestly, I fully expect, you know, to be looking back at, you know, a good successful year of transformation.
spk02: Okay. Thanks for the comment. Thanks, Derek.
spk00: Next question comes from Chris Merwin with Goldman Sachs. Please go ahead.
spk12: Okay, great. Thanks so much for taking my question. I wanted to ask about customers. Obviously, you called out in the script that it was a little bit lower than what you typically have seen historically, but that would seem in part intentional. The sales team is focusing on expansion with larger customers. Can you talk a little bit about why that is the right strategy right now and how you're incentivizing the sales force to that end and just how we should think about that showing up in the metrics on a go-forward basis? Thanks. Thanks.
spk07: Yeah, thanks for the question, Chris. I'll take the first part of that and then maybe hand it over to Kevin first and some more color. I think, you know, here's my view on customer count. It's important, but, right? I mean, it's important that we're always adding new customers because new customers on the strength of those relationships and the strength of the outcomes that we deliver from those customers will grow our business. I think, as I mentioned earlier, however, you know, at the beginning of last year, we really were focused on a mid-market that has a high volume of customer count. And, you know, not coincidentally, the mid-market was, I think, a little, you know, harder hit by COVID, which is why we reappropriated a lot of the resources. But I also think the final thing for Q4, I think this team, just from what I know, the folks that I talked to, you know, pretty much every day across the field. They're focused on closing out the Q4, closing out with the comp plan that they knew, the quota that they knew, and getting to accelerators and a little less so in adding new customers.
spk10: Yeah, and Chris, look, I would add, you know, two pieces. One, focusing on the global 2000 where we see net expansion rates, you know, of north of 132% as well as much lower churn rates, I think just makes a lot of sense. We've talked for, you know, quite some time about, you know, continuing to focus on, you know, those accounts that have the greatest propensity to spend. And I think if you look at the larger organizations that, you know, I think we are going to see better targeting of, there's just, I mean, that is the lion's share of the opportunity that we're going after. And so, you know, while, you know, it may result in a slower total customer growth over time, I think it actually represents a much more significant opportunity to the business. And more importantly, I think, a more tangible opportunity to the business.
spk12: Yeah. Great. Thank you very much. Thanks, Chris.
spk00: Next question, Koza Rishi Jalori with DA Davidson. Please go ahead.
spk09: Hey, this is Philip on for Rishi Jaluria. Thanks for taking the question. So appreciate the commentary on four-year outlook. I was just wondering if you could dig a bit deeper on some of the assumptions at play there on revenue and the macro environment. So it would have felt the last nine months of 2020 would be providing a relatively easier comp. I'm just trying to balance that with your expectations on the improving macro environment. So just Any incremental color you can share there on what's driving your revenue growth expectation for the year would be really helpful.
spk10: Yeah, no, that's a great question. Appreciate it. So let's take, I guess, two pieces. I want to go, you know, back and just kind of reiterate, you know, how we're thinking about, you know, ARR separate and distinct from revenue because I think there's separate dynamics there. You know, as we think about ARR again, you know, we have the obvious benefit of understanding what, you know, the renewal base looks like going into the year and We clearly have, you know, historical net expansion rates and what that typically looks like. And then, as I mentioned, the go-to-market changes that we think will be meaningfully accretive as we go through the year. I think as we continue to focus on, you know, driving, you know, ACV and annual value within our accounts, from a revenue perspective, if you think about the inputs and what drives revenue, you know, one of the sensitive inputs, ultimately, is contract duration. As I mentioned in my prepared remarks, I think we'll probably continue to see contract duration pull in a bit, and that ultimately will drive lesser revenue. So I agree from a comp perspective, just looking at revenue in a vacuum, you know, it probably is an easier comp in 2020 than it was 2019. But I think what you're going to find from a you know, kind of a normalized underlying growth rate that the business is going to accelerate. Very helpful. Thank you.
spk00: Next question, Brad Sills with B&A Securities. Please go ahead.
spk03: Oh, great. Hey, guys. Thanks for taking my question. I wanted to ask a question on – hey, there. How's it going, Mark? I wanted to ask a question about the visualization cycle. I know that it's just one use case for Alteryx, but it is a key use case. Salesforce is talking about wall-to-wall deployments of Tableau. Microsoft is seeing Power BI expansion opportunity. It seems like that's a trend within the visualization industry that we're seeing more of these big expand deals. What's your observation, Mark, on that industry and that cycle? You know, how would you grade Alteryx in terms of getting into some of these bigger expand deals that these companies are talking about? Thank you.
spk07: Yeah, you know, Brad, I think the expand deals that we're focused on, I think, you know, like Viz is one layer in a very, very, like I said before, fragmented set of vendors in the supply chain of what goes into, you know, applying data science and analytics to to the disparate data sources that you have. I think what we're focusing on is just selling those meaningful outcomes that people are prioritizing. Because I'll tell you, they're not prioritizing campus-wide LAN upgrades or WAN upgrades. They're not prioritizing new laptops for everybody. They're prioritizing things that are gonna help their business be more successful now. And that's what we're really focused on doing. We're gonna partner with Yeah, we've been partnering with Tableau for a long time. They make a great biz layer, and most of our customers are great Tableau customers, and we're thankful for that integration. So I think the opportunities to do more in this space go in a little bit of a different direction, Brad, but we're really not ready to talk about that yet. We will for sure talk about that in the spring.
spk10: Yeah, and Brad, I'd just add a couple more points of perspective. You know, visualization is fundamentally driving, you know, descriptive analytics. And when you think of some of the core advantages of the Alteryx platform, one of those is automation, and the other is that we connect to everything. And so being able to automate your analytic, you know, pipelining, if you want to describe it that way, or, you know, really, you know, automating analytic outcomes and informing downstream systems to make decisions, generally is, you know, beyond visualization. And so a lot of the use cases and the value that we're providing to customers isn't just that. It's business insight. It's business outcome. And a very small part of it is actually visualization.
spk03: Got it. Thanks so much, guys.
spk10: Yeah, thank you very much.
spk07: Take care, Brian.
spk00: Next question, Mark Murphy with J.P. Morgan. Please go ahead.
spk06: Oh, hey, this is Benjamin. On behalf of Mark, hey, everyone. Thank you for taking our questions. Kevin, quick question following up on Chris Merwin's question. Is it possible to understand the opportunity within the G2K in terms of what percentage of revenue is it today? What's the current penetration within the base of G2K customers that you have today? And also, does it mean, focusing on G2K, does it mean an over-indexing of investments in international regions going forward?
spk10: Yeah, great question, Pendulum, and happy New Year to you as well. Look, I mean, we have, you know, just shy of 40% of the global 2,000. You know, I think I mentioned in the prepared remarks we have 763 of those accounts. You know, net expansion rates in that cohort of customers is 132%, so, you know, quite a bit stronger than what we see in the overall customer mix. And look, we're not just only focusing on Global 2000, but, you know, the largest customers around the world who have the largest propensity to buy and expand. And so I think if you look at it in that perspective and contrast it to kind of what a more traditional, you know, standard enterprise customer would do, I mean, it's kind of an obvious ultimate decision there. In terms of your question about international, We are orientating the global organization to really focus on those large opportunities, and where they exist internationally, you know, we will invest heavily in capturing that opportunity.
spk06: Understood. Thank you.
spk10: Thank you.
spk00: Thank you. We are out of time. I would like to turn the floor over to Mark for closing comments.
spk07: Thank you, operator. In closing, I would like to thank our associates, partners, and customers, as well as our families, for incredible support and resilience in 2020. I expect 2021 is going to be the transformational year that we'll look back upon a year from now, maybe two years from now, and reflect in amazement as to just how far we've come for our customers, our partners, associates, and for our investors. The market's moving very fast, and we plan to seize the opportunities in front of us and solidify our position as a leader and a winner in this very important space.
spk00: This concludes today's teleconference. You may disconnect your lines at this time, and I thank you for your participation.
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