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spk12: duration of our subscription agreements will continue to shorten. And third, we assume that approximately 40% of TCV booked in the quarter will be recognized up front, with the remainder recognized ratably over the time of the contract. I'd like to remind you that our guidance is subject to various important risks and cautionary factors referenced in our call today and in today's earnings release. For Q3 2021, we expect to end the quarter with ARR in the range of $572 million to $575 million, which represents year-over-year growth of 27% to 28%. We expect GAAP revenue in the range of $121 million to $124 million, which represents a year-over-year decrease of 4% to 7%. We expect non-GAAP operating loss to be in the range of $17 million to $14 million, and non-GAAP loss per share of 21 to 18 cents. This assumes 67.5 million weighted average shares outstanding. For the full year 2021, we now expect GAAP revenue in the range of $520 million to $530 million, which translates into year-over-year growth of 5% to 7%. We are maintaining our full year ARR guidance and expect to exit 2021 with approximately $635 million of ARR or approximately 29% year-over-year growth. We expect our non-GAAP operating loss to be in the range of $15 million to $5 million. Our non-GAAP net loss per share is expected to range from 26 cents to 12 cents. Our non-GAAP net loss per share assumes 68 million basic shares outstanding. Finally, we expect an effective tax rate of 20%. In summary, The transformation journey we began at the beginning of the year is showing positive results, and we believe that the operational plan we are executing to will allow us to achieve $635 million in ARR or 29% growth for the year. We have a great team, 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 to questions. Operator?
spk14: At this time, we will 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'd 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. One moment, please, while we poll for questions. Our first question is from Michael Turvis with T-Bank. Please proceed with your question.
spk09: Hey, guys. This is Eric Ethon from Michael. Congrats on the strong quarter of ARR. Just wanted to ask on duration. You know that it's shortening given the change in sales comp, but just wanted to ask if it was purely due to the sales comp change or if you're potentially seeing any impact in customer commitment levels just as they await the rollout of Designer Cloud.
spk10: Hey, Michael. That's Mark here. Thanks for the question. Yeah, really on the customer front, what we're hearing is, first of all, real joy that we're innovating in a manner that's consistent with the kind of feedback that we've been getting from them in the last year or two. And really nothing else different other than that. I think we're continuing to work strongly with our partners, both on the tech side and the distribution side. And yeah, I feel really good about where we're going.
spk12: Yeah, maybe just let me add, I think what we're seeing is you know, as we got through the year, you know, I think customers are increasingly adopting an annual cadence to, you know, how they're buying subscription software. And I think that's certainly what we've experienced. I wouldn't attribute any of this to, you know, any other factor.
spk09: Got it. That's helpful. And then I just wanted to touch on kind of the G2K side. It's an increased focus for you guys this year, but it looks like it might have dipped a little bit from last quarter. So could you just walk us through maybe why that was and if it was purely related to sales attrition?
spk12: Yeah, so we maintain 39% of the Global 2000 for the quarter. The list of Global 2000 does get updated on about an annual basis, and so we did go through a refresh of that, which resulted in a handful of lesser accounts. But I want to emphasize, I mean, we have 39% of the Global 2000 and they represent net expansion rates of 129%. So there's a massive opportunity of expansion within that customer segment.
spk09: Got it. Thank you. Thanks, Michael.
spk12: Thank you.
spk14: Our next question is from Brent Braceland with Piper Sandler. Please proceed with your question.
spk05: Thank you, and good afternoon. It's encouraging to see the $35 million sequential build in ARR and stabilization in ARR growth to 27%. I guess my first question is actually for Paula, if I could. I know it's only been four months for you here, but I would just love to hear, one, what attracted you to join Alteryx after 20 years in sales roles at Cisco SAP? And two, what are your early observations on the go-to-market strategy and some of the refinements that you're making?
spk00: Thank you, Brent, for the question. I have been listening quite a bit since my time joining here, listening to customers, to partners, to our team, and to our loyal community at a global level. And before I joined, I was really attracted to the fact that customers like the ease of use of our platform and the business impact that it delivers. Since joining, I've been incredibly inspired to find out just how much they really do love us. And in those conversations, I've seen a couple of emerging themes that I think are really indicative of the opportunity that we have ahead of us. The first is relative to the automation appetite in departments like finance and supply chains. So a number of other departments like sales and marketing and engineering have enjoyed modern tools and AI and upscaling for a number of years. But I think the automation opportunity in finance and supply chain in particular is at the forefront right now, which is really positive. And then secondly, we see close to half of our customers right now appointing chief data officers whose remit is to marry the business strategy with the underpinning data and analytics strategy. So I think both of these are really great validations of the Alteryx opportunity. So I'm thrilled to be here. I know with the go-to-market strategy that we launched at the beginning of the year that we have a great opportunity ahead, and I'm very confident in our ability to seize that large opportunity.
spk10: Yeah, Brent, if I can just add to that. You know, I've onboarded a lot of execs in my career over the last 20 years, and I can tell you I've never received the kind of internal response from our associates around the world just on the interaction that they've had with Paula. It's been amazing.
spk05: Great to hear and look forward to hearing more from you in the future, Paula. I guess just one quick follow-up for Kevin relative to kind of these discounts. So when did you change kind of the discounts being offered on three-year contracts? Was that in kind of January or more recently in April at the beginning of this quarter? And then was there also a change to sales commissions paid on one-year versus three-year contracts?
spk12: Yeah, thanks, Brent. Appreciate the question. The changes specific to discounting and one versus three was made more recently. And so, you know, we're certainly expecting that to play a factor as we look forward into H-2. The question around comp alignment just in general, I mean, we have orientated the company, including the sales organization, on ARR and, in particular, ACV. So I'm not surprised to see that manifest itself in contract duration as well. I think the point that we were just emphasizing is we are seeing it come down a bit faster than we had anticipated, but it's coming with the positive result that we're seeing better ACV as a result.
spk05: Got it. That's all I had. Thank you.
spk12: Thanks, Brent.
spk10: Hello, operator, can you hear us?
spk01: Hello?
spk10: Yes. Hi, operator, can you hear us?
spk14: I apologize, just going through some technical difficulties on my end. Our next question will be from Jack Andrews with Needham. We may proceed with your question. And also, as a reminder, we do ask everyone to please limit themselves to only one question.
spk13: Good afternoon, and thanks for taking my question. I was wondering if you could speak to... And given the early beta feedback in terms of your cloud product, could you speak to any changes in your sales playbooks that you think you might need to implement with the looming launch of this product?
spk10: Hey, Jack, I'll kick it off and I'll hand it over to Paula and perhaps Suresh, but Yeah, listen, I think we've approached this beta process really with the intent of listening to, you know, deeply to customers in terms of how they want to consume what we think is incremental innovation and what personas we want to sell to and how we're going to charge for it. Really excited about how the beta is going. And I don't see a big difference in our sales playbook per se because, Listen, I think over time you're going to see more and more innovation being cranked out from Suresh's R&D organization that's going to allow us to deliver much more customer value to our customers with partners and with our customers. And so it's really not that big of a change in the playbook, but Paul, you might have some context.
spk00: Yes, our conversations with customers around our cloud solution is that they see it as an opportunity to expand the accessibility to the innovation that we offer. and really build upon the success that we're having with them and the investments that they've already made in the on-prem solutions. So we're really encouraged by the opportunity ahead with cloud and envision that many of our customers will operate in a hybrid environment for years to come.
spk13: I appreciate that. If I could just ask a quick follow-up question to Kevin. You mentioned your guidance assumes that duration will continue to shorten Do you mean that that should shorten below the 1.5 that it currently is?
spk12: Yeah, my comment, thanks, Jack, during my prepared remarks is that, you know, we are seeing contract duration dip below the 1.5, so it's reasonable to assume that that could happen, you know, as we go in the back half of the year.
spk05: Thanks very much.
spk12: Thanks, Jack.
spk14: And our next question is from Tyler Radke with Citi. Please proceed with your question.
spk03: Hey, Mark. Question for you. I think one of the things you talked about when you joined the company as CEO was just around removing friction and making it easier to do business with Alteryx. I know there's been a lot of changes on the go-to-market side, but where do you think you are in that process? Do you feel like you've been able to kind of unlock some deals that were – held up and how are you thinking about that for the back half of the year?
spk10: Yeah, Tyler, thanks a lot for the question. Yeah, for sure. I think friction is our enemy in technology these days. And I think more and more customers are doing much of the research and even beginning sales cycles without interacting with the human being. And so I think that was one of my big drivers in bringing Suresh Patel on board to run a you know, product management and engineering for us because his experience at Adobe, you know, having walked a mile in these shoes, it was unrivaled, frankly. So, you know, what we've seen as proof points so far, Tyler, are, you know, checked out our website, a significant improvement over kind of where we were late last year. Also, our time to download of our trial version has come down substantially. And then, and I think also, as I think about the, you know, close to 300,000 zealots that are members of our community, take a look at the community site and you've seen how we've reskinned that just in the last few months. And it's much more interactive, much better quality, I'd say, time. And we're seeing the attention span and the growth of our community expand as a result of that.
spk03: Great. And just a follow-up on the sales attrition here. I mean, Do you feel like we've kind of worked through the majority of it? I know you said you've seen it kind of continue here into Q3, but how much more, I guess, downside is there? And just from an overall productive sales capacity level, are we kind of at a level that was lower than entering Q2? Maybe is it comparable to a quarter that you saw 12, 16 months ago? Just any color on kind of where the ramped. productive capacity is relative to prior quarters. Thanks.
spk10: Yeah, you bet, Tyler. Thanks for that question as well. Yeah, listen, I think our sales team prior to last year or prior to this year was focused on a different set of imperatives, and the transformation that we're doing in go-to-market is really aligning the right resources to focus on mostly larger customers, G2000 and above type customers. And then we've augmented those resources with significant doubling down of our customer success organization so that we can really earn the right for permission to do more, earn the permission to do more and expand. I think we're, you know, I think we were surprised, frankly, with the sustaining of attrition through June and July. But that said, you know, it's been a six-month process in terms of the levers that we're pulling to work on mitigation here. And I think we mentioned those in the script. But, you know, most importantly, we brought on a tremendous resource to focus on enablement to make sure we're teaching the right lessons to the right people in the right roles. and really focus on refining our overall marketing messaging and branding so that we're not the best kept secret in analytics any longer. We're really proud about the innovation that we've built, the pioneering that we've done in this space, and most importantly, what we're going to do for customers in the future.
spk14: And our next question is from Koji Ikeda with Bank of America. Please proceed with your question.
spk06: Hey, Mark. Hey, Kevin. This is Koji. Thanks for taking my questions here. Just another question here on contract durations and the total guidance revision here for the full year. You know, thank you, Kevin, for all that explanation. I think I understand the puts and takes there with the contract durations and how it's affecting revenue. But I guess maybe it could help a little bit more if you could talk about, you know, taking the midpoint of the guide here. It looks about a 45 million total revenue guidance cut. You know, maybe if you could just kind of bifurcate that and talk about, you know, how much of that is being affected by contract durations and then from the elevated sales attrition.
spk12: Yeah, thanks for the question. I appreciate it. So, in my prepared remarks, I tried to provide some quantification of how contract duration and its movement impacts revenue. So, you should, you know, kind of rule of thumb at this scale. And, you know, a movement of one-tenth of contract duration has about a $10 million effect on revenue. So, if you look at that relative to the commentary going from 2.0, you know, to potentially sub-1.5, You know, we're seeing a meaningful impact on the forward guidance relative to duration. You know, a secondary factor certainly is attrition that, you know, that we've talked about. However, we are certainly encouraged by this, you know, the second quarter of productivity improvements that we've seen. So I would point you to contract duration as being the primary driver.
spk06: Got it. Got it. Super helpful there. And just one follow-up, if I may. just thinking about contract duration and how it's affecting revenue, you know, I guess how does that affect the way we should be thinking about 2022? Or maybe the better question is, you know, how long should we expect contract durations to affect revenue growth? And with Designer Cloud coming into the story pretty quickly here, how do we think about contract durations with the Designer Cloud product? Thank you for taking my questions.
spk12: Yeah, thanks. I would say this, you know, As I kind of said in one of the earlier responses, I think it is becoming more typical of larger enterprises to get into this buying cadence of once a year. And so I would suggest that we're going to start to see a new normal with slightly shorter contract duration. As I said in my prepared remarks, we're certainly going to see customers continue to elect multi-year and we'll continue to offer those for those customers. But on the whole, I think the sales motion is going to focus on, you know, capturing and maximizing the value that we're offering to customers and the ROI that they're achieving. So I would think that we're going to start to see a new normal as we get into the end of this year relative to duration. But, you know, we'll continue to update you over time as we see changes.
spk06: Got it. Thank you for taking my questions. Appreciate it.
spk10: Thanks a lot, Koji.
spk14: Our next question is from Derek Wood with Cowan and Company. Please proceed with your question.
spk02: Oh, great. Thanks. I guess maybe to Kevin on the sales attrition, it sounds like new hiring has been strong, and I'm just curious if you've been able to kind of more than offset the attrition. And maybe you can just give us a sense for how much sales capacity is up year to date or kind of where you'd like to be by the end of the year.
spk12: Yeah, thanks, Derek. I appreciate the question. We, you know, as Mark mentioned in his prepared remarks, we had the strongest hiring quarter ever this last Q2. And so that's super encouraging when we think about, you know, we are going through, you know, a transformation and we are hiring, you know, as we're investing heavily for growth. And so attrition is You know, it's slightly more pronounced when you're going through these growth and investment cycles than it would be if you're just trying to maintain headcount. So I think that's an important context as we think about, you know, setting up for, you know, certainly for next year. We are hiring, you know, continuing to hire at a very rapid pace. You know, as Mark mentioned, you know, we've doubled the size of the recruiting team. We're continuing to double down on how we enable and send our reps out into the field and, you know, instilling really a culture of transparency, feedback, and coaching, which we think is resonating across the organization. So there's a lot of, you know, aspects to attrition and hiring that we're focused on, and we hope that, you know, as we go through Q3, we're going to see, you know, continued strong hiring.
spk10: Yeah, and Derek, if I could just, you know, add some context there. I think We're also hiring extremely high-quality salespeople who want to come here and build a career at Alteryx in a really important space that has long-term viability. And this isn't my first rodeo in terms of building out go-to-market teams that are focused on expanding TAM and prosecuting it. The productivity of Many of the new hires that we've hired have jumped in and gotten very productive very quickly. I'm thinking of one young fellow in Detroit that is doing an amazing job for us from day one. And there's many out there like him, believe me. So we're very much focused on sales capacity and what that means to the overall business. And we're working hard to get better at predicting things.
spk02: Yeah. And on that, Mark, I mean, you mentioned in the press release that, you know, you've seen significant momentum in your go to market strategy. And I just I'm just curious if you could unpack that a little bit more between the direct and the indirect side. And I mean, on the direct side, you hope that like that you'll start to see lower sales cycles, better close rates. Are you starting to see that with the productive reps? If you could just unpack a little bit more, that'd be great.
spk10: Yeah, you bet. Remember, I think we weren't naturally a partner-led organization last year. I think the pressure that we've got from large Tier 1 GSIs like Accenture, what we announced this quarter, KPMG, as well as the relationship with HCL and TWC, we're teaching our people how to work with these partners and drive these big transformation projects. And so I think the productivity is going to be a function of you know, elevating the enablement across the board of the team and really getting the leverage from these partners in these bigger deals.
spk02: Great. Thank you.
spk10: Yep. Thanks, Derek.
spk14: And our next question is from Camille Mills of Direct with William Blair. Please proceed with your question.
spk08: Hi. Thanks for taking my question. In your full year guidance, you're making strong year-over-year growth and net new ARR in the fourth quarter. Can you talk about your level of visibility at the back half of the year relative to prior years and how much of this growth is currently in contract and how much is dependent on factors like improving macro or improving sales productivity?
spk12: Yeah, thank you for the question. So, you know, as I mentioned, you know, we are expecting and continuing to see you know, continued improvement in the macro, which is encouraging. We've seen, you know, continued improvement in productivity, you know, that is a direct result of, you know, the changes we've made in the go-to-market and how Paul is now driving that team. And all of that, you know, combined with what we see from a pipeline perspective is certainly informing our view. I would remind you that seasonally Q4 is our strongest quarter of the year. We have the largest concentration of renewals in Q4, which is a great opportunity and a strong opportunity for us to expand with accounts. So it is pretty seasonally consistent with what we've seen in prior years. So I don't see anything that's out of trend.
spk08: Okay. It's good to hear and nice to see the improving retention rates. And if I could just quickly follow up, can you give us an update on the competitive environment? Have you seen any changes in win rates or changes in who you're seeing on deals?
spk10: Yeah, Camille, sorry, there's no story there really. I think the competitive landscape, there's a lot of companies out there, 400 plus companies in this space. I think more coming on and getting funded every month. But we're pretty pleased with where we sit in the competitive stack with such an avid followership with our community as well as the volume of customers that we have. And we're really focused on making the very most of that. for their benefit, by the way, because I keep hearing from customers they want fewer vendors, less complexity, more automation, and that's what we're focused on innovating and building.
spk07: Mark, if I can add, our customers are solving a broad array of problems in the analytics landscape. They're working against cloud data warehouses. They're investing in AI and ML. They're doing lots of work around data management. And so we have a bird's eye view of all the use cases that customers want to solve and we're excited about the opportunity.
spk08: That's great to hear. Thanks again.
spk10: Yep, thanks Kamil.
spk14: Our next question is from Calvin Patel with Morgan Stanley. Please proceed with your question.
spk04: Hi all, this is Calvin on for Sanjit. Thanks again for taking my question. I just have one for you guys. With durations coming down, I was wondering how confident are you in the gross retention rates maintaining such high levels next year, given that the renewal cycles will shorten a bit? And are the new use cases that you're seeing similarly sticky to prior years, or are you expecting maybe some... some edge cases where renewal rates or churn could increase?
spk12: Yeah, it's a great question. I mean, I'll start and, you know, others can jump in. You know, we've enjoyed, you know, very strong, you know, both net retention and gross retention, you know, for quite some time. And I think the question you're asking around stickiness is important. I mean, when you think about a customer environment, you know, deploying hundreds or thousands of workflows, automating through server, We become the analytic fabric of that organization, and the ability for those customers to find competitive replacements is incredibly difficult. So I think if you look at how strategically important we are for these customers that have taken advantage specifically around automation and operationalizing analytics, I don't have a concern that we're going to see a dislocation as a result of duration pulling in.
spk00: And I would add to that that, you know, if maybe in previous years you were looking for the one or two use cases to validate our value proposition, it's really flipped with customers' conversations where, you know, especially with putting Chief Data Officers in place, it's about how do we see hundreds of use cases across our organization. It's really about how we drive access to analytics and bring in the full wherewithal of the employee base into that culture of analytics. So customers are seeing the multitude of these cases.
spk04: Awesome. Thank you very much. Thanks, Calvin.
spk14: Our next question is from Mark Murphy with JPMorgan. Please proceed with your question.
spk01: Oh, hey guys, this is Benjamin sitting in for Mark. One question for Sirach on the cloud designer. I was thinking back and I think I remember Alteryx's Secret Sources, I think about it as the engine that kind of rapidly ingest and analyze huge swath of data within a very small memory framework. So with that context, when you have the cloud designer, how What are you seeing with respect to performance? Is there any telemetry that you're getting with the cloud design and performance versus the desktop product? And then the second question for Kevin, if I understand the math correctly, I think you're saying that because of less discounting AR, ACV is about 30% higher. So if you think about the annual ARR, what kind of a benefit do you think that particular dynamic will result in terms of the growth rate this year?
spk07: Maybe I'll take the product question first, and then Kevin can take the growth question. So on the performance of cloud designer versus desktop cloud, we're actually getting really strong feedback on the ability of the engines to scale. And naturally, cloud gives us that additional flexibility of standing up compute when we need it for those workflows. We're getting lots of strong feedback on the interactivity of the browser-based interface. on some of the innovation we've added into the core product that allows our users to kind of map the workload before it happens. So lots of great opportunity to innovate in cloud, which is primarily why we wanted to go there and really take advantage of all the capabilities cloud gives us. Really strong feedback on the product, really strong feedback on the performance. And really, I'm bullish about Cloud Designer as being built for these cloud-scale workloads. That's what we're going after, and the product's kind of fulfilling that need right now.
spk12: Yeah, let me answer, I guess, the ACB ARR question. I mean, it's hard to quantify specifically what the impact of, you know, the three-year to one-year is, other than to say, you know, our ARR guide for the year implies 29% year-over-year growth, which is an acceleration from what we've seen in the first half. And so it certainly is a you know, catalyst in helping our growth rate as we get into the back half of the year. It also, you know, is just, I think, a function of better aligning, you know, the cost of Alteryx and the value that customers receive.
spk01: Understood. Thank you.
spk12: Thanks, Benjamin.
spk10: Thanks, Benjamin.
spk14: And again, as a quick reminder, if you have any questions, you may press star 1 to join the queue. And our next question is, is from Steve Koenig with SBC. Please proceed with your question.
spk11: Hi there. Thank you. It's SMBC. Hi, Alteryx. I appreciate the chance to ask your question. If I could just proceed with the clarification. Kevin, when you quantified that impact in the declining duration, is that a $10 million forward 12-month impact? And then I'll just put my question out there as well, which is also about the math. I know you don't guide to cash flow, but how should we think about the cash flow impact of the declining duration? You know, are most of the multi-year contracts paid up front so the cash flow impact should be proportional to the revenue impact? That's all I have. Thanks very much.
spk12: Yeah, thanks, Steve. And let me go ahead and wrap up these two. With respect to the duration, the one-tenth and $10 million was for the annual period of this year. Obviously, you know, depending on size and scale and the uniqueness of a particular quarter, it could be a little bit different. But I wanted to quantify for what we're seeing this year. So that's for 2021. And then finally, with respect to cash flow, as a reminder, our multi-year contracts are generally paid one year in advance, similar to an annual subscription. So the pull-in of duration should not have any impact on cash flow. Thank you.
spk11: Great. Thanks a lot, Kevin.
spk10: Thanks for the call.
spk14: And we have reached the end of the question and answer session. I'll now turn the call over to Mark Anderson for closing remarks.
spk10: Thank you, Operator, and thank you all very much again for joining us on the call today. I'm very confident in our team, our partners, and the massive opportunity that we had ahead of us. I'm looking forward to seeing some of you on the upcoming conferences in which we'll participate, and I look forward to speaking to you all again next quarter. Take care.
spk14: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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