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spk18: Greetings, and welcome to AlterX second quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, you can start and zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host. Ryan Goodman, Head of Investor Relations.
spk16: Thank you, Operator. Good afternoon, and thank you for joining us today for Alteryx's second quarter 2022 earnings conference call. I'm Ryan Goodman, Alteryx's Head of Investor Relations. With me on the call today are Mark Anderson, Chief Executive Officer, and Kevin Rubin, Chief Financial Officer. Additionally, Paula Hansen, our President and Chief Revenue Officer, and Suresh Patel, our Chief Product Officer, will be joining us for the question and answer session after prepared remarks. This afternoon, we issued a press release announcing our results for the second quarter ended June 30, 2022. If you would like a copy of the release, you can access it online on our Investor Relations website. During this call, we will make forward-looking statements related to our business. including statements about our financial guidance for the third quarter and full year 2022. These statements are not guarantees of future performance. They are subject to a variety of risk and uncertainty, some of which are beyond our control. Our actual results could differ materially from expectations reflected in any forward-looking statement. 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 our investor relations 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 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 Chief Executive Officer Mark Anderson.
spk17: Thank you, Ryan, and thank you all for joining us on the call today. We delivered a great Q2 with annual recurring revenue, or ARR, of $727 million, up 33% year-over-year, and revenue of $181 million, up 50% year-over-year, both exceeding the high end of our guidance range. We are seeing healthy demand trends as evidenced by a multi-year high for our renewal rates and solid year-over-year growth in pipeline generation. Our value-driven sales motion is resonating in the current market environment, and sales execution continues to be strong. In fact, in Q2, we closed our two largest ACV deals ever. I spent much of the last quarter traveling to visit customers, partners, prospects, and our people. Across all three geographic theaters, customers are asking for our help to democratize access to data and use analytics across all areas of their business. At every meeting, a high priority of this critical need was apparent. Companies and governments are realizing that manual processes must be automated and data analytics needs to be fully leveraged. Having a third party come in and do this can only be a short-term solution. Enabling one's knowledge workforce is the only viable long-term answer. As businesses look to optimize profitability and streamline supply chains in the face of uncertainty, they are increasingly looking to leading platform solutions like Alteryx to drive forward their automation and analytic initiatives. I'll begin with some highlights from the quarter and then provide updates on the market opportunity, our go-to-market strategic initiatives, and our platform innovation momentum. Kevin will then provide more details on the Q2 financial results. First, some highlights. We hosted our Inspire user conference in May with well over 4,000 attendees. It was so energizing to engage with our growing community of users and partners where we saw strong validation that data analytics are now table stakes to effectively compete, enhance performance, and navigate the current macro environment. On the go-to-market front, we expanded on the early success we've seen with our ELA strategy by introducing a new cloud ELA in June. We believe this will provide companies with a frictionless path to more broadly leverage cloud opportunities within the Alteryx analytics platform. We also rolled out our updated partner program, which is already having a positive impact on both ecosystem expansion and field-based engagement. We had a productive quarter of innovation as well, with particular focus on enabling scale with governance. We announced a new version of Alteryx Designer aligned with Federal Information Processing Standards, or FIPS, which opens up a large addressable opportunity for us in the public sector. And for cloud, we introduced Designer Cloud powered by Trifacta at our INSPIRE user conference. This all ties back to our core mission of empowering every person to transform data into a breakthrough. We're committed to driving this democratization on a global scale with low-code, no-code automation of advanced analytic workflows and operational processes. Our rapid innovation is creating new use cases for new personas, and our go-to-market strategy enables us to effectively scale our ability to support our customers and capture the large market opportunity ahead of us. We think of this addressable market across three components, potential users, tangible budget, and underlying business demand. On the first item, potential users, our commissioned study with IDC indicates that there are roughly 80 million advanced spreadsheet users wasting more than 60 billion hours annually on manual and repetitive data analytic tasks. This creates a growing pool of potential citizen data scientists who would benefit from Alteryx's low-code advanced analytic and automation capabilities. As for tangible budget, according to IDC, roughly $65 billion is spent on data analytic tools today, and that number is expected to grow to over $110 billion by 2025. I'm increasingly hearing from customers that analytic enablement for the masses is one of the top two budget priorities today. And third, business demand, which brings it all together. Digital transformation is unlocking a vast amount of data and opportunities, and business leaders increasingly require solutions that empower all employees to leverage this data. As for how we address this market opportunity, we've defined our go-to-market strategy across three pillars. enterprise, partners, and customer success. We continue to see success with our amplified sales focus on larger enterprises. We've effectively upscaled our enterprise-focused sales force by adding many well-tenured reps that bring over a decade of enterprise sales experience coming from multibillion-dollar software companies. The quality of our wins speaks for itself. We had a record Q2 for number of $1 million-plus ACV deals. which more than doubled compared to Q2 last year. We added many new Marquee Global 2000 customers, including Aramco, Orange, Suncor, Lithia Motors, and MongoDB, to name a few. Our penetration into the Global 2000 is now at 46%, up seven points year over year. With a global 2000 net expansion rate of 128%, we believe these large enterprise wins provide us with a long runway of opportunities for years ahead. We had a fantastic expansion win with a major pharmaceutical company in Q2. This multi-year customer increased their designer implementation by over 60% to 2,500 users. Plus, they added several hundred intelligent suite licenses and Alteryx machine learning. The company is leveraging Designer to orchestrate data management, optimize supply chain management models, and more effectively calibrate pricing and merchandising decisions. And now, with the addition of cloud-delivered Alteryx machine learning, business users can explore new use cases, such as predictive modeling analysis that can be leveraged across the organization. We're also seeing impressive momentum with our ELA strategy. We believe ELAs provide a more flexible path for new customers to embrace the Alteryx platform and for existing customers to explore more broad-based implementations. Now that digitization and automation are being prioritized, we are meeting the needs of our customers' accelerated transformation agendas. We introduced our cloud ELA near the end of the quarter, and it's already garnering strong interest. We believe this sets us up for positive expansion momentum for renewals for the coming year. Our ELA structure enabled a great win with BDO, a leading professional services firm. The ELA construct allowed BDO to approach analytics with a more comprehensive enterprise-wide strategy. This led to a better realization of potential ROI capture across multiple lines of business and ultimately drove a quadrupling of their Alteryx implementation. As for the second pillar of our go-to-market, our partner ecosystem, it's enhancing our ability to rapidly scale our market reach. We rolled out the updated partner program early in Q2 to better empower this community to effectively bring Alteryx solutions to global markets, deliver value-added services, and elevate user engagement. We subsequently saw an increase in new partners joining the program, including marquee organizations like Presidio, and partner engagement which contributed to strong growth in partner sourced new bookings. We continue to see many of our partners embracing the solutions as customers. One of our larger partners renewed this quarter across a multi-thousand user implementation, now with additional Alteryx offerings. We view this deepening engagement by our leading partners as a strong endorsement of the value Alteryx provides and as a validation that breakthroughs can come from anyone. I dropped by a new hire orientation for this partner in June, up in Canada, where Alterix training was embedded into the curriculum. We trained over 200 new hires to use Designer in their day-to-day roles for this important customer and partner. Our partner community is also one of the key contributors to our third go-to-market pillar, customer success. We are committed to ensuring our customers fully leverage our solutions and unlock a positive return on their investment. Active customer engagement often feeds future upsell with new use cases and new personas. The magnitude of this opportunity is even more prominent in large enterprise companies with ELA's. A great example of this is with Chemours, a global specialty chemicals company, which began with a smaller implementation of designer. In collaboration with one of our partners, we hosted nearly 100 enablement sessions and weekly user groups examining business processes and exploring opportunities to automate and optimize with Alteryx. The teams ultimately came up with some innovative workflows enhancing inventory management and forecasting, resulting in a more pervasive ELA with over 250 designer users plus intelligence suite. While scaling our go-to-market reach, in parallel, we are rapidly innovating our platform offerings and capabilities. Cloud is a key focus on our innovation roadmap, and we are making solid progress integrating our portfolio of offerings onto Trifacta's well-established cloud architecture. At Inspire, we announced Designer Cloud powered by Trifacta, which accelerates the integration of Trifacta with designers' industry-leading user interface and capabilities. We are proud to have an early version of this offering available to customers so quickly after the close of the acquisition. Over the coming quarters, we plan to layer in incremental designer functionality and adjacent platform integrations with Alteryx Machine Learning and Alteryx AutoInsights. It's early days and we're pleased with the significant customer traction in our Alteryx Analytics Cloud. It's been such a thrill to see our customers embracing cloud offerings as they empower new users with new use cases. We're also finding that the addition of our cloud solutions in many cases expands our abilities to secure designer wins with larger enterprises. A new customer embracing both our flagship solutions and cloud is Medallia, a global leader in customer and employee experience. In addition to leveraging designer to optimize analytics across marketing, sales ops, and finance, Alteryx Auto Insights will provide business users with AI-driven, real-time insights across the organization. We're also seeing early adoption of cloud with several existing customers upon renewal. For example... A leading recreational sport retailer both expanded its designer implementation and added Alteryx Auto Insight capabilities across its stores. By leveraging the two solutions together, the customer will empower business leaders, district managers, and store managers with fast, AI-driven insights on key workflows such as sales trends and inventory management. As for our flagship solutions, we announced several UI and governance enhancements at Inspire, along with expanded partnerships with Snowflakes, Databricks, and Google. Also, we are very excited to have introduced a new designer that is FIPS compliant. This creates new opportunities within the public sector and is a strong validation of our commitment to trust and security in our core solutions. In closing, it was a great quarter, and I'm increasingly confident in the opportunity ahead of us. Business leaders are prioritizing analytics and embracing democratization of data to scale their analytics and upskill their workforces. And with the macro environment serving as a forcing function for businesses to optimize and automate analytics, the market is coming to us with greater urgency and demanding solutions that Alteryx is uniquely positioned to provide. To take advantage of this reality, we've been working hard to train our people, onboard people with the right competencies and experiences, and build partnerships that will last decades. I'm so proud of what the team has accomplished and can't wait to keep up the momentum in the coming quarters. With that, I'll turn the call over to Kevin. Kevin?
spk09: Thanks, Mark. Q2 was a strong financial quarter across the board, with key growth and profitability metrics exceeding our expectations entering the quarter. ARR of $727 million grew 33% year-over-year, above the high end of our guided range. ARR growth would have been approximately two points higher excluding the incremental impact of currency since the end of Q1. Revenue of $181 million grew 50% year-over-year and also exceeded the high end of our guided range. Revenue upside was driven by strong renewal rates as well as a slight uptick in contract duration as some of our larger customers opted for multi-year renewals. Non-GAAP operating loss of $30 million was better than guided, with much of the revenue upside falling through to profitability. We continue to benefit from positive growth trends across customers of all sizes with increasing ARR growth contributions in our large enterprise cohort. In Q2, our ARR growth was led by our $1 million-plus ARR customers. This demonstrates our ability to win with large global organizations, which is where we believe the lion's share of the TAM lives and provides a substantial addressable market for us to grow in the years to come. Our customers with 100,000 or greater in ARR saw an acceleration in year-over-year growth and continue to track well above the total ARR growth. This growing traction with large organizations is driving positive ARR net expansion trends. In Q2, our net expansion rate ticked up to 120%, contributing to a strong sequential increase in average ARR per customer, bringing ARR per customer to 88,000 in Q2. As a CFO that leverages the Alteryx platform across my organization, I can tell you that my team is constantly finding ways to meaningfully improve business performance through the use of Alteryx solutions. With the growing volume of data across the company and the broad scope of analytics we need, the Alteryx analytics platform is a key enabler in our efforts to deliver best-in-class execution. With strong performance on the go-to-market front, we are getting better and better at demonstrating the business value of our platform to our growing customer base. For example, our ELA strategy is especially resonating with our larger customers who value the access to Alteryx's multi-product platform, predictable pricing, and flexibility to seamlessly expand throughout the enterprise. These ELA's are driving substantially bigger deals. New ELAs closed in Q2 averaged approximately $1 million in ACV. We are seeing positive trends with the number of customers leveraging ELAs, customers leveraging flexible burst capacity, and total volume of burst capacity being used. We are just now starting to see the benefits of burst capacity usage converting to incremental ARR. ELAs are proving to be an excellent go-to-market vehicle in terms of nurturing a healthy land and expand cadence with our customers while also improving our forward-looking visibility. We are also seeing positive tailwinds from our expanded partnership coverage. Partnership ecosystem growth and higher partner engagement generated partner-influenced business of approximately 50% of new ACV bookings in Q2. We continue to see partners as an efficient path to rapidly scaling our market reach and customer success initiatives. International markets are also an important growth driver for our business, as we've only just begun to tap into the meaningful opportunity for enterprise growth. We have a strong foothold in EMEA, where we saw an increase in renewal rates and continue to win sizable new customers. We had a great win with 3UK, a British mobile network operator, who initially engaged with Alteryx as part of an ERP transformation project in 2020. In Q2, the customer expanded with 150 user Alteryx ELA to bring Designer to additional lines of business and with expanded capabilities. In Q2, we hired new executive sales leadership in both EMEA and APJ, and we see a meaningful opportunity to catalyze new business growth in coming quarters. I've spent time with both of them and am impressed with their capabilities. The company is establishing a strong track record for durable growth, and this remains a focus given the size of the market opportunity and our differentiated position. We are also demonstrating discipline and rigor in the financial model on our return to non-GAAP profitability. This is demonstrated by Q2 coming in $17 million better than the high end of our guided operating profitability range. We believe this outperformance will enable us to accelerate our path to profitability while also providing additional flexibility to selectively invest where we can generate a favorable ROI. We also see several opportunities to drive incremental efficiencies in the model in years ahead. For example, we saw a double-digit year-over-year increase in Q2 sales rep productivity trends, and we expect productivity to further increase as recent hires continue to ramp. Our growing partner ecosystem provides us additional leverage in our go-to-market motion. And from a cost perspective, with our employee retention at a multi-year high, we have greater flexibility in the pacing of the back half of 2022. In summary, the company is executing at a high level with positive growth trends and improving profitability. Our subscription-based, well-diversified business model has us on solid footing entering the second half. Nonetheless, we are mindful of the current macro environment. We are leveraging Alteryx data analytic capabilities to help navigate the current macro environment and are closely monitoring a breadth of key performance indicators. Pipeline generation is a metric that we track closely. We saw solid year-over-year growth in Q2, resulting in the highest Q3 opening pipeline we've seen in many years. Sales cycles are another key metric where we saw slight improvement in Q2. And finally, renewal rates provide us a clear lens on the market demand, and as Mark mentioned, this was at a multi-year high in Q2. With this backdrop, let's now turn to the outlook. While our visibility remains high and demand remains robust, we are prudently taking into account the macroeconomic dynamics in our outlook. For Q3 2022, we expect ARR to be in the range of $761 million to $764 million, representing year-over-year growth of 32%. Our ARR guidance assumes FX rates remain at the current levels. We expect GAAP revenue to be in the range of $191 million to $194 million, representing year-over-year growth of 55% to 57%. This assumes contract duration tracks more in line with recent quarters at roughly one and a half years. We expect our non-GAAP operating loss to be in the range of $8 million to $5 million. We expect our non-GAAP net loss per share to be in the range of $0.12 to $0.09. This assumes 68.8 million weighted average shares outstanding and an effective tax rate of 20%. For the full year 2022, we are increasing our ARR range to $820 million to $830 million, representing year-over-year growth of 29 to 30%. This is up from the prior growth range of 27 to 29%. We are increasing our GAAP revenue range to $770 million to $780 million, representing year-over-year growth of 44 to 45%. This is up from the prior growth range of 36% to 38%. We expect non-GAAP operating loss to be in the range of $30 million to $20 million, an improvement from our prior outlook for a loss of $40 million to $30 million. While we expect profitability linearity to be mostly consistent with historical trends, our Q3 cash flow will reflect a shift to semiannual payouts for employee bonuses. Finally, we expect non-GAAP loss per share to be in the range of $0.56 to $0.46, which assumes 68.6 million basic shares outstanding and an effective tax rate of 20%. Our non-GAAP EPS outlook incorporates an incremental non-operating FX impact. In closing, Q2 was a great quarter. We demonstrated strong durability in our top-line growth metrics with discipline and balance in our path to profitability. Our value-focused sales motion continues to prove successful in the current macro environment. We've entered the second half of the year with strong momentum, and with incremental growth tailwinds on the horizon, we believe we are well on our way to becoming a billion-dollar-plus ARR company. With that, thank you all for joining us today, and I'll turn the call back to the operator for Q&A.
spk02: Operator?
spk18: Thank you, Phil. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then 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 time set before pressing the star key. The first question we have is from Brent Graceland from Piper Sound Lab.
spk02: Hey, Brent, are you there?
spk18: Apologies. The first question. Apologies. It seems we do not have Brent. The first question we have is from Tyler Yaki.
spk07: Hey, good afternoon. Thanks for taking the question. So maybe just a couple on the ELA motion. So first, if maybe Paul is on the call, what's kind of surprising you most in terms of the upside potential in these ELA motions? I know you talked a little bit about the burst capacity in that converting to ARR, but where's kind of the biggest upside surprise coming? And then secondly, as you look at your install base, how do you just think about the percentage or number of customers where this ELA motion could make sense and how far through that opportunity are you? Thank you.
spk00: Great. Thank you, Tyler, for the question. We're really excited about the quarter's results as well as the role that ELA has played in those results. So, you know, I think the upside for ELA is in a couple of different areas. One is just how it supports our customers with their desired accelerated expansion opportunity, whether it's expanding to more users more easily through the burst capacity or whether it's getting experience with some of the newer products in our portfolio that maybe they haven't worked with in the past. It's both an increase in more users as well as access to a broader set of the portfolio. We see very high utilization across the ELA customers that we've already sold. Well over a third of them are in burst capacity today, and that's even with the increased number of new ELAs that we've added in just the last two quarters. So to be totally honest, I don't see any customer that wouldn't be a great candidate for an ELA. And the customer conversations that we've had have validated that. They like the predictable pricing. They like the ease of use. And they love the access to a broader percentage, a broader set of our products. And now we're really excited about the cloud ELA that we launched in June. Already have our first customer onboarded and several more in the pipeline.
spk17: And Tyler, Kevin likes them because they're much bigger deals.
spk07: I'm sure he's not the only one that likes that. Thanks, man. Yeah. Yeah, go ahead. Oh, yeah, sorry. Just a quick follow-up for Kevin. You talked about some moving pieces on contract duration, and obviously this year we're seeing – a higher upfront revenue recognition. I know it's way premature to think about 2023, but could you just give us a sense on how you're thinking about some of the accounting dynamics and just how we should think about the durability of ARR versus revenue growth next year? Thank you.
spk09: Yeah, thanks, Tyler. So I would anticipate that, you know, over you know, the next, you know, I would say four to six quarters, we're going to continue to see somewhat of a stabilization that we've seen in the last several quarters around the inputs to revenue. There's always going to be some minor fluctuations quarter to quarter, like we saw this quarter with respect to larger customers electing to continue on multi-year contracts, which ultimately provides, I think, more durability to ARR over time. The only thing I would caveat is that As we get further into cloud, into 23 and 24, that is likely ratable recognition so long as we're hosting and providing that service. So that would be the only anticipated change over time that I would anticipate.
spk02: Great, thank you. Thanks, Tyler. Thanks, Tyler.
spk18: Thank you. The next question we have is from . Please go ahead.
spk13: Thank you. Mark, can you hear me now? Yeah.
spk17: Hey, Brent, how are you?
spk13: Good, good. Good afternoon, guys. You know, Mark, I know you've been hard at work overhauling the go-to-market strategy, layering in this customer success team for the better part of the last year. I guess a little surprised to see the pace of improvement, some of the momentum, ARR growth exceeding 30% for the second straight quarter and in a tougher macro, be it that much. So my question here, how much of the momentum in Q2 would you attribute to just internal sales execution productivity versus some material change for enterprise demand for data analytics? It feels like it's maybe more company specific and internal, but love to get your view around the momentum you're having and what's driving it here near term. Thanks.
spk17: Yeah, I appreciate the question, Brent. You know, I mentioned on the prepared comments that I spent a good chunk of the quarter traveling. Really, the last five weeks I was on the road across all three geographic theaters. And, gosh, it really feels like... The motion that we've been driving around democratization of data and analytics is really coming to Alteryx. I felt it in every meeting. Every customer was telling us that that's their strategy for going forward, and they need to upskill their workforce. But you can't deny the job that Paula has done on kind of outfitting the sales organization all across the board with discipline, rigor, and focus, and really building relationships at the executive levels in addition to people at the analyst level. So I think it's a combination of both things, but without question, it does feel like the market's coming to us.
spk13: Helpful, Keller. I think, Kevin, just as a follow-up, as you think about the appetite to further broaden the product portfolio, Obviously, valuations have come in here across the whole entire space. Continue to have an appetite to kind of leverage M&A to expand the product portfolio. What's your thoughts now, just given the valuation reset in the public markets and potentially, are you seeing any sort of valuation reset in privates?
spk17: Yeah, certainly private markets, as you know, Brent, follow six, eight, 10, 12 months behind the public ones. So we're certainly watching that. I think the team now on the product and engineering side is busy knitting together our applications, Alteryx Auto Insights, Alteryx Machine Learning, and Designer Cloud powered by Trifacta into that Trifacta backend platform. And that trifecta platform really is the starting point for us to be able to add more functionality to the platform. Because I continue to hear it from customers. They want fewer vendors, less complexity. you know, more consolidation in this space. And we think, who better than us to go do that, given, you know, the zealotry that exists with the user base and the community that we have today. So, you know, busy at work right now, certainly keeping an eye on the markets, and we're always going to be looking to, you know, to add more capability, both organically and inorganically.
spk13: Very helpful, Keller, and obviously it's impressive to see the strength here. Thank you.
spk02: Thanks a lot, Brent. Appreciate it.
spk18: Thank you. The next question we have is from Michael Kidd from KeyBank Capital Markets.
spk15: Hey, this is Eric Keith. I'm from Michael. Congratulations on the results. And I guess a question for Mark and Paul. So, I mean, it sounds like you guys aren't seeing much on the macro. I know Kevin kind of laid out a lot of the data points, the pipeline, and so forth. But I'm curious just to get both your insights on what you're seeing from the field and the customer base, either by geography or customers that comes to either sales cycles budget scrutiny.
spk17: Yeah, thanks for the kudos, Eric, and say hi to Michael for us. Yeah, listen, I think clearly in talking to customers, we're hearing that they're going to be very careful about their enterprise spending. I think that's an environment that I believe Alteryx should be able to thrive in because if you're looking to run a tighter ship, if you're looking to recapture margin, if you're looking to refine and streamline your supply chain, you need to use Alteryx to get a handle of the data that swirls around your business. And so that's how, frankly, we've been kidding out our sales team over the last two years to go sell. Because that's what CFOs and CEOs are buying today. They're buying business outcomes. They're not buying seats and licenses. And so that very much aligned with how Paul has been running the field. But Kev, I don't know if you have any additional comments.
spk09: I think that's right. You know, I think we've done a very good job of, you know, giving customers an opportunity to think about how Alteryx can orientate their business and perform better. That's certainly what my organization has leveraged Alteryx for internally. And, you know, we continue to kind of beat that drum as, you know, we have higher level, more substantive conversations. And then just one follow-up.
spk00: Yeah, I might just add on to it a little bit, because perspective from the field, as you alluded to, it feels good in the customer conversations that we're having globally in our three feeders. In addition to the business executive conversations that we're having, we're now having more CIO conversations as well. We routinely see in CIO surveys that data analytics is coming out in the top two or three spend categories, you know, even with respect to the current macro environment. So all of that is showing up in terms of our pipeline and the conversations that we're having with customers.
spk15: Great. And then, Kevin, just to clarify, I appreciate the color on both FX and duration had on revenue and ARR in the quarter. I'm curious what your assumptions are on duration for the year as a revenue and then relative to 2021. And then on FX, if it's having any impact to your full year ARR guide relative to the quarter.
spk09: Yeah, thanks for the question. So with respect to FX, I commented as I went through guidance. Our guidance assumes that FX rates stay consistent where we see them today. So obviously any material deviation is not in the assumption today. In terms of duration, we did see a slight tick buck in Q2, and my guidance or direction was that we'll expect to see the rest of the year kind of settle back to about one and a half, which is consistent with what we've seen in the last several quarters.
spk02: Thanks. Thanks, Eric.
spk18: Thank you. Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, keep your star and then one for now.
spk12: Thank you for taking the questions and really impressive Q2 so congrats to the team. I actually wanted to pick up on Brent's question around sort of the valuation reset in the market and what that could imply in terms of the competitive environment when we look at sort of the competitive landscape for Alteryx. A portion of that is related to some of the private startup community, particularly around the focus on cloud. In terms of like, you know, the battle for cloud and sort of that land grab opportunity, with some of that valuation reset and sort of a less focus on growth and all costs, what kind of opportunities could that mean for you guys, you know, heading into a slower macro environment where spend may have to be rationalized?
spk17: Yeah, hey, Sanjeev, thanks for the question. You know, gosh, I really don't think of it as a land grab in cloud per se because, you know, we're building out the trifactor architecture in the cloud so that we can be a lot easier to do business with. So it's a lot easier to go from, you know, having an idea to use Alteryx to getting fingertips on keyboards from any set of keyboards. anywhere in the world. And that's really the driver to eliminate friction and just make it dead simple to provision Alteryx to go get breakthroughs with data. So as far as competition goes, yeah, listen, I think it's going to be a tough fundraising environment in the private markets. in the next couple of years. And the companies that don't have a long runway of cash are going to get stuck. And there's already a few very sort of out there examples of that. But honestly, from a competition standpoint, we don't see a ton of competitors. We're really looking to leverage our giant install base and go sell them more services and more capabilities. Sorry, more capabilities at renewal time. And that's why Paula's been so successful building out these annual plans in the second half of last year and this year is because we've got a great cohort of renewals that we can expand pretty predictably upon, and it allows us to have quarters like this.
spk12: I appreciate the thoughts. And then I guess sort of my main question is just sort of, you know, the strategy going into a downturn. And as Paula mentioned, BI analytics does show up as a top three category. However, if you looked at sort of, you know, the space over the last you know, decade plus, entering a downturn has typically been hard for customers to justify expanding seats, at least entering a downturn, whether it's sort of the Tableau market. I mean, you guys slow down in the beginning parts of the pandemic. And so I wanted to get a sense of why entering this slower demand environment, things might be different. Is it because of the ELA strategy? Is it because, in fact, you're not pricing proceed as much as you were, you know, a couple years ago. I just don't understand why the incentive for customers to do that expansion deal will sort of sustain going into a tougher budget environment.
spk00: Yes, indeed. I think there's a few factors that give us confidence that we can expect to continue to see this from the market, from both existing and new customers. We've done a lot of things to make it easier for our customers to expand with us that weren't in place in the past. So the ELA is an example of a commercial construct that makes it easier for people to expand. They don't have to manage licenses nearly as closely as they had to manage them when they were buying them a la carte. Another example is that we've invested in value engineering. We can now quantify for our customers the return on investment. The top line and bottom line impact that our solutions are driving for their business. Customer references that back it up. And then the last thing is on customer success. So, you know, we just turned on in the last quarter a global digital onboarding platform for our customers. So the minute a license is purchased, they're automatically activated on this digital platform. and immediately are guided to where they can find the resources to make use of that software and get up and running and drive adoption and proliferation. So the reality is that I think the market opportunity has been there for quite some time. We weren't necessarily approaching our customers with all the different levers that demonstrate the value, make it easy for them to expand and drive adoption. drive this democratization that they agree with is the answer to becoming a data-driven enterprise.
spk17: Yeah, and Sanjit, I just tag onto that and say we're a very, very different company, completely different leadership, a lot of different people focused in very different ways. likely over-rotated on small-medium business two years ago, and that certainly was one of the first markets to kind of fall before the pandemic. So I think you can hear in our voices the confidence that we have in not only the team, but the operating plan that we have.
spk12: Yeah, very exciting. I appreciate the thoughts, Paul and Mark.
spk17: Thank you. Thank you.
spk02: Thanks, indeed.
spk18: Thank you. Ladies and gentlemen, please note, participants are limited to one question at a time. The next question we have is from Camille Norlock from William and Blair. Please go ahead.
spk11: Hi. Congrats on the strong quarter, and thanks for taking my question. Your sales and marketing investments are up more than 70% year-over-year in the June quarter. I know it's coughing some changes in the organization, but Can you talk about the sustainable sales and marketing growth going forward? And given the rate this quarter is nearly double the sales investment growth rates achieved in the prior two years, how should we think about the potential for ARR acceleration in other years as new sales reps reach full productivity?
spk09: Yeah, thanks, Camille. I appreciate the question. So just a couple things. First of all, keep in mind seasonality. So as we think about sales and marketing, at least in the second quarter, we do have, you know, Inspire Conference. We have the full quarter of trifecta. We typically will front load a lot of the hiring that we do for the year. And so that certainly gets more burden in the second quarter. And then when we think about seasonality of the business and look at the growth implied by guidance, the back half of the year is much stronger for us. than the first half of the year. So, you know, from a relative perspective, sales and marketing has been at relatively consistent levels over the last couple quarters, and we obviously expect to see the business to continue to expand as evident by guidance. So we should see improvement in those metrics for the remainder of this year.
spk02: That's great. Thank you. Thank you. Thanks a lot, Camille.
spk18: Thank you. The next question we have is from Joel Fishbein from Trace. Please go ahead.
spk14: Thanks for taking my question. I just had a follow-up, Mark, on some of your prepared remarks with regards to the partnerships. I wanted to see, you know, if you give us some more color around Snowflake and Databricks and even GCP as a channel for you guys and how that may be helping drive some of the deal sizes and some of the good success that you've been having recently.
spk17: Yeah, you bet, Joel. Thanks for the question. Yeah, I think one of the things we set out to do a couple of years ago was to become a world-class partner in this ecosystem because we knew this ecosystem is bigger than any one company can do anything by themselves. And we recognized very quickly that companies like Snowflake, Databricks, Google, AWS, Microsoft Azure, will become very important, you know, both technology partners and the cloud providers will become very important distribution partners for us going forward. And in bringing on Suresh Patel, who I'll pass this along to in a second, you know, we brought on somebody that stewarded those kinds of partnerships previously in his career. And he's really been heads down in the last year and a half, you know, building out what I think is very clever technical integration to make it much easier for customers that share, you know, Alteryx and Databricks or Alteryx and Snowflake. But in particular, last quarter, we had some great momentum with those partners, Suresh.
spk01: Yeah. Thanks, Mark. We've kind of focused deliberately on some of these partners with the intention of making sure our customers benefit from these joint integrations. So on Databricks, if you were at Inspire, you heard the VP of product at Databricks kind of share some of his excitement for the integration between Alteryx and Delta Lake. So our connectors now support the Delta Lake technology, Databricks SQL, as well as the Cloud Fetch. Similarly, in previous quarters, you heard us talk and you heard Snowflake talk about the strength of integration this past quarter. We delivered a lot of innovation on bulk loading of data into Snowflake. We continue to believe that as the cloud data gravity accelerates, we see a great opportunity for us to help business users get access to those cloud data and cloud insights. And a lot of our integrations are designed to do exactly that.
spk00: And then from a go-to-market perspective, that shows up in the way that we support our customers. We're building blueprints with many of these partners so they understand, our customers understand how to integrate our technologies together, how to implement best practices, et cetera. awarded four different industry vertical competencies by Snowflake last quarter across financial services, retail, healthcare, and media. And we'll continue to invest to make sure that these things show up as value to our customers.
spk02: Great. Thank you. Great work, Joel. Thanks.
spk18: Thank you. The next question we have is from Mike Seacrest from Newfoundland Coast.
spk08: Hey guys, thanks for taking the questions here and congratulations on what was a much, much stronger quarter than we had anticipated on our side. So kudos on that. If I could, absolutely, absolutely. If I could ask a two-part question here, primarily going to Kevin. The first question I had, I think in Mark's prepared remarks to open the call, there was a comment that you guys closed two of your largest ACV deals on record. Is it possible for you guys to size up the impact from that since it'll obviously act as a headwind as we start to think about 2Q comps for next year for revenue and ARR? And then the second component to the question, not to nitpick here, I think in Kevin, in your remarks actually, you said that the upside in 2Q actually provided increased flexibility for investing in high ROI projects. So if I look, you guys beat 2Q at the midpoint by $18.3 million. You're taking up the full year by $10 million. So those incremental dollars that are being redeployed elsewhere, can you just help us think about where those are being invested or where those accelerated projects are taking place?
spk09: Yeah, thanks for the questions, Mike. I'll do my best to answer. So I can't really quantify the ACB deals, but, you know, we've talked in the past about, you know, orders of magnitude of deal sizes. And, you know, to be able to close the two largest ACB deals in our history in this particular quarter with this backdrop I thought was pretty impressive. And it really does go to, you know, the team that Paula has put on the field and how they engage with customers and how they sell value. for sure. In terms of how we think about the tradeoff between the BEAT and where we're going to invest going forward, you know, we are going to make very disciplined, selective investments. If you look at guidance, it does imply that a portion of the BEAT is going to continue to go into primarily go-to-market and product as we continue to focus and work through those teams. But if you look at the profitability profile from where we started the year to where we are today, we have provided a significant improvement in the profitability profile and we are committed to that path to profitability.
spk17: Yeah, and just on large deals, you know, both of these deals were existing customers that we expanded, and we've expanded them dramatically in the last couple of years by selling them more of our designer product but also selling them more of the new products that we've added just in the last year and a half. So that's a motion that I'm expecting every quarter. I'm expecting big deals every quarter, and we're monitoring all the big deals. All of us execs have big deals that we babysit and get involved in, and it's a focus of the go-to-market motion that Paula has built.
spk08: That's terrific. I appreciate the babysitting analogy, and thanks a lot for the call, guys. Really, really helps. Thanks, Mike.
spk18: Thank you. The next question we have is from Pendulum Bora from JP Morgan.
spk05: Hi, everyone. This is Noah on for Pendulum. Thanks for taking my question. Just curious, you know, how is cloud ELA driving some of the unified cloud deals? And can you just help parse through any contribution from Trifacta and revenue or ARR? Thanks.
spk00: So cloud ELAs are being very well received with our customers. It's still early in that we only announced this in June, but we talk about cloud with virtually every customer that we meet with, and what they like about the cloud ELA is very similar to what they like about the on-prem ELA, which is, They not only get the benefit of designer cloud powered by Trifacta, but they get to play with Auto Insights and Alteryx machine learning. We provide flexibility for them to mix and match across those different cloud assets so that they can consume the platform and drive adoption and expansion across their enterprise as they see fit. So it's very encouraging what the response has been from our customers on the cloud ELA, and we expect continued great progress there and look forward to sharing more with you about it on the quarters as they continue to be a big focus for us.
spk09: Yeah, no, just with respect to the question on trifecta, you know, we went into the acquisition and commented that, you know, we expected them to add about $20 million in ARR for the year. In any given quarter, the contribution is really not material to the overall results.
spk02: Got it. Thank you. Thank you. Thanks a lot, Noah.
spk18: The next question we have is from Kojo Akita from Bank of America.
spk03: Hey, guys. Thanks for taking the question. Just one for me. I wanted to ask a question on the guidance here. And, you know, with all the commentary and the answer to all those thoughtful questions before me, you know, it really sounds like The end market is pretty good for you guys. You even mentioned the sales cycles were improving. That's clearly excellent when we've heard other software companies talking about elongated sales cycles. So I guess the question here on the guidance is, are you baking in any sort of assumptions for a worsening macro in the guide, maybe for the low end? Or just kind of walk me through maybe any sort of assumptions for a worsening macro in the guidance. Thanks, guys.
spk17: Yeah, thanks for the question, Koji. I'll let Kevin answer this, but I want to proceed by just reminding you that we've got very strong, very granular controls on this business, and we watch it like a hawk. We get pretty low cost of a tool called Designer to be able to use this across the business to help us see around corners, much like our customers do, to predict how much inflation is going to hurt their supply chain or to predict when or if some uncertainties come in the macroeconomic environment. And we've got to watch those controls like a hawk. That said, we take our forecasting very seriously, and we've built a really disciplined process that does weekly forecasts right down to every individual sales territory in the company, and it rolls up to all of us exactly sitting around this table on a Monday afternoon talking about the granular controls that we have on the business. So I think we reflect that in our guidance. You know, I think most of us here have built a pretty good reputation of doing what we say we're going to do, and we assume that the macroeconomic market might get worse, but the demand for our innovation has never been stronger.
spk09: Yeah, thanks, Mark. So the only thing I guess I will add on top of that is, you know, we did take some prudence and conservatism into the guide, which I commented in the prepared remarks, so we're not You know, we're not expecting that, you know, we're going to be operating in a different macro than others in the environment.
spk17: Yeah, and we're really not focused on the low-end SMB as we have been in prior years, Koji. We're really primarily focused on the largest, you know, roughly 2,000, 3,000 government and enterprise customers out there.
spk03: Got it. Thank you so much, guys. Thank you.
spk02: Thank you, Koji.
spk18: Next question is from Chase Donovan from Dream and Journey. Please go ahead.
spk04: Hey, thanks for squeezing me in here. Just had one on the net revenue retention. It was good to see kind of the future or the kind of continued stabilization and actually an uptick back up into the 120 level. Kevin, can you just help unpack the drivers of the improvement and how durable we should think about those drivers as we head into the back half of the year that tends to be a little bit heavier from a renewable perspective?
spk09: Thanks, Chase. Look, it's many of the things that I think we've already touched on and highlighted. We obviously had very strong execution with large customers and ELA that drive strong expansion. It also gives us quite a bit of visibility into future expansion as we go back to the comments that Paula made around burst capacity and our view into that. It also is a function of the fact that we're focusing on larger customers, and that's where we saw a lot of the strength in the quarter with million-dollar-plus customers. When you're selling ELAs that average about a million dollars per deal, those have the tendency of driving really strong expansion. So I think everything that you saw from us this quarter set this up really well as we think about growth and that expansion of the business for the rest of the year.
spk02: All right, thanks. Thanks a lot, Chase.
spk18: Thank you. The last question we have is from Blair Albanese for Northern Block Securities.
spk06: Thank you. Nice quarter, guys. Thanks, Blair. Just a quick question on your new customer ad. So you added 101 customers this quarter. It's lower than it has been for quite some time. And I'm just wondering, is this really reflecting your shift to larger targets? And what's sort of the average landing size of the deals now if you're going to do fewer customers, but are they getting larger?
spk00: Thank you, Blair, for the question. So you're right in terms of what is reflected in that new customer ad count. We are very focused where the market opportunity is greatest. which is clearly at the large enterprise level, the Global 2000. And so we'd rather add very high-quality companies to our logo list rather than any company for sake of having logo count. So we'll keep the focus on adding new logos, but they will be quality enterprise logos. And then in terms of the land size, we don't – share that value publicly, but it is growing. We are landing at a higher level now than we have in years past.
spk09: I would just add to that, if you look at where we're actually landing, we saw a seven-point improvement in the global 2000s, so really saw strength in landing with larger, better quality prospects who are now new customers.
spk02: Great. Thanks very much.
spk18: Thank you. Ladies and gentlemen, we have reached the end of our question and answer session, and I would like to turn the call back to CEO Mark Anderson for closing remarks.
spk17: Thank you, Operator, and I'd like to say thank you again to our customers, partners, shareholders, and our team here at Alteryx. We had a fantastic first half of 2022, and we're so excited at the opportunity ahead. We've got the right leaders in place, the right go-to-market strategy, and an expanded platform-based portfolio of offerings that can allot so much value for our customers. The company is executing at a high level, and we look forward to closing out the year with strong momentum.
spk02: Thank you all again for joining us. Look forward to seeing you out on the road.
spk18: Thank you, Phil. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. Please now disconnect your lines.
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