Alteryx, Inc.

Greetings. Welcome to the Alteryx First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to your host, Ryan Goodman, Head of Investor Relations. You may begin.

Thank you, Operator. Good afternoon, and thank you for joining us today for Alteryx's first quarter 2023 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, Paul A. 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 first quarter ended March 31st, 2023, as well as our shareholder letter with key metrics and commentary on the results. If you would like a copy of the release and shareholder letter, you can access both 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 second quarter and full year 2023. These statements are not guarantees for future performance. They are subject to a variety of risks and uncertainties, 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 additional forward-looking statements made during this call and 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.

Thank you, Ryan, and thank you all for joining us today. we delivered all key Q1 financial metrics within or above our guided range. Q1 revenue came in at $199 million, up 26% year-over-year. Annualized recurring revenue, or ARR, came in at $857 million, up 25% year-over-year. And Q1 non-GAAP operating loss was $18 million, feeding our outlook as we continued to focus on spending discipline across the company. We are pleased to have delivered on growth and exceeded our non-GAAP operating profitability outlook for the first quarter. Our financial results demonstrate the value that our innovation delivers to customers everywhere, even when facing some continued tightening of the broader IT spend environment. More specifically, we saw changes in customer buying behavior late in the quarter. Customers are applying more scrutiny on deals, which has continued to lengthen our overall sales cycles. This in turn led to some deals that we would have expected to close in a more stable economic backdrop slipping out of the quarter. Despite continued macroeconomic uncertainty, we have not seen any material shift in the competitive dynamics, something we track closely. Now, the guidance that we provided last quarter accounted for some of this macro risk, That prudence, along with our strong execution and a loyal customer base, enabled us to navigate through this backdrop and deliver on our commitments. Customers need our innovation today more than ever. We're seeing robust trends with net expansion and renewal rates. Given our standout 2022 performance and resilience thus far in 2023, I believe we have the right initiatives in place and can continue to stay agile and successful in this dynamic environment. Seasonally, Q1 is our smallest quarter of the year in terms of bookings activity. That said, it's an important time to calibrate the business model to drive continued success for the rest of the year. And in times of dynamic macroeconomic conditions, it is especially key that we stay closely engaged with customer temperament and agile in terms of strategic planning and execution. There are a few elements here I would like to highlight. First, we are executing on our top-down enterprise class sales motion. Understanding spending priorities is critical in the current environment. We have aligned our resources as well as our partner ecosystem around proving the value that Alteryx delivers. Second, we are benefiting from the tight controls we've instilled in the go-to-market motion. This discipline in deal structure and pricing has enabled us to deliver consistent financial results over the past year and is key to driving durable and profitable growth going forward. And third, we recently took a close look throughout the organization for opportunities to optimize our cost structure. The variable nature of our cost structure provides us the ability to stay nimble in this environment, and we announced today that we are executing a plan to reduce full-time employee headcount by approximately 11%. This is certainly not a decision we take lightly, and we deeply appreciate each and every individual who has dedicated their time to Alteryx. With that, let me share a few highlights from the quarter. In mid-February, we announced all access general availability of Designer Cloud, along with enhancements in governance certifications for the Alteryx Analytics Cloud platform. Alteryx Analytics Cloud is now embedded in every aspect of our go-to-market strategy. Our global 2000 penetration increased to 47%, up two points from this time last year, as we continue to gain traction with top organizations around the globe. This growing presence provides us with significant greenfield opportunities to expand within our base. Case in point, our global 2000 net expansion rate increased to 131%, up two points versus the prior quarter. We're continuing to see strong year-over-year growth momentum in ELA sold, with many customers already using burst capacity. For customers with ELA sold prior to Q1 that are still in the burst phase, approximately one-third have engaged with that additional capacity. And on the financial front, we completed a $450 million offering of senior unsecured notes. This reflects a $100 million upsizing from the initial proposed amount given the strong market reception and demand. We accomplished a lot as a company in Q1, and while the economic backdrop was and continues to be challenging, the company executed at a high level and delivered on multiple key initiatives. We believe we're on the right path and we have the right people to drive continued leadership and execution in this market. Our product innovation is a great example of this. In the span of just one year, we acquired and integrated a multi-tenant, multi-cloud architecture, we introduced the Alteryx Analytics Cloud Platform, and we have just recently announced all access availability of Designer Cloud. We are seeing strong early interest in our cloud offerings from both our customers and partner community. The number of customers leveraging our cloud solutions increased over 30% year-over-year in Q1. Our proven ability to quickly create value in high-priority use cases with our flagship solutions has earned us the permission from many of our customers to explore incremental use cases and personas within the Alteryx Analytics cloud platform. For example, we have a multibillion-dollar national commercial landscape customer that has leveraged designer and server for several years to unlock significant savings and eliminate single points of failure. In Q1, this customer expanded with additional designer seats, plus added our cloud-native auto insights to provide AI-driven operational insights and visualization for leaders across hundreds of branch offices. We're also finding that our cloud innovation is creating opportunities for new logo customers. We had a great win with the leading provider of entertainment and telecommunications services in Belgium, who signed on for a cloud ELA during Q1. Our well-established designer capabilities and interface aligned with the customer's vision of enhancing customer engagement analytics, and our ability to deliver this in a cloud environment with Designer Cloud was key to earning us the win. Alteryx Analytics Cloud Platform allows us to sell new low-friction use cases and to new personas. And we have several exciting updates on the generative AI and cloud innovation roadmap to share. First, we're further developing ways to incorporate AI and ML throughout the platform, including some highly differentiated use cases with generative AI that enhance ease of use for knowledge workers and broaden the scope analytics for all specifically we are embedding large language models to help with text summarization enhanced optical character recognition and topic modeling additionally by integrating these large language models with auto insights we will help customers to reduce the time from insight to action As always, we are building generative AI capabilities into our products with our signature ease of use aimed at amplifying an analyst's ability. And second, as customers incorporate Alteryx into their cloud transformation initiatives, we're enhancing our integrations with adjacent offerings throughout the data analytics platform, such as cloud data warehouses, governance, and visualization solutions. In addition, we are focused on delivering unified analytic experiences across our flagship and cloud offerings to enable faster time to value for our customers. We'll have a lot more to share across these themes, such as governance, security, interoperability, and generative AI at our Inspire user conference next month. We have the most comprehensive portfolio of offerings in the history of the company, and And we have a significantly enhanced go-to-market motion comprised of a well-tenured sales team, a partner ecosystem that expands our reach and unlocks incremental opportunities, and a customer success team that helps customers operationalize with faster time to value. We continue to see success with large enterprise organizations. The cohort of our largest customers delivered our highest year-over-year ARR growth once again in Q1. This reflects not just growth in the number of large companies we engage with, but also our ability to prove value and earn the right to expand within these customers over time. Customers are asking for repeatable use cases that enable them to do more with less. Our ability to quickly deliver on this with analytics, automation, and governance enables us to accelerate the expansions and adoption across the enterprise. We've strategically aligned our enterprise sales strategy to make the expansion path as easy as possible for customers. One example of this is our increasing engagement with customers at the executive level. This provides a level of visibility that enables a more deliberate strategic expansion motion across multiple functional areas within the organization. We had a great Q1 win with a global leader in management consulting that demonstrates this dynamic. After a small initial designer implementation in 2022, we closely engaged at the executive level to align Alteryx as a core component of their vision for analytic enablement. With a meaningful expansion upon renewal, the customer looks now to leverage designer across multiple vertical and product service teams, enhancing their client-facing service offerings at scale. The pace and scope of this expansion is simply not possible when limited to line-of-business-level engagement. Another enterprise initiative we introduced about two years ago is our Burstable ELA Bundles. ELA's allow customers to sign on for a defined volume of licenses with flexibility to expand up to 50% beyond that for up to one year. This encourages exploration of new use cases and personas that we believe will contribute to broader Alteryx engagement over time. We saw great success in converting many of these bursts to upsells last year and we're off to a solid start in 2023 with over one quarter of the Q4 ELA's leveraging burst within the first three months. We also continue to land new ELA's with both new and existing customers. which is a key component of our large enterprise sales strategy. Our partners have also emerged as a core driver of our go-to-market motion. Our partner program expands our global market reach and customer success capabilities. In addition, our larger partners often unlock access to key decision makers and IT, reducing friction in the sales cycle. Partners once again influenced over half of the new ACV and Q1. We're particularly excited to see ramping enthusiasm and support for cloud within the partner ecosystem. One of our larger GSI partners added 500 designer cloud seats to their 1,000-plus designer licenses, as well as AutoInsights as they look to incorporate cloud more deeply in their internal operations and client-facing services. We're also seeing great opportunities emerge where we can bring together the Alteryx Analytics Cloud Platform, GSI partner services, and hyperscale cloud offerings for a unique and compelling customer offering. And finally, our high-touch and digital customer success team underpins all of this positive momentum with customers. Customer success efforts are a driving force behind net expansion rate trends and renewal rates, particularly with our larger customer cohorts. These are the folks directly working with our customers with training, enablement, and support, driving productive user engagement and identifying new opportunities for our customers to create value with Alteryx. In closing, as customers increasingly leverage Alteryx in mission-critical use cases across their organizations, we believe the business is well-positioned to deliver durable, profitable growth. Over the past few years, we've successfully transitioned our business model from selling customers dozens of licenses to hundreds, and we have our eyes squarely set on the next order of magnitude. We're working with larger customers than ever before, We're delivering tangible value with our platform, earning us permission to explore new opportunities throughout organizations. We're engaging with top executives and aligning Alteryx as a strategic enabler of their analytic vision. We have partners and customer success teams closely engaged to drive upsell and expansion with ELAs, providing greater flexibility with exploration. And now with cloud innovations, we have a broader analytics platform to better assist our customers. I'm so proud of the Alteryx team for the resilience and execution we've delivered in what has not been an easy macroeconomic environment. Thank you to our customers, our employees, and our partners. And finally, I look forward to seeing many of you at our upcoming Inspire User Conference in May. It's a great opportunity to engage with our community and see firsthand how Alteryx is truly democratizing analytics for all. With that, I'll turn the call over to Kevin for a closer look at the financials. Kevin?