Alteryx Inc (AYX) 2017 Q1 法說會逐字稿

Ladies and gentlemen, greetings and welcome to the Alteryx first-quarter 2017 earnings conference call. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chris Lal, General Counsel for Alteryx. Thank you, you may begin.

Thank you, operator. Good afternoon and thank you for joining us today to review Alteryx's first-quarter 2017 financial results. With me on the call today are Dean Stoecker, Chairman and Chief Executive Officer; and Kevin Rubin, Chief Financial Officer. After prepared remarks, we will open up the call to a question-and-answer session.

During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks and uncertainty. 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 EDGAR system and our website as well as the risks and other important factors discussed in today's earnings release.

Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release in the Investor Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure.

With that, I'd like to turn the call over to our Chief Executive Officer, Dean Stoecker. Dean?

Thanks, Chris. And I'd like to start by thanking all of you for joining us today on our first conference call as a public company. We are very excited to have completed our successful IPO in March. We view our IPO as an important milestone for Alteryx, and one that further enhances our brand awareness and increases the resources we have available to execute the Company's long-term growth strategy.

We are very pleased with our first-quarter financial results where we achieved strong revenue growth and improved our bottom-line performance. We continued to expand our customer base globally, and, at the same time, we scaled our relationships with our existing customer base. Our success continues to be driven by the disruptive benefits of our analytics platform. As the volume, velocity, and variety of data continue to expand, the ability to leverage this data for improved decision-making has become increasingly important for businesses.

Traditional data analysis tools are slow, difficult to use, and resource-intensive. These traditional tools also do not provide a self-service experience, making data analytics elusive to most organizations. Alteryx democratizes access to data-driven insights, making them available to all data workers ranging from business analysts to expert programmers, and even trained the data scientists.

Let's turn now to the financial results of the first quarter, which Kevin will provide more detail on during his portion of the discussion. During the first quarter we reported revenue of $28.5 million, representing an increase of 55% over the prior-year period. Our non-GAAP operating loss was $3.6 million in the first quarter, leading to a non-GAAP loss of $0.08 per share. This is a significant improvement from the prior-year period and reflects our ability to leverage the investments Alteryx has already made in building out a global infrastructure to support long-term growth.

As this is our first quarter as a public company, I wanted to provide a brief overview of the Alteryx value proposition, market opportunity, and business model, in addition to providing details in the drivers behind our recent performance. We are a leading provider of self-service data analytics software. Our subscription-based platform allows organizations to easily prepare, blend, and analyze data from a multitude of sources and more quickly benefit from data-driven decisions.

Additionally, our platform supports advanced analytics, including geospatial, predictive, and statistical analyses. Alteryx brings a fragmented and brittle analytic process into one simple and cohesive self-service experience, combining tasks that were traditionally distributed among multiple tools, requiring workers with highly specialized skills.

This is done through visual workflows using an intuitive, drag-and-drop interface that eliminates the need to write code; and reduces tedious, time-consuming tasks to just a few mouse clicks. This frees up the analyst's day so they can ask better questions against more data to deliver deeper insights that drive the business forward. Alteryx powers the analytic enterprise.

We are pursuing a significant market opportunity and we anticipate continued acceleration in the self-service data analytics market. Some of this is driven by the rise of the citizen data scientist and the line of business. And some of it is the result of enterprise leadership, having the desire to democratize analytics in the effort to turn every data worker into a discoverer of marginal profitability for the enterprise.

Our platform addresses segments of the analytics and BI market that IDC estimates to be $18 billion, as well as an estimated additional $10 billion of net new potential spend associated with 21 million spreadsheet users worldwide working on advanced data prep who we believe can benefit from our platform.

We are witnessing an ever-expanding number of data sets that a business user needs to answer any analytic question. Almost two-thirds of organizations use five or more sources of data for analytic purposes. And adding to the complexity, some of these data are on premise and some of them are found in the cloud.

We give Alteryx users the ability to connect and work across multiple data sources without writing any code, an important differentiator for us, as we believe customers need a data orchestration platform like ours to address this complexity.

In addition, the Alteryx platform can output data models and analytic insights to a wide range of consumption layers, including spreadsheets, documents, presentations, databases, dashboards, cloud services, apps, and APIs.

All told, there are dozens of outputs that Alteryx is sending data and analytics to, with approximately 15% going to interactive visualization products, largely in support of descriptive analytics. We are beginning to more frequently see our customers advance their use of our platform to predictive analytic processes that drive significantly higher business value.

We employ a land-and-expand business model and our go-to-market approach often begins with a free trial, followed by an initial purchase of our platform. As organizations quickly realize the benefits of greater efficiencies and deeper insights derived from our platform, use frequently spreads across departments, divisions, and geographies.

Over time, the Alteryx platform becomes a critical component to business performance and results in expansion into a larger number of users in more departments; and often includes expansion to Alteryx Server as organizations desire to scale with more data, automation, as well as analytic, app, and [rest] API deployment.

During the first quarter we added 237 net new customers, bringing our customer count to 2,565. Our new customers in Q1 were found in nearly every industry and functional area, illustrating the breadth of capabilities and wide range of use cases Alteryx can address. We believe this demonstrates our continued ability to land new customers, and we see continued strength in our expansion, as evidenced by our Q1 dollar-based net revenue retention of 133%.

Customers are seeing real value in the Alteryx platform, giving them the confidence to expand their footprint of designers and servers within their departments, additional departments; and, in some cases, enterprise-wide.

I'd like to give you a couple of examples from Q1. Tropical Smoothie Cafe is an operator and franchisor who offers real fruit smoothies and healthier food choices in 578 locations across the US. The primary challenge for their finance analytics team was to analyze four years' worth of transaction-level point-of-sale data to advanced insights on year-over-year sales, promotional performance, and product mix by location without having heavy lifting from the database administrators or SQL code writers in IT.

Since joining our customer ranks in March, leveraging the drag-and-drop, code-free interface of Alteryx Designer, the finance analytics team has created several applications to gain efficiencies in analytic reporting as well as bring to light specific regionalized markets that need extra attention to drive bottom-line sales and improve franchisee profitability. Their use of Alteryx to perform analytics has only just begun as they work to gain insights into store performance, optimization, and overall brand expansion.

United Fire Group offers insurance protection for businesses, homes, vehicles, and lives through 1,200 independent property and casualty agents and 1,300 independent life insurance agents across the US.

The task of the enterprise analytics team was to analyze data from a few disparate sources across the enterprise, including external data sources as they expand their analytics practice. Very quickly, UFG gained tremendous efficiencies, first by building data prep and blending workflows and leveraging the variety of data cleansing and fuzzy matching capabilities of Alteryx Designer.

By empowering the analyst to do this work, UFG now has a view of marketing opportunities that they did not have prior to Alteryx, including to better identify new agencies for targeted marketing to drive network expansion and growth.

We also had many customers expand their deployment of Alteryx in the first quarter. For example, a leading recreational vehicle manufacturer, which was previously using spreadsheets to analyze logistics within one of their product departments, began using Alteryx in Q3 of 2016 to drive more rapid analysis for logistics.

Their vision was the automation and repeatability of analytics from data integration to spatial and predictive analytics. Limited by Excel and Access, they were seeking to implement a platform that supports their vision for data access from anywhere, anytime. They implemented Alteryx Server to automate repeatable reports for dealer and sales data that they previously performed via manual processes.

In Q1 of 2017, they expanded Alteryx to several additional teams to further empower internal users to integrate data from multiple sources using the cleansing, address standardization, and fuzzy matching capabilities of Alteryx. Using Alteryx, processes that used to take hours or days now take minutes or seconds. They are replacing the fragile processes of Excel and Access with Alteryx, and continue down their advanced analytics journey with the spatial and predictive analytic capabilities of our platform.

We are also seeing positive results from our efforts to expand our business internationally. Unilever, a global consumer products company serving more than 2 billion people each day with more than 100 household brand names, expanded the use of Alteryx in Q1.

The finance team at Unilever Singapore faced a challenge in data management: working with data in multiple locations for sourcing and forecasting. Before using Alteryx, the team had to manually consolidate data in a process that took up to two weeks, allowing very limited time available for analysis to make better business decisions.

With Alteryx, data management was reduced significantly, from days to minutes. The benefit is that the finance team can now allocate the right resources, who now spend very little time on manual data consolidation, and instead are enabled to spend that time on analytics to drive business decisions for growth and profitability.

All of these customer examples support our position as a leader in the self-service data analytics space and our continuing focus on improving platform. We are driving innovation, sophistication, and ease-of-use for our customers around the globe. The recent version 11 release of our platform bridges the gap between IT and line of business users for governed, scalable, and flexible self-service data analytics.

This includes things like smarter tooling, data profiling, more data connectors, greater scale, and ways to make analytic processes easier to consume in a code-free yet code-friendly environment. These enhancements are important as we continually increased the value we deliver our customers, including easing the use of, while expanding the use cases addressed, by the platform. This innovation often leads to further expansion by our customers, helping us establish a strong, dollar-based net revenue retention rate.

Enterprise readiness is another important initiative as we continue to see the role of IT evolve in the self-service data analytics space. IT is now appearing much more frequently and often earlier in the sales cycle. We are the beneficiaries of this trend because having IT involved is necessary to drive broader and accelerated expansion across the enterprise.

As use of our platform expands, IT becomes a more involved player as we are pulling from more data sources, touching more systems, and IT seeks modern data governance and metadata management capability.

We are addressing this need; and in January, acquired a company with software for the purpose of bringing a social order to data, making it more accessible, easier to find and use, while keeping it annotated and secure. All of this being done in a modern cloud cataloging platform that connects Alteryx users to the data, reports, dashboards, and people necessary to best begin their analytic journey.

We believe this will allow us to gain more traction with IT leaders and chief data officers, who are increasingly becoming a critical component to the self-service data analytics movement. We expect to strategically position a new product offering from this acquisition in the second half of this year.

Looking forward, 2017 is shaping up to be a very exciting year for Alteryx. The demand for our platform is at an all-time high. We believe we have laid the groundwork for strong growth over the long-term. Some of the key components of our growth strategy include reaching the millions of data analysts worldwide and in every vertical market who are not using our platform today, and expanding within our current customer base as the appetite for data analytics becomes more pervasive in businesses.

To capitalize on our significant market opportunity, we will continue to invest in our sales organization on a global basis, as well as grow our channel ecosystem and broaden our user community. And we intend to continue investing in our self-service data analytics platform to further expand our capabilities and ultimately serve more users and use cases for businesses worldwide.

The global excitement around the Alteryx platform will be highlighted in a wide variety of use cases from customer presentations at our annual users' conference, called Inspire, next month in Las Vegas. This is sure to be another signature event for the growing Alteryx community.

In summary, we are very pleased with our first-quarter results. We believe our market opportunity is large, and we remain optimistic about our outlook for the rest of the year and beyond. We're excited to be operating as a public company now, and we are focused on building our organization for long-term success.

With that, let me turn the call over to Kevin Rubin, our CFO. Kevin?

Thanks, Dean. I would also like to say that I'm very pleased to be speaking with you this afternoon, and I look forward to spending time with both our existing and prospective shareholders.

I will discuss our first-quarter results and review our second-quarter and full-year 2017 guidance. However, because this is our first earnings call and some of you on the call may be new to the Alteryx story, let me quickly go over some important aspects of our business model.

We have a visible and recurring business model with over 95% of revenue coming from subscriptions in 2015 and 2016, as well as Q1 2017. Subscriptions generally range 1 to 3 years and are typically billed annually upfront. We run an efficient customer acquisition model with a short sales cycle, which we believe provides a stable base from which to grow. We are focused on adding new customers, even if these new customers only start with a few seats. Getting them in the door is the key, as our expansion performance is strong.

Our success in leveraging our land-expand model to rapidly upsell additional licenses into our existing customer base has enabled us to deliver a strong dollar-based net revenue retention rate of more than 120% in each of the last nine quarters. Finally, we are focused on balancing investing in our infrastructure for growth while delivering leverage as we scale.

Now let me turn to our first-quarter results. Revenue was $28.5 million, an increase of 55% year-over-year. International revenue was $5.9 million, an increase of 89% year-over-year and 21% of our Q1 revenue. In the quarter, we added 237 net new customers compared to 180 net new customers in the prior-year period. And we ended the quarter with 2,565 customers, an increase of 63% compared to the first quarter of 2016.

We delivered a strong Q1 dollar-based net revenue retention rate of 133%. Dollar-based net revenue retention can fluctuate a bit depending on mix of business and seasonality.

Before moving on, I would like to point out that I will be discussing non-GAAP results going forward, unless otherwise stated. Non-GAAP measures, including our guidance for the second quarter and full-year 2017, exclude stock-based compensation and amortization of intangible assets.

In addition, non-GAAP net loss per share, basic and diluted, excludes the accretion of Series A redeemable convertible preferred stock outstanding prior to our IPO. And non-GAAP weighted-average shares used to compute non-GAAP net loss per share reflects the conversion of preferred stock into common stock as if such conversion had occurred on January 1, 2017 and 2016, respectively.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in the earnings release we issued earlier today.

Our gross margin was 84% for the first quarter, an improvement compared to a 79% gross margin in the first quarter of 2016. Gross margin was positively impacted by a larger proportion of subscription revenue and greater efficiency in our support organization.

Operating loss was $3.6 million, which equates to an operating margin of negative 13%. This is a significant improvement compared to an operating loss of $5.9 million or negative 31% margin in the first quarter of 2016, despite higher G&A for related IPO costs, and costs associated with operating as a public company.

We are focused on investing for the future while we chart a course to sustainable cash flow generation and profitability. We are investing in sales and marketing to drive awareness and adoption through marketing and branding programs and the addition of more quota-carrying sales reps.

However, our plan is to do so at a slightly slower pace than the past two years, resulting in leverage, as demonstrated in our Q1 results. For 2017, you should expect this trend to continue. I would like to note we do expect to incur additional Q2 expense related to Inspire, our annual user conference.

In R&D, we remain focused on continued product innovation and you should expect to see the pace of investing increase in 2017 versus 2016. Net loss was $3.7 million and net loss per share was $0.08 based on 48.5 million weighted average shares outstanding, basic and diluted.

Turning now to our GAAP balance sheet. As of March 31, we had cash, cash equivalents, and short-term investments of $164.5 million, inclusive of $114.1 million in net cash raised during our IPO, compared with $52.7 million as of December 31, 2016. In April 2017, the underwriters exercised their overallotment option, which generated an additional $17.6 million, net of offering costs, which are not reflected in these balances.

We generated $5 million of positive cash flow from operations in the quarter. Given our subscription-based business model and annual billing terms, we expect cash flow to lead our path to profitability.

Finally, we ended the quarter with 469 employees, up from 375 employees at the end of the first quarter of 2016.

Now let's review our guidance. For the second quarter of 2017, we expect GAAP revenue in the range of $29 million to $29.5 million. We expect our non-GAAP operating loss to be in the range of $7.5 million to $8 million; and non-GAAP net loss per share, basic and diluted, of $0.13 to $0.14. This assumes 58 million non-GAAP weighted-average shares outstanding, basic and diluted.

For the full year 2017, we expect GAAP revenue in the range of $122 million to $123.5 million, representing year-over-year growth of approximately 42% to 44%. We expect our non-GAAP operating loss to be in the range of $20 million to $21.5 million; and non-GAAP net loss per share, basic and diluted, of $0.38 to $0.40. This assumes 56 million non-GAAP weighted-average shares outstanding, basic and diluted. We expect to generate positive operating cash flow for the full-year 2017.

We are pleased with our performance in the first quarter, and we look forward to building a track record of success as we operate in the public market.

With that, we will open up the call to questions. Operator?

(Operator Instructions). Jesse Hulsing, Goldman Sachs.

I'm curious, Dean: how is the mix of use cases or usage been trending between advanced analytics, or I guess data science-y type use cases versus data preparation? And if you look -- I guess as you look at your business, moving forward, how do you expect that to trend going forward?

Thanks for the question, Jesse. I think that we're seeing some interesting things in the marketplace that will provide continued tailwinds for us for quite some time. I think we have to acknowledge that data prep and blending is a fundamental aspect of any analytic process. And if you look at the value chain in analytics, the lowest order of analytic outcomes tends to be descriptive analytics, things that you would typically find in dashboarding tools. So what we're seeing in our user information is an acceleration of our R tools, or predictive, prescriptive, and even cognitive analytic processes.

And I think that as you move up the value chain in analytics, there's much higher value for enterprises. And we intend to put Alteryx in the hands of both the citizen data scientist who can move beyond the low-level descriptive analytic processes to the higher order. And we're working on making sure that we have the sophistication to allow the quants, the scientists, to be able to drive more value for the organizations going forward.

Got it. And you mentioned in your prepared remarks that IT is becoming more involved in the Alteryx adoption and buying process. What is that doing to average deal sizes? And how do you think that impacts sales cycles? Do you expect them to get a little bit longer as IT becomes more involved?

No. We actually are -- our playbook hasn't changed, and it will probably not change for the land component of our model. As you know, we have a land-expand retention model. Our sales cycles are relatively short, relatively small deal size. We try not to engage IT on the initial thing, the initial land. But we try to begin our expand playbooks almost immediately after that initial land. And IT is often involved in the mix and they are coaching and guiding the line of business in these processes. That said, we have seen deals where we landed bigger things in the same period of time on the initial land, but I think it's illustrated mostly in our net retention numbers of 133% for the quarter.

Great. Thank you, Dean.

Mark Murphy, JPMorgan.

This is [Benjamin] sitting in for Mark. Do you -- recently you have introduced at the pay-as-you-go pricing model for Alteryx Server in Amazon AWS. I was curious what has been the early reaction from customers on that, and do you think the new pricing could actually accelerate the usage of Alteryx for transient or ad hoc advanced analytics use cases?

Sure. Great question. We just recently released the service -- the provisioning service up in AWS. With a few clicks, a customer can stand up an Alteryx server and get busy on any number of platforms that AWS provides at different hourly rates. Too early to tell what the uptick might be. What we do know is that people are experimenting. There is a free trial of that, so we know that people are experimenting with it. And I think that's less about us monetizing it in the short run and more about customers begin to experimenting with what it takes to move infrastructure to the cloud; and more, importantly, analytic processes.

What I do know so far are the people who are using the service, most of them have been people who have brought their own license, their own annual license. So, we're not going to report these numbers. We don't expect a huge financial benefit from these numbers. For us, we will begin to monitor this each and every week to make sure that we're doing the right things for customers. But we believe that, if people are going to move the cloud, that it will fuel more designers and perhaps more servers up in the cloud, and even take more friction out of our land-and-expand model.

Okay, got it. And on that topic, Kevin, do you expect any contribution from pay-as-you-go this year? And could that be actually a pressure on billings this year?

We don't expect that this will be a meaningful contribution at all to the business model.

Okay, fantastic. Kevin, another question for you on the dollar-based net retention rate. Obviously 133% looks very solid. But seems like it dipped a little bit sequentially. Anything to call out there? Has there been any considerable change in gross retention side as well?

When you look at the business on a year-over-year basis, we improved from 126% to 133%, which we think is just representative of the strength of the business. And we also think it's more appropriate to look year-over-year than sequential, just due to the seasonality in our business with some of the buying behaviors of our customers. So I think we're pretty pleased with the net retention that we were able to achieve.

Okay, perfect. And last question for me, I think you mentioned that 15% of your output goes into visual analytics kind of tools. Has that gone down since IPO? Have you seen more broader output formats, more so than the visual analytics use cases?

No; it's actually remained pretty steady. Now, the numbers of users, of course, have risen a lot. And I think that really goes to my earlier point that people are beginning to output to more and more consumption devices or consumption layers. We believe that people want to live in their pane of glass to consume analytics. And we see that first wave of analytics at the descriptive layer being driven into interactive dashboarding.

But we also see growth in other consumption mechanisms, whether it's salesforce, a next best action model being pushed into a salesforce record, or a SharePoint list being delivered to content management systems around the world where enterprises have adopted SharePoint.

And so, we have seen a growth in both the types of data being consumed and the types of consumption mechanisms being pushed out the platform. But the -- it's kind of steady-state for those that are going out to the visual analytics platforms.

Got it. Thanks a lot.

Brent Bracelin, Pacific Crest Securities.

This is Alyssa on for Brent. My first question would be around your new customer adds. They were particularly strong for what looks like a normally -- a seasonally slower Q1. What's driving this? Is it a function of improving sales productivity or something else going on in the business?

Well, I think there's a few dimensions to the success on the number of net new customers. The first is this is a huge marketplace. As you heard in the opening remarks, there's a $28 billion TAM while $18 billion of that is locked up in legacy IT infrastructure that will begin to have share shift over time. There's 21 million disenfranchised analysts living in spreadsheets. And so part of this is just the self-service movement that's going on.

The second part of it is I think people are beginning to realize the value that Alteryx drives. There's a disruptive notion around Alteryx, where a lot of customers report crazy things like, I learned Alteryx over a ham sandwich. And I was able to take a workflow that took me an hour to build, and take a process that used to take 100 hours down to five minutes. That's not uncommon at all. And I think the word is getting out that Alteryx has this improvement in inefficiencies for organizations.

And, of course, the third part of it is I think a prosecution of our land-and-expand model. And we've been able to ingest our own cohort data that, quarter by quarter, have incremental improvements in the sales playbooks, the go-to-market motions, the corporate positioning, the demand generation -- all the things that lead to success on landing new customers. So I think those three things will continue for a very long time. And we're excited about adding lots of net new customers in the future.

Okay. And then my other question would be as you look at your net dollar retention, that really strong expansion year-over-year, what are the biggest drivers there? Is that more a function of low churn or expands happening faster, or some other dynamic?

Well, I think the purpose of our land-and-expand model is to land with a couple of seats of Alteryx Designer. We find people who are wild advocates of the platform who drive significant success in performance improvement. They share it with colleagues in their department, other departments, other divisions. And ultimately we start to see the net retention number eke up a few quarters after the land, because we have a lot more designers at play. And then IT is watching for when they want to be able to deploy servers to gain scale, security, scalability, version control. And that just fuels the net retention number.

Okay, great. Thank you.

Bhavan Suri, William Blair & Co.

Nice job there. Great quarter, out of the gate. Just a quick one to start on the expansion rate, and in your comment about sales process and sales investment and IT. You've got a very efficient land model, and then as you drive expansion, you are working with IT. That seems to be somewhat new.

Is there going to be a change in the sort of salesperson you're hiring? Because we've seen this with companies that start off with the sale to business or line of business users; but then bringing in IT, bringing in procurement, bringing in these larger ELA-type constructs, ends up driving a different type of salesperson or different type of sales investment. Just sort of how you guys are thinking through that process as you [drive more with] IT, and as these expansions now become really meaningful dollars from the customer side.

No, I don't think it -- we've actually improved our hiring process, but we're not really changing the persona. We still sell to the line of business for the land. We have the ability to address IT when necessary. IT just needs a signal from line of business that this is a platform that, one, makes their heart flutter; but more importantly, drives ROI for the business. And so, we don't intend to change our hiring model. We will continue to have incremental improvements and enhancements to our playbooks and our selling motions. But IT coming into it earlier actually helps us. It helps our product roadmaps as evidenced by our acquisition in January. But we don't anticipate this forcing changes in our hiring model.

Got it. That's helpful. And then obviously as people use the product a lot, you've got the ability to share models and all the rest of it. But have you guys thought about considering an in-built collaboration offering? Or is there a ways for the field to chat about things? We see this sort of contextual collaboration happening a lot. And it's not like this would be an area where you could ask people to build models, share them, reuse them; it would be a compelling sort of area of investment for you guys.

Great point. Actually some of those capabilities are built into the platform that we acquired in January. That platform is really for -- it's a modern data governance and metadata management platform. It's got Google-like search, LinkedIn-like social, and wiki-like publishing. And most importantly, it connects the users together. So it is a very social platform for the thing that worries IT the most, and that is making sure the people who are now enabled with platforms as powerful as Alteryx start their analytic journey on the right foot.

And so, over time, you will probably see more and more of that; not just in our space, but in every space, as social. But at the end of the day, we're selling B2B software but we're selling to human beings. So we have to have that social aspect in it. And you'll see that in our product in the second half of the year.

Well, that makes sense. Then one last one from me. Just on partners, obviously you got the [SIs], you got the [200 R Bars]. Just about partner contribution in the quarter and for the full year, would you expect for that to account for -- I know we've talked about some of your partners driving a bunch of the expansion; just an update on your strategy, vis-a-vis the partner channel there. Thank you.

Well, partners are roughly driving about 20% of the revenue for the quarter through their reseller channel. We also have significant strategic alliances as well as arrangements with most of the large, global analytic consulting companies, and they tend to drop breadcrumbs wherever they go in doing projects for their customers. These are sell-to relationships as opposed to sell-through relationships.

So we are continuing to expand our channel initiatives across all three dimensions of resellers, strategic alliances, and analytic consultants, especially into new markets where we don't have people in market. And we are teaching our partners about our land-and-expand model so that they, too, can see the benefits of a subscription model that has 133% net retention rates.

Great. Thanks, guys. Congrats again.

Greg McDowell, JMP Securities.

Dean, my first question -- since you've gone public, there's been a lot of talk about how much you guys are drafting off of the data visualization vendors, and how much you are selling use cases to -- in non-visualization type environments.

And I was hoping, based on the IPO road show and your conversations with investors -- I was hoping you could expand on what do you think are some of the misperceptions out there in the market, and among investors, in how they are understanding Alteryx and what you guys are doing. Because it feels like there's this narrative that you guys are only drafting off these visualization players, when I think some of us who have been around the story for a long time and have attended Inspire conferences for years, know that you guys are a lot, lot more than that.

So, a long-winded question, but basically what -- are there any perceptions out there that you think are misunderstood or that you'd like to correct?

Thanks for the question, Greg. I think you're right. There is that perception, and the reality is we don't draft off the visual vendors at all. In fact, I think if you go back to one of the previous questions that was asked, only 15% of the output even goes into a visualization layer. And I think that people have to understand the place where Alteryx plays. We are the heavy lifting between the persistence layers and the consumption layers in the analytic process.

And in order to compete with Alteryx you would have to have, one, a platform; and, two, you would have to have the extensive capabilities of our platform, from ingesting the data to preparing it and organizing it and standardizing it, and applying a range of analytic processes to it and then sharing it with the people who matter most, in metaphors they can understand.

And I think what people tend to believe is that interactive realization is the be-all and end-all. And it is very important for visual data discovery, but at some point you've got to go from discovering to deploying. And I think what we are seeing in the market now is that people are beginning to amp up their use cases from this, I would say, lower-value descriptive analytic function -- that is, seeing what happened in the past -- to predictive functions of what's possible in the future. And a lot of the people who build these algorithms and these models, and who are ultimately going to march on to AI and ML kinds of activities with APIs -- they are not pushing their work into visualization layers.

And we actually are adding more interactive visualization, but not for the purposes of dashboarding. We are actually adding interactive visualization so that you can see your data and understand all the things about your data along the entire analytic process. And so I think people need to just understand that we're -- I would hate to say middle of the stack, but we are the chokepoint between the ingestion layer and the consumption layer. And we see the viz vendors who are really terrific partners, between Qlik and Tableau and Microsoft and AWS QuickSight. These are great partners. But we also see consumption mechanisms, panes of glass, that are well beyond interactive visualization.

Great. Thank you, that's helpful. And one follow-up question, and I don't know if you've addressed it already. But could you talk about the international opportunity and some of the sales motions you're making in non-US markets? Thanks.

Sure. So, we expect to have continued growth in the international markets, for sure. We've seen that in the last three years. I believe we opened up in London four years ago to create a beachhead [fermia]. Today we have, I don't know, 35 people in a variety of roles in London. We opened up Munich last year with a small team.

What we've learned is that analytics isn't a North American phenomenon. We have a fair number of trials, as most of you probably know, that our whole land-and-expand process begins with a free trial. A lot of these trials come in from around the world where we don't have people on the ground. So that's fueling our desire for channel-based efforts because we don't want to spend in every single market.

We have to understand the land-and-expand rates of these markets before we decide to put people on the ground. But we definitely see international becoming a bigger part of the total flow of revenue in the years ahead.

Great, thank you.

Michael Turits, Raymond James.

I want to ask a broad competitive question, on whether or not you've seen much change in the landscape [from where and sell from where]. But maybe specifically to start off around the question that you highlighted around the increased focus in IT. You have responded with more capabilities, including the recent investment that would help you out with governance. So, is that effectively taking you across the enterprise and helping you get bought by IT? Or is there any advantage in shifting to some of the legacy players who obviously have existing strength there?

No. I don't think there's any advantage for legacy vendors at this point. I think if you look at the low single-digit numbers, most of it through M&A growth that these stack vendors are seeing, tell you that IT is looking for modernization across the entire stack. IT doesn't want this mess anymore. They know that the power, especially of analytics platforms, is when it's closer to the context around the business questions being asked. And so, I think IT is beginning to reimagine the analytic stack and in the line of business analyst.

So, for all practical purposes, the reason we made this acquisition is that we know that metadata management is a critical component to enabling these analysts around the world and across an enterprise to be able to start their analytic journey off on the right foot. And IT loves that part about our business, and when they see the successes that the line of business has, I think it's just another tailwind for us.

And anything else, Dean? I know it was on the (technical difficulty) side, but anything else that you are seeing change on -- whether it's from startups or anywhere else along the competitive landscape?

No, not really. Again, we don't have direct competes very often unless we somehow get pigeonholed into a point solution, where we might go against a specific point solution product. But when people recognize Alteryx as an end-to-end unified platform for simple to advanced analytics, we don't have any direct competes.

And will that change in the future? Perhaps. We always keep our eyes to the market to see what's happening in the market. But today you would have to have best-of-breed tools strung together and create lots of friction in order to actually compete with us.

Great. Thanks, and congrats on the first great quarter out of the gate.

Derrick Wood, Cowen and Company.

I'll echo my congratulations. I don't -- I guess in belaboring the point here on IT, but I do have an additional question on -- is there an opportunity to gain incremental budget share from IT as they get more involved in the process, on top of self-service workers? Or is this more about establishing an environment that's more compliant with IT that can drive broader self-service adoption?

Well, I think it's the first part. That's the interesting part, is that we do see dollars shift from IT supporting these initiatives in the line of business. The days of command and control data governance and metadata management, I think, are short-lived. And you're going to start to see more and more of these modern tools exist in the line of business. But IT and chief data officers who are now largely tasked with helping this modernization occur, you're going to start to see them pay for and fund a lot of these new efforts or these modern tools in the line of business.

Okay. And the new product that's coming out later this year, is that going to be separately priced, or will that be part of the core Server SKU price?

The intent is to actually have it as part of the Server, to accelerate Server sales.

Okay. And then I'll throw a couple at Kevin. Strong gross margins, start of the year. How sustainable is this? How should we think about gross margins for the rest of the year? And then on deferred, what are your expectations for deferred billed in Q2 and throughout the rest of the year?

So, with respect to margin, we were pleased with the strong performance in gross margin. It was largely driven by the proportion of revenue that was a subscription relative to service. And we've been a bit more efficient in customer success, including initiatives to drive many of our users to our community where they can interact with other users. They can get online training and other types of enablement resources. So that is obviously showing up here as well.

I would say that we think that this is certainly a sustainable margin profile. We still could have fluctuations period over period, depending on a number of factors, including service mix and the like. But I think that's pretty -- this is a sustainable level.

With respect to your question around deferred, we're not guiding towards those metrics, so I'm not sure that I can offer you any guidance there.

Got it, okay. Thanks, guys.

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I would like to turn the floor back over to Dean Stoecker for closing comments.

Thanks, Adam. Before we end the call, I wanted to thank you for joining us today. And we look forward to speaking with you in the future quarters. I also want to take the opportunity to thank our dedicated employees and partners for their efforts during the quarter to give us the achievement we had. And of course, a big shout-out to our customers for their ongoing commitment to Alteryx the company, and Alteryx the platform. Thanks and have a great day.

Thank you, ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.