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Edited Transcript of AYX.N earnings conference call or presentation 1-May-19 9:00pm GMT

Q1 2019 Alteryx Inc Earnings Call

IRVINE May 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Alteryx Inc earnings conference call or presentation Wednesday, May 1, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher M. Lal

Alteryx, Inc. - Chief Legal Officer

* Dean A. Stoecker

Alteryx, Inc. - Co-Founder, Chairman & CEO

* Kevin Rubin

Alteryx, Inc. - CFO

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Conference Call Participants

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* Bhavanmit Singh Suri

William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Technology, Media and Communications

* Bradley Hartwell Sills

BofA Merrill Lynch, Research Division - VP

* Brent Alan Bracelin

KeyBanc Capital Markets Inc., Research Division - Senior Research Analyst

* Ittai Kidron

Oppenheimer & Co. Inc., Research Division - MD

* James Derrick Wood

Cowen and Company, LLC, Research Division - MD & Senior Software Analyst

* Jon Philip Andrews

Needham & Company, LLC, Research Division - Senior Analyst

* Michael Turits

Raymond James & Associates, Inc., Research Division - MD of Equity Research & Infrastructure Software Analyst

* Patrick D. Walravens

JMP Securities LLC, Research Division - MD, Director of Technology Research and Senior Research Analyst

* Pinjalim Bora

JP Morgan Chase & Co, Research Division - Analyst

* Rishi Nitya Jaluria

D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst

* Steven Richard Koenig

Wedbush Securities Inc., Research Division - MD

* Tyler Maverick Radke

Citigroup Inc, Research Division - Senior Associate

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Presentation

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Operator [1]

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Greetings. Welcome to the Alteryx First Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note, this conference is being recorded. I will now turn the conference over to your host, Chris Lal, Chief Legal Officer. Mr. Lal, you may begin.

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Christopher M. Lal, Alteryx, Inc. - Chief Legal Officer [2]

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Thank you, operator. Good afternoon, and thank you for joining us today to review Alteryx's first quarter 2019 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 uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statements. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's 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 Investors section of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure.

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

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [3]

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Thanks, Chris, and thank you to everyone joining us today. Alteryx got a solid start to 2019 as the positive trends we saw in 2018, such as digital transformation initiatives, increasing global demand for advanced analytics and improved awareness of the Alteryx brand, continued. Q1 revenues were $76 million, up 51% year-over-year. We generated $16 million in operating cash flow and $1.4 million positive non-GAAP operating income. Net expansion remains strong at 134%.

We believe our performance continues to be fueled by our strong global execution along with an enterprise focus on digital transformation. Underlying this trend of digital transformation is automation, which usually begins with automating mundane data tasks. In our view, too many business processes, particularly data-oriented ones, remain highly manual and inefficient, making them ripe for the benefits of automation with Alteryx.

According to a recent survey by IDC commissioned by Alteryx, a typical data process involves an average of 6 disparate data sources, 40 million rows of data and 7 different outlets. Despite increases in innovation, data and analytic processes have become more complex, not less. The continued fragmentation at the persistence and consumption layers continues to be a tailwind for us.

More relevant to Alteryx is the fact that searching for and preparing data consumes over 40% of data workers' time, and approximately 16 hours per work -- per week per worker is wasted on unsuccessful data initiatives. This translates into tens of billions of dollars of analytical waste each year. The Alteryx platform can help organizations transform this wasted time into productive time by easily automating routine processes with its drag-and-drop, click-and-run, code-free and code-friendly environment. Through a simple but powerful graphical user interface, Alteryx enables nontechnical users to identify and connect to the right data, build repeatable workflows, schedule and scale analytic processes across an enterprise, and operationalize and manage data science models, or as we like to say here, just Alteryx it.

We continue to see the total addressable market, or TAM, expand. We now estimate that our core TAM is approximately $23.5 billion. Based on the recent survey, IDC estimates there are 47 million advanced spreadsheet users worldwide. In addition to this, we also believe there will be an increasing shift of the $20 billion in IT-related spend on data and data management technologies that flow from IT into the line of business that will also become available to us over time. In short, we have a large and expanding market opportunity.

In Q1, we added 277 net new customers and now have nearly 5,000 customers, including 28% of the Global 2000. Some of the notable companies that subscribed to our platform during the quarter included Autodesk, eBay, Luxottica Group, Netflix, Twitter and WeWork. Our land and expand model continued to perform well. And consistent with the themes of 2018, we continue to engage with our customers in a more strategic way as we believe the strength of our brand and the power of our platform is resulting in our continued growth around the world.

In Q1, we saw an over 50% increase in new customer lands larger than $50,000 and nearly a doubling of customer expansion transactions greater than $100,000.

During Q1, we also witnessed strong activity within the data and analytics-rich utilities industry. We added Alliant Energy in the U.S., Bulb Energy and Opus Energy in the U.K. and we added ALG Energy (sic) [AGL Energy] in Australia. We also saw more customers with larger lands. For example, in Perth, Australia, Horizon Power, following a trial period, purchased the entire Alteryx platform, including Connect and Promote. Horizon Power is a state government-owned corporation that provides safe and reliable power to 100,000 residents and 10,000 businesses across regional and remote Western Australia.

The firm's strategy is to inculcate a data maturity and governance program via a data science shared services initiative to improve operational insight and drive customer benefits while creating a strong internal data and analytics culture. Alteryx Connect aids in the governance initiative by exposing a social data catalog of the data assets available, ultimately helping the business better perform its functions. With an acute understanding of the importance of operationalizing analytics in a dynamic industry, they deployed Promote to support the predictive models needed to provide superior service for customers.

International performance was also strong in Q1 with international revenue of $23 million, up 54% year-over-year and now representing 30% of total revenue. We now have a customer footprint in over 80 countries. And particularly, we saw strong performance in Japan, where we recently expanded our presence and saw revenue increase by 146% year-over-year. During Q1, we did business with All Nippon Airways, Konica Minolta, Mitsui & Company, NTT DATA Corporation, Nissan, Recruit Holdings, Olympus Corporation and Panasonic Corporation Japan.

Additionally, Honda, a long-time Alteryx customer, expanded in Q1. Honda, like an increasing number of Global 2000 companies worldwide, is leveraging Alteryx for advanced analytics use cases. Honda leverages Alteryx via Internavi, its telematic service that provides real-time traffic, safety, security and environment information to onboard vehicle navigation systems. Honda has a goal to share insights from this system with the public and enable people worldwide to improve their lives.

For example, data regarding traffic patterns with frequent sudden braking can be used by local governments and police for alerting and city planning. It can also be used to analyze traffic patterns and as a guide to help determine the most efficient means of travel. After struggling with extracting the spatial data from Internavi, Honda adopted Alteryx to meet its goal of improving people's lives.

As the volume and variety of use cases for Alteryx continues to expand, we expect to continue to expand our ecosystem to complement our go-to-market initiative. For example, to support the success we've seen recently with tax and audit use cases, we recently entered into a strategic partnership with Thomson Reuters. Jim Smith, President and Chief Executive Officer of Thomson Reuters said, and I quote, "We are excited to introduce Alteryx to our ONESOURCE customers worldwide and look forward to a long and successful partnership. Together, we can offer complementary tools and services to help customers streamline workloads and turn data into insight. That is a front and center issue for all of our customers in legal, tax and regulatory markets."

Looking forward, we expect to continue to expand the types of partners we engage with to adequately address the increasing number of strategic use cases that Alteryx is being leveraged for. And speaking of partnerships, as you know, we recently welcomed ClearStory Data to the Alteryx family. As we said, we believe that consolidation in the crowded data science and analytics space will intensify, and our strong balance sheet enables us to be opportunistic. With ClearStory, we not only acquired compelling IP, we acquired a world-class team. The team's technical expertise in scalable compute, data profiling and auto inference aligns well with our strategy, and we are excited to continue to innovate for the future needs of customers as we make Alteryx synonymous with analytics worldwide.

With that, let me turn the call over to Kevin to discuss our Q1 financials and outlook for Q2 and 2019. Kevin?

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Kevin Rubin, Alteryx, Inc. - CFO [4]

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Thanks, Dean. We had a solid start to the year. Q1 revenue was $76 million, an increase of 51% year-over-year. As Dean noted, Q1 saw a strong enterprise focus that resulted in a favorable product mix on the higher end of the upfront range that we provided last call. As a reminder, we expect approximately 35% to 40% of our bookings to be recognized upfront based on product mix. International revenue was $23 million, up 54% year-over-year as we continue to benefit from the strong global demand for analytics.

Before moving on, I want to remind everyone that unless otherwise stated, I will be discussing non-GAAP results. Please refer to our press release for a full reconciliation of GAAP to non-GAAP results.

Our Q1 gross margin was 90.5%, down slightly when compared to 91.2% in Q1 2018, primarily due to increased headcount consistent with our global expansion and support for new products. As we have discussed previously, as we sell more Connect and Promote, we will have some pressure on gross margin.

Our Q1 operating expenses were $67.3 million compared to $38.7 million in the same period last year. The year-over-year increase in operating expenses was due primarily to additional headcount and other investments in scaling our international operation. Sequentially, our operating expenses increased by 19%, which was also commiserate (sic) [commensurate] with the increase in headcount.

Our Q1 operating profit was $1.4 million or an operating margin of 2%. Net income was $3 million or $0.04 per share based on 67.5 million non-GAAP fully diluted weighted average shares outstanding. Our net income assumes a non-GAAP effective tax rate of 20%.

Turning now to the GAAP balance sheet. As of March 31, we had cash, cash equivalents, short-term and long-term investments of $461.3 million compared to $426.2 million as of December 31, 2018. In Q1, we generated positive cash flow from operations of $16 million driven by strong collection.

Turning to the liability side of the balance sheet. During the first quarter, our convertible senior notes became convertible and therefore were classified as short-term liabilities. This was triggered because our Class A common stock closed above 130% of the conversion price for more than 20 trading days during a period of 30 consecutive trading days.

Finally, we ended the quarter with 936 associates, up from 817 associates at the end of Q4 2018 and 629 associates at the end of Q1 2018. Our increase in headcount is reflective of the pace of investments we are making and we expect to continue to make to capture the meaningful opportunity we see globally.

Now turning to our outlook for Q2 and full year 2019. As a reminder, please note that our guidance assumes the following: Average duration of our subscription terms remains constant at approximately 2 years. Approximately 35% to 40% of our TCV booked in the quarter will be recognized upfront with the remainder recognized ratably over time. Quarterly revenue seasonality is expected to be consistent with what we experienced in 2018. As a reminder, as we highlighted last quarter, Q1 revenues benefited from a small portion of Q4 transactions with January subscription start date, meaning revenue recognition commenced in Q1. This impact is also evident in the 2018 quarterly revenue seasonality under ASC 606. Our outlook also includes the effect of the acquisition of ClearStory, which was completed on April 4.

For Q2 2019, we expect GAAP revenue in the range of $74 million to $77 million, representing year-over-year growth of approximately 44% to 50%. We expect our non-GAAP operating loss to be in the range of $4 million to $7 million and non-GAAP net loss per share basic and diluted of $0.04 to $0.09. This assumes 62.5 million non-GAAP weighted average shares outstanding basic and diluted. As a reminder, we host Inspire, our annual user conference in June, which contributes to seasonally higher sales and marketing expenses in Q2.

For the full year 2019, we are raising our outlook and now expect GAAP revenue in the range of $355 million to $360 million, representing year-over-year growth of approximately 40% to 42%. We expect our non-GAAP operating income to be in the range of $30 million to $35 million and non-GAAP net income per share of $0.38 to $0.45. This assumes 68 million non-GAAP weighted average shares outstanding on a fully diluted basis and an effective tax rate of 20%.

And with that, we'll open up the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Tyler Radke, Citi.

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Tyler Maverick Radke, Citigroup Inc, Research Division - Senior Associate [2]

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I was hoping you could talk about maybe some of the other traction that you're seeing in terms of use cases that you really think are on fire outside of tax and audit. Obviously, that's one that you called out in the quarter. But are there other use cases that you would call out that you feel like you're having a lot of success in selling pretty efficiently into?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [3]

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Thanks for the question. I think that there is general consensus that Alteryx is very horizontal within an organization. So we start to see verticals pop up more than we do now horizontals. Tax and audit is occurring in pretty much every industry in every corner of the globe. We're starting to see a lot of activity in everything from HR to facilities management to finance and planning, applications within the health care industry, within the public sector. I think we continue to be amazed at the variety of use cases within functional areas as well all the way down to seeing America's football team, the Dallas Cowboys, doing interesting things around analytics within the stadium.

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Tyler Maverick Radke, Citigroup Inc, Research Division - Senior Associate [4]

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Great. And then a follow-up, it looks like your net expansion rates have continued to go higher and look like they're at their highest point since at least 2017. But the customer count growth has been slowing down, still growing healthy in the mid-30s. But I'm curious. Is that kind of a -- reflecting a double down in the enterprise? Is that reflecting something intentionally that you're doing? Or any color that you could add there?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [5]

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You're spot on. It actually illustrates the focus we have on large global enterprises. In fact, if you look at the customer count, while it was relatively the same kind of growth as we saw last year, we had 82% growth in Global 2000 customers within that 277. So we are very acutely aware of where the TAM lives, and it doesn't matter whether it's here in North America or the rest of the world. In fact, we saw a 60% growth of those -- of that 82% growth of Global 2000s, 60% of it was within international Global 2000. So we are very focused on our enterprise playbooks, the end-to-end platform story, the emergence of the Chief Data Officer. And I think that will help us continue to see that net expansion for some period of time.

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Operator [6]

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Our next question comes from Michael Turits, Raymond James.

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Michael Turits, Raymond James & Associates, Inc., Research Division - MD of Equity Research & Infrastructure Software Analyst [7]

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Two questions. First, you saw the gross margin come down a little bit, and you said that was related to expansion to Connect and Promote. But we've seen the opposite sometimes, where a gross margin [peak] as Connect and Promote was not as big a percentage of your total. So is something starting to fire a little bit more on Connect and Promote? And if so, what's doing it? And what are the remaining hurdles?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [8]

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Well, I think we're still early on in the process. I think we had indicated before that we could see 6 to 8, maybe longer, quarters before we started to see meaningful attachment rates. The Horizon use case in the script was -- is kind of telling, we're beginning to see more people who step up earlier on the end to end platform, including that first mile with Connect and that last mile with Promote.

I think we've indicated that, in the long haul, if you believe the data science and machine learning are going to eat the world, you're going to need to have Promote in the mix, and we're beginning to see more use cases around that. Our sales teams are within there, both land and expand motions, are talking about the end-to-end platform more. Over time, as we prosecute the Global 2000, I would expect us to have a significant attach rate for both land and expand.

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Michael Turits, Raymond James & Associates, Inc., Research Division - MD of Equity Research & Infrastructure Software Analyst [9]

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And then, Kevin, since we don't really -- is there anything you can do to help us out in terms of understanding some balance sheet kinds of growth metrics? I mean we don't really have a year-over-year comparable on deferred on a 606 basis. If you can help us out with that a bit, it would be great. Or alternatively, talk about how we can think about deferred growth going forward or alternatively talk to us a little bit about RPO in the quarter.

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Kevin Rubin, Alteryx, Inc. - CFO [10]

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Yes. Thanks, Michael. So your last comment, I mean, we would focus you on RPO if you're trying to understand how momentum changes quarter to quarter, and so that would be the appropriate benchmark. We did elect to include the net effect of the contract asset and deferred revenue in our RPO disclosure, so that is a totality of all of the remaining performance obligation. The other thing I guess I would just point to, we saw very typical seasonality in Q1 relative to what was illustrated in the 2018 ASC 606 quarterly information. And so I think as a proxy, you can look to the quarterly seasonality we saw in 2018 relative to how we're thinking about 2019.

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Operator [11]

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Our next question comes from Derrick Wood, Cowen.

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James Derrick Wood, Cowen and Company, LLC, Research Division - MD & Senior Software Analyst [12]

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So Dean, you're talking a lot about end-to-end platform, larger deal activity. I'm just curious, from a go-to-market standpoint, have you guys have historically taken more of a bottoms-up land and expand approach? As you kind of get more scale and awareness and broader adoption, are you starting to see deployment decisions kind of bubble up higher in the organization and become more of a top-down agenda?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [13]

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Well, I think that's only evident when there's a Chief Data Officer in the mix or a proxy thereof. We are beginning to see more of that because we're hanging out more in the Global 2000. Our playbooks haven't really changed, though. Whether we're talking about any aspect of our global team, they're still very focused on the $10,000 to $12,000 2-seat land in 45 days. Even when we closed 40 of the Global 2000 this quarter, invariably the majority of those ended up in that same land cycle. And so we get excited just to land them on a couple of seats so that we can begin the top-down selling motion. So the playbook hasn't changed. The DNA of the sales rep hasn't changed. We're cognizant of the fact that land and expand model works. And because we are at relatively low penetration rates in any of our most penetrated accounts, we see the opportunity for a big expansion over a very long period of time in most of these customers.

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James Derrick Wood, Cowen and Company, LLC, Research Division - MD & Senior Software Analyst [14]

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Maybe touching on the ClearStory acquisition. Can you just give us a sense for what kind of core technology components that you're getting that you didn't have and -- I know ClearStory had been leveraging Spark and harnessing some large-scale unstructured datasets. How are you planning to kind of attack this side of the market in terms of the analytics workloads?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [15]

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Sure. Great question. Let me first add some context to the question. That is, since our convertible last year, we had indicated that we had anticipated a consolidation, maybe an accelerated consolidation in the data science and analytics world. We see many of the folks that are on the modern BI and the data science machine learning MQs from Gartner make themselves available. ClearStory ended up being a great opportunity for us. They -- we've long had a desire to have a presence in Silicon Valley. It gives us a beachhead there. It's a talented team of approximately 20 folks, and they do have core expertise that we haven't had a ton of experience with. They have a number of people who are very active in the Apache Open Source community, leveraging scalable compute on Spark. We have Spark Direct Connect capabilities. However, I think they're going to give us a one-upmanship on the ability to do a much better job than we've done historically.

They've done a -- yeoman's work around what they call data harmonization. We refer to that as smart tooling. That's data profiling and auto inferencing to actually use machine learning to automatically understand what's happening in a dataset, fixing that dataset before you advance your cause down the analytics journey. And I think they also provide something that we're not exactly sure where it's going to fit, but they've done a good job with B3 visualizations, performance-based visualizations on big data. And we see in our inline visualytics play the need to have the ability for very quick response times, rendering times for visualizations on large datasets as you reduce that data through your analytic pipeline ultimately to be able to get to machine learning algorithms that you can operationalize on Promote.

We obviously are not going to go up stack to the dashboarding world. It's still a bloody ocean, and we'll still see what happens there. But we see some of these technologies making their way into our platform, and we think we've got a great team and a presence in the Valley that will allow us to attract more talent.

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Operator [16]

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Our next question comes from Brent Bracelin, KeyBanc Capital Markets.

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Brent Alan Bracelin, KeyBanc Capital Markets Inc., Research Division - Senior Research Analyst [17]

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I'll start with Dean. Let's talk a little bit about kind of partner-influenced deals. Obviously, started out the year here with an auditor change because of some opportunity you saw there. So can you just bring us up to speed on what you're doing with those kind of global SI partners? And then as you think about the 40 new GS, Global 2000 customers you landed this quarter, was that comparable to the same number during Q1 of last year? Was it a little bit higher? Walk us through kind of what you're seeing around the Global 2000 and then partner-influenced kind of deals this quarter.

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [18]

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Good question. So we had 82% growth in our Global 2000 customers this year versus last year in Q1. A significant step-up in the kinds of TAM that we want to address. And again, I'll restate that 60% of that was international. So this is not a North American phenomenon. We're beginning to see large global customers in Germany and Singapore and Australia take the same path down this digital transformation journey.

Regarding tax and audit and some of the partners in that space, you referenced the audit change. I think it's a lot less to do with the audit change. It has to do with the fact that the top 6 tax and audit firms in the world have embraced Alteryx in some form or fashion. And that's because one of the single most important parts of automation in the digital transformation space happens to begin in finance. When you think about the myriad of use cases where you can automate mundane routine tasks that were isolated in the IDC study, we can get 16 hours of every analyst's time back, and organizations get duly rewarded for that operational improvement. And this is across almost everything from transfer pricing to FX risk modeling to R&D tax credits to -- you name it. There's 100 use cases that we have seen. And so we'll continue to build out partnerships with the accounting firms where they see a need to help their customers out and ultimately have joint customers at that point.

And our partnership announced with Thomson Reuters is an important one in that regard. All the firms seem to kind of pick their place, and there's very little overlap with TR and our customer base. We're really excited that they see the opportunity for digital transformation to allow people to live in their ONESOURCE platform for longer periods of time with Alteryx.

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Brent Alan Bracelin, KeyBanc Capital Markets Inc., Research Division - Senior Research Analyst [19]

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Got it. And then just clarification, 82% growth in the Global 2000 this year versus last year, was that a customer count growth figure? Or is that actually kind of an aggregate dollar growth?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [20]

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No, that's customer count. And again, that's exciting to us because that's what fuels net expansion over long periods of time. Those customers in the Global 2000 represent a very significant portion of the 47 million analyst TAM that have been living in complex Vlookups.

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Brent Alan Bracelin, KeyBanc Capital Markets Inc., Research Division - Senior Research Analyst [21]

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That totally makes sense. And then shifting gears, Kevin here, just as we think about the move to ASC 606, we obviously get a little bit more noisy here around some of these metrics that we all kind of look at. But was there any sort of nuances or changes in the move to ASC 606 that would impact net retention rate, the net expansion rate you gave? Any other kind of weird calculations we should think about just given the move to ASC 606?

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Kevin Rubin, Alteryx, Inc. - CFO [22]

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Yes, thanks, Brent. So you may recall, we actually changed the method of calculating. We had net retention, which was a revenue-based metric previously, and we updated that in Q4 on the last call to net expansion. So the net expansion rate is an annual contract value calculation that is unaffected by 606, so that is a pure calculation of how our customers year-over-year are expanding their relationship with us. Other than that, I would just point to the mechanics that I walked through with respect to guidance on how revenue gets ultimately determined.

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Brent Alan Bracelin, KeyBanc Capital Markets Inc., Research Division - Senior Research Analyst [23]

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Got it. Very helpful there and helpful color. Then last question is just on the operating expenses. Looks, obviously as you think about the pace of investment in OpEx this quarter, last quarter, north of 70% kind of growth in OpEx, how are you thinking about kind of those investments? Where are those investments kind of going? And as you think about the elevated investments here, how long do you think you're going to be stepping on the gas around investing in the business to scale it?

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Kevin Rubin, Alteryx, Inc. - CFO [24]

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Yes, I mean I think, as we've talked with you guys in the past, seasonally we tend to front load a lot of our hires to the beginning of the year, certainly first half of the year, with the desire of making sure that we have as much productivity in the back half as we can. So you are seeing some seasonal effects. And then I think as we think more broadly about level investment, I think as we've talked about, there's a significant opportunity for us globally. And as we continue to hire and launch new markets and new offices, we continue to get rewarded from that. And so as long as that is the case and the dynamics, we're going to kind of continue to do that. That being said, I think if you look at our model over a longer term, I mean there's leverage in this model, and we do expect that we'll be able to generate significant cash flow over the longer term.

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Operator [25]

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Our next question comes from Ittai Kidron, Oppenheimer & Co.

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Ittai Kidron, Oppenheimer & Co. Inc., Research Division - MD [26]

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Congrats, guys. Great quarter. Just a couple short ones from me, Dean, on the sales force side. Given the traction that you're seeing in some of the verticals, I think you highlighted utilities and tax audit, how do you think about the progression of the verticalization of your sales force? If I'm not mistaken, you only had government and health care kind of specifically carved out. Is there more coming on a nearer-term basis?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [27]

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Well, we're -- we use Alteryx ourselves internally to understand how people use our platform, looking at everything from job titles to industries to geographies to help inform us what we should be doing next. There are many choices, and we're going to be very careful about investing too quickly in any one of them until we understand the magnitude impact of each of them. But even last year, we stood up 2 of the verticals, and we're in the process of doing a better job at tax and audit, as that is one of the largest, most recent use cases. But we see opportunities in everything from manufacturing of pharmaceuticals as an adjunct to health care, academics. The student market, university market seems to be doing pretty well. I would be cautious about the expansion capabilities in that because that's not necessarily where the largest TAM is. So we're going to be cautious. I don't -- none of the team has identified the one that's going to move the needle, and so we're going to be paying very close attention to it in the next couple of quarters to make determinations.

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Ittai Kidron, Oppenheimer & Co. Inc., Research Division - MD [28]

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Got it. And then just a quick follow-up. When you think about the competitive environment, I know you've talked about how you don't see much out there right here right now, just making sure, checking the temperature there. Any changes there in the field that you're seeing?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [29]

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Well, we pay attention to the competition because it's so varied. There are point solutions along the way depending on what vertical we're in or what use case or functional area we're in. So I'd say there's -- it would be disingenuous for us to say there's no competition and we'd almost have to say that everyone is a competitor to a certain extent. We do see SAS more consistently as a -- the incumbent in an opportunity, not necessarily a head-to-head competition. They -- invariably, people are trying to wean themselves of SAS as being recognized more as the last generation of predictive capabilities.

And so that said, we're -- we pay attention. We pay attention to corporate cultures, which tends to be the second biggest competitor, of people not willing to engage in or embark on a digital transformation journey. But we don't necessarily worry about the competition. We have a competitive intel team, and we keep track of what everyone's doing not just from a product perspective but an M&A perspective and where we see them in the strategic chessboard. So we're aware. We're certainly aware.

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Operator [30]

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Our next question comes from Bhavan Suri, William Blair.

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Bhavanmit Singh Suri, William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Technology, Media and Communications [31]

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I guess I just want to follow up on the competitive environment a little bit, and it's good because I was going to ask a question about -- you keep saying Microsoft, but you mean SAS or SPSS or Enterprise Miner or something like that would be more of the incumbent. But if I turn to like the Trifactas, the Paxatas, the Tamrs out there, I guess are you seeing any pricing pressure from those guys? Or are they being price competitive? Are they leveraging that to get into deals or at least make some noise? I'm just wondering what you're seeing out there from that perspective.

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [32]

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No, certainly not from those folks. I think that the out-of-the-box experience with Alteryx is, it's $4,000 a year on a 3-year contract. That seems expensive. We get through that pretty quickly as people start to realize that out of that 16 hours of wasted activity every week in the hands of each analyst that, that operational efficiency improvement more than pays for itself in a single seat. We have not seen compression of prices at all even in general terms, let alone in a direct competitive environment if you even took somebody who might be the closest to us. Certainly not from the folks that were cloud first or cloud only or Hadoop first or Hadoop only. Our optional, our prolonged optionality gave us lots of opportunity to maintain our prices because we're kind of Switzerland in that space. We don't care about what happens at the persistence layer, the consumption layer. And that uniqueness, that competitive moat that we've built that is now getting deeper and wider, protects our prices.

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Bhavanmit Singh Suri, William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Technology, Media and Communications [33]

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Got it. Got it. And then sort of 1 higher level question I guess. When you think about it, essentially -- especially with the statistical and the advanced statistics part of the package, or of the solution, you're giving people who -- let's take SAS. And SAS used to have -- you'd have to have a PhD in stats or a [MAS] in statistics to really use it, and now you've got an environment where I don't need to code. I could, but I don't need to -- and I can drop random walks. You can drop a [rare] or a regression, whatever, onto data and see the result. But the challenge you have is that now you're putting it in the hands of users who may not totally understand that. So you have a PhD in stats. Of course, you understand that. But the average business user -- maybe at McKinsey and BCG do, but maybe there's someone in the average company that doesn't. I guess are you guys thinking about a way to help these people sort of figure out what the optimal solution? Or are there -- is there AI in there that's going to back test the data and make sure the correlation they get is not spurious. I guess for the less sophisticated user, is there something you guys are thinking about or building towards that allows them to take advantage of the powerful statistical features without actually knowing what that means? Do you get what I'm saying?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [34]

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Totally get what you're saying. In fact, it's very true that, as you liberate analytics across a broader swath of users who -- now it's easy to build algorithmic processes, our concern has been making sure that we amplify human intelligence in that process. So we've embarked over some period of time on a program around assisted modeling to allow the citizen data scientist to actually understand why they would select the model, what that model score might mean, how to decision off that model.

We're seeing the convergence of the trained statistician and the citizen scientist happen. We're going to make sure that we provide the guardrails for the citizen scientist while we provide the acceleration that the PhD wants to get through models quickly. So we see a world in the not-too-distant future where assisted modeling for the citizen scientist is going to be a requirement and an auto-modeling function for trained statisticians, so they can get back to the edge cases and the hard problems within enterprises. We see both of those as real possibilities. The jury is still out on both of them, but if you guys come to our Inspire Conference in June, you'll probably see a little bit of both.

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Operator [35]

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Our next question comes from Jack Andrews, Needham.

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Jon Philip Andrews, Needham & Company, LLC, Research Division - Senior Analyst [36]

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I was wondering if we could drill down a bit more on the large deals in particular. I think that, Dean, you mentioned a 50% increase in deals greater than $50,000 on initial lands. Could you talk about more specifically what's driving that? Is that strictly attach rates of Promote and Connect? Is that the ability to engage directly off the bat with CDOs, or something else?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [37]

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With regard to the lands being larger, I think there's 2 dimensions: One is there's a focus of enterprises on digital transformation, spending more than $50,000 to see success on getting access to the $10 trillion to $15 trillion of value that's locked up in data around the world. It seems like an insurance policy that's pretty low-cost, to be honest with you. We also see that lands are occurring at a larger size when it's an Alteryx user from a previous customer of Alteryx. I can name a couple of customers where that has occurred. Chumash Casino Resort, for example, they recently landed with 9 designers and a server with a former user who used to use Alteryx at a Las Vegas casino. And so they understand the value where Alteryx plays for both code-free and code friendly environments. And for them, it may still be a 45-day sales cycle, but it's going to be north of $50,000 because they understand the impact that the platform has.

When it comes to the nearly doubling of expands that are more than $100,000, I think that the playbooks that we have for a top-down motion, when there's a CDO in the mix, they just work. We've instituted, for example, this last few months, something we refer to as value engineering to help our salespeople and to help customers understand the true value of larger adoption of the platform. And I think this is all beginning to play out the way we've anticipated for many years, where particularly in the Global 2000, they just can't wait to get their hands on our platform to start to eke out value and drive efficiency gains across their organization.

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Jon Philip Andrews, Needham & Company, LLC, Research Division - Senior Analyst [38]

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Appreciate your perspective. As a quick follow-up, I want to ask, given the advancements you've made just around visualization in general, are you seeing any changes in terms of customer behavior about their -- about -- in terms of how they export data to perhaps traditional BI dashboard and reporting tools?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [39]

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I don't have any data that -- in front of me on any recent changes. What we do know is that when we implemented visualytics about 20 months ago, I think it was Inspire of '17 where we rolled it out, we have seen a big uptick in the use of visualization or what we call inline visualytics. I don't think we've seen a huge shift in the outbound activity, but what we do know is that, within the IDC study, that the average analyst will output to 7 different disparate outputs. And that's something we've known to be the case just based on our own product telemetry and what people write out to. Visualization is one of those, but it is clearly not -- there are certainly 6 other common outputs that people use, and I would argue that, for any enterprise, they may be 6 completely different outputs.

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Operator [40]

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Our next question comes from Rishi Jaluria, D.A. Davidson.

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Rishi Nitya Jaluria, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [41]

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Let me start with one that's a little bit more higher level for Dean. So I've seen as -- maybe over the past year or maybe a little longer than that, your sales efficiency has definitely increased and impressively so. Can you maybe drill down into why that is? Is it just a function of the G2K and enterprise momentum? Is it getting larger lands with maybe higher tier or higher SKUs? Anything you can do on that -- color you can give on that would be helpful. And then I've got a follow-up for Kevin.

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [42]

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Yes, I think there's a number of dimensions. I think that we have finally gotten the attention we deserve post-IPO. Maybe it's our performance that continues to enlighten people about the fact that we must have something of value as they investigate these tools. I also know that we have -- we spend a tremendous amount of time on iterating almost all of our processes. In fact, my -- 3 of my 5 strategic imperatives for the company this year are as follows: follow the signals so we actually leverage Alteryx to understand where we're at in any cycle, whether it's in enablement days or closed cycles or funnel metrics for sales and marketing programs; the second is refining the process. So if we see -- if we follow the signals and have an opportunity to refine all of our processes that get people enabled quickly all the way down to their efficiencies in the field, 2-legged sales calls, 4-legged sales calls, we track tons of metrics. And then the third is remove the friction. So we follow the signals. We refine the processes, and we take the pebbles out of the flywheel to make sure that we can continue to improve.

And then lastly, it really is just a global phenomenon. And I'm a sales guy at heart, I just spent a bunch of time in Dubai launching our Dubai office for Middle East and Africa and then last month in Sydney, Australia, with our Inspire on Tour. And wherever we go, we begin to hear people talk about digital transformation and getting to a data science world where kind of they can automate all kinds of tasks, not just the easy, simple ones that might be in tax and audit use cases, but the complex ones that drive higher-order value. So there's a bunch of things at play, but you're right. It's beginning to emerge as a real opportunity for Alteryx.

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Rishi Nitya Jaluria, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [43]

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Okay. Great. That's helpful. And then, Kevin, I wanted to circle back to one comment you made around the higher upfront recognition. Can you maybe just remind us what leads to a higher amount of upfront recognition versus, I think, the 35% that you've talked about being more typical? Is that a function of newer deals? Is it a product function? And then I don't know if you can quantify what that sort of impact in the quarter was, but again, color would be really helpful.

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Kevin Rubin, Alteryx, Inc. - CFO [44]

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Thanks, Rishi. So as we said, the upfront does range and vary anywhere from 35% to 40%. And that is based on product mix, so it does depend on what a customer ends up ordering from us, what the combination of SKUs are that end up in their order. And if you look over -- from Q1 of '18 up to this point, we've seen a very tight range within that 35% to 40% band, but we can get some slight fluctuations within there based on product mix.

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Operator [45]

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Our next question comes from Mark Murphy, JPMorgan.

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Pinjalim Bora, JP Morgan Chase & Co, Research Division - Analyst [46]

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This is Pinjalim on behalf of Mark. Congratulations, guys. Dean, I think previously you have mentioned about this metric that about 60% of your -- or a little less than 60% of your customers have been involved in advanced analytics kind of use cases. Do you have any telemetry to further kind of dissect what are the 2 -- 1 or 2 maybe the most prevalent use cases within that? Is it spatial analytics, predictive or something else?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [47]

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Well, it's a myriad of use cases for sure in the functionality. Remember, Alteryx has something like 260 unique tools, and it has Python support and R support. So there's almost an infinite number of new tools that can be added. That kind of changes the way we look at the platform itself. We have been tracking, since rolling out the Python SDK, that pretty religiously to see the uptick. It has gone through the roof, to be honest with you. So we do know that Python support opens up Alteryx to the 14 million or 15 million Python developers around the world, and we're starting to see all kinds of interesting things being built. In fact, at the conference in June, you'll hear from customers and partners who have actually built new tools with Python in the platform to solve complex predictive and/or spatial use cases.

So the benefit of the platform for us and for investors is the fact that it is very, very horizontal. It's not -- it's a different mix of 226 tools in almost every use case. And so we're excited about this -- the fact that we can cover of on the entire analytics continuum from descriptive analytics that typically end up in a dashboard to predictive modeling to cognitive services. And that's where the real value is going to be, when you can actually march up that continuum. And we see our customers doing it. We will commit to having some additional detail during the Investor Day because I'm sure this is one of those questions that a lot of investors have.

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Pinjalim Bora, JP Morgan Chase & Co, Research Division - Analyst [48]

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Yes. Okay. And Kevin, going to 2019, how are you thinking about the overall sales headcount growth? Is that something you can share for 2019? And any particular focus on any particular geographies there?

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Kevin Rubin, Alteryx, Inc. - CFO [49]

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Yes, thanks, Pinjalim. So I think as we've consistently said, I mean we are spreading and hiring globally. So certainly, the primary focus is on go-to-market resources, and then second to that is the supporting cast around them. We recently launched 2 offices. Dean mentioned Dubai. We also launched Tokyo. And so we are aggressively expanding globally, and that is a key part of our growth strategy here in 2019. I don't know that I can necessarily go beyond that, but I think, again, I'd just go back to we do have a significant opportunity in a lot of these younger markets where we're only beginning to put direct staff. And the metrics that we see from these young markets is incredible.

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Operator [50]

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Our next question comes from Pat Walravens, JMP Securities.

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Patrick D. Walravens, JMP Securities LLC, Research Division - MD, Director of Technology Research and Senior Research Analyst [51]

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Congratulations. I would love to hear your philosophy around pricing, when you increase price and how you think about the discounting for multi-year deals.

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [52]

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Well, we publish pricing on our website. We're pretty transparent regarding it. We always look at price, to try to understand if there's ever any compression in the market that we know what to do. As we roll out new capabilities in the future, we'll always reserve the right to change pricing up or down depending upon what functionality is available through any new SKUs that might be offered. We haven't actually changed our Designer pricing since, I think, 2014 when we launched our land and expand model. I suppose when we start to offer vertical solutions that might be SaaS-based [they] built on top of the platform, obviously that will change things. Our enterprise pricing hasn't changed much. We -- we're fairly careful about how we price large global deals, but we don't see any compression today to warrant -- in fact, I'd be more inclined to go up in price than down in price based on what we know about the value we're providing to customers today.

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Patrick D. Walravens, JMP Securities LLC, Research Division - MD, Director of Technology Research and Senior Research Analyst [53]

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Yes. No, I was thinking the latter too in terms of going up. And then how about on discounting for multi-year deals? How do you feel about that?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [54]

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Well, we offer discounts for longer-term engagement. We're careful in that as well. I think customers are recognizing that getting price protection on a platform that drives significant value is beneficial for them. Our typical contract period is still around 2 years, so it's not like anything we've done has moved the needle there. I think that the appetite of CDOs though, once they see success, is to try to lock in pricing where they can, yet give themselves optionality in anticipation that there could be a sea change in global economic conditions or even software changes in the marketplace. So I think there's a healthy balance between what we want and what we allow customers to get.

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Kevin Rubin, Alteryx, Inc. - CFO [55]

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And Pat, I would just comment, we tend to see the shorter duration contracts with newer customers. But once they've had an opportunity to figure out where we properly fit within their analytic backbone and they tend to spend more, they tend to want to go for a longer-term contract.

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Operator [56]

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Our next question comes from Brad Sills, Bank of America Merrill Lynch.

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Bradley Hartwell Sills, BofA Merrill Lynch, Research Division - VP [57]

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Obviously, great progress with Global 2Ks this quarter and in the last few quarters. Could you remind us where -- maybe just an illustrative example of a Global 2K, where you're furthest along or they're furthest along in adoption? How did they start? How many users? Where are they today? Use cases? What was the catalyst to get these guys using more of Alteryx more pervasively?

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [58]

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Well, again, I would say that it's universal. It's pretty much every industry we've landed, large manufacturers, large CPG companies, tobacco companies, apparel manufacturers, pharmaceutical vendors, in 80 countries around the world. I think we have a total number of 80 countries that we have customers in today. I'm not sure that, that's the number of countries where we have Global 2000s, but it's pretty much every vertical. There's not a lot of concentration in any vertical. We work with many of the large global telecommunications firms and manufacturers, automotive manufacturers. And so it's pretty universally known that the playbooks that we have aren't any different if we're selling in Germany or Japan or Latin America. So it's pretty consistent across the board. Everyone's focused on the one thing that's going to drive value for themselves, and that's automation. And we believe that as long as we can continue to help them in their digital transformation initiatives around automation, we're going to see continued success.

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Operator [59]

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Our next question comes from Steve Koenig, Wedbush Securities.

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Steven Richard Koenig, Wedbush Securities Inc., Research Division - MD [60]

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So I'm relatively new to the Alteryx story, but when I hear you talk about your vision being -- it's impressive and it's quite broad. You're moving in several different directions beyond ad hoc data prep for citizen data scientists. And I'm wondering, of all the things that you're doing, like how are you prioritizing how you're spending your time? What gets productized next? And what's most impactful near term and then maybe longer term? I know it's kind of a broad question, but then if I were to drill down, I don't recall hearing a lot -- I'm hearing a lot right now in the call about automating routine data tasks and embedding in operational processes, especially in vertical use cases. Is that a newer initiative for you? Or has that been going on for a while? And is that largely a go-to-market initiative? Or are there product implications there? That's all I have.

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [61]

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Yes. No, it's a good general question, too, because there's a number of things that I spend my time on. First, let me address the issue of automation. I think that -- well, we haven't changed our business philosophy or model or even the reason we went into the platform business at all. We've always been focused on automation. I think we waited for many years for the market to catch up to recognize the need for automation. So that hasn't changed at all.

The comment around ad hoc data preparation is an interesting one because in order to be the winner in the data science and analytics platform world, you have to spend your time to become best in class at data prep and blending because nobody does data prep and blending for data prep and blending's sake. They do it to actually advance themselves through the entire analytics continuum. And if you didn't believe that predictive modeling or spatial modeling or cognitive sciences was important, then you would judge us based upon people who do data prep and blending or even operational ETL perhaps, and you would see a TAM that would be many times smaller than the TAM that we address today.

I've said this repeatedly on calls, and I'm excited to be able to actually say it again, is that I think that the only thing that can stop us as an organization is the way we define our corporate culture, making this a fun place to work, making this an engaging place for people to ideate and change the world, not just for business outcomes but for social causes. So I spend a lot of my time on building an impactful corporate culture. We're just beginning to launch, and we'll tell you about this perhaps in the next call, a bit more about our recently initiated inclusion and diversity program. The benefits of having a large global operation is that you have lots of ideas and experiences and language and cultures that can have an enormous impact on our outcomes. And we love the fact that we have the ability to leverage that -- those differences to drive value for us and investors.

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Operator [62]

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We have reached the end of the question-and-answer session, and I will now turn the call back over to Dean Stoecker for closing remarks.

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Dean A. Stoecker, Alteryx, Inc. - Co-Founder, Chairman & CEO [63]

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Thank you, operator. Before closing the call, I wanted to publicly acknowledge the hard work of our associates around the world, the engagement of our partners with both us and our joint customers, and most importantly, I want to thank the customers for their business and their advocacy of Alteryx. You illustrate each day that power is not in just what you know but in what you share, and we thank you for that. Thanks to everyone joining us today, and we look forward to updating you on our progress. Thank you.

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Operator [64]

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This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.