U.S. Markets closed

Edited Transcript of DATA earnings conference call or presentation 2-Nov-17 8:30pm GMT

Q3 2017 Tableau Software Inc Earnings Call

Seattle Jun 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Tableau Software Inc earnings conference call or presentation Thursday, November 2, 2017 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Adam Selipsky

Tableau Software, Inc. - CEO, President & Executive Director

* Damon Fletcher

* Derek Wong

* Thomas E. Walker

Tableau Software, Inc. - Former CFO

================================================================================

Conference Call Participants

================================================================================

* Adam Hathaway Holt

MoffettNathanson LLC - Former Partner & Senior Research Analyst

* Bradley Hartwell Sills

BofA Merrill Lynch, Research Division - VP

* Clarke Jeffries

KeyBanc Capital Markets Inc., Research Division - Associate

* Jesse Wade Hulsing

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Mark Ronald Murphy

JP Morgan Chase & Co, Research Division - MD

* Matthew John Swanson

RBC Capital Markets, LLC, Research Division - Senior Associate

* Philip Alan Winslow

Wells Fargo Securities, LLC, Research Division - Senior Analyst

* Raimo Lenschow

Barclays Bank PLC, Research Division - MD & Analyst

* Sanjit Kumar Singh

Morgan Stanley, Research Division - VP

* Steven Richard Koenig

Wedbush Securities Inc., Research Division - MD

* Tyler Maverick Radke

Citigroup Inc, Research Division - Senior Associate

* Zane Brandon Chrane

Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good afternoon. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tableau Software Third Quarter 2017 Earnings Conference Call. (Operator Instructions) Now I'll turn the conference over to Derek Wong, Senior Director of Investor Relations.

--------------------------------------------------------------------------------

Derek Wong, [2]

--------------------------------------------------------------------------------

Thanks, Emily. Good afternoon, and thank you for joining Tableau's Third Quarter of 2017 Earnings Conference Call. With me on the call are Tableau's Chief Executive Officer, Adam Selipsky; Chief Financial Officer, Tom Walker; and Senior Vice President of Finance, Damon Fletcher.

Our press release was issued earlier today and is posted on our website. This call is being broadcast live via webcast. And following the call, an audio replay will be available on the Investor Relations section of our website. Adam and Tom will begin with prepared remarks, and then we will open the call for questions.

Before we begin, I would like to remind you that during today's call, we will be making forward-looking statements regarding future events and financial performance, including our guidance for the fourth quarter 2017. We caution you that such statements reflect our best judgment based on factors currently known to us and that the actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, in particular, our most recently filed quarterly report on Form 10-Q and our annual report on Form 10-K. These documents contain and identify important risk factors and other information that may cause our actual results to differ from those contained in our forward-looking statements. Any forward-looking statements made during this call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.

During the call, we will also discuss non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results is provided in today's press release. The financial outlook that we have provided today excludes stock-based compensation expense, which cannot be determined at this time and are therefore not reconciled in today's press release.

With that, it's my pleasure to turn the call over to Adam.

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [3]

--------------------------------------------------------------------------------

Thanks, everyone, for joining us today. In Q3, we continued to see increased demand for Tableau with a record 4,100 new customer accounts in the quarter. We also saw strong momentum in our subscription offering as our ratable license bookings mix grew to 45% of overall license bookings, above our expectations.

Our higher-than-expected ratable mix impacted total revenue in Q3, which was $215 million, up 4% versus prior year. As a result of the subscription momentum, our subscription annual recurring revenue grew over 200% from the previous year to reach $139 million, and our total annual recurring revenue was $526 million, up 46% from last year. We're pleased with the progress we've made in the subscription transition to date. And in Q3, we saw strong uptake of subscription across our commercial and international businesses. For our U.S. enterprise business, the ratable license bookings percentage mix more than tripled versus the prior year. However, for our U.S. enterprise customers, which represent a majority of the existing perpetual licenses, transitioning to subscription has added a layer of consideration that's extended timelines for larger deals. It's important to remember that, while the subscription transition can impact our quarter-to-quarter results, our move to subscription is in the best interest of our customers given the reduced upfront cost and lower risk to them when deploying Tableau. We expect our move to subscription to continue to increase overall demand for Tableau adoption. These customer benefits also allow us to sharpen our own operations, thereby growing our long-term relationships with customers. So we're going to continue to stay laser-focused on enabling our customers to expand their analytics at scale, and we're highly encouraged by the strong uptake in subscription since the beginning of the year.

Moving on. For today's call, I'll cover 3 areas in my remarks. First, what our next steps and priorities are for subscription. Second, how we're broadening our functionality and reach within the enterprise. And third, the ongoing innovation that we're delivering in the end-to-end analytics platform.

First, on subscription. Just as a reminder, a year ago, before we [publicly] launched subscription for all of our products, our ratable license bookings mix was 16%. Fast-forward to today, and we nearly tripled the percentage mix in Q3. With over 65,000 total customer accounts now around the world, customer demand for analytics has not slowed down. And in fact, it's only continuing to grow. We've covered a good amount of ground thus far, but we still have a lot left to accomplish as we refine our approach to best meet the needs of our customers. So as we look to the next quarter in 2018, we'll be focused on the following: first, we're continuing to focus on our existing customers with programs to help facilitate a transition to subscription in the context of expanding their Tableau footprints. These incentives and other mechanisms [are] designed to accelerate the transition to subscription over the long term. And second, we're focused on better aligning ourselves with the partner ecosystem to help drive subscription adoption and global reach. Given the high demand for subscription we're seeing and the strong customer feedback we've received so far, we believe we're headed down the right path. And the customer enthusiasm for subscription was on full display at our recent Tableau conference. For example, this quarter, one of the world's largest financial services firms, who presented at our conference, signed a landmark deal to deploy Tableau to tens of thousands of their employees. They chose Tableau because we're making them more efficient with their data-driven decision-making. And with subscription, they've lowered the friction of deployment across the organization. Also, by partnering with our IT team, we've struck a successful balance between ensuring reliable controls and governance while giving on-the-ground analysts the flexibility to ask questions of their data across various data sources and lines of business.

Let's turn now to the enterprise and what we're doing to drive our scale and reach there. We're seeing enterprises around the world looking to grow their Tableau footprint from thousands to tens of thousands of users. As an end-to-end analytics platform, we support the full spectrum of what our customers need to drive valuable insights into their businesses, not just visualization but sharing, governance and adoption of self-service data discovery across a secure, compliant and governed data platform. For example, data source certifications are an important part of our most recent Tableau 10.4 release, bringing a new level of enterprise governance to analytics. Customers can now mark data sources as certified so everyone in an organization knows that they're connected to clean, accurate and up-to-date data. Data governance should be seamless, scalable and flexible. 10.4 marks a large step towards more advanced certification capabilities in future releases.

Many of our customers are now balancing governance and self-service analytics at scale through the large-scale enterprise-wide deployments and partnerships with IT. And to help further scale our enterprise reach, we also see a great opportunity in creating strategic alliances with certain service industry sectors, like our recently announced partnership with GE Aviation. Earlier this week, we announced a partnership with GE Aviation digital solutions to empower commercial and military airline customers across the aviation industry with visual analytics that can help improve fuel efficiencies, aircraft safety and consumers' overall flying experience. GE's fleet of 35,000 engines produce more than 100 million flight records each year, capturing more than 1 million terabytes of data per day. We're excited to partner with them to help them and our mutual customers to analyze and customize on the fly with Tableau's advanced analytics capability.

Lastly, to drive further enterprise adoption, we're working to ensure that customers succeed in deploying, adopting and managing Tableau. This means focusing on aspects like refining our customer life cycle approach, articulating the total cost of ownership benefits when comparing us across different vendors and evolving our messaging with relevant case studies, white papers and customer best practices.

Turning now to the ongoing innovation we're delivering in our end-to-end analytics platform. Pushing the frontier of innovation in analytics has always been the lifeblood of the company and nowhere was that more evident than at our recent Tableau conference in October, with 14,000 registered customers and partners from around the world and more than 28,000 viewers online. This year's conference marked the largest attendance in the 10-year history of the conference, with over 400 breakout sessions and 100-plus Tableau customers sharing their success stories and analytics wins. That included customers like Honeywell, Schloss, Comcast, the U.S. Census Bureau, Spotify, REI, Nissan, Zillow, Lufthansa and Cleveland Clinic. Our end-to-end analytics platform was center stage, where we showcased the breadth and the depth of our analytics offering, including core innovations for the Tableau platform such as our new in-memory data engine technology, HyPer, which provides faster performance, higher scalability and fresher data; and a new extensions API, which developers can use to create dashboard extensions that enable customers to interact with other applications directly inside Tableau. And the Tableau Server on Linux, which combines the benefits of Tableau with the flexibility of an open source operating system; and Project Maestro, our data preparation product, which will help more people quickly and confidently transform their data for analysis in a visual and direct way. HyPer and Linux will be available in our 10.5 release, which went into beta at the conference in October, while Maestro is expected to be in beta by the end of the year. And our extensions API is currently available as a developer preview. Our innovation goal here is simple. We want to make it easier for our customers to realize the value of Tableau at scale by delivering an analytics platform that allow people across an entire organization to benefit from data regardless of their analytical skill set. This extends from the C suite, to IT, to the analysts and all the way to tens of thousands of employees in large enterprises and organizations who are using data.

In closing, our pace of innovation is as strong as it's ever been. In the last year alone, we've released over 100 new features. And our customer focus was clearly evident at the Tableau conference, where our passionate data community attended numerous hands-on training and Tableau [doctor] sessions as well as opportunities to hear other customers share their success stories and analytics wins directly with attendees. On that note, I'd like to extend a big thank you to the entire TC team, especially those in marketing, for helping to bring together customers, partners and data rock stars around the world.

A year ago, when I first came to Tableau, I was incredibly excited to join a mission-driven company with a tremendous market opportunity in analytics. A year later, I'm amazed by how much we've accomplished and really proud of how we're helping our customers to see and understand data. As I look ahead to the next year, I'm even more excited by the opportunity to delight customers and deliver on that end-to-end analytics platform. That said, we're going to stay focused on continually refining our subscription approach to help larger customers expand the use of Tableau throughout their organization. We'll focus on delivering on key product innovations that our customers are demanding, and we'll focus on building a long-term

(technical difficulty)

focused on customers, drive our innovation forward and work with a sense of urgency in everything that we do.

I'll now turn the call over to Tom, who'll walk through this quarter's results and share our outlook.

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [4]

--------------------------------------------------------------------------------

Thank you, Adam. Good afternoon, everybody. Today, I'm going to cover the following topics in my prepared remarks. First, I'll discuss our Q3 financial results. And afterwards, I'll discuss our Q4 outlook.

Let's start with our results. For the third quarter of fiscal year 2017, total revenue was $214.9 million, up 4% year-over-year. This compares to $206.1 million in Q3 2016. At the end of the quarter, our total annual recurring revenue, or total ARR, was $526.2 million, up 46% year-over-year. Non-GAAP operating income was $5.5 million. This compares to $18.1 million in Q3 of 2016. Our non-GAAP diluted earnings per share for the quarter was $0.08 compared to $0.16 in the prior year quarter.

Turning now to revenues. Third quarter license revenues were $99.4 million, down 15% year-over-year. Our higher-than-expected ratable mix this quarter impacted our license revenue in Q3 as we continued to make more progress in our subscription transition. Specifically, 34% of license revenues were ratable in Q3, more than triple the 11% in Q3 2016. As a reminder, Tableau Online, OEM, ELAs and term licenses are recognized ratably over the agreement period and are typically invoiced in annual installments.

Third quarter maintenance and service revenues were $115.5 million, up 29% year-over-year. This compares to $89.4 million in Q3 2016. The services component of maintenance and services revenue was approximately 12% of maintenance and services compared to 14% in Q3 2016. Total ARR was $526.2 million, up 46% year-over-year. Our total ARR includes both subscription and maintenance ARR, which consists of the annualized value of all maintenance and subscription contracts at the end of a reporting period. Our subscription ARR was $139.2 million, up 204% year-over-year. This includes term licenses, renewals, subscription, enterprise license agreements and Tableau Online subscription and renewals.

We continue to have an overall combined renewal rate exceeding 90%, which includes both our perpetual-related maintenance and subscription renewals.

Turning now to our geographic revenue segments in Q3. International revenues were $64.9 million, up 11% year-over-year and represented 30% of total revenue. Revenue from the United States and Canada was $150.1 million, up 2% year-over-year and represented 70% of total revenue.

Now let's discuss bookings. As a reminder, we define bookings as the first year of contracted revenue only and do not include additional years beyond the first year, unless a customer pays up front. This means license bookings do not include contractual backlog for future years not yet invoiced. License bookings were down 3% year-over-year in Q3 2017 compared to the growth of 11% in Q3 2016. As we noted previously, our license bookings continue to be impacted by our ongoing shift to subscription. The delta between actual and normalized growth rates has continued to increase as our ratable mix has increased. As a result, we started disclosing normalized license bookings growth earlier this year to help provide context around our underlying bookings demand in light of the different pricing economics. On a normalized basis, our license bookings grew 21% in Q3 2017 compared to 14% in Q3 2016. Our normalized license bookings calculation adjusts for our license bookings by applying a perpetual equivalent ratio to our subscription bookings. We adjust for term licenses and renewals, subscription enterprise license agreements and Tableau Online subscriptions and renewals. We do not adjust for perpetual licenses, OEM distribution or perpetual-style ELAs. For further details on these ratios and pricing, please see our 2017 Analyst Day deck available on our Investor Relations website and our trended metrics table in today's press release.

From a mix standpoint, in Q3 2017, ratable license bookings as a percent of total license bookings was 45%. This is above our expected range of 38% to 43% and almost triple the percentage mix from the prior year, which was 16%. For additional context, if our ratable mix had been in the midpoint of our expected range, holding demand constant, our revenues would have been around $6 million higher and towards the high end of our Q3 revenue guidance.

Now let's discuss margins and operating expenses. As a reminder, our margins and operating expenses are discussed on a non-GAAP basis. Please see our press release tables posted on our Investor Relations website for non-GAAP to GAAP reconciliations.

Third quarter total gross margin was 88% compared to 90% in Q3 2016. As I stated earlier, our Q3 operating profit was $5.5 million. Sales and marketing expenses for the quarter were $105.2 million, up 8% year-over-year. We ended Q3 with sales and marketing headcount of 1,499 people. We invested $57.2 million in research and development in Q3, up 10% year-over-year. We ended Q3 with R&D headcount of 956 people. General and administrative expenses for the quarter were $20.2 million. At the end of Q3, our total headcount was 3,418. This compares to 3,280 employees at the end of Q3 2016 and 3,305 employees at the end of last quarter. Our non-GAAP effective tax rate continues to be 30%. This brings our non-GAAP net income for the second -- third quarter to approximately $6.4 million. Our non-GAAP diluted earnings per share was $0.08, and our weighted average diluted share count was approximately 84 million shares.

On the balance sheet. Cash and investments at the end of Q3 were $988.8 million. Accounts receivables were $131.6 million, and our DSOs were less than 65 days. During the quarter, we've repurchased approximately 276,000 shares of Class A common stock for $20 million, bringing our cumulative shares repurchased to date to roughly 1.4 million shares. These shares were repurchased under the $200 million share repurchase program announced last year. We've deployed a total of $80 million under this share repurchase program. As a reminder, this program allows us to repurchase shares opportunistically from time to time, when we believe that doing so will enhance the long-term shareholder value. The repurchase authorization does not have a fixed expiration date.

I'll now turn to our financial targets for Q4 2017. Please note that all forward-looking guidance is being discussed on a non-GAAP basis. Our outlook takes into consideration a number of factors, including, though not limited to, the overall progress we've made thus far on our subscription transition, our current view on the market environment and the demand we are seeing, our customer buying behavior and our pipeline. We expect fourth quarter total revenues to be between $235 million and $245 million. This outlook assumes the mix of ratable license bookings will represent approximately 46% to 51% of our license bookings for the quarter. This is a significant increase over the 20% mix in Q4 of 2016. Our Q4 guidance primarily reflects increased expectations regarding our Q4 ratable mix as more and more customers choose subscription over perpetual licensing.

And as Adam spoke about earlier, we are seeing more of our large enterprise customers wanting to expand with us via subscription. As we enter into more discussions for larger deployments, we have seen that the consideration period of these deals can be longer. And this variability is also reflected in our guidance.

Given our Q4 guidance, we now expect our ratable license bookings mix for the fiscal year 2017 to increase to 39% to 41%. This translates into fiscal year 2017 revenue to be between $863 million and $873 million, representing year-over-year growth of approximately 5% when using the midpoint of this range.

In the context of our revenue guidance and making faster-than-expected progress in our subscription transition, I wanted to revisit our hypothetical perpetual versus subscription example we have talked about in previous earnings calls. However, this time, I wanted to walk through the difference in the pricing economics in the first quarter an order is taken. For this example, let's assume the order is taken on the first day of the last month of a quarter. So if it was Q4, the order date would be December 1. Let's take the individual user costs of a customer deploying Tableau Server as their analytics solution. Our subscription price is $35 per user per month billed annually. The upfront cost is $420 compared to $1,000 on the perpetual basis. On a perpetual basis, we'd recognize $800 in license revenues in Q4 and 1/12 of the $200 annual maintenance fee. The total revenue recognized in Q4 would be $816. Now on a subscription basis, we would recognize 1/12 of the $420 in the quarter or $35. This example helps highlight the dramatic short-term difference in the way revenue is recognized. $816 versus $35, even though the underlying unit demand is identical. As a reminder, our expenses are also affected when we come -- as we compensate our salespeople the same regardless if they sell subscription or perpetual. The faster-than-expected pace of subscription results in the lower near-term revenue and profitability as we build our recurring revenue base. For the fourth quarter, we expect non-GAAP operating loss of $4 million on the low end and a non-GAAP operating income of $3 million on the high end. For Q4, we expect the non-GAAP EPS range to be between $0.01 loss per share to a $0.05 earnings per share. This assumes a basic share count of 80 million shares under the net loss scenario and a diluted share count of 84 million shares under the net income scenario. This also assumes $2 million in other income, primarily related to interest on our cash and investments.

Given that we're in the midst of a subscription business model transition, it's premature for us to offer a preliminary outlook for 2018 today. However, it's worth highlighting a few points. First, as you've seen, we've experienced an accelerated adoption of our ratable business over the course of this year, and our quarterly ratable mix pace -- has paced ahead of our expectations during this transition. Second, we are pleased with this progress so far and continue to believe that making faster progress is better, even if it results in lower near-term revenue and profitability. As you know, we believe the shift to subscription is good for our customers and our shareholders over the long term as it creates recurring revenue streams, generates more predictable results and expands our overall market opportunity. We also believe the market for analytics has never been stronger, and there are a number of trends in play that are highly related. First, getting analytics tools into the hands of knowledge workers is an increasing priority for organizations. A Gartner survey analysis published in June of this year showed knowledge worker adoption increasing from 22% in 2013 to 32% in 2017. The survey also highlighted the impact of business is greater when BI and analytics use is more pervasive in an organization. Second, the modern analytics market, according to Gartner, is expected to have a 22% 5-year CAGR through 2021 as organizations continue to deploy modern analytics capabilities to more users and gradually displace traditional enterprise reporting with more modern BI platforms. Being one of the industry-leading solutions positions us well to capitalize on this market opportunity.

In closing, I'd like to echo Adam's comments and thank the whole Tableau team for making this year's Tableau customer conference such a tremendous success. Thank you for joining us today. We'll now turn the call over to the operator for Q&A.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from the line of Mark Murphy with JPMorgan.

--------------------------------------------------------------------------------

Mark Ronald Murphy, JP Morgan Chase & Co, Research Division - MD [2]

--------------------------------------------------------------------------------

So Adam, to the extent that subscription offerings are being embraced faster than you had expected, in which bucket is that primarily occurring? Is that the new customers buying subscription only? Or is it more of the existing customers that are expanding via the subscriptions?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [3]

--------------------------------------------------------------------------------

Mark, it's really across the board. I'd say many different areas. Your question was about it versus my expectations. So my expectations were that new customers would be the highest adopters of subscription. That is the case. They are the highest. And even there, we've exceeded expectations. Amongst existing customers, a lot of them want to transition over. But as you would imagine, it's a little more of a process. But still, it's going very well overall, and it's going faster than we would have thought 12 months ago when we embarked on this journey.

--------------------------------------------------------------------------------

Mark Ronald Murphy, JP Morgan Chase & Co, Research Division - MD [4]

--------------------------------------------------------------------------------

Okay. And then as a follow-up for Tom, I just had a mathematical question for you. When you get this kind of upsurge in the subscription purchases, that would actually depress your billings growth. I believe it would be a billings headwind. Because instead of taking, for instance, the $2,000 upfront for the license, you're only billing the $840 or so. I've -- just first of all, is that correct? And if you agree with that, is there any way to quantify the impact it would have at this stage? For instance, I think you said revenue would have been $6 million higher. Is there any kind of comparable proxy for billings?

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [5]

--------------------------------------------------------------------------------

Mark, yes. So overall, you're absolutely right. There's a big headwind with respect from subscription versus perpetual. I think the best way to look at it is at the normalized bookings is -- that's why we're kind of focused on the normalized bookings of 21% this quarter. And the reason that is, is because what we're taking is the demand -- the underlying demand the same, and we're just applying that perpetual equivalent ratio, which is really just the difference between the 2 prices. So when you're looking at the -- if you're looking for more of an idea of the overall demand, the normalized bookings is the better place for you to focus on. The other thing that I'd also focus on, that was brought up at the Analyst Day for the first time, is ARR, right? And so the overall ARR is growing. There's a maintenance portion of that, but there's also the subscription portion of that. So it's a more pure number, and it will be more the number that we'll be tracking going forward, just so you can keep track of how we're doing.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

Your next question comes from the line of Zane Chrane of Bernstein Research.

--------------------------------------------------------------------------------

Zane Brandon Chrane, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [7]

--------------------------------------------------------------------------------

I was wondering, has the Tableau Server offering cannibalized Tableau Online at all, now that you can buy that in a subscription functionality? Previously, the only way to get that functionality was -- in an OpEx model was with Tableau Online. So I'm wondering if you're seeing cannibalization with the Tableau Server subscription now. And secondly, I was wondering if you could give us a sense of how fast seats are growing or some sense of unit volume. I would imagine the subscription ARR is a proxy for that to some extent.

(technical difficulty)

that you didn't have a year ago. So maybe seats are growing faster. I'm just trying to get a sense around the seat growth in unit volume.

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [8]

--------------------------------------------------------------------------------

Zane, it's Adam. On the first part of the question, to the best of my knowledge, we're not really seeing the type of cannibalization that you were talking about. I think that's primarily because we're seeing strong underlying demand growth all over. I mean, Tom talked about by just how much the modern analytics segment of the market is growing overall. We're seeing that really across different customer types and geographies. So even as we continue to improve our server offering, we're also continuing to improve the Tableau Online offering. And so hopefully, those are all going to just kind of continue upward in terms of functionality in tandem. So we really haven't seen that effect.

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [9]

--------------------------------------------------------------------------------

Zane, this is Tom. With respect to the seats growing, the metric around that, I'd kind of answer it the same way I answered the call -- the question Mark had which is around normalized bookings. If you're trying to get at the fundamental growth of the -- or the demand -- of the underlying demand that we're seeing, that's what we're using that normalized bookings for. And so, overall, 21% is what it is. But again, I'd also point towards the ARR because that will be the thing that will continue to grow because we are firm, firm, firm believers that analytics is getting more and more pervasive inside of organizations and companies -- organizations that are doing that are having better results. So we think there's a really big opportunity for us to continue to expand inside our accounts.

--------------------------------------------------------------------------------

Zane Brandon Chrane, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [10]

--------------------------------------------------------------------------------

Okay. So just to make sure I understand. The fact that normalized license bookings accelerated, we should interpret that to mean that the unit volume being sold also accelerated, roughly, is that correct?

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [11]

--------------------------------------------------------------------------------

Yes, it's -- I would say it's more about the underlying demand is basically -- last quarter it was 20%. This quarter it's 21%. So that 1% difference is slightly an acceleration, but it's on par with what it's been doing this year.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

Your next question comes from the line of Raimo Lenschow with Barclays.

--------------------------------------------------------------------------------

Raimo Lenschow, Barclays Bank PLC, Research Division - MD & Analyst [13]

--------------------------------------------------------------------------------

A question for you, Adam. The -- you talked about the enterprises kind of -- especially in the U.S., evaluating the new subscription offering and hence might take a little bit longer time and the deals, potentially, could get bigger. Is that -- how much control do you guys have? Like, I remember in the past, you guys had like a little bit of an issue in terms of selling to enterprise. Is this all kind of enterprise driven? Or is this a combination of enterprise kind of evaluating longer and your sales guys getting kind of still used to the fact that selling subscription but also selling into the enterprise? Can you give us a little bit more color on that one?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [14]

--------------------------------------------------------------------------------

Sure, Raimo. Thank you for the question. I appreciate it. So I think, as I said in my remarks, a lot of these big enterprise customers are now discussing very deeply with us subscription, either new customers or existing customers who want to transition over. And in addition, at the same time, these deals are just getting larger and larger as those big organizations want to deploy Tableau to more people. We're now very regularly talking to customers about deployments in the tens of thousands of users. And so as you might imagine, if you're a CIO or a head of a line of business, and you're talking about deploying a significant capability, in this case, Tableau, to tens of thousands of people, you're going to do your due diligence on that. I certainly would. And so it's actually quite natural that now that we're talking about much larger deployments on average than, say, a few years ago, that there's more consideration, security matters, governance matters, compliance matters, making sure you've got a plan and before deploying, adopting, managing Tableau. And so these are just -- we've talked -- since the day I got here, we've talked about needing to form kind of these deep, long-term relationship with customers. And part of that is really exploring all the elements that they need to explore in order to have done a great job on deciding what enterprise platforms they're going to deploy. So I think subscription is a piece of that. But frankly, I just think that the size of the deployments and the importance of analytics and of data inside these organizations are a big driver of that. So we basically feel we're more or less on track there. Obviously, there's always room for improvement. We are going to keep on training ourselves better. We are going to keep on hiring more of the right people, and we'll continue to improve ourself. But I just think a lot of it is due to the fundamental dynamic of these deployments.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

Your next question comes from the line of Sanjit Singh with Morgan Stanley.

--------------------------------------------------------------------------------

Sanjit Kumar Singh, Morgan Stanley, Research Division - VP [16]

--------------------------------------------------------------------------------

This is Sanjit. Just sort of conceptually, if we revisit the period in the beginning of 2016, expanding in enterprise was an issue. And my understanding of moving to a subscription model is that it was supposed to -- would sort of remove the adoption friction points of Tableau. And now we're talking about a little bit longer consideration times. And so, I guess, what I'm trying to understand is like what is the sort of true friction point? Because my hope would be that subscription would sort of remove some of those barriers. So sort of your thoughts on that.

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [17]

--------------------------------------------------------------------------------

Sure. So a couple things. One is that -- if you just look at new customers, I think that subscriptions compared to perpetual licensing absolutely remove friction and speed adoption. If you just look at our customer adoption numbers, new customer numbers, you can see that. So we had 4,100 new customer accounts this quarter, which was a record for the company, which came on top of pretty strong new customer account growth last quarter of 4,000. So we're -- I think you've seen the uptake there. In terms of the -- of existing enterprise customers, again, I think there are 2 effects here. One of which is, if they've started on perpetual and now we're talking about a move to subscription, there's just a lot of elements. There's -- they've been on a CapEx model, moving to an OpEx model. There's moving the licenses over. A just a little bit of a different process inside of some of those companies. So I think there is a certain effect there just due to that movement, if you will, or that transition. And then again, per the answer I gave a moment ago, I think a significant piece of that actually is not so much related to the subscription per se, it's related to the size and the depth of the deployment. And by the way, these days, those deployments are subscription, but in some cases, that's not the driver of it.

--------------------------------------------------------------------------------

Sanjit Kumar Singh, Morgan Stanley, Research Division - VP [18]

--------------------------------------------------------------------------------

Perfect. Now that's super helpful, Adam. And then just in terms of marking to market on the competitive environment. Has that remained stable? Or did you notice any sort of the traditional players making any more inroads into the market? Or (inaudible) how would you sort of characterize the competitive environment in the quarter?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [19]

--------------------------------------------------------------------------------

I would say not a whole lot of news there, frankly. It's been stable. We've had strong win rates. We continue to have very strong win rates. We really didn't see any major shifts during the quarter. It's a large and growing market space. We expect there's going to be vigorous competition. Don't think that's going to change anytime soon. But we know customers consistently tell us we have the broadest and deepest platform, the best capabilities by far, the most largest and most vibrant community and a vibrant partner ecosystem. And so we feel comfortable with where we are, but it's always going to be competitive.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

Your next question comes from the line of Adam Holt with MoffettNathanson.

--------------------------------------------------------------------------------

Adam Hathaway Holt, MoffettNathanson LLC - Former Partner & Senior Research Analyst [21]

--------------------------------------------------------------------------------

It's Adam Holt for MoffettNathanson. My -- 2 questions about billings in the quarter. So understanding that the ratable mix was higher than expected, but aggregate billings were actually little bit below where we were looking for and consensus was looking for. So it makes sense that the mix might shift, but it also looks like it's possible that both ratable billings and on-premise billings came in below expectations. Did you all hit your ratable targets in the quarter for billings?

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [22]

--------------------------------------------------------------------------------

Sorry, Adam. This is Tom. Yes, so overall, as I said in my prepared remarks, is we're happy with the progress we've been making. I think that the billings that you're looking at is the implied or the calculated billings is coming off of stuff that we have invoiced. I just want to make sure that doesn't include any backlog or multiyear types of agreements. But as the first question that we got from Mark was about the headwinds. So there's a significant headwind there. But overall, we're pleased with our results in the quarter, which I think was the heart of your question. And so yes, there is pressure on the bookings. Yes, it's coming down, but it is within where we were expecting it to be, given the transition and given that we're moving faster through the transition, it's putting more pressure on that number just like it's putting more pressure on the overall revenue number. And that's also another reason why we've been talking about normalized bookings for the last few quarters, just to kind of gauge that underlying demand because that's an easier way to look at the underlying demand purely.

--------------------------------------------------------------------------------

Adam Hathaway Holt, MoffettNathanson LLC - Former Partner & Senior Research Analyst [23]

--------------------------------------------------------------------------------

And you actually touched on the second part of my question, which is the off balance sheet piece, which obviously isn't in reported billings. Was there anything mechanically either in terms of more business going off balance sheet maybe than you expected? Or conversely, was there anything that happened on the duration side where you might have actually billed less than you had thought for some of the ratable agreements? That's it for me.

--------------------------------------------------------------------------------

Damon Fletcher, [24]

--------------------------------------------------------------------------------

This is Damon Fletcher. So as we've moved to more license agreements, many of those are structured as 3-year agreements. So over time, more and more customers are choosing to commit in longer-term relationships with Tableau on the enterprise licensing front. We don't disclose contractual backlog at this time. But I will say, over the last 1.5 years since we introduced that program, there's been more interest in that from our customers.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

Your next question comes from the line of Philip Winslow with Wells Fargo.

--------------------------------------------------------------------------------

Philip Alan Winslow, Wells Fargo Securities, LLC, Research Division - Senior Analyst [26]

--------------------------------------------------------------------------------

Just had a follow-up there on pricing. Obviously, you talked about the strength in ELAs. I'm assuming there's some -- a little volume discount there. But when you look across, just call it, the seats and price points, just wondering if you can comment on any sort of changes that you're seeing there, call it, Q3 and maybe your guidance for Q4 versus the first half and your expectations?

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [27]

--------------------------------------------------------------------------------

Phil, this is Tom. So yes, overall, I wouldn't necessarily call it anything different. What I would say is a lot of what Adam was kind of alluding to is as we're getting into larger enterprise deals and larger volumes of deals, obviously, there's more discounting for those units. And when you're talking tens and tens and tens of thousands of users, there's discounts in play there versus the 10, 20, 50 type of crowd. But is it changing or has the dynamic changed over -- since we've launched? No, not at all. Actually, we're just -- we know that that's what people are expecting as they're bringing analytics to way broader swaths of organizations that volume discounting does come into play, and we're engaging with our customers there.

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [28]

--------------------------------------------------------------------------------

And also -- this is Adam, I'll just add that subscriptions have been the other big part of the pricing mix. Obviously, the nominal price point is dramatically more attractive for customers to, a, enter and, b, have lower risk with the lower subscription payment.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

Your next question comes from the line of Jesse Hulsing with Goldman Sachs.

--------------------------------------------------------------------------------

Jesse Wade Hulsing, Goldman Sachs Group Inc., Research Division - Equity Analyst [30]

--------------------------------------------------------------------------------

Yes, I have 2 questions. First, you had a number of product announcements at your conference this year -- your user conference this year, HyPer, in particular, and Maestro. And I'm wondering, feedback from customers now that those have been out there and previewed. How has interest been for those products?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [31]

--------------------------------------------------------------------------------

Jesse, it's Adam. Well, I'd say for -- first, just to clarify, we showed Maestro, but that's not entering into public beta until later this calendar year. But in terms of the alphas that we've shown customers, it's been very encouraging. We always have to be careful. Those early versions, and there's always still a lot of work to do at that stage. But it feels like we've been making good progress, based on that -- those alphas. In terms of HyPer, which is in beta now, it's still early. That public beta has only been out there for a few weeks now, but we're encouraged by what we've seen. We've seen a lot of use cases where there are very strong performance gains, particularly in creating extract using HyPer and particularly with larger data sets. So we think the gains will be significant. I imagine, even after we release it, that we'll not consider the job done. And we'll continue to try and take the long tail of use cases and improve extract and query performance on an ongoing basis. But feeling good at this early stage.

--------------------------------------------------------------------------------

Jesse Wade Hulsing, Goldman Sachs Group Inc., Research Division - Equity Analyst [32]

--------------------------------------------------------------------------------

And Tom, you guys have had pretty big gap ups in ratable license bookings mix. I think you've gone from 26 to 37 to 45. And if I look at the high end of your guidance, it implies 51. I guess, as you get -- as more and more of the mix shifts to the existing customer base or the deals that you need to do to drive that higher shift to the existing customer base, do you expect it to level off, I guess, as far as the pace of mix shifts? Or is this something that you expect to continue kind of at this clip?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [33]

--------------------------------------------------------------------------------

I don't know if you want to draw a line through 26, 36, 45 and 51 at the high end of our guidance today. I wouldn't -- I do expect it to increase. I don't know the slope of that line. That's why each quarter we kind of update you on the progress that we're making. Clearly, this year thus far, we made a lot faster progress than we were thinking. I do anticipate it continuing to keep going as I kind of outlined at our Analyst Day back in May is, will we get to 100%? I don't know. We have customers, and we will always focus on what our customers need. But a lot of what we're seeing, Jesse, right now is the economics and the pricing around subscription is very favorable to customers, and they like that, and it gives them an opportunity to expand and takes less risk out of their deployments. And so, I expect it to continue to increase above the ranges in Q4 next year.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

Your next question comes from the line of Walter Pritchard with Citi.

--------------------------------------------------------------------------------

Tyler Maverick Radke, Citigroup Inc, Research Division - Senior Associate [35]

--------------------------------------------------------------------------------

This is Tyler Radke on for Walter. Adam, I just wanted to clarify your comments on the subscription pricing impacting the timing of larger deals. Is this a timing issue where you think these deals could get closed in Q4 and perhaps it's just seasonality that's driving that timing of these deals? Or is this potentially a much longer window for these deals to get closed, extending into next year?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [36]

--------------------------------------------------------------------------------

As we, I think, tried to hit a couple of minutes ago, I think there's a combination of a couple things going on here, one of which is -- again for -- just talking about existing customers, right? Because for new customers, getting on board with subscriptions is very, very good for them. Most of them like the OpEx model, like the lower risk model. It works very well. For the existing customers, just -- the act of transitioning over can just have more complexity to it, and just can take a little bit of time. But as I said, it's also kind of co-mingled with that. So just the fact that these are larger and larger deals on average over time. We're doing many, many more thousands or tens of thousands of seats deals than we were 2 years ago, even 1 year ago. And so those larger deals are, I think, causing more consideration and that just causes elapsed time to be longer on average. And that is a good thing. Because that means that we're talking about really being more and more the analytic standard inside of large organizations. And that's where we want to be. That is where the power of Tableau can really be shown. And it's just, as I said, very natural that people are going to do their due diligence. So I think it's just kind of -- it's sort of like one of the laws of physics, that as you do more and more bigger and bigger deals that there's going to be more due diligence and it could just take a little longer. So that's a fact, but in terms of kind of putting a value judgment on it, I think it's actually a good thing because of the reasons that are driving it.

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [37]

--------------------------------------------------------------------------------

And Tyler, this is Tom. And I'll just jump in on that. I think it's a great thing, actually. And I think the conversations that we're having really revolve around 2 dynamics, if you will. Number one is mapping out the demand. So you think about these conversations, they already have a lot of Tableau already in their company, so making sure they have a good line of sight on their current demand because it might be in different pockets. But it's also mapping out that future demand and then setting up an arrangement, an agreement with them so they have the flexibility to deploy that over multiple years. They're looking for that so they can go out there and experiment with using Tableau in different areas of the company. So not only covering the current demand, but the other side of the demand. And so to Adam's point, that takes longer, those considerations, because you really are helping them kind of profile how they would be using Tableau over the next few years and what that looks like to them and making sure that we can come up with commercial terms.

--------------------------------------------------------------------------------

Tyler Maverick Radke, Citigroup Inc, Research Division - Senior Associate [38]

--------------------------------------------------------------------------------

Great. And a follow-up, Tom. I know you're not providing 2018 guidance, but is it fair to say that the Analyst Day, kind of long-range transition targets for continued year-on-year revenue growth and expanding operating margins, are those still on track heading into '18?

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [39]

--------------------------------------------------------------------------------

Yes. I mean, I'm going to update everybody in 90 days once we get through this. I think at the Analyst Day, what I did say was, if he went through this faster, it would put more pressure -- or it would result in near-term lower revenue and margins. And so we are seeing that. So I'll update you in 90 days. But overall, I think we're going to continue to go in the same kind of trajectory that we outlined. But I just want to put it out there, Tyler, that the caveat is, moving faster through the transition, which, as you heard in my prepared remarks, we think is a good thing, could result in near-term pressure on revenue and our margins.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

Your next question comes from the line of Matt Hedberg with RBC Capital Markets.

--------------------------------------------------------------------------------

Matthew John Swanson, RBC Capital Markets, LLC, Research Division - Senior Associate [41]

--------------------------------------------------------------------------------

This is actually Matt Swanson on for Matt. Adam, you mentioned it briefly earlier in the call talking about the lower total cost of ownership. I know you guys had a report out on that earlier on in the year. Could you talk about just how that's resonating with customers? If that's getting through when you're working through the selling process?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [42]

--------------------------------------------------------------------------------

Matt, thanks a lot for the question. Yes, I think it's resonating very well. I think more and more customers are seeing that Tableau actually has the lowest total cost of ownership in that particular report that you're referring to. I mean, it's going to vary by customer deployment, but the particular configurations that were chosen by the analysts, it was 29% lower TCO for Tableau. In addition, there've been other third-party reports released recently. Gartner put out a recent TCO study for BI and analytics. And it's kind of done by group, if you will, but the small group that Tableau is in was a significantly lower TCO than all the other categories, including the kind of big old school BI vendors, including all of the kind of mega-company offerings and the savings were significant. And really corroborated everything in the first report that you talked about in terms of, one, the lower TCO; and two, the fact that the nominal licensing fees are actually a minority of the total cost. And the labor costs, especially in IT but in other areas as well, really dwarf different licensing costs and are something that the customers are more and more figuring out that are really important to include in their total calculation, not just looking at nominal price. So that's resonating very strongly.

--------------------------------------------------------------------------------

Matthew John Swanson, RBC Capital Markets, LLC, Research Division - Senior Associate [43]

--------------------------------------------------------------------------------

And then if I could have one more. I know it's kind of early days right now, but beyond the performance gains of HyPer, is there anything in terms of TAM expansion, maybe deals or markets that you now have the capabilities to go out after once that comes out?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [44]

--------------------------------------------------------------------------------

Yes. Well, it is early, and thanks for noting that. But I think that one thing that HyPer allows us to expand is much larger data sets. You can, all of a sudden, do things in Tableau that you couldn't do before because just of the limitations around the size of data sets. So we demoed this on stage at Tableau conference. It was actually pretty fun. And we just showed that Tableau slicing through -- I'm sorry, HyPer slicing through huge, huge data sets in a way the people really hadn't seen before. So that got the crowd really jazzed and excited. And still have to make sure that's real world is coming through, but we're going to be very focused on that and we're excited by it.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Your next question comes from the line of Brent Bracelin with KeyBanc.

--------------------------------------------------------------------------------

Clarke Jeffries, KeyBanc Capital Markets Inc., Research Division - Associate [46]

--------------------------------------------------------------------------------

This is Clarke Jeffries on for Brent. Just for Adam, if I could dig in a little bit more on the sort of HyPer TAM expansion. Sort of wondering whether, as more customers get their hands on it, whether you've seen it as possibly taking over analytic workloads from maybe legacy or other systems in their environments? Whether you see the potential that it can bring those workloads into Tableau? And whether or not that has sort of an enterprise focus? Or whether you're seeing more and more small customers that have giant data sets and they have to rely on maybe another provider for that scale?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [47]

--------------------------------------------------------------------------------

Well, I think we are seeing more and more customers who are on legacy BI systems start to talk about not just adding Tableau for new workloads but, over time, and it will be a process, actually making Tableau the standard for all their analytics or BI needs. I think that's not just driven by HyPer. It's really driven by the capabilities of the end-to-end platform. So it will be HyPer, which will be a better, faster data engine. I think it will be Maestro, which expands the platform into data preparation. It will be all of the smart analytics that we continue to build, new geospatial capabilities, et cetera, et cetera. A lot of other areas. And with all of those overall feature and capability improvements, and as customers deploy Tableau deeper and deeper, I think we are starting to see more and more of them say, "Okay. The time is coming where we may just stop using or rip out some of these old systems." So that being said, some of those old BI systems were painful and complex to deploy and they can be painful and complex to rip out. So I would not expect that to happen overnight, but I think you can kind of start to see the rock just getting rolling in that direction over time.

--------------------------------------------------------------------------------

Clarke Jeffries, KeyBanc Capital Markets Inc., Research Division - Associate [48]

--------------------------------------------------------------------------------

Great, great. And for Tom, I was wondering if -- whether there's some sort of contract duration, billings duration dynamic happening with the long-term deferred revenue build and whether we could reasonably expect the same kind of long-term deferred revenue growth in the fourth quarter with sort of enterprise seasonality of ELAs or longer contract agreements?

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [49]

--------------------------------------------------------------------------------

Brent, this is Tom. Yes, overall -- no, I wouldn't expect a dynamic change there. And in fact, I think Damon commented on this before. A lot of our contracts, even if they're multiyear kind of contracts, are billed in annual installments. So you're not going to see that buildup in the deferred revenue, long-term revenue because we're billing, that's part of the contracts. So people are contractually obligated for multiple years, but we're billing them on an annual basis. So I wouldn't expect a big uptick in that so much as kind of the off balance sheet backlog of contracts that are just not invoiced yet.

--------------------------------------------------------------------------------

Operator [50]

--------------------------------------------------------------------------------

Your next question comes from the line of Brad Sills with Bank of America Merrill Lynch.

--------------------------------------------------------------------------------

Bradley Hartwell Sills, BofA Merrill Lynch, Research Division - VP [51]

--------------------------------------------------------------------------------

With regard to the 1,000 and the tens of thousand seat kind of deals, the big enterprise deals, I know there are a lot of things you're working on to get those pushed over the finish line. But where is the emphasis, would you say it's kind of changing perception of Tableau as that enterprise-class vendor with the right data governance, security and compliance? Is it more just on how do you make the transition from having potentially hundreds of on-premise licenses to subscription? And then also the partner channel, how do they plan to kind of assisting in some of these deals? I guess where is the general focus.

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [52]

--------------------------------------------------------------------------------

Brad, thanks for the question. It's Adam. I'm going to apologize in advance that this is a frustrating answer, but it's my honest answer. It's really all of the above. It's across the board. I think I've talked very consistently from my first call about this push to really be a mission-critical enterprise technology platform is not something simple. It's not something quick. It's not something which happens in one department. It's not a sales push, for example. I've talked about how it starts actually in product development. A lot of it is around security, governance and compliance. You can get a lot of departmental wins really without being a highly governed application. It's pretty much not going to happen that you're deployed as an enterprise standard across tens of thousands of people without IT and security considerations really being front and center. And so certainly, also in marketing, in terms of being really good at marketing to IT departments as well as to our traditional end-user and analyst base, it's not an or, it's an and. And it's not just marketing to them, it's providing all the materials and aids which are useful to them. Things like case studies of other enterprises that have gone through this in different industries, different use cases, and white papers around scalability, deployment, security, architecture. And then of course, sales, really, getting better and better at long-term account management. And then things like support. Once you're a mission-critical platform, you have to be up. And in the rare case that you're not up, you have to really be on your game in terms of how you respond to customers, do escalations and that type of thing. So I think if it were simple or 1 or 2 things that you could do, a lot more companies would do it. It's precisely the multitude of things that have to be done simultaneously that make it challenging. But it all starts with having a great product that provides great value. And we're lucky to have that. And we're really proud of the team for the amount we've built, all of those capabilities I just mentioned throughout the past year. But in all of those areas, I think we have a significant opportunity to get a lot better.

--------------------------------------------------------------------------------

Bradley Hartwell Sills, BofA Merrill Lynch, Research Division - VP [53]

--------------------------------------------------------------------------------

Great. And then maybe just on just general seasonality in the business over the last couple of years as you've made the shift more towards enterprise-type deals. Are you just -- should we expect more seasonality like this from kind of Q3 to Q4 going forward?

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [54]

--------------------------------------------------------------------------------

Yes. Brad, this is Tom. I mean, overall, we're kind of in the midst of the transition period. So the seasonality of 2 years ago is a little bit different now because of the headwinds that we've been talking about with the different pricing dynamics and how that affects it. So I think the seasonality is different. And you kind of heard the guidance that I put forth for Q4. And I wouldn't say that, that is going to necessarily extrapolate out into the out years, but it's different now than it was a few years ago. And I think once we get through the overall transition, we're going to have a lot more of the current revenues. So I believe it'll smooth off -- smooth out. And that's kind of the goal of moving over to a subscription model. But right now, the seasonality, I wouldn't infer anything different than what I guided for Q4.

--------------------------------------------------------------------------------

Operator [55]

--------------------------------------------------------------------------------

We have time for one more question. Your next question comes from Steve Koenig from Wedbush Securities.

--------------------------------------------------------------------------------

Steven Richard Koenig, Wedbush Securities Inc., Research Division - MD [56]

--------------------------------------------------------------------------------

Terrific. Just -- I'll do 2 quick ones. First one is, removing the friction in the buying process of the existing customers, what are you guys thinking about in terms of maintenance, conversion-type programs, so that those buyers can have kind of one way to buy? And what might be your timing for doing anything here? Any programs? Or do promotions make sense around that as well?

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [57]

--------------------------------------------------------------------------------

Yes. Well, we -- for those existing customers -- I mean, these are really all happening in the context of growing their Tableau footprint. So I mean, if they're kind of steady for whatever reason, there's not a whole lot of interesting reasons to have that conversation. But when people want to grow, which we're seeing all over, obviously, then for some of them, it's easier, more convenient, less complexity to have a single method of licensing. And so those are the ones we're really working with in context of that growth. And a lot of that focus is around how to make sure that they can deploy and adopt Tableau really deeply, really quickly and really get the value out of Tableau because that's certainly our focus is that they kind of get every drop of value out of it. So really, those discussions tend to focus around that.

--------------------------------------------------------------------------------

Steven Richard Koenig, Wedbush Securities Inc., Research Division - MD [58]

--------------------------------------------------------------------------------

Okay. Let me conclude by just asking you about the market growth rate. So 22% you cited from a third-party analyst firm. You've been tracking to about that pace. Is your expectation and objective to continue to kind of track at the market rate? Is that kind of what we should expect? I'm using the normalized license equivalent bookings here as a proxy for unit buying or whatever. Is that market rate kind of a good way to think about how you'll grow?

--------------------------------------------------------------------------------

Thomas E. Walker, Tableau Software, Inc. - Former CFO [59]

--------------------------------------------------------------------------------

Steve, this is Tom. I mean, overall, I just put out that metric just so people had an idea of the dynamics of the BI and analytics market. It is changing. And this is the first year, 2017, where, basically, traditional BI is shrinking as an overall proportion of the magic quadrant and the size of the addressable market. And so we're just putting that out there to show that the dynamic is changing. We think we are well positioned, as long as we continue to focus on our customers and innovate, to continue to grow. And we're happy with getting through this transition. The normalized bookings growth that we're showing and the 21% that we had this quarter is good, but we want to continue to expand. And so we are focused on that now. Whether that goes up or down, we want to continue to grow and take our portion of the market based on us being a leader there.

--------------------------------------------------------------------------------

Adam Selipsky, Tableau Software, Inc. - CEO, President & Executive Director [60]

--------------------------------------------------------------------------------

Great. We're all set. Thank you, everyone.

--------------------------------------------------------------------------------

Operator [61]

--------------------------------------------------------------------------------

This concludes today's conference call. Thank you for your participation, and you may now disconnect.