Nov 9, 2017
Executives
Chris Lal - SVP, General Counsel Dean Stoecker - Chairman and CEO Kevin Rubin - CFO
Analysts
Brent Bracelin - KeyBanc Capital Markets Greg McDowell - JMP Securities Mark Murphy - JPMorgan Michael Turitz - Raymond James Brad Sills - Bank of America Merrill Lynch Jim Fitzgerald - Cowen and Company Jesse Hulsing - Goldman Sachs Bhavan Suri - William Blair
Operator
Greetings and welcome to the Alteryx Third Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Mr. Chris Lal.
Thank you. You may begin.
Chris Lal
Thank you, Operator. Good afternoon and thank you for joining us today to review Alteryx's third quarter 2017 financial results.
With me on the call today are Dean Stoecker, Chairman and Chief Executive Officer and Kevin Rubin, Chief Financial Officer. After prepared remarks, we will open up the call to a question-and-answer session.
During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks and uncertainty.
Our actual results could differ materially from expectations reflected in any forward-looking 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 website and our website, as well as the risks and other important factors discussed in today's earnings release.
Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release in the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure.
With that, I would like to turn the call over to our Chief Executive Officer, Dean Stoecker. Dean?
Dean Stoecker
Thanks Chris, and welcome to everyone joining us today for our Q3 2017 earnings call. We are very pleased with our third quarter financial results.
We achieved strong revenue growth, positive non-GAAP operating income and generated positive cash flow from operations. During the third quarter, we reported revenue of $34.2 million representing an increase of 52% over the prior year period.
Our non-GAAP operating income was $885,000 in the third quarter resulting in non-GAAP net income of $0.02 per diluted share. This quarter further demonstrated the strength of our land and expand subscription model fueled by the power of our complete end-to-end analytic platform for the enterprise.
During the quarter we landed a large number of customers new to the Alteryx platform experience, and continue to expand our existing customers Alteryx footprint evidenced by our strong dollar-based net revenue retention rate that remained above 130% for the fourth consecutive quarter. We have designed and built our end-to-end analytics platform to serve only - not only the millions of analysts and statisticians around the world, but the Chief Data Officers and analytic leaders who are driving digital transformation in large enterprises.
These leaders are focused on [leaving] a data and the analytic culture into the DNA of their company. The citizen data scientists trains statisticians and CDOs alike are seeking an end-to-end business friendly platform capable of delivering simplicity and sophistication to win with analytics.
We continue to enhance external capabilities of our platform to further solidify our category leadership position. In mid-August, Alteryx Connect became generally available as an add-on module to Alteryx server.
Alteryx Connect is our collaborative data exploration platform for the enterprise. It empowers users to discover, share and collaborate on data assets, visualizations, report and workflows that are [indiscernible] with the cross large organizations.
With Alteryx Connect users can easily find and leverage curative data assets otherwise lockdown in [indiscernible] data, sales force, Tableau and many other persistence layers ultimately driving efficiencies for data workers and decreasing their time to insight all while being done in a governed, secured and collaborate manner. Post launch we've seen meaningful demand for Connect from both new and existing customers.
For example, Unitymedia in Germany landed with Alteryx Connect because of the data at their center of their business. To gain control over their data, they started using the data catalog and capabilities of Connect to standardize and get meaning to the massive number of business terms the company utilizes.
They are taking full advantage of the capability to link metadata, data assets and visualizations and most importantly the people who have created those assets. Additionally at Inspire Europe in September, we officially announced Alteryx Promote based on our acquisition of Yhat.
Alteryx Promote another add-on module to Alteryx Server extended the advanced analysts capabilities of the Alteryx platform empowering data science teams with an end-to-end solutions to build the most importantly, deploy and manage predictive models and machine learning algorithms without requiring IT support. Promote requires no coding and exposes machine learning models as rest APIs in scalable and flexible environments either on-premise or in the cloud allowing data science teams to execute models in mobile apps or websites with ease.
With Alteryx Promote models build by both data scientists and business analysts can be quickly deployed, managed and monitored to help the CDO maximize the value from their analytic investments. Alteryx promote is currently being offered to a limited number of customers who will be generally available in early 2018.
We believe the demand for the Alteryx platform will increase globally as evidenced by an IDC study at our Inspire Europe conference held in the U.K. in September.
According to research commissioned by us and undertaken by IDC, there are now 30 million advanced spreadsheet users worldwide with 5.5 million residing in Europe alone. These statics and data scientist face the same challenges, spending way too much time and money in advanced spreadsheet efforts.
Inefficient and risky spreadsheet usage cost businesses €55 billion each year largely because of repetitive and error-prone tasks like copy and paste. We also see the demand for our platform growing as our Inspire Europe conference this year attracted nearly 800 attendees from 30 countries including a meaningful number of partners all records for us.
As with Inspire U.S. key topic areas for attendees included predictive and special analytics, as well as Alteryx Connect and Alteryx Promote.
Inspire Europe filled meaningful customer and prospect dialog, as well as a 62% growth in attendance and a 50% increase in free-trial downloads. We believe that international markets remain a largely untapped opportunity for us and one that we will continue to invest to drive growth.
In Q3, our international revenue grew 83% over the same period last year while accounting for 23% of overall revenue. We believe our investments are paying off in significant ways.
For example, one of the largest companies in Japan, Softbank, a telecommunication and Internet provider has recently expanded its use of Alteryx across all business operations. Softbank initially implemented our platform within its mobile addition where they wanted to replace a combination of complex difficult to use tools and highly manual processes for aggregating data from multiple sources to perform analytics.
With Alteryx the easy to use and processing speed enabled them to realize a significant reduction of first analyst through analytic automation with more timely, accurate and insightful reporting for management. This success led to broader rollout to business users across Japan who now shows a common workload to increase the volumes and precision of data that can be analyzed but ultimately better serve customers.
Adoption continues throughout the pace, as used cases are spreading across a wide array of Softbank departments. During the third quarter we added 231 net new customers and did business in 68 countries around the world.
We exited Q3 with 3054 active customers across a variety of industries in used cases. Many of these new customers are very recognizable brands landing with Alteryx for the first time.
For example in healthcare, we landed industry leaders including both Sharp and Better Healthcare. In business services, we landed [indiscernible] and FedEx Corporate Services.
In consumer goods, we added companies like the Hershey Company, [Treat House Foods] and Master Lock. In travel and hospitality we added Travelzoo, and in academia we added John Hawkins University to our growing list of valued customers.
The expand however go-to-market model continue to perform quite nicely in Q3. Customers continue realign value in the Alteryx platform giving them the confidence to further expand with us.
In the third quarter our dollar-based net revenue retention was 133%, a four point improvement in net retention achieved in Q3 of 2016. For example, [indiscernible] is a division of EPCE, the second largest banking group in France.
There is alternatively Alteryx platform was an initiative of the newly appointed Chief Data Officer and Head of Analytics intending to bring advanced analytics to the forefront to better serve customers and operate the bank more efficiently. The CDO wanted to move away from repetitive manual processes and excel and enable self service analytic function across the enterprise.
Alteryx was first implemented in Q2 official and it expanded in Q3 with Alteryx server an additional designer licenses demonstrating the viable Alteryx now seeing for the division. Users are now able to work with the localized French language version of Alteryx to analyze data from the group's many new warehouses.
Initial use cases, cover analytics for location intelligence, branch optimization, customer segmentation, as well as internally facing efforts to access and play productivity, variable and packing the work force and even trade union relations. Climax International is a global provider of climax control solutions both for residential and commercial markets.
The corporate IT team overseas BI analytics and the company's data warehouses with the objective of insurance decision-makers across the enterprise however with accurate data and key insights. Alteryx was the strategic platform shows to increase the team longevity to support the growth of the organization.
One of the deciding factors in making Alteryx the enterprise standard was the ability to standardize, integrate and enhance disparate data required for automating the analytic process. Climax has seen steady adoption of Alteryx including continued expansion with server, additional designers, as well as our packaged data set options for users across different business units.
The Alteryx expansion has been part of IT initiatives to push more self-service for business users who needed more advanced analytics and statistical analysis capabilities. And one final customer example I would like to mention is a true testament to Alteryx's end-to-end analytics platform story Royal Dutch Shell Plc, one of the world's leading energy companies have embraced the new culture around data analytics to continually reimagine business processes.
As Shell's Alteryx user base continues to expand including 88% of lab users across multiple business units, Shell recently added Alteryx Connect to enable their analyst and data scientists to quickly find their role in data sets within their complex enterprise infrastructure. The variety of application of our platform across Shell is quite impressive, here are a few examples.
Shell's upstream operations team uses predictive analytics capabilities in Alteryx to optimize the ordering, storage and utilization of speed products inventory for onshore, offshore oil rigs ranging from well head two pipeline parts. Shell's carbon capture and storage facility in Canada called Quest West work with the analytics team to develop atmospheric monitoring algorithms in an effort to minimize environmental impact.
The Shell's downstream deliver supply chain use Alteryx's to develop an award-winning suite of tools that provide critical information on inventory, margin, forecast accuracy and blending options. These tools have taken manual processes both in excel and/or into fully automated end-to-end workflows making quality data available significantly faster than what was previously possible.
Shell's downstream trading compliancy uses Alteryx to help monitor operations across multiple markets achieving compliance with current regulations and creating transferability as markets and regulations develop. Shell exploration had a highly manual process for analyzing information coming back from drilling campaigns using Alteryx's a constructive aid new wealth portal where various subject matter experts to visit to analyze future extraction opportunities.
And finally Shell's downstream retail unit is just starting on Alteryx journey. Using Alteryx to job is multiple data sources and transfer manual monthly processes and to accurate error free and automated reporting around performance of our marketing campaigns.
These are all great example of the value of our extended platforms. The improvements we are making in our land and expand model and the role the emergence of CDO is having on our business.
We are realizing a demonstrable increase in the percent of new customers that expand while the timeframe for the expansion has shortened. This has led to improve sales and marketing efficiency and lower customer acquisition cost payback period and improvements in operating income and gross margins all of which Kevin will touch on in a moment.
In summary, we are very pleased with our results for the third quarter. Not only did we achieve stronger financial performance, our thrilled messages resonating with customers and we are getting recognized around the world for analytic capabilities.
We were recently announced the gold winner of the first-ever Gartner Peer Insights Customer Choice Awards driven exclusively by customer feedback. Out of the 59 vendors reviewed, Alteryx ranked number one in business intelligence and analytics capabilities.
We accept this acknowledgement humbly and we expect to continue to expand our platform to address the needs of business analysts, data scientists, as well as Chief Data Officers around the globe. We believe our opportunity is large and growing and we are well-positioned for long-term success.
With that for more color and commentary on our Q3 financials, let me turn the call over to Kevin Rubin, our CFO. Kevin?
Kevin Rubin
Thank you, Dean. I’m also very pleased to be speaking with you this afternoon.
I will begin with our third quarter results followed by reviewing our fourth quarter and full year 2017 guidance. Let's start with our third quarter results which were highlighted by 52% revenue growth, positive non-GAAP operating income and positive cash flow from operations.
Revenue was $34.2 million, an increase of 52% year-over-year. International revenue was nearly $8 million for the quarter, an increase of 83% year-over-year and 23% of our Q3 revenue.
In the quarter we added 231 net new customers and ended with 3054 total customers. We delivered a strong Q3 dollar-based net revenue retention rate of 133%.
As Dave mentioned this is the fourth consecutive quarter above 130%. Please keep in mind that our dollar based net revenue retention can fluctuate a bit depending on extra business and seasonality.
Before moving forward, I would like to remind everybody that unless otherwise stated I will be discussing non-GAAP results. Non-GAAP measures including our guidance for the fourth quarter and full-year 2017 excludes stock-based compensation, acquisition related adjustments including amortization of intangibles, changes in fair value of contingent consideration and related income tax adjustments, offering costs related to our follow-on public offering and impairment of long-lived assets.
In addition non-GAAP net income loss per share basic and diluted excludes the accretion of our Series A redeemable convertible preferred stock outstanding prior to our IPO and non-GAAP weighted-average shares used to compute non-GAAP net income loss per share reflects the conversion of preferred stock into common stock as if such conversion had occurred on January 1, 2017 and 2016 respectively. In periods of non-GAAP income we adjust non-GAAP weighted-average diluted shares outstanding to include the effect of dilutive shares.
A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in the earnings release we issued earlier today. Our gross margin was 86% in the third quarter, an improvement compared to 82% gross margin in the third quarter of 2016.
Gross margin was positively impacted by a larger portion of subscription revenue. We have also seen more and more users leveraging our community site for self-service support and related inquiries engaging with other users, partners and Alteryx employees resulting in lower overall support cost.
I would however like to note that with respect to the recent launch of Connect and the upcoming launch of Promote and the sophistication of these offerings, we expect that we will require some additional support services. Therefore we believe we may see slightly higher service and support cost going forward.
Operating income was $885,000 which equates to an operating margin of 3%. This was ahead of our guidance as it is an improvement compared to an operating loss of $2.9 million or a negative 13% market in the third quarter of 2016.
We continue to focus our sales and marketing investments in Q3 of programs to drive awareness and adoption and through the addition of quota carrying salespeople. During the quarter sales and marketing headcount increase 17% year-over-year, the majority of which was in revenue generating functions.
We also accelerated some investments in countries within Europe and Asia as we discussed with you last quarter and expect to see a full run rate of these investments in the fourth quarter. In addition, the business overall benefited from stronger performing customers driving a higher dollar-based net revenue retention rate and more efficient revenue in the quarter.
In R&D as we focus on innovation and delivering more value through our platform, we've increased the pace of investment in 2017 versus 2016. Net income was $1.2 million and net income per share was $0.02 based on $62.3 million non-GAAP weighted-average diluted shares outstanding.
While we were slightly profitable this quarter, we will continue to focus on investing for longer-term growth including international expansion and building out the sales and marketing and product development teams. As a result, we do not expect to achieve sustained profitability in the near-term.
Turning now to our GAAP balance sheet. As of September 30, we had cash, cash equivalents and short-term and long-term investments of $182.6 million compared with $182.7 million as of the end of June.
We generated $748,000 of positive cash flow from operations in the quarter and $6.4 million through the first nine months of 2017. Finally we ended the quarter with 515 employees up from 413 employees at the end of the third quarter 2016.
Now let's review our guidance. For the fourth quarter of 2017 we expect GAAP revenue in the range of $35.5 million to $36 million.
We expect our non-GAAP operating loss to be in the range of $1 million to $2 million and non-GAAP net loss per share basic and diluted of $0.02 to $0.03. This assumes 60 million non-GAAP weighted average shares outstanding basic and diluted.
For the full-year 2017 we are raising guidance and now expect GAAP revenue in the range of $128.5 million to $129 million representing year-over-year growth of 50%. We expect our non-GAAP operating loss to be in the range of $9.2 million to $10.2 million and non-GAAP net loss per share basic and diluted of $0.15 to $0.17.
This assumes $56.4 million non-GAAP weighted average shares outstanding basic and diluted. We continue to expect to generate positive operating cash flow from operations for the full-year 2017.
This was another strong quarter for Alteryx. We are pleased with the traction our solutions are gaining in the market and the value we deliver to our customers.
With that, we will open up the call for questions. Operator?
Operator
[Operator Instructions] And our first question is from Brent Bracelin from KeyBanc Capital Markets. Please go ahead.
Brent Bracelin
Starting with you Dean, want to dive into the seat expansion opportunity. Obviously the net retention rates here continue to be very high, I think over 130% for the last four quarters.
So as we think about your ability to kind of expand in the existing customer base how much low hanging fruit is there, what's your best guess relative to footprint penetration today and installed base versus opportunity?
Dean Stoecker
Let's not forget first and foremost that this is $20 billion addressable market. There's 30 million disenfranchised data analysis that are living in excel.
And so that the audience for the Alteryx platform is enormous with little over 3,000 customers and a relatively small footprint overall I think we probably are in the low single-digit in the very most penetrated accounts. So, if you think about the market in general there's about 8% of all employment is data workers, we are nowhere close to being penetrated anywhere in North America or any other part of the world, certainly not in any other vertical we service today.
Brent Bracelin
Very helpful context there. And then shifting to the land opportunity, you had very steady new customer ads above 200 a quarter for quite a while here now.
Obviously you're turning profitable little earlier than we thought. What's the plan from a sales investment standpoint?
Are you kind behind plan there to drive new land opportunities? Are you comfortable with the range you’re in now?
How should be thinking about the sales investments particularly as we think about your thinking around 2018 and additional sales investments to drive growth?
Dean Stoecker
So we continue to invest heavily in the organization not just in sales and marketing headcount but in our development headcount to continue to evolve the platform based on what customers are looking for. We continue to invest internationally.
You saw that we had 83% growth in international business, we took business in 68 countries around the world, so we are actually hiring as aggressively as we can, some of that you don't necessarily see in the quarter summer months where it’s kind of tough to do some hiring and you wouldn't get the full effect at the end of Q3 but we're investing pretty heavily even back to the two acquisitions we made this year. So I don't think we're behind it all, I think we're careful about what we're doing, I think that part of the net retention expansion that you see which went up four points from same period last year is that we actually use our own platform to prosecute our own analytics to better understand the kind of the words we want to bring on net new customers.
And I think you're seeing better execution across the board by the sellers we have and enablement for the sellers that we're bringing on board and it’s illustrated in the calculated reduction in GAAP, the improvement in margins and yet that little surprise on operating income.
Brent Bracelin
Last question is more on the technology side, I know it's early days with the predictive analytics tools but anything, any trend wise pop up this quarter relative to the mix of customers downloaded those predictive analytics tools more so than you saw in prior quarters or is it still very early?
Dean Stoecker
I think it’s somewhat anecdotal evidence but we continue to see predictive capabilities and spatial capabilities become a big part of the Analyst Day, as we've reported before only about 15% of the outbound activity from Alteryx goes into visualization products. And an increasing percentage continues to evolve into the higher order advanced functions and I think we're also beginning to see it as we've done into this co-innovation program with our Alteryx promote product that will be released in Q1, we’re starting to see people do some really interesting things in co-innovation around building our model and importing Python script to build machine learning algorithms that instantly be deployed on the Promote platform, really revealing the true benefits of data science.
And so over time, I think you'll start to see Alteryx user community become more and more data science as evidenced by just kind of conversations that happen that are inspired in conference.
Operator
Our next question is from Greg McDowell from JMP Securities. Please go ahead.
Greg McDowell
Dean, one for you first I wanted to ask specifically about Alteryx Connect, you mentioned it was in mid-August and sounds like you have really positive traction so far I think you used the words meaningful demand, I was just hoping you can maybe walk through some typical use cases and how we should think about Alteryx Connect to landing as a standalone product without the core Alteryx versus it being upsold within existing Alteryx customer? And then I have one follow up for Kevin.
Dean Stoecker
Good question, Greg. So I think that we've been, what we've been hearing from customers for a long time is that as we began to allow them to liberate analytics in a code free and a code friendly environment in their enterprises for both citizen data scientists and the statistician organizations are realizing that there's data assets all over the place and new data assets are being curated each and every time somebody pushes the go button inside of Alteryx or every time they touch a tablet dashboard to write an Excel spreadsheet or a CSV and so the proliferation of data and the myriad of persistence layers that exists today has created somewhat of a complexity for organizations to make sure that there is single versions of the truth not in the persistence layer but in the analytic processing.
And so for the last couple of years, we've been hearing key officers and analytics leaders tell us that they wanted to have a social collaborative metadata management layer, a data cataloging service that would basically key up all of the relevant assets and analysts might need to begin their analytic journey. You probably heard me say before that the hardest problem in analytics is knowing what questions to ask, the second hardest issue in analytics is knowing where to begin and our Connect platform actually brings chaos to order when it comes to finding the right assets whether it's dashboards report, even Alteryx workflows or models and it allows the analysts to begin their analytic journey and we're seeing early adopters become far more efficient at finding and beginning, finding the data and then beginning their analytic journey.
But I will say, it’s still early in the process we just rolled it out in mid-August, good traction for both new and existing customers. We don't intend to sell it alone, I suppose there'll be some candidates who start their build-out of the Alteryx platform with either the Connect or the Promote component.
But we see analytics as an end-to-end process and that was our intention to both caps to the platform.
Greg McDowell
And Kevin just a quick two-partner for you, metrics look great across the board one that really stood out is gross margin of 86% and it's absolutely best in class for subscription companies and acknowledging that might dip down a little bit to support Connect and Promote, I guess in terms of impact, are we just talking about maybe a percentage point or two, so back to the 83% to 85% something deeper than that and then a quick second part of my question is just I know Billings isn't necessarily the best way to track the business but as I look at the change in deferred from Q3 to Q4 last year was a very meaningful increase and I was just wondering as we think through change in deferred for Q4 this year, is there anything we should be aware of in terms of what transpired from Q3 to Q4 from a deferred perspective? Thanks.
Kevin Rubin
So let me hit the first one, so in terms of margins we haven't changed our view in terms of our long-term target margins which were pretty consistent with what you mentioned. So I think the order of magnitude that we're just I guess describing with respect to a slight increase in support costs around Connect and Promote is just that, in terms of the calculated billings, I mean to add to your point we don’t guide to it specifically, I think that I would look to our Q4 guidance as a directional view with respect to how we think about Q4 deferred.
Operator
Our next question is from Mark Murphy from JPMorgan. Please go ahead.
Mark Murphy
I wanted to ask you Dean, when you think about the output targets if you had to take a stab at trying to stack rank all of those environments I guess you'd call in the consumption layers to which Alteryx is sending the data, so if you have spreadsheets and documents and databases and dashboards and visualization products et cetera, in what order would you place those and are you seeing I think you alluded to this a bit but are you seeing anything where you could comment deeper in terms of the mix shift?
Dean Stoecker
Well so it’s a very long tail, I will say that and it basically illustrates the need for a platform like ours to be agnostic to both persistence layer and the consumption layer, so we see fragmentation on both ends in a very significant way. I don't think we’ve seen any meaningful shift in the last few months.
I would say that we’re beginning to see more people go to things like Redshift but we see ton of customers who write out to PDS and many are going into Power BI, we're seeing everything from spreadsheets to PowerPoint to back to relational databases as IT comes into the mix and Chief Data Officer try to leverage Alteryx to do a lot of the heavy lifting in the data centers. But it's a very long tail, we support pretty much everything out and I think it illustrates the need for analytics to be consumed in a pane of glass that's appropriate for the user or the consumer of those analytics and I think over time as people begin to embrace our Promote product beginning next quarter we’ll start to see people consuming analytics in web and mobile apps and that will be the destination.
So our thesis has been you should be able to visualize all of your data from the beginning of your asset find in Connect all the way through your analytic build out and then openly by the time you're done, you're actually deploying machine learning algorithms or complex analytic processes in meaningful panes of glass, so just as an illustration within Promote, well we haven't done yet, we have a tool that allows you to instantly deploy machine learning algorithms to your sales force instance. And we believe that that is the logical place for a lot of these algorithmic processes will occur, so it's a long tail hasn't shifted much, this fragmentation is to our advantage.
Mark Murphy
And just to clarify Dean on the last point, you think sales force instances would be a very common target for machine learning algorithms that we're trying to describe?
Dean Stoecker
I guess one of many, I think that if you look at every website, every mobile app some of that really adopters of Promote in our co-innovation program are actually using it to redirect traffic for next best action models or websites picking, helping determine what channel of distribution should be the customer should be going to. So I think we'll see a long tail of consumption from Promote as well.
Mark Murphy
And then a final question for Kevin, the sales and marketing line seemed to show some stronger efficiencies maybe than we might have expected in the quarter, can you walk us through the dynamics there it does sound like you're drawing the headcount, so to what extent did that occur maybe more on the discretionary marketing side versus to what extent if at all was that linked to sales commissions or anything else that might have just correlated on to the booking side at all?
Kevin Rubin
So the vast majority of the increases were directly related to sales and revenue generating capacity, so we are heavily focusing the investment and being able to grow our sales organization, marketing in the quarter we did have our Inspire Europe conference but that’s not a meaningful percentage of the increase.
Operator
Our next question is from Michael Turitz from Raymond James. Please go ahead.
Michael Turitz
I will start with Kevin and move onto Dean. So maybe to Mark Murphy’s question, we see what some of the growth in OpEx came but it came lighter on OpEx better efficiencies, so what really drove the ability to get efficiencies this quarter, it looks like a decent guide in the next quarter quite a strong and then anything you tell us directionally about how we should start to think about OpEx in the next year and margins that will be helpful.
Kevin Rubin
So I mean maybe let me elaborate a little bit then on the answer, the investments that we are making largely in people might be to the prepared remarks, we did see those come in later in the quarter. So you don’t see that the expense associated with those investments on a full run rate basis, you'll start to see those into Q4, I think in terms of just the strength of the business, I mean you know as evident by continually, continuing strong net revenue retention of north of 130%, we have been able to drive more efficient revenue through the model.
I mean we have better recognition, we've got more products to be able to talk to, so it's a bigger enterprise platform story. So I think we're seeing all of those dynamics play out in the results that you're seeing from a revenue growth versus investment perspective.
Michael Turitz
And then Dean you entered into this partnership with partly to do data visualization at the high end for analytics, is this in anyway shift in your strategy around visualization towards wanting to engage more there?
Dean Stoecker
No actually we have views on where visualization has been and where it’s going. Our customers need both static and interactive visualization.
So we’ve actually put a big effort around improving the functionality and flexibility of our own static visualizations, easy to design charts and reports in dashboard like environment. But we also see a change around how visualizations can impact analytic outcomes and so the piece of there is that you shouldn't have to wait till the end of your analytic workflow to see and understand your data that you should be able to instantly connect to a data source that you found let’s say through Connect or other use case just directly to a database, right now spec and see what’s going on with the data, no cells completed field, just the information that will give you relevant here to how useful that assets going to be in the analytic process.
So we believe that getting that knowledge, improve the efficiency of your analytic process, so that by the time you're done you’re actually ready to deploy the analytics in metaphors that matter across that fragmented consumption layer that we talked about earlier. And - is just a great platform to do this and it's the probably the broadest most widely used interactive dashboarding capabilities and we've had great success with it so far.
Operator
Our next question is from Brad Sills from Bank of America Merrill Lynch. Please go ahead.
Brad Sills
I wanted to ask about a comment that were made earlier just sales efficiency obviously margin came in quite a bit better than where we were modeled and primarily from sales and marketing and I think you alluded to the customer acquisition costs coming down and then the cost of maybe the expansion business, I'm also reading into it correctly also coming down, so if you could just provide a little color on what's driving efficiencies in both ends of the business that would be helpful please. Thank you.
Kevin Rubin
So I think again we have done a better job as Dean described using Alteryx frankly to understand our cohorts in our sales motions and we’re seeing that we're seeing that play out in the results, we are seeing that the net new logos, the new customers that we're landing are better quality logos which just by the nature provides for a more efficient expansion cycle thereafter, we’re seeing improvements in net revenue retention that’s a result of some of the dynamics that I previously mentioned and so while we certainly are investing in the backdrop of growth, we have seen our incremental revenue come at a more efficient pace than we’ve seen previously.
Brad Sills
And then if I may one more on international you mentioned Japan was strong, any other countries where you’re maybe perhaps sufficed to the upside in terms of the progress since entering those markets or are ones where you see potential upside from here?
Dean Stoecker
So we’re investing in quite a few arenas as I said 68 countries, we did business in this last quarter, we're seeing trail downloads around the world in lots of other countries that we have no partners in for that matter. So we continue to invest in EMEA today both in London, Munich and our effort around France and opening an office in Paris.
We’ll look at other markets next year as well, in APAC we have opened up Singapore and have begun to staff that office. We are currently in search for country leader in Japan and we have meaningful customers Softbank being just one of many in Japan.
So Australia is a big market force as well, no feet on the ground there. So we will continue to invest heavily in these markets where we see early traction on land where we can then put those customers into workforce.
Operator
Our next question is from Derrick Wood from Cowen and Company. Please go ahead.
Jim Fitzgerald
This is Jim Fitzgerald signing for Derrick. Thanks for taking the question.
So how you guys feeling about current go to market efforts and are there any new initiative that you guys are working on especially with respect to how you're positioning yourselves for selling as data science platform.
Dean Stoecker
So we continue to see the evolution of the needs for an end-to-end platform coming from the CDOs, IT, analytic leaders. So we continue to invest in that, it hasn't changed our go to market motions at all, it does require a bit of a change in our sales enablement which we’re going through we’ll have a sales pickup that will enable our team for example on the sales playbooks for Promote.
But it hasn’t changed our approach at all, we haven't had to hire a different person to sell, we still have a relatively short and inexpensive land cycle. That said, we’re beginning to see expansions happen earlier and participation in expansions happen at a higher pace.
So it hasn’t resulted that the shift in the platform needs and the personas that we're selling to either bottoms up to analysts or top down from CDOs and analytic leaders, haven't had – hasn’t required a change in our sales playbooks at all, mostly just sales enablement.
Jim Fitzgerald
And then one more I may as CDOs are getting increasingly involved, have you noticed any change in the sales cycles or maybe the deal sizes?
Dean Stoecker
No, I don't even to my earlier point we even with CDOs, we still have we don't let the sales people go up playbook. We still land with typically one or two seats in the 45 day cycle but what we do, what the CDO brings is a need to harness the networking effects of people dated technology that isn't always evident when you’re selling to a line of business leader or certainly line of business analysts and so what happens is we tend to get time to value very, very quickly in a simple use case that causes great consternation for the customer that use case then drives continued expansion in relatively quickly because the CDOs have a mission to liberate analytics across the enterprise.
And we’re beginning to see more of that today and I think Gartner has said that by 2020, 80% of Global 2000 companies will have CDO in seats, I don't know what’s that actually progressing as quickly as they think but we’re seeing and perhaps that this is some of the impact we see in our net retention numbers continuing to improve that we do start to see more CDOs coming into the picture earlier for people who are proxies for CDOs even if there IT the expanding line of business in IT requirements.
Operator
Our next question is from Jesse Hulsing from Goldman Sachs. Please go ahead.
Jesse Hulsing
I wanted to follow up on the question around Connect and then I guess also probably can include Promote in this as well. I guess an average customer how much of an uplift percentage wise do you think Connect could provide and also kind of a same question for Promote, how much of a lift could this be?
Dean Stoecker
Well we really haven’t factored in any of those into our own models, I think we went into the extension of the platform based on the needs that customers had. I guess we’re so early in the cycle, we don't really know what the impact is necessarily going to be.
We would hope that it would add to stickiness in the account, it might be that it could lead to additional designer sales as we now made it easier for people to find the data assets that matter, it could lead possibly to more server sales, if scientists are now able to instantly deploy models inside of Promote. So there's lots of things that could happen, we don't have an update at this point, we’re still early in the game, we haven't even launched Promote, we have a bunch of people in co-innovation efforts but this is a great question that we should get from you again Q2, Q3, Q4 of next year.
Jesse Hulsing
And I thought the sale of customer example was pretty interesting and that it kind of showed your evolution from a tool and to more of an end-to-end analytics solution. I’m wondering there’s been a lot of questions around sales efficiency on the call, how much involvement do sales people have in that type of expansion I mean is the sales rep holding the hands of the buyers all the way through and helping them go to procurement and do that sort of thing or is this kind of a natural organic expansion where sales involvement maybe isn’t as heavy as you would see in a typical enterprise software sales?
Dean Stoecker
I think that the latter is what's going on, we obviously have sellers who are tied to customers and they do it necessary to move the sales process through the system. There is some enablement that goes on to get customers to that first use case although that’s relatively small to as evidenced by the services or the lion's share of our business being subscription based as opposed to services based.
So I think the key is finding the ultra-users who have the demonstrated use case that can spend the time to get to an outcome, most of our customers will report magnitude improvements in operational efficiencies, processes that went from 100 hours to five minutes, they get all their time back, they didn’t want to ask bigger questions, harder questions if more data and it particularly when CDOs are in the mix, it’s an easy decision when they see the kind of paybacks that they’re getting. And so it’s I won’t say it’s hands off organic growth but it’s not the heavy enterprise selling that used to see with stack vendors in IT.
Jesse Hulsing
And Kevin one quick one for you, 606 or AC606 any update there particularly on the RevRec side?
Kevin Rubin
There is nothing beyond what I think we’ve mentioned previously, we elected to maintain the private company timeline of adoption which puts us out to the end of ’19, so we do have an opportunity to see how the standard continues to be interpretive, interpreted and involved and can address it as we get closer to 2019.
Operator
[Operator Instructions] And our next question is from Bhavan Suri from William Blair. Please go ahead.
Bhavan Suri
I guess Dean you and I have chatted out this before but I know to understand a little bit on how the trajectory of the use case split went in terms of advanced analytics for data prep but more importantly when you look at sort of whatever the 600 odd partners, are they sort of tied to one use case more the other or they sort of pretty broad, how should we think about that’s how are use cases and sort of how our partners playing into that split between the two use cases of data proponents of the advanced piece? Thanks.
Dean Stoecker
Fair question, so I think it’s probably mix I think that there are some partners that are tied more to A single use case or a vertical and some of them will probably understand the land, the data prep and blending component to a solution downstream in many cases those are people who might have a quick reseller arrangement or RBI or capital arrangement but we’re seeing a growing number of analytic consulting firms around the world that embrace Alteryx for all of their analytic work and we’ve probably indicated this before but if you think about all the major consulting firms from KPMG to BCG to Accenture and Deloitte and they’re all using Alteryx for their analytic processes. So I think people are beginning to realize that that data prep and blending is the on-ramp to higher order analytic processes not just descriptive in diagnostic use cases that you would typically end up seen or visualizing in a product and so that’s beginning to change, I personally have been involved in a number of partner meetings recently hoping to find the growth path for partners around becoming more data science and people are now acquiring a Ph.D.
statistician to help build out their own team to take advantage of the platform that Alteryx has built.
Bhavan Suri
And then you touched a little bit when you’re talking about sort of visualization and static but obviously given the real time world we live in, this is so whole concept of data in motion and I was wondering sort of the how Connect plays them to data in motion and sort of how trying to do real time pieces of data prep and obviously advanced statistical analysis on this critical but how are you seeing that play out is this early instead of trying to integrate data emotion with some of the existing that way people look at some of the advance statistical analytics?
Kevin Rubin
Well I think data and motions alive and well I think that if you take a look at promote for example because of the scalable flexible architecture of promote you’re able to run machine learning processes in a fraction of the time of machine learning algorithm that were previously repositioned or reconstructed by IT that’s been the challenge in data science as the quad builds the model and according to our Rexor Analytics only 13% of PhDs data models always get avoid. So without promote data science could be dead and with promote you’re able to instantly run your model that we’ve seen use cases even in our co-innovation efforts where models use to take eight minutes to run and previously architected solutions typically done by IT and they're running in milliseconds now inside of Alteryx promote.
Bhavan Suri
Let me squeeze one in here just because I was talking about Alteryx guys in some of this modeling PhD space but have you seen SAS or even IBM with the acquisition of SPSS and Intelligent Minor and other things start to think through this as the same way you guys have let’s expand the usage and sort of the deployment of visualization as these used capabilities. And I want to talk about Tableau better we know the things but I am all focused on some other guys are there sort of innovating that space how do you view them competitively?
Thank you.
Dean Stoecker
We have a fairly detailed orientation around the strategic landscape and we watch what people are doing, we have the backdrop of knowing what customers want in a general purpose analytics platform. I don't see them necessarily being the innovators in the space, clearly they are still the leaders but typically in a IT environment and it's clear that we've gone from these systems of record deep in IT systems it has system and engagement other than line of business.
And so we don't necessarily - we worry about all the people who could potentially compete with us, we watch what people do, but I am not sure the innovation coming from the stack vendors of yesteryear will read us as much as new players who might be well funded to have a strategic roadmap that kind of looks like ours.
Operator
Thank you. This concludes the question-and-answer session.
I'd like to turn the floor back over to management for any closing comments.
Dean Stoecker
Thank you, Operator. Before adjourning the call I want to thank all of you for being with us I want to thank all of our employees for their contributions to our continued success this past quarter and a big shout out to all of our customers and partners around the globe for their continuous support of Alteryx to the company and our end-to-end analytics platform for the enterprise.
Thank you for joining us today and we look forward to speaking with you all again very soon.
Operator
This concludes today's teleconference. Thank you again for your participation.
You may disconnect your lines at this time.