Alteryx Inc

F:3AI

Earnings Call Transcript 2020-Q1

[Operator]

Greetings, and welcome to the Alteryx First Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.

I would now like to turn the conference over to Chris Lal, General Counsel. Thank you. Please begin.

[Chris Lal, Chief Legal Officer]

Thank you, operator. Good afternoon and thank you for joining us today to review Alteryx's first quarter 2020 financial results. With me on the call today are Dean Stoecker, Chairman and Chief Executive Officer; and Kevin Rubin, Chief Financial Officer.

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. They are subject to a variety of risks and uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statements.

For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and the Investor Relations section of our website as well as the risk and other important factors discussed in today's earnings release.

Additionally, non-GAAP financial measures will be discussed on today's conference call. A reconciliation of these measures to their most directly comparable GAAP financial measures can be found in today's earnings release.

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

[Dean Stoecker, Chairman and Chief Executive Officer]

Thanks, Chris, and thanks to everyone on the call for joining us today. We hope that everyone is healthy and safe during this challenging time. Let me begin by thanking our 1,500 associates around the world for their incredible and impactful response to the COVID-19 crisis. Your ability to rise to the occasion in challenging times to help your fellow workers, provide assistance to first responders and rush to help our most affected customers is inspiring.

Our thoughts and prayers go out to all of those who have been negatively impacted. And while we will get through this, the genius of humanity is not that we will recover but that we will be stronger when we do.

Let me give you a brief overview of our Q1 results and then we'll dive into how Alteryx is adapting to the current environment and outline our plans to navigate through these uncertain times. Kevin will then walk through our first quarter financial performance and provide our outlook for the second quarter.

In Q1 we booked more than $107 million in total contract value, up 53% year-over-year. We posted $109 million in revenue, up 43% year-over-year. We generated $20 million in positive operating cash flow and exited the quarter with approximately $1 billion in cash and equivalents. We added 356 net new customers including 12 of the Global 2000 and now have more than 6,400 customers around the world including 37% of the Global 2000. Finally, net expansion remains strong at 128% overall and 140% for the G2K as we continue to see strong engagement levels within our larger customers.

Our Q1 bookings activity reflects the broad applicability of the Alteryx platform. The company is in nearly every vertical across the globe. We believe digital transformation with a focus on analytics, process automation and most importantly the upscaling of workers remains a strategic imperative for many businesses. For example, in Q1 in the heavily impacted travel and hospitality segment, we did business with Australia Leisure and Hospitality, Caesars Entertainment, Choice Hotels, Copa Airlines, Graham Circle, Kurtz Corporation, Royal Caribbean Cruise Lines, Six Continents Hotels and Sun Country Airlines.

In the energy sector, we did business with Chevron USA, Dominion Energy Services, Mid-American Energy Company, Pacific Gas and Electric and Thai Oil. In financial services, we did business with BNP Paribas, Royal Bank of Canada and Standard Charter bank. We did business with Allergan, Pfizer, Eli Lilly Hospital Corporation of America and United Health Group in the health care and biotech segment.

Our platform continues to prosecute analytics challenges globally in the telecommunications sector. In Q1, we did business with Saudi Telecom Company, SoftBank, Telstra and Vodafone. We now count the top 10 telecommunications companies in the U.S. as customers.

In healthy economic times, enterprises rely on data and analytics to be competitive. In the now uncertain times we find ourselves leveraging a data and analytics culture to make better decisions to survive let alone thrive is paramount. The COVID-19 pandemic is a reminder of how accurate and timely data and analytics provides the foundation for critical operating decisions and we saw this in action within our customer base.

For example, an existing public sector client that needed to adapt quickly to the COVID situation purchased additional Alteryx licenses to analyze and measure the effectiveness of multibillion-dollar aid program. This sales cycle was started and completed in the last two weeks of March as those aid programs were announced.

In another example, a hospital leveraged Alteryx to quickly adapt their supply chain to source additional personal protective equipment for their frontline workers and first responders and built predictive models to understand the need for ICU beds.

While our Q1 results were strong, we did observe an abrupt and significant change in customer buying behavior in March as many of our customers and prospects around the globe have responded to shelter in place directive and the realities of rapidly changing macroeconomic conditions. Some sales cycles lengthen its customers paused spending in light of increased uncertainty, while they adjusted to the logistical challenges related to doing business in a fully remote environment.

Despite these challenges, the Alteryx team quickly adapted to our own work-from-home environment and even closed a seven-figure transaction with a European financial institution in the last week of the quarter despite having to coordinate with 12 different buying entities and 16 different signers located in 16 different locations, all done remotely.

From start to finish, this global pandemic and subsequent ones that may follow present a myriad of data and analytic challenges and it requires business leaders to upskill their workforces to see data as an asset, analytics as a prowess and process automation as a necessity.

From genome sequencing needed at the start of the virus to the geospatial analytics to manage and monitor its spread to the predictive modeling to anticipate the need for personal protective equipment to the identification of alternate supply chains for their manufacture to logistics for redirecting products from shuttered restaurants to food stores to managing the deployment of trillions of dollars from central banks this crisis presents an enormous data and analytics problem.

We also continue to have meaningful conversations with executives at global organizations who see COVID-19 accelerating their digital transformation initiatives. The need for a data-driven culture has never been greater. We are confident the Alteryx platform can help organizations unify the data analytic processes and people to see success in digital transformation.

Let me now address the current environment and the steps we've taken to protect our employees, partners and customers and manage our business. In mid-March, as most of the countries we conduct business in mandated shelter-in-place actions we shifted to a work-from-home model for our associates to protect their health and well-being.

Alteryx has many work-from-home technologies to help our associates be as productive as possible. We will continue to allow associates to work at home until it is safe to return to their Alteryx offices and they feel comfortable in doing so.

To provide additional support for Alteryx partners and customers, we launched a virtual solution center giving customers the ability to connect directly with solutions experts. To date, a few hundred customers have already leveraged this offering. We are launching the Advancing Data and Analytics Potential Together program otherwise known as ADAPT. ADAPT is a free resource to help upskill workers around the world that have lost their jobs due to the current environment.

Under this program, we are providing free software licenses, access to the Alteryx Community learning path, software certifications and even nanodegrees in business analytics that are being made available in collaboration with Udacity, a leader in digital learning. In this challenging environment, we are reminded that we can and should help create solutions to improve people's lives and we believe that offering up a skill around data science and analytics can be an important way to help these individuals thrive in the 21st century. We are fortunate to be able to provide this program as a way to support the global analytics community.

As a result of COVID-19 and the resulting macroeconomic deterioration, we immediately took a number of actions in response including pausing hiring in the near-term until we better understand customer-buying behavior, although we will move forward with any outstanding offers and hiring will continue for critical roles and functions. We have also curtailed nonessential spending and are focusing our investments on those areas that we believe are most important to continue to drive the business through this recovery.

We rescheduled both of our 2020 U.S. and European users conferences to 2021 and continued to leverage our digital events. We have eliminated all unnecessary travel and continue to focus on operational efficiencies, leveraging Alteryx ourselves to make this process much easier. Taking care of our employees, customers and partners is our highest priority and our current plan is to maintain headcount levels. This will allow us to preserve capacity not only in customer-facing functions including customer support, but also maintain our development resources to continue to innovate.

We continue to monitor the productivity of our sales and marketing investments including our 14-day trial activity, pipeline creation, sales cycle, average deal sizes, contract duration, renewal rates, and overall discounting levels so that we can appropriately align our cost structure with our top line performance. We are in unprecedented times and there is much that is unknown. What we do know is that leveraging data and analytics is equally if not more important in uncertain times. And when workforces have been reduced, either temporarily or permanently, there are fewer resources to help answer these questions.

Better outcomes happen when you combine the imagination of humans, the power of data and the speed of modern compute. Every day, Alteryx is amplifying human intelligence and enterprises around the world, which in turn is delivering better results for our customers. For these reasons, we believe that our business is well positioned with the uncertainties we face. Leveraging our own platform, we will continue to monitor business conditions closely. And we'll continue to adjust our operating plans as the economic effects of the coronavirus unfolds to come out of this crisis stronger than ever before.

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

[Kevin Rubin, Chief Financial Officer]

Thank you, Dean. Despite the abrupt slowdown we saw in March, which I will discuss further in a moment, Q1 results were solid. Revenue was $109 million, an increase of 43% year-over-year driven by a favorable product mix resulting in the upfront portion of revenue recognition being at the high-end of the range and an average contract duration of approximately two years, consistent with prior periods.

Overall net expansion for Q1 was 128%, while net expansion for the Global 2000 was 148%. We added 356 net new customers in the quarter and now have 6443 total customers including 731 or 37% of the Global 2000. Finally, we crossed another key milestone in the first quarter and now have over $400 million in annual recurring revenue or ARR.

Before moving on, I want to briefly discuss the impacts of COVID-19 on our business that we have experienced thus far. Coming into Q1, the momentum that we saw in 2019 continued and we got off to a solid start to the year. However, in March, we saw activity levels slow considerably. This was particularly evident with opportunities with new customers and expansion opportunities that were not attached to a renewal.

Although, as Dean mentioned, we did close a number of transactions with companies in highly impacted verticals such as travel and hospitality, manufacturing and retail, we did experience lower expansion rates from these verticals as these companies focused on difficult decisions to realign their operations in response to COVID-19 and the macroeconomic slowdown. Finally, we experienced a moderate increase in our churn rate most notably in Europe.

To give you more color on our business, approximately one-third of our ARR is from our Global 2000 customers. About 25% of our ARR today is from customers who are in the most impacted verticals, I previously mentioned, and only 6% of our ARR is from small to medium-sized businesses within these highly impacted verticals. We are committed to working with our customers, especially in these verticals through these challenging times.

Now turning back to revenue. Our U.S. revenue was $80.5 million, an increase of 52% year-over-year while international revenue was $28.3 million, an increase of 22% year-over-year. Our strong U.S. performance was driven by continued robust customer demand, specifically within our global strategic customer segment.

Internationally, we saw continued strength in Asia including regions like Japan, but churn rates in Europe increased moderately, particularly in the most impacted verticals previously discussed.

We were able to quickly adapt our go-to-market efforts to transition into a work-from-home environment. Since the end of the quarter, we have seen improved levels of customer activity as we continue to have productive conversations with both new and existing customers.

In April, we saw new business activity resume and was consistent with activity levels in April 2019. We view this as an indication that data and analytics remains critical even in challenging times. We will continue to monitor key productivity and activity levels affecting unit economics to inform us on how or if we continue to invest for the remainder of the year. We intend to balance future growth and profitability appropriately.

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

Our Q1 gross margin was 91% consistent with Q1 of 2019. Our Q1 operating expenses were $102.6 million, compared to $67.3 million in the same period last year. The increase in operating expenses is primarily attributable to increases in our overall headcount level.

Included in our Q1 operating expenses were approximately $6 million of one-time and seasonal expenses, primarily related to our Annual Global Kickoff meeting held in February, and costs associated with rescheduling our U.S. and EMEA user conferences, which were originally scheduled for June and October respectively. These one-time and seasonal expenses are not expected to recur this year.

Our Q1 operating loss was $3.2 million or an operating margin of negative 3%. Net loss was $6.5 million or negative $0.10 per share based on 65.6 million non-GAAP fully diluted weighted average shares outstanding.

Turning now to the GAAP balance sheet and statement of cash flows. For the quarter ended March 31, we generated $20 million of positive operating cash flow and exited the quarter with just shy of $1 billion in cash, cash equivalents, short-term and long-term investments compared with $975 million as of the end of Q4 2019. We ended the quarter with 1,478 associates, up from 1,291 associates at the end of Q4 2019 and 936 associates at the end of Q1 of 2019.

Now turning to our outlook. The current macroeconomic environment is clearly in a state of turmoil, and we expect it will continue to negatively impact our business. Given the evolving situation with COVID-19 and the increased uncertainty it has created for businesses across the globe, at the present time we cannot reasonably predict the impact on our full year 2020 financial results. As a result, we are withdrawing our previous full year guidance and do not intend to provide financial guidance for the full year 2020 at this time.

However, based on the Q2 quarter-to-date activity coupled with the ratable portion of our revenue that will be recognized in Q2, we believe we have sufficient visibility to provide Q2 guidance for revenue, operating income and EPS.

For Q2, nearly two-thirds of our revenue will be recognized from deferred revenue and scheduled multiyear billings approximately 15% is expected from contract renewals and the remainder will be generated from net new business closed in the quarter. We have historically seen between 80% and 85% of in-period bookings coming from existing customers, which is generally in line with what we saw in the first quarter.

As we are closely monitoring the business to retain our strong financial position, we are also sharing a high-level overview of our expected cost structure. Our cost structure is primarily fixed in the short-term as the majority of our expenses are headcount-related and as Dean noted earlier, we intend to maintain current staffing levels.

Also, as I highlighted previously, Q1 expense levels included onetime and seasonal expenses of approximately $6 million, which by definition will not recur in Q2 so we expect to see Q2 operating expenses decline sequentially. We believe these expense levels are proven given our strong base of recurring revenue. However, we will continue to monitor productivity metrics and unit economics to align our investments with the top line performance. We remain committed to long-term profitability and cash generation.

As a result of the current macroeconomic environment and greater variability in our business, our guidance assumes the following. We are expanding our guidance range to account for the increased uncertainty of new business, timing of renewals, slightly higher churn rates and the potential impact to revenue of more flexible payment terms, especially for customers in highly impacted verticals.

The average duration of our subscription agreements continued to be approximately two years. Approximately 35% to 40% of our TCV booked in the quarter will be recognized upfront with the remainder recognized ratably over the time of the contract and current headcount levels will be maintained.

For Q2 2020, we expect GAAP revenue in the range of $91 million to $95 million representing year-over-year growth of approximately 10% to 15%. We expect our non-GAAP operating loss to be in the range of $9 million to $13 million and non-GAAP net loss per share basic and diluted of negative $0.12 to $0.18. This assumes 67 million non-GAAP fully diluted weighted average shares outstanding.

In summary, while we are in unprecedented times, we believe Alteryx remains well positioned given our strong product market fit significant market opportunity given the low penetration into our total addressable market, powerful business model, capable of delivering strong levels of profitability and operating cash flow and our solid financial position with approximately $1 billion of cash on the balance sheet.

We have demonstrated the financial discipline of balancing investment for growth while maintaining profitability. We plan to continue to manage our cost structure based on top line dynamics in line with historical levels of profitability.

Finally, I would also like to add my thanks all of the Alteryx associates across the globe who have quickly adapted to support our customers in these uncertain times.

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

[Operator]

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question has come from the line of Tyler Radke of Citi. Please proceed with your question.

[Tyler Radke, Citi]

Hey. Thanks a lot for taking my questions. And hope you are all staying safe and healthy. I wanted to follow-up on just trying to better unpack the guidance here for the second quarter, because I think obviously that was -- that came in a lot lower than people were expecting. I guess, given that you have seen kind of business trends in April in line with maybe where things were last year, I mean, I guess what's the reason why you expect I guess, the bookings pattern to be so severe?

And then, I would just love to better understand any more -- better understand the framework around duration? I know about two years is what you said Kevin, but maybe if you could just help us understand if you're expecting duration to be a headwind in the second quarter so we could better understand the moving pieces associated with the revenue guidance?

[Dean Stoecker, Chairman and Chief Executive Officer]

Hey, Tyler, Dean. I'll let Kevin follow-up with some comments. But just as a reminder to everyone on the call there's really kind of two factors at play, one is, while we are completely subscription-based we are not 100% ratable. And so we don't have perfect visibility into the entire run rate. We've got visibility into roughly 60% 65% from the balance sheet. And as an analytics company the second part of this is, if you put bad data in you get bad data out. And so we leverage our own platform on all of the KPIs that will indicate when things might change for us. We still don't have all the information that would give us better visibility.

And I think that the April performance is actually fairly strong. We've always been conservative even though we've seen some glimmers of hope in April. It turns out of the logos we brought-in in April 35% of them were actually in the highly impacted verticals, that's also some silver lining in this. But as you know, we've been fairly conservative. Kevin?

[Kevin Rubin, Chief Financial Officer]

Yes. Thanks Tyler. Just a couple of things. I think to Dean's point, given that we don't have front portion to our revenue, there is a heightened impact in the current environment to that. We also have typically seen our quarters back-end loaded in the sense that we do more business in the third month of the quarter than we tend to do early in the quarter. So based on our visibility guidance is what we can reasonably see as we sit here today.

And then finally, your question with respect to duration, we've actually not really seen a material shift in duration either in Q1, nor in the beginning of Q2. So I would not describe duration as a headwind at the moment.

[Dean Stoecker, Chairman and Chief Executive Officer]

Let me add one additional comment and that is around what may be a false positive or a false negative I guess in the case of the impacted verticals. Most organizations are talking about the impacted verticals as having a negative impact on their business. I highlighted a number of verticals in customers who joined us in Q1.

To illustrate that, those impacted verticals may turn out to perform better for us when -- we've always said that when things are good analytics are important. But when times are bad, analytics are absolutely critical. And so we're very optimistic about what is happening in this space and the kinds of customers that are joining us and the impacted verticals I think have another silver lining.

[Tyler Radke, Citi]

Great. And then if I could just sneak in a follow-up. I think Dean you mentioned in both the press release and the opening commentary that you hit the $400 million of ARR this quarter. And I think that's really the first time we've heard you talk about ARR. I know there's been a lot of questions around disclosure of ARR and the various definitions. So maybe just help us understand, is that kind of the end of quarter what's on the books definition of ARR? And what was kind of the inspiration around giving that? And is that something that you expect to provide going forward?

[Dean Stoecker, Chairman and Chief Executive Officer]

Well, I think we've actually given ARR when we hit the $200 million ARR number. I don't think we've given it since. And we wanted to give everyone some comfort on the health of the business. I don't know if we'll provide that number again. As we hit these milestones I think it's important that you understand under the guise of 606 that there are lots of great metrics that drive Alteryx. And so Kevin may have some additional comments on the ARR number.

[Kevin Rubin, Chief Financial Officer]

Yes. I mean I would just I guess double down on the points Dean made. In Q2 of 2018, we did provide the milestone of going through $200 million which we thought was an important milestone and we felt the same way going through Q1 crossing $400 million was also in our view a very important and key milestone to the business. We're not necessarily going to continue to provide it going forward. But as we do have these key milestones we'll communicate those. And then Tyler, your last question, the definition was actually in the press release. But it is essentially the totality of all our active contracts at the end of the period.

[Tyler Radke, Citi]

Great. Thanks a lot.

[Operator]

Our next questions come from the line of Brent Bracelin of Piper Sandler. Please proceed with your question.

[Clarke Jeffries, Piper Sandler]

Hello. This is Clarke Jeffries on for Brent. First question I have is around net adds. One thing that stood out to me was net adds remained strong about a 30% growth rate. I was wondering if you could unpack that. If the typical land of just a few seats it was not -- not seeing any disruption in the March or even the April time frame?

[Dean Stoecker, Chairman and Chief Executive Officer]

No, we really haven't seen a change in the new adds. Obviously it was a good quarter 356 net new customers. Most impressively was the 12 new G2Ks those which we said at 37%. I think what's important to know is that our business model is fairly frictionless. As you know our land cycle is typically a 45-day-or-so land cycle $10, 000, $12,000, $15,000 on the land with a couple of designers. It always begins with a frictionless 14-day self-service trial. That hasn't really changed at all.

In fact we were pretty excited even through the last two weeks when there was abrupt halt to working in the office there really wasn't an abrupt halt to doing business. It was just done in a different environment. And fortunately as a company who prides itself on being agile and being ready for moments like this we turned our teams into work-from-home teams and we have all the business systems to support it including onboarding on new -- those new customers.

So we stayed up the virtual solution centers that give many of the new customers the opportunity to engage with solutions engineers and experts, to get time to value and quick ROI on the investments that they just made. So, really excited about the net new adds.

[Clarke Jeffries, Piper Sandler]

All right. Got it. Really helpful. And maybe just to unpack the commentary on the attrition. Just to be clear about the potential you see for churn versus contraction. For the -- one of the commentaries that we've heard about is budgetary scrutiny and I think that's typically happening at the line business level.

So I just was wondering, if there's any kind of trends you're seeing between customers that are maybe more wall-to-wall or on an overall corporate budget, more contemplating contraction rather than fully churning off of the solution? And so just certainly whether you think contraction will be more possible rather than that churn rate?

[Dean Stoecker, Chairman and Chief Executive Officer]

So that's a great question. So we haven't actually seen a big change in any of that. We had slower growth in Europe in part, Kevin mentioned in the prepared remarks to higher churn in Europe. Europe is driven far more by reseller relationships. A lot of those resellers are smaller resellers that didn't have the ability to react quickly to keep customers.

Most of the churn we do get tends to be in single-seat implementations where it was really more of a lack of expansion. In terms of the expand model that we have, we actually haven't seen -- we've seen people pause but we haven't seen them punt. And I think that the other part of even Q1 that was particularly exciting is that I think we had a record number -- certainly for Q1, a record number of adoption licenses, where it's easier for people to absorb more of Alteryx under an adoption license that can be trued up at a future date when things are better. So we've mitigated, we believe most of the risk but we have not seen major customers put a big pause on their spend.

[Clarke Jeffries, Piper Sandler]

Perfect. Thanks very much.

[Operator]

[Operator Instructions] Our next question comes from the line of Derrick Wood of Cowen & Company. Please proceed with your question.

[Unidentified Analyst]

Great. Thanks. It's Andrew on for Derrick. Hope you’re all well. Maybe just wanted to touch on the larger expansion deals? And maybe how have reps adjusted to selling virtually? How do closure rates looks? And yes, any playbooks or anything looking forward in this expansion motion in particular?

[Dean Stoecker, Chairman and Chief Executive Officer]

Well our playbooks are well established. I think they work regardless of whether it's in office or work-from-home environment. When we put into place our own shelter in place plans, largely driven by local jurisdictions' requirements, we got people up and running right away, be it with collaboration software access to our enterprise business systems portal. We're largely a cloud-based organization. There are some things that are on-prem but accessible through VPN. So that part I think was to our advantage.

I think the more challenging part particularly in the last two weeks of the quarter was -- it was work-from-home dealing with work-from-home. We illustrated the large European financial institution to illustrate the complexity of deal management. If you have all the signers in a single office or even in offices that are remote, it's a little bit differently than getting signers all working from home in 16 different locations.

So I don't think -- our expand motions are fairly frictionless as well. Much of our driving expansion in accounts is actually driven by customers getting excited over the benefits that they're seeing in the platform. Yes, we do go on-site. We've actually turned to not just our virtual solution center but we've seen in the last 30 days a record attendance and registration on our community.

We've long talked about the impact of Community on expansion. I think we've said on a number of occasions that customers who have registered for Community expand three times more than people who are customers of ours who are not involved in Community. And so we saw a record number of unique registrations for Community in the last 30 days. And so -- and that Community is accessible in the UI of the platform. So again it supports a work-from-home environment pretty nicely.

We also have pivoted many of our user groups around the world. Our Community is made up of both online and off-line community. The off-line component, we talked with you about pushing our users' conferences this year to next year. But our user groups around the world have also gone virtual.

So if you care to see them you can join them go to Community and you'll see them. You'll see them all over Twitter and LinkedIn. So we've made it pretty easy for customers to get the expertise they need the support that they need to drive greater expansion. The only challenge there of course is organizations who are trying to figure out what end is up themselves and that may pause things for a short bit.

[Unidentified Analyst]

Great. Thanks. And then internationally, results sounded pretty good. You called out APAC and Japan. Maybe just touch on the regions that have reopened? What are you seeing there? And how much of a leading indicator that could be for here -- for U.S.?

[Dean Stoecker, Chairman and Chief Executive Officer]

Yes. So I was just going to comment, the comments we made around the business with respect to April activity being fairly consistent with what we saw in April of last year. We didn't break that down by region but rather just globally.

[Kevin Rubin, Chief Financial Officer]

Well, we do see continued engagement from all of our teams. We did call out APAC or specifically Japan a strong growing team in Japan doing really well. I think the only soft spot was the renewal base in Northern Europe.

[Unidentified Analyst]

Great. Thanks.

[Operator]

Our next question is from Chris Merwin with Goldman Sachs. Please proceed with your question.

[Chris Merwin, Goldman Sachs]

Okay. Thank you very much. I just had one for Dean. Given the importance of -- the analytics, obviously, as you mentioned in good times and bad times, just curious how we should think about the sense of urgency that customers have about either adding a brand-new deployment? Or even adding seats to the existing deployment that they have? Are there any examples of customers leaning in and doing even more with Alteryx? Because I imagine for many of these customers are facing unprecedented -- some unprecedented circumstances in their business?

[Dean Stoecker, Chairman and Chief Executive Officer]

Yes. No, it's a great question and I think we've long talked about the deep and wide moat we've created and the fact that we can become the analytics fabric of large organizations. We're trying to get their arms around digital transformation. If COVID-19 is not the wake-up call and not the accelerant to digital transformation then there will never be a digital transformation.

I personally have spent quite a bit of my day talking with not just our employees around the world, but executives around the world who are trying to figure this whole thing out. I think they're realizing that being complacent and trying to leverage systems of record deep in IT that got them great to begin with are not the kinds of systems and implementations you need to get great in the next generation. There's a new skill set I think that's being developed in the C-suite around the world. It's called Creative Disruption; it's the ability to reimagine yourselves in a different fashion. You can either wait for this thing to define you or you can take control of it.

And we're seeing large organizations have pronounced impact around an effort to not just democratize data, but to prosecute analytics to automate everything that's happening in their business. And most importantly, I think, the thing that's been missing in digital transformation 1.0 is not being missed in 2.0 and that's upskilling the workforce.

We have heard this repeatedly over the last three years since going public and I think it's now to a heightened sense where organizations know that they have to do this. Otherwise the next pandemic or the next financial collapse or the next calamity that we will face could destroy many of these organizations. So we see this as a huge tailwind for a long time coming.

[Chris Merwin, Goldman Sachs]

All right. Thanks very much.

[Operator]

Our next question comes from the line of Brad Sills of Bank of America Securities. Please proceed with your question.

[Brad Sills, Bank of America Securities]

Thanks, guys for taking my question. Wanted to ask if you've seen in those verticals that have not been as impacted by the pandemic, the other 75% would you classify things as kind of business as usual or even maybe a catalyst that you might have seen from COVID in those industries?

[Dean Stoecker, Chairman and Chief Executive Officer]

Well, I don't think we've seen a significant change in the non-impacted verticals. And as I said before I think it's even encouraging even though people are talking about the 25% that are in the impacted verticals, we're beginning to see glimmers of hope there. I mean when oil hit negative territory in Q1 all bets were off. People probably thought nobody would buy anything. But we actually did quite well in oil and gas because analytics becomes more critical in those situations.

We have not seen a key change, but it's early. It's April. While we're excited about the fact that we've landed about the same number of logos that we had in Q1 of -- or in April of last year, the fact that we still are obtaining G2Ks in April is a positive sign. But in the non-impacted verticals we really haven't seen a shift.

[Brad Sills, Bank of America Securities]

Thank you.

[Operator]

Our next question comes from the line of David Griffin of William Blair. Please proceed with your question.

[David Griffin, William Blair]

Hey. Good afternoon. Thank you for taking questions. So I wanted to talk a little bit about the pricing environment. You know, you increased the price of list -- or the list price of server by about 35% at the beginning of the year and I know that was a reflection of all the incremental capabilities you've added over the last several quarters. And given that you kind of haven't really changed pricing there since at least I think prior to the IPO I suspect there hasn't been much pushback.

But just given the current macro environment and your earlier comments alluding to some customers potentially looking to change things like payment terms, I think it would be great just to get an update on the customer response that you've seen to the price uptick? And then maybe if you could just talk a little bit more generally about what you're seeing out there in the pricing environment that would be helpful?

[Dean Stoecker, Chairman and Chief Executive Officer]

Well, yes, as you know we haven't changed pricing other than the server price for many, many years. We went to our Designer price of $4,000 back in 2014 it still remains at that price. And we raised Server because we're seeing customers get value. There are ROIs that are pretty meaningful 1,000% improvements in operational efficiency gains, $177 million gross margin improvements, $250 million returns and we're seeing this in the value of automation. So we haven't had any kickback really on servers.

Now having said that there are customers even in April that have come back and said, well I'd rather now have fewer Designers in server to begin to automate because the -- if they can -- in particular if they were in the impacted verticals and they did have furloughs or layoffs, the work still has to get done. The questions don't slow down. In fact the questions accelerate. The data doesn't slow down. It continues to get larger, but you might have fewer people to answer those questions.

So Server is still a mainstay for us. A big portion of our customers have Server. We believe over the long-haul seeing success with digital transformation all of the G2Ks that we end up with will eventually have servers from our perspective, because automation is absolutely essential to seeing success in digital transformation.

Overall, we haven't really seen big changes in pricing. I think that we've probably even seen in early stages of April, less discounting. So we're excited about the place that we're in. I think that we're just pausing it to see what other data points we can gather.

[David Griffin, William Blair]

Okay, great. That’s helpful. Thank you.

[Operator]

Our next question comes from the line of Jack Andrews of Needham & Company. Please proceed with your question.

[Jack Andrews, Needham & Company]

Good afternoon. Thanks for taking my question. I joined the call late, so I apologize if you've addressed this. But I wanted to see if you could touch a little bit more on what's happening on the partner side of things? How they're engaging with your customer base? And I'm also wondering just are the mechanics of the deals that your partners are leading you to any different in terms of deal sizes or duration than your historic cadence of business? Thanks.

[Dean Stoecker, Chairman and Chief Executive Officer]

Great questions. I think we've -- we haven't addressed that on today's call, but this is a good opportunity to do so. As you know about 20% of our business has historically been driven by reseller partners. These are typically value-added resellers. Most of them are on the subject matter expertise side maybe they have vertical-bent local market coverage. A few of them are U.S. based or country focused, some are international, very few are actually international.

And in order to take the platform into an ecosystem of people who could drive higher value for us, we set up a strategic alliance program last fall. I think in the year-end earnings call, we talked about PwC joining us as a global elite. That agreement was signed first couple of days of February, right before our global kickoff where we brought all of our employees together.

I can't tell you too much about that, although we know that the time is right for these global alliances. We're starting to see a lot of inbound activity particularly around digital transformation. And what I can tell you is we're building pipeline. And I think that the global analytic consulting vendors recognize that we have the end-to-end platform that allows this data to be democratized, that allows analytic processes to be built, that allows these processes to be automated.

And it drives value for not just us, but it drives tremendous services revenue particularly now as these global organizations have to go in and build models, retrofit departments, upskill workforces. And so perfect timing for having global elites like PwC on our side.

[Jack Andrews, Needham & Company]

Great. Thank you for the color.

[Dean Stoecker, Chairman and Chief Executive Officer]

Thank you.

[Operator]

Our next question comes from the line of Michael Turits of Raymond James. Please proceed with your question.

[Eric Heath, Raymond James]

Hi, guys. This is Eric Heath on for Michael. Kevin on the net expansion rate, could you provide some color on how you expect this metric to trend going forward throughout the year? And maybe some of the puts and takes on those assumptions?

[Kevin Rubin, Chief Financial Officer]

Yeah, thanks. We don't guide out to net expansion, so I'll give you just some directional color. I mean, when we went public I think we indicated that we felt north of 120 over the long-term was sustainable and we still believe that to be true.

Certainly, as we've gotten larger that naturally does have impacts on how net expansion continues to go over time. That being said we're still pretty pleased with 128% on the quarter and 140% within the G2K. I think that continues to demonstrate our largest customers continue to make significant investments in Alteryx.

[Dean Stoecker, Chairman and Chief Executive Officer]

And remember that the market that we are going after, the 54 million disgruntled analysts who hate their jobs who want to be upskilled to be citizen data scientists 15 million of those exist in the G2K. And so we have less than 1% penetration of that entire audience. So, there is massive opportunities for continued expansion.

And when you look at the penetration rates of just Designer knowing that automation is key and roughly let's call it 15 or 20 Designers begets a Server there's a significant upside to this whole model that we we've created.

So, we think that certainly the 120 is for the extended period and we believe that the numbers we've posted for our ordinary -- or our overall customer base along with G2Ks will continue to be strong.

[Operator]

Our next question comes from Ittai Kidron of Oppenheimer. Please proceed with your question.

[Ittai Kidron, Oppenheimer]

Thank you and thanks Kevin for all the incremental color on the breakdowns. Very helpful. Just want to follow-up again to the first question on the Q&A which was your comment on improved level of activity in April and you've called it or defined it as same as April 2019.

And I'm trying to understand really what does that mean from a new customer acquisition pace? From an expansion pattern? Help me understand in what way is it the same as April 2019? And when you give your guidance for the June quarter is the assumption that that level -- is the revenue the target for the second quarter assumes that that level in April stays the same? Or continues to improve? How do we kind of think about the underlying assumptions here?

[Dean Stoecker, Chairman and Chief Executive Officer]

Well, we actually are comfortable with what happened in April. I think we were pretty excited that we could continue to drive the number of logos we did post-work from home post-shock from COVID.

The fact that we were able to get 35% of those new logos and the highly impacted verticals is beginning to potentially change our thesis around whether or not they're good or bad for an analytics platform like ours.

We're pretty convinced that analytics is going to be the savior for a lot of these organizations who are highly adaptive. I'm not sure I have any other commentary on that. Kevin?

[Kevin Rubin, Chief Financial Officer]

Yes. No, thanks Ittai. It's a great question. Look I mean we provided the assumptions and kind of the buildup as we think about Q2 in terms of what we're expecting and where it's being contributed. Two-thirds of the quarter is essentially coming from backlog or RPO. You've got 15% or so that's coming from renewals and then the rest will be generated from in-quarter bookings. The commentary around April I think was really the totality of the business.

So, Dean touched on net new logos and what we've seen in terms of that activity being very similar. And so the general comment was with respect to our overall business. And then we did build up the -- I did provide quite a bit of detail in the buildup to how we're looking at guidance and the revenue that we expect to see this quarter.

[Ittai Kidron, Oppenheimer]

Good luck guys.

[Operator]

Our next question comes from the line of Steve Koenig of Wedbush Securities. Please proceed with your question.

[Steven Koenig]

Hi gentlemen. Thanks for taking my question. And I apologize in advance if you've discussed this already. But maybe in thinking about your Q2 outlook maybe just qualitatively color on kind of the reduction in the outlook compared to maybe what you were thinking three months ago?

Kind of if you were to break that down between attrition in the base versus expansions versus lighter expansions and kind of the impacted verticals versus the non-impacted kind of the -- what are the most important factors as you think about what affected your outlook?

[Dean Stoecker, Chairman and Chief Executive Officer]

Yes. Thanks Steve. So, as I went through -- in the prepared remarks, I kind of gave some color in that regard. We -- as we went through and built up guidance I mean obviously it's being impacted by a lot of the things you described right? I mean we expanded the range a bit to be able to accommodate for what we are seeing from a variability perspective.

We commented on moderate increases in churn rates in Europe. And so as we go through and look at the various different aspects of the business obviously the growth rate is lower than we saw in Q1.

But we're still optimistic around the conversations we're having with customers and to Dean's point, kind of a focus on digital transformation and how the Alteryx platform can ultimately fit into those initiatives.

[Steve Koenig, Wedbush Securities]

And are you guys doing anything in terms of giving especially the most impacted customers kind of easier payment terms or things like that on the contract?

[Kevin Rubin, Chief Financial Officer]

Yes. We're certainly working with customers. I mean, we're obviously a customer-centric organization and providing flexibility where we can. And so we are having those conversations and we are accommodating and working with customers that are most impacted.

[Steve Koenig, Wedbush Securities]

Thank you very much.

[Operator]

Our next question comes from the line of Rishi Jaluria of D.A. Davidson. Please proceed with your question.

[Hannah Rudoff, D.A. Davidson]

Hi guys. This is Hannah Rudoff on for Rishi today. Thank you for taking my question. So first can you talk about how postponing your conferences to 2021 is going to impact this year beyond the one-time expenses you mentioned? And then how much do you rely on conferences for lead generation?

[Dean Stoecker, Chairman and Chief Executive Officer]

Well, conferences aren't really a lead gen activity. There are prospects that show up to our conferences. It is impactful for business, but much of that is throughout the year not just the one-time year we get together face-to-face, but we have community events online and offline. We're very engaged throughout the year with our customers. We have a pretty incredible Net Promoter Score not because of our conferences, but because of our overall customer-centric behaviors.

And while it's disappointing to push them off, no one could get there with planes not in the air. And so as you know one of the things that we're doing with our conferences, we're renaming it to Analyticon, because in times like this we actually see a key change happening when it comes to the overall sector for data science and machine learning. There's going to be continued consolidation in this space.

We wanted to clear the air, because there's so much confusion about data science and analytics. So we're going to open up the conference to a much broader ecosystem. So next year perhaps for the first time, we'll -- we actually will have prospects coming to the conference. The 16 million Python developers that exist in the world and the adjacent technology alliances that we have with the folks like H2O and Snowflake, we'll bring all these people into the ecosystem for data science and analytics to clear the air and to let people know that it's real, it's critical for digital transformation.

So we're disappointed that we pushed it, but we have a whole bunch of really great go-to-market activities coming out over the next few weeks. You'll start to hear about them early next week and we hope you attend them.

[Hannah Rudoff, D.A. Davidson]

Great. Thank you.

[Operator]

Our next question comes from the line of Taz Koujalgi of Guggenheim Partners. Please proceed with your question.

[Taz Koujalgi, Guggenheim Partners]

Hey, guys. Thanks for taking my question. Kevin I have a question for you. If you look at your revenue model, you have some revenue that's still from the balance sheet, your maintenance that gets deferred, and then I guess some part of the revenues are coming from renewals from deals that you signed about two years ago. If you were to break down, how much of the revenues are basically new versus coming from deferred and renewables what is that mix? How much of the revenues are safe in the sense that they are -- you already have them in your bag versus revenue that you have to generate in the quarter? What would that mix look like?

[Kevin Rubin, Chief Financial Officer]

Yes. Thanks. That's a great question. So in my prepared remarks, I actually went through that unpacking. So about two-thirds of the revenue is coming from backlog, 15% or so is coming from renewals. So that I guess you can consider that still in-period so to speak. And then the balance of the revenue will actually be from a business that we close in the period.

[Taz Koujalgi, Guggenheim Partners]

Got it. That's very helpful. Sorry, I was jumping between calls, so I must have missed that.

[Kevin Rubin, Chief Financial Officer]

No. No problem.

[Taz Koujalgi, Guggenheim Partners]

And then April color I think you said the trends look pretty strong. Any more details on how upsells are looking in April versus new customer acquisition?

[Kevin Rubin, Chief Financial Officer]

Well, again, I think our comments generally speaking is that we saw similar activity in April of this year similar to what we saw April of last year. And so that is intended to reflect the overall aspect of the business in addition to just the commentary around net new adds.

[Taz Koujalgi, Guggenheim Partners]

That's very helpful. Thank you.

[Operator]

Our next question comes from the line of Pat Walravens of JMP Securities. Please proceed with your question.

[Joey Marincek, JMP Securities]

This is Joey on for Pat. Thank you for that question. Dean, can you help us to frame the long-term opportunity you see ahead? And then maybe give us some perspective on your product market fit? Thank you.

[Dean Stoecker, Chairman and Chief Executive Officer]

Great question and an important one in times like this while, lots of people are impacted we believe that winners and losers are made in times like this. We see the focus on digital transformation being right in front of us. As I said earlier, if this is not a wake-up call to executives around the world, nothing will wake them up.

We're seeing a clear change from the last attempt at digital transformation. I've talked to a number of Chief Data Officers over the last three or four weeks. And many of them have said, we thought digital transformation was about buying more of what we had in IT and systems of record and hiring scientists. We recognize now that that didn't actually deliver success.

And in digital transformation 2.0, it really is the collection of seeing data as an asset in an organization, turning analytics into a prowess. And most importantly, automating routine tasks, while you're upskilling the humans in the mix, we believe that those 54 million potential citizen data scientists are real.

They do want this work. They do want to provide value to organizations. And we see this as a huge opportunity. In fact, over the next two or three weeks you'll start to hear a lot more about a category of software that we see emerging, that we intend to own.

And you've looked at a category creation in the past whether it was ACM or ITSM or SFA, the winner in that category tends to get 85% of the market cap of the entire category. And we intend that to be Alteryx. So we believe we're particularly well positioned for, not just the short-term but the medium-term and the long-term.

[Operator]

We have reached the top of the hour. I will now turn the call back over to Dean Stoecker, for any closing remarks.

[Dean Stoecker, Chairman and Chief Executive Officer]

Thank you, Operator. Finally I want to once again express my gratitude and appreciation for the Alteryx associates around the world, for their continued dedication and flexibility while, we work our way through this moment in time.

Thank you to our customers for putting your trust in Alteryx and allowing us to be part of the analytic fabric of your organization, and thank you to our partners for your trust and commitment to work together to deliver better analytic output for our joint customers. We believe that, people are the ultimate differentiator here. And there's no better group prepared to address the current challenges, than this global analytics community.

You can find some of this remarkable work from our community by following the #togetherwesolve, hash tag on social media. Thanks for your time today. Be well. And stay strong. Thank you.

[Operator]

This concludes today's conference. You may disconnect your lines, at this time. Thank you for your participation. And have a great evening.