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Alteryx, Inc. (NYSE:AYX)
Q4 2019 Earnings Conference Call
February 27, 2019, 5:00 p.m. ET

Contents:

Prepared Remarks:

Operator

Ladies and gentlemen, greetings and welcome to the Alteryx fourth quarter and full year 2018 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the program, please push * 0 on your telephone keypad. As a reminder, this program is being recorded. It is now my pleasure to introduce your host, Chris Lal. Thank you. You may begin.

Chris Lal -- Senior Vice President, General Counsel and Secretary

Thank you, Operator. Good afternoon and thank you for joining us today to review Alteryx's fourth quarter and full year 2018 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 Law. These statements are not guarantees of future performance but rather are subject to a variety of risks and uncertainty. Our actual results could differ materially from expectations reflected in any forward-looking statement. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's EDGAR system and our website as well as the risks and other important factors discussed in today's earnings release.

As noted later in the call, we are adopting ASC 606, effective when we file our annual report on Form 10-K later this week. We have posted a presentation on the investor section of our website that provides additional details on the impact of ASC 606 on our financial information and disclosure. The financial impact of adoption is also presented in our earnings release. Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release and the investor section of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I'd like to turn the call over to our Chief Executive Officer, Dean Stoecker. Dean?

Dean Stoecker -- Chairman and Chief Executive Officer

Thanks, Chris. And thank you to everyone joining us today to discuss our Q4 and full-year 2018 results. As you know, based on our preannouncement in January, Q4 represented a strong finish to an amazing year. Before I go through our results in more detail, please note that my comments are on an ASC 605 basis. Kevin will provide more details on our ASC 606 results later on the call. Alteryx is clearly benefiting from positive industry trends such as continued investments in digital transformation initiatives, increase in global demand for advanced analytics, and improved awareness of the Alteryx brand, all on the heels of stellar execution by more than 800 Alteryx associates around the world. We set many new company records in Q4 and for the full-year 2018. Q4 revenue grew 57% year-over-year to $60.5 million. Q4 billings were up 65% year-over-year to $116 million. And our Q4 international revenue was up 92% year-over-year to $18 million.

For the full year, we saw revenue grow 55% year-over-year to $204 million with international growth up 96% year-over-year. Gross margins improved to 90%. And we generated $26 million in positive cash flow from operation. Our land and expand model continues to perform quite well. In Q4, we added 381 net new customers. And we now count approximately 4,700 customers in our growing worldwide community including 534 of the global 2,000. Some of the global 2,000, we welcomed to the Alteryx community in Q4 included SentryLink, Credit Agricole Assurance, Colgate-Palmolive, Hewlett Packard Enterprise, and Pfizer. We also saw customers expanding their footprint of Alteryx throughout their organization, evidenced by a more than doubling of customers with greater than a $1 million in annual recurring revenue and a tripling of transactions greater than $500,000 in annual contract value. Additionally, our dollar-based net revenue retention rate remain very strong at 129%.

The technology sector was particularly strong for us in the fourth quarter with transactions from Atlantean, Dropbox, Microsoft, Oracle, and Snap. Another technology bellwether, Adobe, expanded their Alteryx footprint in Q4. Alteryx was chosen as part of Adobe's CFOs Enterprise Technology Modernization Initiative and serves as a key component of their RPA, robotics, and analytics transformation in finance. In what would otherwise be spent manually iterating through monotonous and data-intensive tasks, end-users proved that they could get significant amounts of time back by automating these processes with Alteryx. Verticalizing our go-to-market efforts has been another factor in this continued strain. In Q2 of 2018, we established our healthcare team because we saw an opportunity to better address healthcare as a unique regulatory and business process requirement and deepen our engagement with these companies around the globe.

As a result of these efforts, a health benefits company expanded with a six-figure deal in the fourth quarter. This customer, like many, had its first experience with Alteryx via a free trial. And in the words of one of its users, "fell in love with the simplicity of Alteryx." This organization was using another company's legacy platform for advanced analytics but found it to be "very hard, tedious, and expensive to implement." After a formal evaluation, they ultimately chose Alteryx for advanced analytics due to its simplicity, ease of use, and its support of opensource tools. We are increasingly hearing similar stories as more companies leverage Alteryx for advanced analytics across the enterprise. We continue to see strength across the globe as evidenced by our 96% increase in international revenue for the full year, now representing 29% of total revenue. In 2018, we opened or expanded 12 offices including Tokyo, Paris, and Dubai.

We added over 120 associates outside of North America and now have approximately 25% of our workforce based outside of North America. As we head into 2019, we plan to continue to build our global footprint. Geographically, the Middle East and Africa stood out with a doubling of revenue in Q4. In the quarter, we did business with Abu Dhabi Islamic Bank, Al-Futtaim, a private company, and Dubai Electricity and Water Authority in the UAE, Saudi Commission for Health Specialties in Saudi-Arabia, Standard Bank Group Limited in South Africa, Trade and Development Bank in Kenya, and now count 10 separate government agencies in Saudi-Arabia as customers. Internally, I have outlined a number of strategic imperatives for 2019 which are focused on scaling a world-class global organization that operates with agility and speed while still preserving the culture that makes Alteryx unique. I am extremely pleased with what we were able to accomplish in 2018 and believe we can accomplish even more this year.

However, what I am most proud of is the positive impact that Alteryx is making in our community. We encourage our associates to give back to programs they are passionate about, volunteering their time and energy and using the Alteryx platform to help enable social good and educational initiative. At our global kickoff event in January, we brought the entire company together to align teams on our 2019 strategic imperatives, including our Alteryx For Good effort. At this event, approximately 900 associates, customers, and partners worked together to pack over 100,000 meals that are being sent to Southeast Asia in support of a charitable organization called Rise Against Hunger. We accomplished this task in about an hour, demonstrating the real power of our Alteryx For Good community. With that, let me turn the call over to Kevin to discuss our Q4 financials, our adoption of ASC 606, and the outlook for 2019. Kevin?

Kevin Rubin -- Chief Financial Officer

Thank you, Dean. As Dean mentioned, we had a strong Q4 and full-year 2018. Before I go through our results in more detail, I'd like to provide you with an update on our adoption of ASC 606. As mentioned last quarter, we no longer qualified for emerging growth company status and are adopting ASC 606, effective when we filed our 10-K later this week. Under ASC 605, we recognize revenue ratably over the subscription term which typically ranges from one to three years. With the adoption of ASC 606, we will now recognize a portion of our revenue upfront. And the remainder will be recognized over the subscription term. We will derive the amount of revenue to be recognized upfront and over time from the total value of the contracts with our customers or TCV. As we previously mentioned, our average subscription term across our customer base is approximately two years.

Since we typically bill our customers annually in advance, for multi-year subscriptions, our ASC 606 revenue includes revenue recognized but not yet billed. The unbilled portion is recorded as a contract asset similar to an unbilled receivable. The amount of revenue recognized will vary based on product configuration of each deal, but we estimate it to be between 35% and 40% of our in-quarter TCV booking. This means we will recognize the remaining 60% to 65% of our TCV bookings over the subscription term. This also means that our revenue recognized in the quarter the deal is booked under ASC 606 is higher than our previously reported revenue under ASC 605. I want to emphasize, however, that we are not making changes to how we do business nor how we contract with customers as a result of our adoption of ASC 606. Therefore, we will continue to bill our customers annually, in advance, regardless of subscription term. Under ASC 605, we capitalized and amortized sales commissions over the contract term.

Under ASC 606, we will continue to capitalize sales commissions and other direct costs incurred to obtain a contract with a customer. However, the expense model will track closely to our revenue recognition model with a portion expensed upfront and the remainder amortized over time. Additionally, in our view, given the mechanics of revenue recognition under ASC 606, our previously reported dollar base net revenue retention rate is no longer a meaningful metric to measure our performance. Instead, we intend to report dollar-based net expansion rate which is a metric based on annual contract value or ACV. We believe this metric more appropriately measures the performance of our land and expanse strategy. In Q4, our dollar-based net expansion rate was 132%. We intend to continue to report the number of total customers and net new customers as we view these as additional metrics to measure our performance. The definition of these metrics and historical amounts are not impacted by ASC 606.

We have posted a presentation on the investor section of our website that provides additional details on the impact of ASC 606 on our financial information and disclosures, and the financial impact of adoption is also presented in our earnings release. Our Q4 ASC 606 revenue was $89.2 million. Our Q4 ASC 605 revenue was $60.5 million, an increase of 57% year-over-year. As Dean noted, we saw strength across all areas of our business. Our Q4 ASC 605 international revenue increased 92% year-over-year to $18 million. The strong growth across both our US and international markets reflects the investments we have made and expect to continue to make in growing our business globally. 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 Q4 ASC 606 gross margin was 93%. Our Q4 ASC 605 gross margin was 90%, an improvement of 470 basis points from Q4 2017.

While our reported gross margins were higher for Q4 under ASC 606 due to higher reported revenue, we expect to continue to invest in building out our global support organization. So, we only expect modest improvement in gross margins over time. Our Q4 ASC 606 operating expenses were $56.7 million, increasing slightly over our ASC 605 operating expenses due to the impact of sales commission treatment I mentioned earlier. Our Q4 ASC 605 operating expenses were $55.4 million compared to $31.9 million in Q4 2017. Our Q4 ASC 606 operating profit was $26.4 million or an operating margin of 30%. Under ASC 605, we reported a Q4 operating loss of $1 million compared to an operating profit of $1 million in Q4 2017. Our Q4 ASC 606 net income was $24.3 million or $0.37 per share based on $66.1 million non-GAAP diluted weighted average shares outstanding.

Under ASC 605, we reported a Q4 net loss of $0.5 million or a net loss per share of $0.01 based on $61.5 million non-GAAP basic and diluted weighted average shares outstanding. Turning now to the GAAP balance sheet, as of December 31st, we had cash, cash equivalent short-term and long-term investment of $426 million compared to $194 million as of December 31st, 2017. In Q4, we generated positive cash flow from operations to $14.4 million and $26.1 million for the full year. Finally, we ended the quarter with 817 associates, up from 756 at the end of Q3 2018 and 555 associates at the end of 2017. Our increase in headcount is reflective of the pace of investments we are making and will continue to make to capture the meaningful opportunity we see globally. Now I will quickly recap our full-year 2018 results. Our 2018 ASC 606 revenue was $253.6 million. And our 2018 ASC 606 gross margin was 92%. Our 2018 ASC 606 operating income was $49.1 million.

And our net income was $53.4 million. Net income per share was $0.82 based on $64.7 million non-GAAP weighted average diluted shares outstanding. Our 2018 ASC 605 revenue was $204.3 million, up 55% year-over-year. Our 2018 ASC 605 gross margin was 90%, an improvement compared to 85% for the full-year 2017. Our 2018 ASC 605 operating loss was $1.9 million, an improvement compared to $7.2 million operating loss in 2017. Our 2018 ASC 605 net loss was $1.4 million compared to a net loss of $6.4 million in 2017. Net loss per share was $0.02 in 2018 compared to a net loss per share of $0.11 in the prior year. This is based on $60.8 million and $56.3 million non-GAAP basic and diluted shares outstanding respectively. Now turning to guidance, we believe the need for our solutions globally is increasing. In 2019 and beyond, we expect to increase investments to drive our strong growth as we build a company for scale.

After today, we will no longer report results on an ASC 605 basis, so our guidance is, therefore, being provided on an ASC 606 basis. Also, please note that our guidance considers the following: average duration of our subscription terms remains constant at approximately two years. Approximately 35% to 40% of our TCV booked in-quarter will be recognized upfront will the remainder recognized ratably over time. And quarterly revenue seasonality is expected to be consistent with what we experienced in 2018. Under ASC 606, we recognize revenue at the latter of the date we close a deal or the subscription start date. We have a large percentage of contracts that expire on December 31st with renewal start dates of January 1st. This results in the upfront portion of these Q4 deals being recognized in revenue in Q1. This seasonality is evidence in our 2018 ASC 606 quarterly results.

For reference, we have provided more details on our historical 2018 results under ASC 606 in supplemental materials posted on the investor section of our website. For Q1 2019, we expect revenue in the range of $69 to $72 million representing year-over-year growth of approximately 37% to 43%. We expect our non-GAAP operating loss to be in the range of $5 million to $8 million and non-GAAP net loss per share basic and diluted of $0.08 to $0.13. This assumes $62 million non-GAAP weighted average shares outstanding basic and diluted.

For the full-year 2019, we expect revenue in the range of $345 million to $350 million representing year-over-year growth of approximately 36% to 38%. We expect our non-GAAP operating income to be in the range of $30 million to $35 million and non-GAAP net income per share of $0.36 to $0.42. This assumes $67 million non-GAAP weighted average shares outstanding on a fully diluted basis and an effective tax rate of 20%. To close, we had a strong finish to a great year and expect our positive momentum to continue in 2019. And with that, we'll open up the call for questions. Operator?

Questions and Answers:

Operator

Thank you. Ladies and Gentlemen, we will now be conducting our Q&A session. If you would like to ask a question, please push * 1 on your telephone keypad now. A confirmation tone will indicate your line is in the question queue. You may push * 2 if you'd like to remove your question from the queue. And for any participating using speaker equipment, it may be necessary to pick up your handset before pushing the * key. One moment while we pull for questions. Our first question comes from the line of a Tyler Radke from Citi. You are now live.

Tyler Radke -- Citi -- Analyst

Hey. Good afternoon. Thanks for taking my questions. I think we might all need some Alteryx to do this 606 to 605 --

Tyler Radke -- Citi -- Analyst

There you go. I was just curious if you could talk a little bit about the emerging products Connect and Promote, where you're seeing traction there, what's on the roadmap. And then maybe if you could, Dean, expand on some of the partnerships you've announced and the data science community with H20ai. And I believe you have one with DataRobot as well. Thank you.

Dean Stoecker -- Chairman and Chief Executive Officer

Sure. Thanks, Tyler. So, innovation is an important part of our go-to-market actions. We are never gonna sit still in this data, science, and analytics world. It's moving very fast. It's rather fluid. We made the acquisitions about a year and a half ago. We rolled out both products last year. We indicated early on that both Connect as that data cataloging service would be an instrumental part of our end to end platform, that first mile of analytics that would allow people to find the relevant data assets, the recording assets, visualization assets, models, and algorithms to help them accelerate their analytic journey. We're seeing good traction with Connect. I think that we're learning a lot about the demands that organizations have. We're finding out that data's more strewn across the organization than anyone ever imagined. So, we're doing a lot of work there to add to the number of connectors that we have or for metadata loading. We're working with customers to stand up servers in many of our large customers.

We're excited about the prospects for that first mile with Connect. For Promote, I think I may have indicated on a couple of calls ago that it was probably early on for Promote. I think people are now beginning to realize that the biggest risk to data science eking out the $10 to $15 trillion in value in enterprises around the world is if they weren't able to actually execute models in a governed, salable way. And so, Promote is actually doing very well. We have a number of customers who are using it to do next best action models for gym clubs, for example, doing IOT work on drilling rigs to predict when to shut rigs down. We see organizations using it for all kinds of machine learning algorithms. And so, that last mile of analytics is particularly important to us as well. And we're beginning to get more customers that have the entire end to end platform.

And I would expect that in quarters ahead, we'll be able to bring some of those use cases across the board from that first difficult mile to that prep in blending and analytic pipe letting that's being done in Designer all the way through promoting algorithm.

Tyler Radke -- Citi -- Analyst

Great. And a quick follow-up if I may. You talked about one of the deals that -- it sounded like you unseated a competitor there. I'm just curious if you've started to see a pickup in competitive displacements. Or are you displacing SAS? Or is it another data prep tool that you saw there?

Dean Stoecker -- Chairman and Chief Executive Officer

Well, I think we've indicated before that the primary competition we have is either people living in VLOOKUP in Excel for these citizen data scientists. Or it is last generation analytics platforms, typically SAS. And I'm a sales guy, myself, so I go on lots of customer calls. And I have had the last quarter a number of very, very large SAS customers ask us to help them forklift the last generation out and accelerate the use of Alteryx across their enterprise. So, rarely do we compete on a prep and blend standpoint. Ultimately, the data preparation and blending is the necessary evil to actually get them to meaningful outcomes around the entire spectrum of analytics. And as a result of those things, we either compete with Excel, bringing all the time back to the analyst who uses our product or accelerating the use of data science and analytics across a wide array of capabilities against staff, including the productionization of algorithm.

Tyler Radke -- Citi -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from the line of Mike Turits from Raymond James. You are now live.

Michael Turits -- Raymond James -- Analyst

Hi, guys. Michael Turits. Good evening. And by the way, very thorough and clear job on this thing. So, [inaudible] If we were to -- I know obviously you're not guiding for next year on a 605 basis. But is there anything that would have changed the growth rate. In other words, would a 605 or a 605 growth into next year have been any different than the 37% you guided to? And also, as far as that question, could you maybe bridge for us the relationship between that revenue growth in the high-30s versus the extremely strong billings growth that you had this quarter of 75?

Kevin Rubin -- Chief Financial Officer

Yeah. Thanks, Michael. So, for the first question, it's really hard to compare. Both the 605 and the 606 are just different mechanics. And we're not guiding forward under 605. So, it would be hard for me to draw that correlation other than to say if you just look at our 606 guidance, that should reflect the strength that we're seeing in the business. When you think about -- calculated billings is probably no longer a good measure for purposes of momentum because revenue and billings are now gonna be a little bit disconnected in the sense that we're gonna be booking revenue on TCV.

So, the total value of the subscription contract with our customers. And in some cases, if the contract is more than a year, it'll reflect more revenue than has actually been billed. So, when you see the disclosure in the Form 10-K that we expect to file later this week, I think you'll be able to get some of those mechanics answered around what debt has been unrecognized and use some of those dynamics to look at forward momentum.

Dean Stoecker -- Chairman and Chief Executive Officer

And I'll just add that it's important for everyone to recognize the fact that even with the transition to 606, nothing in the business changes. Our playbooks don't change. Our sales motions don't change. Our contracting vehicles don't change. So, you can expect the same kinds of performance out of us in the future.

Michael Turits -- Raymond James -- Analyst

Great. Thanks. And if I could just get one clarification, I think you mentioned, Kevin, that you would see gross margins increasing moderately. I believe you've been saying that they might see some pressure as you increase for Connect and Promote. So, is that a chance? Or is it just a 605/606 issue?

Kevin Rubin -- Chief Financial Officer

Yeah. I would characterize it as more a 605/606 phenomena. As evidenced by guidance, we are still investing aggressively after the opportunity in front of us. So, as we think about taking more revenue upfront, there still is the dynamic of us continuing to invest aggressively in the business.

Michael Turits -- Raymond James -- Analyst

Okay. Great. Thanks very much.

Operator

Thank you. Our next question comes from the line of Derrick Wood from Cowen and Company. You are now live.

Derrick Wood -- Cowen and Company -- Analyst

Great. And I think I'll echo my congratulations. Dean, so you mentioned in your prepared remarks increasing global demand of advanced analytics. You've historically talked about customers moving along the continuum of the analytics process starting on the descriptive side then moving into the spatial and predictive and cognitive. Is that still the typical land expand cycle? Or are you seeing customers starting on the analytics side? And if this evolves, do you see the need to evolve your go-to-market strategy?

Dean Stoecker -- Chairman and Chief Executive Officer

Well, we've been iterating our playbooks for the last 16 quarters since we rolled our land and expand models in Q1 of 2014. What we are seeing is more data science coming to the forefront, even on the land. So, it's probably important to have everyone recognize that analytics is a global phenomena. It knows no boundaries. And as a result, we're selling this horizontal platform in every vertical in almost every functional use case everywhere around the world. And what we're seeing ultimately that helps us to refine our sales motions, in particular, around the world is that we're seeing accelerated investments from a digital transformation front. And this is particularly happing with the large global 2,000. So, today, we have 27% of the global 2,000s as customers. We're seeing those land cycles happen a little bit bigger. We're seeing more data science orientation, even on the lands and much more so on the expansions. I think I indicated that 57% of our customers were now involved in some form of advanced analytic functions.

Our suspicion is that we'll report some new numbers in June of this year at our conference. It most likely will be considerably higher because, since June of last year, we've rolled out the Python tool with Jupiter Notebook support. And it's now one of the more popular tools inside the platform. We also see this growing appetite for advanced analytics around the world. And when we say advanced analytics, it's across a whole bunch of things. It's complex algorithms. It's predictive models. It's machine learning. Our heritage is facial analytics. And so, we continue to see a wide variety of use cases there. There's also this technology. But I think that a platform is a requirement to nail digital transformation, to no longer be in a whole bunch of best of breed plain solutions. We haven't changed the analytic experience. We've unified it and put the thrill back in problem solving. And we're starting to see this now emerge everywhere around the globe, as evidenced by our 96% growth last year in --

Dean Stoecker -- Chairman and Chief Executive Officer

And of course, brand awareness. We think we've done a great job at the art of marketing. Our brand is becoming more and more recognized around the world, in part because we've got many of the large global analytic consulting firms dropping breadcrumbs when they complete their service engagements. And that's particularly helpful in growing the brand globally.

Derrick Wood -- Cowen and Company -- Analyst

And that was actually gonna be my next question for either you, Dean, or Kevin. But your sales and marketing spend was up about 65% in 2018. That was a big acceleration. I know you guys don't give specific sales rep headcount. But can you give us a sense as to how much of the growth was around expanding sales capacity and how much is investing in other investments like marketing or channel or SEs or something like that?

Dean Stoecker -- Chairman and Chief Executive Officer

Yeah. Thanks. So, as we've talked in prior quarters, when we think about priority around investment, specifically in sales and marketing, it first starts with quota caring reps. And so, we look at where in the world do we have demand that would drive the need to put reps on the ground. And then obviously, as you put those professionals in foreign markets, you have to put infrastructure around them. So, there certainly is investment that is occurring outside of just the quota caring reps. But our priority in terms of where we're investing is first in terms of directly driving revenue.

Derrick Wood -- Cowen and Company -- Analyst

Great. All right. Congrats again.

Operator

Thank you. Our next question comes from the line of Brad Sills from Bank of America Merrill Lynch. You are now live.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Oh. Hey, guys. Thanks for taking my question. Wanted to ask about verticals. Obviously, Alteryx is the sweet of the berry horizontal solution. It applies to many different use cases and verticals. But obviously, you've seen some success here with healthcare and financials. Is there a plan to go after more vertically oriented go-to-market going forward? Are there other potentially low-hanging fruit there?

Dean Stoecker -- Chairman and Chief Executive Officer

There is. I think we put our toe into the water last year with both public sector and healthcare for very, perhaps, different reasons, the selling cycles and budgeting cycles from the government as well as the difficult data challenges and regulatory issues in healthcare. We also recognized that if we're gonna get more and more of our customers north of $100,000 to $500,000 mark to the $1 million mark -- we doubled our number of million-dollar accounts last year. In order to do that more consistently, it's gonna require domain expertise. And so, particularly in healthcare, we brought on a set of folks to help us prosecute analytics within the healthcare sector. We're contemplating even now the creation of vertical solutions. Nothing has been done yet. The market's still really ripe for the opportunities.

We have lots of great healthcare use cases. BioBridge Global, for example, is a non-profit in south Texas. And they're doing amazing things around everything from identifying ways to optimize collection for blood banks to cadaver parts and body tissues to save lives. And so, it's really an important sector that we're working in. A Seattle-based genetics company is using Alteryx to provide information that delivers RXI effects report back to FDA. And so, we're doing a lot of work in the space. A different selling motion just because of the vernacular within the space and the regulatory compliance requirements within the space. But you will most likely see us venture into things like tax and audit this year and perhaps some other verticals.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

That's great. Thanks, Dean. And then one more if I --

Dean Stoecker -- Chairman and Chief Executive Officer

But largely, we'll still focus on this horizontal platform because we're still uncovering use cases that we never imagined.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

That makes sense. That's great. Thanks. And then one more if I may on international. Obviously, you're seeing some real momentum there. Can you remind us of the go-to-market approach there? Did you partner first? Are you now hiring reps? You already have a presence in some of these countries. Maybe just a little bit of color on that. Thank you.

Dean Stoecker -- Chairman and Chief Executive Officer

Sure. We have lots of leading indicator data that helps us understand what markets are active, which ones are ready for those partners or direct sales folks. So, we start with a 14-day pretrial. We know where those trials come in. We know who activates the trial. We know what happens in the trial. And that leads us to partner opportunities. We lead with partners. Some markets are more inclined to leverage partners. Parts of Europe are more that way. Brazil is that way just based on the way business is conducted.

So, we typically start with partners. It's an easy way for us to understand the market, to start to get some brand awareness. And there's a moment in time. We won't describe it here. But we leverage Alteryx behind the scenes on our own data to actually tell us when we need to start hiring and putting feet on the ground to build out the ecosystem further as well as to help in the direct selling efforts. It's a fairly programmed approach. And this last year, it led us to adding or expanding in 12 offices around the world, including Dubai, Tokyo, and Paris. And there'll probably be more opportunities for us this year leveraging that approach.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

That's great. Thanks, Dean.

Operator

Thank you. Our next question comes from the line of Ittai Kidron from Oppenheimer & Co. You are now live.

Ittai Kidron -- Oppenheimer & Co. -- Analyst

Thanks. Hey, guys. Again, congrats. Great quarter execution. A couple from me. Dean, maybe you can talk about the -- how do you think about -- the business performance is clearly very good. But why don't you shed some light on some things that you were not maybe so happy about this quarter, the things that maybe you need to still double down on, that are not quite where you want them to be?

Dean Stoecker -- Chairman and Chief Executive Officer

Well, I'm generally pleased across the board with our team. I think that as we are scaling up very, very quickly, I think we've recognized the need to have more infrastructure to support the rabid growth of our headcount. Some of these things are difficult to see around corners. And I think we're doing a lot more pre-planning work for our budgetary cycle. But generally, I'm very pleased with things. I spend personally a lot of my time on building the corporate culture. It's likely to be the only thing that can stop us in this data science and analytic space. And I'm not unhappy with really anything. But we're never gonna be satisfied with our current state. And we see this $30 billion opportunity in front of us. We seem to be the only player with an end to end platform that's taking advantage of that greenfield opportunity. And we're gonna keep doubling down and improving in every part of the business as much as we can.

Ittai Kidron -- Oppenheimer -- Analyst

That's great. And then just a follow-up for you, Kevin. I just wanna make sure I understand the net revenue retention rate comment because there were two numbers here. I just wanna make sure. It's 129% based on 605. And I guess you're now calling it net dollar expansion rate on 132%. Am I getting that right?

Kevin Rubin -- Chief Financial Officer

Yes, you are. And the only difference is under 605, it was being computed on a revenue basis. And under 606, it's being computed on an ACB basis.

Ittai Kidron -- Oppenheimer -- Analyst

Okay. Well, then I wanna ask then about that 129% based on the 605. That figure has been very -- it's a very small downtick from the previous quarters which were at 131%. And it was very stable for quite some time. I guess my question is = if I remember correctly, the way it's calculated, that would actually suggest a much more significant decline in expansion rate, the in-quarter retention rate being more in the low-mid-120s if I remember correctly. And I'm saying that only because it was very stable, flattish pretty much for the four previous quarters. So, help me understand. Did anything materially change in quarter from a retention rate standpoint?

Kevin Rubin -- Chief Financial Officer

Yeah. So, I don't know that I share the view with respect to the in-quarter expansion rate. We have actually seen very stable and linear expansion within the business. The only thing I would comment is on a revenue basis, that rate is influenced based on when the deals close in the current period. And if those deals tend to close later in the quarter, you tend to get a little bit less recognition of revenue. And that is evident by looking at the 132% on an ACV basis where you get the benefit of deals in quarters. So, I think we're very, very happy with how expansion has been running. And I wouldn't draw the same corollary that you were trying to draw.

Ittai Kidron -- Oppenheimer -- Analyst

Very good. Okay. Thank you for clarifying that. Congrats.

Kevin Rubin -- Chief Financial Officer

I was just gonna say I think you'll also see -- in the deck that's on the investor page, you'll see that the two relative numbers for the last several quarters -- and you'll recognize them. Be very, very similar.

Operator

Thank you. Our next question comes from the line of Rishi Jaluria from DA Davidson. You are now live.

Hannah Rudoff -- DA Davidson -- Analyst

Hi, guys. This is actually Hannah Rudoff on for Rishi. Thanks for taking my questions today. It's nice to see the strong growth in international. And I was wondering if you could talk about the competitive environment it brought and if that's different from what you currently see today.

Kevin Rubin -- Chief Financial Officer

No. The competitive environment is pretty much the same globally. There might be a couple of exceptions where some of the smaller players in the analytic space exist and have their headquarters. But generally, Excel is the global standard for the citizen data scientists. And SAS tends to be the standard for the trained statistician. So, I would say that there's really very little to no difference in the competitive environment worldwide.

Hannah Rudoff -- DA Davidson -- Analyst

Okay. Thanks. And then secondly, if we could return to the verticalized sales team, I was wondering if there were any public sector deals you'd like to file in the quarter and if you had any impact on the government shutdown.

Kevin Rubin -- Chief Financial Officer

We saw no impact from the government shutdown other than when I went to Washington during the shutdown, I couldn't see a lot of people because their doors were closed. But we're actually doing quite well in both federal, state, and local. We have a number of -- we intend to continue to provide you with more information on our government sector successes at our users conference in June. We intend to have a government track so people will be able to hear firsthand what's happening in the federal government. But we're working with a number of agencies. And January actually kicked off the Department of Defense user group in Washington. We're beginning to get real good traction across various agencies. And we're excited that the government's beginning to modernize around this promise of data science and analytics and help spend the taxpayers' dollars more efficiently.

Hannah Rudoff -- DA Davidson -- Analyst

That's good to hear. Thanks for taking my questions.

Operator

Thank you. Our next question comes from the line of Bhavan Suri from William Blair. You are now live.

Bhavan Suri -- William Blair -- Analyst

Thanks. Congrats, guys. A couple questions I wanted to drill into you. Maybe first on the international side, Dean, when you look at the business as it grew in the US, it was all, initially, data prep with some advanced analysis. And that's how it started. When you look at the international business, is it trending the same way? Or are people actually adopting the advanced piece and then the fiscal piece of it upfront? You've seen really nice growth and stickiness in US. I'm wondering what that trajectory might look like from an expansionary business perspective internationally, given it's still pretty early there.

Dean Stoecker -- Chairman and Chief Executive Officer

Yeah. Great question, Bhavan. I don't think it actually is geographically different. I think that it is vertically different. We tend to see, for example, larger predictive use cases in everything from online banking -- so, think Multa, of all places for -- I'm sorry. Online gaming for Multa. Or think banking in the Nordic. So, there are some sectors that tend to lead more with data science. I think it's just a cultural thing. I think as people begin to put a drag and drop, click and run environment in front of more people, you'll start to see the entire continuum get prosecuted at almost every company and every country around the world.

Bhavan Suri -- William Blair -- Analyst

Got it. And then touching on the partners a little bit, slightly different question here. But two parts to it. 1) Obviously, pretty hefty sales and marketing spend. And you're obviously working with partners. But have you seen the switch where your salespeople don't need to go in with a partner as much? Or is it still early? And so, do the partners still need the handholding when they're dropping the breadcrumbs or speaking the CX level executives on that? And then the second part is with the technology partners, that's a consulting guide.

But on the technology side, are you seeing attach rates to guys like Snowflake and RedShip where they're saying, "Hey, to extract value out of what we're holding, this is a worthwhile tool"? So, think about the problem as the data warehouse is great at infrastructure. It holds data. And you can point stuff at it to pull it out. But the value you add is to actually extract that data and do something really powerful with it. Are you seeing any sort of attach rate that those conversations are happening? Or is it still pretty early for the data warehouse, data leg guys to be pushing onto it?

Dean Stoecker -- Chairman and Chief Executive Officer

Well, the first question about sales, our sales team engaging with partners -- remember, we have very low-single-digit services revenue. Most of our services that are attached to that revenue aren't even the traditional services that a partner would provide. We don't do any custom modeling. We don't do any custom integration. It's enablement that we charge for services in some cases. So, our team actually is very engaged with partners. I think we still have around 20% of our revenue coming from reseller partners. There's probably something like 40% of the revenue coming from resellers as well as influence from analytic consulting firms because we don't provide those modeling services or consulting engagement. It actually behooves us to bring those partners in because our customers -- they'll have businesses to run and day jobs to manage during this digital transformation. But actually, it's a win-win across the board. Regarding the tech relationship, yes.

It's pretty interesting. There's a whole bunch of -- I think we've said this before. We haven't changed that analytic experience. We've unified it. What we're seeing is all the people who have been involved in that legacy point solution based part of the analytic process, they're all beginning to recognize the need to be part of the ecosystem of a platform like ours. So, yes. We're actually seeing great traction with the Snowflake folks. There's no formal relationship with them. I think it's more field engagement on a rep by rep basis or customers asking who we might recommend. And we typically bring in two or three partners and let customers make the choice because we're agnostic to the persistence layer, to the visualization layer, to almost all the other touchpoints that customers have. So, we're in a good spot as -- I'll call it Switzerland within the space. And it makes for a frictionless channel program, to be honest with you.

Bhavan Suri -- William Blair -- Analyst

Got you. Okay. Thanks, guys. Congrats.

Operator

Thank you. Our next question comes from the line of Jack Andrews from Needham & Co. You are now live.

Jack Andrews -- Needham & Co. -- Analyst

Great. Good afternoon. Thanks for taking my question. I was wondering if you could drill down a bit on the dynamics regarding your large deal sizes. You mentioned very strong growth rates at the $500,000 and $1 million contract sizes. Are there any common characteristics that you're seeing in those particular deal sizes that perhaps you're learning some lessons that could be applied more broadly to your customer base?

Kevin Rubin -- Chief Financial Officer

Well, I think the critical dimension is that organizations, particularly the global 2,000 typically have chief data officers or proxies for CDOs in the mix. And when that happens, the deal sizes tend to -- well, they all tend to start the same. The land model or a mid-market company is the same as it is for a global 2,000. It's typically a $10,000 land, a couple of beats of designer. It happens still to this day. It's a 45-day sale cycle give or take a handful of days on either side of that. That hasn't changed at all. And so, we encourage our reps to run the same sales playbook regardless of industry, location size.

But with the CDOs in the large organizations where there is a big footprint of analysts who need to get more productive and PhDs who need to deploy algorithmic processes and be part of the collaboration for digital transformation, we actually see them expanding a bit faster and to a lot higher degree in terms of dollars simply because they have a big tranche of potential users. And their mantra, if you're the CDO of a big company, is to harness the networking effects of all the people in your organization, the data that you've got access to, both behind your firewall and out in the wild and the technology that can make all of it productive. And so, the bigger the company, the existence of that CDO leads to, well, in our case, a doubling of million-dollar accounts and the tripling of the number of accounts that are north of half a million dollars.

Jack Andrews -- Needham & Co. -- Analyst

Great. Well, appreciate the perspective.

Kevin Rubin -- Chief Financial Officer

Yeah. We don't see that changing in the future either. I think this data-driven world is just beginning to open up.

Jack Andrews -- Needham & Co. -- Analyst

Sure. Well, just as a follow-up, could I also ask regarding your latest thoughts on M&A, are there specific features that you might be eyeing that could be missing from your platform that you think could be added inorganically?

Kevin Rubin -- Chief Financial Officer

Sure. I think that we made three acquisitions just prior to the IPO to last year. And two of those were additions to the platform. Well, it is a very horizontal platform with a couple hundred tools and Python so that you can create an infinite number of new tool. We recognize that there's, in some cases, a race to get to market quicker. We see opportunities. In fact, Tyler had asked -- and I didn't actually answer the question. So, I'll answer it now. And that was around what we see in the marketplace with some of the partnerships that have been surfacing. We see two needs today. We see a need for advancing the skillset of the citizen data scientists because they actually need to understand what algorithms to choose and why to choose an algorithm as opposed to just a black box approach, just digging through a bunch of data apps to get an algorithm. So, they actually need to amplify their skills to be productive citizens for their companies. But we also see the PhDs who -- they know what algorithm to pick. They just don't wanna have to go build it.

And so, auto-modeling becomes an interesting thing. One of the partnerships that we've been working on is the auto-modeling partnership. And I was on-stage with the folks at H20 recently at H20 World talking about Alteryx and how their driverless AI would be executed within Alteryx just to help scientists out. We're also doing a lot of work with Azure ML. They've put some price pressure on the other competition in auto-modeling. They've rolled out Azure ML for free. And we intend to integrate so that our customers can experiment with machine learning in a cloud compute environment without having any costs associated with it. And this market's pretty fluid. We'll see who bubbles up and who doesn't. And we're prepared for it. We did our convertible to be ready for the availability of lots of these assets over the next couple years.

Jack Andrews -- Needham & Co. -- Analyst

Great. Well, appreciate it. Thanks for taking the questions.

Operator

Thank you. Our next question comes from the line of Pat Walravens from JMP Securities. You are now live.

Patrick Walravens -- JMP Securities -- Analyst

Oh, great. Thank you. Let me add my congratulations. So, an easy question and then maybe one that's a little harder. So, Kevin, we're good for sure on filing the 10-K later, right?

Kevin Rubin -- Chief Financial Officer

We do intend to file later this week.

Patrick Walravens -- JMP Securities -- Analyst

Okay. So, no issues that you know of.

Kevin Rubin -- Chief Financial Officer

Yeah. No. We intend to file this week.

Patrick Walravens -- JMP Securities -- Analyst

That is a long pause. Okay.

Kevin Rubin -- Chief Financial Officer

No, no, no. I didn't know that it required the same response. That's all. My bad.

Patrick Walravens -- JMP Securities -- Analyst

Okay. Yeah. Okay. And then listening to you talking about Alteryx For Good, it occurred to me -- and I don't know if there's a good answer to this. But is there a way -- or how do you think about preventing these tools from being used for bad? You see some of the protests from Microsoft and Google employees when their companies are involved in certain pilots. Is that something you've given any thought to? And is there any way to do it?

Dean Stoecker -- Chairman and Chief Executive Officer

Well, we can't protect people from doing nefarious things with our software. It's a very powerful platform. And given the right kind of data, people could probably use it for the wrong kinds of things. Obviously, we have, even internally, lots of policies around how we deal with data internally, GDPR compliance, etc. We've implemented a bunch of features in our platform to make it harder for people to do nefarious things. But these things can be done with Excel. And so, the cat's already out of the bag with software that allows you to address data in interesting ways. But we understand the challenges of things like privacy of data. And while we don't own any data and we don't host any data, we recognize that our platform is very powerful and that we do what we need to do to protect users.

Patrick Walravens -- JMP Securities -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Mark Murphy from JPMorgan. You are now live.

Pinjalim Bora -- JP Morgan -- Analyst

Well, thank you kindly, ladies and gentlemen. This is Pinjalim on behalf of Mark. Thank you for taking my questions. As you looked into 2019 and think about the product roadmap -- and 2019 and beyond, I guess -- is there any one or two places where your customers are pushing you toward, they want the innovations because to focus on a few things that they may not have? Do they, just broadly speaking?

Kevin Rubin -- Chief Financial Officer

Well, we have user groups. We have customer advisory boards. We have executive advisory boards. And so, we pay attention to what customers say to us. I will tell you that there's not really a common theme. It depends on what people are doing with the platform that bubbles their wants list higher up on the list itself. I would say the general themes from IT are more scalability in the platform, greater discovering and security. And so, we have a big roadmap around doing those kinds of things on the server. But I don't think there's any particular focus from customers. Our goal is to improve all of our development processes so that we have more time to innovate across the entire platform because we address such a broad swath of customers and use cases.

Pinjalim Bora -- JP Morgan -- Analyst

Okay. Got it. And Kevin, what I'm looking at is -- I guess there are a lot of numbers to look at. But when I'm looking at 2019 proforma operating margin under 606 which I think is apples to apples, seems like it's a big downtick from 2018 being 19% to 9% if my math is correct. Is that essentially just incremental investment? And is there a way to pri -- how are you prioritizing those investments across the marketing R&D and international?

Dean Stoecker -- Chairman and Chief Executive Officer

Sure. So, we have continued to talk on previous calls about continuing to accelerate hiring. As I mentioned I think to an earlier question, our priority in terms of how we think about investment is go-to-market first. And so, that is the combination of both domestic and international investment in terms of quota caring reps and infrastructure to support them. Next, in terms of how we think about investment, is R&D. And so, for 2019, implied in the guidance, is continued investment in that regard. I would also just comment that a lot of the heads that we brought in in 2019 were backend loaded. And so, you're seeing the full effects of those expenses in 2019 along with the 2019 hires as well.

Pinjalim Bora -- JP Morgan -- Analyst

Got it. That's all. Thank you.

Operator

Thank you. Ladies and gentlemen, as a reminder, if you'd like to ask any questions, please push * 1 on your telephone keypad now. Our next question comes from the line of Steve Koenig from Wedbush Securities. You are now live.

Steve Koenig -- Wedbush Securities -- Analyst

Okay. Great. Thanks, gentlemen, for including me on your call. And I look forward to following you for many quarters to come. My finance question just got answered. So, I just have one question here more about HR and [inaudible]. And so, the question here really is when it comes to attracting, acquiring, and retaining talent, both the high-profile executives that you try to hold onto as well as talent down in the ring, you're operating in a pretty competitive space. And especially as you move into things like Predictive, that talent really is pretty scarce. And you wanna build up your DNA there. How do you meet this challenge is really my question.

Kevin Rubin -- Chief Financial Officer

Yeah. That's a great question. With low unemployment, particularly in this analytics world, it becomes more difficult. We've actually done a lot of work around building up our versing teams knowing that we are gonna hire so many people this year. We have them in market as well because we've got this global phenomenon which is the benefit. We also have the challenge of having sourcing in APAC to LATAM to EMEA, not just the North American side. We've actually improved our recruiting process, our hiring process.

Most importantly, our global enablement team has been modernizing how we bring people on and how we continue to scale them up over time. I don't know if you've heard some of my previous calls that I have three KPIs now under 606 that's not net revenue retention. It's net expansion. But my other two are net promoter scores coming from customers and net promoter scores coming from employees. So, we take this seriously. Culture is an important part of it. And we're doing what we can to make sure that we find, hire, and retain the best.

Steve Koenig -- Wedbush Securities -- Analyst

Right. Well, thank you for that. And that's all I have.

Kevin Rubin -- Chief Financial Officer

Okay, folks. Thanks. Thanks again to everyone joining us on the call today. We continue on our journey to make Alteryx synonymous with analytics across the enterprise. As we head into 2019, we remain focused on building a business we believe will have continued strong revenue growth and long-term sustainable profitability. We look forward to updating you on our progress throughout the year. Thank you.

Operator

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


Duration: 62 minutes

Call participants:

Chris Lal -- Senior Vice President, General Counsel and Secretary

Dean Stoecker -- Chairman and Chief Executive Officer

Kevin Rubin -- Chief Financial Officer

Tyler Radke -- Citi -- Analyst

Michael Turits -- Raymond James -- Analyst

Derrick Wood -- Cowen and Company -- Analyst

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Ittai Kidron -- Oppenheimer & Co. -- Analyst

Hannah Rudoff -- DA Davidson -- Analyst

Bhavan Suri -- William Blair -- Analyst

Jack Andrews -- Needham & Co. -- Analyst

Patrick Walravens -- JMP Securities -- Analyst

Pinjalim Bora -- JP Morgan -- Analyst

Steve Koenig -- Wedbush Securities -- Analyst

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