ALTERYX (AYX) Q4 2017 Earnings Conference Call Transcript

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ALTERYX (NYSE: AYX) Q4 2017 Earnings Conference CallFeb. 21, 2018 5:00 p.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to Alterxy's Fourth-Quarter and Full-Year 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Chris Lal, general counsel.

Chris Lal -- General Counsel

Thank you, operator. Good afternoon and thank you for joining us today to review Alteryx's fourth-quarter and full-year 2017 financial results. With me on the call, today are Dean Stoecker, chairman and chief executive officer, and Kevin Rubin, chief financial officer. After the prepared remarks, we will open up the call for a question-and-answer session.

During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance but rather are subject to a variety of risks and uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statements. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and our website as well as the risks and other important factors discussed in today's earnings release.

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Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release in the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure.With that, I'd like to turn the call to our chief executive officer, Dean Stoecker. Dean?

Dean Stoecker -- Chairman and Chief Executive Officer

Thanks, Chris, and welcome, everyone, to our Q4 and full-year 2017 earnings call. Q4 was a very strong end to a fantastic 2017. For the fourth quarter, we reported revenue of $38.6 million, representing an increase of 55% over the prior-year period. Our non-GAAP operating income was $1 million for the fourth quarter, resulting in non-GAAP net income of $0.02 per diluted share.

For the full year 2017, revenue increased 53% and we generated $19 million in cash flow from operations. The playbook that we have outlined for you is working. We see increased demand for complete end-to-end analytics platform for the enterprise. Advanced and extensive data [Inaudible] and blending remains an important on-ramp for our customers, who are driving high-value analytic outcomes for their organization.

From simple diagnostic and descriptive analytics often ending up in visualization outputs, to sophisticated spatial analytics and advanced statistical, predictive, and machine-learning models, driving improved decision-making, we continue to address the expanding needs of both the 30 million data analysts worldwide with our code-free platform, as well as the sophisticated and complex work of trained data scientists, solving mission-critical challenges of enterprises in our code-friendly platform. During the fourth quarter, we landed a large number of new customers and continued to see our existing customers expand their Alteryx footprint. Continued execution of our expansion playbook has again resulted in a demonstrable increase in the percentage of customers that expand, combined with an increase in the expansion size. Our dollar-based net revenue retention rate remains very strong, above 130%, for the fifth consecutive quarter.

During the fourth quarter, we saw further evidence of the emergence of chief data officers and analytic leaders who are driving digital transformation in large enterprises. They're embracing our expanded platform and partnering with us to create an analytics culture that is core to their organization. We also continue to have success directly reaching the millions of analysts and statisticians around the world who use our products every day and seizing the opportunity for their expansion over time. We're pleased with the meaningful demand for Alteryx Connect, which has not been generally available for about six months.

We see interest from both new and existing customers who seek a social and collaborative metadata-management solution that helps organizations democratize curated data assets, chart dashboards, report to model, ultimately making the analytic journey and the timed insight much more efficient for any data worker. Firms like Oleon technology in Germany, PPF Banka in the Czech Republic, and a number of other companies have begun to deploy Connect to better allow their workers to find, understand, and leverage the data assets needed for their analytic processes, all in a governed and secure environment. By cataloging metadata from sources like Teradata, Oracle, SQL Server, Redshift, Tableau, Power VI, Salesforce, Excel spreadsheets, and more, Connect customers are harnessing the true value of disparate data needed to drive success in digital transformation. We're also seeing existing customers who use Alteryx designers and servers adopt Connect.

For example, the European Bank of Reconstruction, CB Richard Ellis, Close Brothers, and Brookson, a U.K.-based provider of accountancy services to self-employed professionals and micro businesses, all expanded their footprint of Alteryx to include Connect to advance their initiatives for improved enterprise data management, governance, and quality to help build out data communities for improving collaboration while delivering next-generation analytics of scale. To ensure a great customer experience, Brookson is laser-focused on providing accurate and timely bookkeeping for clients. Without Alteryx designers and servers, it was a challenge to get visibility across their wide array of systems, as they were relying on a high volume of SQL ferries and spreadsheet work, both very time-consuming and of course error-prone. Alteryx has been called a game-changer at Brookson, enabling them to automate processes and become more efficient.

Cross-departmental business users now utilize a simple app to access workloads scheduled to run automatically on Alteryx server and pull the data they need to ensure more accurate, on-demand financial management of accounts. As a result, customer satisfaction is improving, customer call volumes are going down, and the business is scaling faster and building more algorithmic solutions to meet customer needs. This led to a greater need for data governance and standardized processes. With Alteryx Connect, Brookson's community of analysts will be empowered to search, find, and reuse trusted and curated information contained in apps, workflows, and macros to avoid introducing inefficiencies or creating multiple versions of the truth.

Brookson sees Connect as a powerful and complementary solution to accelerate analytics and reporting and further stimulate business users to share and validate access and knowledge. Now that they have the Alteryx platform ingrained into business process, Brookson is expanding its business opportunities with the creation of a new start-up division to service the transaction-heavy hospitality industry. One of our core imperatives in 2017 was to deliver on an end-to-end platform to ensure Alteryx is the heartbeat of analytic enterprises around the globe. Alteryx Connect enables that difficult first mile of analytics and Alteryx Promote simplifies the last mile of analytics.

We announced Promote last fall and it will become available in the next few weeks. Promote supports the deployment and management of statistical, predictive, and machine-learning algorithms built in R or Python. According to the 2017 Data Science Survey conducted by Rexor Analytics, only 13% of statisticians say their models always get deployed. Promote solves this problem in just a few clicks without writing a single line of code.

While Alteryx Promote will be generally available later this quarter, it will be a few additional quarters before we see meaningful deployments globally. We are super excited to be making the last mile of analytics simpler for our customers so they can realize the true value of data science.During the fourth quarter, we added 338 net new customers, exiting Q4 with nearly 3,400 active customers, who represented nearly every industry segment and an ever-expanding set of use cases. Our go-to-market model continues to perform quite well, as we landed many leading global brands including Facebook, Netflix, PayPal, and Northrop Grumman. And, as indicated in previous calls, some new customers are beginning to land with larger deal sizes, particularly when the organization supports a strong data and analytics culture.

For example, SK Innovation is Korea's largest global energy and chemical company. The analytics team within the operations group is tasked with finding the optimal operating environment by analyzing installation conditions, the nature of crude oil to be used, petroleum sales specifications, inventory status, production levels, and shipping plans. Alteryx was chosen as the right solution to facilitate their intelligence platform construction project utilizing the Alteryx predictive modeling capabilities with R by creating a new best-practice set of tools on the Alteryx platform and developing and deploying analytic apps in Alteryx to democratize analytics for broader use. By implementing Alteryx, SK Innovation is working toward faster insights for optimal operation based on an integrative and responsive analytical environment.In addition to increasing our overall customer base in Q4, we have also expanded our geographic reach and conducted business in more than 70 countries around the world.

New customers in the fourth quarter outside of the U.S. include Telefonica and Claro in Brazil, Dubai Airport, the Ministry of Modernization in Argentina, Oman Arab Bank in Oman, and BNP Paribas in both Singapore and Switzerland. These additions contributed to Q4 international revenue growth of 81% over the same period last year. And for the full year of 2017, international revenue has accounted for 23% of our overall revenue mix.

Continuing to support our global growth is a key area of investment for us, and we believe Europe and Asia continue to represent largely untapped opportunities for Alteryx.As I previously mentioned, the expand side of our go-to-market model continues to perform well. In the fourth quarter, our dollar-based net revenue retention was 131%, in part fueled by a meaningful uptick in the percentage of customers expanding their use of our platform as well as a meaningful uptick in the size of their expansion. Organizations like Alaska Airlines, Avaya, and T. Rowe Price all expanded their footprint of Alteryx in the fourth quarter.

T. Rowe Price's U.S. intermediary business sells investment products to a diverse set of clients with unique needs, buying behaviors, and portfolio activity. The distribution intelligence and enablement team is responsible for taking the guesswork out of how sales and marketing prioritize in-person and digital client engagement effort.

With the help of Alteryx, the goal is to better understand client needs and wants so that they can deliver the right messages to the right individuals at the right time creating effectiveness and efficiency for both clients and T. Rowe Price associates. By developing a strategic-intelligence framework on the Alteryx platform, they're enabling on-demand, mobile-based, self-service analytics. Alteryx helps them pinpoint what clients are doing with T.

Rowe Price funds every day so sales and marketing can effectively identify and respond to potential client needs.2017 was a year of many successes for Alteryx and we believe we are just at the beginning of our journey. As we look ahead, I want to spend a moment or two on how we are aligned as an organization, around our 2018 strategic imperatives and why I am so confident in our future. First, we are acutely focused on building a business for meaningful growth and scale. We will do so with continued innovation that furthers both sophistication and ease-of-use of our platform.

This kind of innovation will enable us to address an even broader set of use cases while also bringing our addressable market even more within our reach. We will continue to make investments to expand our enterprise [Inaudible] organization on a global basis, driving our land-and-expand model more efficiently or reaching a diverse and growing cohort of customers. Combined with strong dollar-based net revenue retention rates, we are building a business we believe can deliver significant revenue growth with greater sales and marketing efficiency, a lower customer-acquisition cost payback period, and a clear pathway to significant sustainable operating performance and profitable growth. Second, we're putting more focus on activating our ecosystem to drive awareness and scale by adding new partners in both new and existing markets, by enabling existing partners on our end-to-end platform playbook, and by improving our engagement model with resellers, analytic consulting firms, and technology partners around the globe.

The full value of our platform will be apparent when we see customers and partners alike building, steering, even selling their own Alteryx tools, macros, workflows, apps, and APIs, further opening up a $29 billion global addressable market for code-free and code-friendly data science and analytics.Third, we continue to advance a data-analysis culture here at Alteryx. As an analytics software company, we are focused on leveraging our own technology to drive the analytics that lead to better decision-making. Every functional area within our company is focused on the KPIs related to performance and the data to improve decisions leading to sustainable success. We have seen our analytics matter in improving our [Inaudible]-payback period, improving our time to hire for open [Inaudible], delivering industry-leading net revenue retention, prosecuting phone-home data to improve our customer experiences, and much more.

And finally, all of our teams are focused on what we refer to as star execution. We are streamlining our operations and focusing on attracting and retaining top-tier talent. We are refining our associate on-boarding and continuous-learning program to tackle the challenges of rapid growth with an increasingly diverse workforce. We're also focused on creating career paths to help our associates grow and take on new challenges that will undoubtedly be available with our continued success as a growing global business.

Building an amazing corporate culture is critical to our long-term success, and it is an important element of star execution. one of the programs I am most proud of is our Alteryx for Good program. We encourage our employees to give back to programs that they are passionate about, volunteering their time and energy, and using the Alteryx platform to help enable social good and educational initiative. One such initiative is with the Department of Health and Human Services, who sponsored a code-a-thon to find ways to look at data differently, to help with the national opioid crisis.

We sent 20 employees, customers, and partners comprising four teams, to Washington, D.C., last December, using Alteryx to help crowdsource solutions for this terrible epidemic. We are grateful for the opportunity to be part of a solution to some of our world's most pressing problems.With that, for more color and commentary on Q4 and full-year financial, let me turn the call over to Kevin Rubin, our CFO. Kevin?

Kevin Rubin -- Chief Financial Officer

Thank you, Dean. I'm also very pleased to be speaking with you this afternoon. I will begin with the fourth-quarter and full-year results, followed by reviewing our first-quarter and full-year 2018 guidance. Let's start with the fourth-quarter results, which were highlighted by 55% revenue growth, positive non-GAAP operating income, and positive cash flow from operations.

Revenue was $38.6 million, an increase of 55% year over year. International revenue was $9.3 million for the quarter, an increase of 81% year over year and 24% of our Q4 revenue. In the quarter we added 338 net new customers and ended with 3,392 total customers. We delivered a strong Q4 dollar-based net revenue retention rate of 131%.

As Dean mentioned, this is our fifth consecutive quarter above 130%. Please keep in mind that our dollar-based net revenue retention rate can fluctuate a bit depending on the timing of when revenue and expansion occur. Before moving on, I would like to remind everyone that unless otherwise stated, I will be discussing non-GAAP results. Non-GAAP measures, including our guidance for the first quarter and full year 2018, excludes stock-based compensation; acquisition-related adjustments, including amortization of intangible assets, changes in fair value of contingent consideration, and related income tax adjustments; offering costs related to our follow-on public offering; and impairment of long-lived assets.

In addition, non-GAAP net income loss per share, basic and diluted, excludes the accretion of Series A redeemable, convertible, preferred stock, outstanding prior to our IPO, and non-GAAP weighted average shares used to compute non-GAAP net income loss per share reflects the conversion of preferred stock into common stock as if such conversion had occurred on January 1 of 2017. In periods of non-GAAP net income, we adjust non-GAAP weighted average diluted shares outstanding to include the effect of dilutive shares. A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in the earnings release we issued earlier today.Our gross margin was 85% in the fourth quarter of 2017, an improvement compared to 83% gross margin in the fourth quarter of 2016 and flat compared to last quarter. As we noted last quarter, with the launch of Connect and the upcoming launch of Promote, we expect these products will require some additional support services and slightly higher cost of services due to the sophistication of this offering.

Operating income for the fourth quarter of 2017 was $1 million, which equates to an operating margin of 3%. This was ahead of our guidance and is an improvement compared to an operating loss of $4.6 million or negative 18% operating margin in the fourth quarter of 2016. We continue to focus our sales and marketing investments in Q4 of 2017 on programs to drive awareness and adoption, and through the addition of quota-carrying salespeople. As Dean mentioned, we increased hiring globally in the fourth quarter, with many of these employees starting in January.

In fact, we have added over 60 people already this year. We also accelerated investments in Europe and Asia and will continue to do so going forward to drive international expansion. Net income for the fourth quarter was $1.4 million and net income per share was $0.02 based on 62.7 million non-GAAP weighted average diluted shares outstanding.Turning now to our GAAP balance sheet, as of December 31, 2017, we had cash, cash-equivalents, short-term and long-term investments of $194.1 million, compared with $182.6 million as of September 30, 2017. We generated $12.5 million of positive cash flow from operations in the quarter and $18.9 million for the full year 2017.

Finally, we ended the quarter with 555 employees, up from 424 employees at the end of the fourth quarter 2016.Now, I will quickly recap our full-year results. 2017 total GAAP revenue was $131.6 million, up 53% year over year. Our gross margin for 2017 was 85%, an improvement compared to 81% for the full year 2016. Operating loss was $7.2 million for the full year 2017, an improvement compared to $19.7 million in 2016.

Net loss was $6.4 million in 2017. This compares to a net loss of $21 million in 2016. Net loss per share was $0.11 in 2017, compared to $0.45 in the prior year. This is based on 56.3 million and 47.1 million non-GAAP weighted diluted shares outstanding respectively.Now let's review our guidance.

For the first quarter of 2018, we expect GAAP revenue in the range of $39 million to $40 million. We expect our non-GAAP operating loss to be in the range of $3.5 million to $4.5 million and non-GAAP net loss per share, basic and diluted, of $0.06 to $0.07. This assumes 60 million non-GAAP weighted average shares outstanding, basic and diluted. For the full year 2018, we expect GAAP revenue in the range of $176 million to $179 million, representing year-over-year growth of approximately 34% to 36%.

We expect our non-GAAP operating loss to be in the range of $15 million to $18 million and non-GAAP net loss per share, basic and diluted, of $0.24 to $0.29. This assumes 60.9 million non-GAAP weighted average shares outstanding, basic and diluted. Our guidance assumes that we will continue to generate meaningful revenue growth, taking advantage of the drivers of our business Dean just discussed. Our guidance also is that we make investments in our go-to-market initiatives, adding sales headcount both in the U.S.

and internationally, as well as supporting our marketing efforts and channel programs to drive growth in 2018 and beyond. We will also be investing to further strengthen and broaden our platform. Already this year we've added over 60 people, many of whom were hired in 2017 but had 2018 start dates. Our hiring traditionally is more weighted toward the first half of the year so we can get these people trained and benefit from their productivity as we move throughout the year.

In addition, I would like to remind you that we have a U.S. Inspire conference in June and our Q2 expenses are seasonally higher. We intend to continue to manage the business with a responsible balance of growth and profitability, and expect to generate positive cash flow from operations again in 2018.With that, we will open up the call for questions. Operator.

Questions and Answers:

Operator

At this time, we'll be conducting a question-and-answer session. If you would like to ask a question please, press *-1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *-2 if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * key. One moment please while we poll for questions.Our first question is from Bhavan Suri, William Blair. Please proceed with your question.

Bhavan Suri -- William Blair and Company -- Analyst

Hey, guys. Really nice results. So, congrats on all the numbers across the board. I guess I just wanted to touch quickly on two quick things.

One, if I look at your [Inaudible] expense, it's phenomenal, right? 130% has been very strong. And now I look at the guide of 35% growth and I look at sort of what your customers expand [Inaudible] and I obviously understand the lands are small, but they're getting a little bigger, the expansions happening a little faster. Help me unpack the revenue guide a little bit to understand if I've got sort of 30%, let's assume even if it slows down, growth in my existing customer base expanding, how we should think about sort of what that means for net new customer acquisition and sort of just how you guys are thinking through that part of how you built up the guide? I'd love to understand it a little more. Thank you.

Dean Stoecker -- Chairman and Chief Executive Officer

Bhavan, thanks for the question. I think we've talked on previous quarters about the lands being better-performing cohorts, that we expect our net retention numbers to be where they're at. There's no assurance that that will continue. While we haven't seen a flattening of our S-curve, we continue to see this $29 billion market opening up.

We're seeing some of the lands, like SP Innovations, happen at a larger scale. We're seeing a bigger percentage of our customers expand and having those expands larger. The long-term sustainability of that, we don't actually know at this point. What we do know is that our playbook, in both the land and the expand motions, are working around the globe.

So we'll continue to double down on making sure that that continues.

Bhavan Suri -- William Blair and Company -- Analyst

Got it, got it, and then a quick follow-up here just on the other side, which is, if you think about 2017, revenue grew 53%, OPEX well below that and obviously you've got some hires that are going to sort of start ramping in '18 here, but as you think about the time for those guys to ramp up, would love to understand that, and also just a little more clarity as you unpack OPEX, is it because of the ramp of the new sales hires that OPEX is growing just in line with [Inaudible] or marginally faster? Just wanted to understand those components, too, given sort of the billings numbers we've had in 2017.

Kevin Rubin -- Chief Financial Officer

I think what you're seeing from an OPEX perspective, I think we talked the last several quarters about accelerated investments in sales and marketing with the backdrop of obviously the opportunity in front of us, and we didn't have the full expense benefits of those hires that came in late in the year, and then the ones that we've mentioned in the prepared remarks that we've hired at the start. So you are seeing the full expense burden of those new heads in the model, which I think is consistent with the dialogue. [Inaudible] the 60 that we've hired thus far this year, 40 of them are in sales and marketing. So it covers off on some of the, what you might consider a light investment in sales and marketing in 2017.

Bhavan Suri -- William Blair and Company -- Analyst

Got it. That's helpful. Thanks, guys. I appreciate you taking my question.

Operator

Our next question comes from Brent Bradford with KeyBanc Capital Markets. Please proceed with your question.

Brent Bradford -- KeyBanc Capital Markets -- Analyst

Thanks for taking the question here, one for Dean and one for Kevin. Dean, let's start with you. Revenue growth here accelerated to 55% from 52% last quarter. We don't see that often in subscription models.

So what were some of the specific factors that drove the acceleration in the subscription revenue this quarter? Do you think there's this broader market awareness of this problem that you're addressing? Is it just improved sales, productivity, seasonality? Walk us through what were the specific factors that you think contributed to the upside in the quarter and the acceleration in the overall business.

Dean Stoecker -- Chairman and Chief Executive Officer

There's no one issue. There's a number of issues. I think part of it is the exposure we've gotten from going public. It's taken away some of the friction in the selling process.

The market clearly understands the value of higher-order analytic outcomes. And then we see some people moving on from first-generation visualization products to higher-order tools that do everything from spatial to predictive machine-learning. We're seeing that. We're also seeing the CDOs have an impact for larger organizations.

We did have a number of larger-scale lands, and whenever there is a CDO or a proxy for a CDO, we see expansions happening, landing a bit bigger and expanding a bit faster.

Brent Bradford -- KeyBanc Capital Markets -- Analyst

And CDO? Refresh me -- what does that stand for again?

Dean Stoecker -- Chairman and Chief Executive Officer

Chief data officer. Sometimes they will have different titles, but it might be a global analytics officer, a CIO acting as, I've even seen the CFOs acting as CDOs, but the key metric here is that these people have a need for heightening the awareness of data analysis [Inaudible] across their enterprise.

Brent Bradford -- KeyBanc Capital Markets -- Analyst

Got it. When you're selling to that CDO, it just basically resulting in larger lands? Certainly makes sense. Kevin, for you, this is more of a clarification question on the guide. As we think about the expense guide, this is all still ASC 605 and just can you clarify if that's the case? And then also, as a follow-up, could remind us on your sales-commission expenses? Are those expenses as incurred? Just kind of remind us, given we're all talking ASC 605 and 606, where you're at.

Kevin Rubin -- Chief Financial Officer

We are still 605. This is the old revenue standard. From a commission perspective, we do capitalize and amortize commissions under the guidance that exists before 606.

Brent Bradford -- KeyBanc Capital Markets -- Analyst

Got it. So, the operating net loss guidance for the full year, that would include basically expense commissions. OK. Thank you.

Kevin Rubin -- Chief Financial Officer

You're very welcome. Thank you.

Operator

Our next question comes from Michael Turits, Raymond James. Please proceed with your question.

Michael Turits -- Raymond James -- Analyst

Hey guys, Michael. Can you hear me OK? I got a little background noise on my end. Again, on the margin, obviously a great quarter, great guide on top line, bit below the Street on bottom line. Just want to make sure A) it's clear that that is an effective -- an increased push as far as hiring and investment and why, and was some of that even delayed out of this quarter and why? Because I think we were probably expecting that it would be something that was delayed last quarter and would have hit [Inaudible].

Dean Stoecker -- Chairman and Chief Executive Officer

Yeah, certainly, we did accelerate in hiring in the back half of last year. So there was -- there was additional hiring that occurred, specifically in sales and marketing in Q4. Some of that was fully burdened in the quarter and some of that you're going to be fully burdened in Q1, and is reflected in our guidance for Q1. So it is the nature and timing of when we're able to hire people and when they start, and it is a little bit challenge as you get to the end of the year.

A lot of top talent typically want to finish out their years at the organizations they're at and then we benefit from them coming into the new year.

Michael Turits -- Raymond James -- Analyst

And then it was a very strong billings quarter that was [Inaudible] as reported billing was calculated. Is there anything non-seasonal, anything that would have been unusual pull-forwards in this quarter to make us think that billings would be below seasonal in 1Q?

Dean Stoecker -- Chairman and Chief Executive Officer

There was certainly nothing unusual to the business in Q4 from the billings perspective. There was nothing that I would highlight that was out of the ordinary.

Michael Turits -- Raymond James -- Analyst

OK, great quarter. Thanks so much for taking my question.

Operator

Our next question comes from Jesse Hulsing with Goldman Sachs. Please proceed with your question.

Jesse Hulsing -- Goldman Sachs -- Analyst

I have a couple. First, you mentioned that some of the lands are getting bigger. I was wondering if you could quantify what the growth has been in initial ASPs over the last year or if they're growing? And when you look to '18, do you expect those to grow over the next year?

Dean Stoecker -- Chairman and Chief Executive Officer

We're certainly not going to guide to that. We have very little change in our average deal size. There are a few deals that are significantly larger on the lands but nothing to move the needle meaningfully. I think it's almost anecdotal evidence that the CDOs are having an impact on, not necessarily just land, but more importantly the size of the expansion.

We still tend to run our sales playbook on the land to be the $10,000, 45-day sales cycle, but when CDOs or proxies of such are in the mix, the expansion tends to happen faster, and I think that's why we're seeing net retention has remained very high.

Jesse Hulsing -- Goldman Sachs -- Analyst

Yeah, that makes sense. And then on Connect, it sounds like that's starting to get some meaningful traction. I understand that it's still fairly early, though, for that product. In a typical decent-sized customer, what's the uplift potential if they start to use Alteryx Connect? Is it 60% uplift, 100% uplift? Is it more or less? Just trying to get a sense of how big the incremental opportunity is there.

Dean Stoecker -- Chairman and Chief Executive Officer

It's still early to know what the actual metrics are around it, but the prerequisite is you have to have a server, so $45,000 for a server. There's $39,000 annual lift on Connect. We don't have enough data, we probably won't for a few more quarters to know exactly how many designers are in play. Yes, we had some new customers that landed with Connect because I think they started their democratization of analytics with lots of other tools and they're now seeing chaos and trying to rein in the chaos around all the assets that might lead to a more efficient journey.

But the whole play was really around extending the platform for that first mile of analytics when there's a large number of designer-users so that people can find the workload, the macros, the apps and APIs along with the curated data assets throughout the enterprise to begin that journey. So, it's early. We're confident that there'll be lands for people that will later expand with designers and servers, but the focus has been to get all of our sellers talking about the end-to-end analytics platform for the enterprise, but we still believe that the majority of Connect customers will be existing Alteryx users.

Jesse Hulsing -- Goldman Sachs -- Analyst

Yeah and, Dean, one [Inaudible] kind of in the weeds in the guide, but I'm curious: growth has been great this year, or in 2017, and profitability has also been very strong. I guess when you look forward, what are you most excited about in the business and what's surprises to the upside? Thank you.

Dean Stoecker -- Chairman and Chief Executive Officer

I think what all of us are excited about is the fact that as a platform, it's not one problem we're trying to solve. It's actually most any problem in enterprises today. So it's very horizontal. In almost every industry we landed customers and across 70 countries this past quarter.

Use cases continue to surprise us, which tells us there'll be continued success in our expansion model as more departments with new use cases to begin to sort of leverage Alteryx for driving analytic outcomes in organizations. I'm not sure there'll be a big surprise if you're looking for me to point to one. I think that for us, it's blocking and tackling. We have an amazing model built on a very powerful platform that the market is beginning to recognize as a leader in the self-service data science and analytics space.

We're seeing more of our customers move up that continuum from simple diagnostic reporting and visualization up to higher-order outcomes including the hope for, and maybe this is the "aha moment" with Promote coming out in a few weeks, we believe that data science might be dead without Promote. So we're going to provide the ability for people who are building machine-learning algorithms to instantly deploy those algorithmic processes inside of the Promote platform. We haven't announced pricing yet. As we get close to the release date, which will be this quarter, you'll see that pricing, but we're very hopeful that the last -- just like we're solving the first mile of analytics, we're very hopeful that the last mile of analytics will actually be the coup de grace for enterprises trying to get to digital transformation.

Jesse Hulsing -- Goldman Sachs -- Analyst

Thank you.

Operator

Our next question comes from Mark Murphy, J.P.Morgan. Please proceed with your question.

Albert Chi -- J.P.Morgan -- Analyst

How's it going? This is Albert Chi on for Mark Murphy. Congrats on the quarter. Just want to ask about your linkage with visualization in particular. You've mentioned that only about a 15% of Alteryx get out put to visualization tools.

Do you expect that number to increase or decrease or jump around and what use cases are starting to displace those viz outputs?

Dean Stoecker -- Chairman and Chief Executive Officer

Well, I don't think it's either/or. I think there are some use cases where visualizations are the perfect metaphor to be able to understand what's happening in your data, but the reality is there are higher-order outcomes where visualization as an endpoint doesn't provide any advantage. You have the example of next-best-action models that are created inside of Alteryx as machine-learning algorithms that if exposed to being instantiated by the Salesforce.com. So, in that particular case, you don't need visualization at all, and we see the world where machine learning will drive most of the activities for enterprises over the next few decades, and we believe that visualization will take a back seat.

In fact, we're seeing strong traction in our inline visual [Inaudible]. We talked about over the last couple of quarters. We continue to expand our visualization capabilities but we don't believe that it's just about being in the dashboard. We believe that it's about seeing all of your data through your workflow so that you understand what's happening in it, what you have to do to clean it and organize it, and then see what influence the model has but ultimately, the ultimate value in data and analytics is when you're able to push an algorithmic process to automation so that more people can be beneficiaries of those analytic processes.

Albert Chi -- J.P.Morgan -- Analyst

Got it. And I was wondering if we can get an update on the server and [Inaudible] designer mix. I think the last update we had was about 50-50 if I'm not mistaken, and I know you alluded to Connect and potentially Promote possibly leveling out those numbers in a different way. Can you talk about where that's trended?

Kevin Rubin -- Chief Financial Officer

I think what we've talked about historically has been designers as compared to enterprise deployments, which are inclusive of servers and ELAs as we define them, and that mix of roughly 50-50 has been very, very consistent. I think to Dean's earlier commentary, it is a bit too early to predict what we're going to see from Connect and Promote. I would imagine, as we continue to actively pursue net new logos at the same time we're going through expansion that those two products are simply going to facilitate similar distribution of business between designers and enterprise deployment.

Albert Chi -- J.P.Morgan -- Analyst

Great. Thank you.

Operator

Our next question comes from Greg McDowell, JMP Securities. Please proceed with your question.

Greg McDowell -- JMP Group -- Managing Director

Great. Thank you very much. One for you, Dean, and one for you, Kevin. First, Dean, I just wanted to dig a little deeper into how you're thinking about the Salesforce and the Salesforce organization in 2018 because as I peruse the Alteryx careers website, there's strong hiring across the board -- customer-success organization, inside sales, outside sales, channel sales, international opportunity.

So, I was just hoping, No. 1, we could hear about where a lot of the resources are going with respect to sales optimization and 2. maybe how you're balancing the domestic and commercial versus enterprise market versus the international markets. And then one follow-up for you, Kevin.

Dean Stoecker -- Chairman and Chief Executive Officer

One of our core imperatives this year is really around building the business for growth and scale, and it is across the board. So I'm not surprised that you see the range of [Inaudible] that we have open for sales. It's not just North American, it's not just in commercial or enterprise or strategic teams. It has to do with placing people in the market.

We had business in 70 countries, we see trial downloads from way more countries than that. We see partner inquiries from all over the world. So we're very careful and prescriptive about when and where we place people and in what numbers. I think in the last call we indicated that we were going to continue to invest in other markets, in [Inaudible], Paris -- we've launched our team there and continue to hire in Paris.

We continue to hire out in Munich. We have begun our hiring and have a few people on board in our Singapore office, and we continue to search for the beginning of our team in Tokyo. So, I think it's safe to say that we have a very prescriptive approach. We're looking at a bunch of data points to know how much, when, and where [Inaudible] in those marketplaces.

I think it's safe to say that we're actively pursuing these investments. As I said, we've hired 60 people this year, 67% of them are in sales and marketing. So, we see the opportunity in front of us.

Greg McDowell -- JMP Group -- Managing Director

That's helpful. Thanks, Dean. And then, for you real quick, Kevin, I just want understand philosophically the cash flow from ops and I know you intend to have positive operating cash flow in 2018 but just want to make sure I understand that No. 1, it probably won't be at the scale of 2017 just given the stepping the foot on the investment accelerator and No.

2, are we still at around the $4 million CAPEX run rate for the business? Thanks.

Kevin Rubin -- Chief Financial Officer

Yeah, sure. Thank you. So beyond guiding to cash flow profitability in 2018, we haven't provided more color. I think your thinking is reasonably consistent.

In terms of CAPEX, I would expect it to be a little bit higher in 2018 over some of the historical trends, just given some of the expansion we're doing throughout the world and largely just building out space and outfitting our professionals with the tools they need. So, it'll be a little bit higher this year in 2018 than we've seen previously.

Greg McDowell -- JMP Group -- Managing Director

Got it. Thanks.

Operator

As a reminder, we're now conducting a question-and-answer session. If you'd like to ask a question, please press *-1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *-2 if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing tghe * key. One moment, please, while we poll for questions. Our next question is from Derek Wood, Cowen and Company. Please proceed with your question.

Jim Fitzgerald -- Cowen and Company -- Analyst

Hi, this is Jim Fitzgerald, in for Derek. Thanks for taking the question. So, my first one is about the trade-off between growth and margin. How do you guys weigh that trade-off and what leverage are you looking at to help you drive more growth, particularly in your channel partnerships? And then maybe you can talk a little bit about who you see as the key strategic partners.

Dean Stoecker -- Chairman and Chief Executive Officer

So, let me address that first. Kevin may have some additional comments on it. So, one of the big initiatives for this year is around activating our ecosystem. So we intend to leverage partners a lot more in all of our activities, both resellers, and the expansion motion, because we can't be in all markets with the same girth.

We intend to work more closely with the strategic partners, having direct field engagement, hand-to-hand combat in the field with sellers from our key technology partners and really working with a very large tranche of users within SIs and analytic consulting firms around the world. They tend to leave breadcrumbs in lots of places, but we have not really activated the engagement model with them. So, we have a big focus this year on everything from recruiting and on-boarding and leveraging that ecosystem so that we can get more feet on the street in places where we don't have direct folks.

Kevin Rubin -- Chief Financial Officer

The only thing I would add in that regard is, I think what we've consistently said and still are operating under the same basis is, as long as we continue to see the attractive unit economics that we've enjoyed thus far, we will continue to be investing for growth as opposed to trying to optimize for profitability.

Jim Fitzgerald -- Cowen and Company -- Analyst

OK, great. And just the second one, how have you guys seen competitors evolve over the last year or two? It seems like a pretty fragmented market. So I'd be interested to hear your thoughts on that.

Dean Stoecker -- Chairman and Chief Executive Officer

I think they're still very fragmented. I think that there's still a number of players in the traditional [Inaudible] and analytics world, some of the folks who built their viz platforms on Hadoop may pivot to be on-premise with different abilities to ingest persistence layers. We don't see much change in the predictive world. A lot of the same players continue to exist.

We haven't seen many changes to any of the products. I think many are trying to go from being a product to a platform, so emulating maybe some of our success with the Alteryx platform. So, no real meaningful change. We still see a lot of people who have one capability only but not an end-to-end platform, and we see that as a huge [Inaudible] for us in the future.

Jim Fitzgerald -- Cowen and Company -- Analyst

OK. Thanks a lot. Nice quarter.

Operator

Our next question comes from Brad Sills, Bank of America. Please proceed with your question.

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

Oh, hey guys, thanks for taking my question. Just one on the success you're seeing in the enterprise expansion deal, you've seen that business growth over the last several quarters, has there been any change in kind of the user profile in terms of what they may or may not be running prior? In other words, is it primarily still the citizen-data scientists, additive-type user that's coming out of these expansion deals or are you starting to see replacement of more legacy analytics?

Dean Stoecker -- Chairman and Chief Executive Officer

I would say we're beginning to see the early stages of displacement, although we still go in with a net new approach. Our bottoms-up selling motion is a couple of [Inaudible] of designer in the six-week sale cycle. It can be a variety of use cases, so there's no compensation in vertical or use case. It tends to, and you can see in our net retention numbers, it tends to expand much quicker.

I will say that what we have seen is more predictive use cases start earlier in the land cycle. SK Innovation, for example, was a fairly large land in South Korea, largely built around predictive, and we're beginning to see, in fact we see that in the -- to one of the earlier questions, we see our phone-home data indicated that more and more of our customers and users are beginning to engage in predictive capabilities, and we just don't believe that's going to slow down anytime soon and as soon as we make the Promote product available, we're hoping that more and more people will start to deploy algorithmic processes because that's when the excitement begins, I think.

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

Great. Thanks, Dean. Then one more if I may. Just on the hiring dimension in the enterprise, is that primarily just for account managers, reps that are focused on specific accounts? Are you addressing the market more with verticals or use-case scenarios? Just curious where these [Inaudible].

Thank you.

Kevin Rubin -- Chief Financial Officer

I think we've been consistently communicating that we have an equal effort within our sales and marketing spend both for total customers and net new customer growth and expansion. The net new teams tend to be inside, telephonic-based and then the expansion teams are field-based. So the investment has been largely equal between those two organizations.

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

Great. Thanks, Kevin.

Operator

Ladies and gentlemen, we've reached the end of the question-and-answer session. Now I would like to turn the call back to Dean Stoecker for closing remarks.

Dean Stoecker -- Chairman and Chief Executive Officer

Thanks for all your questions today, folks. We've made significant progress on the initiatives we've outlined in previous calls, and we believe 2018 will be a continuation of our journey and an opportunity to drive toward continued strong revenue growth and long-term sustainable profitability. Before closing today's call, though, I'd like to give a big shout-out to all the dedicated associates here at Alteryx for their contributions to our success this past year and to all of our customers and partners for their continuous support and advocacy. Thanks for joining our call today and look forward to speaking with you again very soon.

Take care.

Operator

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

Duration: 53 minutes

Call Participants:

Chris Lal -- General Counsel

Dean Stoecker -- Chairman and Chief Executive Officer

Kevin Rubin -- Chief Financial Officer

Bhavan Suri -- William Blair and Company -- Analyst

Brent Bradford -- KeyBanc Capital Markets -- Analyst

Michael Turits -- Raymond James -- Analyst

Jesse Hulsing -- Goldman Sachs -- Analyst

Albert Chi -- J.P.Morgan -- Analyst

Greg McDowell -- JMP Group -- Managing Director

Jim Fitzgerald -- Cowen and Company -- Analyst

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

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