Alteryx, Inc. (NYSE: AYX) Q2 2020 earnings call dated Aug. 06, 2020
Corporate Participants:
Christopher M. Lal — Chief Legal Officer & Corporate Secretary
Dean A. Stoecker — Chairman and Chief Executive Officer
Kevin Rubin — Chief Financial Officer.
Analysts:
Tyler Radke — Citigroup — Analyst
Derrick Wood — Cowen and Company — Analyst
Ittai Kidron — Oppenheimer and Company Inc. — Analyst
Chris Merwin — Goldman Sachs — Analyst
Bradley Sills — Bank of America Merrill Lynch — Analyst
Khanh Ngo — Needham and Company — Analyst
Bhavan Suri — William Blair and Company — Analyst
Hannah Rudoff — D.A. Davidson — Analyst
Adam Bergere — J.P. Morgan — Analyst
Clarke Jeffries — Piper Sandler — Analyst
Joey Marincek — JMP Securities — Analyst
Presentation:
Operator
Greetings, and welcome to the Alteryx Second Quarter 2020 Earnings Conference Call. [Operator Instructions] A brief question-and-answer session will follow the formal presentation. [Operator Instructions].
It is now my pleasure to introduce your host, Chris Lal. Thank you. Mr. Lal, you may begin.
Christopher M. Lal — Chief Legal Officer & Corporate Secretary
Thank you, operator. Good afternoon, and thank you for joining us today to review Alteryx’s Second Quarter 2020 Financial Results. With me on the call today are Dean Stoecker, Chairman and Chief Executive Officer; and Kevin Rubin, Chief Financial Officer.
During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainty. Our actual results could differ materially from expectations reflected in any forward-looking statements. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC’s website and the Investor Relations section of our website as well as the risks and other important factors discussed in today’s earnings release.
Additionally, non-GAAP financial measures will be discussed on today’s conference call. A reconciliation of these measures to their most directly comparable GAAP financial measures can be found in today’s earnings release.
With that, I’d like to turn the call over to our Chief Executive Officer, Dean Stoecker. Dean?
Dean A. Stoecker — Chairman and Chief Executive Officer
Thanks, Chris, and thanks to everyone on the call for joining us today. We hope that everyone continues to be healthy and safe during this challenging time. Let me give you a brief overview of our Q2 results, followed by some detail on COVID’s impact on our go-to-market activity, then we’ll dive into our strategy for navigating the uncertainty that we expect will continue for some time.
Lastly, and perhaps most importantly, Q2 is a quarter for innovation, so I’ll bring you up-to-date on 3 meaningful additions to our product portfolio and how they are resonating with customers and advancing our role in the analytic process automation category. Kevin will then walk through our second quarter financial performance and provide our outlook for the third quarter and high-level commentary on what we’re expecting for the remainder of the year.
In Q2, we generated $96 million in revenue, up 17% year-over-year. While bookings were flat, we did exit the quarter with over 40% year-over-year growth in annual recurring revenue. Our Q2 gross margins remained strong at 91%, and we added 271 net new customers, including 6 of the Global 2000. We now have more than 6,700 customers around the world, including 37% of the Global 2000. Net expansion was 126% overall and 137% for the G2K. Finally, our balance sheet remains strong, with just under $1 billion of cash and equivalents. The global dislocation experienced as a result of the COVID pandemic, followed by shelter-in-place orders, altered our customers’ buying behaviors in Q2. We observed notable changes, such as higher levels of scrutiny on spending across all sectors, resulting in longer sales cycles, smaller deal sizes and less favorable linearity in the quarter. Based on what we see today, we do not anticipate a material improvement in business conditions during 2020.
At the same time, we believe that COVID is creating a longer-term tailwind for our business. Companies that lacked analytic rigor or those with data challenges sought out a quick ROI solution to help them adapt to rapidly changing business conditions. Many found their answer with Alteryx. We believe this dynamic provided a tailwind for new business during Q2 as we saw solid land activity in high-risk verticals, such as transportation, accommodations, foodservice and retail. We believe this illustrates that data and analytic capabilities are important, particularly in challenging times, although initial deal sizes were slightly smaller than they have been historically.
The industries and functional use cases that Alteryx addresses continue to be quite broad. We landed new customers, including Levi Strauss do Brasil Industria e Comercio Limited, Petrobas, Banco Santander and Omega in LatAm; Tassal Group Limited, Samsung Biologics, 5G Japan, Toyota Systems Corporation and China Construction Bank in APJ; Suncor Energy, Match Group, Snap, BlackLine and ServiceNow in North America; and Bayer AG, Mondelez, Statistics Center Abu Dhabi, Merck Chemicals, Qatar Airways, Southern Water Services and L’Oreal in EMEA.
While we see incredible ROI stories every quarter, in Q2, 2 stood out. The first example was like so many activities during this pandemic, delivered virtually in a webinar in early July. In the session, Neil Leibowitz, Vice President of Tax at SiriusXM, described the journey his tax team had in landing and expanding with the Alteryx APA platform. They began in Q3 of last year with an adoption license to create efficiencies in compliance and provision process, along with developing cash models for the complex task of federal and state apportionment. Neil stated that, “Alteryx was easier to use and more likely to be adopted by a larger audience.” Early use cases that drove hundreds of hours of savings led to a third expand in Q2 of this year to support shared services and accounting operations, with a focus on automation and its ROI.
The business case for analytic process automation was defined in 157 use cases with potential savings of more than 9,200 hours annually. In a period of just 90 days, they automated more than 40 use cases and contributing more than 2,500 hours of annual savings. Over their short 9-month journey of transformation, Neil indicated that COVID has successfully forced them to think more critically through a financial lens to justify technology investments. We are super excited to count SiriusXM as an Alteryx land and expand customer.
Additionally, when you save lives, ROI is immeasurable. With the assistance of our Riadh, Saudi Arabia partner, Quant Data & Analytics, we closed Saudi Arabia Ministry of Health primarily for a COVID-19 use case. The ministry manages local government hospital and medical activities. They were in a trial experience when COVID started. With the Alteryx APA platform, they were able to automate the collection of COVID test results from national labs, integrate it with hospital data and data on those who were quarantined in hotels. They then built network analysis workflows to understand the virus reproduction rate and track it’s spread. According to the customer, this helped them slow the spread of the virus and save lives of frontline health care workers and the population at large. The power of Alteryx gave them insights into how, when and where to respond to COVID-19 cases, and who to quarantine, what facilities to close and how to allocate hospital bed space. These use cases are 100% aligned to our company mission to unleash the thrill inherent in solving problems using our platform to fuel remarkable business and social outcomes.
Let’s turn to COVID’s impact on our Q2 expansion activity. As with new business, we saw expansion business sales cycle slow. Conversations with customers indicated that many sought to leverage their existing investments rather than undertake large new projects and consequently, postpone or downsize larger initiatives. To address this new normal of buying behavior, we increased our use of adoption licenses. An adoption license is a short term contract, generally 6 months, that allows the customer to effectively take Alteryx for an extended test drive to prove value and gauge demand before they make a longer term commitment. Adoption licenses has allow us to engage with broader audiences at larger enterprise for an extended period of time to help prove out digital transformation initiatives. It is also a way for us to continue to engage with and support our customers in these trying times. It also acts as an insurance policy of sorts for our customers.
In Q2, adoption agreements increased by over 60% year-over-year and more than 100% sequentially. As you heard in the SiriusXM story, these have been a successful sales strategy for us since we initiated our land and expand model. Historically, upon expiration of the adoption agreement, we see a large number convert to departmental or enterprise license agreements, accelerating expansion velocity. While we cannot predict when macro conditions will improve, we can and will continue to support our customers as they navigate these difficult times.
Turning to retention. As we discussed on our Q1 call, we once again experienced high customer churn, particularly in smaller organizations in highly impacted verticals and regions mostly impacted by COVID. dollar-based churn was predominantly seen in downsized contracts as customers brace themselves for potential economic impacts related to the pandemic and rationalized existing investments. As has been the case in prior quarters, most of the customer churn was driven by organizations with only a single designer seat that had not yet expanded. It is also important to note that customer churn continued to be concentrated in the commercial sector, which we define as less than $100 million in annual revenue regardless of the vertical.
Turning to our ecosystem. On the heels of announcing our global elite relationship with PwC in Q1, in Q2, we broadened our partner network by adding 2 strong technology partners in Adobe and UiPath. We believe that having an open and vibrant ecosystem is an important element to bringing our analytic process automation vision to life as the market for data, analytics and automation continues to converge.
During Q2, Alteryx delivered significant innovation to the market with the launch of Intelligence Suite, Alteryx Analytics Hub and our next-generation AMP engine. Intelligence Suite brings to market a powerful designer add-on bundle of assisted modeling, which enables analysts in the line of business to build robust machine learning and advanced analytic models in a code-free environment through a guided step-by-step process. Intelligence Suite’s text mining and natural language processing building blocks also deliver improved capabilities for working with semi-structured and unstructured data through OCR recognition, sentiment analysis and topic modeling as a result.
Early feedback from customers has been positive, and early customers include Siemens Gas and Power; Bell Canada; QDOBA Restaurant Corporation; Mars, Incorporated; General Dynamics; and the U.S. Navy’s Naval Research Lab. Alteryx Analytics Hub sets the stage for the next-generation of analytic process automation by up-leveling automation, collaboration and data discovery in a secure and governed way, allowing everyone across the entire enterprise to benefit from actionable data and analytics. Hub blurs the lines between the design time experience in Designer and run time automation in Server, and provides an affordable path for smaller work teams to leverage the benefits of automation. In future releases, we intend to see greater integration with some of the capabilities of Connect and Promote, auto modeling capabilities currently being developed and a potential marketplace for third parties to monetize assets to the growing audience of Alteryx users around the world.
We also introduced our new Alteryx Multi-threaded Processing engine, or AMP, allowing customers to execute workflows simultaneously, resulting in processing efficiency on larger data sets with complex analytical processes. While not a stand-alone SKU, the AMP engine is shipped with every Designer, Server and Analytics Hub, and we are delighted to see impressive efficiency gains in analytic processing. Alteryx is proud and humbled to have been named a customer’s choice recipient in the Gartner Peer Insights for data science and machine learning platforms for the third consecutive year.
Let me now give you an update on how Alteryx is adjusting to operating in today’s fluid environment. We continue to operate primarily in a work-from-home environment, although we have started to reopen select offices in regions where it’s permitted and where it is safe to do so. However, in regions where offices have reopened, we will not require associates to return to work if they are not comfortable doing so, and will continue to support remote work in the near term. The health and safety of our associates is our primary objective. While overall, Alteryx team adapted well to working at home, we did struggle to effectively onboard and enable some of our new hires, particularly new sales reps, learning our systems, playbooks and new product offerings. Many of these new sales reps had very limited, if any, time on-site at one of our offices, and haven’t ramped up as quickly as historical cohorts.
To address this specific challenge and restore overall sales and marketing efficiency to historical levels, we are or have made the following operational adjustments: we’re improving sales enablement and further refining our learning and development capabilities to help reps ramp-up at the same levels they have historically. We have adopted a new learning platform, adjusted sales playbooks to account for our additional offerings and are creating enhanced content to foster learning in a fully remote environment. While improving sales enablement, we are also enhancing our engagement with global alliances and tech partners to expand our sales footprint. With the negative financial realities taking hold in many verticals, mid-market and SMB organizations, we are reallocating some sales resources. For example, we have reassigned some of our reps from the commercial teams to our enterprise and customer success teams to help support larger expansion and customer renewal activity. We will continue to realign and enhance marketing, community and support initiatives to digital experiences to reflect today’s reality.
As we discussed with you last quarter, we launched a virtual support center, which continues to see strong engagement levels, and our community site continues to be a great resource for customers to connect with each other, while in-person opportunities to do so are limited. Maintaining profitability is an important strategic objective, so we continue to closely monitor and, if necessary, we’ll adjust operating expenses to appropriately align to our operating plan. We are monitoring key performance indicators, such as pipeline creation and conversion rates, average deal sizes, sales cycles, renewal rates and overall discounting to ensure that our top and bottom line performance is aligned. I am proud of the work our associates have done in the most uncertain of times, but what I am most proud of this quarter is the work that our team has done on our ADAPT program. As we discussed with you last quarter, ADAPT, our advancing data science and analytics potential together program, is a way to give back to the global analytics community and help upskill those negatively impacted by the COVID-19 crisis.
Since launching in early May, we have welcomed almost 10,000 participants from 125 countries into the program. We are excited to bring more people into the analytics fold and provide them with the resources to help them be part of today’s data-driven economy. With hundreds of individuals becoming certified in our platform and obtaining their nanodegrees in business analytics on the Udacity learning system, we are doing our part to help future-proof their careers.
In closing, despite the continued uncertainty that I believe will remain for the foreseeable future, we remain steadfast in our belief that Alteryx is well positioned to execute on our vision for analytic process automation. We are confident that we will emerge from this crisis stronger than ever and in a solid position to drive higher levels of growth and margin expansion.
With that, let me turn the call over to Kevin to discuss our Q2 financial performance and our outlook for Q3 as well as some commentary for the remainder of the year. Kevin?
Kevin Rubin — Chief Financial Officer.
Thank you, Dean. Before jumping into the numbers, let me provide you some additional color on the business impacts we experience in Q2 as a result of the current pandemic. Last quarter, we highlighted that new business activity in April was consistent with the levels in April 2019. This gave us some degree of confidence that customers were reengaging after the abrupt slowdown we saw at the end of March. However, as we have typical software linearity in our business, meaning the majority of our bookings are generally concentrated in the back half of the quarter, changes in customer buying behavior did not become apparent to us until later in the quarter. These changes included elongated sales cycles resulting from customers having more robust approval processes and higher levels of scrutiny, smaller deal sizes and less favorable linearity with some transactions slipping into Q3.
During the quarter, we added 271 net new customers, and now have 6,714 customers, including 737 or 37% of the Global 2000. Within our new logos for the quarter, we landed new customers in high and medium risk verticals, demonstrating that even in these challenging times, analytics remains very important. The changes in customer buying behavior were most evident in our expansion business, particularly for transactions that were not attached to a renewal. Along with these trends, sales and marketing productivity declined for the quarter, and we saw a moderate increase in our churn rates globally. As Dean mentioned, there are a number of actions we are undertaking in the near-term to drive efficiency in our business. I will lay these out — these actions out by strategic investment priority. First, sales and marketing.
As we discussed previously, our primary investment area has been expanding our global go-to-market footprint. Q2 was a challenging customer buying environment, and as a result, we are focusing on improving sales rep training and enablement, reevaluating our partner engagement, redeploying sales resources to focus on higher-value opportunities and adjusting marketing spend to reflect the digital reality we are living in today. We will continue to monitor key activity levels affecting unit economics, including our trial activity and conversion, pipeline creation, sales cycles, average deal sizes, contract duration, renewal rates and overall discounting levels to inform us of how or if we’ll continue to invest during the remainder of the year. Our second investment area is product development. We expect to continue to invest in our product development efforts to advance our product road map in support of APA and digital transformation. We believe being able to continue to advance our product road map despite the short-term challenges will better position us when we emerge from the pandemic and current economic dislocation.
Our third investment area is back office, support and infrastructure. We are critically evaluating investments in this area in direct response to our go-to-market dynamics. We will closely monitor momentum in our go-to-market and make future investments in this area as deemed necessary. In the near term, we are focused on ensuring these teams are operating efficiently in support of our global teams.
As we navigate the remainder of the year, we intend to balance future growth and profitability appropriately until we begin to see renewed strength in our go to market. We have historically demonstrated the financial discipline of balancing investment for growth and profitability, and we intend to manage our cost structure based on top line dynamics.
Now turning back to the numbers. Revenue was $96.2 million, an increase of 17% year-over-year. U.S. revenue was $66 million, an increase of 14% year-over-year, while international revenue was $30.2 million, an increase of 25% year-over-year. Growth in North America was negatively impacted by lower expansion activity, specifically within our enterprise and global strategic customer teams. Internationally, almost most regions — although most regions did experience weakness, we saw strength in the Middle East and Asia. Overall, average contract duration for Q2 was approximately 2 years, consistent with prior periods. Net expansion for Q2 was 126%, and net expansion for the Global 2000 was 137%. We ended the quarter with over $430 million of ARR, or annual recurring revenue, which was up over 40% year-over-year. Going forward, we intend to provide ARR as an additional operating measure to help investors assess the health of our business.
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 Q2 margin was 91%, consistent with Q2 2019. Our Q2 operating expenses were $88 million compared to $73.4 million in the same period last year. The increase in expenses is primarily attributable to increases in our overall headcount levels. Our Q2 operating loss was effectively breakeven. Net income was $1.7 million or $0.02 per share-based on 69.6 million non-GAAP fully diluted weighted average shares outstanding.
Turning now to the GAAP balance sheet and statement of cash flows. In the second quarter, we used $13.4 million in cash flow from operations, primarily related to timing of payments related to canceled events and other working capital needs. Year-to-date, we have generated $6.6 million of positive operating cash flow, and as of June 30, had $974.4 million in cash, cash equivalents, short-term and long-term investments. We ended the quarter with 1,515 associates, up from 1,478 associates at the end of Q1 2020, and 1,076 associates at the end of Q2 2019.
Now turning to our outlook. The current macroeconomic environment continues to be in the state of turmoil, and we expect conditions will remain fluid. Taking this into account, we are providing revenue, operating income and EPS guidance for Q3, consistent with historical patterns. We are also providing a full year outlook for revenue and ARR. We emphasize that our guidance is subject to various important risks and cautionary factors referenced in our call today and in today’s earnings release. Our guidance considers the following: the overall macroeconomic environment continues to be as challenging as we experienced in Q2 2020; an expanded guidance range to account for increased uncertainty of new business, timing of renewals, variability in contract duration and slightly higher churn rates; the average duration of our subscription agreements will be approximately 2 years, however, there may be headwinds relative to contract duration as compared to the second half of 2019; approximately 35% to 40% of our TCV booked in the quarter will be recognized upfront with the remainder recognized ratably over the time of the contract; for Q3, approximately 70% of our revenue will be recognized from deferred revenue and scheduled multiyear billings, approximately 15% is expected from contract renewals and the remainder is expected to come from net new business closed in the quarter.
We have historically seen 80% to 85% of in-period bookings coming from existing customers, which is generally in line with what we saw in the first half of 2020. For Q3 2020, we expect GAAP revenue in the range of $111 million to $115 million, representing year-over-year growth of approximately 7% to 11%. We expect our non-GAAP operating income to be in the range of $8 million to $12 million, and non-GAAP net income per fully diluted share of $0.09 to $0.14. This assumes 71 million non-GAAP weighted average fully diluted shares outstanding. Again, assuming no major changes to macro conditions, we believe that revenue for the full year 2020 will be approximately $460 million to $465 million, or a year-over-year increase of approximately 11%. Additionally, we expect to exit 2020 with approximately $500 million of ARR, or annual recurring revenue, which translates into over 30% year-over-year growth.
In summary, while we are in unprecedented times, we believe that Alteryx remains well positioned given our strong market, product market fit, significant market opportunity given the low penetration into our total addressable market, powerful business model and strong financial position with nearly $1 billion of cash on the balance sheet.
Finally, I would also like to extend my special thanks to all of the Alteryx associates across the globe who have adapted to our work-from-home reality and have continued to delight our customers each and every day in these uncertain times.
And with that, we’ll open up the call to questions. Operator?
Questions and Answers:
Operator
Thank you. [Operator instructions] Our first question comes from Tyler Radke with Citi. Please proceed with your question.
Tyler Radke — Citigroup — Analyst
So as you know between new business duration and churn. I guess just on duration. I know, Kevin, you said duration was about two years, but just curious if there was any kind of year-over-year headwind? I know you said you may expect that a little bit in the second half of the year, because as you mentioned, bookings were flat year-over year, but I just wanted to make sure whether there is any duration impact on the Q2 numbers that help drive the flat bookings. And I think billings grew much faster than that. So just trying to understand kind of the discrepancy there?
Kevin Rubin — Chief Financial Officer.
Tyler, thank you. We did not hear the first part of the question. But if the end of it, if you’re just asking for the contract duration dynamics relative to kind of Q2 and the first half, I’m happy to answer that. But I want to make sure I’m answering the right question?
Tyler Radke — Citigroup — Analyst
Yes. It was mainly just are you seeing — was there a duration headwind if I look at Q2 ’20 versus Q2 19? Because your bookings look like they were flat year-over year, but it looked like billings grew around 25%. So just wanted to understand if there was a duration headwind on the bookings?
Kevin Rubin — Chief Financial Officer.
Yes. No. Thanks for clarifying. We did not see any material change in contract duration as it related to Q2 versus Q2. And what we experienced with billings was really a timing effect that came into Q2.
Tyler Radke — Citigroup — Analyst
Okay. And then, I guess just a question maybe for Dean. I think as you look at the broad customer base of Alteryx, and there’s tons and tons of different use cases out there from data prep to advanced analytics to kind of automation within finance departments, and I’m curious if you’ve observed if any of those use cases are stickier? I would think some of the work you’re doing with PwC in terms of modernizing tax and finance. Obviously, those departments still have to do their taxes and whatnot in this environment. So just kind of curious if there’s any kind of discrepancy between business trends based on the use case?
Dean A. Stoecker — Chairman and Chief Executive Officer
No. I don’t think there’s really been any major sea change in the use of Alteryx for any functional area. I would say that we did see a bit more scenario planning with Alteryx in FP&A teams in Q2, and probably we’ll continue to see that in Q3. I think that for the last six months or so, more and more activity is around automating the office of finance, very similar to what you saw in the SiriusXM use case.
The partnerships with folks like PwC bring us subject matter expertise for sure. Most of the churn that we saw in the business was actually commercial accounts that either couldn’t expand or just didn’t have TAM available. And so I think what we saw in the quarter was just elongated sales cycles and smaller average deal sizes for the most part, and that’s why we kicked in with our adoption licenses. So the use cases remain the same.
The selling cycle changed a bit. The vehicle wasn’t a new one. That’s been time-tested with the adoption licenses, and so we continue to be pretty excited about what’s happening in the space. I think that a lot of the large organizations have paused major transformation efforts. We saw a lot more mini and micro transformation efforts so that folks in the CXO office can continue to march down this journey to digital transformation success.
Tyler Radke — Citigroup — Analyst
If I could just sneak one clarification. When you talked about some of these license agreements, where maybe you give an unlimited amount of users for a period of time, just kind of trial and see demand. When do those periods — when does that typically expire? Is it year-end? Does that kind of align with your Q4? I just wanted to clarify that.
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, we have different ilks. So we control the three dials that matter to us and to the customers. And they are the number of seats and servers we don’t do unlimited, we have a price point for that use and the duration. And sometimes, depending on the maturity or the culture the organization has or the vision that they have for transformation, it may be three months, it may be six months, it might be nine months.
What we do know is that we’ve had very good conversion success historically with this. We saw a number of new business adds this last quarter with adoption licenses, which typically is not the case. So we’re helping out customers who don’t want to give up on their journey but have slowed down the velocity of that journey. And coming out of the adoption period, tend to lead to much bigger expansion. We’re not sure if that will be the case this time, if they’ll get pushed from Q3 to Q4 from Q4 to Q1. We do know the vehicle works.
Tyler Radke — Citigroup — Analyst
Thank you.
Operator
Our next question comes from Derrick Wood with Cowen and Company. Please proceed with your question.
Derrick Wood — Cowen and Company — Analyst
Kevin, you gave ARR, that’s helpful. You gave it last quarter. I think you just gave a number last quarter, but now you’re giving a number and growth. Can you tell us what — how ARR grew in Q1 and what growth was in 2019? So we have those numbers.
Kevin Rubin — Chief Financial Officer.
Yes. Thanks, Derrick. It is a metric that we’ve kind of drifted out at various different milestones over the years. And more recently, we did provide it in both Q1 and now going forward. We aren’t providing what those interim periods are. But I think there’s enough information you can kind of interpolate to come up with your own estimate.
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, I think it’s important, Derrick, to remember that we guided to 30% growth on ARR to the end of the year. So a healthy, strong, growing business in a very large space for data science and analytics. And today, we’re the only publicly traded company that focuses in on this space with a code-free, code-friendly platform to help people see success in digital transformation.
Derrick Wood — Cowen and Company — Analyst
Yes. And Dean, I wanted to parse this a little bit more in terms of what you guys are seeing because there’s — we’ve seen other software companies weather the storm a bit better through Q2, particularly in the enterprise. And clearly, you’ve got some more headwinds, and it caught you by surprise going in the back part of the quarter. So I mean, I guess, if you look at internal and external factors.
On the external, is there something that, with respect to your end markets, that may be facing greater budget pressure or maybe there’s a change competitively? Or internal, was there some development where maybe there were seats oversold and there’s more absorption needed to be taking now? Maybe you could just kind of walk us through a little bit more thoughts on internal versus external impacts.
Dean A. Stoecker — Chairman and Chief Executive Officer
Yes. No, I think it was a tale of two quarters. It was the things we can’t control, COVID, and it’s spread and its impact on businesses. And then the things we can control. And so what we did see — it was almost like three quarters in 1 in Q2 with April being very different than May and June. So obviously, there was an air pocket that had a big blip in it for April. We didn’t see actually much improvement, although we anticipated some improvement in May. So linearity wasn’t necessarily on our side.
So we actually took control of the things that we can take control of. We, for example, rationalize our marketing spend. Almost everything has gone to a virtual reality from moving everything, all the excitement from our INSPIRE Conference, which drives people excited about the platform to buy. We’ve moved all that excitement to the Community.
We’ve seen a 60% — 68% growth in the monthly active users of Community, we’ve seen an 82% engagement — engaged users on the Community. We launched our Virtual Solutions Center, where 1,000 customers continue to advance their learning and understanding and the value that our platform brings. We saw the Discovery program launch, which is a — and these were launched actually pre-COVID. Almost all these activities began pre-COVID, a 30-day trial program that’s kind of a guided discovery effort to get to value quickly.
We held 235 virtual webinars, including a live stream for the APA event. We’ve iterated a bunch of things in the sales organization, allocating people to the customer success team and the enterprise expansion team. So there’s a whole bunch of things that we can’t change. But what we do know is that the conversation at the strategic level continue to be very strong.
We’re quite bullish on what’s going to happen as people start to emerge from COVID. And frankly, I think that the use of adoption licenses helps us in the long run.
Derrick Wood — Cowen and Company — Analyst
If I could squeeze one more on that last point. Can you give us a sense of the mix of adoption license percentage of total transactions or some metric in Q2 and how you see that moving into the second half?
Dean A. Stoecker — Chairman and Chief Executive Officer
I can’t give you that. I think what’s telling about it is that we had more than a 60% growth in the use of adoption licenses over same period last year. And I think the most telling is the 100% increase in adoption licenses in a mostly pre-COVID quarter in Q1 to a COVID world in Q2. So it was a quick change to the model.
As soon as we recognized that there were some things we couldn’t control, organizations were standing up new teams to scrutinize every kind of a spend. They were delaying cycles. They were inserting as much but in the process as possible. And so the adoption licenses took out as much friction as we could possibly take out being some of the things we can control.
Derrick Wood — Cowen and Company — Analyst
Thank you.
Operator
Our next question comes from Ittai Kidron with Oppenheimer. Please proceed with your question.
Ittai Kidron — Oppenheimer and Company Inc. — Analyst
Thanks, guys. Dean, maybe just kind of following up then again on these adoption licenses, can you clarify if the pricing on those is materially lower? And I’m trying to gauge again, just to make sure I understand this, whether this is something that you chose to try and push on customers, given the challenges you had in closing deals and renewals? Or this is something that customers came to you and said, listen, we’re having a bit of a challenge here, can we do something temporary and then revisit somewhere down the road?
Dean A. Stoecker — Chairman and Chief Executive Officer
Yes. We have standard SKUs for adoption licenses. There’s some flexibility. And again, it goes back to the vision the customer has, the aptitude and appetite for growth of our platform.
I would say that we offered them up typically, as an ask from customers who would say, things have slowed down, we’re not going to be able to get this deal through. So let’s figure out what the true demand is. They tend to be anywhere between, let’s say, 25,000 and 100,000. I don’t have the exact count for Q2. But I do know it was a large increase in the number of adoptions.
Ittai Kidron — Oppenheimer and Company Inc. — Analyst
Okay. And with regards to the business itself, you talked about commercial. I just want to make sure, again, the buying behavior that has changed, it applies across your business and across all verticals? Or this is just a commercial and impacted industries?
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, I think the elongated sales cycles occurred across the entirety of the base of the business. I think that the churn was mostly impacted in commercial businesses, much of it in the highly impacted verticals. But at the same time, 20% of our new customers came from high-risk verticals, tending to be in larger organizations in those verticals. Some of those examples are like Qatar Airways who — I don’t know if they had a plane in the air, but landed with us to really understand what was happening in their operations.
Ittai Kidron — Oppenheimer and Company Inc. — Analyst
Got it. Very good. Thanks, guys.
Operator
Our next question comes from Chris Merwin of Goldman Sachs. Please proceed with your question.
Chris Merwin — Goldman Sachs — Analyst
Thanks so much for taking my question. I wanted to ask about the cloud strategy. I mean the same we keep hearing from companies is that as they talk to customers, they’re increasingly looking to migrate all different types of systems to the cloud. And I know that obviously, some of your customers today have a cloud instance of the product, but are you thinking about trying to migrate more and more of your customers to the cloud in time or architecting more cloud-native products? Is there more of an imperative to do that, and particularly in light of what seems to be an acceleration of digital transformations for customers? Thank you.
Dean A. Stoecker — Chairman and Chief Executive Officer
Sure. Thank you for the question. So everyone knows, we actually have quite a few customers who are in the cloud. We have our server deployments for automation and analyst processing up in AWS and Azure for as little as $9 an hour that you can execute with just a few key strokes.
We actually have that up there for three or four years with almost no activity. And that’s not to suggest that cloud isn’t important, but we’re hybrid. We understand that we want to be close to where the data lives. And in large organizations, especially in the Global 2000, most of their data hasn’t moved.
In fact, earlier this week, I was on the phone with a Chief Data Officer of a Fortune 50 insurance company on the East Coast, and he indicated that they’ve been dabbling with the cloud for quite some time, but not a single bit of customer data was currently in the cloud. And so I think that we’ve been focused on cloud for a very long time. We are in the process of a cloud-based Designer, mostly to ease the burden of deployment of large implementations in organizations around the world. We have — if you attended our APA event, you would have heard that PwC indicated that they have 55,000 users of Alteryx.
Now it’s a hassle to deploy quarterly releases of an image for those users, so having a browser-based delivery would be better. The customers are not pushing us for a multi-tenant SaaS service, at least not today. The data is living everywhere. It’s going to be hybrid forever.
And we’ll live where the customer tells us to live, and we’ll be prepared when the customer says that the data gravity has shifted. It just has not shifted. And I don’t think it’s going to shift for quite some time.
Chris Merwin — Goldman Sachs — Analyst
Thanks very much.
Operator
Our next question comes from Brad Sills with Bank of America. Please proceed with your question.
Bradley Sills — Bank of America Merrill Lynch — Analyst
Thanks for taking my question. I wanted to ask more about the adoption licenses. What has your experience been historically in terms of version of those types of licenses to see expansion from there?
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, we see significant conversion rates, considerably higher than our normal conversion rates, and that’s because we have strategic conversations typically top down. We don’t offer adoption licenses to the analyst who’s just trying to solve a data problem and might have 10 users in their functional area. It’s typically someone who’s moving down the path of major transformation who isn’t sure that they’ve got 200 users or 2,000 users or 20,000 users. So we’re pretty careful on how we move those dials of the adoption licenses.
We have seen great success. We’ve tried not to rely on them. But in a time like Q2, as customers struggle to figure out how they were going to get to their successes, we came to their rescue to help them out, and it will work out for us in the long run. Whether that converts in the period in which the adoption license expires or not is yet to be seen.
Again, we’re bullish on what’s going to happen in the future. It’s just a matter of timing and when we’re going to recover from COVID.
Bradley Sills — Bank of America Merrill Lynch — Analyst
Thank you.
Operator
Our next question comes from Jack Andrews with Needham. Please proceed with your question.
Khanh Ngo — Needham and Company — Analyst
Good afternoon. It’s Khanh in for Jack Andrews today. I was wondering if you could provide some color on your comments on longer deal cycles? Can you provide some numbers around average deal time before and how is this changed today? And how should we be thinking about what you can control in terms of sales and marketing that gets these sales cycles back to normal?
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, we’ve clearly looked at every aspect of our sales and marketing go-to-market activities. We’ve rationalized a bunch of things away. We’ve moved most everything to virtual. We’ve doubled down on ways to support and engage our customers.
Yes, I won’t give you the magnitude of the deal sizes, but they are — I wouldn’t say they’re extremely smaller, they’re a smidgen smaller, but the sales cycles are a bit longer. And there are some ways you can control some of it, and there’s other ways you can’t. Most of the customers that we sell to is, in particular, the top-down selling motion, most organizations who are going to have large expansions with us inserted their own teams just like we did, where we have scrutiny over big spend and committees get more involved and when they’re all working remotely, it becomes more and more of a challenge. I think we actually illustrated a customer from Q1 that was just had a very large expand that had, I don’t know, 16 different signers across four different countries.
And those are just challenging things for customers. And Q2 kind of accelerated that change. And so we embraced it in the ways we could, and we’re doing all that we can to — well, you know that we’ve been very capital efficient. So we’re never going to take these situations lightly.
We’re going to look at all of our own spend, and we’re going to make sure that we’re investing in the things that drive the most value for our shareholders.
Khanh Ngo — Needham and Company — Analyst
That’s helpful. And can you talk about how your recently announced APA messaging has resonated so far with customers? How does this provide go-to-market help in terms of new lands specifically?
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, it’s been great, actually. The APA message, we started that whole process back in late summer of last year. We recognized that what was happening is all of our conversations have become more strategic, and our platform has become more critical for transformation. Remember that the APA message is all about this convergence of analytics, data science and automation.
And it’s at the forefront of certainly the C-suite’s mind. And the APA messaging came off really well in June. We launched the category first week in June, we had a large attendance at our live event. We continued to have meaningful conversations with both new customers and existing customers.
By the way, the Fortune 50 insurance company that was on the phone, which I mentioned earlier, he actually is a large customer of Alteryx. And we were talking about the APA message, and he said, “Well, your APA platform not only allows me to do things better, but it allows me to do better things.” Meaning we give them all their time back so they can focus in on more strategic initiatives to drive higher values in terms of outcome. So the response has been great. And our product innovations that we rolled out fit very cleanly and nicely into that APA messaging.
Khanh Ngo — Needham and Company — Analyst
Thank you. I appreciate the color there.
Operator
Our next question comes from Bhavan Suri with William Blair. Please proceed with your question.
Bhavan Suri — William Blair and Company — Analyst
I guess I wanted to touch a little bit just on sort of backing up a little bit the logic here. So in tough times, when you think about core use case, like understanding price elasticity or how to create new pricing model to drive greater usage, $5 foot long subway, etc., it feels like the use case for the core technology should tick up, like the ability to say, how do we drive better profitability, better pricing, better segmentation, better allocation on store shelves, etc. Help me sort of reconcile a little bit with what you’re seeing in terms of the larger customers. Again, commercial, I understand.
These larger companies totally get the value. And to help me understand sort of, I feel like the usage should be picking up dramatically as people try to figure out how do I optimize in this environment?
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, I think the timing is kind of what’s at stake here. It’s not the interest in the technology or the value proposition that the technology drives. When companies are down digital transformation efforts, they want to ensure that it’s not a single-use case that’s driving the value. They care about, well, what SiriusXM cared about? 157 use cases.
And they wanted to make sure that they could cover off on a large number of those use cases before they actually did expand. I will say that as we’ve gone more from — in the last 12 months, maybe even 18 months, more and more from a small land to the top-down selling motion with larger lands and larger expands, one of the things that we’ve also done even in the last 90 days is leverage our value engineering team for more of the strategic discussions that we’re having with the C-suite. So we put together a value engineering team about 1.5 years, two years ago. We’ve perfected the playbook for value engineering in a few of the verticals, and we’ve begun socializing that effort with a broader part of our go-to-market team.
So we do drive value. I think you see that in every customer you talk to, you see that in all the use cases that you find on — 260 use cases that you find on community. And so the key is actually driving more of it so that sellers have that value proposition at the moment of inflection for customers to buy.
Bhavan Suri — William Blair and Company — Analyst
Got it. Got it. Got it. And then maybe touching a little bit on the product. When I think about the AMP product, as you think about the scale of what you’re doing now in terms of data cleansing, data prep, sort of pulling all that data together in a much bigger scale, do you feel like you’re moving back into the stack a little bit to that ETL space at all? Because it’s still a business user’s still sort of low-code, no-code. So help me think about sort of where you’re headed in terms of that direction? Is there sort of strategic direction to head back toward a little deeper in the stack there? And then I have a quick follow-up.
Dean A. Stoecker — Chairman and Chief Executive Officer
No. The AMP engine is an in-memory engine. It is far more scalable. We’re seeing extraordinary throughputs on processing for large databases, particularly when there’s complex analytic processes being run.
But again, it is an engine for processing in-memory. And frankly, we don’t care where the processing does occur. Someone wants to push business logic from the Alteryx UI back into Redshift or Teradata or Snowflake or SQL Server, we’ll allow you to do that. But it makes the — it provides the horsepower that analysts need.
Now that we’ve liberated data across their enterprise, they don’t always have to go with the server. Although I will say that the purpose of rolling out the analytics hub was intended to get people to adopt server earlier. And of course, the AMP engine is shipping with Server, Hub and Designer.
Bhavan Suri — William Blair and Company — Analyst
Got it. Got it. No, that is helpful. Again, pushing the technology back wherever you going to use it seems like a really useful sort of incentive for others to sort of expand usage.
I just want to touch quickly on RPA. When you think about sort of the automation piece here, you think about RPA and you think about, hey, I’m going to connect a bunch of things, and there’s a onetime use case and there’s multiple times sort of reitering that integration, how do you think of so where RPA fits in next to you guys? Or is that sort of a totally separate space? But it feels like RPA hasn’t really adapted to analytics much, but it feels like it could be a good fit here synergistically. Just trying to think through that process. Thank you.
Dean A. Stoecker — Chairman and Chief Executive Officer
Great question. I think that the corollary of RPA to the automation continuum is similar to visualization to the analytic continuum. The automation vendors are, I think, really important for organizations around the world to understand the impact that automation can have. And for us, we actually tend to automate more sophisticated complex processes.
The partnership we formed with UiPath is really very nice. They’ve built some capabilities that allow you to execute bots in Alteryx as part of an analytic pipeline, both at the front of the pipeline to go get some data, let’s say, and at the end, to go do another activity. And so there’ll be some joint activity with UiPath. You’ll probably see some announcements here very soon.
We’re excited about the RPA space. It opens up the aperture around the third leg of APA, and that is a focus on automation.
Bhavan Suri — William Blair and Company — Analyst
Got it. Thanks, guys.
Operator
Our next question comes from Rishi Jaluria with D.A. Davidson.
Hannah Rudoff — D.A. Davidson — Analyst
Hi, guys. This is Hannah Rudoff on for Rishi today. First, Kevin, maybe could you walk us through the factors that are contributing to the delta between ARR growth and revenue growth?
Kevin Rubin — Chief Financial Officer.
Yes. Sure. Thank you. That’s a great question. If you remember, we’ve spoken for quite some time, our revenue mechanics and ARR are disconnected. Revenue is driven by bookings, which is TCV and an upfront portion based on product mix, and ARR is really just the accumulation of ACV over time. So the two are very disconnected in that regard.
Hannah Rudoff — D.A. Davidson — Analyst
Okay. Great. And then second question, how long do you expect it will take to get these newer sales reps back up to the productivity levels you hope they’d be at?
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, it’s progressing pretty quickly. Before COVID, we started down the path of modernizing our enablement systems here. As you know, we typically front-load our quota carriers at the beginning of the year. Have we been able to predict COVID’s emergence, we might not have hired quite so many.
But we were right in the mix of modernizing the entire enablement process. And we are on Phase 2 of that process. And so it won’t be too much longer before we see them be productive back to historical levels.
Hannah Rudoff — D.A. Davidson — Analyst
Great. Thank you.
Operator
Our next question comes from Mark Murphy with JP Morgan. Please proceed with your question.
Adam Bergere — J.P. Morgan — Analyst
It’s Adam Bergere on for Mark Murphy. Thanks for taking my question. So for one, is there any additional color you guys can provide on the difference just in the general macro, I guess from a pipeline perspective between April and June?
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, I think that the primary difference was as we went into June, our customers and prospects were faced with internal headwinds of their own. And again, I think that’s why we chose to use our other playbooks to help them out. I don’t think that there was — I think there was some change in attitude, but I think the process change so that, that attitude couldn’t actually reveal itself in terms of deals being done.
Adam Bergere — J.P. Morgan — Analyst
Got it. That’s helpful color. And second, is there any additional, I guess, detail on like on the investments you’ll be making for your digital marketing strategy going forward?
Dean A. Stoecker — Chairman and Chief Executive Officer
Well, we’ve actually made lots and lots of changes to it. Much of it was also planned pre-COVID. We’ve been investing in our community for the last five years. And we have a very, very active community.
Again, we’ve had a 68% improvement in the monthly active users on Community. And we know the impact that Community has on our customers. They tell us, we help them get up to speed in the data science world. We help them socialize it to their coworkers.
It leads to more expansion. And when we come out of COVID, we’ll see that expansion, I suspect. But we also have done a lot around new programs in Community that would take the place of on-site working days, where we go on-site and have workshops with customers. So everything from our Discovery program.
We have lots and lots of people in our discovery programs. Our Virtual Solutions Center has gone over extraordinarily well, more than 1,000 customers spend considerable time with our teams online. So I think we’ve made the pivot to the virtual world quite well.
Adam Bergere — J.P. Morgan — Analyst
Thank you, guys.
Operator
Our next question comes from Brent Bracelin with Piper Sandler. Please proceed with your question.
Clarke Jeffries — Piper Sandler — Analyst
Hi. It’s Clarke Jeffries on for Brent. Dean, I was wondering if you could compare and contrast what you’re seeing right now with what you saw in the last period of economic uncertainties. It may not be the financial crisis, but what is that telling you about how long it will take for spending level to return to normal?
Dean A. Stoecker — Chairman and Chief Executive Officer
Good question. I’ve been at this for a while. I’ve seen three, I’ll even say four of these events or this is my fourth event. This one is different in that it’s kind of hard to predict what’s going to happen next based on what media says and whether there’s going to be people going back-to-school and back to the office and whether it will emerge again in a second wave.
That part is a little uncomfortable. But I think the long-term is we believe in this space. Obviously, it’s not going to go away. It’s perhaps put a pause button down. But it’s going to reemerge. And I actually think it will be just as swift of reemergence as we had in 2008. You’ve heard me say on many quarters that in good times, people need data science and analytics; in bad times, they need them more. And it’s a matter of time.
And I’m pretty confident that in the end, we’re going to win the APA category and we’ll be the leader in the data science and the analytics space. And we just may have to wait a smidgen longer.
Clarke Jeffries — Piper Sandler — Analyst
Perfect. That’s very helpful. And then, Kevin, I just wanted to clarify that contract duration remained constant despite adoption licenses? And if so, does that really just reflect the low contribution on a dollar basis of those adoption licenses?
Kevin Rubin — Chief Financial Officer.
Yes. I mean — great question. So when we look at contract duration, it is on a dollar-weighted basis. And as Dean alluded to, the whole advantage of adoption licenses are that they’re a low entry price, and they really give customers an opportunity to trial a large swath of licenses at a relatively low cost. So they don’t generally have an impact on overall contract duration.
Clarke Jeffries — Piper Sandler — Analyst
Thank you very much.
Operator
Our final question comes from Pat Walravens with JMP Securities. Please proceed with your question.
Joey Marincek — JMP Securities — Analyst
Great. Thank you. This is Joey Marincek on for Pat. Just quickly on M&A. I was curious, is that still top of mind for you guys? Just any color, how you’re thinking about M&A right now?
Dean A. Stoecker — Chairman and Chief Executive Officer
Sure. Thanks for the question. As you know, we did our convert in 2018. We did our larger convert last year, we did specifically to invest in the business and, in part, be ready for consolidation in the space.
We have pointed to accelerating consolidation for the last 18 months, two years. I think COVID forces the hand of a lot of players that haven’t found a product market fit and who know that they have to be part of an end-to-end platform like ours. So we continue to look at lots of deals. That said, good companies get bought, not sold.
And so we’re fairly particular about where we go deep in looking at organizations. But I think there is a huge opportunity. Our thesis is still around three pillars that IP is going to be important. In fact, the last acquisition we made, Feature Labs, last October, we’ve already woven in their EvalML engine, they’re Python open source engines, into both our assisted modeling product.
And it is part of the same platform, it is part of the predictive server that provides auto modeling capabilities. That will compete with the data robots and the H2Os of the world starting next year. And so inserting IP, buying IP is important. acqui-hires, there’s probably a lot more people that are available now, so acqui-hires might not be as critical.
But there’s also opportunities to buy meaningful revenue streams in close proximity to our space.
Operator
There are no further questions at this time. I’d like to turn the floor back over to management for the closing remarks you may have.
Dean A. Stoecker — Chairman and Chief Executive Officer
Thank you, operator. In closing, I want to thank our associates, partners and customers, not just for driving business performance, but for driving societal outcomes. Your efforts did not go unnoticed, and we take our corporate social responsibility quite seriously. You heard about our success with the ADAPT program, educating nearly 10,000 humans that have been displaced as a result of COVID-19, and we are doing considerably more.
Through our Alteryx for Good program, we have provided nearly 30,000 free licenses of our software to more than 2,300 universities around the world, teaching critical data science and analytic skills for the 21st century. And we currently support more than 500 not-for-profit organizations in dozens of countries needing our help in doing good with data and analytics. Thank you for all you do. I am looking forward to updating you all on our business progress next quarter. Thanks, and be well.
Operator
[Operator Closing Remarks]