Alteryx, Inc. (AYX) Q4 2021 Earnings Call Transcript

Alteryx, Inc.  (NYSE: AYX) Q4 2021 earnings call dated Feb. 15, 2022

Corporate Participants:

Chris Lal — Chief Legal Officer

Mark Anderson — Chief Executive Officer

Kevin Rubin — Chief Financial Officer

Suresh Vittal — Chief Product Officer

Paula Hansen — President & Chief Revenue Officer

Analysts:

Hannah Rudoff — Piper Sandler — Analyst

Tyler Radke — Citi — Analyst

Andrew Sherman — Cowen & Company — Analyst

Michael Turits — KeyBanc — Analyst

Sanjit Singh — Morgan Stanley — Analyst

Kamil Mielczarek — William Blair — Analyst

George Iwanyc — Oppenheimer & Co. — Analyst

Steven Koenig — SMBC Nikko Securities — Analyst

Pinjalim Bora — JP Morgan — Analyst

Koji Ikeda — Bank of America Merrill Lynch — Analyst

Chase Donovan — Raymond James — Analyst

Edward Magi — Berenberg — Analyst

Presentation:

Operator

Greetings. Welcome to the Alteryx Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to your host, Chris Lal, Chief Legal Officer. Thank you. You may begin.

Chris Lal — Chief Legal Officer

Thank you, operator. Good afternoon, and thank you for joining us today to discuss Alteryx’s fourth quarter and full year 2021. With me on the call today are Mark Anderson, Chief Executive Officer; and Kevin Rubin, Chief Financial Officer. Additionally, Paula Hansen, our President and Chief Revenue Officer and Suresh Vittal. our Chief Product Officer will be joining us for the question-and-answer session after prepared remarks.

This afternoon, we issued a press release announcing our results for the fourth quarter and full year ended December 31, 2021. If you’d like a copy of the release, you can access it online on our Investor Relations website.

During this call, we will make forward-looking statements related to our business, including statements about our financial guidance for the first quarter and full year 2022. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties some of which are beyond our control. Our actual results could differ materially from expectations reflected in any forward-looking statement. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and our Investor Relations 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 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, Mark Anderson. Mark?

Mark Anderson — Chief Executive Officer

Thanks, Chris, and thank you all for joining us on the call today. I’m delighted to report that we finished the year on an exceptional note with revenue, annual recurring revenue and non-GAAP operating income all beating guidance. At the beginning of 2021, I outlined comprehensive changes to our business, a transformation designed to significantly increase our innovation and product development as well as modernize and streamline how we sell to and serve customers. Looking back, I’m so proud of the entire Alteryx organization for executing such change, while delighting customers and exceeding our forecast for the year.

It’s wonderful to see the impact on many of our initiatives show up in our results, growing ARR by 30% year-on-year to finish 2021 at $638 million was job number one for us. We added a $145 million in net new ARR during the year, and delivered a record $59 million in Q4. This gives me the kind of confidence and momentum that every CEO wants going into a new fiscal year. Kevin will get into the details, but I’d like to highlight some of the progress we made in 2021 on our strategic imperatives before outlining our priorities for fiscal year ’22.

Since joining Alteryx, I have not wavered from my contention that we have a massive opportunity ahead of us. Business and government leaders tell me frequently that they are early in their journey to digitize and become data-centric organizations. A sense of urgency to up-skill their work forces is only increasing. As this generational shift towards data literacy evolves, we believe there will be independent companies that emerge as platform leaders in this market. Today, we see a market opportunity of approximately $65 billion across the analytics and data engineering space. These markets are growing at a healthy clip and are projected to exceed $110 billion by 2025, according to IDC.

Furthermore, we also recently completed a new study with IDC that concluded there are over 78 million advanced data workers worldwide, and we believe our strategy of democratizing analytics across this population positions us well. We will seize this opportunity through innovation, executing on our go-to-market strategy and expanding through partners.

Our product innovation continues to strengthen. Under Suresh Vittal’s leadership, we are advancing our product roadmap and continue to drive both organic and inorganic opportunities to accelerate our innovation agenda. We’re focused on 3 pillars of innovation; cloud-centricity, big data fluency and AI as a strategic advantage. We’ve been making terrific progress, both Designer Cloud and Alteryx machine learning are now available in North America. In addition, with the success we’ve seen in APJ with Alteryx Auto Insights formerly Hyper Anna, we are excited to share that we have now launched Auto Insights in North America.

As more and more customers deploy modern data architectures in cloud data warehouses and operate across a hybrid cloud environment, their need to bring analytics to the data will certainly increase. Our acquisition of Trifacta enhances our ability to help customers solve this problem. In addition, it expands our product portfolio and accelerates our journey to the cloud. This acquisition leapfrogs us into all 3 public cloud environments giving our customers more flexibility. Trifacta is particularly strong at serving the needs of IT and data engineers. this aligns very nicely with our core go-to-market strategy to work more inclusively with IT. Today, this adds to our growing portfolio of cloud-based products. Ultimately, we expect Trifacta to become our modern cloud-based back-end for the combined Alteryx platform. Trifacta also brings us a rich bench of cloud-first talent across key functional areas of our business. Throughout 2022, we’ll update you on our platform build progress.

We know that you’re keenly interested to learn more about our strategy and pricing for our cloud products. In order to drive adoption and encourage growth in our audience, including expansion within our customer base, we launched with introductory pricing that scales by user for all of the cloud products; Designer Cloud, Alteryx Machine Learning and Alteryx Auto Insight. For Trifacta, we will retain the existing pricing contracts which scales based on consumption. Collectively, we are reducing the friction customers’ experience while providing more capabilities for them to further mature their analytic journey.

On the go-to-market front, we’ve been focused on building and scaling a world-class team. Under Paula Hansen’s leadership, we’ve seen major improvements in our account coverage, partner engagement and execution discipline. Our foundation for long-term growth is being instrumented through scalable sales processes and coordinated sales, marketing and customer success resources. Customers tell me, this focus helps them do more and do it faster. That confidence shows up in our 30% growth in year-over-year ARR results. Other proof-points include, we closed 17 deals with more than $1 million in ACV in the quarter, nearly double of what we closed in Q4 2020. We ended the year with 90 customers with over $1 million in ARR representing a 45% year-over-year growth. We realized our highest renewal rate since 2018. And we saw sales productivity continue to increase across the board.

The fourth quarter is traditionally our strongest quarter for expansion business and this quarter was no different. For example, a large multi-state insurer moved away from a la carte purchasing and expanded by leveraging our new ELA bundle, because they saw a strong appetite for future growth. Additionally, ELA structure deliver the value and flexibility required. An important factor in their buy decision was due to our tight integration with Snowflake which align to their cloud strategy. This insurer is primarily using Alteryx in the actuary, finance and informatics departments, and early feedback includes how easy Alteryx is to use and to drive change with scalable automation throughout the organization.

MillerKnoll, formerly known as Herman Miller and known for their modern home and office furniture, expanded with Alteryx this quarter. We’re building out their modern data and analytics technology stack and we are a key partner. By leveraging Alteryx’s Snowflake and Tableau to speed up automation and up-skill business analysts, MillerKnoll has seen value across their sales, supply chain and finance departments. The elegance of the integration between partners in this stack was a key driver for MillerKnoll.

Also this quarter, a leading America car-rental company became a customer and is leveraging our platform to address data access challenges preventing them from optimizing FP&A initiatives. The company is using the Alteryx platform to integrate critical planning, budgeting and forecasting data coming from SaaS applications and to provide real-time insights to the FP&A team. Data that was generated but trapped in ERP and SaaS applications is now being pulled into workflows generating real-time actionable business insights.

Excellent partnerships. We continue to focus on developing the ecosystem through strategic technology and distribution partners. Like MillerKnoll, customers expect modern vendors to work well together. As a generational move to data centricity plays out, we are well-positioned in the modern data ecosystem. With every partnership we solve for a better customer experience, more actionable insights and increased speed-to-value. Our strategy with technology partners is to deliver seamless integrations for customers and encourage deep field collaboration. This flywheel is just getting going for us, and there is a lot of upside here. In Q4, we sizably expanded our partnership with Thomson Reuters, allowing them to sell Alteryx across 3 of their key business units, Thomson Reuters customers that leverage these broad range of solutions yield remarkable results with dramatically improved efficiencies and risk reduction.

Finally, AWS provides us with a great example of how we’re leveraging partnerships to expand our go-to-market reach. In Q4, Alteryx Designer and Server became available in the AWS marketplace. This means that customers with enterprise discount programs in place can now have Alteryx product purchases count towards their annual consumption committed. This unlocks new sales opportunities for us. This also allows AWS customers to realize the value of Alteryx, while streamlining procurement and consolidate billing.

In 2021, we achieved terrific progress with the SparkED Program, our education and upskilling initiative that empowers learners at all levels to acquire data analytics knowledge and skills. We now have more than 130,000 students representing over 700 global universities. We have ambitious plan to leverage SparkED with our passionate community to create hundreds of thousands of data evangelists who advocate the Alteryx technology throughout their careers.

As an executive team, we are hyper-focused on leveraging the momentum from our solid finish to 2021, our 3 recent acquisitions as well as last week’s successful in-person sales kick off. This was the first time in 2 years. We had well over 1,000 attendees including over 200 partner participants. The energy was incredible. We’ve constructed another solid operating plan for FY ’22 and my confidence in our team and their ability to execute has never been greater. We still have much work to do, but I’m optimistic that we will continue to see strong operating results as we execute during FY ’22. Our ability to innovate is accelerating and our readiness in the field continues to improve as we sunset our year of transformation.

Now, moving onto 2022, we are squarely focused on the following key initiatives that will define our success. This will be a year of innovation for Alteryx as we build an integrated cloud platform and assert our leadership, while broadening our value in a modern data analytics stack. Our vision is to make it easy for customers to democratize analytics across their enterprise, using easy to access cloud solutions. All while still providing flexible options that complement their on-premise investments. We believe we are well-positioned to build on this vision in FY ’22.

Our core products, Designer and Server continue to deliver new innovative capabilities that extend our low-code, no-code, analytics automation. All 4 of our cloud products including Trifacta are available now. We are focused on driving adoption of these cloud solutions across our customer base as we move quickly to integrate Trifacta as our unified cloud platform through the rest of 2022. Our go-to-market strategy focuses on the foundation we put in place last year. Enterprise class value selling to the Global 2000 supported by a robust partner ecosystem from the initial land all the way through value realization. Our customer facing resources are now aligned under Paula’s leadership. The launch of our cloud portfolio will provide our customers with innovation and options, initially in 2022 and in a more meaningful way in 2023 and beyond.

In closing, I’m so proud of our results and the progress we made last year, and I’m extremely grateful to our employees, partners and especially to our customers for their support in this journey. I believe we have put the vast amount of transformation behind us. I’ve been doing this for a long time. But I’ve never seen an executive team execute so much, so quickly and so well. Customers globally are looking for unified platforms as they advance their digital transformation agendas and work to democratize data. I’m confident that we’re doing the right things to drive predictable growth for a very long time. And I believe Alteryx will be one of the winners in this highly fragmented data analytics and automation landscape. We’re building an innovation powerhouse supported by a world-class go-to-market motion. We look forward to keeping you updated on our progress and are also planning to hold an Analyst Day in conjunction with Inspire our Annual User Conference being held from May 16 to the 18. We’ll provide more information about that soon.

With that, let me turn the call over to Kevin. Kevin?

Kevin Rubin — Chief Financial Officer

Thank you, Mark. Q4 was a record quarter for us as revenue, ARR, non-GAAP operating income, all exceeded guidance. We ended the quarter with approximately $638 million in ARR, up 30% year-over-year. The second quarter in a row now that we’ve seen accelerated growth. Q4 revenue was $174 million, an increase of 8% year-over-year, and our Q4 non-GAAP operating income was $18 million, or 10% operating margin. 2021 was a transformative year for Alteryx; new leaders reinvigorated our go-to-market efforts and accelerated our innovation engine which is evident in our strong results. And with the recent acquisitions and new product launches, we believe we are on solid footing to build on this momentum into 2022.

Our focus on the largest customers and prospects is gaining meaningful traction. We now have 43% of the Global 2000 as customers which reinforces our large upsell potential and strong customer lifetime value. We also saw an uptick in net expansion within our Global 2000 segment at 128%. We now have approximately 90 customers with at least $1 million in ARR, up 45% year-over-year. And as of Q4, customers with $100,000 or greater in ARR make up approximately $0.5 billion of our ARR and grew 36% year-over-year. Some of the key wins for the quarter include Circle K, Devon Energy, DIRECTV, Pfizer Canada, Safeway, Textron Systems, Veeva Systems and Warner Brothers Productions.

Q4 was another record hiring quarter as we ended with approximately 2,000 employees. And we saw a significant improvement in employee attrition, which was cut in half from the peak we reported in Q2 of ’21. These are important proofpoints as we invest in the business for durable growth in the coming years.

Now onto the financial review. I want to remind everyone that unless otherwise stated, I will be discussing non-GAAP results. Please refer to our press release for a full reconciliation of GAAP to non-GAAP results. Our Q4 GAAP revenue was $174 million, an increase of 8% year-over-year. Our strategic shift to focus our go-to-market on ACV to strengthen ongoing pricing is working. Average contract duration was approximately 1.5 in 2021 compared to approximately 2 years in 2020 and 2019. The resulting accounting treatment from the lower contract duration cost us approximately 10 percentage points of revenue growth in 2021. We believe this was a non-recurring impact for 2021. I’m pleased to report that as a result of our strategic focus on ACV, we are seeing improved pricing and this sets us up well going into 2022 where we have a large population of renewals.

Our Q4 gross margin was 93%. Q4 margin reflects the continued investments we are making in building out our customer success organization. We are beginning to see the benefits of these investments prove out in our improved net expansion rates within the Global 2000 and overall improved renewal rate. Our Q4 Operating expenses were $143 million compared to $103 million in the same period last year. The increase in our operating expenses is attributable to the increase in our overall headcount and marketing programs to drive growth. Our Q4 operating income was $18 million, or an operating margin of 10% and net income was $12 million or $0.17 per share based on 69.3 million fully diluted weighted average shares outstanding.

Let me briefly summarize the results for the full year. ARR grew 30% for the year and revenue increased 8% to $536 million. Gross margin for 2021 was 92%, reflective of the continued investments in customer success. Operating expenses for the year were $493 million as compared to $383 million last year, primarily due to the record hiring in 2021. Full-year operating loss was $2 million, essentially breakeven, and net loss was $11 million or $0.16 per share based on 67.2 million fully diluted weighted average shares outstanding.

Turning now to the GAAP balance sheet and statement of cash flows. In the fourth quarter, we generated $39 million in cash from operations, and as of December 31, we had over $1 billion in cash, cash equivalents, short-term and long-term investment. Before turning to our outlook for 2022, I’d like to share with you a high-level framework for how we are approaching this year. First, we are entering 2022 with a backdrop of robust demand from large enterprise customers who are looking to digitally transform their businesses. Second, we have an expanding product portfolio with a strong go-to-market strategy to help us achieve our growth plan. Third, our acquisition of Trifacta closed on February 7th. We will start recognizing their financial results as of the close date and anticipate that this acquisition will contribute approximately $20 million in ARR in 2022. We expect limited revenue contribution this year due to purchase accounting treatment of deferred revenue, which will be a one-time dynamic as deferred revenue will build back up throughout the year. Fourth, we expect to see an increase in the amount of revenue we recognized upfront from our on-premise products. For 2022, we expect the upfront revenue recognition for our on-prem products to be approximately 50%, up from 40% previously.

As a reminder, ARR measures the overall health of the business closely correlates to the long-term cash flow, and is unaffected by contract duration and other revenue mechanics. We believe our focus on ARR encourages the right operating behaviors, while providing the most flexibility and choice for our customers. And finally, from a seasonality perspective, we expect 2022 revenue, ARR and cash flows to be like previous fiscal years. As in the prior fiscal years, we typically hire aggressively early in the year, so that we can benefit from productive employees in the second half. This results in higher operating expenses in the first half of the year relative to revenue and ARR with leverage coming in the second half of the year. Finally, I’d like to remind you that our guidance is subject to various important risks and cautionary factors referenced in our call today, and in today’s earnings release.

Now turning to our outlook for Q1 and full year 2022. For Q1 2022, we expect ARR to be in the range of $675 million to $678 million, representing year-over-year growth of 32%. We expect GAAP revenue to be in the range of $144 million to $147 million, representing year-over-year growth of approximately 21% to 20%. We expect our non-GAAP operating loss to be in the range of $50 million to $47 million, and non-GAAP net loss per share of $0.61 to $0.58%. This assumes 67.8 million weighted average shares outstanding.

For the full year 2022, we expect to exit with ARR in the range of $805 million to $815 million representing year-over-year growth of 26% to 28%. We expect GAAP revenue to be in the range of $710 million to $720 million, representing year-over-year growth of 32% to 34%. The impact of increasing our upfront revenue recognition percentage from approximately 40% to approximately 50% adds roughly $45 million in revenue, which we have included in our guidance.

We expect our non-GAAP operating loss to be in the range of $50 million to $40 million primarily due to our Trifacta acquisition and the impact of purchase accounting. Excluding the impact of Trifacta, we expect our business to be breakeven on the year. Our non-GAAP net loss per share is expected to range from $0.68 to $0.58. This assumes 68.3 million basic shares outstanding. Finally, we expect an effective tax rate of 20%.

In summary, I’m excited about what is to come in 2022. We have a robust pipeline with a large growing TAM of over $110 billion by 2025 that we believe we are well-positioned to serve. We are aggressively building out our cloud platform with new product launches in the acquisition of Trifacta. We are bolstering our go-to-market strategy with an experienced and growing sales organization and expanding our partnerships. And we expect to see healthy growth in ARR and accelerated revenue growth.

And with that, we’ll open up the call for questions, operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Brent Bracelin with Piper Sandler. Please proceed with your question.

Hannah Rudoff — Piper Sandler — Analyst

Hi all. This is Hannah Rudolf on for Brent Bracelin today. Thank you for taking my question. Just one for you Suresh, it’s really clear that you guys are investing in Cloud, Lore IO and Hyper Anna and Trifacta, I guess my question is aside from the integration of these acquisitions and execution. Is there any feature or functionality you feel like you still need to capitalize on the Cloud opportunity?

Suresh Vittal — Chief Product Officer

So I believe the integration of these platforms and user experience, so we’re delivering value for the entire enterprise. We is a massive opportunity in democratizing analytics and offering best-in-class on-premise solutions as well as best-in-class cloud solutions. And that’s what our roadmap is going to be focused on here on forward.

Mark Anderson — Chief Executive Officer

Just a reminder, Hannah, it’s really not a big-bang kind of a build for us. This is something we believe is going to take us a good couple of years to do and we’re doing this really to reduce friction so that our customers can interact with us as quickly and successfully as possible.

Hannah Rudoff — Piper Sandler — Analyst

Helpful. Thank you.

Operator

Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.

Tyler Radke — Citi — Analyst

Yeah, thanks for taking my question. Maybe a question for Paula, and congratulations on the promotion. I wanted to touch on the go-to-market side, obviously nice to see the strong growth in million dollar deals. I guess, I’m curious what you’re doing differently. I mean, how are you kind of approaching the ELA and standardization exercise across your larger customers? And then maybe a second question for you is just how are you, I guess what’s the message for your sales force this year as it relates to co-selling Trifacta and how are you just kind of managing those 2 product lines? Thank you.

Paula Hansen — President & Chief Revenue Officer

Thanks, Tyler, for the question, and also for the congrats. So really as we look at the ELA discussions with our customers, it’s part and parcel with our broader strategy of the democratization of analytics and having the conversation around upskilling the enterprise, enabling more personas across the enterprise to participate, the opportunity for analytics and helping to unlock the potential of data for their business. So the ELA helps us in that discussion because customers like predictability, they like flexibility, it supports them in their growth and their adoption and expansion initiatives. So it’s been a very positive conversation for us, both with our existing customers as well as in some cases with new customers who just want to understand what the growth opportunity looks like with Alteryx as they continue to mature their analytics.

In terms of your second question, we had our SKO last week, it was electric to be with the team, both in person and virtually, and of course, that’s when you galvanized the team around the direction and mission. So to your question, it’s really clear, we put a foundation in place last year around enterprise selling, around value selling. We’ve made investments in customer success to help our customers realize the benefit post investment with us to drive adoption and value realization. We’re 100% continuing on that path and we have diversified our sales motions. We have a lot of personas now that we speak to, our classic business analysts, business users where we often land where Designer and Server and Alteryx Machine Learning serve really well, and now we’re thrilled that we can plan Trifacta into that democratization conversation and access a whole new persona of the data engineer and the IT user.

And so the mission is clear, we’re here to help our customers mature their analytics automation capability. We know that in order to do that they need to serve a number of personas across the enterprise, and we now have an incredibly powerful portfolio of both organic developed products as well as acquisitions like Trifacta and others to enable us to have those conversations.

Tyler Radke — Citi — Analyst

Thank you.

Operator

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

Andrew Sherman — Cowen & Company — Analyst

Great. Thanks. It’s Andrew on for Derrick. Congrats on the strong quarter. Kevin, your ARR guide is stronger than we had modeled that includes Trifacta, obviously, but can you talk about the pipeline heading into the first half what are some of your expectations on Designer Cloud in terms of releasing pent-up demand, and how should we think about the shape of their ARR growth through the year?

Kevin Rubin — Chief Financial Officer

Yeah, thanks the question. I appreciate it. So look, we’re going into 2022 with a lot of confidence having just put up 30% growth in ARR and a record Q4 quarter, so that gives us a lot of confidence as we go into the year. As I mentioned during the prepared remarks, we do have a strong pipeline and we’re looking pretty confidently as we go forward. We also have a very large population of renewals that I mentioned, that come up for renewal in this year and there is no better time for us to really have those conversations with customers about expanding the relationship than in the year renewal. So there is a lot of really, really positive momentum that we’ve built out both from a pipeline and energy as Paula mentioned coming out of SKO and then a population of renewals as we get into the year.

In terms of your comments around the shape of ARR, as I mentioned, I expect the seasonality this year to look very similar to prior.

Andrew Sherman — Cowen & Company — Analyst

Great. Thanks Kevin.

Kevin Rubin — Chief Financial Officer

Thank you.

Mark Anderson — Chief Executive Officer

Thanks, Derrick.

Operator

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

Michael Turits — KeyBanc — Analyst

Hey guys, congrats on the deal, and on the quarter. Kevin, if you gave us the EBIT and told us what it was ex the write-down, but a lot of puts and takes from rev-rec position there. What about cash flow, but where do you expect cash flow to come out and how much cash flow negative impact from Trifacta?

Kevin Rubin — Chief Financial Officer

Yeah, thanks, Michael. So in terms of, I mean we don’t guide to cash flow per se, but operating income and how we think about investing in the year is a reasonable proxy for what we should expect from a cash flow perspective. As I mentioned, we expect the core business this year to run at breakeven levels and we obviously are assuming Trifacta’s run rate in expenses this year. So there is a one-time effect relative to that. But as we go forward to the year and we start to book and build their business that will have a positive effect on cash flow going forward.

Michael Turits — KeyBanc — Analyst

Okay. Thank you.

Kevin Rubin — Chief Financial Officer

Thanks, Michael.

Mark Anderson — Chief Executive Officer

Thanks a lot, Michael.

Operator

Our next question comes from the line of Sanjit Singh with Morgan Stanley. Please proceed with your question.

Sanjit Singh — Morgan Stanley — Analyst

Thank you for the question and congrats on a strong close of the year. I just wanted to give you a chance to go through the sort of strategic rationale behind Trifacta, because in some sense it looks like the core capabilities sort of speak to Alteryx’s core value proposition historically. And so why was the right time now to buy a cloud data integration, data preparation tool? And what do you think the impact as Trifacta get out in the market, is that part of the solution? What do you think the impact on other parts of the portfolio, particularly the Cloud Designer products, which is just recently launched core Alteryx Designer and Server, how you can manage that portfolio. What is the impact on the growth on that side of the portfolio will be?

Mark Anderson — Chief Executive Officer

Yeah, I mean thoughtful question, as always, Sanjit, I really appreciate it. First of all, on the rationale, listen, I think yeah, I’ve been pretty clear about the feeling that we really need to build a platform in the cloud that can support all the innovations that could be expressed is apps down the road to make them as easy as possible for anyone to provision from any device anywhere in the world, and that’s the kind of flexibility I think that will stand us apart from people in the long run. And Trifacta has been doing that for the last 2.5 years, we get a team of 200 cloud-first, I think the rock stars and we spent the better part of last year working with them and even before due diligence. And I think the timing is right for Trifacta as well. I think if you look at the execution improvement through Q3 and Q4, getting to $579 million in Q3 and getting to $638 million in Q4 on the ARR line, I think it demonstrated the reasoning for the changes that we made and the fact that Paula’s fingerprints are all over it. That combined with the significant drop in attrition. We mentioned in Kevin’s prepared comments. Yeah. We just felt like the right time, because we need to reduce the time for the journey to get this build, if we did it by ourselves, it could take 4 years. This cut significant time of that and really brings people onto our bench that we need. And not just the 100 or so that are in product and engineering, there’s 100 people in finance and accounting and marketing and sales that bring cloud-first skills and we need that especially at this scale to inject into our team. So we’ve been clear like, we don’t have to build a Cloud platform yet, but the sooner we get going and the sooner we really start to make some progress on that I think the more flexible and the less friction our customers will will experience when they’re doing business with us.

I think on the impact, it’s really opens up as Paula said, it opens up a whole new persona for us. As you know we’ve been primarily focused on selling to business analysts, Hyper Anna gives us a new persona to sell to a business user, somebody like you were or me that may not necessarily want to write Python or get into workflows in Alteryx, and the folks at Trifacta have been selling into IT and data engineers, that’s their primary go-to and that’s a really complementary motion to what we’ve been doing and it really dovetails into the focus that Paula is driven into the team of hiring people that come from bigger companies, a lot more experienced, selling to senior level executives, but also being inclusive with IT to drive governance and inclusive with security to drive security compliance. And so it really I think is an ideal fit and it comes at the ideal time for us.

Sanjit Singh — Morgan Stanley — Analyst

Appreciate all the details, Mark. Thanks.

Mark Anderson — Chief Executive Officer

Yeah, thanks Sanjit.

Operator

Our next question comes from the line of Kamil Mielczarek with William Blair. Please proceed with your question.

Kamil Mielczarek — William Blair — Analyst

Thanks for taking my question and congrats on the great results. I realize it’s still early, but how are you thinking about the mix of the cloud as you look out 2 to 3 years? And given the range of personas that the new product target, should we expect any changes in how you’re incentivizing your sales team as you rollout and integrate the cloud solution?

Mark Anderson — Chief Executive Officer

Yeah, I’ll start with that and maybe Paula can give you some some more context Kamil. You know, I think the journey that we’re on is to really try to differentiate ourselves by building a real platform that consolidates multiple elements of what other people would be separately selling to our customers and we think very clearly that platforms win and that’s why we’re on this drive to reduce the amount of time it takes us to build the platform and bring on the kind of people like all 3 of our acquisitions have done to the kind of people that can design and build the products that our customers are going to use in the future with far, far less friction than this industry has ever seen before. So yeah, I think we’ve made great progress on that. Paula?

Paula Hansen — President & Chief Revenue Officer

Yeah thanks, Mark and thanks for the question Kamil. So the foundation that we put in place last year from a go-to-market perspective really supports this motion of our growing cloud portfolio and it really is about making sure that we can have the enterprise wide conversation as well as have tailored discussions with the multiples of personas that participate in the enterprise capability and conversation. So I have every confidence that the go-to-market foundation that we’ve put in place will scale with us through 2022 and beyond. And just excited that the portfolio is continuing to grow and evolve and we plug more of that innovation into the go-to-market.

Kamil Mielczarek — William Blair — Analyst

That’s helpful color. Thanks again.

Mark Anderson — Chief Executive Officer

Thanks Kamil. Congrats again.

Operator

Our next question comes from the line of George Iwanyc with Oppenheimer. Please proceed with your question.

George Iwanyc — Oppenheimer & Co. — Analyst

Thank you for taking my questions. So maybe digging in a little bit more into the strong demand environment and the go-to-market effort, when you look at the ecosystem leverage that you’re getting now, maybe can you give us a bit more color on what you’re seeing with the AWS marketplace launch, and how quickly you can put your own direct sales force on that customer generation to drive expansion as well?

Paula Hansen — President & Chief Revenue Officer

Thanks George for the question. We’re really excited about the AWS marketplace and participated and reinvent and had many ecosystem partner meetings, while we were there because of the importance of partnerships overall to our go-to-market strategy and our growth quite frankly. So I think the AWS marketplace like other marketplaces, which we will participate in gives us another route to market, gives us a chance to have customers consume our products through different means and channels leveraging some of the investments and commitments that they’ve made with some of the cloud providers like an AWS. And from a go-to-market perspective, our field is definitely encouraged to be thinking about all the different partners within the ecosystem that we work with, whether it’s the GSIs that are helping us have conversation at the senior executive level around digital transformation or whether it’s with some of our technical partnerships like with Snowflake and UiPath and others or solution providers that help us expand the marketplace to new customers and with an existing customers. So it’s a big part of our growth strategy is ecosystem partnerships, and I think we’ll be expanding to more partnerships, new partnerships in 2022 as well.

Mark Anderson — Chief Executive Officer

And if I could just add on top of that, George, I think you’re right, the strong demand is coming because I think people are waking up here now, but God willing, post-pandemic, and realizing that it’s not just the PhDs that are going to deliver the kind of analytic solutions for the modern enterprise or government. It’s got to be everyone and everyone needs to develop skills to become more data-centric if you’re going to be a successful business. And so I think that demand for us is coming, because companies are recognizing that and there is no real platform out there that consolidates as much of this as possible. So that gives us the confidence that we can put our heads down to build this innovation powerhouse.

George Iwanyc — Oppenheimer & Co. — Analyst

Thank you.

Operator

Our next question comes from the line of Steve Koenig with SMBC Nikko. Please proceed with your question.

Steven Koenig — SMBC Nikko Securities — Analyst

Hi there, thanks for taking my question. Congrats on the quarter, and what I would love to get some color on would be, how is your sales productivity ramp and particularly for the first half of your 2021 hiring that you did, what do you see in terms of transfer system-wide productivity, and then what’s your masking your hiring cycles that are going on now and your plans for the year against your performance for the year, what trends would you see in productivity throughout ’22? Thanks very much.

Mark Anderson — Chief Executive Officer

Yeah, thanks for the question, Steve, I’ll start out with some high level data and then pass it on to our new President, Paula. Listen, I think, for — excuse me for one second, Paula, do you mind taking the answer, I got to — I have be…

Paula Hansen — President & Chief Revenue Officer

Yeah, you bet. So Steve, I think the sales productivity is something that we’ve talked about a little bit the last couple of quarters. We’re pleased to see improvement in that the last couple of quarters, it will continue to be a focus for us as we go through 2022 and at the same time we’re expanding sales capacity. So the TAM is big and growing as we shared in the opening remark, and we are investing in that TAM, and in the opportunity for growth. So we’re pleased that we are not only hiring more sales capacity, but we are seeing improvements in the productivity of that sales capacity and in some cases, the newer people that we’re hiring are hitting the board faster, hitting hitting their stride faster. I think in part because of of the hiring focus that we’ve placed on the types of talent that we know can come in and have impact, and then the strategy just being the right strategy based on what our customers are telling us.

Mark Anderson — Chief Executive Officer

Yeah. And I’ll tag onto that, thanks, Paula. You know, take a look at the kind of people that we’re bringing on board, you can see them on LinkedIn, they are actively talking about their experience at SKO last week, they’re talking about their experience with Alteryx as an employer and they’re coming from companies that have $1 billion or more in revenue. They have that stage experience that is so necessary to make customers happy at this stage. And they are coming with more than 15 years on average of experience, and so they’ve been through start-ups and they’ve often done this long-term sustained hyper growth journey. And I think Paula is maybe too modest to recognize that she is a talent magnet, she’s building a team of talent magnets, and I think that’s what’s necessary to win in tech these days.

Steven Koenig — SMBC Nikko Securities — Analyst

All right, well thank you both.

Mark Anderson — Chief Executive Officer

Thanks, Steve.

Operator

Our next question comes from the line of Pinjalim Bora with JP Morgan. Please proceed with your question.

Pinjalim Bora — JP Morgan — Analyst

Great, thank you all, and my congratulations as well on the quarter. One question from me on framework, could you help us maybe, I think I heard a little bit, but could you help us maybe how do you position Trifacta and Designer Cloud, because you have now 4 different cloud products. So I think I heard unified cloud platform, Trifacta’s unified cloud platform. So over time, all these products should be — would be — would they kind of fold under the Trifacta umbrella from a technical or branding perspective as well? And then I think you launched pricing on some of your cloud products I heard user-based and Trifacta has volume based. So over time, could we expect that pricing also to kind of unify under one of the 2 models?

Mark Anderson — Chief Executive Officer

Yeah, thanks for the great question Pinjalim, as always. Yeah, I think, think of Trifacta as, think of them as being the foundation of our platform, we’re leveraging the work that they’ve done over the last 2.5 years in building their stack in all 3 public cloud players in more than just one geographic theater. So I think that really sort of express routes us to having a platform that we can now write and build applications to access that platform to be as friction free as possible. And so in terms of positioning, we went through a really successful Designer Cloud trial period that’s Suresh ran, as well as kind of like a early user and we learned a lot of data about how customers wanted us to give them bundled offerings with Designer Cloud as well as Designer be able to incorporate more of these new products into our enterprise license agreements to be able to be as as flexible as possible, but also to encourage people to burst beyond what their limits and thresholds are, not penalize them for going one seat over.

So really flipping the script on that. And so you can think of discrete products today that the Hyper Anna product, Alteryx Auto Insights, we render the data that Alteryx is able to aggregate and pipeline, and that can give a person like me or Kevin English language suggestions about areas to surface, to look at really simple to use, and I think it will be a new persona that we can sell for Alteryx Machine Learning, it’s the same thing, we’re making machine learning for the mass and being able to suggest some machine learning models that the customers may want to build and deploy and go from there. And those will be apps that will access the platform that Trifacta has. In the near term, over the next year, we’re going to use Trifacta’s consumption based pricing to continue selling into their customers and start enjoying some intimacy with IT and the data engineering, really important roles that we’re just starting to get successful selling to and building features and compliance that make them happy. So it will all come together under a common platform for sure I think you’ll start to see your pricing.

Again, this is not a race to finish, we want to do this to make us easy to do business with for our customers, but we’re going to do a high quality job, and I think people will wake up in 2023, much like Office 365 users woke up, and not really knowing whether they’re working in a browser working on an application and we want to make it as easy as possible for people. And Paula, you may have some more things to add there.

Paula Hansen — President & Chief Revenue Officer

Thanks, Mark and a great question Pinjalim. So we’re clear in terms of where we saw it coming off of our kick-off last week. When we think about Designer Cloud, we continue to see a lot of interest from lines of business, business analysts, business users, who are familiar with designer cloud like ease of use, they’re familiar with the various tools. So that’s a really logical place for us to continue to expand our Designer Cloud footprint where we already have hundreds of users from our early release program, and then we see a different opportunity with the Trifacta solution where we’re going to be speaking with data engineers inside of IT. These are often the people that are making decisions on how data warehousing and re-platforming of their data architecture, and in that case the Trifacta solution is just a really perfect match for them. So very distinct but complementary sales motion.

Pinjalim Bora — JP Morgan — Analyst

Understood, thank you for the thoughtful answer. One quick question for Kevin. I think you said $20 million, it seems like some Trifacta on the ARR for the year. Just wanted to ask if that number is kind of a post-DR write down number, anyway to kind of understand the Trifacta run rate prior to the acquisition and how should that $20 million going to flow into the year or through the year?

Kevin Rubin — Chief Financial Officer

Yeah, thanks Pinjalim. I appreciate it. So when we do, well, now that we’ve closed the acquisition and we integrate the financial information of Trifacta into our books and records, we will take the deferred write down as you mentioned, as it relates to revenue. So that is what’s impacting the higher expense level as we go forward to the year. From an ARR perspective, it’s not affected by those same dynamics. And so we are bringing forward the business that we’ve acquired. And so, as I mentioned, we expect about $20 million in ARR to come from them this year.

Pinjalim Bora — JP Morgan — Analyst

Got it. Thank you.

Mark Anderson — Chief Executive Officer

Thank you.

Kevin Rubin — Chief Financial Officer

Thanks, Pinjalim.

Operator

Our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question.

Koji Ikeda — Bank of America Merrill Lynch — Analyst

Hey, Mark, Paula, Kevin. Nice quarter and finish to the year. Two questions for me. On the guide for 2022 operating income guidance without Trifacta would that operating income guidance maybe have come in close to breakeven. Just trying to get a sense of the magnitude of the acquisition/integration costs.

Kevin Rubin — Chief Financial Officer

Yeah, thanks Koji. So as I mentioned in the prepared remarks, the core business before Trifacta is expected to operate at breakeven for this year.

Koji Ikeda — Bank of America Merrill Lynch — Analyst

Got it, got it. Okay. Sorry, I missed have missed that, apologies. And then the second question, in the prepared remarks, I noticed you, there was a comment about rev-rec change for this year 50% upfront versus 40 from the past. Is this an effective contract duration, or is there anything else we should be thinking about that’s causing that rev-rec change?

Kevin Rubin — Chief Financial Officer

Yeah, no, it’s not a function of contract duration, unfortunately 606 has got some gymnastics in it that we’ve talked about ad nauseam, but in this particular case for the on-premise products, we’re going to see a slightly higher portion of upfront as a result of some of the packaging of features and Designer and so we’ll have a little bit upfront, I commented that it will drive about $45 million of incremental revenue in ’22 which is certainly not the totality of the increase in the guide.

Koji Ikeda — Bank of America Merrill Lynch — Analyst

Got it, got it. Thanks so much. Thanks guys.

Mark Anderson — Chief Executive Officer

Thanks Koji.

Operator

Our next question comes from the line of Chase Donovan with Raymond James. Please proceed with your question.

Chase Donovan — Raymond James — Analyst

Hey guys, thanks for taking the question and congrats on the great quarter.

Mark Anderson — Chief Executive Officer

Thanks Chase.

Chase Donovan — Raymond James — Analyst

You noted the strong success with Auto Insights in APJ and that’s now coming to North America also noted the strong demand for the machine learning products. Just curious, if you take a look at the take rate today for incremental modules where do you kind of see that stand today and where do you think that can go over time is you guys now that is going to pop and strategy?

Mark Anderson — Chief Executive Officer

Yeah Chase, we’re not going to get into take rates on the cloud stuff byproduct. I think at this stage, it’s still relatively small from a materiality standpoint compared to Designer and Server business. But I can tell you just from having seen it firsthand, the founders of all of the businesses were that we’ve acquired, we had our sales kickoff last week and Kent and Natalie, the founders of Hyper Anna, where we’re probably tied for the most successful people at the show because the Trifacta had 50 — we have 50 Trifacta people there and they were swarmed by our sales team, overwhelmed might be another term. So listen, salespeople one they want more products to sell, and they want more people to sell it to and we recognized in all of these acquisitions you our investor base and analyst base can count on the experienced team that we have to sort of execute a plan to make these people and in this technology integrate into our company. That’s in my mind, we’re acquisitions either either succeed or fail. And so you can bet, we’ve got a very granular plan for each of these products to not only help avail our salespeople to more, but also educate the market around what we’re doing to build this platform.

Suresh Vittal — Chief Product Officer

And Chase if I can add a quick data point. We spent the last 6 months putting our products through a beta and a limited availability, several hundred customers have been using these products for well over 6 months now. And the feedback generally has been positive across the board for Alteryx Machine Learning and Designer Cloud. And so we feel very confident that we are ready to meet the customers where they want to be met, and kind of expand the use case with the combination.

Chase Donovan — Raymond James — Analyst

Okay. That’s really helpful. And then one more, just, I know we’re only a week into closing the Trifacta acquisition, I was just curious any high-level thoughts how you think about the Trifacta integration process and timeline? And just any major milestones that we should watch out for this year? Thanks guys.

Kevin Rubin — Chief Financial Officer

Yeah. Thank you. Great question. So I’ve had the opportunity of doing integrations of multiple products in the past and I think the journey with these cloud product integrations is where you put your customers at the heart of the process, take their feedback and do your drive integration. So I don’t view this as a kind of a big bang execution for us, but we will be releasing capabilities almost on a quarterly basis, and there’ll be milestones that we play out here. But as you’re thinking about the themes for integration, definitely platform and infrastructure integration is going to be a big theme for us, Mark have talked about the opportunity with Trifacta becomes a cloud platform and so bringing us common set of platform services. It’s something that we’re thinking about and we’re delivering against pretty aggressively. You should expect to see us going to thematically user experience and onboarding should be other theme. And then of course the third theme, I think about data connectivity and cloud connectivity across a variety of data sources. So as we build-out the roadmap, these themes will be front and center for us.

Chase Donovan — Raymond James — Analyst

Perfect, thanks.

Mark Anderson — Chief Executive Officer

Thanks a lot Chase.

Kevin Rubin — Chief Financial Officer

Thank you.

Operator

Our final question comes from the line of Edward Magi with Berenberg Capital Markets. Please proceed with your question.

Edward Magi — Berenberg — Analyst

Thanks for taking my question and congrats on the quarter and the acquisition. Just one last question here, we talked about how fiscal ’21 was a transformative year for Alteryx, can investors view right now is a sort of inflection point that demonstrates we’re past major growing pains through new management introductions over the past 4 months? The company has really pinpointed its vision on growth at scale.

Mark Anderson — Chief Executive Officer

Yeah, for sure. I think, I hope that by inferring from our tone and hearing from our words that we’re squarely focused on driving long-term ARR growth into this massive TAM that we have with the best platform and the best people. So that’s — we moved a lot of people out of the business in the last year, some self selected, some more be around for the volume of change that we imposed, but the team that we have now, the volume of people that we brought in are hitting the ground running. And I think we’re in a really good spot. Edward, I really do.

Paula Hansen — President & Chief Revenue Officer

And I would add Edward that, real quickly to add to the point that Mark was making, this is a year of acceleration opportunity for us because that’s what our customers are asking us to do. And one of the responsibilities that I’ve picked up in my new role as our customer success and services organization where we’re really focused after the sale with our customers on driving adoption and expansion and value realization, and what they have told us to a customer at the executive levels that they’re looking for us to help them accelerate their maturity with automation and analytics. And so this customer success team that’s been built under our Chief Customer Officer, Matthew Stauble over the last year plus has just blown me away in terms of what we’ve been able to deliver to our customers, really helping them with that acceleration that they’re asking for. And we’re going to come out with some exciting things that we’ll be sharing with you throughout the year around how we will help our customers assess their analytics maturity, benchmark themselves, give them recommendations on how they can accelerate their journey, real business partnership discussions that frankly they’re asking Alteryx to lean in on as a good business partner in addition to the technology that we provide. So that’s going to be something we’ll continue to update you on as well over the course of the year.

Edward Magi — Berenberg — Analyst

Really great to hear. And really looking forward to what we’re going to see next year. That’s all from me. Thank you.

Mark Anderson — Chief Executive Officer

Thank you so much.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now turn the call over to Mark Anderson for closing remarks.

Mark Anderson — Chief Executive Officer

Thanks, operator. I’d like to say thank you again to our customers and our team at Alteryx. Let me be very clear that we expect to win in 2022. We have a large TAM in front of us, and we are well-positioned to take our share of that opportunity. We’re going to do this by focusing on ARR growth, by building the technology that’s imperative to the modern stack, and by delighting customers with a go-to-market motion that will make them successful, faster.

Operator

[Operator Closing Remarks]