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Qlik Technologies, Inc. (NASDAQ:QLIK)

Q4 2012 Earnings Call

February 14, 2013 5:00 p.m. EST

Executives

Staci Mortenson – IR

Lars Bjork – President and CEO

Bill Sorenson – CFO, Secretary and Treasurer

Analysts

John DiFucci – JPMorgan

Keith Weiss – Morgan Stanley

Greg Dunham – Goldman Sachs

Brent Thill – UBS

Steve Ashley – Robert W. Baird

Tom Roderick – Stifel Nicolaus

Karl Keirstead – BMO Capital Markets

Ross Macmillan – Jefferies & Co.

Jesse Hulsing – Pacific Crest Securities

Nathan Schneiderman – Roth Capital

Ed Maguire – CLSA

Robert Chen – Citigroup

Derrick Wood – Susquehanna

Matt Hedberg – RBC Capital Markets

Greg McDowell – JMP Securities

Operator

Good day, ladies and gentlemen, and welcome to the Qlik Technologies Fourth Quarter 2012 Earnings Call.

[Operator Instructions]. As a reminder, this conference call is being recorded.

I would now like to introduce the host for today's call, Staci Mortenson. Please go ahead.

Staci Mortenson

Thank you, operator. Good afternoon and thank you for joining us today to review Qlik Technologies' fourth quarter and full year 2012 financial results. With me on the call today are Lars Bjork, Chief Executive Officer, and Bill Sorenson, Chief Financial Officer. After prepared remarks we will open up the call to a question-and-answer session.

During this call we may make statements related to our business that would be considered forward-looking statements under federal securities laws. Words such as but not limited to predict, plan, expect, focus, anticipate, believe, goal, target, estimate, potential, may, will, might, momentum, could, seek and similar words will identify forward-looking statements. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date.

These statements reflect our current views regarding the future, are subject to a variety of risks and some uncertainties that could cause actual results to differ materially from expectations. 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 EDGAR system and our website. We encourage all investors to read our SEC filings. Qlik Technologies expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements made herein except as required by law.

Additionally, non-GAAP financial measures will be discussed on this conference call. A reconciliation to the most directly comparable GAAP financial measures can be found in our press release which is available on our website www.qliktech.com under the Investor Relations tab. Also please note that our webcast of today's call will be available on our website in the Investor Relations section.

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

Lars Bjork

Thank you, Staci. I'd like to start by thanking all of you for joining us today.

We ended the year on a strong note with Q4 revenue and non-GAAP earnings per share exceeding the high end of our guidance. It’s particularly pleasing to see our efforts in the enterprise space paying off.

For the fourth quarter we recorded total revenue of $137.5 million, representing an increase of 27% over the prior-year period and 28% on a constant currency basis. Our non-GAAP operating income for the quarter was $32.3 million and non-GAAP net income was $0.25 per diluted common share.

For the full year, revenue was $388.5 million, an increase of 21% year over year and 26% on a constant currency basis. Our non-GAAP operating income for the full year was $36.6 million and non-GAAP net income was $0.26 per diluted common share.

During the quarter we took advantage of strong demand and better sales execution across our enterprise business and continued to build on our success in our SMB segments. As we've been discussing with you for the last several quarters, we have improved our sales processes, proving ROI and value proposition to customers earlier in the sales cycle. These actions combined with seasonal enterprise buying patterns are clearly reflected in the increase in deals over $250,000, which are up to 52 from 35 in Q4 of 2011, including a number of multimillion dollar deals. I'm proud of our teams for their focus in closing the Q4 opportunities at hand while building healthy pipelines to support what we expect to be another year of solid growth in 2013.

The Americas led the way during the quarter with revenues increasing 41% year over year and representing 36% of our total revenue. We saw a significant increase in the number of enterprise level deals to existing and new clients, as well as an increase in the overall number and average size of deals.

We're also pleased with our results for the quarter from Europe with revenue growing 19% from the prior-year quarter and representing 55% of our total revenue. Europe continues to be a strong market for us and we experienced broad-based growth in the region as companies recognize that our software will help them better manage their operations and drive business outcomes in the current macroeconomic environment. For example, one of our bigger deals in the quarter was a retailer in one of the most challenging European economies.

Rest of world revenue increased 34% year over year during the fourth quarter, representing 9% of total revenue, reflecting the investments we've been making in these territories. We ended the quarter with approximately 27,000 customers, we saw a healthy distribution of deals across all the markets we serve from both our partner and direct sales channels. During the fourth quarter, 51% of license and first-year maintenance came to our partner channel and 49% through the direct sales team, both enterprise and inside sales.

While we continue to move out into the enterprise, we believe it is important that we maintain a balanced go-to market model that enables us to effectively reach our broad end-markets. Our land-and-expand strategy continues to work as customers made increasingly meaningful commitment to us with 67% of license and first-year maintenance from existing customers. Having demonstrated the ROI in initial land deployments, we were able to engage our customers and expand in multiple large-scale deployments.

We saw average deal size increase, with the majority of our large deals coming from existing customers who know that we can scale with them. An example of a large global enterprise customer that continues to expand its relationship with Qlik Tech as well as its QlikView deployment is Volkswagen AG, one of the world's leading automobile manufacturers and the largest carmaker in Europe.

The Volkswagen Group is made up of 12 brands, including Volkswagen, Audi, SEAT, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania and MAN. Volkswagen AG currently has more than 4,000 QlikView users and more than 100 production QlikView applications in key businesses including procurement, product management, and sales, where QlikView is powering a 360-degree supplier view, combining procurement, quality and production information.

Across the business, QlikView is at the core of business discovery via self-service analysis for decision-makers and power users. QlikView is included in the CIL Book of Standards as an approved technology enterprise-wise. Volkswagen is also deploying QlikView on mobile to reach out to its users to facilitate a completely seamless discovery experience.

Another case in point is SunTrust, one of the United States' largest regional banks with 25,000 employees and $173 billion in assets. After a lengthy competitive process against other solutions including Cognos, Tableau and Microsoft among others, SunTrust Enterprise Business Intelligence Group selected QlikView to deliver business discovery applications, interactive dashboards and scorecards. Key application areas include corporate performance management, risk management, finance, lending, expense management, fraud and others. SunTrust is expected to scale to 5,000 QlikView users early in 2013 and is finishing implementation of the infrastructure to support 10,000 users by June of this year.

As we reflect on 2012, we made a significant investment across our business to build a sustainable growth platform and further differentiate our value proposition. Our products are more enterprise-enabled with the introduction of QlickView Direct Discovery and the QlikView Governance Dashboard. We continue to verticalize our enterprise sales force in order to better leverage relationships and industry expertise.

We expanded our functional expertise to better support go-to market initiatives, spanning sales, marketing, solutions and partners. While our sales force was tested in 2012, we believe that they are now better equipped to deal with economic volatility, longer enterprise sales cycles and tighter approval controls. We also continued to expand our reseller OEM and system integrator channels and further develop our inside sales team to support our SMB business. We expect to leverage all these investments in 2013.

In addition, we further strengthened our management team with the addition of Terrie O'Hanlon as Chief Marketing Officer. We're very happy to have her onboard and will leverage her more than 20 years of marketing experience in the software, hardware and services space. Terrie has led the marketing programs of many fast-growing and innovative companies, and we expect she will apply her expertise, rigor and discipline to further expand our market-leading position, lead generation capabilities, and help drive future revenue.

As we look ahead to 2013, we are optimistic about our business and we continue to believe that there is a great growth opportunity ahead of us. The entire company is aligned around a few primary goals that will be key to our continued success. First, we will continue to broaden our service offerings to help our enterprise customers drive more successful deployments, increase ROI, and scale further with us over time. Qlik Markets will offer an even wider range of applications so our customers can access a more complete solution designed to solve their specific business problems.

Second, QlikView 12 will ship in 2013, bringing a new level of mobility and enterprise capabilities to our customers. And finally, we're also focused on improving customer success and building stronger relationships. While the product is important, we realize that companies don't just buy a product, they buy a relationship including an array of services and support.

Before I turn the call over to Bill, I want to spend one moment on two things we are proud of. First, the recently released Gartner Magic Quadrant has us positioned in the leader quadrant for the third straight year, based on completeness of vision and ability to execute. If there were a single market theme in 2012, it would be that data discovery became a mainstream architecture. This year every vendor in the leaders' quadrant now has some type of self-service BI offering which signifies that the category we pioneered has transformed the entire BI industry and it's very exciting to have maintained leadership in the market we created.

Second, I'm pleased to announce that Qlik Tech won the CSR on a Shoestring award at the 2013 PR News CSR Awards, which honors the year's top corporate social responsibility campaign. The award went to a program we initiated in 2012 when Qlik Tech employees took on the challenge of each turning $10 into $100 in 10 weeks. Clik Tech exceeded the goal of $100,000 to raise over $150,000 for the children of Africa through an organization called Hope HIV. The winners, which were announced earlier this week at a luncheon at the National Press Club in Washington, D.C. included brands like Walmart, FedEx and Coca-Cola. Corporate social responsibility is a great -- of great importance to us and a key foundation for our strong company culture.

We are optimistic about 2013. We have established a strong foundation for growth and are making the necessary investments to further enable us for the enterprise market while continuing our success in the small and medium business markets. We believe the opportunity for QlikView is expanding and we are extremely well-positioned competitively in the market.

Based on the demand for our products along with the steps we're taking to better enable the enterprise, we believe that we can achieve annual total revenue growth in excess of 20% in 2013. And while plan to make investments for ongoing growth in 2013, we're targeting improvements in our profit margins by driving greater efficiencies across sales and operations.

In closing, I'm sure most of you saw that Bill Sorenson has announced his intention to resign as CFO. I want to take a moment to thank Bill for his many years of service to Qlik Tech. Since joining Qlik Tech in 2008, Bill has played an integral role in the company's growth including taking us through the IPO, building a strong global finance and IT team. I'm confident that our team is well-prepared to support the continued execution of our strategic vision and growth objectives, and I appreciate Bill's commitment to ensuring a smooth transition until his successor is found.

With that, let me turn the call over to our CFO, Bill Sorenson.

Bill Sorenson

Thank you, Lars. I'd like to provide further details on our financial performance during the fourth quarter and full year 2012, followed by our guidance for the first quarter and full year of 2013.

We're very pleased with our fourth quarter results, ending the year on a strong note. Total revenue was $137.5 million, up approximately 27% over the same period last year, exceeding our guidance for the fourth quarter. We estimate that the negative impact from foreign currency exchange rate fluctuations from the prior-year period was approximately 1%.

Within total revenue, license revenue growth was strong, increasing 24% over the same period last year to $93.5 million. Maintenance revenue was $34.9 million for the fourth quarter, increasing 40% over the same period last year, reflecting both the value our customers generate with our software and our increased focus on this important revenue stream.

Professional service revenue was $9.1 million, increasing 23% over the fourth quarter of 2011. During the quarter, 51% of license and first-year maintenance was generated from our indirect partner channel and 49% from our direct channel. Our broad and diversified partner stream continues to perform well and drive our growth.

We also benefited from larger average deal sizes, more large deals, and improved deal flow across both our direct and indirect channels. During the quarter we completed 177 deals over $100,000 compared to 159 in the same period last year. These deals include license revenue plus first-year maintenance. Included in this we closed 52 deals over $250,000 compared to 35 in the same period last year. We also saw significant increase in deals greater than $1 million. For the full year we closed 11 deals greater than $1 million with the majority happening in the fourth quarter.

We saw a number of these larger deals in healthcare and financial services where we have had success for a number of years. For example, we closed a deal on Q4 with Nasdaq OMX, which operates the largest electronics equity markets in the United States. Nasdaq OMX is currently in the process of building out a QlikView application called [NasDash], which will be used to provide more than 70 executives including CEO Bob Greifeld, with key performance metrics on the day-to-day business performance drawn from over 15 different data sources.

In 2012 we also gained traction in retail and automotive, closing many larger deals, including a number of deals over $1 million, demonstrating that QlikView not only scales to the enterprise, but that it brings value to many functions across a broad range of industries.

Our headcount ending the quarter was 1,425, a 35% from the year-ago period and a sequential increase of 47 from September.

Let's now turn to costs and margins. We will review our numbers on a GAAP basis and, where applicable, on a non-GAAP basis. Non-GAAP numbers exclude stock-based compensation expense, employer payroll taxes on stock transactions, amortization of intangibles, and utilizes an estimated long-term effective tax rate of 32%. A GAAP to non-GAAP reconciliation can be found in the tables of our press release which is available on our website.

Gross profit for the fourth quarter of 2012 was $123.7 million and represented a gross margin of 90% compared to a 91.6% gross margin in the fourth quarter of 2011. Operating expenses totaled $97.2 million in the fourth quarter compared to $72.8 million in the prior year, which reflects a meaningful increase in R&D spending as we prepare for QlikView 12, as well as a continued investment in our enterprise sales and services capabilities.

As a result, our operating income on a GAAP basis was $26.5 million, a slight increase compared to GAAP operating income of $26.2 million in the same period last year. Our non-GAAP operating income was $32.3 million for the fourth quarter, an increase compared to $30.6 million in the prior-year period. Non-GAAP operating income excludes $5.4 million of stock-based compensation expense, $100,000 in employer payroll taxes on stock transactions and $300,000 of amortization of intangible assets.

During the quarter we had a foreign exchange loss of approximately $100,000 which was included in other expense compared to a loss of $700,000 in the same period last year. Foreign exchange gains and losses can fluctuate and our guidance does not consider any additional potential impact to other income and expense associated with foreign exchange gains or losses as we do not estimate movements in FX rates.

GAAP net income for the fourth quarter was $13.3 million or an income per common share of $0.15 on a diluted basis, compared to GAAP net income of $15.6 million or income per diluted common share of $0.18 in the fourth quarter of 2011. On a non-GAAP basis, our net income was $22 million for the fourth quarter of 2012, an increase compared to a non-GAAP net income of $20.4 million for the fourth quarter of 2011. Non-GAAP income per diluted common share was $0.25 for the fourth quarter of 2012, an increase compared to non-GAAP income per diluted common share of $0.23 in the same period last year.

For the full year 2012, our total revenue was $388.5 million, an increase of 21% or 26% on a constant currency basis. GAAP income, or operating income rather, was $14.6 million and non-GAAP operating income was $36.6 million. We generated GAAP net income of $3.8 million or $0.04 per diluted common share for the year and non-GAAP net income of $22.9 million or $0.26 per diluted common share for the year.

Moving to the balance sheet, cash and cash equivalents total $195.8 million as of December 31, 2012 compared to $177.4 million as of December 31, 2011. During the 12 months ended December 31, 2012, we generated $27.7 million in cash flow from operations compared to $16.7 million for the year ended December 31, 2011.

Now, let me turn our thoughts on the first quarter and full year 2013, starting with the first quarter. We expect total revenue to be in the range of $87 million to $91 million, a non-GAAP operating loss to be in the range of $15 million to $18 million, and a non-GAAP net loss per common share of negative $0.12 to negative $0.15. For the full year 2013, we expect total revenue to be in the range of $465 million to $475 million, an increase of approximately 20% to 22% over 2012.

Non-GAAP operating income is expected to be in the range of $50 million to $54 million, translating into a non-GAAP operating margin of approximately 11%. This expansion of approximately 200 basis points from 2012 is expected to be delivered through greater efficiencies across sales and operations even while we continue to invest in the products and services to drive our growth. Non-GAAP net income per diluted common share is expected to be in the range of $0.39 to $0.42. As described in our press release, we exclude certain items in our non-GAAP calculation and make certain assumptions about our tax rate and shares outstanding.

Our guidance reflects the fact that first quarter revenue has historically represented between 17% and 19% of annual revenue. In addition, the company's first quarter operating expenses have been and continue to be higher sequentially than Q4. This is due to costs related to the company's Annual Employee Summit, which is held in January, the full impact of hiring in the prior fiscal year, and expected first quarter employee additions, along with seasonal increases in employer payroll taxes and benefit expenses. The combination of these trends unfavorably impacts our operating income in the first quarter. We also want to remind you that we hold our Partner Summit in Q2, and while the expense for this event is less than the Employee Summit, it is meaningful.

Finally, from a revenue perspective, as we continue to further penetrate the enterprise, we expect our year to remain backend loaded, but are not expecting significant shifts in our quarterly contribution percentages from historical patterns.

Before we turn the call over to Q&A, I want to say that it has been a tremendous privilege to serve as Qlik Tech's CFO and to be part of its extraordinary growth. Qlik Tech has been a family to me, and I'm extremely proud of what we have all accomplished. Qlik Tech continues to have a bright future, and I will remain actively engaged as CFO until a successor is named, and I look forward to seeing all of you out on the road over the coming months at investor conferences and meetings.

So with that, operator, I think we're ready for the Q&A session. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions].

Our first question comes from John DiFucci from JPMorgan. Your line is open.

John DiFucci – JPMorgan

If I can just congratulate you guys on a really impressive quarter here. I have one question for Lars and then a follow-up for Bill. Lars, it's interesting to see 51% of the license for first-year maintenance coming from indirect. So you've got both indirect and direct business strong this quarter, because it's typically about 50/50 in the fourth quarter. It's great to see the direct kick in, and that's sort of where at least the investment community, we've been focused on, because you've been building that over the last year or year and a half or so. But we've seen some weakness from others in the indirect channel, really from the mid-market. Can you talk about what you're seeing in the channel, and remind us of your continued investment in there, in the mid-market, or in the channel? Because I think that's something that we, I don't know, maybe we lose focus on a little bit.

Lars Bjork

Yeah. Thank you, John. I think what we have to start recognizing is we have a very large, very broad partner community of 1,400 partners, and some of them operate in territories and markets that haven't been impacted over the year. You've seen a stronger number, as you were alluding to, for indirect markets in previous quarters, and I think it's a broad base, many verticals, many segments, many territories, and a clear focus on this over a long period of time that's paying off now.

John DiFucci – JPMorgan

So it's something that even though you're focusing a lot of effort in the direct channel, the indirect isn't something you're deemphasizing at all, it sounds.

Lars Bjork

Not at all. I think the whole idea of the indirect channel is that we focus on it as much. You might not be seeing it represented in the expenses, but that's the nature of it. We are partnering with somebody else to do part of the work here.

John DiFucci – JPMorgan

Okay, great. And if I might, Bill -- well, first of all, Bill, it's been a pleasure working with you, I really enjoyed it and I wish you the best in what you're going on to do. But everything looks really strong across the board for this quarter. But cash flow was a little bit lower than we were looking for, but you had a huge jump in accounts receivable, which I'd guess is a reflection of the large deals that you both -- you and Lars both pointed out in the quarter. Should we assume those receivables will be collected next quarter and have a positive effect on cash flow next quarter?

Bill Sorenson

Yes, absolutely. And John, I'm not going anywhere quickly, so unless you could find Lars a successor, I probably will be here too next quarter, but I look forward to continue working with you. But yes, you can expect cash flow to be dramatically improved in Q1 by virtue of collections.

John DiFucci – JPMorgan

Great. Thanks a lot, guys. Nice job.

Bill Sorenson

Thank you.

Operator

Our next question comes from Adam Holt from Morgan Stanley. Your line is open.

Keith Weiss – Morgan Stanley

Excellent. This is actually Keith Weiss sitting in for Adam Holt. Thank you for taking our question. Great quarter, very impressive growth in the Americas. What might be even a little more impressive was the acceleration you saw in Europe. Lars, I was wondering if you could talk a little bit about what you saw in Europe. Do you think, I mean, is it too soon to call turning a corner in Europe there? Was there a catch-up business from perhaps weakness earlier in the year that really came to fruition in Q4? Give us some kind of color into what drove that accelerating growth in Q4.

Lars Bjork

Yeah. I wouldn't talk about turning a corner or a catch-up because that's hard for us to make that judgment call. What I think we had spoken about before is we are making a strong inroad into the enterprise business and a lot of these things have been underway, and while it didn't materialize in Q3, they certainly did in Q4. And what's pleasing to see, that it is so broad-based in Europe. It's across the board. We're doing good in Northern Europe, we're doing well in Central Europe. And to my and our expectation, I think we did very well in Southern Europe where expectations are lower.

Keith Weiss – Morgan Stanley

Excellent. And perhaps if I could have one follow-up for Bill. Maintenance did very well in Q4, seasonal uptick that was well ahead of what we were expecting, and I think what you've seen in the past couple of years. Were there any one-time items, excuse me, in that maintenance line? And how should we think about maintenance trending into Q1 based upon such a strong Q4 performance?

Bill Sorenson

Well, Keith, in any quarter we generally have some catch-up and we wouldn't necessarily comment related to that being one-time items. We are progressively moving our renewals up to 90%. We look to continue to move it higher, and we would hope we can do better there. I might be conservative as you approach modeling it, because as we said before, we do business in 105 territories, many of that is through partners, many of those deals are very small, and we would anticipate that folks renew smaller transactions, but we'll continue to move in that direction. We'll continue to try to push it higher.

Keith Weiss – Morgan Stanley

Excellent. Thank you very much, guys.

Operator

Our next question comes from Greg Dunham from Goldman Sachs. Your line is open.

Greg Dunham – Goldman Sachs

Hi. Thanks for taking my question. Really just one. We're not seeing a lot of software companies post big deals or many of them in the December quarter, and you guys are kind of an exception there. Can you just I guess talk about your big deal pipeline as you look out to 2013 relative to where it was when you looked into 2012?

Lars Bjork

Yeah, I think the view is should take care. We've spoken about land and expand, that's how we engage with these customers. It is pretty clear that it is beginning to materialize and pay off from our perspective. We have lots of engagements with larger customers, and more and more these customers are looking for self-service type of offerings that are being rapidly deployed, quick time to value, and I think we have now proven ourselves to be a very viable player for broad-based deployments of this type of service and software. And it is -- the outlook looking into 2013 versus a year ago is much different from a year ago.

Greg Dunham – Goldman Sachs

That's helpful. I guess one quick follow-up maybe for Bill, you mentioned kind of the Q1 guidance being that kind of percentage of the normal build throughout the year. Does QlikView 12 impact the timing of revenue in FY '13 at all? Is that going to change the mix at all or is that not going to have a big impact? Thanks.

Bill Sorenson

It's not our expectation, Greg, to have an impact.

Greg Dunham – Goldman Sachs

Perfect. Thank you.

Operator

Our next question comes from Brent Thill from UBS. Your line is open.

Brent Thill – UBS

Good afternoon. Just as a follow-up on the enterprise business, Lars, you're landing some pretty impressive logos. When you look at the average seat deployment in some of these larger transactions, is there any sense you can give us in terms of what you're seeing in terms of that growth on the enterprise perspective? Any other anecdotal evidence of how this is breaking beyond just maybe a division of maybe one of the larger enterprises across the company?

Lars Bjork

I think you can say it goes from very large divisions to companywide. It goes from thousands of seats to tens of thousands of seats. And where we more and more become the corporate standard -- and in some cases we do augment another solution and in other cases we actually replace an incumbent solution.

Bill Sorenson

And if I can just add, the one thing that's really interesting, Brent, is that what you're seeing in some of these big companies is they are really trying to create self-serve opportunities for their employees to effectively create the information in a way that's most relevant to them, and that's really key to the trends that we see driving BI growth going forward.

Brent Thill – UBS

Okay. So the multi-thousand seat transactions you're seeing an increasing traction, that trend continues?

Lars Bjork

We believe so, yes.

Bill Sorenson

Yeah, most definitely.

Brent Thill – UBS

Okay. And real quick, just, Bill, on the headcount, you've been right around mid 30% growth rate in terms of the headcount growth the last couple of years. Do you expect that to slow in '13?

Bill Sorenson

I think it's early yet, Brent, for us to really comment on what we think it will be. We're still looking to continue the growth. I mean I think right now it would be hard for me to say definitively it's going to grow at that rate. I think we'll have to see how the year progresses. But I do think headcount will continue to grow. We're not going to be flat line here.

Brent Thill – UBS

Great. Thanks.

Operator

Our next question comes from Steve Ashley from Robert W. Baird. Your line is open.

Steve Ashley – Robert W. Baird

First, my congratulations as well, and Bill, good luck on your next endeavor. I guess I'm going to ask kind of the same things that have been asked through the last couple of questioners, and it has to do with the pipeline. Did you see a normal amount of business slip at the end of the period? And could you maybe characterize the health of the pipeline this year versus a year ago?

Lars Bjork

I think you always see movements in and out of a quarter, and it was nothing different in Q4. The pipeline we are facing right now for Q1 of this year is probably as healthy as we've ever seen it before.

Steve Ashley – Robert W. Baird

Perfect. And then sales productivity, you mentioned you'd gone through the transition, you had started to hunt bigger game and you started to see some improvement. Do we expect or do you expect to see continued sales productivity improvement and are there additional steps you'll be taking this year to try to drive that?

Lars Bjork

Absolutely. While we are very pleased with Q4 and it's certainly showing improvements in productivity, we are not at all at the place where we would like to be. Some of the things that we are continuing to invest in is further verticalization of sales and support around that with biz dev and mark dev teams. The broader offering on the service side, these larger deals do crave another type of engagement for them to be successful, and we recognize that. That is more investment in education and training. It's more investment in expert services, in foundation services in a broader sense. So, yes.

Steve Ashley – Robert W. Baird

Thank you.

Operator

Our next question comes from Tom Roderick from Stifel, Nicolaus. Your line is open.

Tom Roderick – Stifel Nicolaus

Hi, guys. Good afternoon. I'll echo the prior sentiments here on the nice quarter, and Bill, best of luck in the next steps for you. So, Lars, you just talked a little bit about investments in services and consulting and things of that nature, and recently made a pretty senior hire on the services side. Can you guys give us a sense as to how we ought to think about, within the context of overall roughly 20% growth for next year, whether services or license will grow faster? Or should we think about kind of both of them in that ballpark of 20% each?

Lars Bjork

Well, since services is a relatively small number for us, on a relative basis it could potentially grow slightly faster than that. But it's too early to make any prediction on that. I think, as I mentioned before, I think you will see us deliver more services in these larger engagements, and then at the other end of the spectrum where you saw more of a ready-to-install installation, there will be hardly any services.

Tom Roderick – Stifel Nicolaus

Got it.

Lars Bjork

But I would -- I think you should plan for it to grow, from small numbers, relatively slightly faster.

Tom Roderick – Stifel Nicolaus

Okay. And then earlier, Lars, you mentioned that QlikView 12 here is set to be released in 2013. Can you help us pinpoint that timing? Is that kind of a Q2 event? And then as we think about QlikView 12 itself, maybe it would be useful and helpful for us to think about -- or for you guys to talk a little bit about functionally and structurally what are some of the key advantages of that product that you have customers looking forward to?

Lars Bjork

In due time when we announce it, we will cover all of what's included in your question. At this point we're not ready to speak to it more than it will be released in 2013.

Tom Roderick – Stifel Nicolaus

Okay. I'll jump back in queue. Thank you, guys.

Operator

Our next question comes from Karl Keirstead from BMO Capital Markets. Your line is open.

Karl Keirstead – BMO Capital Markets

I wanted to ask about the full year 2013 revenue guidance. If we use reasonable assumptions for maintenance and services, we would get to sort of a mid-teens license growth. And given that the comps are much easier, 35% headcount growth, so a lot of the salespeople will get their sea legs in 2013. That license growth seems very doable, and I'm wondering -- it's certainly a good idea to set the bar low, but Lars, is there anything else that might be sort of weighing on your mind as you set the '13 guide, maybe a macro or company-specific issue? Thank you.

Lars Bjork

There is nothing else weighing. And yes, we set the bar low, being sure that we can make it and break it. I'll let Bill elaborate.

Bill Sorenson

Yeah. As you know from fourth quarter we got a lot of pushback from people relative to our guidance. We want to ensure that the guidance levels that we establish for next year are conservative. And we very much want to get back on our historical trend of beating and raising.

Karl Keirstead – BMO Capital Markets

I appreciate that. Thanks.

Operator

Our next question comes from Ross Macmillan from Jefferies. Your line is open.

Ross Macmillan – Jefferies & Co.

Thanks a lot, and congratulations. I actually had a question on costs, just really around R&D ramp that we've seen now for a couple of quarters. I understand obviously you're working a lot on the next release. But I'm just curious, are you anticipating that we're going to move R&D to a sort of higher percentage of revenue on a sustainable basis? Or is this a bulge, if you will, around this product initiative? I'm curious to get your thoughts.

Bill Sorenson

Well, it's a bit of a bulge, Ross. I mean, first of all, the relative cost was higher than what we've done historically because we had to supplement our teams with some external consulting because of the amount of work that we're doing on version 12. We will be replacing those external with internal folks. But as we've talked about before, I would expect you're going to see us sort of in the 10% type of range for R&D. I don't expect you're going to see a further bulge from there, but certainly in that 10% area is what we would expect. And yeah, continue to be efficient there.

Ross Macmillan – Jefferies & Co.

Maybe just one follow-up, just on Q1 do you expect your license revenues to grow year over year?

Bill Sorenson

Yes. Absolutely.

Ross Macmillan – Jefferies & Co.

That's helpful. Thanks again. Congrats.

Lars Bjork

Thanks.

Operator

Next question comes from Jesse Hulsing from Pacific Crest. Your line is open.

Jesse Hulsing – Pacific Crest Securities

Hey, guys. Thanks for taking my question, and Bill, it's been a pleasure working with you. First question, Lars, you mentioned earlier, you were talking about vertical-specific hiring on the sales and marketing side and on the services side. Have you found that that's using the sales process for some of these larger deals and does that contribute directly to some of those big healthcare wins that you talked about?

Lars Bjork

Absolutely. Team's focusing on a certain vertical, getting deeper into it, knowing all the challenges, the needs, the problems, and being able to replicate one success story by helping the next client. Absolutely.

Jesse Hulsing – Pacific Crest Securities

Do you think that's a competitive differentiator for you right now versus some of the other data discovery, if you want to call it that, or analytic solutions?

Lars Bjork

I wouldn't be able to answer that question fully. I would expect that most companies would go down that route eventually. We have just seen that it is definitely paying off, as well as making early investments in education and training and services to get the customer as quickly as possible successful, pace off in the next coming expand deals.

Jesse Hulsing – Pacific Crest Securities

Great. Thanks, Lars.

Operator

Our next question comes from Nathan Schneiderman from Roth Capital. Your line is open.

Nathan Schneiderman – Roth Capital

Hey. Thanks very much. Nice job, guys, and Bill, good luck. Good luck with your future initiatives. A couple of questions for you. Lars, when you look at the 177 deals over $100,000, about what percent would you characterize as really departmental deals? And I don't know if you could share with us maybe a percent that you feel is multi-department versus enterprise.

Lars Bjork

I don't think -- we don't track that number, I wouldn't even be able to look at it. My sense is that they are far more cross-department, far more broad-based and, in a number of cases, serving many functions within the business.

Bill Sorenson

Yeah. I would just add to that, Nathan, no one yet is buying it for every employee, if that's what you mean by an enterprise deal. But we're still getting thousands of seat deployments and those deployments are getting larger and larger.

Nathan Schneiderman – Roth Capital

Got it. And Lars, I was hoping you could share with us your current thoughts on the visualization market and cloud delivery, these kinds of solutions, and maybe if you could tie into that your feelings about the competitive environment versus Tableau in particular and maybe how that relates to anything you may introduce with Qlik 12. Thanks very much.

Lars Bjork

Yeah. So if you take cloud, I think we track it like everyone else. It's still a small market in the BI market, as we've all spoken about. There are some clear constraints. We already use it through a number of partners that deploy QlikView in the cloud. And we track it. Time will tell whether this is going to be a big part of the market.

On the competitive side, I think we see more or less the same type of competitive environment with the stack players being the large players out there given their size. And I don't have a specific view on the visualization market more than I think it's a subset of the market that we serve. It solves one specific problem. It is more a tool than a platform or a solution which we represent.

Operator

Thank you. Our next question comes from Ed Maguire from CLSA. Your line is open.

Ed Maguire – CLSA

Good afternoon. I want to also give my best wishes to Bill. It's been really good to work with you. When you look back at the challenges that you had in the middle of the year, you'd put some sales changes in place, and as you look back after having a strong quarter, in your view, what was really responsible for those -- for the miss that you had in the second quarter and then the strength? Was it an issue of sales process? Is it, you know, how much of a role do you feel that the economy played? Or do you actually just have a much more backend loaded fiscal year as would be implied by your guidance for 2013? Thanks.

Lars Bjork

Hi, Ed. Lars here. Clearly macroeconomic factors in the middle of the year, and combine that with our ability or lack of ability to adapt to that economic volatility, which I think we're far better equipped. But also a number of these deals that we have now seen materialize in Q4 was worked on in the background over the third quarter. And while we couldn't speak about them, we didn't see them materialize, we knew they would be happening.

Ed Maguire – CLSA

Okay. Great. Thank you.

Operator

Our next question comes from Walter Pritchard from Citigroup. Your line is open.

Robert Chen – Citigroup

Thanks. Congratulations on a great quarter. This is Walter for Robert -- I mean, Robert for Walter. First, a question on the contracting mechanics of the larger, multimillion dollar deals. Just wondering if some of the deals that you've signed that are sort of enterprise wide, tens of thousands, if they're becoming sort of enterprise license agreements or are you still taking the Western Europe as they sort of scale out?

Lars Bjork

No, if there are opportunities to scale in these accounts even if some of them are very [respectful] in size.

Bill Sorenson

The only other thing, Robert, I would just add to that, is that there seems to be a lot of focus on ELAs. We're working with companies, and in some cases 75,000, 100,000, 200,000 employees. For us to be successful, we don't necessarily have to do an ELA.

Robert Chen – Citigroup

Got it. Just a question about the Q1 guide, sort of following up on Ross' question, it seems like if year-on-year license growth can be up in Q1, that it sort of means that either maintenance revenues is down sequentially or professional services revenue is down year on year. Is there something that we're missing in terms of that guide?

Bill Sorenson

Yeah. I think what you guys are missing is the same thing that everyone's missed last year. When we look at our guidance, when we look at clearly what's in the pipe, we have to mindful of what the year looks like. And we look at the year and we're looking at 20% to 22% growth and we're looking at Q1 to represent 17% to 19% of that year. And that's what we looked at. And our confidence relative to the guidance level comes from what we see in the pipe. But we're not going to put out a number like basically consensus would suggest in Q1 would represent 21% of our revenue in a year. We've never done that. So it really is looking at the seasonal patterns of our revenue.

Robert Chen – Citigroup

Thank you.

Operator

Our next question comes from Derrick Wood from Susquehanna. Your line is open.

Derrick Wood – Susquehanna

Thanks. Nice job on the quarter, guys. Lars, I know you're not talking a whole lot about the product and the new release. It does seem like there's chatter out there that it's a new -- it's a re-architecture or perhaps a new code base. So I'm just trying to get a sense for the potential in terms of risk on disruption of deal flow as you look at releasing this new product.

Lars Bjork

So first of all, we anticipate that most of the business that we will sell in 2013 will be off the current version while we do introduce the other ones. Specifically in the enterprise, I think we all know that the likelihood of somebody being first out of gate upgrading to something is fairly small. And at this point we don't anticipate that this will be more challenging than any other upgrade. It will be case by case, you can't make a broad statement and say that it works for everyone or it's going to be a challenge for everyone.

Derrick Wood – Susquehanna

Okay. And in terms of the new deals or the new product and functionality you have, the governments -- Governance Dashboard and Direct Discovery, did those play roles in driving some of your large deals yet in Q4, or -- just curious if that's kind of helping on the enterprise traction.

Lars Bjork

I think they helped us to drive the deals. If they were explicit parts of the deal, I wouldn't be able to answer. But clearly we have seen the Governance Dashboard being downloaded now more -- close to 10,000 times off Qlik Markets, the most downloaded item on the market. So yes, I think they are involved in the deals. If they were material parts of deals, I think it's too early to say.

Derrick Wood – Susquehanna

Okay. All right. Thank you.

Operator

Our next question comes from Matt Hedberg from RBC Capital Markets. Your line is open.

Matt Hedberg – RBC Capital Markets

Great. Thank you. Thanks for taking my question, guys. And I'll offer my congratulations as well. Last quarter you talked about emerging partnerships with Cloudera and Teradata. Obviously it's still early in sort of the maturation there, but wonder if you can give us a little bit more color and update on those two partnerships.

Lars Bjork

Yeah, so primarily on Teradata, there is clearly a number of opportunities that we are pursuing together. It's still early days. As you well know, Teradata is in big deal business and their sales cycle is in many cases much longer than ours. So it's progressing nicely, there's great interest, but it's still early days.

Matt Hedberg – RBC Capital Markets

Great. And then one last sort of follow-up to an earlier question, you talked about being better equipped to handle uncertain economic volatility. Last quarter you talked about kind of elongated sales cycles. I'm curious, did you see sales cycles contract or are we sort of in sort of a new normal of sort of elongated sales cycles?

Bill Sorenson

Very much a new normal.

Matt Hedberg – RBC Capital Markets

Great. Thank you.

Lars Bjork

Thank you.

Operator

Our last question for today comes from Greg McDowell from JMP Securities. Your line is open.

Greg McDowell – JMP Securities

Hi, gentlemen. Nice quarter. Thanks for squeezing me in here. It certainly feels like you guys and a few others have been taking share from the traditional stack analytic spenders, and that's been occurring for a while now. So my question is, do you feel like your share gains are starting to accelerate from the traditional stack vendors? And do you feel like this is a market that will be able to sustain sort of 20% plus growth not only in '13 but in the years beyond that? Thank you.

Lars Bjork

I don't think we track it that way. We track so many people's needs, problems and challenges out there when it comes to making smarter decisions of information, and it's clearly that we were in a place at the table. Yes, we do believe we can sustain a growth in excess of 20% over several years.

Greg McDowell – JMP Securities

Great. Thank you.

Operator

This ends our Q&A session. I will turn it back to management for closing remarks.

Lars Bjork

So before we end the call, I'd like to thank you all for joining us today. I would also like to thank our employees and our partners for their efforts during 2012. A special thanks to Bill, while he's not leaving today, it's been great working with you.

Bill Sorenson

Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's program. This concludes the program. You may all disconnect.

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