Tableau Software's CEO Discusses Q2 2013 Results - Earnings Call Transcript

Aug.11.13 | About: Tableau Software (DATA)

Tableau Software Inc (NYSE:DATA)

Q2 2013 Earnings Call

August 08, 2013 05:00 pm ET

Executives

Jay Peir - VP, Corporate Development

Christian Chabot - Chairman, CEO & Co-Founder

Tom Walker - CFO

Analysts

Heather Bellini - Goldman Sachs

Keith Weiss - Morgan Stanley

Philip Winslow - Credit Suisse

John DiFucci - JPMorgan

Brent Thill - UBS

Karl Keirstead - BMO Capital Markets

Greg McDowell - JMP Securities

Jesse Hulsing - Pacific Crest

Derrick Wood - Susquehanna International Group

James Gilman - Drexel Hamilton

Operator

Good day, ladies and gentlemen. Welcome to Tableau Software Second Quarter 2013 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded.

I'd now like to turn the conference call over to Mr. Jay Peir, Vice President, Corporate Development.

Jay Peir

Thank you and good afternoon, everyone. With me on today's call are Tableau's CEO, Christian Chabot and CFO, Tom Walker.

As a reminder, today's conference call is broadcast live via webcast. In addition, a replay of the call will be available on our website following the call. By now, you should have received the copy of our press release that was distributed this afternoon. If you have not it is available on the Investor Relations section of our website.

Before we begin, I would like to remind you that during today's call, we will make forward-looking statements regarding future events and financial performance, including our guidance for our third quarter and our full fiscal year 2013.

We caution you that such statements reflect our best judgment based on factors currently known to us and the actual events or results could differ materially. Please refer to the documents we file from time-to-time with the SEC. In particular, our final prospectives for our initial public offering and our Form 8-K filed today with our press release. The final prospectives in press release contains and identify important risk and other factors that may cause our actual results to differ from those contained in our forward-looking statements.

Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. We disclaim any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

During the call, we will also discuss non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results is provided in today's press release. The projections that we provide today excludes stock-based compensation expense, which cannot be determined at this time and are therefore not reconciled in today's press release.

With that, it's my pleasure to turn the call over to Christian.

Christian Chabot

Thank you, Jay. I would like to thank everyone for joining us today on Tableau's first quarterly conference call as a public company. I am pleased to report that Tableau had a strong second quarter, delivering total revenues of $49.9 million. This represents a 71% increase over the prior year second quarter.

During the quarter, we added over 1,500 new customer accounts, bringing our total to over 13,500 customer accounts. These accounts are located in over 100 countries. As we outlined on our IPO road show, we've successfully grown our business using our land and expand strategy.

During the quarter, we deepened relationships with many of our existing customers, including Dell, Deloitte Consulting, DePaul University, Google, Intel, Pandora Media, Red Box, automated retail, SUPERVALU and Swedish Health Services. We also added many new clients including Danske Bank, Family Dollar Stores, George Washington University, Paychex, RadioShack and Telefónica Chile.

As we grow our business, we will continue to make investment in our sales infrastructure and leadership team. To that end, I am excited to welcome Scott Jones as our new Vice President of Americas Sales. Scott comes to Tableau from SAP, where he spent 11 years in leadership positions. Most recently as Chief Operations Offer of the Global Database and Technology division. Scott will be instrumental in helping us to expand our services and sales in the Americas in both, enterprise and commercial accounts. He reports to Kelly Wright.

As this is our first conference call as a public company, I would like to take few minutes to talk about Tableau for the benefit of those who weren't able to participate in our IPO road show.

Tableau Software has been on a mission for over a decade to help people see and understand data. We believe making it easy for people to see and understand data represents one of the most important opportunities in computing this century. We believe there is an opportunity to help people answer questions, solve problems and generate meaning from data, in a way that has never before been possible and we believe there is an opportunity to put that power into the hands of a much broader population of people who have it today.

Our breakthrough technology enables people of all skill levels to see and understand and harness the potential of data. Many small and medium-size organizations considered Tableau to be their very first business intelligence applications. Many large organizations, including some of the largest organizations in the world, consider Tableau to be their very first self service business intelligence application. In short, Tableau has brought ease-of-use in this industry to a new level.

We've grown quickly over the last few years and today we have over 13,500 early adopter customer accounts, a momentum which suggests that the world is ready for technology that finally delivers on the promise of making data useful for the masses. The most exciting part of it all is that we believe we are just at the beginning of our journey.

With that as a backdrop, let me share a few stories of how our customers use Tableau today. ManpowerGroup is the world's third largest human resources services provider with over $20 billion in annual revenues and 400,000 clients. During this past quarter, they selected Tableau for an enterprise-wide deployment.

ManpowerGroup says it used to take them five people and three weeks to produce a report for one client. Using Tableau, two people are now able to service 50 clients in one or two days. This is a great example of customer dramatically improving the speed with which they can turn data into insight. Their conversations have changed from anecdotal and instinct base to data-driven allowing ManpowerGroup to get ahead of its clients need better.

In July, we announced a win with the Federal Aviation Administration. The FAA selected Tableau to visually analyze the broad range of data and support [with mission] to provide the safest, most efficient aerospace system in the world. The FAA is using Tableau to analyze data from air traffic operations, workforce planning and financial and IT systems. The FAA has stated "Tableau has enabled us to fundamentally change the way we do analytics. We have move from a waterfall to an agile model that provides a far more collaborative process and rapid time-to-market."

Tableau is growing as a result of the rapid adoption of our technology in our customer base and this momentum continues. You can see, for instance, in our customer conferences. In June, we held our European Customer Conference in London, where over 430 customers gathered to discuss how Tableau can bring additional value to their businesses and we are excited to be holding our U.S. Tableau Customer Conference from September 8th to September 12th in Washington D.C. We expect it to be another tremendous customer event with record turn-up.

In product news, a few weeks ago, we launched Tableau Online, our new cloud-based product, Tableau Online is a SaaS or software-as-a-service version of our popular Tableau Server product. Tableau Online makes it even easier for people to explore, analyze and securely share data without requiring IT support. I am pleased to announce that Tableau Online has already been adopted by several 100 customer accounts. We expect Tableau Online to be largely complementary to our licensed software business and we expect adoption by both, new and existing customers.

Overall, we are still in the early customer adoption phase for this new product and we don't expect Tableau Online to be a significant portion of our business in the near-term. In summary, we feel positive about Tableau's business momentum as we head into the second half of the year. We continue to land new business and to expand within our large installed base of customers.

Before I turn things to Tom Walker to provide more details on our results, I would like to thank you all for joining us for our first earnings call. Your support along with that of our tremendous team of customers and partners is invaluable, and I'd be remiss if I didn't mention how incredibly proud I am of the contributions of all Tableau's employees to get us to this point. You energy, efforts, passion and pursuit of a greater mission fuel our success at Tableau. I look forward to continued work with all of you on the next leg of this important journey.

Tom?

Tom Walker

Good afternoon, everyone. As Christian highlighted, we posted a strong Q2. We delivered $49.9 million in total revenue, a 71% year-over-year increase. Given our top line performance, we posted positive non-GAAP operating income of $1 million and non-GAAP net income of $300,000. Our non-GAAP diluted earnings per share was $0.01 based on weighted average shares of $46.9 million. As background, we have two primary revenue streams, license and maintenance and services.

In terms of license revenues, we generally saw our software as a perpetual license. This license revenue is recognized at the time of sale and usually has gross margins of 99%. We do have some term licenses such as OEM arrangements and subscription licenses. These term and subscription revenues have been a single-digit percent of total revenues both, historically and for this past quarter. In terms of maintenance and services revenues, when purchasing a perpetual licenses a customer also typically buys year of maintenance.

Maintenance is generally set at 25% of our license price. Our standard maintenance contracts cover one year and the revenue is recognized ratably over that period. Services include training and professional services for which we recognize revenue upon the completion of such services. These service revenues have also been a single-digit percentage of total revenue both, historically and for this past quarter.

Our renewal rate is a dollar-based calculation that we described in more detail in our prospectus. Our maintenance renewal rate for the past few years has consistently been greater than 90%. We believe this is testament to the value our customers place and our continued product innovation and customer support. With this background, I'll now walk you through a few of the details of our financial results.

Total revenues for the second quarter were $49.9 million, an increase of 71% from the prior year quarter. Our performance was bolstered by an increase in customer adoption by both, new and existing customers as well as increased awareness by IPO in May. We added over 1,500 customers accounts in Q2, bringing the total to over 13,500.

License revenues were $33.5 million, up 66% from last year. Our maintenance and service revenues were $16.4 million, an increase of 84% compared to last year. The vast majority of our revenues are currently in U.S. dollars, so there's so there is minimal impact from exchange rates. From a geographic standpoint, revenues from the United States and Canada were $40.4 million, up 63% from the prior year and represented 81% of our total revenues. Our international revenues were $9.4 million, or 19% of total revenues. During Q2, revenues from EMEA, APAC and Latin American regions, all grew over 100% year-over-year. We believe international expansion represents a significant growth opportunity for us.

Our business results were the consequence of our land and expand strategy, which results in thousands of transactions of all the sizes throughout a given quarter. Turning to large deals, we closed 80 transactions over $100,000 each in Q2 versus an average of 60 per quarter in 2012. Important to note, we experienced variability in the number of large deals from quarter-to-quarter.

Let's spend a few minutes on margins and operating results. Unless otherwise noted, all references to our expenses and operating results are on a non-GAAP basis, which are reconciled in the press release tabled and posted on our Investor Relations website. In Q2, overall gross margin was 91%. We are not expecting to maintain these margins. As we continue to expand and invest in our global support and operations, our gross margins will likely decrease. Our total headcount at the end of the second quarter was 930, an increase of 96 people during the quarter. This represents an increase of 86% from the prior year quarter. As a reminder, the majority of our operating expenses are employee-related.

Our second quarter operating income measured on a non-GAAP basis was $1 million. This was better than expected and largely the result of a few items. First and foremost, our top line results. Second, timing of both hiring and capital spending versus our plan. The timing of our hiring during the quarter was slightly slower and several of our facility expansion projects were initiated towards the end of the quarter. We posted non-GAAP net income of $300,000 and earnings per share of $0.01. During the quarter, our weighted average share count was 46.9 million shares including 9.4 million shares sold in our IPO.

Now, on to the balance sheet and statement of cash flows, cash and cash equivalents at the end of the quarter were approximately $221 million, up a $181 million from the prior quarter, primarily driven by our net IPO proceeds of 177 million. Free cash flows for the second quarter were $2.1 million, up from $1.9 million in the year ago quarter and (Inaudible) was $33.4 million and our DSOs were fewer than 65 days, consistent with prior periods and our target.

Now I'd like to move on to the financial outlook. We'll be providing guidance for Q3 and the full year 2013. For the third quarter, we expect total revenues to be within a range of $49.5 million to $51.5 million. Using the mid-point of this range, this represents 57% year-over-year growth. In terms of operating expenses, as Christian has said before, we see a significant market opportunity and plan to make investments throughout the company.

We do not currently expect margin improvement. In fact, you should expect operating losses to increase as we continue to invest aggressively. As a reminder, our large annual customer conference call is in September this year. For Q3, we are targeting negative non-GAAP operating margins of between negative 10% and 12%. We anticipate our third quarter basis share count to be between 59 million and 60 million shares.

For the full year, we expect total revenues to be between a $198 million and $202 million, representing growth of around 57%. We plan to invest and run the business at negative operating margins. For the full year, we are targeting non-GAAP operating margins of negative 6% to 8%. As you've seen in our prior results, our non-GAAP operating margins can fluctuate on a quarter-by-quarter basis.

In closing, we are pleased with our Q2 results and excited about the opportunity in front of us. Although we did not invest as much as we wanted to this past quarter, we are focused on investing for the long-term.

With that, let me say, thank you. We appreciate your time and interest and we'll now welcome your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Heather Bellini with Goldman Sachs.

Heather Bellini - Goldman Sachs

You guys launched Tableau 8 at the tail end of the first quarter. How is the reception then and how should we think about the release in terms of course growth contribution to the second quarter? Thank you.

Christian Chabot

This is Christian. We did release Tableau 8 in March, and that had a really positive effect on the business, It's impossible for us to break it out as an exact growth contribution, but when we do a release we are doing two things. One, we are significantly increasing our competitive capability through feature and function, but we are also doing some marketing. We do road shows in dozens of cities and lot of outbound e-mail and special events and what not.

So, we would point to the release of 8 as a contributory factor for the second quarter, things going even better than we hoped, but I couldn't quantify it exactly. And, certainly, we hope that that contribution will continue over the coming year.

Heather Bellini - Goldman Sachs

If you don't mind, if I could just one follow-up then, just in terms of historically you guys have benefited a lot from follow on purchases with your installed base. I am just wondering was the level of follow on business in the second quarter consistent with prior periods and how do we think about modeling existing customer purchases going forward. Thank you.

Tom Walker

This is Tom. I'll take that one Yeah. There are three key drivers to our overall business model and so customer acquisition, customer expansion and then maintenance and services. In the quarter, we are firing on all three cylinders, so our acquisition business grew 1,500 new customer accounts and so that was going very well. A majority of our license revenue does come from our existing base. We saw the expansion sale continue there. Also, the maintenance and services our revenues grew a healthy in Q2, so it wasn't one area more than the other actually all three were doing very well in Q2.

Operator

Your next question comes from the line of Keith Weiss with Morgan Stanley.

Keith Weiss - Morgan Stanley

I wanted to dig into the new customer acquisitions this quarter, greater than 1,500. I think the biggest number that we see sometimes. It seems like growth there actually accelerated. Any details you could give us perhaps what drove that acceleration. Do you expect that to be sustainable on a go-forward basis at that type of pace of new customer additions?

Tom Walker

Yes. It was a record number of new customer accounts that we added, so you are right there. We added just under 1,100 in Q1. It is a driving metric of what we do. Overall, we expect to continue to expand our base over time. What was driving it? A lot of awareness, so clearly this year we have had a tremendous amount of awareness.

Christian mentioned to Heather's question about the 8.0 launch. There is a significant amount of marketing efforts that go along with our launches and a global road show for the product that we took on the road to many, many countries around the world. That in conjunction with the IPO generated a lot of awareness, so we do think that we got a boost from that. How to quantify it? I couldn't give you exact number, but we do expect as being one of the key drives customer acquisition, we do expect it to grow and we focus on bringing new customers into the franchise.

Keith Weiss - Morgan Stanley

Excellent. Then on the expense side of equation, you did come in below our expectations in terms of OpEx spend. Can you talk to us a little bit about some of those timing issues? Was there difficulty finding our people, difficulty in ramping up and whether the investment plan itself was paired back at all or just pushed in for back half of the year?

Christian Chabot

Yes. We did add 90-60 for this quarter so that's up 86% over the previous year. If you looked at the operating expenses, those increased 96% over the previous year, so we are investing aggressively to grow things and that should grow the business and expand the company. So, with respect to the timing is, we're very careful with whom we hire. That's very important. We are not lowering our standards that who comes in to Tableau and what we are trying to accomplish and so there might be some lumpiness in hiring. With respect to majority of expenditures being employee related that lumpiness will show up in the OpEx line, but overall we saw record application for jobs and we see a lot awareness of people want to come over to Tableau, but there was no real issue there. We continue to hire and we are going to continue to hire into the future.

Keith Weiss - Morgan Stanley

Excellent. Again, very nice quarter.

Operator

Your next question comes from the line of Philip Winslow with Credit Suisse.

Philip Winslow - Credit Suisse

Congrats on a great quarter. Can you talk about some of the pretty substantial growth that you've seen internationally obviously it still remains relatively small percentage of revenue, but wondering if you could walk through just your strategy for penetrating international markets and what milestones we should look for going forward? Thanks.

Tom Walker

Yes. So, international revenues were $9.4 million and so they represented 19% of our overall revenue as we mentioned on the road show and part of what we are focused on is expanding. So, internationally, we break it into three regions, so we've got EMEA, A-Pac and Latin America, and so we are investing in all of those areas. But being 19% of revenue, there's a lot of infrastructure and hiring right leaders in critical infrastructure first and that will lead to more longer term growth, so we will continue to do that.

As far as a account growth, the new customer account growth, between the U.S. and international, directionally they were the same type of growth rates that we experienced in the regions, so we are seeing all the regions very healthy, but it's really early in the stage of our international expansion, and so we are going to continue to focus on it and grow it, because we see a huge opportunity.

Operator

Your next question comes from the line of John DiFucci from JPMorgan.

John DiFucci - JPMorgan

Christian, you mentioned in your prepared remarks and we have seen earlier that you hired Scott Jones, an SAP veteran as VP of the America in Sales. I guess, what's going to be his primary focus going forward relative to your go-to-market strategy to-date? I mean, can you talk to us a little bit about, are there going to be any changes or expansion to your go-to-market strategy?

Christian Chabot

No. I would not say that that was associated with any strategy change or major organizational shift at all. That was really bringing in more horse power, more leadership, and it's just the size of that sales pyramid and that's engine has grown over time. And so to be specific, Scott will own both, enterprise and commercial within our largest business which is North America, and so we are really looking for someone who understood certainly field selling and enterprise arrangements and big deal negotiation, but equally so someone who understands the beauty and simplicity of inside sales and sales to commercial accounts and Scott has brought both of those to the table and will be building those organizations in a very similar fashion the way we have been.

John DiFucci - JPMorgan

Okay. Great. Thank you. And, if I could a follow-up for Tom, and just a little more specific I think than what Keith was asking about some of the expenses. License was much stronger than expected here and sales and marketing expense and the biggest expense line was about in line. How do you reconcile that? I mean, one thing I thought perhaps maybe, [Scott] on board and out of those 96 people if you can talk about just generally, how many of them were sales and marketing and will we expect that sort of that expense line perhaps that hiring to sort of ramp up as we got to the year?

Christian Chabot

Okay. So, I'll take the second question first. So, the break up as we do with the headcount, we don't break it out specifically, but the focus is really on sales and marketing and R&D. So, the majority of our headcount will be brought on in Q2 and that we are focused to bring on future is in those two, so you can think of it that way, John, with respect to that.

With respect to the operating expense and the timing is, we've been hiring at a very fast clip for years quite frankly and so as more and more people get bought in, they ramp and they ramp at different speed, so the ability us to overachieve and not exactly hit our operating expenses. We're still adding more people and we are gone continue to add more people. So, the timing, I think the hiring of people is always lumpy and so it will be that way, but overall the trend is going to be hiring more people into the franchise as we look into 2014 and 2015.

John DiFucci - JPMorgan

Okay. Great. Thanks, Tom. Thanks a lot, guys. Nice job.

Operator

Your next question comes from the line Brent Thill with UBS.

Brent Thill - UBS

Christian, just on the seat count, the number of deals was obviously very impressive, and I am curious if you are seeing any initial deals that are opting to take more seats upfront or, are you still seeing the model where they are starting with a few and then you see these repeat orders coming through subsequent quarters after? Any change in what you are seeing in that dynamic?

Christian Chabot

Tom will follow-up with that if there's an applicable [number of series], but the macro answer is no. No change. Really, we have been nursing this land and expand model which is a combination of small deals, mid-sized deals and big deals for some time. Once in a while, you are able to negotiate and engage with a big upfront net new account and some large user count transaction and those deals continue to happen periodically, but they are really the exception at the norm and so I don't really have any, there has been not shift in that regard. Anything you would add, Tom?

Tom Walker

Yes. Brent, I'll just jump in on that. Just typically the average order size of the trends have not changed in the typical average order size being most sub-$10,000 to get started in the franchise and then expanding over time, so the key is that the model that Christian is talking about is, small orders mid-size orders or larger it's the same machine and we've kind of built machine to be able to handle them all very efficiently and we focus more [lifetime] customer and making sure once we get customer like the 1,500 new ones that just joined us that we keep them forever and it shows up in our retention rates and we just keep expanding the franchise, because inside his department or throughout an organization that's kind of the focus of our sales team is making sure that we get Tableau every where it can be.

Brent Thill - UBS

Okay. Chris, I know you mentioned that the cloud business isn't going to be significant portion of near-term. Can you just help us understand the division of how this is going to potentially help us as the platform builds out with Ontram plus cloud? How you see that domain over the next year?

Christian Chabot

Yes. For sure. I am glad you asked this. The headline point with our release of Tableau Online is that we are big believers that the winning strategy in this market, in the business intelligence and analytics market unlike other segments of software, is one that is a both strategy. Meaning, both on-premise and in the cloud, so this is not a business model transition or a shift from one to the other at all.

For the foreseeable future, and by that I mean the foreseeable decade, there is a legitimate and valuable need for companies to sometimes adopt analytics technology on-prem, behind the firewall and sometimes to push it or expand in the cloud and we have launched this initiatives just to provide customers with that later capability which is not one that we've had.

As we go forward, we will see examples of going some buyers going online only, we'll see examples of some buyers going on-prem only and we'll even see some buyers doing both. To give some color on that one, even in our just very early start here we see some customers using our on-prem products Tableau Server to work with their, you know they are big valuable hard-to-move data behind the firewall. And at the same time, adopting Tableau Online to push out data to partners through their extranet without having to bother with poking, getting access to the firewall and what not and so I think the products will coexist very healthy.

Inevitably probably in later calls as years go by, inevitably there will [start to be] questions about what we think about the mix of revenue between those two and what not. Obviously, we are not at that point yet. We just launched the thing, but we are enthusiastic about both product lines and both have a really important place in our business line.

Operator

Your next question comes from the line of Karl Keirstead with BMO Capital Markets.

Karl Keirstead - BMO Capital Markets

One for Christian, one for Tom. Christian, just on the competitive front, just focusing maybe on these 1,500 new accounts, was there any change or were your surprised by the portion that had a competitive bid process. And, of those that did, was there any change in the quarter in terms of who you saw whether it's the legacy vendors, [Bob], Cognos or whether it's the [spark fire] folks, so that's one question for you. Then for Tom, I think in April there was a relatively modest price increase on your enterprise server edition. I am wondering whether that had any contribution to the 2Q results. Thanks.

Christian Chabot

You know, really no material change in the competitive mix or feel as we have seen and that's really as simply as I can put it. The big picture here competitively as you know is what we have called the you know the most, the many and the few, which translate to the vast majority of organizations and teams and groups and divisions in the world really have nothing other than spreadsheet or nothing other than greedy SQL programming or low end reporting widget and so there is just really a green field opportunity out there and we haven't really seen any change to report certainly since our IPO in who we face when we do complete.

Tom Walker

Hi Karl, this is Tom. With respect to the enterprise price change in April, so yes the enterprise core price did increase slightly in April, mostly a function of product feature and functionality better performance. Because, just to refresh your memory that the 8 core pricing is we have two license methods here, name user and core based for Server and so this is an eight core licensing. So, given the performance of 8.0 and a lot of the enterprise enhancements, we did increase the price $25,000 to $75, 000 to $299,000. And, so with respect to that and the deals that we, we did thousands and thousands and thousands of deals this quarter. We only had 80 deals that were over $100,000, so proportionally it didn't necessarily move the needle or anything like that. It's just providing value to those enterprise customers.

Operator

Your next question comes from the line of Greg McDowell with JMP Securities.

Greg McDowell - JMP Securities

Christian, first a long-term question for you, I was wondering if you could share your view on the current penetration rates of this analytics opportunity, specifically within sort of the 600 million information workers out there. Also talk about where those penetration rates can go and also your view on whether you think you are reaching any saturation point yet with any of your existing customers. Thanks.

Christian Chabot

We view ourselves as just very, very early in terms of market penetration. For that matter, even if you combine competitors of Tableau in the equation, the overall penetration is extremely low, so without having the capability to give specific numbers to it, it feels like single-digit percent in terms of opportunity to help people, harness the power of data and combine it and visualize it and tell stories with it. As I was saying earlier, the vast majority of people adopting Tableau even within large accounts, you know they basically have nothing and they are just trying to grind things out painfully with spreadsheets.

If you drilled in on that, there is a range of type of customer in terms of how high it can go. I happen to think a company like Deloitte as an example, you know, with over 100,000 employees whose business essentially is to generate insights. I mean, essentially that's their business. You know, in a company like that it seems to me like you can go to 60% 70% of the workforce, possibly even higher.

You'll find other instances with the lower knowledge worker ratio or even a lower daily ratio, where probably at best you are going to get maybe 20% of the workforce, so huge diversity but overall it's just tremendous opportunity.

My favorite encapsulation of the opportunity remains. There are 55 million organizations in the world according to some estimate, so far Tableau's penetrated 13,500, So, overall, we have a lot of work to do and we are at the beginning of a long journey.

Greg McDowell - JMP Securities

That's helpful. Thank you. Maybe one quick one for you, Tom. On the road show you talked about one of the drivers of growth was expanding the partner network, so I was just hoping you can comment on serve the direct sales versus indirect sales mix and whether that's starting to change more towards the research, the OEM channel? Thanks.

Christian Chabot

Greg, great to talk to you. Yes. With respect to channel efforts on the road show. Absolutely. We see this as a huge investment opportunity. In Q2, our overall indirect revenues were still under 25% of our overall revenue, so the same as historic trends, but we are continuing to make investments and build that out and build out the network with partners, so that's happening both, domestically and internationally but those are more longer term investment that we are making and we are just expanding quarter-by-quarter continue to growth, but for Q2, there was no dramatic change from our historic trends.

Operator

Your next question comes from the line of Jesse Hulsing with Pacific Crest.

Jesse Hulsing - Pacific Crest

Hi guys. I have a follow-up question on the customer account adds, because as was stated previously it's been accelerating year-over-year growth wise. You mentioned, some potentially drivers were Tableau 8 and the IPO and some marketing pushes, but I guess, if you could may be quantify it little bit more. Have you see in a material surge upward in downloads. I guess kind of pool based interest. And, has the surge continued or was there spike with the IPO and with Tableau 8 and then it's kind of leveled up ?

Tom Walker

This is Tom. I'll take that one and Christian can jump in on it afterwards. Overall, I don't think there is an overall shift in the business or a trajectory. It's a constant growing. It's go-to-the-market efforts is to get people to the website to download the price and try the products, so those are overall trends they are all expanding. There wasn't a spike or anything along those lines. It's been a steady execution as awareness has built towards 8.0 towards the awareness with the IPO as we continue launch Tableau Online we are constantly out there trying to find new customers and get our technology in the hands of those, so if you are just looking at a straight overall trend it would up into the right, but it's not as lumpy as you would think.

Christian Chabot

Yes. My guess is you are just trying to think about what to model and what to think about going forward. Sitting here, we are really thankful for the awareness that basically the whole IPO effort gave the company, but that wasn't one moment or spike as Tom was saying but it was real I mean over about a six month period between the buzz there's an [up] and making all the private company lists and then filing and just someone go through the whole process. We've definitely reached a record awareness. To put a closing thought on that, honestly it's a little bit hard to tell for us here whether that is a sustaining thing that can be modeled going forward. It can't, and so as a result you'll be conservative and say wouldn't model it going forward, but you know.

Jesse Hulsing - Pacific Crest

Great. As a follow-up kind of related to seasonality, Tom, I believe last year your customer conference was in Q4 and generally does the customer conference drive an increase in deal closure or deal sizes and when we think about Q3 versus Q4 relative to normal, would that skew that at all or no?

Tom Walker

The customer conference over all is a tremendous company and employee and customer event, so it's a spectacular event, but overall pushing the needle on revenues, I wouldn't think the shift between Q4 and Q3 to focus on it that way. The one thing I would base examples over seasonality as there's already sub-seasonality in the business and when you look at Q2 to Q3 historically so it's been about single-digit type of growth rate, so generally speaking our Q2 to Q3 doesn't grow as aggressively as the other ones and Q4 is the strongest quarter of the year and from the seasonality standpoint usually Q1 is off of Q4, but with respect to the customer confident that we are not anticipating a huge boost. It's in the second week in September, so it's late in the quarter, so we don't expect that, but they are typically just a wonderful event for both, our customers and our employees.

Operator

The next question comes from the line of Derrick Wood with Susquehanna International Group.

Derrick Wood - Susquehanna International Group

Thank you. Do you guys have an attractive two-pronged growth model here across both, traditional BI and XL users? Any way to give us kind of a breakdown in terms of deal count in terms of what gets deployed on top of traditional databases and what's a desktop license and maybe if you've seen any change in growth rates there?

Christian Chabot

Well, the short answer is no and the reason is here is, the funny thing. You can go to about every single global 2000 company and they will literally rattle of the list of BI standards they have. In plenty cases it's quite a few of them and so they often have the self standards, but if you drill down into that and look at the portion of the knowledge worker base actually using them, right? Or using them for the applicable project that they currently have budget for, you'll find that the usage rates are very low.

As a result of that, it's too hard to design an label which ones we would say were traditional BI versus odd. A point I was going to punch there I would say keep in mind it's not as black and white as you have the old stuff or you have nothing. We are really excited about the fact that they so much in the market has nothing, but in equally interesting opportunity are this people who frankly have a shelf standard or maybe even are deployed on a shelf standard, but are totally frustrated with it and are struggling to apply it to their newest project or acquisition or fast turnaround time or SEC request or whatever the analytics project of the day is and that's where this new category of faster, more agile self-service BI can really clean up, so not trying to decoy it, it's the numbers can't really be known, because of that but that's the quality to feel for it.

Tom Walker

Yes. Adding to that, Derrick, just a little bit, it's not like a algorithm replace strategy with traditional BI. That's not what we are doing. Christian talked about expanding the market, I mean, the you think about the customers that are using our technology they are focused on ease of use, time to value and increasing the productivity of all their workers, not just a select group of workers, so we think of it as much more expanding the market and it could be people on traditional BI and it could be people who don't know what BI stands for, so it's both people and we look to expand?

Derrick Wood - Susquehanna International Group

Great. If I can just squeeze a follow-up here, Tom. I think there is some stuff you have disclosed in filings, I am not sure what you're giving on conference calls but new versus existing percentage of revenue if you are giving that out that would be great and then just the end of quarter fully diluted shares out.

Tom Walker

So, breaking down new versus existing, one of the metrics that we are going to give every quarter will be the new account adds, customer adds, breaking out the model between the new and existing license. We are not going to break that out on the quarterly basis, so that's not it, but I do want to give you some flavor on it or some direction on it.

The new adds are very, very important to the business, but just like we outlined in the S1, the existing base and growing that existing base and the existing customer base is where the expansion that becomes a larger and larger portion of the overall license growth quarter-after-quarter, but both are growing just like they have in the past and growing healthily.

Derrick Wood - Susquehanna International Group

Then with shares.

Tom Walker

Hold on one. Second. Approximately $59 million.

Derrick Wood - Susquehanna International Group

What about, if you were to report a profitability that just kind of the fully diluted?

Tom Walker

Probably the upper $60 millions.

Derrick Wood - Susquehanna International Group

Okay. Thank you.

Operator

We have time for one more question. Your next question comes from the line of James Gilman with Drexel Hamilton.

James Gilman - Drexel Hamilton

Christian, I may have missed this or Tom. I may have missed this earlier, but can you talk about which verticals you saw strength in the economy and whether the economy is helping or hurting sales for or having no impact and I have a follow-up question for Tom.

Christian Chabot

Overall, no particular verticals to really call out the business strategy as well as the product strategy have been really horizontally focused. We are waited in rough proportion to the way the economy is weighted, so healthcare and financial services and what not continue to be strong for us, but we would be sending the wrong signal in direction if we message focused one or an abnormal contribution from what it's done, because it really just isn't the case. In fact, just as a matter color for anecdote.

Some of the most unexpected verticals have become really important to the business that are really exciting to work on like gaming as an example. The number of companies big and large, I mean from Microsoft to Zynga, all the way down to thousands of little (Inaudible) working on basically creating online and offline games has become a vertical no one even knew about 10 years ago and they are extremely data-intensive and they love to do analytics. So, everything from crazy things like high school education and gaming and niche medical causes, all the way up to the big verticals whose names you expect, are a part of the monthly Tableau sales and we do expect that to be the case going forward.

James Gilman - Drexel Hamilton

Tom, when you'd given guidance, you mentioned we would foresee some losses in the coming periods, but earlier in the call you mentioned that you have been hiring aggressively in past periods, so is it guidance here maybe I am very conservative given your past aggressive hires and you have been able to have a positive margins and maybe we could have a little bit better margins this year than you might be telling us?

Tom Walker

Yes. I think, I don't want to use the word conservative as much as prudent. As I mentioned before, the overall expenditures are OpEx that we spend a lot it of is employee related and hiring can be lumpy and so we are not necessarily focused on just bringing people on broad. We are looking for the right talent to bringing for the solutions. So, with respect to that, the plan is to continue to hire at a very healthy clip. I mentioned actually that the total OpEx is up 96% year-over-year so, we are investing aggressively and we are going to continue to do that. With the guidance that what I was trying to get at James, to make sure that everybody understood we are gone to continue to do that. There could be some lumpiness with hiring, but for the most part we are focused on it we have a strong recruiting team that helps us with that.

James Gilman - Drexel Hamilton

Thank you for taking my question. Again, congratulations.

Christian Chabot

Great, I did want to say one thing else just getting back to Derrick's questions, I just did a lookup real quick. So, fully diluted shares outstanding it would be the low-$70 millions, so I meant to say fully diluted shares outstanding would be low $70 millions. Just want to correct that for everybody.

Operator

Now I would like to turn the call back over to Jay Peir.

Jay Peir

Thanks everyone for your participation today, and that concludes our second quarter earnings call. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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