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Tableau Software (NYSE:DATA)

Q3 2013 Earnings Call

October 28, 2013 5:00 PM ET

Executives

Jay Peir - VP, Corporate Development

Christian Chabot - Chairman, CEO and Co-Founder

Tom Walker - CFO

Analysts

Keith Weiss – Morgan Stanley

Brent Thill – UBS

Greg Dunham – Goldman Sachs

John DiFucci – JPMorgan

Philip Winslow - Credit Suisse

Greg McDowell - JMP Securities

Jesse Hulsing - Pacific Crest

Operator

Good day ladies and gentlemen, and welcome to the Tableau Software Third Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Afterwards, we will conduct the question-and-answer session and introductions will be given at that time. As a reminder, this conference is being recorded. I would now like to turn the conference call over to Jay Peir, Vice President, Corporate Development. Please go ahead, sir.

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 being 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 a 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 fourth quarter and full fiscal year 2013, as well as statements relating to our current expectations regarding our anticipated 2014 fiscal performance.

We caution you that such statements reflect our best judgment based on factors currently known to us and that 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 perspectives for our initial public offering, our 10-Q, and our Form 8-K filed today with our press release. These documents contain and identify important risks 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’d like to thank everyone for joining us today on Tableau Software’s second earnings call as a public company. I’m pleased to report that Tableau had an exceptional third quarter delivering total revenues of $61.1 million. This represents a 90% increase over the prior year third quarter. During the quarter, we added over 1500 new customer accounts bringing our total to over 15,000 customer accounts worldwide.

During the quarter, we deepened relationships with many of our existing customers including Barnes-Jewish Hospital, Boeing, Macy’s, Nike, Zulily, and Twitter. In addition, we added many new clients including Siemens AG, Colgate University, All Recipes, Nestle Nespresso, Jenny Craig, and Williams-Sonoma.

Our third quarter results were bolstered by a large multimillion-dollar deal with a leading technology company. This company was using a traditional business intelligence platform to produce thousands of reports for its people. While these reports were useful for monitoring standard operational metrics, they didn’t read employee’s needs to delve deeper into data. Use of our products in this account started within one business unit and over the last two years has expanded to over 15 groups across the company. Recently, this customer set out to establish an enterprise standard for self-service business intelligence which led to the multimillion-dollar transaction. This deal demonstrates the power and value of Tableau to the enterprise.

Next, let me share a few examples of our customer’s experiences with Tableau. The first is ASM Research, a Tableau customer that was recently acquired by Accenture. ASM Research is a leading provider of advanced information solutions and services to the U.S. Defense and Federal health clients. Using Tableau, they have been working with the U.S. Army to take data from more than 50 disparate data sources and make it more useful. In one project, ASM Research was able to help the Army National Guard save $20 million by combining data from multiple data sources into one dashboard.

Another customer example is Rosetta Stone. Rosetta Stone makes interactive technology that is changing the way the world learns languages. It’s collecting data at a rate of hundreds of millions of observations each day. Rosetta deployed Tableau to help with its two-week queue for handling ad hoc analytics requests within the company. Today, those requests are turned around in just a day. Rosetta Stone is expanding its user base with about 70% of the financial team now using Tableau along with customer outreach operations and other departments in the organization.

Our third customer example is the Carlson Rezidor Hotel Group. The group is part of Carlson, one of the largest private companies in the world. They specialize in hospitality, travel, leisure, and food. The company’s business intelligence team was able to demonstrate return on investment with Tableau during the 14-day trial of our products. And within 60 days of deployment, 300 hotels were asking for weekly updates in Tableau. They are now able to answer question in minutes instead of days. In just five months, the team made 1200 proactive recommendations to hotels using Tableau.

During the quarter, we also held our annual Tableau Customer Conference in Washington, D.C. This was the first time we have held our conference on the East Coast and we were very pleased with the turnout. Over 3000 customers and partners attended the conference to leverage their investment in analytics, hear about what’s coming next in business intelligence and network with other people in the Tableau Community. Conference attendees were able to see presentations by a large number of Tableau customers including Discovery Channel, Facebook, the FAA, LinkedIn, BNY Mellon, Redbox, Macy’s, Tesla Motors, the U.S. Army, Mozilla, and Exxon Mobil.

At our conference, we showcased several product development advances that we expect to feature in our upcoming releases. Those features include a new interface for connecting to and joining data, integration with the R statistical package, a new (paradigm)[ph] for storytelling with data, enhanced enterprise features like full support for 64-bit operating systems and the Mac version of our software. To support these developments, we have grown our research and development team by over 75% from the prior year third quarter.

Another aspect of the Tableau Community is Tableau Public. Tableau Public is our online product that lets people share interactive data on the public web. Use of that product continue to expand in the third quarter and we improved our support for that community by launching a new featured called author profiles. Author profiles allow people to build and maintain a public data visualization identity much like they might maintain their social media identities.

In the third quarter, people posted all sorts of data to the public web using Tableau Public on subjects ranging from roadway safety, to global literacy rates, to Bundestag elections, to movie directors, to my personal favorite on analysis of 4th of July fireworks injuries. If you were wondering, men are responsible for more than two and a half times more firework injuries than women. I am sure that will come as a surprise to no one.

On a final note, this past quarter, Tableau was named Washington’s best workplace in the extra large company category by the Puget Sound Business Journal. We’re honored to have received the top honor for the second year in a row. And this award is attributed to the efforts of all of our employees. In fact before I turn the call over to Tom, I want to recognize and thank our employees around the world many of whom are listening in. The talent, dedication, and passion of our people are what enables us to deliver on our mission to help people see and understand data. Their commitment is the cornerstone of our success. And with that, let me turn the call over to Tom.

Tom Walker

Thank you, Christian. Good afternoon, everyone. I’ll first read capital results from the quarter and then share guidance for Q4 and the full year. Total revenues for the third quarter were 61.1 million, an increase of 90% year-over-year. Our performance was bolstered by the impact of our annual Customer Conference which took place during this quarter, as well as the increase in the number of large transactions. During Q3, we closed 119 transactions over $100,000 each, almost double the average of 60 per quarter in 2012.

On the customer adoption side, we added over 1500 new customer accounts in Q3 bringing the total customer accounts to over 15,000. License revenues were 42 million up 90% from last year. Our maintenance and services revenues were $19.1 million an increase of 91% compared to last year. From a geographic standpoint, revenues from the United States and Canada were 49.8 million and represented 82% of total revenues. International revenues were 11.2 million, or 18% of total revenues during the quarter.

We continue to believe that international expansion represents a significant investment and growth opportunity for Tableau. Our business results are the consequence of our land and expand strategy which includes thousands of transactions of all sizes throughout a given quarter by both new and existing customers. As Christian mentioned, our existing customer growth included a multimillion-dollar transaction during Q3. Multimillion-dollar transactions are now the typical metric we’ll provide, rather, we are sharing with you so you have some insight on how customers are expanding their use of our software. We believe this speaks to the scale and power of our solutions.

As Christian noted, this large transaction was an existing Tableau enterprise customer. They’ve been a customer since 2008 and have expanded their usage over time. This deal exemplifies our land and expand strategy where customers expand at a pace that works for them. While our revenue over performance was augmented by this large transaction during the quarter, I will note that we do experience variability on a quarter to quarter basis with respect to the size and timing of such large transactions.

Next, I’ll 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 tables and posted on our investor relations website. In Q3, our gross margin was 93% bolstered by our strong license revenue growth. We expect our gross margins to decrease slightly as we continue to expand and invest in our global support and operations. Our total headcount at the end of the third quarter was 1,039. This represents an increase of 70% from the prior quarter. We increased headcount across all areas of business although primarily in our sales and marketing and development teams.

For the past seven quarters, we have added an average of over 100 new hires per quarter. For the quarter, total non-GAAP operating expenses were 50.4 million, up 85% year-over-year. As a reminder, the majority of our operating expenses are employee related and we continue to focus on expanding the team and investing for the long term.

Our third quarter operating income measured on a non-GAAP basis was 6.3 million. This was better than expected and primarily the results of our top line over performance. We posted non-GAAP net income of $5.6 million and non-GAAP earnings per share of $0.09. During the quarter, our weighted average share account was 59.1 million shares.

Next, I’ll briefly review the balance sheet. Cash and cash equivalents at the end of Q3 were approximately $226 million, up $4.9 million from the prior quarter. Ending accounts receivable was $44.2 million and our DSOs were fewer than 65 days consistent with prior periods.

Now, I’d like to move on to our guidance for Q4 and the full year 2013. For the fourth quarter, we expect total revenues to be within a range of $65 million to $67 million. Using the midpoint of this range, this represents 58% year-over-year growth. In terms of operating expenses, we plan to continue to make investments throughout the company. For Q4, we’re expecting to generate breakeven operating margins on a non-GAAP basis. We anticipate our fourth quarter fully diluted share count to be between 72 million and 73 million shares.

This fourth quarter guidance equates to a full year 2013 total revenues of between $215 million and $217 million representing annual growth of around 69%. For the full year, we’re targeting non-GAAP operating margins of approximately 2%. Although we are projecting non-GAAP operating margins for the year, I want to remind that we have grown non-GAAP operating expenses over 85% on a year-on-year basis in each of the prior two quarters. In scenarios where we do not grow our top line as fast as we’re operating expenses, we will experience operating losses. We plan to continue to invest aggressively to position the business for long-term success.

Switching away from guidance, I thought it’d be helpful to give you an early look at 2014 revenues. We are still in the midst of planning for next year and will give you specific guidance on next quarter’s earnings call. We are anticipating 2014 revenue growth of approximately 40%. As a reminder, historically, we’ve experienced seasonality between Q4 and Q1, which in turn affects non-GAAP operating margins. And as you’ve seen in our prior results, our non-GAAP operating margins can fluctuate on a quarter by quarter basis.

Before I turn the call over for Q&A, you’ll notice in our earnings release the mention of lock-up release. Goldman Sachs and Morgan Stanley as the representatives of the underwriters in our IPO have agreed to waive certain lock-up restrictions applicable for certain shares of the company’s stock – common stock. This waiver will permit the sale of such shares by certain stockholders who executed the 170-day IPO Lock-Up Agreement. For lock-ups, restrictions will be released on October 30, 2013 and these shares will become eligible for sale on October 31, 2013. The total number of shares eligible for sale at the end of Q3 was approximately 4.9 million shares. The total number of vested options eligible for sale at the end of Q3 was approximately 7.4 million options. Please note, for the stockholders that executed the 180-day IPO Lock-Up Agreement, those lock-ups remain in place and covered 44.8 million shares and 0.5 million vested options at the end of Q3.

You also notice that we have filed our – we have filed a Form S-1 Registration Statement with the SEC this afternoon that has not yet been declared effective. Please note that the company is not selling any primary shares as part of this transaction. And as you understand, we are not permitted to comment further on it at this time. 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 Keith Weiss with Morgan Stanley.

Keith Weiss Morgan Stanley

Excellent. Very nice quarter, guys. Kind of outside – I don’t think we’ve seen very much anywhere in software recently. So, really nicely done. In looking at the quarter in particular, I was wondering if we could talk to the big deal dynamic. It looks like both in terms of just deals over 100Ks as well as that deal – that multimillion-dollar transaction that you guys have had more success with the large deal, anything in particular that catalyze for you guys in that regard to this quarter and if you could give some commentary about the overall ASPs. Does this -- is this bringing up the overall ASP for the business?

Christian Chabot

Hi, Keith. Thanks for asking about that. We continue to see progress in closing larger transactions, focused on larger deployments within larger customers as part of growing the -- but we’re not seeing a shift in business model. And to your question pointedly, this quarter was nothing extraordinary in terms of the input again. Of course we’ve been investing in enterprise selling capability and enterprise style scalability and functionality for many years now. And it continues to pay off I think in a healthy way from quarter to quarter.

The deal we did mention was not the biggest deal in company history or anything like that. It was just a really nice one and a representative one so we wanted to call it to your attention. With regards to ASP generally, Tom, you want to take a crack at that one.

Tom Walker

Hi Keith, this is Tom. So with ASPs, basically breaking it into two buckets; the acquisition accounts that we bring on, the ASPs have been consistent, so sub $10,000 – they continue to go that way. And though as we continue to expand the existing business, people could buy, they don’t always have to buy a multi-million dollar configurations, they can buy as they need. And so, the overall ASP for the existing business hasn’t changed dramatically either. So it’s just in the quarter, we did thousands and thousands and thousands of transactions. And these were just 119 of them.

Keith Weiss – Morgan Stanley

If I could sneak one last one in on distribution. You guys are obviously keeping the pedal to the metal there, [inaudible] it looks like over a 100% growth in sales and marketing spend on a year on year basis. Are you running up against any constraints in terms of your ability to find the people in terms of hiring up this aggressively on the distribution front?

Tom Walker

So, no and we continue to hire at a clip, we’ve been doing it as I mentioned, we’ve hired over 100 people per quarter for the last seven quarters. The primary focus of the two larger areas that we’re hiring is in sales and marketing, and R&D. And so we’re not necessarily seeing a constraint, we are focused on getting the right people that are part of the mission and want to help us continue to build and help our customers see and understand their data. But we’re not seeing a limit on what we can hire. We’re just focused on hiring really great people.

Keith Weiss – Morgan Stanley

Excellent. Again, outstanding quarter, guys.

Christian Chabot

Thanks, Keith.

Operator

Your next question comes from the line of Brent Thill, UBS.

Brent Thill – UBS

Good afternoon. Christian, just on the sales process as you start moving more upstream, can you just talk through how you’ve changed the culture and the selling process to evolve as you’re getting to larger transactions. Just curious if you’re seeing any change in terms of the sale cycles or anything that will go along with the success that you brought?

Christian Chabot

Okay, great. Well, I think the short answer is nothing new for the quarter or for the year. I think the point I would underline is the fact that Tableau isn’t ushering in a sales methodology transition. This is not a replacement of one thing with another. Rather, it’s both. And what I mean by that is we’ve spent many years building and in some ways trying to perfect a really efficient insight driven sales engine that reaches accounts of all sizes, and alongside of that, also building an enterprise capability. So the two styles are in fact different in terms of sales cycle lengths and hiring profiles -- the folks and targeted customers and what not, but nothing new. And so, I think I wouldn’t be sending the right messages if I made it sound like we’re in some stage of transitioning from one to the other. It’s really not that way. If I were to maybe close with an analogy, I mean by analogy picture SalesForce.com. I mean they’re in a very healthy and sustainable fashion. They have been selling for many years to accounts of all sizes. And as they have brought on that big selling -- that big deal selling capability, they have of course also preserved and expanded their insight sales engine. So that’s more of a picture of what’s going on here. And again, to put a point on it, no material has changed in that regard this quarter.

Brent Thill – UBS

Okay. And just keeping with distribution, if you can just update us on the system integrator support if you’re seeing -- what kind of new partners you’re seeing coming on or the big guys staffing up and increasing rates. Just give a sense of what’s happening on that side, that’d be helpful. Thank you.

Tom Walker

Great. Hi, Brent. This is Tom. So yes, I’ll update you on that. So, it’s still early in our channel investments. I think as you know, one of the investments we’re making is a long-term investment, is to help amplify our channel indirect efforts. Historically, they’ve been less than 25% per quarter. But we are continuing to make a headway with these agreements. But as in this last quarter, it was -- our indirect versus our direct business was proportionally the same as it has been historically. But, they’re continuing to grow in these relationships either -- there’s more to come on that but there’s -- the relationships are strong, but we want to keep growing them.

Brent Thill – UBS

Thanks.

Operator

Your next question is from the line of Greg Dunham with Goldman Sachs.

Greg Dunham – Goldman Sachs

Thanks for taking my question. First question for you Christian, how big is the Mac opportunity within your base and beyond from your perspective in the next couple of years?

Christian Chabot

Oh, hi, Greg. Great question, there’s a lot of excitement around the Mac version and we just announced it and actually started to show it at our last customer conference. And the reception was of course very warm. There’s a lot of excitement about the release and there’s a lot of excitement about it internally. Truth be told, we haven’t spent a lot of time trying to come up with a precise market size figure. I’m not exactly sure how we would do that. So let me just say we view the opportunity as tremendous, far more so than we ever would have imagined as an example when we started the company in 2003. And there’s a few reasons for that. One is that in traditional professions or what I should say in professions and in verticals that are traditionally Mac heavy, we feel like we have a great story for customers and a lot of value to add, but those customers are on Macs. Obvious examples being in higher education, right, so going into some of these verticals that are very Mac heavy has always been very exciting to us. And probably by itself would’ve been motivation to invest in the technology.

Of course, what’s happened over the last five years [that no one] [ph] expected is the Mac is increasingly seen as the choice – either a primary or a secondary choice for the world-leading companies. And I -- it’s seldom I walk in to an account of any size in any industry where you don’t have the people with conference room tablet or with their Mac laptops. And so, without putting a figure to it, I would say that we’re investing in it because we believe they’re a substantial opportunity in virtually every profession we address, in every industry we invest. And in addition, every company size we invest in. And so we hope for big things. Go ahead, that’s fine.

Greg Dunham – Goldman Sachs

Just - sorry about that. One follow up maybe for Tom is, you did have a user conference and that is typically a benefit for you. Any sense of how much of a benefit that typically is or how would you think about that contribution being abnormal in the Q3?

Tom Walker

Yes. Hi, Greg. –It’s great to talk to you. So yes, the conference was great. I would say the -- I can’t give you an actual number of what the -- what it contributed overall. But let me just say the run up to the conference, there was a lot of excitement, a lot of awareness. Elissa, our Chief Marketing Officer does a great job with that. Her team does a great job with it. And so we saw a good amount of awareness and that lead up to it. So, overall, we do think it did contribute to the overall success of Q3. And last year at this time, it was in Q4 if you remember, so we pulled it into Q3 this year. And so, we do think it did have an impact.

Greg Dunham – Goldman Sachs

Great. Thanks guys.

Tom Walker

Thank you.

Operator

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

John DiFucci – JPMorgan

Thank you. So guys, have you tried to figure out, think about to what’s changed if anything? You had been doing well but your top line has accelerated the last two quarters. I guess as you think about it, I was going to ask what Greg just did, I was wondering how much the conference helped and they always help but this quarter was a huge quarter. So, I don’t know is it - and it doesn’t even sound like you’ve really started to invest heavily internationally. I guess if you can talk was there anything on the margin that’s changed here other than just executing against an opportunity that people have been waiting for and want to buy?

Tom Walker

Yeah, I mean, hi, John, this is Tom. And so -- yeah, with respect to Q3, clearly, we had really good customer adoption. So, that was not -- that was atypical, adding another 1,500 customer accounts is over 80% year-over-year growth on new customer accounts. The conference absolutely helped the awareness- is helping and also the large transactions you saw, those increased over 100 - transactions over $100,000 in the quarter.

So, there’s no real trajectory change. It’s just we had a strong quarter and those things have popped up as the reasons for beating our internal plans quite frankly.

John DiFucci – JPMorgan

Okay. Could you hit on Tom or Christian, what you’re doing to expand internationally or what your plans are there?

Tom Walker

Sure. I’ll go first John and then Christian can jump behind me if I don’t cover everything. So, we’re continuing to invest in all the regions. So, we got EMEA operations. We’ve got APAC operations. And we have operations in Latin America. So, specifically, we’re expanding our London and our London Office just came online in Q3, really, really excited about it. The team over there is doing great, and we continue to hire and expand over there.

The same thing in Asia Pacific, actually the office we just opened up our new office there today. As a matter of fact, they got to step into their new office this morning. And so, we’re continuing to invest in sales, marketing, support, and a little bit of operational resources in those areas. But it’s primarily bringing our technology to these regions and focusing on what customer’s need and the support that they need to grow.

So, those are the primary drivers of the investments that we’re making, but to be specific we’re investing all the regions. So, we’re seeing the opportunity everywhere. Our product was, you know, localized in eight languages over two years ago. It’s the same download that you have off our website, you download. You go up to the help menu, you toggle it and you can pick one of the eight languages. So it’s very, very easy to get our technology across the globe.

And it’s the same download. You can download it anywhere in the world in 90 seconds to get that product, and our server product you can download in about nine minutes. We’re just seeing the adoption there, and it’s being driven by free trials from our website and we see the action and the traction, if you will, and that’s where we’re deploying sales and marketing resources.

John DiFucci – JPMorgan

Great. That’s really helpful guys. Great job. Thanks.

Tom Walker

Thanks, John.

Operator

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

Philip Winslow - Credit Suisse

Thanks, guys. Just want to build on the last couple of questions. We saw that general availability of Tableau 8, a couple of quarters ago. Over the past three quarters, we have seen that reacceleration of growth, so Christian how much of – I mean, obviously Tableau 8 is loaded with new features. I mean, how much do you think the release has really benefited you guys. And then as you think kind of going forward about, what else you can pack in the Tableau, what are some of the near-term things that you guys are focused on?

Christian Chabot

Well, I think there’s no doubt that our major upgrades for our products helps drive our sales. Tableau 8 was a major release for us, was a year under construction [inaudible] impact. I mean of course, it’s hard to pinpoint the exact quantity - impact it’s probably unknowable, but it’s certainly material and profound.

Now, all that said, what you’re probably after is what [inaudible] which can be kind of pin to something that I can identify and in is repeatable. I would say at first blush, I mean, Tableau is an R&D machine. I mean, in some ways, the most important thing we’ve built over 10 years as a company is our R&D team, just exceptional talent level of people investing in disruptive new ways to solve major analytical problems, and our R&D investment ratio as you can see is one of the highest in all of software. And so we certainly do expecting big things from the dot releases we’ll do on the Tableau 8 platform, as well as Tableau 9, 10, and 11 down the road. So, in some sense that we do think is repeatable.

Now, all that said, 2013 is a bit of a special year. We went public this year. We had our biggest ever customer conference. We reached a record a level of awareness. We brought international on the line in a way that was beyond just a few guys in an office. There’s (inaudible), so we feel we have a bunch of tail factors going for us at this time and that the product [is great and so it’s] [ph] just a part of the bigger story

Philip Winslow - Credit Suisse

Got it. Thanks.

Christian Chabot

Thanks, Phil.

Operator

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

Greg McDowell - JMP Securities

Great. Thank you so much, and congratulations, guys. My first question, you talked about the revenue over performance in part coming from a large multi-million dollar deal, and I was just wondering as you look at the pipeline for Q4 and for next year if the number of multi-million dollar type deals is exceedingly higher than it was say this time last year.

Tom Walker

Hi, Greg. This is Tom. So, yeah, with respect to kind of looking forward in the pipeline, you know, as Christian and I have kind of hammered – you know, this land and expand model is not contingent on having to have this multi-million dollar deals. I think one of the things customers love most about us and our sales folks is the ability of – they can get started pretty small, in fact, with a trial off the web site and expand it over time. So, the goal is not necessarily just to land the multi-million dollar deal, it is to expand the customer account. It is more the lifetime value of a customer and making sure they are successful and that our technology is getting deployed in more and more places throughout an organization.

So, from looking at the pipeline standpoint, that’s not the kind of focus of the pipeline. It is just making sure that we are – you know, we bifurcated it into the acquisition type, new accounts, acquiring new customer accounts and then expanding the accounts we have and making them really, really successful with our technology.

Greg McDowell - JMP Securities

Great. Thanks, Tom. And then, maybe one for you, Christian. There are companies out there who seem to be trying to make some noise with free analytics or free visualization product and I was just wondering how you react to these sorts of announcements, and do you think these other companies are maybe making these announcements from a position of strength or a position of weakness? I would just love your thoughts there.

Christian Chabot

Yeah, I’ll take that one. You know, in some sense, every time there is a new competitive entrant whether it’s a kind of knockout strategy or not, you know, it is a continuing validation of our market. I mean, we have claimed for years that there will be a broad market shift toward Tableau’s way of doing things. I mean, companies simply want to move toward more agile self-service for the people business intelligence strategies, and we would certainly expect many more product entrance over the years, and we’ve seen a few.

You know, with regard to the ones we have seen so far, and those in particular that have been labeled free or very low, low cost you know, that started about three or four years ago. It really started I would say with Microsoft, which I think what came on big was a big free alternative or big free offering in 2010. They did that again in 2012, and a couple of other major, major public companies have done the same thing, so you know we are three to four years into the experiment of you know what is the impact of these free – you know, free products on the market place and you know, you can see it in the numbers. Not only have they not slowed our growth, our growth has actually been accelerating and so, you know, going forward, we expect a similar results, more and more companies investing in the Tableau ways of doing things, and more and more opportunities for Tableau to be the market leader. So, that’s the way we see it.

Greg McDowell - JMP Securities

Thank you.

Operator

(Operator Instructions).

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

Jesse Hulsing - Pacific Crest

Thanks for taking my question. Christian, you called out your large deal in the quarter and the evolution from a report driven legacy environment to a more self-service paradigm, when you look at your pipeline and look at your customer base, is this sort of evolution in the works in a large number of them, and do you expect that to be the norm over the next few quarters?

Christian Chabot

Could you clarify exactly what you mean? I want to make sure I get the right aspect of the question.

Jesse Hulsing - Pacific Crest

Are you seeing more customers driving a replacement of the legacy report driven?

Christian Chabot

I see. Well, I think the most important thing we are doing, and this is as true this quarter as the previous ones, to your question. The most important thing we are doing is increasing the size of the business analytics marketplace, said differently we're bringing the power and potential of analytics to a much broader population of people within a company, even though it’s companies that have these big slow moving traditional BI standards. In fact, even within our global 2000 style customers, we find that most people in the workforce who understand data don’t have anything other than spreadsheets, because the traditional standard is basically sitting on the shelf or stuck in development. In that sense, the most important thing we're doing is just bringing the power of analytics to people who really have nothing other than the spreadsheet.

Now that said, as account of all, some of them do decide to do wholesale replacement of their traditional strategy. Companies do tend to see a better way over a period of quarters or years and start to move their whole strategy in that direction. We do periodically do wholesale replacement, but to your question that is not the main thrust of our sales success and we don’t expect that to change at least for the next couple of years.

Jesse Hulsing - Pacific Crest

Got it. By my estimate, the pace of customer acquisition accelerated again this quarter, maybe walk through what you think is driving this given that it's off of a larger base and pretty impressive because of that. Do you think Tableau Online had an impact this quarter on customer adoption?

Tom Walker

Hi, Jesse. This is Tom. Yeah, I mean, the overall new account growth was over 80% year over year, so it has grown. I think it's testament to our marketing folks to be honest. They do a tremendous job with awareness. This year has been a banner year for us on the awareness front and the marketing front. We had the IPO, we had 8.0, we had the customer conference. These were all large things that have increased our overall awareness and so that has helped dramatically and so that’s probably what you're seeing. There's a lot of things, a few single things that we've done, big things that we've done that helped increase our overall account growth.

What was the second part of your question, Jesse? Sorry.

Jesse Hulsing - Pacific Crest

The Tableau Online.

Tom Walker

Thank you. So Tableau Online, I don’t know if Christian reiterated that, so we launched that in July and so we got several hundred customers there. That is I’ll break the usage into three different buckets with respect to Tableau Online, so we've got a group that is brand new to Tableau, so those will new customer accounts and we are seeing some traction there. We'll see another group that is actually Tableau desktop users. They aren't currently using the server at all and so it is opening up server usage to those folks.

And then we also have a smaller portion that is a Tableau desktop and server on premise customer, and they're actually using it online in a different group or in their group to complement what they're trying to do and other teams that need to have analytics. Sort of like Christian was just saying it’s bringing analytics to people who don’t have them, so we've seen that. But overall the Tableau Online, we got several hundred customers, but it's very, very early in that cycle.

Jesse Hulsing - Pacific Crest

Great. Tom, maybe talk a little bit about sale cycles, how [inaudible] obviously your mix is moving to much larger deals. Have you seen any change in how sale cycles in aggregate are trending, and maybe talk a little about how you're managing that?

Tom Walker

Yes. In aggregate, they're not changing, so I wouldn't say there is a big – Christian was talking about that with the previous question about we’re not necessarily changing our approach to the enterprise or to our commercial business. Overall, it's consistent with what is done in the past periods. We are adding more sales folks and marketing folks, and so that’s definitely part of the cases. But with respect to the overall trends, on the spectrum of the strategic account managers being on one end and the acquisition sales managers being on the other end, you've got a different kind of ramping and growth and so overall we're spending a lot of time focusing on our on boarding and our training and getting people up and running into different pockets. The overall ramp can vary from anywhere from 3 to 6 months or 6 to 9 months to 9 to 12 months on average, depending on which group you're in.

Jesse Hulsing - Pacific Crest

Great. Thanks, Tom.

Tom Walker

Okay.

Operator

Your next question comes from the line of Derrick Wood with Susquehanna. Derrick, your line is open. If you’ve muted your line, please unmute yourself.

This concludes the question and answer for today. I would now like to turn the call back over to Christian Chabot, CEO, for closing remarks.

Jay Peir

Hi. This is Jay Peir. I just want to thank everyone for your participation today, and with that this concludes our third quarter earnings call.

Operator

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

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