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Executives

Brett Pollack

Lars Björk - Chief Executive Officer, President and Director

Timothy J. MacCarrick - Chief Financial Officer

Analysts

John S. DiFucci - JP Morgan Chase & Co, Research Division

Keith Weiss - Morgan Stanley, Research Division

Brent Thill - UBS Investment Bank, Research Division

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Walter H. Pritchard - Citigroup Inc, Research Division

Jamison Manwaring - Goldman Sachs Group Inc., Research Division

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

Stewart Materne - Evercore Partners Inc., Research Division

Ross MacMillan - Jefferies LLC, Research Division

Raimo Lenschow - Barclays Capital, Research Division

Karl Keirstead - Deutsche Bank AG, Research Division

Matthew Van Vliet - Stifel, Nicolaus & Company, Incorporated, Research Division

Abhey Lamba - Mizuho Securities USA Inc., Research Division

Matthew Hedberg - RBC Capital Markets, LLC, Research Division

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Greg McDowell - JMP Securities LLC, Research Division

Edward Maguire - CLSA Limited, Research Division

Qlik Technologies (QLIK) Q4 2013 Earnings Call February 20, 2014 5:00 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the QlikTech Q4 and Full Year 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Brett Pollack, Director of Investor Relations. You may begin.

Brett Pollack

Thank you, operator. Good afternoon, and thank you for joining us today to review Qlik Technologies' fourth quarter and full year 2013 financial results. With me on the call today are Lars Björk, Chief Executive Officer; and Tim MacCarrick, our 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 will be considered forward-looking statements under federal securities laws. Words such as, but not limited to, predicts, plan, expects, focus, anticipates, believes, goal, target, can, 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 reflecting our current views regarding the future are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. Any statements regarding our products are intended to outline our general product direction and should not be relied on in making a purchase decision as the development, release and timing of any features or functionality described for our products remains at our sole discretion.

For discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's EDGAR system and our website. We encourage all investors to read our SEC filings. Qlik Technologies expressly disclaims any obligations 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 at our website www.qlik.com under the Investor Relations tab. Also, please note that our website -- 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 Björk. Lars?

Lars Björk

Thanks, Brett, and thank you all for joining us today. We are pleased with our results for the fourth quarter, which came in above the high end of our guidance range for both revenue and non-GAAP operating income as we leverage our global infrastructure to deliver against our quarterly goals.

We continue to expand our footprint in the enterprise where Qlik is being used to drive mission-critical business applications that grow revenue or improve operational efficiency for our customers. We kicked off the limited release of our next-generation product during the quarter and continue making advances across our portfolio of products and solutions.

And just a few weeks ago, we came back from a very successful employee summit. We all left energized by the opportunity that is in front of us and aligned around how we will invest across our business in 2014 to execute on our multi-year growth strategy.

For the fourth quarter, we reported total revenue of $161.8 million, representing an increase of 18% over the prior year period. Our non-GAAP operating income for the quarter was $41.3 million, and non-GAAP net income was $0.31 per diluted common share. Tim will go into this in more detail in a moment, but I'm pleased to say that we have made progress addressing the operational challenges we discussed with you in October. And while our work is not finished, we feel good about our ability to take advantage of our growing pipeline.

For the full year 2013, revenue was $470.5 million, an increase of 21% year-over-year. Our non-GAAP operating income for the full year was $36.2 million, and non-GAAP net income was $0.26 per diluted common share. During 2013, we did business in approximately 120 countries, and our global network, built over many years, represents an important asset to support worldwide deployment. As we enter 2014, we remain very confident about the large market opportunity in front of us and our leading role within it.

QlikView delivers greater speed and agility, transform the way companies think about and run their operations and satisfies the information needs of business users at the pace of business today. With our efficient scalable engine, powerful data integration and enterprise governance tools, QlikView can expand in the largest organizations, enabling them to leverage their data to make better decisions.

QlikView users go beyond simply describing or visualizing what's happened. They leverage our associative query to interrogate their data and discover why it happened. QlikView simplifies decision-making in an increasingly complex data environment.

The proof is everywhere. Cox Media, an integrated media company, expanded its use of QlikView across the enterprise to analyze TV and radio revenues, email marketing programs and monthly financials. Over the last 5 years, Cisco has generated more than $100 million in additional renewal and upgrade revenues by using QlikView to increase visibility into its installed base and identify new revenue opportunities.

Waffle House, the restaurant chain, chose QlikView to give its management better access to data on their mobile devices as they visit their locations across the United States. And let me update you on the deal we spoke about previously. A national health service organization has now used QlikView to realize GBP 42 million in procurement cost savings, and at the same time, increase the productivity of the Business Intelligence function by 75%.

As another proof point, Qlik earned the 2013 Best in KLAS award in the BI and Analytics segment. KLAS, a research firm specialized in health care vendor performance, gathered feedback from more than 16,000 health care providers for its best-in-class software and services report. This recognition validates our focus on health care within our broader virtualization strategy.

QlikView empowers our customers to make discoveries that improve care, lower cost and drive efficiency in all areas of their business. I'm pleased that we will accept -- be accepting this award on Sunday at the annual HIMSS conference of top health care IT thought leaders.

Finally, the Gartner Magic Quadrant from BI and Analytics platforms came out today, and we are pleased that it shows that the paradigm has clearly shifted to data discovery vendors as the clear leader setting the agenda for the industry. We have long agreed that data discovery is top of mind for business, IT and purchasing executives alike, especially for larger deployment as an alternative to traditional BI tools that are not user friendly and don't offer rapid time to value. Gartner's comments regarding enterprise manageability confirms that we saw where the market was going with QlikView.Next and the governance capability we invested in with Expressor.

Gartner even says that, "Qlik has embarked on one of the boldest strategies of any vendor to address enterprise -- enterprise's unmet need for BI platform that can fulfill both business users' requirement for ease-of-use and IT's requirements for enterprise features relating to reusability, data governance, control, scalability and so on."

As a value proposition expense, our brand also needs to evolve to support broader market positioning. As you may have noticed on our website, we launched our new brand Qlik, which refers to more than our flagship product, QlikView. Qlik is a purpose. It encompasses who we are and what we do. We enable people across organizations to make more insightful decisions and act on them. The evolution of the market and the competitive landscape, the growth of our Business Discovery platform and service offerings and our deep commitment to customers through our customer success framework are some of the key drivers for the new brand articulation and visual brand identity. We are very excited about what the new brand promises for the future of Qlik.

Now let me take a moment to update you on QlikView.Next. In November 2013, we shipped a limited availability release to a select group of customers who are evaluating it in a variety of environments. Their feedback on key elements include user-centric capabilities and visualization having confirmed our strategic objectives. We're also very pleased to report that we will deliver a beta version of QlikView.Next to a broad group of partners in the next few weeks, allowing us to get even more input as we approach general availability later in the year.

At our Analyst Day next month, we will demo the product to provide opportunities for attendees to try it for themselves. We have an exciting vision for the future of BI, and we'll give you more insight on how we plan to execute on the large and growing market opportunity.

Now let's be clear about one thing. As exciting as QlikView.Next is, we believe QlikView 11 remains the leading user-driven Business Discovery platform in the industry. QlikView 11 delivers tremendous value for customers, enabling them to run their businesses more effectively. System integrators, partners and customers around the world are building more mission-critical apps for QlikView 11 and delivering them in on-premise or hosted environments. We plan to continue to invest in innovation in this product, improving usability and delivering faster ROI. We expect QlikView 11 to be the main driver for our 2014 revenue and intend to support this product for at least 3 years after the general availability of QlikView.Next.

Having covered our brand and our product strategy, let's now spend some time on the rest of our 2014 plans. Our revenue and non-GAAP operating margin guidance reflects a thorough planning process that aligned our business model with our strategic goals. We have prioritized investments in our go-to-market model, product road map and infrastructure to deliver on our market opportunity.

Let's start with our go-to-market model. In the enterprise space, we will expand investments in our full range of services to help our largest customers clearly define their Qlik road map and create higher ROI solutions that enable the organization to extract more value from their data and their Qlik installations. This is in addition to the enterprise-class governance capabilities, security controls and 24/7 support we already provide to scale their deployment.

As for our channel, we'll continue to expand and strengthen our best-in-class global partner network, with particular focus on system integrators and technology partners. These relationships can be game changing, when we join the go-to-market with packet solutions and integrated technologies that reduce the time to value and open new opportunities to land and expand.

For example, a key SI partner was instrumental in identifying a business challenge that QlikView was uniquely positioned to solve, bringing us into the opportunity and delivering one of the largest deals in the quarter. We will continue to invest in building our relationship with SIs, which we believe could influence a much greater percentage of our revenue over time.

Our business grew up in the SMB market, and it remains an important element in our go-to-market model. In 2014, we'll continue to invest in our inside sales capabilities around the world, leveraging repeatable processes, innovative management techniques and of course, lots of QlikView analysis to expand our capacity in this area.

Our customer success framework wraps our software in a range of services, support options and community platforms. We'll continue to expand these offerings and deepen their penetration across our customer base to help make our customers more successful and drive or expand opportunities.

Finally, I am excited to announce that we'll be holding our first annual Global User Conference in the U.S. in the fourth quarter of this year. As you know, we have leveraged our Business Discovery World Tours as frequent touch points with our customers on a local level. We expect to continue with these events in 2014. But as we consider the launch of Next and the meaningful size of our global customer base, we now see a great opportunity to bring our customers' partners and employees together in one location.

This event will feature hands-on education sessions, provide opportunities for customers to share with and learn from each other and allow our sales teams to build relationships and engage in more personalized value selling with both existing customers and prospects.

As you can see, there's a lot to be excited about in 2014. We're making targeted investments across the business to support our sales force and partners, build and manage pipeline, deliver best-in-class solutions and drive revenue and market share growth over time.

Before I turn the call over to Tim to walk through the financials in more detail, I wanted to mention an initiative that is a cornerstone of who we are at Qlik, our corporate social responsibility program, which we call Change Our World. Today, Qlik has 2 primary corporate charity partners: Medair and HOPEHIV. Medair helps people who are suffering in remote and devastated communities around the world, while HOPEHIV serves children and young people in sub-Saharan Africa affected by HIV and AIDS.

We donated our software and services to these charities to enable new insight into their operations. In addition, Qlik employees have given countless hours and raised significant amounts of money to support these and other important causes around the globe. We are extremely proud of the dedication of all of our team members and thank them for their efforts to change our world.

With that, let me turn the call over to our CFO, Tim MacCarrick.

Timothy J. MacCarrick

Thank you, Lars. I'll start by providing further details on our financial performance during the fourth quarter and full year 2013, and then I'll discuss our guidance for the first quarter and full year 2014.

We ended the year on a strong note and are pleased with our fourth quarter results. Total revenue of $161.8 million was up 18% in reported currency and 17% in constant currency over the same period last year. Within total revenue, license revenue was $103.1 million in the fourth quarter, an increase of 10% over the same period last year.

Maintenance revenue was $45.7 million for the fourth quarter, increasing 31% over the same period last year, further validating the value our solutions provide to our customers. Professional service revenue was $13 million in the fourth quarter, increasing 43% over the fourth quarter of 2012, reflecting the increasing demand we saw as we continued to further penetrate the enterprise.

The Americas showed strong year-over-year growth in the fourth quarter, increasing 25% in reported currency and 26% in constant currency. European revenue grew 13% in the fourth quarter in reported currency and 9% in constant currency from the prior year period, in line with our expectations.

Rest of World revenue increased 20% in the fourth quarter in reported currency and 29% in constant currency year-over-year during the fourth quarter. Our partner network and direct sales force both had good performance in the fourth quarter, with 53% of licensed and first-year maintenance generated from our indirect partner channel and 47% from our direct channel, which is generally consistent with our go-to-market model.

During the fourth quarter, we completed 208 deals over $100,000 compared to 177 in the same period last year. This included 55 deals over $250,000 compared to 52 in the same period last year, and we closed 7 deals greater than $1 million during the quarter versus 8 in the prior year period. For the full year 2013, we completed 511 deals over $100,000 compared to 458 in the same period last year. This included 141 deals over $250,000 compared to 114 in the same period last year, and we closed 15 deals greater than $1 million compared to 11 in 2012.

One of the large deals signed in the fourth quarter was an expanded deal with Hartford HealthCare Corporation, an integrated health system with more than 18,000 employees. They will extend their deployment of QlikView to drive quality and claims analysis for their accountable care organization, as well as add value to their Oracle PeopleSoft environment by making QlikView their ERP analytics standard. Our solution team was able to differentiate Qlik's offering from both a feature and function perspective, along with quantifying future value of this customer by taking advantage of the deep domain expertise we have built in health care.

We have added and will continue to add business development sales and sales support people with vertical market expertise. This includes an increased investment in our global industry market development organization, which is made up of senior industry subject matter experts who support all aspects of our go-to-market success. We've identified repeatable solutions that address specific business challenges, including in areas such as sales performance, retail omni-channel analytics, banking credit risk, patient population management and operating room performance. With vertical expertise and repeatable solutions, we increased the value Qlik delivers and improve our ability to win new customers and expand across their organizations.

As we discussed previously, our Q3 results revealed opportunities to improve our pipeline management processes. During the fourth quarter, we made good progress in this area. We hired and trained more business development reps, added more process discipline around pipeline management execution and gained greater visibility into deal flow. Although our work is not finished, these actions have helped lay the foundation for further improvements throughout the next couple of quarters to help take further advantage of our growing pipeline.

Turning to headcount. We ended the fourth quarter with 1,721 employees, a 21% increase from year end 2012 and a sequential increase of 60.

Now let's focus on cost and margin performance and review our results 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 utilize an estimated long-term effective tax rate of 30%. Please note that 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 2013 was $143.9 million, representing a gross margin of 88.9% compared to a 90% gross margin in the fourth quarter of 2012 and 85.6% in the third quarter of 2013. Operating expenses totaled $111.2 million in the fourth quarter compared to $97.2 million in the prior year period, reflecting our ongoing investments to support sales coverage and capacity, product development and launch, building scalable infrastructure and strengthening our marketing efforts.

As a result, our non-GAAP operating income was $41.3 million for the fourth quarter compared to non-GAAP operating income of $32.3 million in the prior year period. Non-GAAP operating income for the fourth quarter 2013 excludes $7.8 million of stock-based compensation expense, $127,000 of employer payroll taxes on stock transactions and $758,000 related to the amortization of intangible assets.

During the quarter, we had a foreign exchange loss of approximately $800,000, which was included in other expense, compared to a loss of $100,000 in the same period last year. As you know, 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 foreign currency rates.

On a non-GAAP basis, our net income was $28.5 million for the fourth quarter of 2013 or $0.31 per diluted common share compared to a non-GAAP net income of $22.7 million or $0.26 per diluted common share for the fourth quarter of 2012.

For the year ended December 31, 2013, we had $10.9 million in GAAP tax expense. This resulted in a GAAP net loss of $10 million and a GAAP loss per diluted common share of $0.11 compared to GAAP income per diluted common share of $0.04 in 2012. GAAP tax expense for the full year 2013 reflects approximately $7 million of charges incurred during the period related to valuation allowances and other tax-related reserves.

Moving to the balance sheet. Cash and cash equivalents totaled $227.7 million as of December 31, 2013, compared to $195.8 million as of December 31, 2012. For the 12 months ended December 31, 2013, we generated $29.7 million in cash flow from operations compared to $27.7 million in the prior year period.

Now turning our thoughts on the first quarter and full year 2014 guidance. Starting with the first quarter, we expect total revenue to be in the range of $110 million to $114 million, non-GAAP operating loss to be in the range of $18 million to $16 million and a non-GAAP net loss per diluted common share of $0.14 to $0.12. As a reminder, the first quarter operating loss includes the expenses associated with our annual employee summit held in January.

For the full year 2014, we expect total revenue to be in the range of $545 million to $555 million, an increase of approximately 16% to 18% over 2013. Non-GAAP operating income is expected to be in the range of $30 million to $35 million. Non-GAAP net income per diluted common share is expected to be in the range of $0.23 to $0.27.

Our full year revenue guidance reflects confidence in our ability to continue to disrupt the BI market and increase the value we deliver to our global customer base. Our non-GAAP operating margin guidance reflects ongoing investments in pipeline management and operational sales processes throughout the year, building on the positive steps taken in the fourth quarter.

We also plan to make incremental strategic investments supporting sales coverage and capacity, expanding our customer success capabilities, driving product development and the launch of QlikView.Next, building scalable infrastructure and strengthening our marketing efforts. We think the opportunity in front of us is large and growing, and we will continue to invest ahead of our growth to deliver on our vision for the future of Business Intelligence and capitalize on that opportunity.

With that, operator, I think we're ready to begin the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of John DiFucci of JPMorgan.

John S. DiFucci - JP Morgan Chase & Co, Research Division

I have a question for Tim and then a follow-up for Lars. Tim, Lars said that QlikView 11 is going to support 2014 guidance, which I just want to verify. Does that -- that implies you don't have any sort of incremental addition to guide to the numbers because of QlikView.Next? And I guess what is -- is there anything implied in the full year guidance for 2014 relative to the launch of QlikView.Next? I know -- well, I get asked all the time and I'm sure you do, too, about the risk that there's a pause before the launch from customer activity. I know it's not something you've seen before, but if you can comment on that it would be helpful.

Timothy J. MacCarrick

Sure, John. Thanks. So I think the comments that we've made is that the predominant share, the vast majority of our revenue in 2014 will come from QlikView 11. We do obviously intend and have been very clear that we expect to go GA later in the year on QlikView.Next. So there will be some minimal impact within the current year as it relates to the introduction of the new product. And as we've also indicated in the past, we do think that there will be some impact associated with releasing the new product, but we're working very closely with our customers and want to make sure that any pause would be minimal, and that's our current expectation.

John S. DiFucci - JP Morgan Chase & Co, Research Division

Okay. Great. That's very helpful. And Lars, you said -- I think you said in your prepared remarks you made progress in some of the things that happened in the last quarter. And it looks like the Americas and the Rest of World were really strong against very difficult comps. And Europe was kind of okay, up 9% and actually against an easier comp. I realize it's a larger region for you. But I guess, can you give us any comments? Is that what we should just be expecting out of Europe going forward and most of the growth will just come from the other regions, realizing Europe is, again, is the largest region?

Lars Björk

Yes, John, so I think you should expect growth from all regions. We have, as we've spoken about before, deliberately not made Europe a primary investment territory as has been the U.S. and the rest of the world. And we can see that, that has paid off well. We are still growing in Europe. I wouldn't indicate that there is any turn in the economy to a much better place, even if we gradually see it improving. And you should probably expect that U.S. and rest of the world will lead the way going forward but still seeing growth in Europe.

Operator

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

Keith Weiss - Morgan Stanley, Research Division

One for Tim and one for Lars again. Tim, in terms of the guidance on the OpEx line for this year, is there a part of the OpEx spending that's related to QlikView.Next of a ramp-up in terms of distribution or marketing ahead of that product release that would be somewhat one-time, say, in nature because of this, what is a big product release?

Timothy J. MacCarrick

Yes, absolutely, Keith. There definitely is a meaningful component to that expense investment. We're going to make sure that the product gets out the door at the right time and in the right way, and we've built in the costs associated with that as we see them at this time into the guidance.

Keith Weiss - Morgan Stanley, Research Division

Got it. And then just the follow-up for Lars, in terms of the improving sort of vis-a-vis the fixes into the sales process, how has that -- has that been able to sort of refill the pipeline, if you will, heading into the first half of the year to your satisfaction in terms of getting that sales cadence into place to get the, maybe not so much the large deals, but get the transactional deals into the pipeline to fill up the first half of the year that tends to be more transactionally focused?

Lars Björk

I would say, yes, we see improvements in this area. Pipeline is growing, and the quality of pipeline is growing, but it is a continuous effort. So we're not at the place where we would say we are done.

Operator

Our next question comes from the line of Brent Thill of UBS.

Brent Thill - UBS Investment Bank, Research Division

Lars, a lot of questions from clients around the release path of QlikView.Next. I'm just curious, I know you're not going to give out an exact time frame, but can you give us a sense of the milestones that you're hoping to hit from going from limited to now it sounds like a broader beta to a final GA? Can you just give us a sense of what those steps are? And again, I know you're not going to probably give us a time path other than later in the year.

Lars Björk

So the whole intention is to tap into our existing customer base and do it in a staged way to get very valid feedback from us. And part of that is also the tapping into our partner community and broader than that, as we move into the year. And as we mentioned in a few weeks, we will make it available to a broad group of our partners. At our Analyst Day, we will speak a lot more to their release schedule going forward, and you will have a great opportunity to see and touch the product. So there is more to come around this, and we are following a plan and we're getting the valuable feedback that we feel is very important to roll this new product in.

Brent Thill - UBS Investment Bank, Research Division

Okay. And just following on to Tim's comment around the sales structure and adding more business development reps. Is there any major alignment changing you're making in your go-to-market in terms of the footprint? Or is this effectively the same playbook that you've been using, you're just making some small tweaks?

Timothy J. MacCarrick

Yes, we like the playbook, and we're going to continue with the playbook. This is really about adding more capacity. So when we talk about business development reps, it's about adding more capacity to handle the growing pipeline and support larger deal sizes. We are also, as we indicated, adjusting the processes around pipeline management to give us better leverage on a greater number of BDRs that we've hired.

Operator

Our next question comes from the line of Steve Ashley, Robert W. Baird.

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

I guess I'd like to just ask on Europe, was there any difference in the performance or the growth of your indirect channel in Europe versus direct?

Timothy J. MacCarrick

No, not really. It's across both.

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Okay. And in terms of -- you talk about improving pipeline management. You've made some improvements. You've advanced that, and there's still more work to do. Is there more color you could give us on kind of what has changed and what you hope will change execution-wise in Europe going forward?

Timothy J. MacCarrick

Well, I think this is a problem that's also an opportunity, and it really is based on the fact that we continue to see terrific opportunities, a large and growing pipeline, deal sizes continue to expand. And at the same time, we see longer sales cycles. So the changes that we're making are really around, as I mentioned, increasing the capacity to handle that larger pipeline, to manage the deal flow through the pipeline in a more deliberate way and that includes process changes in how BDRs interact with our lead management system, how we manage the overall funnel of leads coming in and shepherd them through the overall cycle. It's basically to drive more optimization on a lead-by-lead basis with a greater number of people supporting the bigger pipeline.

Operator

Our next question comes from the line of Walter Pritchard of Citigroup.

Walter H. Pritchard - Citigroup Inc, Research Division

Just maybe asking the question a different way, I'm wondering, it looks like your larger deals, especially deals over $250,000, weren't as strong in the quarter and implies that your smaller deals were much stronger. I'm just wondering, could you talk about the changes you've made and how that's impacted the various size of deals as you look to kind of optimize your execution over the last 3 months?

Timothy J. MacCarrick

Yes, as we said, we were pleased with our fourth quarter performance, I think, across our business model. We certainly saw strength in a number of areas there. From a lead management and pipeline management perspective, we certainly understand the difference between a small and medium-sized deal, which is -- obviously has a much shorter sales cycle, and those larger deals that have to be managed and cultivated over several months to get them ready to be closed in a particular quarter. So we certainly adjust our processes accordingly. But we have looked at the processes supporting all deal sizes and all types of deals coming in across our various market segments with an eye towards tweaking, adjusting and improving that process on an ongoing basis.

Walter H. Pritchard - Citigroup Inc, Research Division

And then just, Tim, a follow-up for you on the expenses. It looks like you're guiding for the year, expense is growing roughly the rate that revenue is growing, but you actually have expenses growing according to your guidance faster in the first half. It sounded like really the incremental expense in the year was more second half or later in the year as you rolled out QlikView.Next. So I'm just trying to understand what exactly is going on with the OpEx. I guess we expected a bit more -- a bit of leverage this year and didn't see it.

Timothy J. MacCarrick

Yes, so remember that our employee base is growing by 21% year-over-year, so there's related costs of that larger employee base. We also, as you know, have 2 large expenditures in the first half of the year. In the first quarter, we have our employee summit, and in the second quarter, we have our partner Qonnections event. The investments that we're making in part relate to the rollout and launch of QlikView.Next. But as we also indicated, we're continuing to invest in sales capacity, in the sales management process and pipeline management process. And when we talk about scalable infrastructure, that in part relates to the implementation of our new NetSuite-based ERP, which we will also roll out later in the year. So it's not just the product development and launch. It's also related to a number of other key investment areas that we think will pay good returns for us in the future.

Operator

Our next question comes from the line of Greg Dunham of Goldman Sachs.

Jamison Manwaring - Goldman Sachs Group Inc., Research Division

This is Jamison calling in for Greg. How much of QlikView.Next is about ability to work with additional new data types? And then just kind of beyond that, how do you feel the platform is positioned to handle these new, like, Big Data types that are becoming more prevalent?

Lars Björk

Yes, so I don't think we will expand to new data types as such because we can handle any data types today. I think we are going to expand to new users and new use cases that wouldn't necessarily find a platform in the BI space or discovery space, something for them today by lowering the hurdle for anyone to grab onto it. I also think that by making it into a true platform, by opening up the product to all kinds of APIs, we are going to open up the product to be embedded in so many other environments. So the whole focus from us here has been on reaching a larger market opportunity, and that's also why we are investing ahead of that opportunity. We think there is more to capture out there.

Operator

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

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

Circling back to the deals over 250k and I guess million dollar deals, my estimates were down year-over-year. How's your win rate trending within those opportunities?

Timothy J. MacCarrick

Jesse, it's Tim. Win rates continued to be strong, very strong, really pretty much across the board. So we don't have any concerns there at all.

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

And the license growth this year was about 14%. You guided full year revenue for '14 to 17% at the midpoint. What are your expectations for license growth relative to total revenue growth?

Timothy J. MacCarrick

I mean, we don't break it out in that way. But we continue to see strong momentum, obviously, through our broad go-to-market model. We also really enjoy and continue to focus very intently on our non-licensed parts of our revenue base. Maintenance continues to grow at very strong rates, and our professional services business continues to scale nicely as we move further and further up into the enterprise.

Operator

Our next question comes from the line of Kirk Materne of Evercore.

Stewart Materne - Evercore Partners Inc., Research Division

Tim, can you just talk about, when you guys are making investments in sort of capacity on the sales pipe right now, can you just talk a little bit about how much are going to be sort of quota-carrying reps versus the amount of infrastructure needed to support some of your initiatives around vertical markets and things like that?

Timothy J. MacCarrick

Well, we look at things fairly holistically, right? So adding quota carriers is always important, and we're continuing to expand our sales capacity in that regard. But as we continue to move into the enterprise and grow and sales cycles get longer, it's very important to support that quota carrier with sales support resources, business development reps, inside sales folks as well. And so we do that on a relatively proportional basis. But in all cases, given the market potential that we have, we're continuing to invest across the board.

Stewart Materne - Evercore Partners Inc., Research Division

And I guess to that point, when you guys are getting into more large deals with more support that you just mentioned, I mean, are the deal sizes going up in proportion to the amount you're spending to get into those deals? Meaning, if you look at just the absolute number of sort of million dollar deals this quarter or in the 250k plus, I mean, it's up. But relative to what -- sort of your hiring you've done, it's not up proportionally. So I guess I'm just wondering, is the increase in ASP worth the investment and the people to sort of support these larger deals? I'm just trying to get a sense of when do we start to see the leverage, I guess, from some of those investments?

Lars Björk

Well, you might not be able to see it in one quarter, Kirk. We -- clearly, we see that we can grow the opportunity within that account over a longer period of time by engaging on a much, much broader front.

Operator

Our next question comes from the line of Ross MacMillan of Jefferies.

Ross MacMillan - Jefferies LLC, Research Division

Lars, I understand you're trying to improve process from pipeline nurturing and conversion. But could you talk to your pipeline coverage ratio with regard to your guidance? Is it consistent with what you had coming into, for example, last year? Or have there been any changes with regard to how you've thought about pipeline coverage ratios relative to guidance?

Lars Björk

So we've talked about this quite extensively that we've put an enormous amount of focus and rigor into the size of the pipeline and particularly, the quality around the pipeline at any given state. And there is no difference on the coverage from a year ago. But the effort that we've put into qualifying a lot of the opportunities in the pipeline in time and also in their respective stages gives us assurance that we have a very robust pipeline.

Ross MacMillan - Jefferies LLC, Research Division

Great. And then just on QlikView.Next, are you still anticipating functionality to evolve on a stage release basis, such that there're going to be iterations of QlikView.Next with incremental pieces of functionality over time?

Lars Björk

Well, yes. That's the whole intention of having another cadence on the release schedule is that we will continue to build out that platform with a much more frequent release schedule. We've spoken about a 4- to 5-month intervals, so yes.

Ross MacMillan - Jefferies LLC, Research Division

Great. And then just one last one, I think we've talked about cost quite a lot on this call. But Tim, is there a quantification around the global user group? Is that a material impact on OpEx this year?

Timothy J. MacCarrick

Well, we're going to run and deliver a very exciting event. We think this is a terrific opportunity, the beginning of an annual tradition to bring our broad user base together and share best practices and showcase the company and our product portfolio. I wouldn't view that as a material cost impact that we should call out separately. Again, we're making investments in the product and product launch. We're making investments in sales capacity. We're making investments in scalable infrastructure, and we're also continuing to invest in a broad range of marketing initiatives to take advantage of the market opportunity, of which the global event is one.

Ross MacMillan - Jefferies LLC, Research Division

Great. And maybe just one very last one, if I could, just to go back on Europe. Lars, is your expectation that Europe will grow more slowly than the other 2 regions, but the growth rate should be better than the 9% we've seen for the last 2 quarters?

Lars Björk

I think the expectation is that we will continue to grow in Europe. Will we expect it to grow faster than the regions that we relatively invest more in, like the U.S. and rest of the world? No. What it's going to be in the end, we will see. We think there is still very, very large opportunity to grow in Europe. And as it gradually improves macro economically, we think we're well positioned to capture more of that.

Operator

Our next question comes from the line of Raimo Lenschow of Barclays.

Raimo Lenschow - Barclays Capital, Research Division

Quick one on the Next product. Can you talk a little bit about what it can do for you to increase the TAM or the addressable market within accounts? Obviously, your business users were using it very happily and because you have really good analytic capabilities in there and that was a big advantage over Tableau. But with you now improving virtualization as well and kind of having a better front end, what does it do to you to get more customer, more potential users on the platform?

Lars Björk

Yes, I think a big driver for us in QlikView.Next is that we are enormously focused on what's easy today might not be enough to call easy tomorrow. So ease of use from a developer's perspective, but more importantly from a user's perspective or even making a user partly into a developer and not having to rely as much as they might do today on their current platform, on development capabilities. But also as I mentioned before, opening up the product with all kinds of interfaces through APIs will make it very easy to embed in other environments, and we think that is also going to grow it in the use case.

Operator

Our next question comes from the line of Karl Keirstead of Deutsche Bank.

Karl Keirstead - Deutsche Bank AG, Research Division

My question is for Tim, and it's about the maintenance revenue line. Tim, normally when software companies experience fairly material license growth decelerations, you see it with the lag on the maintenance line, yet your maintenance line is still growing above 30% hanging in there like a champ. And I'm wondering if you could help us understand that, if it is that you succeeded in increasing renewal rates. When does Qlik lap that increase? And hence, when should we expect, if we should, maintenance growth to decelerate?

Timothy J. MacCarrick

Sure. Well, I think as I mentioned earlier, we continue to be pleased with the level of growth that we're seeing on the maintenance revenue line. Our renewal rates continue to be in and around the 90% range. We have, as we've indicated in the past, put specific resources in place to focus on renewal rates and we've seen those over our prior quarters continue to grow. There's an opportunity as well in our partner community where we're helping them with maintenance renewal rates as well. So listen, I think we've guided for 2014, we're going to continue to see a strong maintenance renewal through the next 4 quarters and we're going to continue to focus on renewal rates as a key enabler to that, as well as license growth.

Operator

Our next question comes from the line of Tom Roderick of Stifel.

Matthew Van Vliet - Stifel, Nicolaus & Company, Incorporated, Research Division

It's Matt Van Vliet on for Tom. Just a quick question in terms of, recently, you've been saying you're not seeing much deal slippage or pushing off from customers waiting for QlikView.Next. I was just wondering if you could give us some commentary about what kind of the sales pitch is and what the ease of transfer over eventually if you get customers to sign up for QlikView 11 and then eventually moving them towards QlikView.Next? Is there going to be an easy transition? Is it something that is part of the sales cycle now? Just some additional color there maybe why you're not feeling like customers are putting off purchasing decisions.

Lars Björk

Well, first of all, I'm not going to share that now because we are not pitching this to customers. We are sharing it with existing customers so they can get an insight into the new product. We are not at the point where this is generally available and therefore, we are not selling the product yet. I think you will get a better insight into this when we have the Analyst Day, if you have the opportunity to join us there. And we will, in due time, have a clear roadmap as to how you migrate from one platform to the other.

Operator

Our next question comes from the line of Abhey Lamba of Mizuho Securities.

Abhey Lamba - Mizuho Securities USA Inc., Research Division

Lars, can you talk a little bit about the competitive field, who you're seeing out there the most? And why is there such a big difference in your growth rates versus one of the other players in the space? Is it just that they are sizing small, or is there something in the market that each of you are targeting?

Lars Björk

So overall, the competitive landscape looks very similar to the previous quarters. The most common vendors that we meet are the stack vendors given their enormous size and their outreach. We're seeing Tableau a little bit more than we've seen in previous quarters, but not really notable, and that sort of summarizes what we see here. So I can't comment on someone else. I can only comment on what we do in the market. I think we serve different markets, otherwise we wouldn't be seeing each other so limited as we do.

Abhey Lamba - Mizuho Securities USA Inc., Research Division

Okay. And Tim, should we expect revenue growth rates to accelerate from the 2014 levels? And what type of initial investments that you're making this year should help us see that type of acceleration?

Timothy J. MacCarrick

Well, I think all of the investments that we're making are going to be helpful to us for the future. These are investments that set us up for success in 2014 and beyond, and we're very focused on executing on those investments over the next 12 months and look forward to delivering against the guidance we've provided.

Operator

Our next question comes from the line of Matt Hedberg of RBC Capital.

Matthew Hedberg - RBC Capital Markets, LLC, Research Division

Lars, you indicated you're investing heavily in both the direct and indirect channel and called out specifically the investments in the SI world in particular. I guess, with QlikView.Next and all of its new features, should we expect the split between direct and indirect to change once that product goes GA later in the year?

Lars Björk

We don't believe so, but at this point, no.

Matthew Hedberg - RBC Capital Markets, LLC, Research Division

And then coming out of the employee summit, are there any changes to sales territories or anything? Obviously, you're adding a lot of headcount capacity. But any changes to sales territories?

Lars Björk

No, not really. As we touched on in the script, what we are doing is we are putting a focus on going deeper into verticals, a specific focus on certain solutions in certain verticals, adding people to the industry market team who are the experts in a specific industry or -- and/or vertical.

Operator

Our next question comes from the line of Derrick Wood of Susquehanna.

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

It looks like you guys have pretty good DSOs in the quarter. Maybe you could talk about how linearity tracked in Q4, and since it's already kind of the latter part of February, how linearity is tracking in Q1?

Timothy J. MacCarrick

No, I think you're right. We were generally pleased with DSOs in the fourth quarter. We're on, I think, a pretty good trend there. We don't see that changing. They've been stable generally over several quarters, and we don't see any issues there.

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Okay. And then I guess on the -- I mean, in the quarter, it really looks like you guys are investing more on the services side. You had very strong growth in the quarter. I mean, are you trying to bring more in-house? Or what's causing you to accelerate investments? And how do you think that will help you with selling more software?

Timothy J. MacCarrick

So Derrick, as we continue to move further up into the enterprise, we leverage our broad platform, which extends beyond just the QlikView platform and includes our services and solutions. Even though as Lars mentioned, our vertical expertise comes to bear there. And as you have these longer sales cycles and more significant use cases, that's where our professional services organization can really help the customers get more rapid time to value and realize significant ROIs on their investment in the software itself.

Operator

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

Greg McDowell - JMP Securities LLC, Research Division

Great. I have more of a high-level question around your customers adopting QlikView as their enterprise standard for analytics. I think in that Gartner report that just came out today, they mentioned around 50% of your customers that they surveyed viewed Qlik as their true enterprise analytics standards. So my question is, where do you think that percentage could go moving forward? And what are the most important features in QlikView.Next that can help you guys truly become the enterprise analytics standard in organizations? And I assume that would be at the expense of the stack vendors?

Lars Björk

Greg, I think your assumption is right. I think it will be at the expense of the stack vendors. And certainly, I think it can go up. How high it can go, it's hard to say. There is always a preference for more than one tool in the larger corporations. But I think what we enable with the new product, as I talked before, the open interface is going to take us there. The ease-of-use is going to take us there. The focus on marriage-ing the needs of IT and business users, what we call governed business discovery, I think is going to be a huge milestone in the Next release. I think a lot of enterprises realize that visualization and such is an important component of your offering. But you need more than just visualization, and that's what goes into QlikView.Next. You have to be able to manage the large deployments, you have to be able to scale them, and at the same time, drive the absolute best ease-of-use for the users.

Operator

And our last question comes from the line of Ed Maguire of CLSA.

Edward Maguire - CLSA Limited, Research Division

I just wanted to flip the question around. There's been a lot of discussion about the large deals from the execution standpoint. But from your perspective, what is your customer's appetite for larger deals? And given the placement or the elevation of Business Discovery in the Gartner Magic Quadrant, it would certainly seem that this is -- it certainly is a positive for QlikTech and the other agile BI vendors. What are you seeing in terms of the dynamics of your customers there? And do you think that the investment, particularly in the verticals, will have any impact on changing the mix of larger versus midsized deals in particular?

Lars Björk

Ed, Lars here. Yes, I think there is absolutely an appetite to make a larger investment in discovery platforms. It doesn't necessarily mean that we'll do it in one investment. You don't have to buy something ahead of time in this market. So you're going to qualify deals. And I think there is a great opportunity to continue along those lines, specifically where there's virtualization because you are then going to solve even more distinctly a critical need or a business problem. It all comes down to, can we deliver it to that value? So that's the whole intention of that: making it more sticky, making it more likely to grow and delivering more time to value.

Operator

I'm now showing no further questions at this time. I'd like to hand the call back over to Lars Björk for any closing remarks.

Lars Björk

So before we end the call, let me remind you of some important dates coming up. We look forward to seeing some of you on the upcoming investor conferences, as well as our own Analyst Day taking place in New York City on March 13. You should be receiving a formal invitation via email in the next few days. I highly encourage you to attend.

Please also check our Events page on our website for future events, which includes our sponsorship of the Gigaom Structure Data conference in New York City on March 19 and 20. And our second joint webinar with Deloitte on February 26, focusing on how QlikView can be used to help organizations increase transparency, better understand the implications of their actions and find ways to manage risks.

With that, I'd like to thank you all for joining us today. I would especially like to thank our employees and partners for their efforts in the fourth quarter of 2013. Thank you.

Operator

Ladies and gentlemen, thank you for staying in today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone.

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