Qlik Technologies (QLIK) Lars Björk on Q4 2015 Results - Earnings Call Transcript

| About: Qlik Technologies (QLIK)

Qlik Technologies, Inc. (NASDAQ:QLIK)

Q4 2015 Earnings Call

February 11, 2016 5:00 pm ET

Executives

Brett Pollack - Director of Investor Relations

Lars Björk - President, Chief Executive Officer & Director

Timothy J. MacCarrick - Chief Financial Officer

Analysts

Raimo Lenschow - Barclays Capital, Inc.

John DiFucci - Jefferies LLC

Walter H. Pritchard - Citigroup Global Markets, Inc. (Broker)

Matthew George Hedberg - RBC Capital Markets LLC

Jesse Hulsing - Goldman Sachs & Co.

Karl E. Keirstead - Deutsche Bank Securities, Inc.

Brent Thill - UBS Securities LLC

Brad Sills - Bank of America Merrill Lynch

Mark R. Murphy - JPMorgan Securities LLC

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Sanjit K. Singh - Morgan Stanley & Co. LLC

Andrew J. Doupé - Wedbush Securities, Inc.

Abhey R. Lamba - Mizuho Securities USA, Inc.

J. Derrick Wood - Susquehanna Financial Group LLLP

Bhavan S. Suri - William Blair & Co. LLC

Kirk Materne - Evercore

Operator

Good day, ladies and gentlemen, and welcome to the Qlik's Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today's conference is being recorded.

I would like to introduce your host for today's conference, Mr. Brett Pollack, Vice President of Investor Relations. Sir, please go ahead.

Brett Pollack - Director of Investor Relations

Thank you, operator. Good afternoon and thank you for joining us today to review Qlik's fourth quarter and full year 2015 financial results. With me on the call today are Lars Björk, Chief Executive Officer; and Tim MacCarrick, 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 including predictions, expectations, estimates or other information that will be considered forward-looking statements under federal securities laws. 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 a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on SEC's EDGAR System and our website. We encourage all investors to read our SEC filings. Qlik 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, including a reconciliation of revenue on a constant currency basis to reported revenue can be found in our press release, which is available on our website, www.qlik.com, under the Investor Relations tab. Also, please note that our webcast of today's call will be available on our website in the Investor Relations section.

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

Lars Björk - President, Chief Executive Officer & Director

Thanks, Brett, and thank you all for joining us today. 2015 was an exciting year for Qlik. I'm very proud of the efforts of our employees and our partners as we achieved 23% constant currency total revenue growth. We succeeded the high-end of our total revenue guidance of 21% to 22%. We also delivered full year license revenue growth of 21% on a constant currency basis versus 13% last year or an 800 basis points improvement, which is a great accomplishment for the company.

Even more compelling was the performance of our product platform including very strong results from Qlik Sense. In only its first full year of introduction, Qlik Sense was the primary driver of our license growth in 2015. Qlik Sense was also a key factor in many of our large deals including nine of our 13 deals greater than $1 million in the fourth quarter and 17 of 31 deals greater than $1 million on a full year basis. In 2015, we believed we jumped to a new S-curve with Qlik Sense, comprising approximately 18% of our full year license revenue and 25% of our Q4 license revenue. Combined with the other products on our platform, we believe we are making great strides in a large and growing market.

During the fourth quarter, we delivered strong performance in the Americas and Europe, while Asia-Pacific continued to experience an increasingly challenging sales environment and came in well below our expectations. Despite the weakness in Asia-Pac, our global organization and balanced go-to-market model enable us to achieve 22% constant currency total revenue growth in the fourth quarter, which exceeded the high-end of our Q4 total revenue total guidance of 17% to 21%.

On a reported basis, we delivered total revenue of $205.5 million in the fourth quarter. As a result of the relative strengthening of the U.S. dollar subsequent to the date we last discussed guidance in October, our reported total revenue for the quarter was negatively impacted by approximately $4 million. And our non-GAAP income from operations was negatively impacted by approximately $1.4 million.

Our non-GAAP operating income for the fourth quarter was $44.3 million and non-GAAP net income was $0.31 per diluted common share, which was below our expectations. This was primarily caused by variable cost increases driven by our revenue, channel, and geographic mix in the fourth quarter. Tim will share the details in a few minutes.

Our 2015 revenue growth in customer adoption gives us a lot to be excited about. Qlik's marketing message, seeing the whole story that lives within your data, is resonating in the marketplace as more customers and prospects are looking for a holistic approach to analytics. With our platform, we offer five distinct use cases from one vendor, self-service visualization, guided analytics, embedded analytics, data-as-a-service, and reporting collaboration.

Visualization is very important but deriving deep value from analytics require more robust platform and allows users to seamlessly interrogate multiple data sets on a real-time basis, highlight associations in the data and gain dynamic insights in a governed manner. We expect these broader capabilities to enable us to increase our opportunity, strengthen our differentiation, and expand our market share.

In Q4, our value proposition delivered compelling revenue growth including in the enterprise where we closed 13 deals greater than $1 million versus nine deals in the fourth quarter of 2014. During the fourth quarter, a large well-known long-only institutional asset manager selected Qlik Sense to be deployed enterprise-wide in a greater than $1 million deal. Following initial use of Tableau, this customer hit a wall relative to scalability and governance and selected Qlik Sense to replace their prior investments. We believe this is another validation and visualization-only solutions often deliver limited value and further highlights Qlik's differentiated vision in the marketplace.

Additionally, we completed a deal with Qantas Airways, Australia's largest international airline. As a part of their transformation program, Qantas is empowering its employees with a range of tools to make data-driven decisions. Our consulting team worked closely with Qantas Group IT to implement self-service analytics capabilities, leveraging the governance, security, and scalability aspects of our platform. Our work with Qantas began in the HR department and will now extend to operations, the operations team to enable better visibility of aircraft on-time performance levels.

Also, during the quarter, a leading global beverage company selected Qlik Sense in a greater than $1 million deal. This company has a global initiative to take a holistic view of their consumers to drive better business outcome. Qlik Sense was selected for its scalability, governance, and visualization capabilities.

In July 2015, we announced our first multi-million-dollar Qlik Sense-only deal with AFAS Software, a fast growing European ERP software provider based in the Netherlands. In December, AFAS fully integrated Qlik Sense into their online product and went live. To-date, approximately 1 million AFAS users have already created 15,000 personal dashboards using embedded Qlik Sense software. AFAS customers are able to select from a menu of 43 templates populated with individual user data. In the future, AFAS plans to offer enhanced capabilities, including authoring of visualizations as well. To quote AFAS' CEO, Bas van der Veldt, "since the launch of our recent release of AFAS Profit BI edition, which has been very well received by our clients, Qlik has helped to accelerate our growth and drive more clients of AFAS from on-premise to our cloud offering".

The AFAS deal reinforces the importance of OEM as a key focus area for Qlik. It is great to see one of our largest OEM customers having success leveraging our technology to accelerate their revenue growth. Serving as another important proof point of the strength and scalability of our platform, in 2016, we plan to invest further in the OEM and web developer markets.

These customer examples highlights our competitive differentiation which is a direct result of the robust innovation agenda we outlined several years ago combined with our agile release cadence and cloud initiatives, we are well positioned to maintain this differentiation into the future.

And for the sixth consecutive year, Qlik was positioned in the Leaders Quadrant of Gartner's Business Intelligence and Analytics Platforms Magic Quadrant report which was issued last week. Customers and industry analysts, like Gartner, are taking notice of the key components of Qlik's overall vision; a platform delivering self-service visualization capabilities combined with governed data discovery and smart data preparation making all levels of analytics even easier to perform. Gartner stated that, compared with its chief competitors, Qlik scores significantly higher on complexity of analysis, which we attribute to its stronger ability to support multiple data sources, a robust calculation engine, and associative filtering and search. As a result, Gartner recognizes Qlik's enhanced vision and our platform approach as one of the most complete solutions on the market.

Last month, we announced the availability of Qlik Cloud Plus, for $20 per month users can now have greater storage and sharing capabilities on our cloud platform. This is in addition to our free Qlik Cloud offering which has tens of thousands of registered users since its inception last year. And DataMarket, which provided curated data sets for customers and prospects. Qlik Cloud Plus is the next step in the evolution of our cloud strategy and we intend to deliver even more cloud capabilities in 2016.

In February 2016, we will be launching Qlik Sense 2.2. And in May, at our combined customer and partner conference, Qonnections, we will be highlighting Qlik Sense Enterprise 3.0, which we expect to be generally available in June. We remain firmly committed to our QlikView solution and plan to make annual releases following QlikView 12 which we launched in December 2015. QlikView remains a highly appreciated product by our customers and we plan to continue to reinforce that commitment with ongoing QlikView innovation and support.

We expect that many of our existing QlikView customers will continue to choose to expand with Qlik Sense and other Qlik offerings, taking advantage of the breadth of capabilities to implement incredibly powerful and effective solutions for all their analytical needs. This was clearly evidenced by the successful launch of Qlik Sense and we remain excited about its momentum.

From a license revenue product mix perspective, we anticipate that by the end of 2016, we will have visibility into when Qlik Sense will be the leading product on the platform. We also expect continued strong QlikView performance primarily supporting the existing customer base and contributing meaningful total revenue and cash flow to the company. Going forward, we intend to provide quarterly updates on the progress of our platform strategy and annual updates on the contribution of Qlik Sense to our revenue.

To support the continued momentum of our platform strategy, we're focused on further increasing brand awareness. We are targeting to be in even more opportunities because when Qlik is fully evaluated our strong competitive win rates are even stronger. In addition, we have strengthened our leadership team to more effectively capitalize on opportunities in the enterprise and to develop a stronger ecosystem of channel, system integrator, and OEM partners.

In August 2015, we hired Mark Thurmond, our EVP of Worldwide Sales and Services. Mark brings significant experience leading larger, high growth organizations and a tremendous level of energy, which has been well received by employees and customers. Under his leadership, we recently hired two new executives to join Qlik, Eric Johnson and Toni Adams.

Eric is our new President for the Americas and brings a wealth of executive experience at BlackBerry and Sybase as well as SAP's $2 billion database and analytics group. Toni Adams is our new SVP of Partners and Alliances and has held senior level roles at VMware and Symantec. We're very excited to have Mark, Eric, and Toni at Qlik and appreciate the positive impact they are already having on the business.

These experienced leaders, together with the rest of the executive management team, will continue to drive our go-to-market strategy and support our innovation agenda to increase account coverage, capitalize on our five core use cases, better develop and support our partner ecosystem, and continue to align our service organization, all focused on our goal of driving double-digit constant currency growth for many more years into the future.

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

Timothy J. MacCarrick - Chief Financial Officer

Thanks, Lars. As I review our results for the fourth quarter and full-year 2015, and share our guidance for the first quarter and full-year 2016, please keep in mind that our constant currency results are calculated by taking revenue from our entities reporting in foreign currencies and translating those amounts into U.S. dollars using the foreign currency exchange rates from the same period in the prior year.

For the fourth quarter, total revenue was $205.5 million, representing an increase of 12% over the same period last year and an increase of 22% on a constant currency basis. Our reported total revenue for the fourth quarter was negatively impacted by approximately $4 million as a result of the relative strengthening of the U.S. dollar since we last provided guidance in October.

For the full year 2015, we achieved 23% constant currency total revenue growth, which exceeded the high-end of our total revenue guidance range of 21% to 22% compared to 20% growth in 2014. On a reported basis, total revenue for 2015 was $612.7 million, representing an increase of 10% year-over-year. For the full year 2015, the relative strengthening of the U.S. dollar year-over-year negatively impacted total reported revenue by approximately $70 million.

License revenue for the fourth quarter was $126.1 million, increasing 12% over the fourth quarter of 2014 and 21% on a constant currency basis. For the full year 2015, license revenue grew 9% to $327 million. On a constant currency basis, full year license revenue growth was 21% compared with 13% for the full-year 2014. Maintenance revenue was $62.7 million for the fourth quarter, increasing 14% over the same period last year and 24% on a constant currency basis. For the full year, maintenance revenue grew 13% year-over-year to $229.5 million, or 26% on a constant currency basis.

Professional services revenue was $16.7 million for the fourth quarter, up 10% compared to the fourth quarter of 2014 and up 18% on a constant currency basis. For the full year, professional services revenue grew 7% year-over-year to $56.2 million, and 18% on a constant currency basis.

Total revenue in the Americas increased 23% in the fourth quarter and 28% on a constant currency basis. For the full year, Americas total revenue grew 18% year-over-year and 22% on a constant currency basis. European total revenue for the fourth quarter increased 9% compared to the same period in 2014, and increased 22% on a constant currency basis. For the full year, European revenue grew 5% year-over-year and 23% on a constant currency basis.

Rest of world revenue for the fourth quarter declined 5% over the same period in 2014 and increased 4% on a constant currency basis, reflecting the economic challenges in the region we experienced in late Q3 that continued in the fourth quarter. For the full year, rest of world revenue grew 8% year-over-year and 23% on a constant currency basis.

During the fourth quarter, 50% of license and first year maintenance billings was generated from our indirect partner channel and 50% from our direct channel, compared to 52% indirect and 48% direct in Q4 2014. 73% of our license and first year maintenance billings in the quarter came from existing customers and 27% from new customers. At the end of the fourth quarter of 2015, our customer count stood at approximately 38,000.

We had very good large deal metrics in the quarter, even considering the sizable movement of foreign currency during the last year which has adversely impacted our period-over-period reported comparisons. During the quarter, on a reported basis, we completed 255 deals over $100,000 compared to 238 deals in the same period last year. We closed 89 deals over $250,000 compared to 71 deals in Q4 2014. And 13 deals greater than $1 million compared to nine deals in the fourth quarter of 2014.

For the full year 2015, we completed 602 deals over $100,000 compared to 556 deals during the prior year. This included 175 deals over $250,000 compared to 147 deals during 2014. And we closed 31 deals greater than $1 million compared to 20 deals in 2014. On a constant currency basis, for the full-year 2015, deal counts would have been 665 deals over $100,000 including 197 deals over $250,000, and 32 deals greater than $1 million. Our head count ending the fourth quarter of 2015 was 2,511, a 23% increase from the same time last year and a quarter-over-quarter increase of 57 people.

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. 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 2015 was $178.8 million, representing a gross margin of 87% compared to 89% in the fourth quarter of 2014. Operating expenses totaled $148.4 million in the fourth quarter compared to $131.9 million in the prior-year period.

Non-GAAP operating income was $44.3 million in the fourth quarter compared to non-GAAP operating income of $42.1 million in the prior-year period. Our non-GAAP operating profit was negatively impacted by approximately $1.4 million as a result of the relative strengthening of the U.S. dollar since we last provided guidance in October.

For the full-year, non-GAAP operating income was $37.1 million representing a 6.1% margin, compared to non-GAAP operating income of $32.8 million, representing a 5.9% margin in the prior-year period. Our non-GAAP operating income for the year was negatively impacted by approximately $5.5 million as a result of the relative strengthening of the U.S. dollar year-over-year. After factoring in the $1.4 million of foreign exchange impact since we last issued guidance in October, our non-GAAP operating income for the fourth quarter was approximately $6 million below the midpoint of our guidance. Approximately, half of this variance impacted gross profit and the other half impacted our expense levels in the quarter.

Within cost of goods sold, a larger number of deals with systems integrators drove higher referral fees and our professional services engagements in Q4 required a higher level of sub-contractors in certain regions where customer demand exceeded our capacity. From an expense perspective, greater license growth in Europe and the Americas offset the weakness in Asia-Pac but resulted in higher variable compensation. Marketing expenses were also higher in the quarter as we continued to support the ongoing momentum of Qlik Sense.

As an organization, we believe we've made progress towards a multi-year path to our long-term non-GAAP operating margin goal of 20%. In 2015, we launched and established an operational excellence program called, Fit for Growth, which identified key opportunities to drive productivity, leverage, and scale improvements over time.

As a part of Fit for Growth, we also completed a project to baseline and benchmark our overall cost base and have set multi-year benchmark targets for key areas of the business. These insights give us the confidence that we are moving in the right direction. And despite the challenges seen in this quarter, we plan to drive a 200 basis point to 250 basis point margin improvement in 2016.

For example, we streamlined our event strategy in 2016. In January, we hosted a virtual employee kick-off in full strategic and operational alignment very early in the year. This format was very well received by the employee base. And together with regional sales kick-off business meetings, the broad Qlik team is energized and aligned for 2016. In May, we will host customers and partners and analysts at a consolidated Qonnections conference rather than holding three separate events as we have in the past.

Through our Fit for Growth program, we remained very focused as a company on driving operational excellence to deliver scale and leverage in support of our long-term margin goal of 20%. During the quarter, we had a foreign exchange loss of $2.8 million which was included in other income and expense compared to a gain of $165,000 in the same period last year. The foreign exchange loss in Q4 2015 negatively impacted non-GAAP EPS by $0.02.

As you know, foreign exchange gains and losses can fluctuate and our guidance does not consider any additional future 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 $29.1 million for the fourth quarter of 2015, or $0.31 per diluted common share compared to non-GAAP net income of $29.6 million or $0.32 per diluted common share for the fourth quarter of 2014.

On a non-GAAP basis, our full year net income was $21.2 million or $0.23 per diluted common share compared to non-GAAP net income of $21.7 million or $0.24 per diluted common share for 2014. Our non-GAAP net income for 2015 and 2014 assumes an estimated long-term effective tax rate of 30%.

Cash and cash equivalents totaled $320.1 million as of December 31, 2015, compared to $244 million as of December 31, 2014. We had strong cash flow from operations of $59.6 million during the year ending December 31, 2015, compared to $35.6 million during the year ending December 31, 2014.

Our full year of free cash flow calculated by taking cash flow from operating activities, minus cash used for capital expenditures increased significantly year-over-year, up from $22.6 million in 2014 to $44.4 million in 2015, primarily driven by improvements in our accounts receivable collections processes and strong deferred revenue growth.

Deferred revenue was $180.4 million, up 37% year-over-year and 46% in constant currency, reflecting continued strong maintenance renewal rates and process improvements in automation driven by our Fit for Growth program.

Turning to our thoughts on first quarter and full-year 2016 guidance, we are assuming that foreign currency exchange rates for the first quarter and full-year 2016 will approximate current exchange rates. This business outlook is directional guidance only, as foreign currency exchange rate fluctuations and changes in the mix of domestic and international revenue and expenses can impact our results.

Our guidance for 2016 reflects the competitive strength of our platform, our differentiated value proposition, continued momentum with Qlik Sense and continued weakness in our Asia-Pacific region. For the full year 2016, total reported revenue is expected to be $695 million to $705 million and reflects the negative impact of approximately $10 million to $12 million of foreign exchange headwind on a year-over-year basis due to the relative strengthening of the U.S. dollar. This represents 15% to 17% year-over-year growth on a constant currency basis and 13% to 15% on a reported basis.

We anticipate a 200 basis point to 250 basis point improvement in margins to 8% to 8.5% in 2016. Accordingly, our non-GAAP operating profit guidance for the full-year 2016 is $56 million to $60 million. Our non-GAAP net income per diluted common share is expected to be $0.41 to $0.44.

For the first quarter of 2016, we expect total revenue to be in the range of $132 million to $136 million, representing 10% to 13% growth and 12% to 15% growth on a constant currency basis. We expect a non-GAAP operating loss of $18 million to $15 million, and a non-GAAP net loss per diluted common share of $0.14 to $0.12.

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

Question-and-Answer Session

Operator

Our first question comes from the line of Raimo Lenschow with Barclays. Your line is open. Please go ahead.

Raimo Lenschow - Barclays Capital, Inc.

Thank you. Just quickly, so if I summarized the year, you were better on constant currency, a bigger (30:44) FX headwind, but the one thing that I'm slightly puzzled with is that you had higher sales and marketing spending that kind of really blow the profit number apart. Can you just talk a little bit about the process what happened there, did a lot of people hit sales accelerators late in the year, or how can that kind of mismatch happen? Thank you.

Timothy J. MacCarrick - Chief Financial Officer

Sure, Raimo. So, overall, we were very pleased with how the business performed in the fourth quarter, as you point out, beating the constant currency revenue growth guidance for both Q4 and full year. And it really shows the strength of our diversified model. And although we experienced, I would say, pretty meaningful weakness in Asia-Pac, again, in Q4, that was made up for by strength in Europe and the Americas.

So the gap to the profit number is about $6 million when you take into consideration the foreign exchange impact in the quarter. Half of that was in cost of goods sold. So, here, we have SIs that are becoming a larger part of our revenue mix and they do have referral fees, and we experienced more referral fees in the quarter than we had expected. But it's good to have those big deals, right, because although we're paying these referral fees, the SIs get us into bigger and larger deals. And we also used some subcontractors on the consulting side where actually we ran out of internal capacity in three of our sub regions within Europe.

On the expense side and, more specifically to your question around marketing, that's where the other half of the expense was. Two main factors there, one was more marketing spend as we support our digital footprint and drive pipeline. The other impact was due to the mix of revenue that shifted from Asia-Pac into Americas and Europe. And, obviously, with the weakness that we saw in Q3 in APAC and the continued weakness in Q4, what had been driving in part our year-to-date growth was very strong performance and strong productivity levels in Europe and Americas. So when they over-achieved in Q4 to make up for Asia-Pac, we had more reps really that got into their accelerators. So impacts on the bottom line really driven by a handful of commercial dynamics that, frankly, helped us over-achieve revenue. So that's a little bit more background for you.

Raimo Lenschow - Barclays Capital, Inc.

Okay. Thank you.

Operator

Thank you. And our next question comes from the line of John DiFucci with Jefferies. Your line is open. Please, go ahead.

John DiFucci - Jefferies LLC

Thank you. Lars and Tim, first quarter guidance implies – if our math is correct, implies something around 7% constant currency license growth. And I know you don't guide license, but we can sort of back into it. That's a – whatever it is, it's something around there, let's say – that's a significant deceleration from what you have been doing. I guess how do we interpret that, and how do – I guess why do you expect what looks like reacceleration through the year, which is implied in the annual guidance, which we can back in for license as somewhere around 9%?

Timothy J. MacCarrick - Chief Financial Officer

Yeah. So, John, I think, first of all, focusing on the full-year guidance, driving 15% to 17% constant currency revenue growth, given some of the challenges that we see continuing to persist in Asia-Pac, is I think a good place for the company to focus.

And in Q1, a couple of things there. Number one, we do expect this continued weakness in Asia-Pac to be a factor there. But I think, in addition to that, we've got what we feel to be a pretty balanced Q1 guide that hopefully will get us off to a good start here at the beginning of 2016.

John DiFucci - Jefferies LLC

I guess if I could follow up, Tim, on Asia-Pac, and I get the weakness there – I mean, it's in the news, and we see it and you guys had a little trouble there last quarter. But I believe that you have said that you had closed some of those deals that slipped last quarter, and we'd presumed they were larger deals. And Asia-Pac still is not that big relative to the Americas and EMEA. So I just thought that if you closed some of those deals that slipped, we would assume that Asia-Pac, given its relative small size, would have been at least okay. But it sounds – I mean, you gave the numbers, it wasn't okay – did you just do nothing there other than those slipped deals? I mean it sounds like it must be really bad there.

Timothy J. MacCarrick - Chief Financial Officer

Well, I mean, again, it was the 4% constant currency revenue growth for overall rest of world. But you'll recall back in very late Q3, we started to see some of this regional macro influence of the slower growth rates in China impact a small number of larger deals there. And when we guided in Q4, we did expect some of those larger deals to close, and in fact we still expect them to close, but they didn't close in Q4. So we're still into a situation where these deals, we believe they're won deals, but it's taking longer. These sales cycles have elongated. And so, we're taking a balanced view of how Asia-Pac is going to read through this regional macro weakness. So that's basically what happened. We did expect a couple of those deals or a few of those deals to close in Q4 and, in fact, they're now likely to close in 2016.

John DiFucci - Jefferies LLC

And I'm sorry, I'm just going to ask one last one because you've hit on it. And you mentioned the 15% to 17% constant currency revenue growth, and there has been talk of like 20% growth for the foreseeable future. And granted that under (37:04) something is happening in an important region in the world, I get all that. But if things start to come together, that's something we should just kind of throw out the window right now, or is that something we should still, at least, have not necessarily in our models, but thinking that perhaps you could do if things were to sort of settle down in Asia-Pac and nothing else – no other material hits in other parts of the world?

Timothy J. MacCarrick - Chief Financial Officer

Yeah, I mean I think we're very comfortable with where we're positioned competitively. I think there's a number of key data points here for Q4 and full year that are just terrific data points for the company in terms of our results, and the strength of Qlik Sense, and our cash flow, and so on. So the 15% to 17% is what we think is the right balance of risk and opportunity for 2016. But we certainly don't rule out the possibility of growing further or higher than that, and certainly we would want to see some returning strength in Asia-Pac that could certainly be an enabler to that. So we don't rule that out. And I think from the company's perspective, in the past, we've talked about continuing to be a strong double-digit grower. And, obviously, the performance in 2015 was terrific, and we look forward to continuing to leveraging our strengths here going forward.

John DiFucci - Jefferies LLC

Great. Thanks a lot, Tim. Thanks, Lars.

Operator

Thank you. And our next question comes from the line of Walter Pritchard with Citi. Your line is open. Please go ahead.

Walter H. Pritchard - Citigroup Global Markets, Inc. (Broker)

Hi. Thanks. Lars, it seems like the competitive sort of noise in the space is at a pretty high pitch and I'm wondering, could you talk about maybe what you're seeing competitively versus 6 months and 12 months ago, is there any sign that you're seeing Power BI come into the picture? Or you mentioned a displacement of Tableau there, I'm curious just kind of your assessment overall of the competitive landscape.

Lars Björk - President, Chief Executive Officer & Director

Yeah, sure. So I think what we can see is, we established Qlik Sense really in the market in 2015. We are very pleased with the traction. We are pleased with the fact that it is established enterprise-class ready platform and solution already.

Is there a little bit more noise in the market? Yeah, probably. But it doesn't affect us in the business, per se. I think we are very well positioned. And as recognized by Gartner, we are combining two of the needs that a lot of enterprises have; the ease of use with a governed (39:38) side of it, too, and not just focusing on self-service visualization. So, our win rate against competition remains very strong and, if anything, a little bit stronger than before.

Timothy J. MacCarrick - Chief Financial Officer

Operator, we can move to the next question.

Operator

Thank you. Our next question comes from the line of Matt Hedberg with RBC Capital Markets. Your line is open. Please go ahead.

Matthew George Hedberg - RBC Capital Markets LLC

Yeah. Thanks, guys, for taking my questions. Strong results out of U.S. and Europe. And I guess referencing back to John's question, I guess, in terms of Asia-Pac, it seems more macro. Is there anything structural that Mark can change there – to just change that overall trajectory there? And then maybe in your overall guide, obviously, you're assuming some weakness in Asia-Pac continuing, but is there an added level of conservatism also in the U.S. and Europe sort of given the uneven macros that appear out there?

Timothy J. MacCarrick - Chief Financial Officer

Yeah, I think, listen, we're set up for success in Asia-Pac. If you think back to the growth rates that we experienced in the back half of last year, up 50% in the third quarter, up 76% – these are 2014 numbers, and even up 43% constant currency first quarter 2015 and 34% in the second quarter. So I don't think it's anything structural. I think we're set up for success there.

We've seen this company and our products read-through macro weakness in the past and our European results over the last X number of years, I think, are a great validation of that. We still think that that will be the case in Asia-Pac, but it's just not clear exactly when that read-through will start to begin. So, nothing structural there. And, listen, I think, we're poised to continue to take advantage of some nice deals there that are still in the pipeline. It's more a question of timing here going forward.

Matthew George Hedberg - RBC Capital Markets LLC

I guess in terms of – is there an added level of conservatism in the U.S. then, or is that sort of, you're not really expecting anything to really change there, given the strong results and the trajectory?

Timothy J. MacCarrick - Chief Financial Officer

Yeah, I think you said it, with the trajectory and the results, I think, are good momentum-builders for us as we go into 2016. Our guidance is a balance of risk and opportunity. But I would not say that there is anything specific in there around broader macro outside of the regional Asia-Pac concerns that we have.

Matthew George Hedberg - RBC Capital Markets LLC

Great. Thanks, guys.

Timothy J. MacCarrick - Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Jesse Hulsing with Goldman Sachs. Your line is open. Please go ahead.

Jesse Hulsing - Goldman Sachs & Co.

Yeah, thank you. You made some changes to sales leadership in the U.S. Can you walk us through the impetus of those changes and I guess looking at your 2016 guidance, do you see any risk of disruption due to a transition in sales leadership? Thanks.

Lars Björk - President, Chief Executive Officer & Director

So, Lars here. So, first, I would say that, Joe DiBartolomeo, who was with us for a little over four years, did a phenomenal job for those years. We think, though, that what we need for the next phase of growth in the U.S. we found in Eric Johnson. He is onboard. He is aligned with the team. And we don't think there's going to be any distraction in the U.S. markets.

Jesse Hulsing - Goldman Sachs & Co.

All right. Thanks.

Operator

Thank you. And our next question comes from the line of Karl Keirstead with Deutsche Bank. Your line is open. Please go ahead.

Karl E. Keirstead - Deutsche Bank Securities, Inc.

Thank you. Tim, question for you, you give this metric around the percentage of first year license and maintenance that comes from existing and new customers. And it skewed quite a bit in the fourth quarter, way up in terms of the mix from existing customers, which I suppose indicates you're doing a good job with seat expansions and perhaps with Sense. But on the flipside, the decline in the mix from new customers, just wondering if you could help us interpret the big swing in that metric? Thank you.

Timothy J. MacCarrick - Chief Financial Officer

Sure, Karl. We do, seasonally, see that sort of dynamic in the fourth quarter. Obviously, it's our largest quarter of the year. And I think it's where the land and expand model that we have in place really generates a lot of revenue for us. So we're really thrilled that we had a significant mix of existing customers, especially featuring in some of our larger deals.

And keep in mind that, it's not just sort of land and expand with the same product, because of our move to the platform, we're now able to up-sell existing customers to help meet their broad and full analytics needs. So we don't look at it in any way other than really positive.

It will swing back the other way as we go through the early quarters of 2016. And when you think about our customer count, we remain very pleased with how Qlik Sense new customers feature in that customer count as well.

Karl E. Keirstead - Deutsche Bank Securities, Inc.

Got it. Thank you for that.

Operator

Thank you. And our next question comes from the line of Brent Thill with UBS. Your line is open. Please, go ahead.

Brent Thill - UBS Securities LLC

Thanks. Lars, just a follow-up on Karl's question. In the last four years, you've had roughly 3,000 to 4,000 net new customer adds and this year the – at least this – when you approximate it, 38,000, it was up around 4,000, I believe. I think everyone thought that Sense would help accelerate that customer count. And I guess it's offset by you're getting much larger transactions that you've noted.

So, can you just give us a sense, is that a range you're happy with? Do you feel that you can do better there? Or are we looking just at the wrong metric and you're looking more at the contract value per customer and that's a metric that we shouldn't really hone in on?

Timothy J. MacCarrick - Chief Financial Officer

Yes, I think it's a metric to keep in mind but I wouldn't over think it. Obviously there is some rounding that happens when we go quarter-to-quarter, as well. The number of new customers that we added in the fourth quarter was good. We were very pleased with it. And as I mentioned earlier, we're pleased with the composition of Qlik Sense within that overall number, keeping in mind that we don't count any customers that have downloaded the free software from our website, or are using the free Cloud offering that we have.

So with the introduction of the new paid Cloud version, we should probably see those numbers move a bit faster over the coming quarters, but, no, we're very comfortable with where we are at in that regard.

Lars Björk - President, Chief Executive Officer & Director

Yes, and I would add to that, so if you look at Qlik Sense, and you highlight that we have done a number of large deals, which is very, very pleasing, it confirms the enterprise capabilities in that platform already, but we are equally pleased that there is a long, long tail of lands that we can expand in. So the mix is very good. And as Tim mentioned here, don't forget the tens of thousands of people that are in Qlik Cloud that we now have an ability to convert either through the paid version or on to an on-premise deployment.

Brent Thill - UBS Securities LLC

Tim, can I just follow up with a quick one just on margin, the margins really haven't improved for quite some time and you're calling for 200 basis points to 250 basis points. Where are you finding the most leverage in the cost structure?

Timothy J. MacCarrick - Chief Financial Officer

Well, listen, I think certainly the margin was below our expectations, no question about that. We, after I would say a few years of investments, right, getting Qlik Sense out the door, building internal scalable infrastructure, ramping up our marketing efforts again behind the new product, although it was quite modest, we did have a small amount of margin expansion here.

But my prepared comments were really to just sort of share the confidence that we have through the Fit for Growth program. So we've identified quite a number of opportunities to help scale and leverage the business. Those opportunities principally are focused on G&A and improving and leveraging sales and marketing while still maintaining growth.

At the same time we expect to continue to invest in R&D. So that's the mix, right? Leveraging scale out of G&A and sales and marketing while continuing to invest in innovation going forward. And there is a lot of things that we're working on that will accrue in 2016, plans identified in 2015 that will start to accrue in 2016 and beyond.

Brent Thill - UBS Securities LLC

Thanks.

Operator

Thank you. And our next question comes from the line of Brad Sills with Bank of America Merrill Lynch. Your line is open. Please go ahead.

Brad Sills - Bank of America Merrill Lynch

Thanks, guys. I wonder if with the changes in sales leadership, you anticipate any significant changes in go-to-market tactics, territory reassignment, anything kind of organizationally or just go-to-market wise that we should expect might change with the new leadership.

Lars Björk - President, Chief Executive Officer & Director

Lars here. Not more than we do on an ongoing basis. We always make fine-tuning and changes to segmentation and territory assignments and so on, but that's just business as usual. Other than that, no, not at this point.

Brad Sills - Bank of America Merrill Lynch

Okay. Thanks. And then one more if I may. Lars, anything that you're excited about or customers are excited about with what's coming with Qlik Sense 3.0 that might potentially provide a catalyst for pipeline?

Lars Björk - President, Chief Executive Officer & Director

Well, I think they're excited already. We can see that in the numbers. I think we have a tremendous opportunity on something that we touched on, but we haven't talked on the call about, and that's the whole developer community and OEM and that piece. The fact that we have a very, very open platform, which you could embed components off or you could build on, has tremendous opportunity in the use cases that we haven't really touched on now.

And it can drive, which it has already started to drive thousands and thousands of developers to build third-party components, extensions, plug-ins, whatever, on our platform. We are putting more effort behind that. You're going to hear and see more of that from us in addition, today, more traditional use cases.

Brad Sills - Bank of America Merrill Lynch

Got it. Thanks, Lars.

Operator

Thank you. And our next question comes from the line of Mark Murphy with JPMorgan. Your line is open. Please, go ahead.

Mark R. Murphy - JPMorgan Securities LLC

Yes, thank you. Tim, so you have $320 million of cash on the balance sheet. And I'm just curious if you can offer your framework for capital allocation. In particular, do you have a trigger level at which you think you would decide to repurchase shares, perhaps you're looking at multiples of maintenance or multiples of revenue as some kind of a trigger level?

Timothy J. MacCarrick - Chief Financial Officer

Yes, thanks, Mark. So we are always considering various options around capital allocation, including supporting further acquisitions and we keep a robust radar screen around opportunities there. And certainly we'll consider other ways to invest that money to drive growth or even would consider returning it to shareholders at some point in time. Keeping in mind, as well, that within that overall balance we need to manage the amount that is domestic cash versus foreign cash which plays a factor in how you allocate that capital. But we don't rule out any of those options and opportunities and so I think it's a great asset that we have, and we intend to continue to leverage it to make the business better.

Mark R. Murphy - JPMorgan Securities LLC

Great. And as a quick follow-up, Lars, I just wanted to clarify, I think around the middle of last year you had spoken to the potential for Qlik Sense to drive more than 50% of bookings by late 2016, and so I'm just wondering given your comments, are we tracking to that 50% level for later this year, or did you modify the language a little bit to where you're saying you'll have visibility into that threshold by the end of this year? I just wasn't sure if anything changed there, or if it's the same overall message?

Lars Björk - President, Chief Executive Officer & Director

No, I just think I'm wrongly quoted. What I said was we had a leading product. I never said 50%, because we sell more than two products. And we will very likely sell more products even in the future. So what I said is, by the end of this year, which we have restated now, we would be at the place where Sense is the leading product or we have visibility to when that will be.

Mark R. Murphy - JPMorgan Securities LLC

Thank you.

Operator

Thank you. Our next question comes from the line of Steve Ashley with Robert Baird. Your line is open. Please go ahead.

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Great. You called out a tableau displacement mentioning that the customer said that the product just couldn't scale to its needs. I was wondering if you could give us some color on just what that meant and in what way could it not scale that you could scale for them?

Lars Björk - President, Chief Executive Officer & Director

So from our understanding, and I can't go much outside of the quote here, Steve, is that number of users, data sets, and how they intended to use it, wasn't appropriate for their use case. And that's why they started to look at Qlik Sense.

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Great. And then I wonder if you could just comment on the deferred revenue growth again. That number was really strong here in the fourth quarter. Can you walk us through again what may have been driving that?

Timothy J. MacCarrick - Chief Financial Officer

Yes, it's just I think similar factors that we've seen underlying what I think has been a full year of good deferred revenue performance. We continue to see renewal rates remain high. We see customers appreciating the overall platform and wanting to be updated and current on maintenance. I think customers even appreciate the fact that we backward-integrated the Qlik Sense engine into QlikView which gives them a platform that they can have some more agility on. It's really those fundamentals. And we've got, I would say, world-class processes now internally coming out of the Fit for Growth program to drive communication with those customers and drive renewals, and we've seen good results from that.

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Great. Thanks so much.

Operator

Thank you. And our next question comes from the line of Keith Weiss with Morgan Stanley. Your line is open. Please go ahead.

Sanjit K. Singh - Morgan Stanley & Co. LLC

Hi. This is Sanjit Singh. Thank you for taking the question. Wanted to get back to the margin performance in the quarter and specifically on the mix of indirect channel sales, was that an aberration this quarter or is that sort of the new normal in terms of your mix of direct versus indirect?

Because typically when we see a shift to more indirect, all those sales aren't free. It should be at least neutral to margin because it obviously needs some professional services. Is that the right way to think about it or was just this mix sort of an aberration this quarter?

Timothy J. MacCarrick - Chief Financial Officer

Yes. I think, generally, the mix that we mentioned is – it's consistently – a mix is more towards existing customers in the fourth quarter as we drive a much higher level of revenue. But I would expect that to mix back more to normal levels as we go here through the first several quarters of 2016.

In the fourth quarter, our large deal performance was supported by a good proportion of existing customers. So the interesting thing is, again, it wasn't just expanding with existing customers with the same product. It was in some cases expanding with existing customers with another product on the platform, i.e., Qlik Sense.

So more specifically to your question around the profit impact in Q4, that was primarily driven by more SI deals, and the referral fees that hit us in cost of goods sold. So that's really where we had a little bit of a channel mix impact. We did more deals through SIs in the quarter than we had expected and that drove a bigger impact to gross margin.

Sanjit K. Singh - Morgan Stanley & Co. LLC

Got it. And a quick follow-up, sort of toggling back to the assumptions underlying your 2016 guidance. I think it's well understood about the APAC weakness. But from what you've seen through January and the first half of February, have the trends in Europe and Asia sort of continued the momentum that you've seen in Q4, did they carry forward into the first half of the quarter?

Timothy J. MacCarrick - Chief Financial Officer

Yes, I mean, everything we're seeing supports our guidance for Q1. We're continuing to see strength in Europe and Americas and expect them to feature well obviously in our first quarter guidance.

Sanjit K. Singh - Morgan Stanley & Co. LLC

Thank you, guys. Appreciate it.

Operator

Thank you. And our next question comes from the line of Steve Koenig with Wedbush. Your line is open. Please go ahead.

Andrew J. Doupé - Wedbush Securities, Inc.

Yes, hi, this is Andrew Doupé on for Steve. I just wanted to ask about Qlik Sense again. Can you guys just elaborate a bit more about – the role Sense is playing to sell to new customers, is the sales force leading with Qlik Sense? And then what success is the sales force having selling Qlik Sense to existing customers who may be running QlikView? Thank you.

Lars Björk - President, Chief Executive Officer & Director

So, yes, to your first part of the question, we lead with Sense. Well, I'll put it this way, there is no real reason for us to even bring QlikView into the picture with a new customer unless there is a specific requirement from the customer. And what we have seen, to go to the second part of your question, is that we have been successful in both of these cases. We are up-selling existing customers in Qlik Sense for new use cases and new users. And we are also being successful selling into net new customers Qlik Sense that wasn't looking at QlikView. So it's a mix of both, which is the traction we want to see. We want to, of course, harvest the existing customer base and broaden the customer base, which we think we are well on our way to do.

Operator

Thank you. And our next question comes from the line of Abhey Lamba with Mizuho Securities. Your line is open. Please go ahead.

Abhey R. Lamba - Mizuho Securities USA, Inc.

Yes, thank you. Lars, you talked about sales management changes in the U.S. and alliances changes. How about the teams in Asia-Pac, you talked about macro and structural – macro issues and structurally it's intact but how about internal organizationally, do you need to make any changes over there, and also in Europe?

Timothy J. MacCarrick - Chief Financial Officer

Yes, so as I mentioned, the growth trajectory for Asia-Pac last year and even in the first half of 2015 – or sorry, in 2014 and the first half of 2015 was quite good, and really what's changed there is this regional macro impact. So we remain comfortable with how we're set up for success in Asia-Pac and even the deals that have now slipped out of Q3 and Q4, we still have them in the pipeline and we'll be working with clients to take them down when we can. European growth has been strong and we're continuing to penetrate that market and expect to continue to do so with the team we have.

Abhey R. Lamba - Mizuho Securities USA, Inc.

Thank you.

Operator

Thank you. Our next question comes from the line of Derrick Wood from Susquehanna International Group. Your line is open. Please go ahead.

J. Derrick Wood - Susquehanna Financial Group LLLP

Thanks. So it sounds like you guys are seeing Qlik Sense drive a greater number of large deals which is nice to see and, Lars, I know you talked about how there is a long tail on Qlik Sense. But as you take this more platform approach to the market, are you guys kind of shifting more focus on larger transactions, and if so, should we be thinking about kind of even greater seasonality as we look at the distribution through the year?

Lars Björk - President, Chief Executive Officer & Director

No, what I think you should anticipate and plan for is that we're going to do both. So that's what's so great with Sense. It is a broad platform that covers many use cases. For us, it is of course exciting that we can this early in its lifecycle already close large deals, and that signals that it's enterprise-ready. But equally so, it is a product that is easy to enter into, the ease of use to get started. The fact that you can get started now in our Cloud with our free and our paid version, and upload data without installing any software, without writing a single line of code, you can build your first application. That is a very, very compelling starting point for a lot of business users on one end, and then on the other end you have the enterprise.

J. Derrick Wood - Susquehanna Financial Group LLLP

Okay. And then just quickly, Tim, to clarify on the gross margin side, these higher SI partner fees and the subcontractors, is that something to expect in 2016, or is that something that can normalize?

Timothy J. MacCarrick - Chief Financial Officer

Well, I think it was unique and a bit unexpected in Q4, but ultimately appreciated at least from a revenue perspective. I mean, keep in mind that, as Lars mentioned, we drove constant currency license growth from 13% in 2014 up to 21% in 2015, which is phenomenal performance. The SIs played a role in that and played a little bit of an overweight role here in Q4.

But, no, I wouldn't view this as a trend you need to model, per se, throughout 2016. We continue to appreciate the growing partnership that we have with SIs and it will help support our guidance for 2016.

J. Derrick Wood - Susquehanna Financial Group LLLP

Okay. Thank you.

Operator

Thank you. And our next question comes from the line of Bhavan Suri with William Blair. Your line is open. Please go ahead.

Bhavan S. Suri - William Blair & Co. LLC

Thank you. Hey, guys. Thanks for taking my question. Just a couple of follow-ups there on the SIs. I guess the first one is, obviously, Lars, you just talked about the ease of use, the ability to implement Dashboard and applications without coding. But then you've talked about the SIs being a bigger role. Those two things don't seem to jibe, because obviously those guys want billable hours. So help us understand what's driving them to Qlik Sense, say, from some of the legacy traditional solutions that have a lot more billable hours involved in implementation.

And then the second question is, some of the Sis – a lot of the SIs actually, but pick Cognizant, pick Accenture, specifically called out weakness in healthcare for 2016. Financial services and healthcare are obviously critical for you guys, how you would think about what they're seeing vis-à-vis sort of what you're seeing?

Lars Björk - President, Chief Executive Officer & Director

Yes, so the first part of your question, the point I wanted to make is that Sense is ready to handle both those two use cases all the way from that simple one that you described, which can get more or less anyone up and running, to the most advanced comprehensive, very deep analytics on an enterprise where very likely you will have had quite a bit of consulting invested in that, your own or somebody else's.

That's the great part of the platform. It is very comprehensive and handles a broad set of use cases. Your comment on system integrators comments, well, I think we could see that we are working with them in many verticals and you mentioned, too, that the reason why we work with many of them, we haven't seen any of that. And we don't anticipate that it will influence our ability to do businesses in those verticals because we do a lot of it on our own and the fact that we do work with them all the time.

Bhavan S. Suri - William Blair & Co. LLC

That's helpful.

Operator

Thank you. Our next question comes from the line of Kirk Materne with Evercore ISI. Your line is open. Please go ahead.

Kirk Materne - Evercore

Yes, thanks. Just one follow-up around Sense. Around the bigger deals that it was involved in, was Sense baked in from the beginning of those deals or was it something that sort of up-sized the deal as the customers sort of got a better sense of what it was capable of. I'm just trying to get a sense on if Sense is coming in as a critical part of that initial large deal or something that as you get into discussions with the customer it actually adds on to the size as you go through the contracting process? Thanks.

Lars Björk - President, Chief Executive Officer & Director

I think you see both use cases where we're leading with Sense and that is how we got the deal and you see those use cases and business discussions that expand and people recognize more needs and we can add more products to it. And in this case Sense, through a dialog that might have started somewhere else. So it's a combination of both.

Kirk Materne - Evercore

Great. Thanks.

Operator

Thank you. And that's all the time we have for Q&A session today. I would now like to turn the conference back over to Lars Björk for any closing remarks.

Lars Björk - President, Chief Executive Officer & Director

So before we end the call, I'd like to thank you all for joining us today. I would also like to thank our employees, customers and partners for their continued support during 2015.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone, have a great day.

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