Key Takeaways From Tableau's Q2 Earnings

Tableau Software ‘s ( DATA ) stock price rose around 9% in trading on Thursday after announcing its Q2 earnings. After seeing impressive growth in the first quarter, the company continued its momentum, reporting revenues of around $213 million, an increase of 7% over the prior year quarter. Licensing revenue declined by over 10%, though this was largely due to the transition from a perpetual licensing to subscription model, with the latter reducing upfront revenue significantly. The quarter saw the addition of over 4,000 new customer accounts, which took the overall customer count to over 61,000. The company was able to close 15 six figure deals and around 372 transactions greater than $100,000 in the quarter (+12% year over year). Earlier in the quarter, the company revised its subscription pricing structure across all product lines. With reduced upfront costs across all product lines, we expect increased adoption of its products.

The company’s continued efforts in expanding international reach and higher spending on research and development led to a 5% increase in operating expenses. However, this was a slower rate of growth as the company has prioritized keeping expenses in check. We expect its net loss to broaden sequentially as the company will continue to invest significantly in order to remain competitive against software giants Microsoft, Salesforce and SAP.

Subscription Pricing And Product Innovation Drove Adoption

Tableau’s licensing revenues saw a 12% year over year decline, while maintenance and service revenues jumped nearly 34% in the last quarter. With the number of customers increasing every quarter, maintenance revenues are expected to see solid growth in the near term.

The company launched Tableau 10.3 in Q2, with six new native data connectors in this version, including Dropbox, Service Now, MongoDB, Microsoft OneDrive and Amazon Athena. With increased customer demand and competition from Microsoft Power BI, Tableau introduced subscription-based pricing for all its product lines. This will likely put pressure on revenues in the near term, but is in line with the company’s long term growth vision.

The company generated over 69% of its revenue from the U.S. and Canada, but growth in these relatively mature markets has slowed down. As such, the company is aggressively targeting growth in international markets. International revenues witnessed 17% growth and constituted 31% of the company’s overall revenues (200 basis points above the prior year quarter), which highlights the returns on its increased global footprint.

Way Forward

Going forward, Tableau expects its growth momentum to continue into the year ahead. In the current quarter, the company expects to generate revenues in the range of $213 million to $223 million, with the midpoint of the guidance representing 6% year-over-year growth. For the full year, the company expects to generate revenues in the range of $865 million to $890 million, with the midpoint of the guidance representing 6% year-over-year growth.

Please refer to our complete analysis for Tableau

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