In last week’s earnings call, business intelligence software maker Tableau Software (NYSE: DATA) announced it was shifting its focus away from perpetual licenses and toward subscription licensing, reports GeekWire. The move will provide recurring revenue for Tableau while also making its product available to more companies at a lower price point and allow larger companies to expand their use of the product to more employees.
CEO Adam Selipsky said this shift will initially put more pressure on the company’s bottom line, but it would help stabilize revenue and diversify the company’s customer base over time.
Other highlights in Tableau’s third quarter call include:
- Total revenue was $206.1 million, a 21 percent increase year-over-year.
- License revenue was $116.7 million, a 7 percent increase year-over-year.
- Company added more than 3,600 new customer accounts, giving Tableau more than 50,000 accounts worldwide.
- More than 250,000 people use Tableau Public to share data on their blogs and websites.
- Tableau closed 360 transactions larger than $100,000, a 22 percent increase year-over-year.
- GAAP operating loss for Q3 was $29.4 million, compared to a GAAP operating loss of $13.2 million for the same period last year.
- Diluted GAAP net loss per share was $0.40.
Christian Chabot, chairman and co-founder of Tableau, commented on the quarterly results in a press release.
“During the third quarter, we generated our highest quarterly revenues and expanded our customer base to over 50,000 customer accounts worldwide. But our results were impacted by extended sales cycles on large deals in the U.S. and softness in EMEA.”
In the earnings release, Selipsky spoke of Tableau’s “leading products, talented people, dedication to technology innovation and passionate customers.
“We see great opportunity to serve and expand our customer base, deepen our enterprise engagements, and accelerate our progress in the cloud,” Selipsky said. “Looking ahead, I am confident that Tableau’s leading technology is well positioned to address the large and growing market opportunity for business analytics.”
From an operational standpoint, one of the key highlights was hiring Selipsky as President and CEO. Previously, he worked at Amazon in web services. The company also launched Tableau 10, one of the company’s “most significant releases in its history,” it delivered new APIs to developers, and it announced the global expansion of its free software program to help nonprofits “do good with data.”
Despite the operating loss of $29.4 million for Q3, investors didn’t have a significant reaction to the stock price. It was $43.51 on November 2, the day after the earnings release, but rebounded to $47.32 per share, as of 4:33 PM EST, November 10. The big drop came in late January 2016 when the stop dropped in half from $80.24 on January 29 to $37.22 on February 8. According to analysts contacted by Fortune, the February drop was due to increased competition and perhaps some operational deficiencies.
Insider Take:
While Tableau’s losses are concerning, it seems like Selipsky is taking immediate steps to turn things around. By shifting toward a subscription model, the company can diversity its customer base, making it more affordable for smaller companies to use. Also, the recurring revenue can help offset some of the million-dollar losses the company is posting quarterly.
With competition from companies like Microsoft and Salesforce, it can’t afford to continue to rest on its laurels. It must continue to act and innovate quickly. Based on Selipsky’s track record and his early vision for the company, it seems they are moving in the right direction.