Tableau Software (DATA) is trading sharply lower (-11%) this morning after reporting Q3 earnings/guidance last night. In terms of background, Seattle-based Tableau Software provides software that is designed for anyone with data and questions. DATA says it's democratizing the use of business analytics software by allowing people to access information, perform analysis and share results without assistance from technical specialists. By putting powerful, self-service analytical technology directly into the hands of people who make decisions with data, the goal is to accelerate the pace intelligent decision-making.
Its products are used by people of diverse skill levels across all kinds of organizations, including Fortune 500 corporations, small and medium-sized businesses, government agencies, universities, research institutions and non-profits. Customers use the software to achieve goals, including increasing sales, streamlining operations, improving customer service, managing investments, assessing quality and safety, studying and treating diseases, completing academic research, addressing environmental problems etc.
Its technology offering includes VizQL and its Hybrid Data Architecture. VizQL is a breakthrough visual query language. It translates drag-and-drop actions into data queries and then expresses that information visually. VizQL unifies the formerly disparate tasks of query and visualization and allows users to transform questions into pictures without the need for chart wizards etc. VizQL can deliver dramatic gains in people's ability to see and understand data.
For example, in October 2017, DATA announced a partnership with GE Aviation Digital to empower airline customers across the aviation industry with visual analytics that can help improve fuel efficiencies, aircraft safety and consumers' overall flying experience. GE's fleet of 35,000 engines produce more than 100 million flight records each year, capturing more than 1 million terabytes of data per day. DATA is partnering with them to help them and mutual customers analyze and customize on the fly with Tableau's advanced analytics capabilities.
Its Hybrid Data Architecture combines the power of its Live Query and In-Memory Data Engines. Its Live Query Engine allows users to instantaneously connect to large volumes of data in its existing format and location, reducing the need for time-consuming data transformation processes that only technical specialists can perform. Its In-Memory Data Engine enables users to import large amounts of data into DATA's in-memory database. Using advanced algorithms and data compression techniques, its in-memory technology facilitates quick query responses on up to hundreds of millions of rows of data. Its Hybrid Data Architecture enables these data engines to work in harmony. In 2016, about 71% of revenue came from North America and 29% was from international customers.
Turning to the Q3 results, non-GAAP EPS came in at $0.08, which was slightly below market expectations but still within prior guidance of $0.04-0.11. Revenue rose 4.3% year/year to $214.9 mln, which was below market expectations and it was toward the lower end of prior guidance of $213-223 mln. On the call, DATA guided to Q4 non-GAAP EPS of $(0.01)-0.05 and revenue of $235-245 mln. Both of these numbers were below market expectations.
Something to be aware of is that in April 2017, DATA announced it was transitioning customers from perpetual licenses to a subscription-based pricing model for all of its products. The big benefit for customers is that it reduces the upfront cost and lowers the risk for customers when deploying Tableau. DATA expects its move to subscription will increase overall demand for Tableau adoption.
On the call, DATA said it's pleased with the progress it has made in the subscription transition to date. In Q3, the company saw a strong uptake of subscriptions across its commercial and international businesses. For its US enterprise business, the ratable license bookings percentage mix more than tripled versus the prior year. However, for its US enterprise customers, which represent a majority of the existing perpetual licenses, transitioning to subscription has added a layer of consideration that's extended the timeline for larger deals.
In sum, DATA is trading sharply lower on its Q3 earnings and Q4 guidance. A big part of the shortfall appears to stem from DATA's switch customers from perpetual licenses to subscriptions. A year ago, before DATA publicly launched subscription for all of its products, its ratable license bookings mix was 16%. Fast forward to today, ratable license bookings mix has grown to 45% of overall license bookings, above internal expectations. The higher-than-expected ratable mix impacted total revenue in Q3 and appears to have tempered guidance for Q4.