A new full position 5.

Investment Analysis Clubs Saul’s Investing Discussions
21

How you model the growth, do you expect the current growth rate to continue for x number of years or you expect it like 50% 2018, 40% 2019, 35% 2020, 30% 2021, 25% 2022, etc.

Hi Kingran,
Actually I don’t think in terms of five years. I wouldn’t have a clue what they’ll do in 2022. I just constantly reevaluate my positions, and hold them as long as they do well and the story hasn’t changed. I’m investing in Alteryx for all the reasons I cited:

A company little understood by investors, which hasn’t yet been run up to astronomical levels, and in a category of its own (more or less) with a TAM 100x larger than its revenue, and growing revenue at over 50% per year in the 9 months its been public, and this actually seems to be accelerating, as they only grew revenue 42% from in 2015 over 2014. With an enormously rapid rate of customer acquisition, with a very low cost of acquisition. With many household names among their customers. With positive Operating Cash Flow. With an Adjusted Operating Margin moving up rapidly towards breakeven, and having perhaps just started having positive adjusted earnings. With a land and expand strategy, which is working like gangbusters, with the highest Dollar-Based Retention Rate I’ve ever seen (133% to 135%), and with 2014 and 2015 cohorts growing take by 70% and 90% in the second year. With a gross margin of 86%. With a reasonable EV/S ratio for a rapidly growing company. With high customer satisfaction and happy customers who keep signing up for more and more.

Customers liked it so much that Gartner had to establish a new award for them:

Gartner named Alteryx the Gold winner in its first-ever Gartner Peer Insights Customer Choice Awards for Business Intelligence and Analytics, a rating of vendors by verified end-user professionals.

Putting all that together, it’s more than enough for me, and is easier and more meaningful than trying to guess at growth rates five years for now.

Best,

Saul

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22

I actually like the look of Alteryx but have some of the same hopes and fears in common with Splunk.

  1. It’s a very important area in the era of big data
  2. There’s consistent fast growth

Importantly it is closing in on profitability and and is nowhere near the overvaluation I see in Splunk. If things go well it should do better, if things hit the wall it shouldn’t collapse the way I imagine Splunk might.

The other issue I had with Splunk was their insane levels of SBC. I hope Alteryx manages to control itself there. If I read it correctly it is hardly costing them 500k which seems low but I’m not complaining.

One risk I see is to what degree we are approaching very tough compares in the next year as all the recent 50% growth quarters were post IPO and they might have been engineering a lot pre/post IPO etc.

Need to watch it doesn’t suddenly drop from 50% to zero based on lapping these post IPO quarters.

Ant

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23

Importantly it is closing in on profitability and and is nowhere near the overvaluation I see in Splunk. If things go well it should do better, if things hit the wall it shouldn’t collapse the way I imagine Splunk might.

Actually, I see overvaluation as more of a concern with AYX than with SPLK. AYX is trading at an EV to forward revenues of 11.5 while SPLK is at 8.5. AYX is averaging revenue growth of about 47% over 3 years while SPLK should be at about 40% (using next year’s projected numbers). SPLK’s revenue growth may be slowing though with projections of 30% for next year.

AYX is much smaller and may have more room to grow. So maybe you’re right. Anyway, I’m going to just keep AYX on my watch list for now. I may buy on a dip.

Cheers,

Dave (long SPLK)

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AYK certainly isn’t going with the flow today.

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