Alteryx - Notes from the Needham conference

The thesis for Alteryx sounds great. Amazing products. Exceptional customer advocacy. Ever growing amount of data in the world. Companies create data in multiple, disparate, locations. Process automation is a critical need and is turning into table stakes. They estimate the TAM is $50B.

I’ve maintained a small position (0.6%) to keep my attention on the company.

On 10/5/2020, the company replaced the CEO (and co-founder) with the board member responsible for the CEO search, Mark Anderson.

On 12/9/2020 the company replaced a co-founder (Libby Duane Adams) with a new Chief Customer Officer, Matthew Stauble. (in his previous life he was in customer service at Palo Alto)

On 1/4/2021 the company hired a new Chief Revenue Officer away from Palo Alto and announced that its old CRO (Scott Jones) is leaving the company. Dean Darwin and Mark Anderson have worked together for 25 years. On this date, they also raised their guidance but gave tepid ARR guidance. They will report earnings on 2/9/2021.

I listened to the CEO and CFO in a fireside chat at the Needham conference.

Mark’s view is that he’s upskilled the CRO and CCO positions. The strategy is to create a more efficient sales force and apply resources to post-sales. Dean is a magnet for talent.

When asked about the confluence of factors in the data space, the emergence of Snowflake, Tableau being acquired, the amount of data moving to the cloud players (AWS, Azure, Google), etc, here is his response.

But this space is massive, and only gets bigger. And I think in the long run, it becomes measured in terms of hundreds of billions of dollars of TAM it’s lately. What we’re trying to do at Alteryx is really transform our business as all growing companies have to do and really build machine like, efficiencies and capabilities in taking the problems that customers have, and prioritizing them with engineering, and delivering features or software or tools or solutions that solve those problems, and then build the machine like capability and predictability equally importantly, and the go-to-market so that so we can take that innovation, put it in the hands of customers with as little friction as possible and earn permission to do more, because we do such a wonderful job of that, to my earlier point about making two key go-to-market hires, we will become – we will take that zealotry and get customers so much more.

He was asked about about their appetite for making acquisitions

But right now, its heads down, we were heads down, closing up the year, building out a plan for the FY2021 time. And it’s definitely a year of transition. But we want to make sure that we get back to predictability and working to optimize productivity and output from the field team, and complete, at least get our transformation another quarter to farther along before we start thinking about plugging more on top of that.

His response to the importance of partners (like PwC)

And as we continue to put stage appropriate people up and down the organizations, not just a few people at the top of the organization, Jack, it’s people all up and down the organization that want to come in, and work in an environment where there’s real clarity of purpose and mission, and an opportunity to do something really special. And I think at Alteryx, we feel we have that opportunity to strive to become the biggest, the most important company in data science and analytics, not for world power domination or financial gain, but because who better than us with our innovation, and the experiences that we facilitate, for customers, and we like have to get there.

In summary, the company is going through a ‘transformation’ and a ‘transition’.

  • New leaders learning the products and markets.
  • New Account Executives calling on customers
  • New Sales Plan
  • New Sales Structure
  • New Compensation Plans

This is not to say that all of this wasn’t needed nor to say the new team won’t be able to execute. I don’t see how it happens in less than 6 months. I will be selling my shares in search of better returns.

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The thesis for Alteryx sounds great. Amazing products. Exceptional customer advocacy. Ever growing amount of data in the world. Companies create data in multiple, disparate, locations. Process automation is a critical need and is turning into table stakes. They estimate the TAM is $50B.

I’ve maintained a small position (0.6%) to keep my attention on the company.

On 10/5/2020, the company replaced the CEO (and co-founder) with the board member responsible for the CEO search…

On 12/9/2020 the company replaced a co-founder (Libby Duane Adams) with a new Chief Customer Officer

On 1/4/2021… announced that its old CRO (Scott Jones) is leaving the company

In summary, the company is going through a ‘transformation’ and a ‘transition’.
- New leaders learning the products and markets.
- New Account Executives calling on customers
- New Sales Plan
- New Sales Structure
- New Compensation Plans

This is not to say that all of this wasn’t needed nor to say the new team won’t be able to execute. I don’t see how it happens in less than 6 months. I will be selling my shares in search of better returns.

Hi J Putter, that was an excellent summary about what’s going on with Alteryx. I guess that the Board or Directors made the same observation that we had made six months earlier, that the company had hardening of the arteries. It did. They had reacted to Covid with panic “We are stopping all hiring and spending and are hunkering down” instead of seeing it as an opportunity, as so many of our other companies did, but they were already behind the eight ball because they had refused to adapt to the cloud.

I agree that they may pull it out, but that remains to be seen, as I imagine that all must be in turmoil in the company right now.

Thanks,

Saul

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…it’s people all up and down the organization that want to come in, and work in an environment where there’s real clarity of purpose and mission, and an opportunity to do something really special.

I know that this is only one data point. But I know an excellent sales manager with whom I’ve worked almost six years that is going to work at Alteryx. This person has a lot of success in Enterprise and SaaS Sales as well as in Sales Processes.

For a company whose products virtually sell themselves, only to discover that they don’t in difficult times, it looks like they’re starting to bring in excellent people that really know how to sell at all levels of an organization.

DJ

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I guess that the Board or Directors made the same observation that we had made six months earlier, that the company had hardening of the arteries. It did. They had reacted to Covid with panic “We are stopping all hiring and spending and are hunkering down” instead of seeing it as an opportunity, as so many of our other companies did, but they were already behind the eight ball because they had refused to adapt to the cloud.

It seems Alteryx made a strategic mistake, focusing on selling into mid-tier companies.

And the problem with these mid-tier companies is that they spend less money on Alteryx’s products, and they churn more. Those were the companies causing problems

So now, Alteryx will only focus on high-tier companies. The high-tier companies simply spend more, and have a NER of 132%. (So going forward, it won’t be important to focus on Alteryx’s customer growth numbers. Focus on revenue growth.)

As for cloud, it seems high-tier companies have yet to really move there. For instance, one of Alteryx’s customers, some huge bank, said that only 1% of their data is in the cloud. They’ll move there, but it will take 5 or 10 years.

In a few months Alteryx will release their cloud roadmap. They’ve hired the guy who helped Adobe move from on-prem to SaaS. That’s a smart hire.

Anyways, it’s easy to conclude that Alteryx is facing headwinds. But they have a plan in place, and over the next few quarters we’ll learn more.

I know that the tendency is to only invest in the sure thing, but sometimes the better returns come when things seems unsure.

Chris

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