Alteryx Reports Earnings

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Hi Everyone,

Revenue = 96.2M (+17.3% YOY) Last Quarter revenue was up 43.2%
Retention Rate = 126% (-2% QoQ)
Customer Number = 6,714 (+271 QoQ)

They are REALLY slowing down due to COVID, but their margins are holding up fine. I think that they will one day return to stellar growth, but there is likely to be some short term pain. This is a great company, but I have no idea when things will turn the corner, economically.

I trimmed from 20% to 9.2% prior to the announcemnt… I am currently looking for a better home for my money, possibly NET or ZM (I already have a good amount of FSLY).

Best,

bulwnkl

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What I wrote in Alteryx’ last quarter thread:

“I don’t pay too much attention to the actual revenue growth in Alteryx’ case. A small acceleration in ARR growth will lead to disproportional revenue growth acceleration (see q4 last year) whereas a small slowdown willl lead to disproportional deceleration (see q2 guidance). I am therefore frustrated that Alteryx doesn’t consistently report ARR and hope this will change in the future as this is the key metric to assess Alteryx performance.”

I also sent an e-mail to Alteryx IR suggesting to report ARR on a consistent basis to increase transparency to investors.

Well, they now reported ARR for the first time as a separate metric in the earning release and ARR was up more than 40% YoY. They also guided for an increase in ARR of more than 30% for FY2020. This clearly shows that the underlying business is still growing strong despite the covid 19 headwinds.

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One thing to consider: In ARR are the last good quarters included. 2 quarters before COVID-19. In 2 quarters the growth rate for ARR will be much lower in the range of 10 - 15%.

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One thing to consider: In ARR are the last good quarters included. 2 quarters before COVID-19. In 2 quarters the growth rate for ARR will be much lower in the range of 10 - 15%.

–

Did you read my post? They guide for more than 30% FY2020 ARR growth (compared to FY2019) which includes 4 COVID-19 quarters (or 3.5 at least)

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Yes there’s a temporary drop in AYX revenue growth rate from the last 2 q. The way I see it is that the pandemic damage to economy has bottomed in march. The economy has bounced back since then. This was reflected in AYX past 2q revenue growth trend.

Let’s look at it as a symmetry.

Quarterly revenue peaked at : 156.45m in 4Q2019. 4Q2019 is a local peak.

1Q2020 108.83m vs 3Q2019 103.4m 5.25% increase
2Q2020 96.2m vs 2Q2019 82.04m 17.25% increase.

We can see 1Q2020 was the bottom and 2Q2020 is picking speed again.

AYX’s revenue growth rate should be back to normal in the next few quarters. How fast is the recovery is anyone’s guess. I am not trying to predict the economy.
AYX is a high quality business. It’ll be short sighted to sell out a quality business because of a few quarters of bad performance. There’s no fundamental problems that I can see.

I am long AYX and not changing the position.

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What I don’t understand is:

If they increased their customer count 27% and their dollar net retention was 126%, how could their revenue only increase 17%?

This doesn’t make sense to me.

What am I missing on the accounting of this?

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What I don’t understand is:

If they increased their customer count 27% and their dollar net retention was 126%, how could their revenue only increase 17%?

This doesn’t make sense to me.

What am I missing on the accounting of this?

… they increased their customer count 27% <— new customers in, old customers out

… dollar net retention was 126% <— old customers (at least one year old?)

… how could their revenue only increase 17%? <— can’t add old and new, maybe new customers bought very little.

Denny Schlesinger

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What I don’t understand is:

If they increased their customer count 27% and their dollar net retention was 126%, how could their revenue only increase 17%?

This doesn’t make sense to me.

What am I missing on the accounting of this?

Unlike other SaaS companies, Alteryx doesn’t recognize the contract value ratably. They recognize approx. 35-40% of the value upfront. If they sign a 3-year contract for 100 dollars, 35 dollars of revenue will be recognized in the first quarter and the remainder will be recognized ratably over the 11 other quarters. If you have SA subscription, I believe this article explains it well: https://seekingalpha.com/article/4246224-alteryx-little-saas…

Therefore, it is completely pointless to compare the 17% growth with the growth that Coupa, Okta, CRWD and others will report. Use the 40% ARR growth if you want to compare…

If you look at the definition of dollar net retention in Alteryx earnings release:

Dollar-Based Net Expansion Rate . Our dollar-based net expansion rate is a trailing four-quarter average of the annual contract value, or ACV, which is defined as the subscription revenue that we would contractually expect to recognize over the term of the contract divided by the term of the contract, in years, from a cohort of customers in a quarter as compared to the same quarter in the prior year. To calculate our dollar-based net expansion rate, we first identify a cohort of customers, or the Base Customers, in a particular quarter, or the Base Quarter. A customer will not be considered a Base Customer unless such customer has an active subscription on the last day of the Base Quarter. We then divide the ACV in the same quarter of the subsequent year attributable to the Base Customers, or the Comparison Quarter, including Base Customers from which we no longer derive ACV in the Comparison Quarter, by the ACV attributable to those Base Customers in the Base Quarter. Our dollar-based net expansion rate in a particular quarter is then obtained by averaging the result from that particular quarter with the corresponding result from each of the prior three quarters. The dollar-based net expansion rate excludes contract value relating to professional services from that cohort.

In short, the dollar net retention rate looks at the ACV rather than the actual recognized revenue. This is similar to other SaaS companies and a better proxy for actual business performance.

To summarize, ARR growth of ± 40%, driven by 126% dollar net retention rate from existing customers and 27% increase in customers (who spend less per customer than the existing customers).

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I’m not too surprised that new customers are starting slow by spending less in this environment. I’m sure most companies are.

The good news is that if they have the same type of success later “expanding” after the initial “land”, we could see a rapid acceleration, although I would bet that may be more like sometime in 2021 when the economy is a little closer to normal.

In my mind, I own AYX because of what I think they will do over the next 3-5 years, not as worried about the short term as long as they are making the right types of progress. Growing the customer count and getting in those doors sure feels like there is still a growing need for their tools and once budgets gets opened back up, hopefully we’ll see the kind of growth that AYX is accustomed to.

They gave a good example about Sirius radio expanding their use of Alteryx tools a lot this past quarter during the conference call.

-mekong

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It was interesting also that they noted that UiPath and Adobe are new technology partners. From the call transcript:

They’ve (UiPath) built some capabilities that allow you to execute bots in Alteryx as part of an analytic pipeline. Both at the front of the pipeline, to go get some data let’s say and at the end to go, do another activity. And so there will be some joint activity with UiPath to probably see some analysis here. We’re excited about the RPA space that opens up the aperture around the third leg of APA and that is a focus on automation.

Alex

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Rubenslash,

Thank you so very very much for your summary in your last post,

‘ To summarize, ARR growth of ± 40%, driven by 126% dollar net retention rate from existing customers and 27% increase in customers (who spend less per customer than the existing customers).’

Well stated! I owe you a debt of gratitude!

I try not to think of macroeconomic influences; but, COVID and it effect on our economy is making it very difficult not to consider this.

My thinking is that this company will comeback stronger in the next 2-3 quarters, independent of COVID vs our economy. My now 5% allocation is dependent upon my belief in this companies relative growth potential in the next year (that’s relative to other companies in which I could be investing). And with markets being a six month leading indicator of a companies performance, I’m not selling any shares now.

Thank you,

Jason

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