Alteryx - some numbers for the hesitant

Investment Analysis Clubs Saul’s Investing Discussions
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Alteryx – some numbers for those of us who may have been rattled by the short who posted so nicely and innocently, just because of his concern for “some pretty nice folks trying to understand their companies and compound their savings”. What total b—s—!

He warned us about cheaper competitors such as KNIME which is a FREE and open-source platform, is the top right leader in the Gartner Magic Quadrant for Data Science, and can run on AWS and Azure. It has a FREE desktop version (vs. AYX’s $5,195/user/year Designer), and its Server offering has pricing options dramatically below AYX list prices.

Sounds pretty scary, doesn’t it!

He also warned us about Microsoft Advanced Data Prep, which is not what Alteryx does primarily, of course, and about Tableau Prep, which has proved to be of no consequence, and again, not what Alteryx does. Both are cheaper than Alteryx. Let’s see:

Alteryx’s revenue percentage growth looks like this:


**2016:          57  67**
**2017:  61  50  55  55**
**2018:  50  54**

That looks solid as a rock to me. That’s competing against those cheaper and even free opponents.

Well then, let’s look for the effect of competition on their gross margins. Their adjusted gross margin last quarter was 90%, up from 84% a year ago. 90% gross margins! It sure doesn’t look as if they’ve had to reduce prices to compete!.

How about deferred revenue? Their deferred revenue at the end of the year the last four years, in millions of dollars, has gone: 29, 44, 71, 114…. Take a good look at that!

Do their customers like what they are getting, or is Alteryx having a lot of turnover? Well their dollar based net retention rate has been over 130% for the last seven quarters. Before that it was in the 120’s, so it’s improved with age and size. Doesn’t look like too many customers are leaving to try out cheaper alternatives.

Are they getting new customers? Their number of customers, which was 3940 at the end of June, is more than quadruple the 961 customers that they had three years ago, at the end of the same quarter. Quadruple in three years!

And for a little more reassurance, the number of shares grew only 4% from a year ago, which is remarkable for one of these super fast growing companies.

Oh, and they are Operating Cash Flow positive. Actually $25.3 million positive in the last twelve months, which is not an insignificant amount for them, but 15.5% of their trailing revenue.

Boy, are they having trouble competing against those cheaper alternatives!

Best,

Saul

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Sounds pretty scary, doesn’t it! – Saul

And then you cite a bunch of numbers…

I don’t pretend to understand all the tech in the various discussions swirling around (not accusing anybody of pretending! LOL), but like you… I know that I can look at the numbers and discern how they’re doing regardless of the interplay of “tech-ese”.

Example of some tech conversation: “Yeah, it ! Therefore .”

Me: YEAH! Those are great numbers. And I have some idea of what they’re doing even though I don’t understand how they’re doing it.

Results: +$$$ (aka: Pleased)

Yep. Investing can be ferociously complex…or it can be pretty straight forward. I prefer straight forward (by looking at the results) and it still seems to work.

:slight_smile:

Rob
Just a former engineer and business guy…but a successful investor
Rule Breaker / Market Pass Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Today seems like a good day to add some more AYX, with the whole market down ~3% (at least my piece of it seems to be). Haven’t even bothered to see why yet…

The only caveat is that AYX just dropped below its 50-day SMA, which is usually the first alert for technical traders to sell. So there may be cheaper days ahead even.

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Saul, I get how well Alteryx has done historically, the question marks I see are about the future … not the near future … but a more distant future. I.e., no question that they make a good investment now, but the sort of thing that worries me personally a bit since I am not confident that I am going to notice if things start to turn south. To be sure, this forum is likely to be a big help in noticing if that happens, but sometimes events transpire to scare off some people, but not all, and the level of monitoring drops considerably. I don’t doubt that you personally will be on top of the situation, but I’m less sure about myself.

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Saul,

Thanks for an excellent, and simplified break down!  Not that I was at all concerned, but that I
appreciate that you took the time to assess the situation from a logical perspective!

I do have one question though, and this it from a perspective of trying to understand what is
important in the numbers, since I'm not very good at that yet!

<i>Alteryx’s revenue percentage growth looks like this:

2016:          57  67
2017:  61  50  55  55
2018:  50  54         
</i>

Is the slowing of the YoY numbers important?

i.e. 2017Q1 at 61, vs/ 2018Q1 at 50, same for 2017Q2 vs. 2018Q2 ?
This trend continues back to 2016Q3 & Q4 vs. 2017 Q3/Q4..

Thanks.
--
Paul
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Paul,

i.e. 2017Q1 at 61, vs/ 2018Q1 at 50, same for 2017Q2 vs. 2018Q2 ?
This trend continues back to 2016Q3 & Q4 vs. 2017 Q3/Q4…

Actually, Q2 of this year grew 54% versus 50% in 2017. That is quite a good sign. Accelerating growth. It remains to be seen what will happen going forward. However, an increasing net expansion rate with increasing margins are also great signs to boot.

Keep in mind they were growing in 2016 from a rather small base and 50%+ revenue growth today, potentially accelerating, is nothing to sneeze at.

Let’s monitor the next few quarters and see how they stack up. The numbers and prior conference calls suggest they will be solid. We will see.

A.J.

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Phoolio,

Thanks, great catch! I must have looked too quickly!

Sorry about that.

Paul

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Tamhas-You might be tempted to think I am coming after you w this post since we have shared some posts on NPI. However, these are genuine questions. It seems like you have a very good working knowledge of a lot of the technologies we discuss on this board. Yet, I can’t seem to get a good read on which if any you truly believe provide a good investment opportunity. Do you actually like any of the companies we discuss as investment opportunities? Are there any that you like we have not discussed? I know you seem to often be concerned about CAP. Any company that you see that has a potential multi-year CAP?

Thanks
David

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… the question marks I see are about the future … not the near future … but a more distant future.

First of all, I don’t presume to speak for Saul, so this my answer, not his. I assumed your question was open for anyone to address it.

First of all, on a different thread we’ve agreed on harboring doubt regarding the moat Alteryx does or does not have. So, I can relate to your reservations. No one is forcing you to invest in AYX. If it makes you uncomfortable, interferes with your sleep and so on, then the answer for you should be easy. Don’r buy their stock and you’re done.

But you keep raising questions, so it sounds like you really don’t want a piece of this action, but keep coming back to peek over the edge. I couldn’t live that way, once I decide to walk away, I don’t look back. But it’s up to you.

But let’s look at the “future.” What exactly is the future? How far away in time is it? I went round and round with that question until I read a post by Tinker who asserted that the government has defined “long term” as one year and a day. That’s when short term capital gains become long term capital gains. Clear as a bell. The future is exactly 366 days from the day you make your purchase. If you make a number of acquisitions of the same equity, than you have a number of different time periods that are in the future. It needn’t be any more complicated than that. Four quarters. At least from a tax perspective, but it actually simplifies the whole question if you apply the one year criteria to the way you think about all your investing activity. I know, TMF mantra is “buy and hold”. Or Buffet famously said something to the effect of “my ideal holding period is forever.” But let’s get real. Is there anything in life anywhere that you can unfailingly rely on behaving in a continuous uninterrupted manner forever? Nothing I can think of.

So for now (that is the near term under a year) I am very comfortable with my Alteryx position despite my misgivings about their moat. Numbers don’t lie (but management sometimes does). I’m comfortable with the people supplying the numbers and the regulations that keep them honest (woe to those who believe in unfettered, unregulated capitalism, a liars paradise).

Will I hold AYX forever? No. I won’t live forever. Will I hold AYX for more than a year, probably, but I reserve the right to change my mind should I see signs that their performance is eroding. Will I know when that happens? I’m not as astute as many who post here when it comes to analyzing financial performance, I’m improving, I’m learning, but I’m far from having Saul’s intelligence and instincts. But he’s been at it for 30 years or so, I’m still a newbie. So, I unashamedly and unabashedly lean on others smarter than I. Isn’t that what this board is all about? Learning and benefiting from one another. I contribute in the areas in which I have experience, knowledge and confidence. I benefit from others who make other contributions. I’ve never seen a post from Saul explaining s/w technology. I don’t hold that against him.

So, if you don’t have any confidence in AYX, don’t buy it. Move on. If you think it has potential as an investment for long enough to make a decent (or better) return, then buy some - don’t put your life savings into it, just some. If you think you’re not smart enough to know when to trim or exit, keep reading this board and pay attention mostly to the folks with a demonstrated track record.

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David, yes, I am invested in a number of the companies we discuss here such as ALGN, ANET, MDB, NKTR, NVDA, PVTL, SQ, and UBNT. For several of these I have posted cautions at one time or another because I observed something that deserved some caution. Being aware of a caution doesn’t necessarily translate to not investing. It just means being aware of the issues. E.g., TSLA, in which I am also invested, is a classic case of promise and cautions.

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I need to get back into ALGN. Anyway, I think Musk has lost it. Too bad.

Can you try to explain the appeal of PVTL in layman terms? And why you like it? I got out at basically break even. My gut says it will become outdated before it really catches on. But, not sure where I come up w that.

Thanks