Alteryx write-up all in one place

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Thanks, volfan for thinking of this and prodding me. I should have done it weeks ago. I didn’t even think of it.

I had to post my initial write-up on Alteryx in five parts on Dec 12th, because the board system was having trouble taking long posts. Here are the five posts again, modified and consolidated in full format:

I just started a new stock at a full position! As you well know, what I usually do with a new stock is take a tiny starter position and then add to it slowly and cautiously. Well, Alteryx (AYX), which IPO’ed just nine months ago, is still largely unknown to investors. I discovered it and fell wildly in love with the investing opportunity this stock represents. As of the end of December it’s become a 12% position.

Here are some reasons I got excited:

Alteryx is attempting to build a new category - a platform that combines both data integration and high end analytics, targeting the emerging category of citizen data analysts.

It feels that its TAM is about $10 billion.

It is cash flow positive, and its loss level is far less than some other well-known data analytics companies.

Its valuation in comparison to other hyper-growth vendors is moderate at less than 6X EV/S.

Some notable current users include Accenture, Coca-Cola, BP, and Ford.

The dollar based net revenue retention was 134%, a very strong number compared to many such companies.
Overall, its basic strategy is land and expand. The cohort analysis suggests that it is working effectively.

Customers rated Alteryx very high for overall customer satisfaction and delivery of business value.

Alteryx was cash flow positive in the first three quarters of this year and it forecasts that it will be cash flow positive going forward.

It seems to have excellent:
gross margins,
customer acquisition cost,
long term value per customer in relation to the acquisition cost,
dollar based retention rate,
overall revenue growth,
and it’s TAM seems less than 1% penetrated

After all that enthusiasm, here are some actual facts and figures:
TTM Revenue - $118 million, up 52% from $78 million
Subscription Revenue – over 95% of total revenue
TTM Dollar Based Retention Rate – 133% and accelerating.
Cohort Revenue Growth: -


**2014 cohort** revenue grew to **170%** of base revenue in one year, and to **270%** of base revenue in two years.
**2015 cohort** revenue grew to **190%** of base revenue in one year.

Adj Gross Margin – 86%
Total Customers – 3054 plus
Customers include Ford, GE, Microsoft, Shell Oil, HP, BBC, etc, etc

Adj Op Margin was
-36% in 2015
-23% in 2016
-09% in 2017 (first 9 mo)

And now some fundamentals:


**Revenue** 
2014:			   =  38
2015:             14   15  =  54
2016:   18   20   22   25  =  86
2017:   29   30   34

Trailing revenue is now 118, and estimates for the year are 129 (at least), which would be up 50% (again, at least).

**Revenue growth percent**  (Looks very solid)
2015:			   =  42%
2016:             57   67  =  59%
2017:   61   50   55

**Dollar-Based Retention Rate**  (Increasing from already high levels)
2015:   123%   124%   125%   122%                 
2016:   126%   127%   129%   135%
2017:   133%   134%   133%

**Customers**  (Increasing at an amazing rate)
2015:    760    961   1140   1398                 
2016:   1578   1834   2047   2328
2017:   2565   2823   3054

**Operating Cash Flow**  (Has turned reliably positive. Means no need for dilution)
2016:   +3.0   -7.0   -5.2   
2017:   +5.0   +0.7   +0.7

**Deferred Revenue** at end of 
2014:         $29 million
2015:         $44 million
2016:         $71 million
Q3 2017:      $79 million

**Adjusted EPS**  I figured 2016 (pre-IPO) as if they had the same 62 million shares they have now, to make figures comparable.
2016:   -10    -11    -05   
2017:   -06    -09    +02

So what do we have? 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. What more could I ask for?

Hope you find it helpful

Saul

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And don’t forget to read Bert’s write-up of the company from September, and do read the December investor’s presentation on their website. They were both very helpful and useful.

Saul

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While their close for the year at $25.27 is down from my purchase price over $27, and down from the high for the month of about $29, the close was their highest monthly close ever, in spite of some bad press during the month (which was discussed at length on the board).

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Saul, much thanks for an insightful 2017!

I came across something interesting regarding AYX.

Amazon AWS has something called Redshift Data.

What that heck is that you ask (me included)?

https://en.wikipedia.org/wiki/Amazon_Redshift

Redshift differs from Amazon’s other hosted database offering, Amazon RDS, in its ability to handle analytics workloads on big data data sets stored by a column-oriented DBMS principle.

Amazon has listed a number of business intelligence software proprietors as partners and tested tools in their “APN Partner” program.[7] The company’s business intelligence partners include Actian, Actuate Corporation, Alteryx, Dundas Data Visualization, IBM Cognos, Infor, Logi Analytics, Looker, MicroStrategy, Pentaho,[8][9] Qlik, SiSense, Tableau Software, and Yellowfin. Partner companies providing data integration tools include Informatica, SnapLogic, and Talend. System integration and consulting partners include Accenture, Deloitte and DXC Technology.

I’m still digging up any analysis into Amazon’s Analytics Database offering. Considering the list of companies certified to provide business intelligence and data integration, TLND ahem, from the data, this at least informs whom AYX’s competitors are to a degree.

I consider the next step to be in determining how big Redshift data will become, the current growth rate and if those values can be extrapolated into revenue values for AYX and the others?

Alas, AWS seems to be a mystery box but the competitor list of AYX portends a large enough TAM?

~Scott

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I came across something interesting regarding AYX. Amazon AWS has something called Redshift Data…

Thanks Scott, very interesting! (But hard to figure out what it is and what it does, but who cares (:grinning:), as long as amazon likes it and partners with AYX).

Saul

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Its valuation in comparison to other hyper-growth vendors is moderate at less than 6X EV/S.

Wanted to check on the valuation.

I have 62.3M shares out at a price of $25.88 right now for a market cap of $1.6B. Minus cash of $182.6M gives an EV of $1.43B. Let’s say this year ends with revenues of $129M.

This leaves an EV/S of 11.1.
What am I missing?

Thanks,
A.J.

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I have 62.3M shares out at a price of $25.88 right now for a market cap of $1.6B. Minus cash of $182.6M gives an EV of $1.43B. Let’s say this year ends with revenues of $129M.

This leaves an EV/S of 11.1.
What am I missing?

Thanks,
A.J.

I think the 6x EV/sales ratio may have been from the beginning of October when Bert did his writeup (https://seekingalpha.com/article/4110983-alteryx-better-way-…). The share price was closer to $20 then.

I also see something seemingly funky glancing at the financials with the (ending in) March 2017 quarter listing only about 35 million shares rather than the 58 and 59 million shares listed for the June and Sept 2017 quarters. Google Finance and Scottrade both list 59.17 million shares currently (for a market cap of $1.54B at a share price of $26.11).

Looking closer at Bert’s write-up, he had the share count as about 58 million and the 6-ish EV/sales ratio is based on consensus revenue estimates for 2018, not TTM…he had an EV at that time of right at about $1 billion even, and a 2018 revenue estimate of probably $165-ish million rather than $129-ish million for 2017.

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I also see something seemingly funky glancing at the financials with the (ending in) March 2017 quarter listing only about 35 million shares rather than the 58 and 59 million shares listed for the June and Sept 2017 quarters.

The IPO in March caused the share count to spike. I do not know the specific details.

As far as Bert’s estimate of $165M in 2018, that seems reasonable if not a bit conservative.
All else being equal (cash and shares out), that would give an EV/S of 8.66.

A.J.

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I also see something seemingly funky glancing at the financials with the (ending in) March 2017 quarter listing only about 35 million shares rather than the 58 and 59 million shares listed for the June and Sept 2017 quarters.

Hi Volfan,
When you see something like that usually it’s not something funky. Usually it’s an IPO. Every once in a while it could be a stock split, but not in this case. It was the IPO.
Saul

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Alteryx had an 8 million share secondary in early September as well. I’m not exactly sure whether that gets instantly added to share counts on sites like Google finance, brokerage sites, and such. For the 10K’s, I would guess that was factored into the weighted average number of shares for the quarter ending September 30th, so just a bit less than a third of the additional 8 million shares were “in play” for that quarter, with all of them “in play” for the quarter ending Dec. 31, 2017.

And after looking at the 10Q for the quarter ending in September, scratch all that…as the 8 million share offering was not exactly an issuance of additional shares.

10-Q link:
http://d18rn0p25nwr6d.cloudfront.net/CIK-0001689923/9bd67b63…

Initial Public Offering and Follow-on Public Offering

In March 2017, we completed an initial public offering, or IPO, of our Class A common stock. In connection with the IPO, we sold 10.4 million shares of Class A common stock, which included the exercise in full of the underwriters’ option to purchase an additional 1.4 million shares in April 2017, at $14.00 per share for aggregate net proceeds of $131.4 million after underwriting discounts and commissions and offering expenses. Prior to the closing of the IPO, all shares of common stock then outstanding were reclassified as Class B common stock and all shares of our then outstanding convertible preferred stock held prior to the IPO were converted into Class B common stock. See Note 6 for further discussion of our Class A and Class B common stock.

In September 2017, we completed a follow-on public offering in which a total of 8.0 million shares of our Class A common stock (issued upon automatic conversion of shares of our Class B common stock) were sold by certain selling stockholders at a price of $21.25 per share. We did not receive any proceeds from the sale of shares of our Class A common stock by the selling stockholders and we incurred offering costs of $0.7 million in the three and nine months ended September 30, 2017 in connection with this offering. These costs are included in general and administrative expense in our condensed consolidated statement of operations and comprehensive loss. As of September 30, 2017, we had 21.1 million and 38.0 million shares of Class A common stock and Class B common stock issued and outstanding, respectively.

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Here’s the last earnings press release.

https://investor.alteryx.com/news-and-events/press-releases/…

To summarize:
Shares outstanding used to calculate earnings in Q3 were 62.3M.
Next quarter’s guidance is based on 60.0M shares out.
Full year guidance is based on 56.4M shares out.

Clear as mud…

A.J.

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Full year guidance is based on 56.4M shares out.

Full year shares are an average over the four quarters. That way for every company as far as I know. If company has increased shares during the year, full years shares will be less than later quarters. This is probably the solution in AYX’s case.

There’s another factor that sometimes figures into number of shares. If a company starts making a profit for the first time, sometimes shares that weren’t counted before, while they were losing money, get counted. It’s usually just a couple of million and I don’t understand the why of it.

Saul

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Full year shares are an average over the four quarters. That way for every company as far as I know. If company has increased shares during the year, full years shares will be less than later quarters. This is probably the solution in AYX’s case.

Thanks, Saul. I did assume that; however, there is still one thing that doesn’t jive.

Why would next quarter’s share count be estimated lower than last quarter?
Next quarter is 60.0M versus last at 62.3M. I certainly don’t believe any shares are being bought back.

If a company starts making a profit for the first time, sometimes shares that weren’t counted before, while they were losing money, get counted.

I saw that recently while reading a conference call or press release.

It’s usually just a couple of million and I don’t understand the why of it.

That makes two of us.

A.J.

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Count me as 3, as I noted a similar thing in a Pure Storage slide deck I was perusing.

My guess is that it is sort of an employee stock option of some sort that is only exercise-able if the company is profitable.

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I have noticed this as well in case of recent IPOs.

My observation once or twice was that they had convertible warrants conditioned to profitability.
Generally they control the amount such that it doesn’t become overly dilutive.

I am guessing that with JOBS act, they don’t have to highlight such potential dilution but I am not sure.
Most management will disclose this in offer statement but not discuss later until trigger just because of timing uncertainty.

I consider this as mild issue. I have seen some real misuse related to low disclosure required by JOBS act. That’s for another post.

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AWS Redshift is a large scale database, so the store of all your data-warehouse type data (ie, not transactional, but historic data you want to analyse etc).

Pretty much any analysis tool can plug into Redshift, so companies can choose their analysis tool. AWS also has Quicksight (https://quicksight.aws) which is probably more playing in the Alteryx space. Quicksight is a Tableau competitor, and not very good at the moment (IMO), but theres plenty to copy in that space, and I assume they will progress relatively quickly.

I’m pretty familiar with the space, and just watched the Alteryx designer demo. It’s actually really cool. It’s not any new amazing thing, but it takes a number of existing tools and combines them in a pretty slick package.

In fact, the presentation is so compelling I’d definitely be interested in trying it out at my work (a real-estate startup) except caveat below. We have data people, but they have to know SQL and R to do their thing. We have marketing people who would love this sort of ability to access data, but are limited technically.

Obviously, you need to know what logistic regression (etc) is to choose to use it, but once you have the basic knowledge (a method of converting variables into a 0-1 value → binary decision making) you can just keep using it.

The only caveat (for us) is pricing, although we are pretty cash strapped. The target market is a bit above us!

But it certainly looks like a pretty compelling tool if you have the budgets. Essentially the proposition is, “If you give us (non technical people) access to the data, and we can play with it without bothering (expensive/rare) technical resources”.

Contrasting with Tableau, QuickSight et al, which are more end-of-chain (all the data is already cleaned and in pretty good shape).

The major red flag I could see is if other vendors (in particular the Tableaus of the world with significant customer access) decide to move down the chain to enable better data access/cleansing/analytics toolsets. It looks relatively easy for both Tableau to move down (into cleansing/analytics - Project Maestro?), and Alteryx to move up (into Visualisations).

Of course, the same could be argued about Tableau!

In summary, Alteryx is a lovely wrapper around existing toolsets, in particular, SQL and R, that would make it relatively easy for technical people to set up data-cleansing pipelines, and non-technical people to perform analyses above and beyond what can be done in existing tools.

I think the big question is, do they have a niche that is defensible from Tableau et al?

cheers
Greg

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Greg,

U wrote:

I think the big question is, do they have a niche that is defensible from Tableau et al?

This is the crux of the matter. Thx for bringing it to the fore.

I do not know the answer but u r asking the right question. I recommended ur post.

Rizz

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Thanks Rizz. On reflection, I’m not exactly sure that is the “big question”

The big question I now think is, What does that data cleansing(ETL - extract/transform/load) /analysis/visualisation space and TAM actually look like in terms of growth/size? What will it look like in a year or two?

I don’t think Alteryx are creating a new market, they seem to be in that “tell me interesting stuff about my (big) data” space that Tableau etc are in. I know Tableau are much more in the “I have the data all cleansed and analysed, now draw some pretty pictures” space and thus are dependent currently on ETL tools to get the data in shape, which is where Alteryx come in.

Some questions that spring to mind (note, Tableau is my default ‘competitor’)
Q1: how many companies invest in Alteryx and Tableau? [From some quick googling, Alteryx seems to be recommended as the ETL tool of choice for Tableau.]
Q2: How good are the Alteryx salesforce? [Seem pretty good from growth rates]
Q3: Competition? eg: http://www.yourdataverse.com, https://www.datawatch.com/our-platform/monarch/ and probably lots of others. How do they compare?
Q4: How inclined are Tableau to move into Alteryx space? [They seem pretty inclined with https://www.tableau.com/project-maestro - what impact on Alteryx?]

Some quick numbers (just grabbed from interactive brokers) suggest that Alteryx is doing a great job of growing.

cheers
Greg
I took a starter position in Alteryx because I’m a neophyte at this game!

Alteryx:
Market cap: 1.6b
TTM revenue: 118m
TTM Revenue Growth: 55%
TTM P/S: 13.34
PE (MRY): -48
1YEPSGrowth: 34.7%

Datawatch:
Market cap: 131m
TTM revenue: 36m
TTM Revenue Growth: 19%
TTM P/S: 3.57
In the same space, significantly smaller than Alteryx. Alteryx is growing revenue much faster (50% versus 19%)
PE (MRY): -32
1YEPSGrowth: 15.65%

Tableau:
Market cap: 5.6b
TTM Revenue: 878m
TTM Revenue Growth: 13%
TTM P/S: 6.38
PE (MRY): -37
1YEPSGrowth: 5%

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Simply for the sake of gathering 2 of the most effusively praiseful takes on Alteryx that I have come across, I will provide these 2 links within the same post, cross-posting them as replies both on the NPI board and Saul’s board (along with another board or two on the paid side of Fooldom).

An Alteryx take from Tinker from 5/25/2018 (other decent discussions within the thread…despite its original topic being related to politics):
http://discussion.fool.com/this-hiatus-is-too-easy-33077297.aspx…

Saul’s initial announcement about starting a position in Alteryx from 12/12/2017, prompted in large part by an article from Bert Hochfield:
http://discussion.fool.com/a-new-full-position-1-32921051.aspx?s…
Due to technical difficulty, this was put out in 5 parts, the above link is to part 1.
Here is a later posting with all 5 parts consolidated into a single post (the post this reply is made to):
http://discussion.fool.com/alteryx-write-up-all-in-one-place-329…

Also, here is a thread where Saul pointed to Alteryx’s customer video testimonials:
http://discussion.fool.com/alteryx-testimonials-32933548.aspx?so…

volfan84
long AYX

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In light of today’s Alteryx rise, here (if you open to see the whole thread) is a re-visiting of the consolidated thread version of when Saul initially bought Alteryx, as a full position.

I think he bought it at around $26/share or thereabouts.

volfan84
long AYX since January 2018, a bit late (hahaha) to dive in after Saul’s initial full position

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