Alteryx

[Citibeach44]

HiStocknovice,

Very level headed write up. I think you are spot on in your assessment. A slow down is a slowdown no matter what company.

With such an irrational short term market I too thought it was best to cut my AYX shares in half as it too was my biggest Hyper growth holding.

Probably is just a ZS or TWLO type of hiccup, but near all time highs I’d rather lock in Somme profits and wait it out with a smaller position to see how this next quarter goes.

Share price might never reflect a slowdown, but I’d rather be prudent and not take too much risk. AYX just doesn’t deserve right now to be the biggest holding in this great sector of companies in my portfolio.

TMB

[PaulWBryant]

As usual, I’m 100% open to being shown any flaws in my thinking.

One potential flaw I’ve struggled with myself is not framing the situation correctly. AYX is actually still down from its February highs near $160 per share. If they had come out with 65% revenue growth and guidance for 40% next Q, they might well be testing that high again. As is, I think the market has correctly weighed the risk, and AYX continues to be somewhat cautiously traded at a PS ratio of 19 or so. OKTA sports a PS of 35ish, SHOP’s is pushing 50…so AYX isn’t the stock market darling among the companies we follow.

I have zero issue with a smart, proven management team deciding to hunker down for a spell. The tradeoff is there’s zero chance I am hunkerin’ down alongside them with 18%+ of my portfolio. I’m much more comfortable with 8%-10% as things work themselves out. If I end up missing out a bit in the short term, c’est la vie.

I agree whole-heartedly with this, and pretty much everything you wrote. I too have trimmed, both immediately (at sub-$110 per share, ouch), and again yesterday at $129. This is how I would put my reasoning:

When I hold a 20%+ position, it is not just because I love the company long term, but because I think it is majorly undervalued in the short term. I could say that when AYX was at $80. I could say that if AYX was at $130 and growing at 70%. I can’t say that when AYX is at $130 and like growing at 30% or 40% in the near future.

This isn’t a complete reversal in my assessment of the company: it’s just prudence. AYX is still a 13%+ position for me. I don’t imagine I’ll sell much more of it…I have too much cash already and not much I want to buy.

Bear

PS - The 43% number for the 1st Q is pretty shocking. Assuming that in Jan and Feb they were on track for close to 60% as usual, this means new business went to near 0 in March.

Even though April was “similar” to April 2019, re-acceleration will be difficult. They just turned in 108.8m instead of the, maybe 120m we might have expected. The delta there means they have a little less recurring revenue going forward.

[gmcnatt]

From the call, it sounded like March was hit hard, but April started to show a turnaround. It sounded like they were being cautious but were optimistic that companies need AYX now more than ever.

They were even still selling to the oil industry, and this was in April when US oil went negative.

- Dean Stoecker

Well, I don’t think we’ve seen a significant change in the non-impacted verticals. And as I said before I think it’s even encouraging even though people are talking about the 25% that are in the impacted verticals, we’re beginning to see glimmers of hope there. I mean when oil hit negative territory in Q1 all bets were off. People probably thought nobody would buy anything. But we actually did quite well in oil and gas because analytics becomes more critical in those situations.

We have not seen a key change, but it’s early. It’s April. While we’re excited about the fact that we’ve landed about the same number of logos that we had in Q1 of – or in April of last year, the fact that we still are obtaining G2Ks in April is a positive sign. But in the non-impacted verticals we really haven’t seen a shift.

- Dean Stoecker

Hey, Tyler, Dean. I’ll let Kevin follow-up with some comments. But just as a reminder to everyone on the call there’s really kind of two factors at play, one is, while we are completely subscription-based we are not 100% ratable. And so we don’t have perfect visibility into the entire run rate. We’ve got visibility into roughly 60% 65% from the balance sheet. And as an analytics company the second part of this is, if you put bad data in you get bad data out. And so we leverage our own platform on all of the KPIs that will indicate when things might change for us. We still don’t have all the information that would give us better visibility.

And I think that the April performance is actually fairly strong. We’ve always been conservative even though we’ve seen some glimmers of hope in April. It turns out of the logos we brought-in in April 35% of them were actually in the highly impacted verticals, that’s also some silver lining in this. But as you know, we’ve been fairly conservative. Kevin?

- DEAN AGAIN

Let me add one additional comment and that is around what may be a false positive or a false negative I guess in the case of the impacted verticals. Most organizations are talking about the impacted verticals as having a negative impact on their business. I highlighted a number of verticals in customers who joined us in Q1.

To illustrate that, those impacted verticals may turn out to perform better for us when – we’ve always said that when things are good analytics are important. But when times are bad, analytics are absolutely critical. And so we’re very optimistic about what is happening in this space and the kinds of customers that are joining us and the impacted verticals I think have another silver lining.

[SaulR80683]

Saul, they forecasted 10% growth this quarter and the stock went up since. That was my point.

Hi 12x

Actually you said “the market full well knows next quarter will be 10% YOY growth”

But they DIDN’T predict 10% growth. They predicted revenue of $91 million to $95 million. Last year, second quarter, they had $82 million.

91/82 = 11% growth at the low end

95/82 = 16% growth at the high end

The midpoint of their guidance is up 13.5%, but that’s irrelevant. They always beat the high end of their guidance, and they said over, and over, and over, that they were being very conservative… and that after the last two weeks of March where they had to SET UP work from home, and contact your customer from home, April had returned to normal “throughout the business”… but that they were still being very cautious.

So let’s say they beat that “very conservative” $95 million by an even more conservative $10 million and come in at $105 million.

105/82 = 28% growth. I’d consider that the floor in my estimate.

Do you really think that if they had predicted 10% growth, and “the market full well knows next quarter will be 10% YOY growth,” that Alteryx would have risen $25 in a week? Do you think anyone believes they will grow only 10%.

For God’s sake, the CEO and CFO kept winking about the estimates as being very conservative. They were saying, “We are doing fine but who knows what the future holds in this situation, so we are going to guide extreme conservatively so no one can come back and sue us for estimating too high”, or something like that.

Best,

Saul

[12x]

Unbelievable. Their quarterly earnings transcript clearly states forecasted revenue growth of 10% to 15% growth in Q2. Im looking right at it. My whole point is the market has had the chance to absorb this very low growth rate projection for next quarter. And in turn bid the shares up higher.

The whole point of my post is that they gave very low guidance next quarter and the stock rose despite that and you keep arguing that they are likely to beat that number.

As to what they will really do, I am not sure. One would hope they would beat their estimates. I am not going to get into a discussion on what they will REALLY do.

How many times have we seen a company suddenly lower their revenue estimates by a large amount and saw the stock suddenly tank? That didn’t happen here. The market is not punishing AYX for their growth forecast and that’s my whole point. And that’s it.

[rliu]

I think that is Street already knew the ASC 606 will cause AYX quarterly revenue distortion easy happened just like last Q +75% yoy and that’s easy explanation for the weird price movement last two Q after ER. And after COVID, they understand their gonna be few new contracts signed in March. So they just expected AYX will provide a not satisfying numbers for Q2. They were not surprised with only +15%ish yoy. And after AYX exposed numbers which surprised us but not Street. And so that’s why the price move last two days IMO.

I’m not gonna judge the very short term price change but want understand what’s the information price move told me. It obviously LONG TERM story not changed, but please do not mislead by ASC 606 which will take any 2 years big amount contracts value 35-40% in one single quarter.

Rick

[12x]

This is the exact quote:

For Q2 2020, we expect GAAP revenue in the range of $91 million to $95 million, representing year-over-year growth of approximately 10% to 15%

Here was another quote:

As a result of COVID-19 and the resulting macroeconomic deterioration, we immediately took a number of actions in response, including pausing hiring in the near term until we better understand customer buying behavior, although we will move forward with any outstanding offers and hiring will continue for critical roles and functions. We have also curtailed non-essential spending and are focusing our investments in those areas that we believe are most important to continue to drive the business through this recovery. We have rescheduled both of our 2020 US and European users conferences to 2021 and continue to leverage our digital event. We have eliminated all unnecessary travel and continue to focus on operational efficiencies, leveraging Alteryx ourselves to make this process much easier.

The whole discussion before delving into what they will really do next quarter was, Alteryx put out low guidance. On top of that, they put out a hiring freeze. They cut all non-essential expenses. These are not things a healthy, growing business does! Especially the hiring freeze. They risk filling crucial roles and missing out on top talent that could fill those roles because they, like many other software companies these days, I know you brought up Nutanix doing the furloughs and an example of a company to avoid, well, the very next day, VMWare, their main competitor, put out a notice they were ending 401k match, performance reviews/raises the very next day, and C-level executives were taking a pay cut.

So the discussion was/is, AYX has some very unfavorable things going on, that are shared by many other software companies. On the other hand, there are companies that have performed well. Such as Twilio. Mainly companies that have benefited from remote working and social distancing. Those companies have seen their stock rise as they benefit from new business. AYX has NOT! So the argument was, AYX should be sold because certain bad things are going on.

Which brings me the questions.

1. Should AYX really be sold due to short term issues related to COVID-19 when the long term story remains intact?

2. If AYX should be sold, what should be done with the proceeds?

I have done some questioning about this and my answer to number 1 has been No. On top of that, I already have some stocks that DO benefit from social distancing.

[Klay2]

“How many times have we seen a company suddenly lower their revenue estimates by a large amount and saw the stock suddenly tank? That didn't happen here. The market is not punishing AYX for their growth forecast and that's my whole point. “

Market does not behave rationally most of the time. Look at SQ, and the 40-50% jump on TWLO and FSLY after earning, do you still think the market treats AYX more favorably than other SaaS stocks?  After the last earning, AYX went up, but it was certainly not rewarded accordingly to its fantastic numbers. What is more, AYX went down along with other SaaS and only recovered half of the loss before the earning release. In other mean time, other high-flyers, TTD, OKTA, MDB to name a few, had already more than fully recovered before their earning release.

My observation is that AYX is one of the few that did not recover well. To me, the market did not treat AYX fairly this time when compared with other SaaS stocks.

[IRdoc]

This whole quarter to quarter discussion is just an artifact of the calendar and the rule saying the company needs to provide the information by the quarter. If their fiscal year was moved up a few weeks this quarter might have looked awesome and next quarter much worse. It matters for trading but not so much for long term investing. AYX is not going benefit directly from Covid-19 but it is also unlikely going to be appreciably hurt. Over the course of a month not only them but many of their customers had dramatic changes in the way they do business. They could have had a week’s worth of deals lined up ready to sign that just had to be delayed by a week or two because the parties need to figure out how to do it remotely. Air travel has basically shut down. If you want to play earnings or trade based on the next couple months then it’s worth thinking about. Otherwise, the long term thesis is intact and there isn’t really anything they could have reported this quarter that would have really changed that. Assuming you trust management (otherwise why be invested), their business is solid. Until I see a definitive trend or their story changes, I’ll just keep holding.

Same goes for Zoom. Their name is out there and synonymous with teleconferencing in the public. Whether they report revenue up 100% or 500% it doesn’t really mean much long term. It’s basically one or two months of business that is definitely not usual, so there’s no way to draw any definitive conclusions.

NVDA also comes to mind. When they went bonkers with mining I didn’t really trust it, and when their growth stopped there was an obvious reason (they should never have been selling that much that fast anyway). You can look at changes in the data center landscape or competitive landscape and how that’s reflected in the numbers, but when there’s a one time anomaly I generally don’t pay attention.

Sometimes I think I’d be better off just reading the annual reports to get a wider view than quarter to quarter noise. I just don’t see how anyone can make a definitive judgement based on two quarters straddling a world wide shock to business.

[geocarw]

An hour and a half after Alteryx reported their results, in the middle of the call, I decided I needed to post on the board in the middle of the conference call and alert you to what I was hearing: That, if the tone of voice and what the CEO and CFO were saying was true, Alteryx was fine, and don’t sell out of your positions!

What I find interesting is, as of today May 10, Insider Transactions is -67.95%. Looks like 29 Option Exercise and 71 Sales from June 11, 2019, to May 5, 2020. Looks like they are selling some of their positions.
https://finviz.com/quote.ashx?t=AYX

George

[FourthStooge]

As usual, I’m 100% open to being shown any flaws in my thinking.

While I see no flaws in your thinking, I think things look a bit better than you do.

Basically, they said that they did observe an abrupt and significant change in customer buying behavior in March as many of our customers and prospects around the globe responded to shelter in place directive and the realities of rapidly changing macroeconomic conditions.

They also said that In April, we saw new business activity resume and was consistent with activity levels in April 2019. We view this as an indication that data and analytics remains critical even in challenging time.

We know that they typically guide low enough so that they can easily beat. Lately, they’ve beaten guidance by a lot. I believe that they have been surprised by the amount of business they did in the most recent September and December quarters.

Here are the historical guidance numbers

Guide	Mar	Jun	Sep	Dec
2017		29.3	32.1	35.8
2018	39.5	43.5	49.5	56.5
2019	70.5	75.5	89.5	129.5
2020	106.5	93.0		

Here are the historical revenue numbers:

Rev	Mar	Jun	Sep	Dec	Tot
2016	18.4	20.0	22.5	25.0	85.8
2017	28.5	30.3	34.2	38.6	131.6
2018	50.3	51.5	62.6	89.2	253.6
2019	76.0	82.0	103.4	156.5	417.9
2020	108.8				

Here are the percentage beat numbers:

%Beat	Mar	Jun	Sep	Dec
2017		4%	7%	8%
2018	8%	8%	9%	7%
2019	8%	9%	**16%	21%**
2020	2%			

The number of customers is growing nicely, up 30% YoY, which is the same as the past 2 quarters (although trending down over the past few years), despite the big slowdown in March business:

#Cust	Mar	Jun	Sep	Dec
2016	1,574	1,833	2,050	2,323
2017	2,565	2,823	3,054	3,392
2018	3,673	3,940	4,315	4,696
2019	4,973	5,278	5,613	6,087
2020	6,443			

Grth	Mar	Jun	Sep	Dec
2017	63%	54%	49%	46%
2018	43%	40%	41%	38%
2019	35%	34%	30%	30%
2020	30%			

Also, adjusted gross margin is holding up nicely as well, staying above 90%:

AGM	Mar	Jun	Sep	Dec
2016	79%	81%	82%	83%
2017	84%	84%	86%	85%
2018	91%	91%	92%	93%
2019	90%	91%	92%	93%
2020	91%			

The way I see it is that prior to the most recent quarter, business has grown much more rapidly than the company expected, even considering the sandbagging. COVID-19 & WFH started getting serious at the end of February and into March, which made March a terrible month. Despite this, April has shown to be consistent with 2019 numbers. The March quarter was still a beat over the original conservative guidance, although the last month (March) of the quarter is the month with the most business getting done. Alteryx, seeing somewhat of a return to 2019 figures in April, shouldn’t have such a shock (like in March) and should do okay through June. There will probably be some slipped March business happening this quarter providing a small plus. Maybe this is why April looks good.

The customer count is increasing nicely, margins are steady and the story management has provided on the earnings call is good and conservative. Users love the product, there is still no real competition and the TAM is huge and getting bigger. Who knows how much bigger it can get as they develop new products and go after individual verticals with specific solutions?

Alteryx’s quarterly results did not reveal any problems with its long term prospects. Once the economy normalizes, Alteryx sales growth should reaccelerate.

Following Tinker’s recent epiphany to do nothing during the crisis has been good for me with all of my holdings. The only modification I made to this policy was buying more shares on the way down.

DJ

[stocknovice]

DJ -

Excellent post and thanks for the thoughts. I track those same numbers. The way you’ve tied them together makes sense, and I agree the Q3/Q4 numbers were pleasant surprises for everyone. For now I’m wondering whether those surprises might turn into tough comps. AYX has always noted seasonal effects which cause revenue to ramp during the second half. They outlined the same for 2020 during the 4Q19 conference call. If this drags on too long (or has already), those seasonal effects might disappear this year. That could make the numbers for the rest of FY20 a wash (while also creating super easy comps for them to smash in 2021). I’m not saying a Q3/Q4 drag is guaranteed, but that’s a risk that wasn’t there for me prior to the virus.

At the same time, I’m excited to see what they have up their sleeve. On the call the CEO hinted at a “category of software we see emerging” that they “intend to own”. Within the next couple days they announced a Chief Information Security Officer hire along with several upcoming investor presentations. It’s clear something is coming. Are these enough dots to suggest some sort of cloud offering? If so, that could be a catalyst for the stock. That’s simply speculation on my part, but I guess we’ll know soon enough.

In the end there’s no right or wrong to any of this. It’s simply me emptying out my mental notebook, and I appreciate all the thoughtful responses. For now I’ve dropped AYX to 8.1% and my #7 spot out of 9. I sincerely hope Alteryx gives me plenty of reasons to build it back up.

[RafesUserName]

If I may attempt to summarize…?

• Everyone is happy with Alteryx. They did well this quarter in absolute terms, but in relative terms some are disappointed. There is some disagreement about the short term but not the long term.

• Some people trimmed their holdings due to uncertainty and risk management reasons relative to their own risk tolerance or portfolio management philosophy, but no one mentioned selling out entirely. Some said they are holding, which is the other side of the same coin. My own position is just 2.3% of my portfolio so I am holding and looking for opportunities (dips, clarity, etc) to add more at a better value.

…did I get that about right? Regardless, I look forward to watching this evolve and am grateful to the participants on this board for sharing so passionately!