AYX Annual Shareholder Meeting

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On Wednesday May 22, Alteryx is holding its annual shareholder meeting. Although they are headquartered in Irvine CA, for some reason the meeting – at least this year – is being held in Broomfield, CO. That is about half-an-hour drive from my house. I am a shareholder, and I plan to attend in person.

I’ve been to shareholder meetings for a good handful of companies, and all I can say with certainty is that there are plenty of differences in format (although there are also some legal requirements regarding the format). I mention that because it means that I can’t promise anything about my experience there.

I expect to have studied the company’s 10-K and annual proxy statement before I arrive. I hope to also have read some recent earnings conference call transcripts, any interesting press releases, and perhaps reviewed some investor presentations. I hope all that will arm me with a set of thoughtful questions, which will hopefully yield thoughtful answers. I also wanted to offer you the chance to ask questions through me. Again, I can’t promise that I’ll be allowed to ask all the questions I bring. One company whose annual shareholder meeting I attended allowed only one question per attendee (!) although most companies have been far more generous.

If you have any questions for Alteryx’ management, I’ll try to ask management for you. Please reply to THIS post – my post, and not one deeper in the thread – if you want to be sure that I see your question in time to bring it with me (or for me to ask you questions about your question). Please consider responding to me personally (a “reply” with “E-mail this reply to the author” checked instead of “Post this reply to the boards”), although sometimes a good question can generate more good questions. Again… no promises. Hopefully, I’ll have a write-up of my experience at this event posted within a few days after it occurs.

Fool on!
Thanks, and best wishes,
TMFDatabaseBob (long: AYX)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I am a Maintenance Coverage Fool (see the above link for details). I am not an investment professional, merely an investor.

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I believe the CEO said that he believes that Alteryx can achieve 16,000 customers by 2021 (I don’t have the source. Maybe someone else?). Given the current rate of customer growth, it is hard to see how Alteryx can reach that number. One question on my mind is what they see as their path to 16,000 customers.

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Ayx targets citizen data scientist…stressing low/no-code ease of use.

We see companies like ESTC MDB SMAR and TEAM all thrive and grow with a sales model aimed at the developers and open source community for viral exposure.

Without breaking what is obviously working (targeting excel users), have they considered a parallel or forked approach to get their product spreading more virally towards developers?

I think of ESTC and how the developer community is driving more and more use cases.

Wondering if that can be another accelerator for them, as client growth as a % y/y seems to have peaked.

I get Enterprise is the focus and agree. But there are many more developers at a large enterprise than there are CDO’s and heads of HR and Finance.

Dreamer

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great thanks for doing this!

  1. are the shares from the convertible senior notes counted in their diluted share count?

  2. If they are, approximately how many shares is that?

  3. Does their capped call cover 100% of the potential dilution from the convertible bond?

  4. Have people been redeeming the convertible bonds now that the share price is high enough for them to do so?

  5. In the CC AYX mentioned that Clearstory establishes a beachhead in Silicon Valley. Do they expect to grow their team in Silicon Valley?

Thanks,
Ethan

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Bob,
Thanks for your effort. Here is a question:
Alteryx now has 5000 customers and probably around 60,000 users (I am assuming $4000/seat/year). Given that you have millions of citizen data scientists as possible customers and you have barely scratched that number why is the customer growth number slowing in the last few quarters?

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Texmex. Customers do not equal users. Ayx defines a customer as as a invoice. One customer could have 10 thousand users or 2 users. Ayx has been going after bigger customers because they have more users.

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I think I clarified it in my question. 5000 customers but 60K users @ $4000/user/y for $240M annual rev.

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Texmex,

It is my understanding after reading the CC notes that going forward we should worry less about a slow down in customer growth. This is due to their strategy of going after customers with large numbers of users. I guess I’m confused why you are concerned about a slowdown in customer growth when you used the number of users to calculate revenue.

From the Q1 call: “And consistent with the themes of 2018, we continue to engage with our customers in a more strategic way, as we believe the strength of our brand and the power of our platform is resulting in our continued growth around the world. In Q1 we saw an over 50% increase in new customer lands larger than $50,000 and nearly a doubling of customer expansion transactions greater than $100,000.”

-Dan

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So, 5000 customers cam get them up to Millions of users? They should give some visibility of their larger customers. For example SMAR has 80,000 domain customers and grew tha number by just 7% you but most of their future growing is coming from that base. They give us a good breakout of what their largest customer ACV is. Not sure get the same from AYX.

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Hi Bob,

Some great questions for you to choose from in this thread. Seeing as only one question will be allowed at the event, would you consider following up with an email to IR to collate the rest of the questions that remain unanswered after the meeting?

Jus an idea,
Thanks

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Hi fireblade909.

I’m sorry if my post was misleading. Allowing only one question per shareholder is the worst case that I have seen at any company’s annual shareholder meeting – as I indicated, I’ve attended shareholder meetings of several companies. That is not what I “expect” from Alteryx. Most companies are more generous fielding shareholder questions. I mostly brought up limits just in case I’m not allowed to ask all the questions I hope to bring which, yes, will include some great ones thanks to this board. I will consider reaching out to Investor Relations (IR) afterwards if my questions are left unanswered. I agree with you that that’s a good idea. But rather than funnel everything through me, it might be even better if the questioner him- or herself reached out to IR. There is always the possibility that I might misunderstand the question (or the intent behind it), so an e-mail directly from the original questioner lessens the possibility of that kind of misunderstanding creeping in. If the questioner in question (did I just write that?) has never contacted an IR department directly before, that would be the perfect excuse to “break the ice”. But let’s see first what I CAN get answered.

I actually may be able to answer (at least partially) one or two of the questions myself before I go to the meeting, just from having studied the 10-K (I’m still working on that) and other company materials. For example, the 10-K does talk about the sales model addressing the developer community as well as business analysts, although the latter does seem to be the primary target. Where I can, I’ll try to develop answers myself, which may lead to related questions that I can bring to the meeting instead. Another thing I learned in the 10-K is the answer to, “Why Broomfield, Colorado?” Alteryx has an R&D center there.

Fool on!
Thanks and best wishes,
TMFDatabaseBob (long: AYX)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I am a Maintenance Coverage Fool (see the above link for details). I want to share my research with you since we’re all part of the larger TMF Community.

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Hi all. The Alteryx annual shareholder meeting is tomorrow morning and I intend to be there bright and early. It took me longer to work through my preparatory process than I thought, but I have finished. Now I want to address everyone’s questions.

BobbyBe, I couldn’t find any reference to CEO predictions of 16,000 customers by 2021. Therefore, I don’t intend to ask about that goal. I agree with you that 16,000 by 2021 seems to be a stretch. I do have other customer-related questions I intend to ask. Hopefully they’ll help you.

Dreamer, I intend to ask some questions about their penetration into IT departments. I suspect that there may be a cultural clash where IT departments view themselves as the builders of systems and protectors of data where Alteryx seeks to decentralize those functions. But we’ll see how (if) my questions get answered. I hope that the intent of your question comes through in the ones I’ve composed.

Ethan, First, yes, the convertible senior notes are now included in the diluted share count. This seems to have started in 4Q18. Based on the “initial conversion rate” and the size of the offering, about 5.2 million shares would be created. The Indenture document speaks to customary adjustments to the initial conversion rate, and I intend to ask about those. The difference between basic and diluted, as of 1Q19, is about 5.55 million shares. Prior to 4Q18, earnings press releases referred to a single share count as “basic and diluted”. I intend to ask about the capped call, but the language in the 10-K makes it sound as if it covers the vast majority, if not all, of the conversion exposure. I intend to ask if conversions have occurred, although I suspect that the interest payments make early conversion unlikely. The section of the conference call where they described ClearStory as a Silicon Valley beachhead did also indicate that they hoped their presence in the Valley would allow them to attract more talent. I feel as if that answers your fifth question, so I don’t intend to raise it.

TexMex, I think you’ve gotten some good answers from Ethan and Dan (SettingDTone). Alteryx has stressed that they are concentrating on Global 2000 companies at this point, and that they feel as if a good portion of their Total Addressable Market resides there. I think they are nearing a 30% penetration rate in terms of getting their first sale at these companies. They’ve also indicated, though, that they feel as if they still have plenty of room for expansion even in many of their most deeply-penetrated customers. As I said earlier, I do intend to ask about customer count growth.

I have an original question regarding the definition of Dollar-based Net Expansion Rate, but I REALLY appreciate the questions that you’ve asked as they’ve been very helpful in formulating the questions I’ll ask. I truly hope that the thrust behind your original questions isn’t lost in my translation. Hopefully I’ll be able to post my write-up later this week.

Fool on!
Thanks and best wishes,
TMFDatabaseBob (long: AYX)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I want to share my research with you since we’re all part of the larger TMF Community.

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BobbyBe, I couldn’t find any reference to CEO predictions of 16,000 customers by 2021. Therefore, I don’t intend to ask about that goal. I agree with you that 16,000 by 2021 seems to be a stretch.

Here is the link to the interview with AYX CEO where he states the billion dollar revenue and 16,000 customers in 2021. I don’t know that I’d hold them to it as some type of guidance but rather a goal or aspiration, but this is where the discussion arose.

https://www.cmlviz.com/2019/03/05/AYX/alteryx-one-on-one-ceo…

CMLviz: What about Tableau, Splunk, etc? How do you compete or overlap with them?

DS: We are in a very different space. Tableau is a repository for […] Talend is more about operational ETL for the on-prem to cloud migration. We went into an area where nobody else wanted to venture, the choke point of analytics, finding it and getting it ready.

Our TAM is five times bigger than the TAM of Tableau. They are dealing with people who only live in visualizations. And that’s understandable because no one ever got shot taking a cool, sexy chart to a meeting. If the world will be eaten by machine learning, the existential threat of visualization vendors is when they say, we are putting everything into machine learning on Salesforce, so why do I need to visualize anything?

Tableau just said that they passed 86,000 customers and a billion dollars in revenue. We believe we can get to a billion dollars in 2021 with 16,000 customers. We are much higher value, which is reflective of the higher-order problems we are solving for businesses.

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Bob,

Thanks for this. I typed “Alteryx 16000 customers 2021” in Google and found this.

https://www.cmlviz.com/2019/03/05/AYX/alteryx-one-on-one-ceo…

Just in case you do want to ask about it.

A.J.

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You may find this helpful or already have it, Page 9 of their ASC 606 overiew goes into pretty good detail of Dollar Based Net Expansion Rate (NER). https://s22.q4cdn.com/730379107/files/doc_financials/quarter…

They also go into some more detail in the conference call,

We had net retention which was a revenue based metric previously and we updated that in Q4 on the last call to net expansion. So the unit expansion rate is an annual contract value calculation that is unaffected by 606. So that is a pure calculation of how our customers a year over year are expanding their relationship with us.

Tyler Radke

Great. And then a follow up. It looks like you’re your net expansion rate continue to go higher and look like they’re at their highest point since at least 2017. But the customer count growth has been slowing down still, now its growing healthy in the mid 30s. But I’m curious is that is that kind of reflecting a double down in the enterprise?

Dean Stoecker

You’re spot on. It actually illustrates the focus we have on large global enterprises. In fact, if you look at the customer count while it was relatively the same kind of growth as we saw last year, we had 82% growth in global 2000 customers within that 277.

So we are very acutely aware of where the TAM lives. And it doesn’t matter whether it’s here in North America or the rest of the world. In fact, we saw a 60^% growth of those - of that 82% growth in global 2000, 60% of it was within international global 2000.

So we are very focused on our enterprise playbooks, the end to end platform story, the emergence of the Chief Data Officer and I think that will help us continue to see that net expansion for some period of time.

THanks for doing this, Good stuff, wish I could be there.

best,
ethan

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TexMex, I think you’ve gotten some good answers from Ethan and Dan (SettingDTone). Alteryx has stressed that they are concentrating on Global 2000 companies at this point, and that they feel as if a good portion of their Total Addressable Market resides there. I think they are nearing a 30% penetration rate in terms of getting their first sale at these companies. They’ve also indicated, though, that they feel as if they still have plenty of room for expansion even in many of their most deeply-penetrated customers. As I said earlier, I do intend to ask about customer count growth.

Issue with AYX is they do not tell us if their larger customers are growing at a faster rate than overall or have more room to grow. SMAR, DOCU, SQ do. Here is the following from SMAR CC.

We continue to see very strong growth in our larger customers with 6,192 now paying us $5,000 or more per year and 444 now paying us $50,000 or more per year. These customer segments grew year-over-year by 63% and 135%, respectively, and now represent approximately 66% and 27% of total ACV.

So, larger customers growing faster

Yes. So Mark, one of the real blessings of the company is, even though we did see a 50% step up in ACV, the number is still tiny. I mean, we’re taking $2,500 on average. So the opportunity for us to really reach the full potential with an account, we were talking orders of magnitude, not order of magnitude.

And it’s our job now to help enroll people on what’s possible and help them reach that. And we have high watermark now. We have, as Jenny has now reported out, we are tracking over $100,000 contribution from customers. We have customers over $0.5 million. We have customers over $1 million. So when you see these high watermarks within the organization, that is really the pacesetter for the organizations ahead, we should not settle for a $20,000 account.

More room to run.

From Docu CC

They have been highly effective at this, growing the number of customers we have with ACV over $300,000 by 50% in fiscal '19.

Even SQ breaks out the numbers to show that GPV from larger sellers is rising faster. It would be nice to get confirmation that AYX is also growing their larger customers faster or have more room to grow in their larger customers.

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Hi TexMex.

From the Tiernan Ray interview (thanks to both of you who pointed it out to me):

“We are growing really fast, but with just a low-single-digit penetration of any of the customers we sell to.”

Although I couldn’t quickly find the reference, they’ve also mentioned this in at least one earnings conference call. They’ve gotten their foot in a lot of doors, but their “land and expand” approach still seems to have plenty of “expand” ahead of it. The other companies you’ve mentioned may be talking a bit more explicitly than Alteryx, but Alteryx isn’t silent on the issue. I hope that helps.

Hi Ethan.

Thanks for the follow-up. Yes, I had seen that Q&A interchange. My question is a bit different. The question – and the answer – will be revealed in a few days. I don’t think it is right to reveal the question until management has answered it.

Fool on!
Thanks and best wishes,
TMFDatabaseBob (long: AYX)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I want to share my research with you since we’re all part of the larger TMF Community.

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