AYX earnings preview

AYX will be reporting Q4 2019 results next Thursday AMC. In the recent quarters AYX’s growth has been accelerating. Here are those numbers (% Beat is the beat over the top of the previous’ quarter guidance):

      RevGr  %Beat
Q1'17 55.2%  
Q2'17 51.8%
Q3'17 52.1%
Q4'17 54.6%
Q1'18 50.0%   7.1%
Q2'18 54.4%   6.4%
Q3'18 58.7%   8.4%
Q4'18 56.8%   5.2%
Q1'19 51.0%   5.6%
Q2'19 59.3%   6.5%
Q3'19 65.2%  13.4%
Q4'19 46.4%(E) growth at top of guidance

While I think the Q4 results may show revenue growth below the most recent quarter’s 65.2% growth rate, I think there is good reason to believe that Q4 2019 + Q1 2020 could show growth close to or even more than the comparable 6 months (Q4 2018 + Q1 2019). Why do I think this may be the case?

  1. Growth has been trending up: Well, it’s only the last 2 quarters. Q3 2019 was particularly strong with the percentage beat spiking. Maybe management was not expecting this large of a number.

  2. Expand of their land and expand has been strengthening: Here’s Stoecker in his prepared remarks on the Q3 2019 earnings call: "we had 92% growth in the number of expands greater than $250,000. An increased rate of expansion in large, existing customers is a revenue growth accelerator. Here’s some more than from the conference call that shows that digital transformation seems to be accelerating and expand also seems to be accelerating: Stoecker: The biggest takeaway for me was the change in the conversations that we’re having with customers. When we had our first Inspire EMEA conference four years ago, the conversations were more about who are you guys, what do you do, features and functions and trying to resolve very specific use cases. Today, the conference was about digital transformation, it was about building cultures where organizations are hoping to get their teams to think about data and asset to drive the business. They’re thinking about automation. They understand this convergence of the citizen data scientist and trained statistician.

And most of the meetings that I had were identical to ones we had in Nashville back in June. How do we go from 100 seats to 500 seats, or how do we go from 500 seats to 5,000 seats. There was zero conversation about features and functions. It was about driving a culture of data science and analytics, because everyone realizes the power of automation in the hands of more people to solve more complex business challenges.

And here’s another quote about AYX becoming the standard and rapid deployment within larger customers:

[Stoecker]:The large organizations that we’re dealing with, particularly but not exclusively in the G2K are recognizing that we have become an enterprise standard in their enterprises. And many of these customers are going from tens of seats to thousands of seats in their build out of our platform.

  1. Management’s increased confidence that targeting G2K is working: Here’s Stoecker again on the call:

The second part of your question was any big differences around the world? Actually, there’s almost no difference. There’s some cultural differences in certain parts of certain theaters around the world. But this quarter, for example, we landed 27 additional G2Ks, 17 of those were international. And it’s the same problem, whether you’re a major retailer in Dubai doing hyper local merchandising, or you’re an airport in or an airline in Hong Kong, trying to hedge fuel. Everyone has these same issues.

So that part, again, we’re really confident that we’ve touched a nerve with global organizations, which is why we’ve been reporting on and going after the G2Ks where 9 million of these citizen data scientists hang out and the lion share of the PhDs. They’re going after bigger customers and these bigger customers are buying more at the initial purchase. The other interesting point is that AYX now has seats deployed in 34% of the G2K yet they have only penetrated less than 1% of the seat potential that is available for taking inside G2K.

So the following comment by CFO Rubin shows why Q4 2020 may see a dip in revenue growth: We recognize revenue upon the letter of contract signing or contract start date. As we discussed earlier, this year during our Q1 earnings call, this factor is important to keep in mind as we enter Q4, because we have a number of renewal contracts that expire at December 31st and which renew on January 1st. This dynamic results in Q4 TCV bookings that will not translate into revenue until Q1, 2020. But the revenue that can’t be recognized in Q4 will be recognized in Q1 2020. So if you take Q4 2019 and Q1 2020 the growth should be high over the comparable 6 months. This will be particularly true if the duration of the renewal contracts continues to rise as we saw in Q3 2019 (note that Q4 2019 guidance assumes a 2 year contract duration).

I expect Q1 2020 to be a lot better in terms of growth than Q4 2019. Looking forward to next week!