AYX earnings

Investment Analysis Clubs Saul’s Investing Discussions
#3

Forecasting 30-35% growth. That’s quite a slowdown…

If they only do 30-35% in 2020, that would be a slowdown and disappointment…but…they are almost certainly sandbagging.

Last year, in February 2019, they gave guidance of 36-38% for 2019. How did they actually do?..+65%!

So yeah, I would bet they beat even the high end of their guidance pretty significantly next year. Will it be 65% again? Probably not, but another year of 50% growth would be just fine by me.

Here is the full press release:

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

In the fourth quarter of 2019:

  • Revenue increased 75%!
  • Gross Margins stayed at 92%
  • Net income nearly doubled
  • And they have close to a billion dollars in the bank

Looks like the stock is up a couple percent in after hours trading, even despite the big runup over the past two months.

I can’t ask for much more than that!

-mekong

50 Likes
#4

I believe they forecasted 38% for the qtr that just ended so it appears just being conservative or sandbagging.

#5

Come on guys… Like anyone takes any guidance from these guys and others as anything other than polite fiction. lol. This has been going on for years, but perhaps you are new to AYX.

Best,
Matt

18 Likes
#6

They are sandbagging as always (If I am not mistaken, they did not miss the estimates once since IPO). I will be happy if they do 45% growth, which should be achievable given the NRR of 130%.

1 Like
#7

They forecasted 36-38% ($345-350m) last year and came in at 65% ($417m, nearly 20% upside from high end of guidance). So yeah they are conservative, to say the least. A similar upside beat from their high end of guidance would be about 60% growth ($672m).

Keeping customer growth around 25% (slight slowdown) and NER of 130% gets them to about 60% growth. It would take a drop to about 10% customer growth and 120% NER to get their guidance.

4 Likes
#8

The quarter was fantastic. No sane person could ask for anything more of this business.

  • 75% growth over Q4 last year
  • They grew revenue 50% from Q3 (which itself was an amazing growth qtr)
  • Margins remain consistent at very high levels
  • Company has net income! (as in real GAAP net income)
  • Share count is increasing at a reasonable level

Recent quarterly growth:

Q1 55%
Q2 59%
Q3 65%
Q4 75%

I can’t say enough about this company’s execution. To grow this much, with not having a “bad quarter” is just astounding. Even great companies occasionally have bad quarters. But AYX is a model of execution.

Valuation (at $146/share, recently traded AH):

P/S Trailing: 22.4
P/S last 2 Qtr: 18
P/S Q4 Annualized (danger as this business has some seasonality): 15
P/S Forward at midpoint of guidance: 16.7
P/S Forward at 50% growth rate: 14.9

Even with the recent run of the stock, and at slower growth (50%) than any reported quarter this past year, the company would close 2020 at a P/S of 15 if the stock doesn’t increase further from here. Valuation seems very reasonable from my vantage point.

Or another way to think about it, to have terminal P/S of 20, at a growth rate of 50%, the share price would need to increase 34% from current levels over the next year.

It is my largest holding and I sleep well at night knowing that these guys are killing it.

Rob

71 Likes
#9

I suppose if it “craters” to merely 50% growth this year that’s still pretty good if they maintain 92% margins. That’s about the same as a 70% grower with 65% margins.

#10

I suppose if it “craters” to merely 50% growth this year that’s still pretty good if they maintain 92% margins. That’s about the same as a 70% grower with 65% margins.

How is this true? Maybe for just one or two years. But growth compounds, and margins stay relatively constant. A 70% grower even at 50% margins over time will make more money than a 50% grower even at 100% margins.

2 Likes
#11

I suppose if it “craters” to merely 50% growth this year that’s still pretty good if they maintain 92% margins. That’s about the same as a 70% grower with 65% margins.

Terrible maths! From UP 42% to DOWN 60% relative gross profit in ten years.


 **70%       65%         50%      92%** 
**Year   Revenue        GP     Revenue       GP    Delta**
   0     1,000       650       1,000      920      42%
   1     1,700     1,105       1,500    1,380      25%
   2     2,890     1,879       2,250    2,070      10%
   3     4,913     3,193       3,375    3,105      -3%
   4     8,352     5,429       5,063    4,658     -14%
   5    14,199     9,229       7,594    6,986     -24%
   6    24,138    15,689      11,391   10,479     -33%
   7    41,034    26,672      17,086   15,719     -41%
   8    69,758    45,342      25,629   23,579     -48%
   9   118,588    77,082      38,443   35,368     -54%
  10   201,599   131,040      57,665   53,052     -60%

Believe Einstein, never underrate the power of compound interest.

Denny Schlesinger

31 Likes
#12

I was reading the earnings call transcript and I was curious about what everyone thought about Alteryx’s revenue recognition per ASC 606.

I’d like to once again remind investors of how our revenue is determined under ASC 606. Revenue is determined based on the total amount of bookings in the period, total contract value or TCV. As a reminder, we typically enter into either one-year or three-year agreements with our customers. TCV includes the full dollar value of multiyear agreement. Of our TCV booked in the quarter, we recognized between 35% and 40% of that amount upfront. The percentage recognized upfront is solely based on product mix.

Perhaps I’m not understanding and someone can explain to me, but it appears Alteryx greatly benefited from being able to recognize revenue up front for longer duration contracts and in this case, they were able to recognized 35-40% of the amount upfront.

Could this revenue recognition principle blow up in their faces in later years since they are recognizing the majority of the revenue up front due to the way they do their contracts? It seems like with the renewals coming in January 1, we may see another huge uptick in revenue for Q1 if they recognize most it upfront. Again, I could be misunderstanding and someone could help me understand.

10 Likes
#13

Could this revenue recognition principle blow up in their faces in later years since they are recognizing the majority of the revenue up front due to the way they do their contracts?

It would only have an impact if customers dropped Alteryx after their contracts expired and if Alteryx stopped gaining new customers. Neither of those are the case today as evidenced by the DBNRR and new customer growth.

It is possible this will cause some seasonality in the business. For instance, let’s use an extreme example where 100% of their customers renew in the 4th quarter. Yes, this would make for weaker quarters for Q1 through Q3, but it would all balance out on a TTM basis.

No, I don’t see any reason for concern whatsoever.

A.J.

4 Likes
#14

I suppose if it “craters” to merely 50% growth this year that’s still pretty good if they maintain 92% margins. That’s about the same as a 70% grower with 65% margins.

Terrible maths! From UP 42% to DOWN 60% relative gross profit in ten years.


           70%       65%         50%      92%                           
Year   Revenue        GP     Revenue       GP    Delta
   0     1,000       650       1,000      920      42%
   1     1,700     1,105       1,500    1,380      25%
   2     2,890     1,879       2,250    2,070      10%
   3     4,913     3,193       3,375    3,105      -3%
   4     8,352     5,429       5,063    4,658     -14%
   5    14,199     9,229       7,594    6,986     -24%
   6    24,138    15,689      11,391   10,479     -33%
   7    41,034    26,672      17,086   15,719     -41%
   8    69,758    45,342      25,629   23,579     -48%
   9   118,588    77,082      38,443   35,368     -54%
  10   201,599   131,040      57,665   53,052     -60%
*Believe Einstein, never underrate the power of compound interest.*

Not to belabor the point, but it all depends on the other assumptions

If I assume that the 70% grower is going to naturally decelerate faster than the 50% one, with them both reaching long-term 20-25% growth rates five years from now, then their gross profit dollars will be pretty similar throughout


Year	65%GP	Growth		92%GP	Growth
0	 650 			 920 	
1	 1,105 	70%		 1,380 	50%
2	 1,746 	58%		 1,960 	42%
3	 2,532 	45%		 2,685 	37%
4	 3,342 	32%		 3,517 	31%
5	 4,177 	25%		 4,396 	25%
6	 5,221 	25%		 5,495 	25%
7	 6,527 	25%		 6,869 	25%
8	 7,832 	20%		 8,243 	20%
9	 9,398 	20%		 9,891 	20%
10	 11,278 20%		 11,870 20%

-mekong

13 Likes
#15

Just remember when they went from ASC605 to ASC606, they had a huge jump in revenue. If you never adjusted for ASC606 both the current year and the previous year as AYX did, THAT huge jump of like doubling revenues (or whatever it was) would have been the misleading thing that couldn’t continue.

There is no tricky unsustainable results hiding in how AYX reports its numbers, so long as they continue to execute as they have.

2 Likes
#16

The quarter was fantastic. No sane person could ask for anything more of this business.

Recent quarterly growth:

Q1 55%
Q2 59%
Q3 65%
Q4 75%

I can’t say enough about this company’s execution. To grow this much, with not having a “bad quarter” is just astounding.

I couldn’t agree more. When it was down in the aftermarket I couldn’t resist and added a half a percent to my position size at $143.35, even though it was my largest position.
Saul

37 Likes
#17

Not to belabor the point, but it all depends on the other assumptions

Of course, but I’m not making any assumptions. I’m saying that high gross margin does not make up for low revenue grow rate. Besides, high gross margin can be offset by high GS&M, i.e. by low operating margin. Put another way, beware of anchoring, beware of confirmation bias, beware of treating a complex model as if it were simple. Comparing revenue growth rate to gross margin is an apples to aardvarks comparison. :wink:

Denny Schlesinger

9 Likes
#18

it appears Alteryx greatly benefited from being able to recognize revenue up front for longer duration contracts and in this case, they were able to recognized 35-40% of the amount upfront.

Could this revenue recognition principle blow up in their faces in later years since they are recognizing the majority of the revenue up front due to the way they do their contracts?

The quarter to worry about that was the quarter they reported yesterday. They first reported using ASC 606 in Q4 2018. I shared your concern, thinking that now that we’re lapping this year, they might not be able to grow at 60% or 65%. Well, they grew at 75%! This quarter astounded me…no exaggeration. I was literally talking to myself out loud as I marveled at their results yesterday.

As some have pointed out, they benefited from recognizing this revenue up front, so that was kind of artificial growth a year ago. But now they grew 75% on top of that! Alteryx sales are gaining momentum.

AYX is a force of nature. It’s hard to even remember that it was available below $90 a couple months ago. If I didn’t remember it, I’m not sure I would believe it.

Bear

40 Likes
#19

When they adjusted the previous years revenues to asc606 to get the comparison, they also “front loaded” last year’s revenues as well.

This is completely apples/apples comparison.

They did not gain any benefit byvfront loading the sales. The only way you could say that is if you looked at ASC606 last year to ASC605 revenues the prior year.

4 Likes
#20

AYX is a force of nature. It’s hard to even remember that it was available below $90 a couple months ago. If I didn’t remember it, I’m not sure I would believe it.

Bear

It is amazing. I increased my position about 10% last year with buys just below 90 and then in the mid 90’s. It was already my #1 position so I was cautious in adding. Now, I just wish I had bought more! As an aside, it’s been jockeying with SHOP for my #1 position and I had trimmed SHOP 10% to add to AYX, mainly due to valuation concerns - now I wish I hadn’t trimmed that either.

I think the lesson is to stick with your winners and to not fret over valuation if the company is hitting on all cylinders. And to have confidence in your convictions.

Dave

18 Likes
#21

I suppose if it “craters” to merely 50% growth this year that’s still pretty good if they maintain 92% margins.

They lowered their pro forma 2020 Op Margin 4% below consensus, just fyi.

Long AYX,

#22

And to have confidence in your convictions.

Monkey is riding fast and high in his banana mobile along with the re$t of you this AM, thanks to our cumulative good sleuthing on AYX, the little banana daiquiri that could and did.

But let’s be very careful about the humanoid propensity for hindsight bias: had things not worked out so hot, for whatever unforeseen reason, the adage would have been “had we only been more cautious and skeptical, we would have sold before earnings after the big rise.”

Confidence in our convictions cuts both ways, in other words: we ought to have confidence in our work, but we also need to maintain proper humility––ALWAYS––that confidence is not enough to overcome that which is not in our power to see or understand. The fundamental nature of the universe is probability, not predictability, remember.

So, yeah. AYX seems like a shower and a grower and for now, we celebrate. But we do so with heads bowed and full of gratitude to Saul and Co, the lovers and haters who make us better investors and, hopefully, more giving and generous creatures to one another.

Smooches,

Monkey (long AYX) and wondering whether to add to DDOG…

94 Likes