Hi all, my AYX CC notes.
Summary: A good quarter with very low guidance due to COVID19. Net adds were strong (+356) even with increased churn. Some interesting up-coming announcements hinted at. The biggest uncertainty is how long and how big the COVID19 impact will be. They mention that 6% of revenue is with SMEs of “impacted verticals” but surely the impact will be bigger and potentially longer. As opposed to businesses that are thriving under COVID19 (ZM, WORK, CRWD, LVGO etc).
There was an abrupt and significant change in customer buying behaviour in March as well as new sales cycles lengthening. Guidance is also very low by their standards (+10% to 15% yoy). AYX was down 3.65% today (the next day after earnings), so the market didn’t seem to care that much, although an analyst said guidance was “a lot lower than people were expecting”.
They did say they saw “In April saw new business activity resume, consistent with activity levels in April 2019”. It’s a little unclear what that means, although Q2 2019 added 305 net new customers.
They also recognise a lot of their total contract value upfront which suggests Q2 will be tough. On the other hand, G2K Net Expansion Rate was 148% which says that those massive companies are finding a lot of value with AYX.
The big trends are still there, and the mention of Digital Transformation 2.0 is a theme repeated by various companies. AYX has heaps of cash.
There were some interesting new? bits coming out (I hadn’t seen mention previously - anyone have comments?):
- The repetition of Digital Transformation 2.0
- Process Automation
- At end of questions, Dean said “In fact, over the next two or three weeks you’ll start to hear a lot more about a category of software that we see emerging, that we intend to own.”
Unfortunately, none of the questions mentioned Connect and Promote (and barely Server).
cheers
Greg
Q1 2020
Reviewed May 2020
Checklist
Q: What is revenue doing yoy?
Up 43% for this quarter. Big drop in growth predicted for next quarter. The big question is how long before growth picks up?
Q: What are customers doing q-1? Up 6% which is consistent with previous quarters.
Q: DBNER? 128% and 148% for G2K. Excellent.
Q: Revenue per customer up or down (either revenue/customers or ARR)? They just passed $400m ARR. Revenue per customer is dropping a bit from last quarter, and will be something to watch. On the other hand, AYX have stupidly high gross margins, so plenty of wiggle room.
Q: Expenses as percent of revenue going up or down (ie, any sign of leverage)?
Big jump in sales interestingly as a percent of revenue. Other expenses are also up as a percent of revenue, which would be expected with the revenue drop.
| | | Percent of revenue |
| | | Q1 2020 |
|:----|:-------|:-------------------|
| S&M | 65,165 | 60% |
| G&A | 24,543 | 23% |
| R&D | 26,181 | 24% |
Review
Booked $107m TCV +53% yoy.
$109m in revenue +43% yoy
$20m in operating cash flow
$1b cash and equivs
356 net new customers
+12 → 37% of the G2K
Net Expansion 128%. 148% G2K! Strong engagement with larger customers
"We believe digital transformation with a focus on analytics, process-automation and upscaling of workers remains a strategic imperative
Travel and hospitality segments - did business in those segments.
Energy sector - Chevron etc. Includes some airlines.
Financial services and healthcare in biotech segment.
Top 10 telecoms companies in US as customers.
Public sector client - expanded to measure multi-billion aid platform.
Hospital - used Alteryx to adapt supply chain to source PPE, predictive models for ICU {GD: interested in more detail here}
“Abrupt and significant change in customer buying behaviour in March”. Some sales cycles lengthen.
(Pandemic)… “requires upskilling workforce, see data as an asset, analytics as a prowess, process automation as a necessity…” {GD: process automation seems to be a big deal here, has that been mentioned much previously?}
“Need for data-driven culture has never been stronger”
Pausing hiring in the near-term
Curtailed non-essential spending
Rescheduled US and European user conferences until 2021.
“This crisis presents an enormous data … challenge (for businesses)”
Acceleration of Digital Transformation.
Finances
Abrupt slowdown in March.
Q1 momentum continued.
New customers & expansion that wasn’t renewal
Slower expansion in affected industries
Moderate increase in churn, particularly in Europe
Continued strength in Asia
“In April saw new business activity resume, consistent with activity levels in April 2019” {GD what does this mean? In Q2 2019 they had 305 net new customers, so maybe another 100 customers in April?}
Improved levels of customer activity in April - consistent with 2019
- Data and analytics critical
$6m of one-time and seasonal expenses - primarily related to Annual Global Kickoff meeting in February and rescheduling user conference cost.
| | | | |
|:--------------------|:--------|:---------|:-----------------------------------------------------------|
| Revenue | 109m | +43% yoy | upfront at high end, average duration 2 years |
| | | | {GD: isn't this just the roll over from Q4 coming into Q1? |
| DBNER | 128% | | 148% G2K. Lower expansion in impacted verticals |
| Customers (net new) | +356 | | |
| Customers (total) | 6443 | | 731/37% G2K |
| ARR | >$400m | | not normally reported, but did at >$200m ARR. |
| | | | 1/3 from G2k, **1/4 from impacted verticals**, 6% SMEs |
| | | | in impacted verticals (ie, most vulnerable) |
| US | $80.5m | | |
| International | $28.3m | | Strength in Asia, churn in Europe |
| GM | **91%** | | Holy ....! |
| Opexp | $102.6m | | Headcounts - rescheduled conferences |
| OpLoss | -$3.2m | | |
| Net loss | -$6.5m | | 0.10/share |
| Shares | 65.6m | | |
| OCF | $20m | | |
| Cash | ~$1b | | |
| Associates | 1478 | | |
Guidance
Expanded guidance range because of:
- Uncertainty of new business
- Timing of renewals
- Slightly higher churn rates
- Potential revenue impact for more flexible payment terms
| Q2 | | | |
|:--------|:-------------|:----------------|:--------------------------------------------------------------|
| Revenue | $91 to $95m | +10% to +15%yoy | 2/3 from recurring, 15% from renewal, rest from new customers |
| OpLoss | -$9 to -$13m | | |
| Shares | 67m | | |
“nearly two-thirds of our revenue will be recognized from deferred revenue and scheduled multiyear billings approximately 15% is expected from contract renewals and the remainder will be generated from net new business closed in the quarter”
Cost structure primarily fixed - staff costs - intend to maintain current staff levels {GD: with $1b in the bank, you’d hope so!}.
$6m one-time expenses in Q1 → So Q2 expenses will decline sequentially.
Q&A
- Guidance a lot lower but April trends picking up? 2 factors at play - completely subscription based, but not 100% ratable. So not perfect view. Bad data in, bad data out. Use Alteryx - still don’t have all info that will give us better visibility. Some glimmers of hope in April, 35% of new logos were in highly impacted verticals. Being very conservative.
Given we have upfront portion to revenue, so heightened impact. Quarters back end loaded (3rd month is > other 2). No material shift in Q1, start of Q2.
Impacted verticals - may turn out to perform better for us. “When times are bad, analytics is critical”. So optimistic.
- $400m ARR this quarter - whats the definition? why sharing now? Given ARR when we hit $200m. Give people comfort on health of business. Key milestone. ARR = All active contracts at period end.
- Net adds - strong. No change in new adds. 12 new G2Ks = 37%. Business model is fairly frictionless. Land cycle is 45 days, $10-$15k. Begins with 14 day trial. None of that has changed. No abrupt halt to doing business.
- Contraction vs churn. No big change, slower growth/higher churn in Europe. Europe driven by reseller agreements. Most churn in single seat accounts. Expand model - “people pause not punt”. Q1 record number of adoption licenses {GD: not sure what this is}. Mitigated most of the risk “have not seen major customers put a big pause on their spend”.
- Larger expansion deals - playbooks well established so WFH works. But hard in some cases to get multiple signoffs for deals. Record numbers of community registrations. User groups have gone virtual. Made it easy for customers to get the support they need to drive expansion.
- Internationally - regions reopened comments. Pretty consistent with April last year. Continued engagement. APAC/specifically Japan. Only soft spot renewal base in Northern Europe.
- Customers leaning in? “(AYX has created a) Deep and wide moat”, can become analytics ‘fabric’ for larger orgs. If COVID19 not the wakeup call for digital transformation… won’t be one. Need new systems to “get great”. Creative disruption, how to reimagine yourself. Automate everything, upskilling workforce. Orgs know that they have to do this, otherwise next calamity could destroy them. Huge tailwind for a long time coming
- Non-impacted verticals (75%) - no significant change. Impacted verticals, glimmers of hope. Oil and Gas eg, “did quite well”. Landed about same numbers of logos in April last year.
- Pricing environment - Server increase at start of year. Haven’t changed pricing for many years (Designer = 2014!). Raised Server because ROIs were huge. Value of automation. Some customers have said “fewer Designers + Server”. Eg: some furloughs = fewer people to answer questions, but questions accelerate. All G2Ks will have Server. No big change in pricing. Early April… less discounting.
- Partner side of things - 20% of business by resellers (normally vertical focussed, &/or local market coverage). Strategic alliance program last fall. eg PwC. Lot of inbound activity around digital transformation.
- DBNER - IPO, north of 120%. As we grow, NER gets harder, but very good results. Market we’re going after - citizen data scientists, less than 1% = massive opportunity for expansion. Significant upside, so >120% for extended period.
- Green shoots, how same as April 2019 {GD: he didn’t understand either}? Happy with new logos in April. 35% of new logos in impacted verticals. 2.3rd backlog, rpo, 15% renewals, remainder {GD: 18%} from new logos.
“The commentary around April I think was really the totality of the business.” {GD: Still don’t know what this means}
- Easier payment terms for impacted business - working with them to provide flexibility.
- Conferences, delayed - not a lead-gen activity. Impactful for business, but throughout the year. Community events, incredible NPS {GD: what is it?} Lots of great goto market opportunities. Opening up conference to much broader ecosystem (eg: Python developers, Snowflake (database) H2O (ML/AI platform)). “clear the air, lots of confusion around data science and analytics” {GD: whats the confusion?}
- Revenue - new(18%) vs deferred/backlog (67%) and renewals (15%). Upsell vs new? April 2020 similar to April 2019.
- Long term opportunity - believe winners and losers made in times like this. “If this is not a wakeup call to execs, nothing will wake them up”. Clear change from last attempt at digital transformation. V2.0 → collection of seeing data as an asset, analytics as a prowess, automating routine tasks, upskilling people. Next 2-3 weeks you’ll hear about category of software that we intend to own. Well positioned for medium-term and the long-term.