AYX - resilent earnings?

Many of our beloved companies are traditional subscription models but at the same time “IT Infrastructure” plays that may benefit from critical functionality and contracting. I’m trying to understand across our companies in general and AYX specifically how this thinking may be right or wrong.

I haven’t had the opportunity to do the work and not looking for someone to do it for me, but wondering how AYX sells their services. Are these month to month seat licenses or more long term. Do their customers have the opportunity to quickly reduce their “seats” that could be driven by these types of black swan events?

I hope to do this assessment for all my companies:
TTD - could easily see advertising spend reduce quickly
MDB - seems unlikely that a company would no longer pay for their database
ESTC - I have no idea but may move in lock step with DDOG
COUPA - supply chain and business services -
CRWD - probably won’t loose existing customer but will new customers hesitate to sign up?
AYX - see above

Happy to discuss in direct email if this is off-topic speculation.



Regarding TTD, advertising spend as a whole would of course in a recession type scenario, but would programmatic spend, which accounts for <10% of total ad spend (I think even less), and which is highly efficient, targeted, and effective, decrease? I honestly do not know, but I could even see the opposite occurring. A downturn could cause marketing budgets to flow toward programmatic. Behavior change often requires a shock to the system. Not sure if this is realistic. Would love to hear what others here think.

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*advertising spend as a whole would of decrease

Recession hurts almost everyone, even disruptors like TTD. The problem is the share price is priced for expected growth and not recession growth (well, it use to be. At this point in time reassessment has been made in valuations of almost very stock we follow, even for the good, as with Zoom).

As for AYX, the average contract length is 2 years. Unlike typical SaaS, the customers pay up front, usually annually I think. You can see this in deferred revenue. A decent minority chunk of the contract is recognized upfront as well for accounting purposes. So AYX is not as volatile as say a mongo would be with Atlas with the customers mostly paying monthly, and therefore quite free to vary dramatically if they wish to. The practicality of this depends on the use case and the distribution of use cases, and we have no such information.

But it is all about growth in the end. AYX is certainly not immune to vendor freezes by potential customers and therefore making it difficult to sell to new customers, and making it more difficult to upset and virally expand to existing customers.

Thus, AYX has a more steady stream of revenues than a SaaS billing month to month, but is hardly immune to a slow down because new sales and new viral expansions will become more difficult in an environment where customers simply are cutting back. Telling employees to make do, etc.

This is what happened in the 2008/2009 financial crash. There was plenty of money out there and companies sat on it because they were more worried about survival than expansion. Cannot innovate in the future if you don’t exist.

During this coronavirus period a confluence of events have happened. (1) for some reason my calendar has gone rather blank (despite having plenty of clients), (2) been a good year, so not worried about immediate business survival, and (3) with the virus shutting things down anyways, I am taking the time and investing in my business and expanding into another practice area, and hope to come out of this stronger than ever.

I bring this up, because this what the best and most dominate public companies will do. While others are down, trying to survive, they will be out there investing to dominate when things return. So not everyone is going to shut down their spending, but the bulk of the more mediocre or fragile businesses will as they will look to survive. Alteryx is an integral part of their business, and they are going to keep Alteryx. However, their rate of expansion may materially slow or even stop pending resolution of their concern about survival.

This is also why in down turn, investing in winners is almost always preferable. Winning businesses are positioned to gain advantage in the up times and the down times, and their competitive advantages will just grow. The best public companies who are not just trying to survive will use this down town to even better increase their CAP (as well as expand their Alteryx use - as data is part of their competitive advantage).

Unfortunately the majority of companies are more mediocre, and that being the case, Alteryx will not be immune as their existing placements may be considered business critical and maintained, but expanding seats will be less critical in a slow down if survival is their #1 priority. Few are immune from a true slow down and recession. It is a domino effect, and I cannot recall many who have maintained prior growth through the entire down period. Yet, as you can see from charts, for the best companies, you can hardly find these down periods as they pass quickly (usually 6 to 12 months) and they dominate even more post recession period.



I am more optimistic about Alteryx than most companies in the intermediate term. Their platform is in the business of solving problems. And this Covid-19 pandemic is causing a lot of problems. We are seeing large scale demand and supply disruption. Companies are going to be looking for a way to make sense of how everything is shifting, and consulting firms are going to bring them to Alteryx. That’s my two cents.