AYX the Rodney Dangerfield of our stocks

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AYX is my #1 holding so like many here I’ve been wondering what’s triggering AYX’s relative slump. Until CRWD’s ER I was also wondering about its underperformance relative to stocks we follow.

I’d love to hear thoughts on these 2 possibilities and outlooks…

(1) Unlike stocks like Okta, MDB or Coupa, do AYX and CRWD both suffer from a general disbelief in a long-term CAP? Aside from any daily TA patterns it seems like there is another cycle. After the glow of their incredible ER cools (usually a month or so), doubt seems to creep back in as analysts and industry experts question each firm’s ability to sustain growth among a landscape full of VC money and innovation. Prices slowly drift down, investor anxiety settles in and position-trimming adds more fuel to the pullback. AYX is not one to constantly release news so the void is filled by competitive updates or market deterioration concerns. Competitive news or market suppositions resonate more against AYX and CRWD than it does other stocks that appear to have stronger moats.

(2) Right now, without an obvious connection to supporting COVID efforts or WFM, AYX is now additionally weak from a concern about IT priorities shifting and budgets being diverted to support WFH solutions vs new AYX installs or licenses. I went searching on AYX’s website for any clues to ways they support Covid-fighting and found this: https://www.alteryx.com/input/to-our-customers.

In case you skip it, the article specifically highlights remote work capabilities with AYX and that AYX will be sharing new Covid-related use cases in April.

Outlooks:
My guess (I’m trying to brace myself for this anyway) is that AYX holders are not going to see much relief until we are close to the next ER when, barring general Covid-related market swings we get the usual movement up. It feels like the magnitude of the pre-ER rise will be more subdued if Covid issues are still front and centre and there have been no analyst commentaries on channel check progress.

I’m expecting AYX’s Q1 results to be affected by Covid, but that its focus on larger accounts helps buffer negative headwinds and it once again surprises on the upside of that very low guidance (maybe less upside than usual though).

CRWD, thanks to its role in supporting WFH and market tailwinds like Symantec’s partial market abandonment has an excellent chance of continued gains - avoiding its usual mid-cycle drop.

Soludag
Long AYX and CRWD

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Alteryx is a money-saver for many companies. Companies will be looking to save more money in this environment, not less. So I don’t expect many subscription cancellations. In the Alteryx community, hundreds of use cases are being described. (see https://community.alteryx.com/t5/Alteryx-Use-Cases/tkb-p/use…).

Just by browsing through the list:

Workday Data Migration : How we saved over 2000 hours of manual effort
Publicis Media: 2,880X Faster Reports with Alteryx
Smart Relocation: How HR Saved 1,700 hours
British American Tobacco Generated £7M in Benefit using Alteryx
Mr Price Gets Back 500 Hours a Week with Alteryx
Siemens Runs Through 50M Data Rows in Minutes
Stratasys Generates Big-time Savings by Using Alteryx to Run a Report in 30 Minutes Instead of 5 hours
Precision Sales – Leveraging Alteryx to Decrease Drive Time and Distance
Cargill Saves 844 Hours Per Month with 3 Alteryx Users
Coca-Cola Reduces 60% Cost Using Alteryx to Build a Store Dashboard
Johnson & Johnson Automates 95% of their Compliance Training Process
Dairy Queen’s Automated Spatial Analysis Saves $700K Over Time
LATAM Private Bank Saves 33,000 Hours with Alteryx
… and so on…

Do you really think all these customers will go back to expensive manual processes? I don’t think so.

I am not going to say that Alteryx is immune to this crisis. I expect headwinds in onboarding new customers as it might take more time to convince them of Alteryx’s value, on-premise support is difficult in this environment etc. Also distressed customers (airlines, hospitality,…) might (temporarily) cancel their subscriptions or delay payments in an attempt to survive, but this will also affect other SaaS companies.

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AYX is my largest holding as well. I added some through last few weeks.

I believe AYX will see sustained high growth because of speed of decision making based on daily updated data has never been stronger.

Someone posted WORK CEO’s twitter feed on another thread on this board… you can see how dynamic the decision making becomes… would you think a management team would like to accelerate latest data processing for better decision making (and do so without adding more people) with AYX
OR keep guessing and save few seats of AYX which ultimately costs more not just in inferior decision making but also literally more due to more man power used in data processing?

Sure transportation and entertainment industries are toasted at this point but even they will need better decision making on daily basis when they come back online… and in the meanwhile health care to groceries to pharma to online gaming to remote work to governments… all of these industries need better decision making NOW on a daily basis. I see very positive for AYX.

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I do think there is some legitimacy to AYX struggling a bit – if only in the short term, and if only due to slowing growth.

In the short term, an immense amount of companies are going to be forced to make cuts in some way, shape, or form. I see AYX as a very valuable tool, and one whose long term forecast still looks great. BUT, if you’re a CEO looking at making cuts or halting certain purchases on the software side, a data analysis tool is almost certainly easier to make due without than an endpoint security provider like CRWD, OKTA, ZS, etc. Less efficient data analysis is sub-optimal right now, but a major security incident is potentially catastrophic.

The other thing I would note is that AYX’s balance sheet doesn’t look quite as good as some of the other software we talk about. AYX’s debt-to-equity ratio was at 155% last I checked (with about 23M in FCF). Their growth has obviously been phenomenal, but slow that down (as is likely to happen) and the debt ratio takes a further hit. ZS, CRWD, and PAYC all look considerably better on that front, and in a recession I think that matters.

Again, I’m a huge fan of AYX long term, and if it keeps dropping I will almost certainly add some more myself, but I do see some legitimacy to the market remaining cautious toward it right now.

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The other thing I would note is that AYX’s balance sheet doesn’t look quite as good as some of the other software we talk about. AYX’s debt-to-equity ratio was at 155% last I checked

That is very misleading. Alteryx’s debt is convertible to shares in 2023. I think the price of conversion is $44 or thereabouts. Even with the current crash that’s a double. It will convert into equity. This is not the sort of debt that will be called, or has annual payments or the like. It is at very low interest and in the end will be convertible into Alteryx shares.

Meanwhile this gives Alteryx more than $700 million in cash to further consolidate the industry.

Tinker

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Tinker,

They issued new convertible debt last August and retired the 2023 bonds with them. The new ones are due 2024 and 2026. I believe the convert price is ~$189/sh.

I fully expect them to be rockin’ and rollin’ way before then

Bnh

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Even better terms! Thanks Bnh for the update.

If you look at the employment sites and Linked In, with the proviso that many such advertised positions may be put on hold for now (although when it comes to scarce data people, maybe not) Alteryx is not suffering as a desired skill employers are requesting. And compared to its competition, you really hardly see a true competitor listed as a desires skill. Sometimes you’ll see Python or R, and often that is with Alteryx listed as well. IBM has a product that is in demand and mentioned in the same breath as Alteryx, but IBM’s product does not do what Alteryx does, just like Tableau does not either (except for much simpler use cases).

So yeah, unless data is a fad, companies will no longer want to democratize and automate data, yeah, it is a temporary stock incidence more than a long term business issue.

In nay event the convertible debt is not an issue.

Tinker

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At it’s peak, Alteryx was my top holding and is now #3 at 20%. I’m not super tech savvy but have been trying to understand why they’ve continued to drop more than some of our other stocks.

The Q4 2019 presentation highlighted sales to 36% of the Global 2000 companies:
Home Depot, GPA, Walgreens, Groupon, Kraft Heinz, Campbell’s, Danone, Nestlé,Colgate Palmolive, Procter & Gamble, Unilever, Anheuser Busch, Shishido, Telus, Cisco, Vodafone, Swisscom, Cox, Mediabrands, KDDI, Giarte, Clear Channel, Tribune Direct, Fox, Netflix, Cineplex, Omnicom, Mediabrands, Chevron, EDF, Sempra Energy, Koch, Murphy Oil, Transocean, Tata, DHL, LEK, BDO, High Point Solutions, KKR, CLARIANT, Marquis & Milliclap, AMBIT Energy, World Fuel, Abbott, Sharp, Novo Nordisk, DeVita, TriHealth, Pacific Life, American Heart Association, Queensland Covenant, Memorial Garmin, SABEMI, AkzoNobel, Airbus, Sudbury Rigazio, Bridgestone, Ingersol Rand, Hallmark, Saint Gobain, ADIB, Citizens Bank, First Commonwealth, HSPC, Brazil Bolsa Balcao, Wells Fargo, State Department Federal Credit Union, facebook, IBM, Amazon, Teradata, Oracle, Vizio, Intuit, twitter,
I don’t see the downturn impacting these companies causing them to drop Alteryx.

Stanley Black and Decker, Konica Minolta, Estee Lauder, Alaska Airlines, Marriot, MGM Resorts, Royal Caribbean, Hilton Worldwide, Expedia, Dubai Airports, Voyages, David’s Bridal, Michael Kors, Audi, Nordstrom,IKEA, Buffalo Wild Wings, dunkin’ Donuts, DQ, DELL
While these companies may suffer a huge drop in sales, IMO they will likely still utilize Alteryx’s product.

Yes, opening new accounts could slow and maintaining 75% growth may prove difficult. But with AYX’s 130% dollar based net expansion rate, a very healthy growth % should continue.

Going through the exercise of typing these companies helped me decide to hold fast and ignore the downward slide.

Thanks
JT

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I never use data analytics in my job (I may get end product but have no clue what generates it). Never thought of reviewing open postings with a keyword search - ran a couple:

Java: 700+
Python: 400+
Alteryx: 100+

Note: certainly some and maybe many of these hits could be the same posting. But, my quick take is most Alteryx positions seem to be more business oriented. Alteryxs posting also mention familiarity with other products like Tabelau and to a lesser extent Xceptor, Qlickview, Java.

Python usually mentions Java, Hadoop, Spark, R, Impala, and these seem more hardcore IT.

I think it’s well ingrained and isn’t going anywhere soon.

Mike

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In nay event the convertible debt is not an issue.

Convertible debt can be used to secure short positions since they know at what price they can buy the stock to close the position should the stock price take off. The convertible debt could be one reason the stock is tanking.

Denny Schlesinger

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