AYX Thoughts

[Retirementdough]

I wanted to chime in with some thoughts on AYX. I have seen many posters/post on the boards talking about recent earnings.

First let me start off with AYX is a great company and if willing to hold for next 3 to 5 years I think you will make money on your investment.

However I believe it is dead money for next 6 months, possibly longer depending on Covid. In fact for those that are currently buying, I believe the price is going lower in the short run.

I have to admit I find it a bit insulting that a poster would brag about buying share after this recent fall and act as if they were smarter than most of the AYX investors on this board. Many of us have been holding for 2 years or more and bought the stock between 35-50 dollars. All you have to do is go back and look at monthly portfolio reviews. I sold with well over 70% annual return on AYX.

Lots of talk about ARR and many people pointing to 40% ARR and why that points to healthy business for AYX. Problem is not ARR, problem is bookings. Bookings were flat. Bookings are the tip of the spear for revenue coming into your company. Why did this happen?

From the earnings call: As with new business, we saw expansion business sales cycle slow.

As we discussed on our Q1 call, we once again experienced high customer churn, particularly in smaller organizations in highly impacted verticals and regions mostly impacted by COVID.

Many of these new sales reps had very limited, if any, time on-site at one of our offices, and haven’t ramped up as quickly as historical cohorts.

However, as we have typical software linearity in our business, meaning the majority of our bookings are generally concentrated in the back half of the quarter, changes in customer buying behavior did not become apparent to us until later in the quarter. These changes included elongated sales cycles resulting from customers having more robust approval processes and higher levels of scrutiny, smaller deal sizes and less favorable linearity with some transactions slipping into Q3.

Hannah Rudoff – D.A. Davidson – Analyst
Hi, guys. This is Hannah Rudoff on for Rishi today. First, Kevin, maybe could you walk us through the factors that are contributing to the delta between ARR growth and revenue growth?

Kevin Rubin – Chief Financial Officer
Yes. Sure. Thank you. That’s a great question.
If you remember, we’ve spoken for quite some time, our revenue mechanics and ARR are disconnected. Revenue is driven by bookings, which is TCV and an upfront portion based on product mix, and ARR is really just the accumulation of ACV over time. So the two are very disconnected in that regard.

ARR is basically up 40% due to the fact they were booking more new business a couple of quarters ago. Does not lend itself to justify values of a hyper growth company IMO.

I posted this on the AYX paid boards the other day:

AYX

was at ~$91.50 on 10/31/19 when they announced Q3 results.

They reported 65% Q3 yoy revenue growth

They projected 47% Q4 yoy revenue growth

They predicted total 2019 revenue of 392m or 55% yoy revenue growth

Now they are $169 nine months later with 17% revenue growth

Q3 predicted revenue growth of 11% what is predicted as negative revenue growth in Q4

Annual predicted revenue growth of 2020 11%

I think they have a potential long fall coming on stock price.

If Wall Street had them at 91.50 when they were actually in hyper growth mode, what will they value them at now? I am not sure but I feel strongly this stock in going down before going back up. I could be wrong but tough decisions have to be based on the information given. The earnings call had a lot of explaining of why the business is stalling.

Again in long run great business, in short run I see more pain ahead. Justifying the business is strong because of 40% ARR, sorry I disagree.

[spudlyone]

I agree. Completely sold out of Ayx before earnings. Reading all that was written it was almost a certain miss. I trimmed TTD back from 25% to 20% after their earnings at over 500, thought about putting it into Ayx at 122, then reread stuff. Put it into Fsly, Ddog, Zm, and a little Okta today. Good company yes, but tough road over the next year unless they announce something new. Thanks for your work.

[rbgibbons]

I have to admit I find it a bit insulting that a poster would brag about buying share after this recent fall and act as if they were smarter than most of the AYX investors on this board. Many of us have been holding for 2 years or more and bought the stock between 35-50 dollars. All you have to do is go back and look at monthly portfolio reviews. I sold with well over 70% annual return on AYX.

Sorry, I didn’t meant to be insulting.

I don’t post to message boards much because most of the time I’m very uncertain, often wrong, and I don’t want to get mentally locked-in to a particular view of the future simply because I talked about something on a message board. So I only really post when I’m pretty sure of something and want to give back to the community. (I think I’ve never used the phrase “pretty obvious” on a message board or any published article when predicting a dramatic change in a company’s future results.)

At the same time, I think post-mortem analysis can be useful to learn from current mistakes to avoid similar mistakes in the future. Someone basically said, “Nobody saw this coming”, when it was clear in advance that it was coming, and the thesis was trivial to both explain and understand. So, it seemed responsible to help with the post-mortem to point out where the information was available to avoid the mistake.

That said, emotionally, it’s very hard to lose money, so I can understand why my post was viewed a simply rubbing salt in wounds. Sorry for being a jerk and completely non-empathetic during a difficult time. (My post-mortem analysis of this interaction is that next time, I should really stay silent–when you lose money, it totally sucks being told where you went wrong, so I should know better.)

(FWIW, like many here, I bought most of my AYX at $25 and $30, and I’m not happy that I needed to sell the stock, take a taxable gain, and look for other places to invest.)

[tamhas]

At the same time, I think post-mortem analysis can be useful to learn from current mistakes to avoid similar mistakes in the future. Someone basically said, “Nobody saw this coming”, when it was clear in advance that it was coming, and the thesis was trivial to both explain and understand. So, it seemed responsible to help with the post-mortem to point out where the information was available to avoid the mistake.

Investing is all about projecting the future. Saying, I saw what happened yesterday 3 months ago is suspicious unless you were loudly proclaiming it 3 months ago … in which case you get to timidly point out that you were right back then.

It should also be noted that there are a number of different investing styles represented on this board. Some will happily exit a company that has great future prospects in order to put their money on something that will perform in the short term. Others are more interested in sticking with companies they perceive to have great long term prospects even though the short term is less than stellar. Being able to look back at how much one’s investments have grown since earlier in the year, despite the short term loss, is a very positive reinforcement for the latter position.

[foodles]

rbgibbons,

Sorry, I didn’t meant to be insulting…Someone basically said, “Nobody saw this coming”, when it was clear in advance that it was coming…I can understand why my post was viewed a simply rubbing salt in wounds. Sorry for being a jerk and completely non-empathetic during a difficult time. (My post-mortem analysis of this interaction is that next time, I should really stay silent.)

I’m not RetirementDough, but I’m almost 100% positive the “insulting post” he mentioned was not yours, as I also posted about the same OP’s comment before RD did.

I found nothing wrong with your post at all! Quite impressive, actually, as you linked your comment from early April that said exactly what we all know now to be true.

Please continue posting when you have thoughts to share!

[addedupon]

“I think they have a potential long fall coming on stock price.”

It could go down more and stay down below $90 for a couple of years but i doubt it. I should have sold when Bert suggested it a couple of times before earnings after the run up but didn’t. Thought maybe the market knew something, i.e that they might surprise on the upside. Besides, i don’t like to bet against great management, especially when the longer term trends favor substantial growth.

So at this point, i’m not selling, and if it drops below $100, which would mean 10X revenue, i’ll likely add.

Remember this is a covid 19 recovery stock. This slow growth period for Alteryx is a trivial blip in the longer term growth prospects if the company continues to innovate and maintain its lead over any unknown competition. Indeed it is now apparent that the surge to new highs before earnings likely had to do with longer term confidence in a turnaround despite the negative Q1 report. The most recent report tells us that that the turnaround may take a few quarters longer than previously believed.

Moreover, suggesting the AYX stock price should dip to levels below last October prices does not consider two counter points.

Alteryx’s revenue base is significantly higher now than it was then due to months of rapid revenue increases. More importantly, the market now pays more than last year for companies with high growth in its future. If AYX hyper growth is over for 3-5 years or so then the bears are likely correct. My view is that this dip is a mere blip relative to the decade ahead, likely to last a few more quarters.

Your conclusions are reasonable and you may turn out to be right. But i’m taking the other side of that trade now. Had i done what i should have and sold before earnings, i would likely be buying back at these levels. I prefer to bet with brilliant executive leadership with important products, especially bootstrap founders.

[rtichy]

Here’s the thing I think you are forgetting:

Alteryx’s products are “known” and when the business cycle turns upward, they’ll be positioned, but competition will likely have caught up, to these products, too. Unless we see Alteryx investing substantially in R&D to stay ahead and announcing even newer great products…

So, I want to see new products coming forth, similar to Datadog, today. Otherwise, a company may be sitting and waiting… in error.

[AnalogKid70]

“Your conclusions are reasonable and you may turn out to be right. But i’m taking the other side of that trade now. Had i done what i should have and sold before earnings, i would likely be buying back at these levels. I prefer to bet with brilliant executive leadership with important products, especially bootstrap founders.”

replying to addedupon

The more I have thought about it, I think I agree with you. I have seen both sides of the argument for AYX in many the sources I use for research. Everyone agrees it’s a great company and it will probably come back at some point. The debate is mostly around how long it will take to come back. I’m willing to start scaling back in at this point and wait for the comeback.

I previously said I was going to wait for a “great” price before buying back in. I know, that’s kind of subjective. I said that when it was in the low 120’s after ER. I decided to start getting back in yesterday at $108 using the money I had from selling pre-ER (which was small - only 1% position). I have some cash coming end of next week and will decide then whether or not to buy more AYX.