Do These Metrics Help Predict Returns?

I believe these metrics can help explain valuation - sort of. There have always been extremely overvalued companies, and most of them have had conventional business models.

I notice, that for example, Mongo has a very low number on sales efficiency from the numbers uses. Yet Mongo has kicked the butt of practically every other stock in the universe during the last year or so.

I thank Saul for brilliantly explaining the 605 and 606 differences. I did not sell Alteryx because I think it is going to crash or anything. I just wanted the money for something else. I see Alteryx as starting to turn into a more “mature” stage vs some other companies. Absent what I see as a FUD or otherwise just too good to be ignored opportunity i am not going to say what I put it towards. Could be SMAR, Elastic, more Mongo…perhaps to convert my world’s largest collection of frog species back into a swimming pool, who can say. But I decided to do so. Nothing to do with the upcoming earnings call.

Btw I do consider SMAR to be in a less mature growth period that Alteryx is now. For whatever that is worth.

But back on topic here, I still think it comes back to CAP and growth. On Saul’s board the top 3 companies on a metric used there (that better synced with me) - I forget it now, turned out to be #1 ZS, #2 MDB, #4 ESTC. Not much different than when Nvidia and ANET were #1 and #2 on IBD (just happened to be that way) and then SHOP - one just had to say JUST BECAUSE with SHOP. On every metric SHOP was the most expensive and had clear business metric issues. Yet still, SHOP still out did them all.

One aspect I think, and I’ve used this before, is singular. Could anyone else do what Home Depot was doing once they were first mover? In retrospect of course not. In real time, back then, I am sure we would not understand what HD was doing. But with our experience I believe we can now identify a company like Home Depot (tech or not tech) who is doing something no one else will ever be able to equal - absent a discontinuous disruption. Even Microsoft got theirs at some point. Intel got theirs. No one is immune. But absent that…

Mongo…can anyone else do what Mongo does? We have studied that in-depth and the answer is no. And Mongo continues advancing its product. Mongo does not need to have 100% of the market, just dominate its sphere. Btw/ that new type of SQL database we discussed a few days ago, Mongo already has that covered. Mongo added SQL query capabilities, if I recall correctly (unless I mixed it up with Elastic).

Where would the world be without Mongo? Working with hybrid solutions, as no one still has a true general purpose NoSQL database.

Zscaler…answer is the same, where is the world without Zscaler? Sure, sure, someone else may have got around to it, but they did not, and it is Zscaler that did.

TTD - yeah, yeah, yeah. One i let go. But seriously, where would the world be without TTD. There would be no one to seriously challenge the walls and the giants. TTD is the sole outsider with any scale and neutrality.

TEAM - the product sold itself and is still selling itself. TEAM recreated the way the industry does business, just like VEEV did in the CRM healthcare industry.

What we have now are some new comers. The three are Elastic, Smartsheets, and Zoom. It appears that Elastic is singular like the above. Where is the world without Elastic? Someone else would need to step up, but they did not. So it is an Elastic world. The talk about Elastic is can it take marketshare from Splunk? Splunk is really the only alternative. The other talk is can Elastic make hordes of dough giving away most the product like it does? To date it has grown faster and makes more money per customer than Mongo, and no one questions Mongo’s ability to do so.

To respond to these questions. The market is so large that Splunk and Elastic can and will happily co-exist. Elastic will take over Splunk customers on the fringe, and Splunk probably won’t do the same on their end. Elastic will have more paying customers, but Splunk customers will pay more per customer. There is not likely to be anyone else who can possibly catch up at this point.

Elastic’s business model, TBD. As I linked to a few weeks ago, the ability to recreate the proprietary functions that Elastic offers for money is nearly impossible (absent a Netflix sort of operation). There are open source and commercial solutions that can do each material piece that Elastic sells, but they in the end cost money, don’t work as well, and have to be pieced together with multiple other unrelated software packages to accomplish what Elastic sells in one package.

If you are a serious user, and not Netflix or Apple, your going to pay Elastic for any material production product you put out with Elastic.

The other 100 million users of Elastic don’t matter. These are either developmental usages, trying to develop production products, or usages that would not pay anyways. Mongo has the same circumstances.

Zoom…you know what, I don’t know. I just look at the numbers. The numbers for Zoom speak volumes. Zoom is something special. What exactly Zoom is doing that is singular, I don’t yet know but clearly in a crowded and “mature” market Zoom is profitably growing at lightning speed and disrupting it. Clearly Zoom has something singular they are doing. Zoom is clearly not a commodity. TBD. Tuesday IPO I understand.

Smartsheet…I’m out of time for now.

Tinker

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Tinker, where do you see “mature” in ayx? I used ASC 605 numbers just to make comparisons easier.


   Rev growth %   GM%    Customers added %/(#) Dollar Net Expansion
2017 
Q1    55         83.1      62.5    (237)       133
Q2    51.8       82.5      53.9    (258)       134
Q3    52.1       84.1      49.2    (231)       133
Q4    54.6       83.8      45.7    (338)       131

2018
Q1  50            88.3      43.0   (281)        132
Q2  54.4          90.1      39.6   (267)        131
Q3  58.7          90.5      41.3   (375)        131
Q4  56.8          90        38.4   (381)        129

If AYX were mature I’d expect to see Dollar Net expansion to be much lower, customers added to be in the single to low double digits percentages and revenue growth to show a clear trend down. Instead I see revenue growth to be better in 2018 than in 2017. Dollar net expansion is just a little bit down which we expect as their customer base grows and I think they are doing quite a nice job adding customers at an accelerating rate.

Naturally we need to follow all these things. The switch to asc 606 is going to make results much lumpier so we shouldn’t worry too much if one or two quarters come in lower than what we expect as long as their customer adds keep going and their Dollar net expansion stays on its slow path down.

The second part of my argument is… have you read the AYX conference calls?

“a number of very, very large SAS customers ask us to help them forklift the last generation out and accelerate the use of Alteryx across their enterprise.”

“We also see this growing appetite for advanced analytics around the world. And when we say advanced analytics, it’s across a whole bunch of things. It’s complex algorithms. It’s predictive models. It’s machine learning.”

“we doubled our number of million-dollar accounts last year.”

"I spend personally a lot of my time on building the corporate culture.
It’s likely to be the only thing that can stop us in this data science and analytic space. And I’m not unhappy with really anything"

“We seem to be the only player with an end-to-end platform that’s taking advantage of that greenfield opportunity.”

“ur case, a doubling of million-dollar accounts and the tripling of the number of accounts that are north of half a million dollars.”

I don’t see any disconnect in what they have said with the numbers we have seen so far. Granted, something can changes in the future but if the opportunity is anywhere near as big as AYX thinks it is, they should be firmly in the upswing of their S curve. AYX has been in business 20ish years right? Appears they are finally in the right place at the right time. The rest of the world has caught up to, and needs what AYX is doing.

btw, i agree with most everything else you said.

best,

ethan

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I actually thought I was posting on the NPI board :wink: So some of my comments are known on that board.

I see the company maturing as its growth rate is actually slowing down (still substantial mind you) but at lower revenue levels than other companies whose revenues are starting to speed up.

I see the company maturing as the CEO is talking about consolidation within the industry. If the industry were growing faster even the smaller players would still be growing with hope and not need to be consolidated with the larger players.

I see the company maturing when the CEO gives a comment like 16,000 customers and $1 billion in revenues by 2022. Turns out, the official line, this was just a hypothetical example to demonstrate that Alteryx has much better economics than its rival and thus a much larger market opportunity. A company accelerating growth does not need to pull a “Nutanix” on us; albeit Alteryx is not a Nutanix. Alteryx has far less competition.

I also see maturity in that the quarterly customer growth gains are staying nominally nearly equal each quarter, and thus slowing down as a percentage of total customers. We are not seeing acceleration as we are seeing it elsewhere.

That is why I called their business becoming more “mature” in relation to where they are on the S curve of product adoption.

Give it 2 or 3 quarters and lets see what happens.

Tinker

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I actually thought I was posting on the NPI board :wink: So some of my comments are known on that board.

lol i figured :wink:

I see the company maturing as its growth rate is actually slowing down (still substantial mind you) but at lower revenue levels than other companies whose revenues are starting to speed up.

why do you say slowing? 2017 growth rate was 53%, 2018 was 55%

I see the company maturing as the CEO is talking about consolidation within the industry. If the industry were growing faster even the smaller players would still be growing with hope and not need to be consolidated with the larger players.

normally I would agree with you but if we are thinking about the same quote the CEO was talking about how there are a bunch of tiny players that have interesting tech he would like to acquire. I think that is a vastly different consolidation than in something like hadoop where hortonworks and cloudera needed to consolidate because their industry isn’t growing.

I see the company maturing when the CEO gives a comment like 16,000 customers and $1 billion in revenues by 2022. Turns out, the official line, this was just a hypothetical example to demonstrate that Alteryx has much better economics than its rival and thus a much larger market opportunity. A company accelerating growth does not need to pull a “Nutanix” on us; albeit Alteryx is not a Nutanix. Alteryx has far less competition.

agreed, this was a silly comment. His comments about tableau also annoy me

I also see maturity in that the quarterly customer growth gains are staying nominally nearly equal each quarter, and thus slowing down as a percentage of total customers. We are not seeing acceleration as we are seeing it elsewhere.

nominally nearly equal? They grew their customers count40% in 2018. or are growing 8-10% sequentially. In 2017 they added 1064 customers and in 2018 they added 1306 or just about 23% more customer adds. That seems pretty darn good and not nominal at all. If you believe the conference calls their customers are a lot bigger too.

Give it 2 or 3 quarters and lets see what happens.

I’m not posting to have the internet “last word” . I respect your opinion and generally see investments very similarly to you. I just don’t see AYX like you do right now unless something changes. You might be reading the tea leaves correctly but even if they only increase their customers what they did this last year then they will increase their customer count 22%. That is powerful stuff in a land and expand business and should get their revenue growth just slightly north of 50%.

Anywho, good talk. Always a pleasure.

-e

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Hey, I can be fickle. I needed money from somewhere to either invest elsewhere or to fix my pool or such (note: I am not presently fixing my pool}. As such, I took from what I considered the least best of places to take from.

I think if you look at the nominal number of new customers each quarter the numbers have varied (this is from memory, as I had the actually numbers) from 270 to 390 something. The last 2Qs being at the top, but no clear pattern as some quarters are more some less, not in sequential order. But in the end all pretty much in the same range.

Whereas Elastic goes from 500 to 900…Mongo is at organically it appears around 900 a quarter. Alteryx remains in the 300s each quarter. About a year ago I stated that Alteryx needs to accelerate their customer growth numbers. The reason for this is that companies have a need for what Alteryx does. If Alteryx does not get to them first someone else will.

In the end, absent a need for the money for (draw you own conclusions above) I just had to choose least best. Such awful problems we currently have :wink:

And I saw Alteryx acting like a more maturing company. Even its multiple (one year forward - and this may be the 606 talking) has become nearly “reasonable” (but still overvalued so no problem there in that regard).

Tinker

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I still think it comes back to CAP and growth.

I understand growth, but what’s CAP? I assume it’s an acronym…

Thanks,
-LB

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CAP is Competitive Advantage Period. How long you are going to stay ahead of competitors and to what extent.

Looking at all the tea leaves that have been discussed in the thread I’m just not picking up what you’re putting down about Alteryx “maturing”. Growth “rate” accelerated. Customers adds were the highest number ever. The only number that will be noteworthy was $NRR tracking down a point or two to a still massively impressive 129%. That could be a one off but will be laser focused for what that metric in next Q.

Alteryx should be careful with Tableau. I think it’s worth exploring more their relationship with Tableau. As we know, the Alteryx platform is pretty horrible at data visualization and the CEO is flatly uninterested in making investments in that field. This is probably for two reasons. The first is it’s not the high value side of data analytics and his focus is on the more valuable stuff AYX dominates. The other I believe is how important the Tableau integration is to Alteryx customers.

I say that because I was digging around into some reviews of Alteryx for another purpose and started to discover just how many customers were using Alteryx to prep data to go into Tableau for visualization. I don’t know if I’d say it’s a majority but it’s a good percentage of Alteryx customers. Here’s what I mean.

https://www.trustradius.com/products/alteryx/reviews

Doing a word search for Tableau yields 24 hits just on page one. And that’s without drilling down and reading the whole individual reviews just the top layer summary.

Here’s one sentence that sums it up.

Alteryx is the primary ETL/analytics tool being used by our BI users. Alteryx is particularly popular because of its ability to create a Tableau data extract and thus provides a meaningful alternative to Tableau’s missing data blending capabilities.

They have a symbiotic relationship it seems. Tableau can’t do data blend/prep well. Alteryx can’t do visualization well. So they are unlikely to cut each other off. And I believe that AYX is one of the only solutions out there that provides the Tableau extract feature. But it’s like they have each other’s wolf by the ears. If they ever steal the others magic ingredient to the others Flaming Homer they might be able to offer up a Flaming Moe. And then who knows where that could wind up.

But I found it interesting. Not necessarily saying it’s a concern but something we should be aware of.

Darth

Eternal props to anybody who knows the secret ingredient to the Flaming Homer.

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Cough syrup. Children’s cough syrup!

I still see AYX as a top contender. I could see them acquiring Tableau in a few years, once they grow a bit more, to resolve the potential rivalry. AYX has the superior position, strategically, given the integrations companies create between all their data sources to drive the analysis functions.

Visualization seems like more of a commodity. But a well integrated solution is probably worth having at the right price. It would be interesting to see how many non AYX customers Tableau has.

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