Saul: I trimmed my Alteryx position by about 38% of its shares. It was a fairly easy decision for me. I thought “Alteryx is pulling in its horns, cutting hiring, reducing spending, and will still probably grow by 25% this quarter and this year. That’s pretty remarkable. But Livingo and Coupa are going all out and booming…we had Datadog accelerating its growth in the same months that Alteryx slowed from 75% growth to 43% growth…Alteryx was seeing the pandemic as a headwind and riding it out… https://discussion.fool.com/sorry-but-here-is-another-update-345…
I reasoned similarly to Saul, and cut my over-sized position by actually a bit more than 40%. But the question is, if Alteryx is having a rough time in the short run compared to other companies, Why keep it at all? If the short term is going to be so bad, and AYX is not more than 15% off all time highs…shouldn’t we go to the sidelines and maybe come back later?
Well…Dean said on the call that they have visibility into 60-65% of revenue. They also said 15% usually comes from renewals. That leaves just 20-25% of each Q’s revenue generated by in-quarter bookings. They also said much of it comes in the last month each quarter. That would have been March. I think sales ground to a near halt in March, so perhaps for Q1 in-quarter bookings were 50% of what they would have expected in a non-COVID world.
Here’s the key: That’s 50% of the 20-25% of quarterly revenue that comes from in-quarter bookings. The other 75% to 80% of quarterly revenue was fine. Unaffected. So their total revenue for the quarter would only be off by a little more than 10% from what we would have otherwise expected. So instead of 160% of the revenue they had in Q1 last year (aka 60% growth, which is about what we could have expected in a non-COVID world), they had 143% (43% revenue growth). That’s a difference of just over 10%…so my logic seems to check out.
So what’s realistic for Q2?
Again it will mostly depend on in-quarter bookings, especially in June. Sales would have to get crushed again – as bad as they did in March – for revenue growth to even be below 40%. Totally could happen, but I don’t think we should expect it. It seems completely impossible for them to come in at or near 16% (their bananas guidance) because they’d not only have to have near-zero in-quarter bookings (and we know they had some in April), but also have tons of expected renewals fail to renew. Maybe there’s something crazy that could happen with temporary discounts that I’m not seeing, but I think it’s pretty unrealistic that revenue growth could be less than around 30% in Q2. And as I said, I’d expect 40%+. And I even think a realistic possibility is that they re-accelerate to 50%+ growth or more. All that would take is normal renewals, and for in-quarter bookings to return to maybe 75%+ of what would have been expected in a non-COVID world. So it wouldn’t even take a 100% return to normal, I don’t think. Maybe a 75% sales comeback is still not likely…but then again, perhaps they get some increased demand in May and June (esp June as things re-open and maybe some re-hiring happens), and businesses need analytics more than ever. But I’m not counting on that.
I am counting on AYX continuing to be best-in-class. With or without huge success from the new offering they announced, they are the best at what they do. I searched on Indeed and saw many, many companies looking to hire experienced Alteryx users. Currently, 765 different job postings mentioned Alteryx by name.
In short, I still like AYX long term. They’re seeing a bit more financial impact than DDOG and others…but DDOG sports a PS of about 54 and AYX is at about 21. The risk/reward on AYX seems more than fair to me. I’ll keep my 13% position and consider adding if share price dips.
PS - Saul mentioned “Alteryx is pulling in its horns, cutting hiring, reducing spending.” I would somewhat disagree, given their new offering, etc. I think the verbiage to this affect on the CC was just to signal that they have the ability to control spending and tailor it to the demand they’re seeing. I see this as incremental and prudent, not wide-sweeping or thesis-changing.