I last wrote about Alteryx , the $6 billion big-data analytics engine that serves enterprises across dozens of industries from Audi and Barclays to Pfizer and Unilever, in early October. 

 

It's time for an update as the company just delivered big beats on both the top and bottom lines last Thursday.

 

Q3 revenues were $103.4 million vs the consensus of $90.5M, for a monster 14% topline beat and 65% year-over-year growth!

 

And EPS of $0.24 beats the $0.09 estimate by 15-cents.

 

Gross Margins maintained at 91-92%.

 

 

Q4 sales were guided to a range of $128-$131 million vs the $126 million consensus, for 44-47% growth.

 

Q4 EPS are projected by the company to come in between $0.27-$0.30 vs the $0.33 consensus, so slightly weaker.

 

Full year 2019 sales guidance of $389-$392 million represents 53-55% growth vs $375M, implying Q3 + Q4 strength.

 

Forecast FY19 EPS of $0.57-$0.60 vs $0.48 is obviously higher on the Q3 beat as a deciding factor.

 

 

**Ended the third quarter of 2019 with 5,613 customers, a 30% increase from the third quarter of 2018. Added 335 net new customers in the third quarter of 2019.

**Achieved a dollar-based net expansion rate (annual contract value based) of 132% for the third quarter of 2019.

**Raised $800 million of additional growth capital via a convertible note offering in August 2019.

**Acquired Feature Labs to further enable Alteryx to address the data science and machine learning talent gap in October 2019.

 

 

The call was very interesting with analysts really digging in to understand this completely new type of business where a big-data analytics engine is in such demand that their customers keep buying new Alteryx Designer seat licenses at over $5K a pop.

 

That's why the Dollar-Based Net Expansion Rate is at 132%. That metric expresses the amount of new business coming from existing customers.

 

Analysts were also trying to understand how automation with machine learning (ML) will impact sales going forward.

 

I got the sense that some of the analysts are wondering if the possibility of too much automation will reduce the number of "citizen data scientists" at corporations who want/need a $5K+ per year Designer seat license.

 

But the automation aspect is just a tool. And you can't create and use an ML data tool without a human being who has a data idea or task to research and model.

 

Here is a good exchange from the call between Citi analyst Tyler Radke -- who has been an early bull on AYX and has the highest price target of $150 -- and Alteryx CEO Dean Stoecker, who believes his company will become the dominant player in a $24 billion market...

 

 

 

 

 

(end of conference call excerpt)

 

 

These questions from analysts about future customer demand for the platform -- and management's ability to answer them well -- are extremely important because it's how the i-bank research analysts can go back to their desks and model future growth.

 

There were also lots of questions about billing and booking of revenues given the newly implemented ASC 606 accounting rules for SaaS companies. The complexities of how companies navigate those rules, and many have different ways of doing it, are too nuanced to get into here.

 

So we really have to wait and see how the analysts model sales for Alteryx given that many of their contracts last for two years and are front-end loaded.

 

Since the company has given no guidance yet for 2020, the analysts have a big job to do on their own.

 

We will know what answers their spreadsheets give them this week as they either revise their estimates higher, or lower. I expect the former.

 

Right now, I have some initial reactions from Friday right after the company report. And these two pretty much encapsulate the range of views.

 

First, an analyst turned skeptical...

 

DA Davidson: Analyst Rishi Jaluria lowered his price target on Alteryx to $95 (from $123) and kept his Neutral rating after its Q3 results, saying that while the company beat on earnings and raised its FY19 guidance, billings were "somewhat light." The analyst adds that the earnings call commentary around enterprise and large deal traction was "encouraging," but CEO Stoecker also indicated that overall IT spending will grow "only modestly" next year.

 

But our AYX bull was relentless...

 

Citi: Alteryx should be bought on any significant weakness, said analyst Tyler Radke who cautioned shares of Alteryx could be volatile as investors digest the company's decelerating growth. Radke recommends buying the stock on any significant weakness as he still sees an attractive growth story and he maintained $150 price target.

 

I myself was looking forward to accumulating some more Alteryx shares on Friday under $90, but it didn't stay there very long. 

 

 

The Software valuation correction of Q4 has been rough for many high-flyers. AYX was above $145 in September and I was glad we booked 50%+ gains from our May buys.

 

But I was not counting on the duration of "fear and loathing" as good companies with big growth had further to fall to earth if they were still trading at 15-20X sales.

 

And AYX is still trading rich at 12-15X into 2020 sales projections of $400-500 million (rolling 12-month basis over 4 quarters).

 

So that's why, despite 50%+ sales growth, it can still trade lower on further multiple compression because the growth won't be 60%+ like it was for Q3.

 

But I will be a buyer under $90 every time because Alteryx has raving fans that can't imagine using another data engine.

 

Disclosure: I own AYX shares for the Zacks TAZR Trader.

 

 

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