Irvine data analytics software maker Alteryx Inc. is counting on San Francisco’s Trifacta to speed up its journey into the cloud. Industry watchers are waiting to see if the deal can help reignite the rate of revenue growth, and stock price, at Orange County’s most valuable publicly traded software company.
Alteryx (NYSE: AYX) earlier this month announced the planned acquisition of cloud-based “data wrangling” company Trifacta, whose software makes data analytics faster and more intuitive.
Alteryx will pay $400 million in cash from its hefty balance sheet, with an additional $75 million to be granted in the form of restricted stock units to some Trifacta employees.
It’s by far the largest acquisition in the history of Alteryx, which was formed in 1997 and whose software allows data workers to turn huge amounts of information and data into actionable business decisions.
Prior to Trifacta, its largest buy was the October 2019 purchase of Feature Labs in Massachusetts for a reported $37.7 million.
The money’s well spent, Chief Executive Mark Anderson tells the Business Journal.
“We said we’re going to the cloud to make it easier for our customers to put their hands on our innovation,” Anderson said on Jan. 7, the day after the purchase was announced.
The deal marks the third acquisition under Anderson, who took over the CEO reins from co-founder Dean Stoecker in October 2020. The deal is clearly his biggest corporate move since his hiring.
Shortly after his appointment, Anderson told the Business Journal that while internal innovation would remain a focus, to expect an acquisition push under his watch, noting the Irvine company had nearly $1 billion of cash on its balance sheet.
Anderson said Trifacta is “two years ahead of us on their journey to build their entire software stack in all three public cloud players,” which are Google Cloud Platform, Amazon Web Services and Microsoft Azure.
“What we get from them is a company 200 strong of cloud-first people that have been down some of those long dark alleys on their journey” to the cloud, he said.
Just how much revenue Alteryx expects Trifacta to add will likely have to wait until the next earnings call, now scheduled for Feb. 15. Until then, Anderson is restricted in the amount of information he can discuss.
At the time of Trifacta’s last big funding round in 2019, a $100 million Series E deal that pushed its total funds raised past $220 million, the Bay Area company said its annual recurring revenue was growing 85% and cloud-based revenue had more than doubled.
Alteryx revenue in prior years galloped along with gains of 50% or more, the most of any public company in OC. Its rate of growth began slowing in 2020.
Analysts are expecting revenue to accelerate 18% this year to $620.9 million. Revenue last year grew at a slower 6.6%, according to analyst estimates.
“Well, they’ve got to execute,” Derrick Wood, a managing director at Cowen and Co., told the Business Journal, speaking of the impact of the latest buy.
He said the “the near-term challenge will be integration” as is usual in transactions such as this.
“I think longer term it’s the right move and it’s going to pay off for them,” Wood said. “Trifacta is way ahead of the curve in terms of having a platform.”
The Trifacta transaction is expected to close by the end of March and is subject to customary closing conditions.
Trifacta will be positive for Alteryx, according to William Blair analyst Kamil Mielczarek, who rates the shares “outperform.”
“We do expect the acquisition to be accretive to Alteryx over the long term and it does accelerate the pace at which Alteryx will ramp its cloud business,” Mielczarek told the Business Journal on Jan. 7.
He added: “Alteryx disclosed in its presentation that the transaction will have a moderately negative impact on FY22 free cash flow as Trifacta employees are integrated.”
Alteryx’s share price has declined some 47% in the past year, closing around $60 as of early last week, giving the company a valuation around $4 billion. It went public in 2017 at $14 a share.
Trifacta specializes in “data wrangling”—the process of cleaning, structuring and enriching raw data into a desired format for better decision-making in less time.
Adam Wilson, CEO of Trifacta, said: “Together, we have the opportunity to enable thousands of customers globally to unlock powerful business insights with the combination of Trifacta’s Data Engineering Cloud and Alteryx’s Analytics Automation platform.”
While announcing the acquisition, Alteryx also said Jan. 6 that its fourth-quarter revenue is expected to be at or above the high end of its previously issued guidance.
The earlier guidance had called for revenue $163 million to $168 million for the quarter ended Dec. 31 and $635 million in annual recurring revenue for the same period, according to Alteryx. The company says annual recurring revenue is the more accurate measure of its growth.
Revenue for the third quarter of 2021 was $123.5 million, close to analysts’ expectations and down 5% from the same period a year earlier. Net loss attributable to common stockholders for the third quarter ended Sept. 30 was $58 million, versus a gain of $4.4 million in the year-ago period.