Alteryx Inc. Chief Executive Dean Stoecker forecasts rough going for the rest of the year due to the coronavirus, but he’s confident his closely watched data analytics firm will emerge from the crisis stronger than ever.
“We’ll be the leader in the data science and analytics space,” Stoecker said. “We just may have to wait a smidgen longer.”
Earlier this month the Irvine-based company (NYSE: AYX)—Orange County’s standout publicly traded technology firm since its 2017 initial public offering—reported a slowdown in sales growth for the second quarter and an outlook for the rest of 2020 that fell short of investors’ expectations.
Shares in Alteryx, OC’s sixth-largest publicly traded company by market cap, fell nearly 30% the following day, losing several billion dollars in its valuation.
Stoecker said the COVID-19 crisis “altered our customers’ buying behaviors” in the last quarter, which ended June 30. That included “higher levels of scrutiny on spending across all sectors,” longer sales cycles and smaller deal sizes.
“Based on what we see today, we do not anticipate a material improvement in business conditions during 2020,” Stoecker told analysts on Aug. 6.
The company’s shares have been seeking to regain lost ground since the announcement and were up almost 11% for the year to about $110 as of Aug. 14 for a market cap of $7.3 billion, despite the body blow following its earnings report.
Yet, that’s a far cry from the heady pre-pandemic days of mid-February when the company’s market cap first burst through the $10 billion barrier with a share price topping $158 apiece; at the start of August its shares were above $170. Alteryx went public in 2017 at $14 a share.
Stoecker—estimated by the Business Journal last month to have a fortune in the $1.5 billion range—has been tossed out of the billionaire’s club for now, based on the share price for the 8.3 million shares he owns in the company. They are now worth close to $915 million.
Solid Position
Still, Stoecker remains optimistic about the future of the company that sported a 65% increase in annual revenue last year.
“We’re confident that we’ll emerge from this crisis stronger than ever and in a solid position to drive higher levels of growth and margin expansion,” the co-founder and CEO told analysts while highlighting several second-quarter innovations.
“In good times, people need data science and analytics. In bad times they need them more.”
Alteryx’s software allows data workers to turn huge amounts of information into actionable business decision. New customers using the company’s product last quarter included Levi Strauss, Banco Santander and Qatar Airways.
While second-quarter revenue at $96.2 million was above analysts’ estimates and up some 17% year-over-year, Stoecker told analysts that bookings—the dollar value of business that the company closes in any given period—were “flat.”
“As with new business, we saw expansion business sales cycle slow. Conversations with customers indicated that many sought to leverage their existing investments rather than undertake large, new projects and consequently postpone or downsize larger initiatives,” according to the CEO.
Headwinds
Alteryx said in its earnings release statement it assumes that “significant headwinds will generally continue in the third and fourth quarters of 2020 and there will be uncertainty around new business and renewal timing or billings terms.”
Third-quarter revenue is expected to be in the range of $111 million to $115 million, an increase of 7% to 11% year-over-year, while full-year revenue could increase 10% to 11% to $460 million to $465 million.
Those projections disappointed analysts whose average consensus projected third-quarter revenue of $119.3 million and 2020 revenue of $505.1 million.
One of those listening to Stoecker’s presentation was Bhavan Suri, a research analyst and partner at William Blair & Co.
“We continue to believe the future is strong for the company,” Suri told the Business Journal by email. He and two colleagues added in a note to clients: “We believe the slowdown in the business is temporary and Alteryx’s differentiated solution set will drive reacceleration in revenue growth coming out of the COVID-19 pandemic.”
Test Drives
To address the new buying behavior, Stoecker said Alteryx increased use of “adoption licenses.”
An adoption license is a short-term contract—generally six months—that allows customers to effectively take Alteryx for an extended test ride to prove value and “engage demand before they make a longer-term commitment.”
Onboarding Struggle
Stoecker also said that while overall the Alteryx team adapted well to working at home, “we did struggle to effectively onboard and enable some of our new hires particularly new sales reps learning our systems, playbooks and new product offerings.”
Stoecker also highlighted some of the company’s second-quarter innovations as he spoke with analysts on earlier this month.
“During the second quarter, we not only described a new category of software, Analytic Process Automation, but we also delivered significant innovation to the market with our Alteryx Analytics Hub, Intelligence Suite and 2020.2 releases,” Stoecker said.
“We believe these innovations will help bring our customers’ digital transformation efforts to life.”
