The big data analytics industry had a momentous 2019. The burgeoning technology space was thrust into the spotlight early in the year with Google parent Alphabet and salesforce.com each making multi-billion dollar deals to acquire Looker and Tableau, respectively; there was the IPO of Datadog which has been off to the races since going public in the fall; and many firms enjoyed massive upside as cloud computing and digital transformation is putting data science in high demand.
One of the best performers of the year was Alteryx (AYX +0.00%). Shares are up nearly 900% since the dot-com-era software outfit went public in late 2017. Sales and earnings soared last year to support that run as new customers signed up to use the company's big data engine, and existing clients ramped up their use of the software. The pace of expansion is expected to ease up in 2020, but Alteryx's growth story is far from over.
Image source: Getty Images.
Putting a ribbon on the 2019 financials
As cloud computing takes over as the basis for organizations' operational structure and fuels global digital transformation, data analytics becomes an increasingly viable and valuable tool. That was on display once again during Alteryx's fourth quarter of 2019. Revenue grew 75% from the same period in 2018, boosted by the addition of 474 new customers (bringing the total count up to 6,087 at year's end) and growing net dollar-based expansion by 130% (implying existing customers were spending an average 30% more than last year).
Net dollar-based expansion was an especially powerful force in 2019 for Alteryx. The metric grew 134%, 133%, and 132% in the first three quarters of the year, respectively. Added together and with all the new customers, the high-growth company was able to increase its adjusted earnings per share by 57% for the year -- in spite of heavy spending to maximize growth.
|
Metric |
Full Year 2019 |
Full Year 2018 |
Change |
|---|---|---|---|
|
Revenue |
$418 million |
$254 million |
65% |
|
Adjusted gross profit margin |
91.9% |
92% |
(0.1 pp) |
|
Operating expenses |
$341 million |
$201 million |
70% |
|
Adjusted earnings per share |
$0.94 |
$0.60 |
57% |
Data source: Alteryx. Pp = percentage point.
Also of note this year, Alteryx acquired two start-ups for undisclosed (which means very small) sums: analytics firm Clearstory Data back in April 2019, and machine learning and AI software company Feature Labs during the fourth quarter. As for Feature Labs, Alteryx called out the company's automation know-how, citing a report from tech researcher Gartner that predicts 40% of data science tasks will be automated by the end of 2020. Alteryx is thus continuously innovating its data platform, freeing up data scientists' time to focus on higher-order tasks and generating insights from the massive amount of information organizations are tapping into as they update their operations for the digital age.
Slower growth, but growth nonetheless
After the blockbuster year, Alteryx issued an outlook for $555 million to $565 million in revenue for 2020, representing growth of 33% to 35%. Adjusted earnings per share were forecast to be $0.80 to $0.91, down as much as 15% as the company continues to plow cash into its expansion efforts.
It may be a cool-off from 2019, but there's still plenty to like about Alteryx's sales trajectory. Management tends to underpromise and overdeliver on the financials, and the full-year 2020 outlook could get upgraded in subsequent quarterly updates. After all, Gartner has reiterated its view that global spending on cloud computing will rise 17% this year as the world continues to go the way of digital, and that double-digit percentage growth is in the cards for the foreseeable future. Alteryx recently signed a five-year strategic partner deal with global professional services firm PwC to help raise awareness of the data analytics and automation platform and capitalize on the digital revolution.
However, even though it's growing fast, Alteryx stock's 18 times expected 2020 sales valuation and 133 times expected adjusted earnings are on the high end of what would even be considered premium valuation. Investors are anticipating that the double-digit sales momentum will continue for years to come. Thus, I don't think Alteryx should be a major holding in any investors' portfolio (full disclosure, it's currently about 0.25% of my investment holdings).
Nevertheless, this data analytics company is still worth a look for those willing and able to hold for the long haul and buy the inevitable dips that will come down the road.
