Investors who were lucky enough to get in on the Alteryx (NYSE:AYX) IPO have seen more than a ten-fold return since the company went public in 2017. For investors who think they've missed the boat, they haven't. One measure of the opportunity ahead is that only 37% of the largest 2,000 companies across the globe are on its client list.
These large organizations are especially important for Alteryx's growth plans. To understand why, let's look at the challenges these companies face, how the company is helping address those challenges, and what this data analytics platform is doing to expand its Global 2000 (G2K) client list.
Big company challenges
Big companies have big data problems: huge numbers of customers, numerous products, and many different departments. Let's look at a few specific cases to get a better picture of how Alteryx's tools can help.
Coca-Cola's Senior Business Analytics manager, Jay Caplan, uses Alteryx's software to help restaurant owners better manage replacement parts for their Coca-Cola Freestyle machines. The software is able to pull data from machines located all around the country, trend the data, and email personalized reports to restaurant managers automatically.
Walmart's HR compensation team used Alteryx to design and roll out a new pay structure for its 1.2 million store employees. It generated personalized pay increase letters for each employee that were sent to 5,000 store managers. These communication packages enabled local management to communicate individual specifics of how each employee's pay was affected all on the same day.
The software's capabilities are perfectly suited for these kinds of large-scale problems in any industry. The amount of time and money that can be saved for these enterprises can be huge. It's a key reason why these customers are willing to pay up for these powerful analytics tools.
Landing and growing in large organizations
The entry-level product, Alteryx Designer, is priced at $5,195 per year per user. This may seem like a hefty sum, but the return on that investment can be tremendous. Not only is the individual user able to save time by reducing administrative data prepping tasks, but it allows the analyst to more easily produce key insights to help the businesses save money, increase sales, or improve service. Management estimates that there are 15 million analysts in the Global 2000, and it only takes one curious person for the product to land in an organization.
In Coca-Cola's case, it was Kaplan. His data set was too large for Microsoft's office tools, and he downloaded the free trial. Within a couple of hours, he was able to build a robust database for analysis even though he hadn't used the platform before. He said, "From that moment on, I was hooked."
Over time, as he worked with other analysts, they realized the power of the tools and became users too. Kaplan commented, "There's just something contagious about it." Today, Coca-Cola has several hundred employees that use Alteryx's tools across the organization. This is a perfect example of how the company's land-and-expand strategy is working.
Fueling the growth
Last quarter, the company landed 12 new G2K customers, bringing the total to 731. Growth from these existing customers can be measured by its net dollar retention numbers. G2K clients registered an impressive 140% net dollar retention rate in the first quarter, higher than the overall figure of 128%. This growth isn't just from additional licenses, but it's also from upgrades to more expensive and more capable server and enterprise-wide products.
Earlier this year, Alteryx announced a strategic partnership with PwC and named them as a Global Elite partner. This allows PwC to follow through on its commitment to digitally upskill its workforce as it expands usage of Alteryx's tools across its 276,000 employees. Additionally, the consulting company is expected to bring in an additional $1 billion in new business for Alteryx over the next five years as it works with its large global clients on their digital transformation journeys.
The takeaway for investors
G2K customers account for a third of the recurring revenue and are quickly expanding usage, powering the company's 40%-plus quarterly revenue growth. As the need for analytics continues to grow, large enterprises will need powerful tools to enable them to compete in the digitally-enabled world of tomorrow. Kaplan said it best as he explained that "in today's day and age, every group is dependent on data, from audit and finance to production and delivery."
Alteryx's opportunity to land new G2K customers and expand the footprint in existing ones is enormous. Investors should watch as this growth company makes progress toward its aspirational goal to serve 100% of the Global 2000.