Tableau Rewriting Definition Of Fast Growth Company

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Tableau Software ( DATA ) may be rewriting the definition of a fast-growth technology company.

The data analytics software company offered its best case to date for the title earlier this month when it blew away analysts views for its fourth quarter highlighted by year-over-year quarterly revenue growth of 95%. Analysts had expected 60% growth.

Investors responded in kind, sending shares soaring by over 12% on Feb. 5, a day after its Q4 results.


The stock is up 45% this year after ending 2013 up 122% from its IPO offering price of 31 on May 17.

Tableau Software is one member of an emerging club of young gun software players catching on with investors as they challenge multibillion technology stalwarts such asOracle ( ORCL ),SAP ( SAP ) andIBM ( IBM ) with innovative methods for managing electronic data, says Derrick Wood, an analyst for Susquehanna Financial Group.

"That is the appetite these days, you look across the landscape,Workday ( WDAY ),Splunk (SPLK), Tableau, all of these stocks are just up and to the right, and it's such a dynamic time in technology and some of these vendors are very disruptive with big growth curves, and valuations are getting bid up on an appetite to own these names," he said.

Charting Territory

Tableau's software lets companies sift through data from multiple departments and arrange that information in charts and graphs.

The primary difference between Tableau and some of its rivals is that its software can be used by most office staff without the help of information technology departments, says Steven Ashley, an analyst for Robert W. Baird & Co.

"Tableau is coming into the market with tools that provide better visualizations of data that the common man or knowledge worker can use," he said.

In the quarter, Tableau reported a per-share profit, minus items, of 20 cents due to a one-time tax benefit vs. 4 cents in the year-earlier period. Analysts polled by Thomson Reuters had expected a break-even quarter. Revenue in the quarter jumped 95% to $81.5 million vs. the same quarter last year.

For the current period, the company said it expects revenue of $61 million to $63 million, or growth of 52.5% to 57.4% from the year-earlier quarter. Analysts had expected $60 million, or growth of 50%.

Many investors have a one-track mind when looking at Tableau, says Daniel Ives, an analyst for FBR Capital Markets.

"They are buying on the revenue growth; at the end of the day you can count on one hand the type of quality companies that are growing at this pace in these types of secular areas," he said. "Relative to expectations, they kind of blew the cover off the ball."

In the quarter, Tableau's license revenue grew 92.9% to $58 million vs. the year-earlier period. Revenue from maintenance and service shot up 99.6% to $23.4 million.

Tableau released a new version of its software in November and is planning another new version in Q2 and yet another next year.

During a conference call with analysts to discuss its earnings, CEO Christian Chabot said Tableau expanded relationships with several large existing customers, includingGoogle (GOOG) andFord Motor (F).

Expanding Use

Tableau's ability to find ways for customers to use its software is providing the fuel for much of its growth, Ives says.

"The new products help, but once Tableau gets in the door they are really able to expand their overall presence and that has been on their keys to success," he said.

Is it enough? Analysts expect Tableau's year-over-year revenue growth to begin to decelerate to 57% in Q1 and 45% in Q2 after a steady climb from 62% to 95% the past four quarters.

And Q1 is a particularly slow period for software companies.

Many of Tableau's deployments are in specific departments rather than across a company. Pushing beyond that boundary could compromise the business model that has made Tableau a favorite among knowledge workers and the reason for its success, Wood says.

"If they want to get into the market in signing bigger platformwide deals, they are going to need to tailor not just to the business user but to IT," he said. "When you start getting into bigger deployments, there is a need for security and schema and structure and compliance -- all of that stuff that IT needs to be in control of."

Investing In The Business

In the quarter, Tableau's sales and marketing costs rose 72.9% to $40.1 million vs. the year-earlier period while R&D spending climbed 76.2% to $18.2 million vs. the same quarter last year.

Tableau's global message is gaining traction. Its international business represented 22% of revenue in Q4 vs. 18% in the prior quarter.

Growth does come at a price.

"The biggest challenge is managing rapid growth," Ashley said. "If you are growing your business at 70%, 80%, 90% (annually) you have to hire 70% or 80% or 90% more people, more office space (and) more computer capacity."

Tableau must keeping pushing the big boys such as Oracle and SAP, said Ives: "There is a big opportunity in the installed base that is the traditional analytics vendors and it's really going after that opportunity. That is really the golden nugget."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: DATA , ORCL , SAP , IBM , WDAY

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