The data analytics industry has been big news this year, and for good reason. Businesses are spending hundreds of billions of dollars, possibly trillions, to update their operations for the digital age. Tools that make sense of all that new digital data are thus in high demand. Google parent Alphabet and salesforce.com have both spent billions to acquire analytics firms, and a new firm, Datadog, recently hit the market toting a valuation of $10 billion.
Not to be left out of the conversation is the (relatively speaking) old dog Alteryx (NYSE: AYX). Alteryx stock is up 76% over the trailing 12-month stretch, which includes a recent tumble along with other high-flying software companies late in the summer. Growth reaccelerated during the company's 2019 third quarter, though, and management sees plenty left in the tank in the years ahead.
2019 keeps getting better
The company's Q3 revenue grew 65% year over year to $103 million. Alteryx landed 335 new customers in the quarter, bringing its total count up to 5,613. Management said that only 683 of those relationships are in the Global 2000 (a list of the world's largest publicly-traded companies), leading to the belief that there's plenty of room to keep adding big new customer contracts.
Besides new clients, Alteryx has also been able to steadily grow its relationship with existing ones. Its dollar-based net expansion rate came in at 132%, implying that the average existing customer spent 32% more in the last quarter than it did a year ago.
The bottom line adjusted for one-time items and stock-based compensation also improved from the year prior, rising 38% to $16.4 million. Alteryx is all about growth now and maximum profits later, still, it's heartening to find a high-growth technology outfit that's operating in the black. All told, pairing Q3 with the first half of 2019 yields some impressive results for this data analytics outfit.
|Metric||9 Months Ended Sept. 30, 2019||9 Months Ended Sept. 30, 2018||Change|
|Revenue||$261 million||$164 million||59%|
|Gross profit margin||89.7%||90.2%||(0.5 pp)|
|Operating expenses||$235 million||$140 million||68%|
|Adjusted earnings per share||$0.30||$0.28||7%|
Data source: Alteryx. Pp = percentage point.
Alteryx on growth, acquisitions, and the future of data
It's been an impressive run for the software company, especially considering that Alteryx isn't a new kid on the block. The company was founded over two decades ago in 1997, but the torrid pace of digital data creation and the digital transformation movement of the past couple of years has supersized its expansion as of late. CEO Dean Stoecker cited a report from tech researcher IDC during the last earnings call that predicts organizations could spend $2 trillion on digital upgrades in 2019 alone. That's been a powerful tailwind for Alteryx and the broader big data industry, and Stoecker explained that he sees his company's software platform as a means to drive that digital transformation.
Image source: Getty Images.
Specifically, one of the themes Alteryx is being tapped for is automation. Data scientists have moved beyond just putting together charts and graphs -- that's what the computer does now. Instead, they're spending their time helping make business decisions and making complex assumptions with data sets. To aid with the automation of lower-level tasks, Alteryx announced in October that it has acquired Feature Labs, a machine learning start-up that originated out of MIT.
In its acquisition press release, citing data from Gartner, Alteryx said that 40% of data science tasks will be automated by next year. Feature Labs uses artificial intelligence to help train digital systems and collect the right data, leaving data scientists and business analysts to make sense of the information to drive better outcomes. With automation on the rise, the tiny firm should be a natural fit for what Alteryx is already trying to do.
As for the outlook, management did forecast a slowdown during Q4. Revenue should be $128 million to $131 million, marking an improvement of 44% over a year ago and good for $0.27 to $0.30 in adjusted earnings per share. It's a sharp drop in growth rate from what was just posted in Q3, but management has been conservative with guidance recently, so another surprise to the upside could be in store. Either way, it's clear that this data software company is still going strong and is worth keeping an eye on.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo and his clients own shares of Alphabet (C shares), Alteryx, and Salesforce.com. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Alteryx, Datadog, and Salesforce.com. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
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