FEBRUARY 12, 2020
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Patterns
matter, like habits. Grasping their way matters more. On the Super Highway of Now data’s king and those without only pick around the edges. “Data” you patter? Think sports stats, or Invine-based Alteryx. Yup. AYX reports on Thursday, and there’s a pattern. That’s why we’re writing you now. We think this pattern is actionable.
Actionable insight is what Alteryx is also all about–using data analysis to drive productivity, direction, and focus. For our purpose the pattern’s in their chart. We’ve got those too. Each time AYX reports investors behave much the same way. We know that because we looked, and now’s the time to know.
When economies slow cyclicals slip to your portfolio’s back side. That’s a pattern also, that’s industrials, materials, staples, energy, real estate. What’s left? IT, secular growth, and that’s “Alteryx Again and Again. The Pattern You Can Play.”
Many
smart people will tell you that the international economy is slowing. The unfortunate coronavirus epidemic is already a factor in China’s GDP. Energy, materials, and financials crowd the bottom of the sector performance stack year-to-date. Who’s outperforming? Utilities sit on top followed by IT. Utilities are viewed as steady-eddy income. Info tech is secular growth. So is Alteryx. They’re up 19.3% in 20 days, and 44% YTD.
Is Alteryx a good stock? Yes. Is AYX a buy? Wait. This software as a service(Saas) company has 15 analysts following, with 7 Buys, 4 Outperforms, and 4 Holds. Alteryx is part of the cloud plays, thus a secular–no roaring economy required. They don’t need a roaring economy to thrive. And thriving they are. “Expensive” you ask? Relax, they’re as expensive as dental reconstruction. Hold-up. Who the hell is Alteryx?
Irvine-based Alteryx provides customers, now including Amazon UK Services and Microsoft, the ability to easily aggregate, blend, cleanse, analyze, and share previously incompatible data all on a drag-and-drop platform. Not a coder? No prob. AYX “democratizes data,” in that it’s code-free. And the system is easily scaleable to any size by “the seat.” Grab yo seat–it’s a new age. Analysis includes statistical, prescriptive, and predictive, analysis. The analytic results allow modeling that is both testable and deployable directly into workflows. AYX is also transforming the process into an automated software as a service(Saas) offering to include “end-to-end” automation, now the true target. In short they turn machine gibberish into gold and offer that process almost like a plug-in box.
The market giveth and taketh away. Cutting-edge quality costs. Secular stocks, or growth in any market, often don’t come cheap. Again–never worry. Alteryx is as expensive as hell. Yet when questioned about paying up for transformative growth what did Benjamin Franklin have to say? “By the time the future reaches the kitchen table, it’s the past. Those too cheap to pay, should go away.” Ben had little tolerance for fools, and quickly added “Data is king and Alteryx isn’t a prince. It’s profitable now.” Of course it is, unlike so many Saas cloud companies. Many are yet priced on that sick-producing price/sales metric, because that’s all they’ve got. Not AYX.
Q3’s
earnings call revolves around several themes, mainly the digital revolution, the automating of data analysis, and success in carrying that message more widely. Companies are coming on-board, realizing that their future resides in data analysis and the need to automate that formerly extravagantly-expensive process.
“Our conversations used to revolve around ‘who are you guys?’ Now they’re about what we do, the digitizing and automation of the analytic process.”–CEO Dean Stoecker. Alteryx.
The process of analytics is transforming–increasingly moving to machine learning. Alteryx is currently providing the leadership in what CEO Stoecker calls “a very noisy and crowded space.” Alteryx provides both the “citizen and the data scientist” the flexible tools to easily create usable results, and models, ones easily deployed directly into customers’ operations. The company refers to this as “Democratizing data,” and it’s indeed a recurring company catch phrase.
This
company seems to be doing what no one else has ever been able to do, and they’re selling “seats” or–we assume work station subscriptions–to the platform. Got a big operation? Contract more seats, to a platform as simple as “drag-and-drop” or complex, coded, and customizable, for your data specialist. A metric you’ll hear when listening to them is “TCB” or total contract buy. Again, their system aggregates, blends, prepares, and analyses data from previously incompatible sources.
AYX is a data mulcher. In goes Styrofoam, old travel brochures, a squirt of bourbon, and a line of linux–bam. Insights you can use.
With the Alteryx platform companies save vast amounts of time, increasing productivity in two ways–directly and through insights generated then employed. The time they save is that of highly-trained and expensive data specialists. Why? Anyone can do it. They receive the juicy insights of data about their business, driving better decisions and focus.
On
October 31st out in Irvine Alteryx announced quarterly revenues of $103.4 million, posting a year-over-year growth rate of 65%. Nice. They collected four “congrats” from analysts on the call. That’s good. The consensus EPS estimate was for $0.0860. Actual non-GAAP was $0.24. That means AYX posted an EPS beat of 179%. What did they get for that? Shares bled down for days, and then went sideways. What else?
-GAAP Gross Profit $93.8m., up 61% y/y.
-Gross Margin of 91%.
-Non-GAAP income from operations $22.0m., up 53.8% y/y.
CFO Kevin Rubin explains. “Results were driven by execution, a product mix skewed to the higher end of the range, and longer contract duration. Contracts range between 1-3 years, averaging 2.”
Q3 saw 335 new customers for the company, bringing their total to 5613, including 683 of the big global 2000. That’s 34%.
Among the new comers are some big names; Amazon UK Service, Microsoft, Work Day, and Uber Technologies. What did management say about that? “We’re actually very happy with our new customer add. They’re very much the right customers.”
Alteryx now has $986.5m., or nearly a billion dollars to work with. They nearly doubled their cash in nine months. That qualifies as a serious move.
Cash flow from operations increased by $1.8m., a respectable 15.4%, from $11.7m. to $13.5m.
What kind of “color” was offered about results and the business? “We do believe rev. is the most relevant indicator of growth in the business.”
In the relatively now “Inspire” conferences the company now does, Stoecker adds that “The talk has changed from ‘who are you guys’ to exchanges about data transformation. driving a culture of data scientifics.”
Comments emerged concerning what the company refers to as “partnerships.” Who and what are they? One; “In market co-selling partners. Two; Resellers.” Three; “The big six accounting firms.” Stoecker adds that all are “carrying the message” concerning the transformative the company offers.
CEO Stoecker sums up the space and business: “It’s a very noisy crowded space. Unless you’re going end-to-end you’re probably going to the wayside.”
Guidance:
Fourth Quarter:
Q4 revenue range between $128-131m. or 44-47% y/y.
Non-GAAP Income between $26-$29m.
Non-GAAP EPS between $0.27-$0.30.
Full year 2019:
Revenue between $389.0 to $392.0, and increase of 53% to 55%.
Non-GAAP Operating Income between $50.0-$53.0 million.
Non-GAAP EPS between $057-$0.60.
Q4’s Consensus and Compare
The consensus estimate for Q4 is $029 a share, near the top of the company’s $027-$0.60 range. The year-over-year comparison is against a ($0.01) loss. That’s known as an “easy compare.”
_The Pattern_
Alteryx Inc. AYX: NYSE 2-11-20
Volatility
is the word for extended hours trading. It goes both ways and can be used both ways. Often prices move abruptly just as an earnings report is released. Often however, the largest moves occur during the initial conference call. Example. Ford’s share price plunged the minute earnings were released on he 4th. We bought the drop and then idiotically stopped monitoring. An hour later we discovered that a 5-minute spike occurred which sent prices up more than a dollar a share. Oops. And bam–the price vanished.
We’re leaving Ford, but were 4.5% down on the day F reported. We had cut our position in half on strength prior to the report. When prices plunged on the release, we bought back hundreds of shares at $0.86 lower. The 10.5% spike occurred during the call. We missed it, when we could have sold right then, realizing hundreds in minutes. We could then have bought it back in 5 minutes, at a dollar a share lower. Really. Look at the 5-minute chart.
Multiple bites at the apple. Playing the AYX earnings pattern. If AYX spikes 10% anytime during Thursday’s after-hours session we intend to sell. 10% is a great kicker. We’ll be monitoring on a 5-minute chart, through the conference call. Sell and buy back as it goes is the process. Why? Programmatic institutional trading moves prices up/down by employing set buy/sell points. Example. We’ve witnessed Square(SQ) hit the same high and low three times in 15 minutes. If we’re still in, we intend to sell out on Friday, and watch for a repeat of the multi-day decline to buy again, if the price declines enough.
Patterns are not guarantees. Yet the observed pattern here seems worth the attempt. AYX is a good candidate, because it’s a good story, company, and stock. We want to own it longer-term. Yet this market is unstable. Alteryx’s earnings behavior demonstrate how to sell higher and buy back lower. If we sell and it doesn’t drop, we have profits and can wait. That’s a high-quality problem. We can also simply look elsewhere. If it does drop in the days following, we can buy it again. If it spikes above our sell price, only greed generates unhappiness.
Alteryx Inc. AYX: NYSE 2-11-20
Alteryx
just filled-in a five month U-shaped drop. It bounced off resistance at $144.92 on the 4th(see top chart.) Shares had punched down 40.6% from $147.19 on September 6th to a low of $87.42 on October 22nd. Since then AYX has climbed straight up 63%(as measured from a Tuesday intraday price of $142.52.) No climb lasts forever and this one’s been spectacular. Profit-taking is only wise. Others will do so on this report–for certain.
Why take profits in a company with a bright future such as Alteryx? Unrealized gains are only digits, and long-term investing is only investing when you sell. Otherwise it’s called owning. Abiding uncertainty dominates economic conditions. We’ve simply moved from a trade war to an epidemic. All indexes are banging away at repeat all-time highs, a circumstance which can not last. Such circumstances breed nervous quick-trigger profit-taking in both traders and investors.
With a 63% climb behind, just enforced resistance immediately above, and a pattern of post earnings declines, selling half or even more of an Alteryx position on earnings is only sensible. It’s called “playing the odds.” Good luck and good investing.
Alteryx IR
Q3, 2019 Earnings Press Release
https://s22.q4cdn.com/730379107/files/doc_financials/2019/q3/AYX-Q3-Earnings-Release_FINAL.pdf
Jam of the Day
“We Back”
https://www.youtube.com/watch?v=23nlI9t4TlM
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You had me smiling all the way through….you little trader you… 🙂
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