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Cloud Stocks: Tableau Grows Through Small Acquisitions

Posted on Wednesday, Feb 13th 2019

According to a report published late last year, the global Data Visualization Applications Market is expected to grow at 10% CAGR by 2026. The growth is expected to be driven by the healthcare industry as it leverages the application of MRI in several medical areas including cardiology, radiology, and oncology. Recently, Billion Dollar Unicorn Tableau (NYSE: DATA) announced its fourth quarter results but its weak outlook failed to impress the market.

Tableau’s Financials

Tableau recently adopted a new accounting standard ASC (Accounting Standards Codification) 606 that changes the way it recognized revenues. Revenues as per ASC 606 came in at $336.3 million. Revenues as per ASC 605 grew 10.5% over the year to $275.5 million, missing the Street’s forecast of $276.4 million. The company ended the quarter with a loss of $67.4 million. On an adjusted basis, it delivered a loss of $0.03 per share, significantly better than the market’s forecast of a loss of $0.08 per share.

By segment, license revenues came in at $170.8 million and maintenance and services revenues at $165.5 million.

It ended the year with revenues of $982.9 million and a net loss of $277.2 million or $3.36 per share.

Tableau expects to end the current year with revenues of $1.33-$1.4 billion with a non-GAAP net income of $1.54-$1.85 per share. It estimates to end the current quarter with revenues of $278-$292 million with a non GAAP net loss of $0.09-$0.01 per share. Analysts are forecasting revenues of $1.36 billion for the year with a net income of $1.61 per share and $292.1 million for the current quarter with a net income of $0.11 per share. The market wasn’t pleased with Tableau’s outlook and the stock slipped nearly 5% in the after-hours trading session. Some believe that the decline in the stock price was a mere correction for the over valued stock.

Tableau’s Growth Focus

Over the previous year, Tableau has been focused on moving from an up-front perpetual license-based model to a subscription-based model. During the last quarter, subscription annual recurring revenues grew 127% to $443.2 million. Total annual recurring revenue grew 41% over the year to $840.9 million with subscription annual recurring revenue growing 127% to $443.2 million. Tableau expects that by shifting to a subscription-based model, it will make it easier for its customers to scale and grow.

Tableau continued to release several product upgrades to attract more customers. It rolled out upgrades for Tableau Prep that use machine learning algorithms to help users fix common data quality issues faster. Tableau Prep accelerates data preparation by democratizing a complex task into a simple and visual process. Tableau is working on releasing an add-on called Prep Conductor to Tableau Server and Tableau Online. Prep Conductor will automatically schedule and manages Prep flows and will expand data management capabilities to its platform.

It is also working on a natural language processing solution Ask Data, which is currently in public beta stage. Ask Data uses natural language processing so that users can ask questions of their data in plain, simple language, and get an interactive visual response in Tableau. It is expected to be a part of the upcoming 2019.1 release for Tableau.

As part of its growth strategy, Tableau has also been acquiring smaller firms to build its portfolio. So far, the company has made four such acquisitions. Its latest acquisition was that of Empirical Systems that it acquired last year for an undisclosed sum. Empirical Systems offers AI solutions to perform statistical analysis on small data. Its platform had been developed at the MIT Probabilistic Computing Project and was useful to create generative models and offer probabilistic answers to ad hoc queries. Prior to the acquisition, Empirical Systems had raised $2.5 million in funding. Tableau is leveraging the acquired AI capabilities to deliver improved analytic solutions to its customers.

In 2017, Tableau had acquired Palo Alto-based ClearGraph. ClearGraph’s solutions provided customers with access to a semantic search platform that used context awareness and natural language processing to interpret and answer natural language queries. Its tools were focused on simplifying the process of discovering and understanding enterprise data. ClearGraph had raised $3 million prior to the acquisition.

Other older acquisitions made by Tableau include HyPer and Infoactive. Germany-based HyPer was a main-memory-based relational DBMS for mixed OLTP and OLAP workloads and was bootstrapped. Chicago-based Infoactive was also a smaller organization, having raised $50,000 to develop an online platform that provided web publishers with tools to create interactive, mobile-friendly infographics with live data. Terms of these acquisitions are not known.

Tableau has been picking up these smaller organizations to help develop its product’s capabilities and drive market expansion. The strategy has stood it well so far. What other acquisitions do you think it could make to keep building on this growth?

Its stock is trading at $125.78 with a market capitalization of $10.51 billion. It had climbed to a 52-week high of $133.74 earlier this year. It had fallen to a 52-week low of $77.32 in April last year.

This segment is a part in the series : Cloud Stocks

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