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Cloud Stocks: Analysis of Alteryx PaaS Strategy

Posted on Tuesday, Aug 25th 2020

Data science and analytics platform provider Alteryx (NYSE: AYX) early this month reported its second quarter results that beat analyst estimates. However, its disappointing outlook sent its stock sliding.

Alteryx’s Financials

For the second quarter, Alteryx’s revenue grew 17% to $96.2 million beating analyst estimates of $93.8 million. GAAP gross profit was $86.6 million, or a GAAP gross margin of 90%, compared to GAAP gross profit of $72.7 million, or a GAAP gross margin of 89% a year ago. GAAP net loss was $(35.3) million, compared to GAAP net loss of $(3.2) million a year ago. Non-GAAP net income was $1.7 million or $0.02 per diluted share compared to non-GAAP net income of $0.9 million or $0.01 per diluted share a year ago. Analysts expected loss of $(0.14) per share.

At the end of Q2, it had cash, cash equivalents, and short-term and long-term investments of $974.4 million, compared to $974.9 million as of December 31, 2019.

With customers going for higher levels of scrutiny, sales cycles have elongated, and deal sizes have become smaller. It ended the quarter with 6,714 customers, up 27%, with 271 net new customers. It achieved a dollar-based net expansion rate of 126%. It ended the quarter with over $430 million in ARR, an increase of over 40%.

For the third quarter, revenue is expected to be in the range of $111 million to $115 million or a growth range of 7%-11%. Non-GAAP net income per share is expected to be in the range of $0.09 to $0.14. For the full year 2020, Alteryx expects revenue of $460-$465 million, a growth range of 10% -11%. Analysts were expecting 15% growth for the third quarter and 21% for the full year.

Alteryx’s New Offerings

Alteryx recently introduced its next generation Alteryx Multi-threaded Processing engine, or AMP. It allows customers to execute workflows simultaneously, resulting in processing efficiency on larger data sets with complex analytical processes. While not a stand-alone SKU, the AMP engine is shipped with every Designer, Server, and Analytics Hub.

Alteryx has been investing on improving its analytic process automation (APA) platform, which unifies analytics, data science and business process automation in one, end-to-end platform. To extend the functionality of the APA platform, it introduced Alteryx Analytics Hub and Alteryx Intelligence Suite. Alteryx Intelligence Suite provides a designer add-on bundle of assisted modeling for building robust machine learning and advanced analytic models in a code-free environment. Intelligence Suite’s text mining and natural language processing building blocks also deliver improved capabilities for working with semi-structured and unstructured data through OCR recognition, sentiment analysis, and topic modeling. Early customers include Siemens Gas and Power, Bell Canada, QDOBA Restaurant, Mars, General Dynamics, and the U.S. Naval Research Lab.

Alteryx Analytics Hub helps in up-leveling automation, collaboration, and data discovery in a secure and governed way, allowing everyone across the entire enterprise to benefit from actionable data and analytics. Hub blurs the lines between the design time experience in Designer and run time automation in Server and provides an affordable path for smaller work teams to leverage the benefits of automation.

Alteryx’s PaaS Strategy: Platform or API

Alteryx’s APA platform is used in over 6,400 companies globally and in over 37% of the Global 2000 to democratize data across an organization, automate business processes and upskill people.

Alteryx’s PaaS Strategy: Developer Community

The pandemic has pushed engagement levels and user growth across its developer community. There has been over 60% growth in the monthly active users of Community. Last quarter, Alteryx launched the Advancing Data and Analytics Potential Together (ADAPT) program to offer free data analytics training. So far, nearly 10,000 people from 125 countries have participated in the program. A recent drive to recruit student developers also garnered strong response.

Early this year, Alteryx announced a five-year partnership with PwC U.S. As part of the agreement, PwC will leverage Alteryx’s data science, analytics, and process automation platform as part of its consulting and digital solutions. PwC recently indicated that they have 55,000 users of Alteryx Platform. Alteryx further broadened its partner network by adding Adobe and UiPath as its technology partners.

Alteryx Partner ecosystem depends on partnerships with global system integrators, leading technology companies, global consulting firms, and major data partners to deliver powerful business outcomes. It also teams up with resellers, consultants, and analytic experts with a deep understanding of the Alteryx Platform across verticals to deliver value to its mutual clients.

While smaller VARs are part of their ecosystem, we have not yet seen an ISV ecosystem emerge on their PaaS. This is the likely evolution of their PaaS strategy.

Alteryx’s PaaS Strategy: Marketplace and Metrics

Alteryx doesn’t have a marketplace of products from developers yet. However, in its recent earnings call, it talked about a potential marketplace for third parties to monetize assets to the growing audience of Alteryx users.

For companies to get the most out of their PaaS strategy, it is vital to share metrics and how much they are making from this strategy. We need more metrics on how many apps they have, how many developers are developing apps on their platform, how do the developers make money, etc. We want to see more from Alteryx by way of ecosystem metrics.  

Its stock dipped on its disappointing outlook. It is currently trading at $109.96 with a market cap of $7.28 billion. It hit a 52-week high of $185.75 in July this year. It hit a 52-week low of $75.17 following the COVID-19 crash in March.

This segment is a part in the series : Cloud Stocks


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