Alteryx | S-1 Breakdown

Alex Clayton
Mar 1, 2017 · 7 min read

Company and Product Summary

Alteryx, a leader in SaaS self-serve data analytics, filed for a $75M IPO. Goldman is the lead bookrunner (same as MuleSoft a couple weeks ago) and they plan to trade under the symbol, “AYX”. Alteryx was actually founded in 1997, but has been in its current form since 2010. Data is exploding within enterprises and while there are a plethora of data visualization tools at the application layer, preparing and blending data to make it consumable to the business analyst is challenging — this is where Alteryx comes in. Alteryx’s growth been accelerating and they did $85.8M in revenue in 2016, up 59% YoY. They grew the previous year at 42%. Alteryx also ended 2016 with $94.9M in implied subscription ARR (annual recurring revenue). The company has over 2,300 customers in more than 50 countries, and over 300 of the Global 2000. Alteryx ended 2016 with 424 FTEs and is based in Irvine, CA. As I wrote here, I expect more and more SaaS companies to file in the next few quarters. We’ve had AppDynamics, MuleSoft and now Alteryx in the last 2 months.

While Alteryx is in the analytics space, they are a partner to companies like Looker, Tableau, and Microsoft (PowerBI). Their ability to prepare, cleanse and blend together data from any source, and easily plug into application-layer BI applications (like those I mentioned above) is their core differentiator. We all know data is expanding at an exponential rate and is roughly doubling every two years. Enterprises know all this data can enable leaps in productivity and significantly increase strategic decision-making abilities, yet IT in many cases lacks the capability to easily bring the data together in one place for analysis. Current methods are manual, slow and difficult. Moreover, Alteryx not only lets business users make sense of data they have a suite of collaboration tools, making data shareable and accessible across enterprises. All of this is built to be self-serve and can be deployed either in the cloud or on premise. Below are a couple illustrations showing traditional methods vs. their platform.

Traditional Methods

Alteryx Platform

Alteryx has 2,328 customers across 50 countries, with customers from all industries including the likes of Ford, Kaiser, Nike, Southwest Airlines, Cisco, Tesco and many others. Revenue is 95% subscription and no customer accounts for more than 10% of total revenue. Their implied subscription ACV (annual subscription contract value) was $40.7K last quarter, which has been going down the past few years (more on that below), and while they mostly sell through direct sales/marketing channels, they employ a land-and-expand business model. Their sales often begin with a free trial and bubbles up within enterprises, and most deployments begin with an individual data analyst / user. Alteryx charges subscriptions by users and contracts are mostly 1–3 years in length.

Market Opportunity

Alteryx’s product addresses the BI and analytics tools, data integration and spatial integration markets, which represented $18B in spend in 2015 and is expected to grow to $27B by 2020 (IDC). There are also 21M Excel spreadsheet users (IDC) that could potentially be using Alteryx’s software, representing an additional $10B in spend.

Competition

The company competes mostly with manual processes — Excel spreadsheets or custom built, internal tooling. They also compete with incumbent software and services vendors like IBM, Microsoft, Oracle, SAP and SAS. TIBCO and MicroStrategy also have products that compete. I do think if Alteryx continues to succeed, some application-layer visualization vendors like Tableau or more full-stack BI vendors like Looker could move deeper into the data stack and potentially compete.

Investors

The company has reportedly raised $163M from investors including Insight, Sapphire Ventures, Thompson Reuters, Toba Capital, ICONIQ, and Meritech. 5%+ pre-offering VC shareholders include Insight (27%), Sapphire (13%), Toba (6%) and ICONIQ (5.6%). Their last reported valuation was $765M (post) in an $85M round led by ICONIQ and Insight in Oct-2015.

Financials and Metrics

Alteryx has been growing revenue at a 50% CAGR over the past 3 years, and did $85.8M in revenue in 2016, up from $53.8M in 2015. As I mentioned earlier, Alteryx’s revenue growth has been accelerating while their ACVs have declined. Over the past 8 quarters, their implied subscription ARR has grown almost 120% ($43 → $95M), while ACVs have shrunk almost 30% from $58K to $41K. Typically, you see companies increasing ACVs as they move further up-market. Although, during the same time period their net revenue retention has increased from 123% to 135%. It’s clear the company has embraced a land-and-expand GTM strategy and it’s having a positive impact on revenue growth. Their customers start most often with a user, or department, and expand. For example, customers in their 2014 cohort expanded 2.7x in 2016 from initial purchase. Furthermore, I do think a major macro factor impacting their growth is the explosion in self-serve visualization tools across the board — companies want to analyze data (whether with Tableau, Looker, Qlik, PowerBI, etc) and realize they need a way to prepare, cleanse and blend it.

Another interesting stat is that in 2016 only 8% of revenue came from new customers, down from 11% in 2015, again highlighting the land-and-expand nature of the business. Alteryx’s operating margin was (27)% in 2016, down from (53)% in 2014, and the absolute operating loss dollar figure has been ~$(20)M/year over the last 3 years. In terms of sales efficiency, their average payback period over the last 8 quarters was 26 months (non-GAAP), although last quarter’s was 20 months and it’s been improving. Even though that’s not a great number, it doesn’t feel hard to justify given their high net revenue retention numbers. You can see other public SaaS company averages here. Cash burn from operating activities was only $(6)M in 2016, down from $(8)M in 2015. You can see outputs of their metrics below.

Annual P&L GAAP (000's)

Quarterly Subscription Revenue ($M)

Note: Subscription revenue was ~95% of total revenue in 2015 and 2016.

Implied Ending ARR Over Past 8 Quarters ($M)

Alteryx is growing their implied ARR quickly, although their net new ARR is not growing sequentially quarter-over-quarter as you can see in the chart below. Over the past year, they have added over $36M of net new implied ARR.

Note: Implied ending ARR calculated by multiplying quarterly subscription revenue by four.

Customers by Quarter

Implied ACV (annual contract value) by Quarter

Note: Calculated by taking quarterly implied subscription ARR over customers in the quarter.

Dollar-Based Net Revenue Retention Rate

Cohort Output from S-1

Cash Flows (000's)

Quarterly P&L (000's)

Note: All numbers in 000’s except Implied ACV.

Valuation

As always it’s hard to know what the exact valuation will be, but I expect Alteryx to be priced/trade like other fast-growing SaaS companies and the primary valuation metric will be an EV/NTM revenue multiple (enterprise value over next-twelve-months revenue). High-growth software companies trade at a ~5x NTM revenue median, and some closer to 10x (this comp set includes businesses like Salesforce, Workday, ServiceNow, Veeva, etc). Even though they are very different businesses, I think Alteryx’s valuation will be affected by MuleSoft’s IPO and how it trades, which is expected in the next few weeks. Looking at the simple math, you can see the range of enterprise values below.


Alteryx has become a leader in the data analytics/preparation market and is enabling enterprises to make better, data-driven decisions. The management team must have taken a leap of faith to shift the go-to-market to be more bottoms-up in nature, and clearly it has paid off. I’m hoping for a very successful IPO and congrats to the Alteryx team.

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