Alteryx (NYSE:AYX) Posts Better-Than-Expected Sales In Q4, Stock Soars

Full Report / February 09, 2023
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Data analytics and automation platform Alteryx reported Q4 FY2022 results beating Wall St's expectations, with revenue up 73.2% year on year to $301.1 million. Guidance for next quarter's revenue was $200 million at the midpoint, 2.07% above the average of analyst estimates. Alteryx made a GAAP loss of $31.7 million, improving on its loss of $37.5 million, in the same quarter last year.

Alteryx (AYX) Q4 FY2022 Highlights:

  • Revenue: $301.1 million vs analyst estimates of $279.3 million (7.79% beat)
  • EPS (non-GAAP): $0.84 vs analyst estimates of $0.51 (64.1% beat)
  • Revenue guidance for Q1 2023 is $200 million at the midpoint, above analyst estimates of $195.9 million
  • Management's revenue guidance for upcoming financial year 2023 is $985 million at the midpoint, beating analyst estimates by 1.81% and predicting 15.2% growth (vs 57.8% in FY2022)
  • Free cash flow was negative $557 thousand, compared to negative free cash flow of $67.3 million in previous quarter
  • Net Revenue Retention Rate: 121%, in line with previous quarter
  • Customers: 8,358, up from 8,340 in previous quarter
  • Gross Margin (GAAP): 89.4%, down from 90.5% same quarter last year

Initially created as a way to organise census data for the government, Alteryx (NYSE:AYX) provides software that helps companies automate and analyse their internal data processes.

Analyzing data across a multinational company with millions of data sources creates a lot of complex processes that are difficult for analytics teams to keep track of.

It is essential for large companies to keep track of their data and be able to properly analyze it. Today, with an exponentially growing amount of data points there are full business analytics teams focused on making sure company data is properly being captured and analyzed. Alteryx helps companies automate their complex data and analytics processes to get actionable insights from their data more quickly and efficiently. By saving companies time and streamlining data capturing and analytics processes, Alteryx customers are able to spend more time analyzing their data and using it to improve their business.

Alteryx works through standardizing the data capturing process which is called ETL in the industry or “Extract, Transform, Load”. It is extremely important for companies to get their data from various sources into a standardized platform so that data can be turned into business insights. After automating the data capturing process Alteryx helps companies automate the analysis of their data through machine learning models which are custom built to each customers unique business goals. Alteryx can then turn a customer's real-time data into an automated and actionable workflow without a human in the loop. For example, an ice cream stand using Alteryx could capture the data of how much inventory they have, use machine learning to determine when to order more, and create an automated workflow to ensure they never run out of ice cream with little human supervision.

Organizations generate a lot of data that is stored in silos, often in incompatible formats, making it slow and costly to extract actionable insights, which in turn drives demand for modern cloud-based data analysis platforms that can efficiently analyze the silo-ed data.

Other providers of tools to help companies process and analyse their data include: Amplitude (NASDAQ:AMPL), Domo (NASDAQ:DOMO), Health Catalyst (NASDAQ:HCAT), Palantir (NYSE:PLTR)

Sales Growth

As you can see below, Alteryx's revenue growth has been very strong over the last two years, growing from quarterly revenue of $160.5 million in Q4 FY2020, to $301.1 million.

Alteryx Total Revenue

This was a standout quarter for Alteryx with quarterly revenue up an absolutely stunning 73.2% year on year. which is above the two year trend for the company. On top of that, revenue increased $85.4 million quarter on quarter, a very strong improvement on the $35.1 million increase in Q3 2022, and a sign of re-acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Alteryx is expecting revenue to grow 26.6% year on year to $200 million, slowing down from the 33% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $985 million at the midpoint, growing 15.2% compared to 59.5% increase in FY2022.

Customer Growth

You can see below that Alteryx reported 8,358 customers at the end of the quarter, an increase of 18 on last quarter. That is a little slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Alteryx Customers

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Alteryx Net Revenue Retention Rate

Alteryx's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 121% in Q4. That means even if they didn't win any new customers, Alteryx would have grown its revenue 21% year on year. That is a good retention rate and a proof that Alteryx's customers are satisfied with their software and are getting more value from it over time. That is good to see.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Alteryx's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 89.4% in Q4.

Alteryx Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.89 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a great gross margin, that allows companies like Alteryx to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Alteryx burned through $557 thousand in Q4, with cash flow turning negative year on year.

Alteryx Free Cash Flow

Alteryx has burned through $135.9 million in cash over the last twelve months, a negative 15.9% free cash flow margin. This low FCF margin is a result of Alteryx's need to still heavily invest in the business.

Key Takeaways from Alteryx's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Alteryx’s balance sheet, but we note that with a market capitalization of $4.18 billion and more than $341.8 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth Alteryx delivered this quarter, and we were also glad to see the improvement in gross margin. Additionally, revenue guidance was ahead of expectations for both the upcoming quarter and full year. Zooming out, we think this was strong quarter. The company is up 9.24% on the results and currently trades at $65.64 per share.

Is Now The Time?

When considering Alteryx, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. Although we have other favorites, we understand the arguments that Alteryx is not a bad business. We would expect growth rates to moderate from here, but its revenue growth has been strong, over the last two years. And while its growth is coming at a cost of significant cash burn, the good news is its impressive gross margins are indicative of excellent business economics.

Alteryx's price to sales ratio based on the next twelve months is 4.3x, suggesting that the market is expecting more moderate growth, relative to the hottest tech stocks. We don't really see a big opportunity in the stock at the moment, but in the end beauty is in the eye of the beholder. And if you like the company, it seems that Alteryx doesn't trade at a completely unreasonable price point.

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