Alteryx's CFO: Companies Want to Better Understand Their Data Right Now

In a talk with TheStreet, Alteryx CFO Kevin Rubin discussed the COVID-19 pandemic's near-term impact, as well as Alteryx's strategic thinking on R&D and M&A.
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Though it has led Alteryx’s  (AYX) - Get Report deal activity to slow, the current macro environment has also sparked a greater interest among companies in making better sense of their data, the company insists.

Alteryx, whose software underpins many corporate data science and analytics projects, is six days removed from beating Q1 revenue estimates and issuing below-consensus Q2 revenue guidance. With deal activity having slowed sharply in March before improving some in April, the company guided for Q2 revenue to be up 10% to 15% annually, a slowdown from Q1’s 43% clip.

Alteryx’s stock, which is up more than nine-fold from its $14 2017 IPO price, initially sold off following its Q1 report. But shares more than recovered their losses on Friday, and are now above pre-earnings levels.

On Monday, I had a chance to talk with Alteryx CFO Kevin Rubin for a second time (the first interview, which took place in Aug. 2019, can be found here). Here are Rubin’s comments on current business conditions and Alteryx’s strategic thinking, slightly edited for clarity.

How business has trended so far in Q2.

Rubin: “Although we saw a fairly abrupt slowdown in March, we did see activity in April of 2020 fairly consistent with the level of activity we saw in April 2019. So conversations with customers became more productive, we saw new logos around the same level we had seen in April.

So there was a resumption in business activity in April, in spite of the abrupt slowdown that we experienced in March.”

On being more flexible about payments with companies currently facing financial challenges.

Rubin: “We’ve had [a small number of] customers with outstanding invoices who have reached out and asked for accommodations, which we’ve generally provided. So we’re working with customers specifically in what we’ve defined as impacted verticals -- travel, hospitality, manufacturing, retail, etc. -- we will work with them on a payment program that will meet their business needs given the impact they may have had.

And we’ve had a small number of customers who were placing new deals who have asked for more flexibility around payment terms. And again, where we have a history with the customer and the only issue is what’s going on in the world, we’ve generally worked with them as well. So we are trying to accommodate as many customers as we can through this cycle.”

What Alteryx has been hearing in talks with clients.

Rubin: “I think, generally speaking, what we have seen across all verticals, and through conversations with various level of executives at those companies, I think this [environment] is accelerating everybody’s desire to better understand data.

“I think at the end of the day, we are seeing a renewed interest in how data impacts these companies...Companies that previously thought they could get by without really focusing on data initiatives are recognizing pretty quickly that’s not the case.”

The strategic positioning of Alteryx’s analytic process automation (APA) platform, which was unveiled on Monday morning and is declared to unify “analytics, data science and business process automation in one, end-to-end platform.”

Rubin: “We announced basically a new category, analytics process automation, or what we’re calling APA...In our mind, that’s the convergence of data, process and people. A lot of the business process automation that exists in the world...it’s essentially automating the remedial, mundane tasks of an individual person...something that has to do with the activity that a human is doing.

We’re actually talking about something much broader than that, which is really automating business process that is convergent with data and analytics to help make better decisions through the people that monitor those processes...This is essentially transforming how businesses are leveraging their data assets, optimizing process and upscaling their individuals.

When you think about it, most of what data work has been in has really been in trying to get to the answer and there’s been very little effort around how you actually interpret the answer and make decisions. We’re trying to automate all of that work to allow the workers to spend most of their time actually interpreting and making better decisions.”

How much Alteryx has been seeing rival offerings from Tableau Software -- now owned by Salesforce.com -- and Microsoft when competing for deals.

Rubin: “We have actually not seen Tableau much at all. I think Salesforce  (CRM) - Get Report is still trying to digest and figure out how to best position Tableau. And best we can tell, they’re basically sending the Tableau reps who are now overlays into all of the Salesforce accounts and just trying to push digitalization through those accounts. Which frankly, would be incredibly accretive for Salesforce, but we’re not really seeing much of Tableau in our conversations.

With respect to Microsoft  (MSFT) - Get Report, it’s kind of the same. Keep in mind, we are tending to sell directly to the line of business and those departments that are actually running business. Microsoft mostly sells to IT, and so we’re generally in very different conversations. We’re solving the direct business problem, whereas Microsoft tends to just package a lot of their technologies into [enterprise license agreements] and tries to push them down that way. So we really haven’t seen any material impact at this point.”

On whether Alteryx plans to offer hosted, SaaS versions of its Alteryx Designer and Alteryx Server products.

Rubin: “We don’t get customers asking us to host Designer or Server on their behalf. And some of that just comes down to performance. If it’s a multi-tenant, SaaS, hosted product, you have to deal with problems such as a noisy neighbor and throttling and actual performance. The types of analyses that our customers are doing is pretty intense. So that’s not where the conversation tends to go.

Where we have been pretty vocal, and [what] customers seem to be resonating with, is the notion of, ‘Can we deploy the Designer product in a browser to allow our largest customers a much easier way to deploy the software?’ Thick client on a desktop is much harder to manage than just simply entitling a user and having them go to a browser. We did show a prototype version of that at our conference last year. That’s kind of the direction we’re going.

At some point, I imagine, for some class of customer, we’ll introduce a cloud version. Frankly, in doing so, the concept of Designer and Server may end up blending together. Because we would essentially offer much of what Server offers through that service. But really, the focus is on, how do we help our largest clients massively deploy Designers through a browser rather than a thick client install.”

The impact of COVID-19 lockdowns on sales productivity and deal implementations.

Rubin: “Obviously as we got into March, we did see a reduction in overall productivity. That was our commentary on the call. We also noted that we were pretty surprised at how quickly we were able to shift to work-from-home environments...We gave an example of a European bank with 12 order forms, 16 Designers and 16 locations that we were able to facilitate execution remotely [for].

Our ‘land’ business -- attracting new customers -- has largely been inside sales, over-the-phone, online types of transactions. So that really wasn’t much of a shift for those sellers...Our field sales organization, [which] is responsible for expanding the customers, had to pivot their method to remote. But at the same time, their customers were remote, so we were kind of doing so together.”

Where Alteryx is looking to direct R&D investments going forward.

Rubin: “Part of what you’re going to see from us under this new defined category of APA is significant innovation over the next 12 to 18 months. More so than you’ve probably seen from us previously at all.

“And that innovation is going to come from a couple different directions. You kind of touched on it with AI, ML, just call it advanced data science. You’re going to see quite a bit of innovation coming out of the Feature Labs acquisition that will be part and parcel of the APA platform.

“We also are going to continue heavy innovation around ease of use. That is a big pillar of our development efforts. [Our goal is] not just to make the platform more sophisticated, but [to] make it just drop-dead easy for data workers who may not have as much comfort and experience working with data...And then how do you take data analysts and move them up the curve to behave like data scientists? And so you’re just going to see us continue to press on sophistication of the platform along with ease of use.”

Alteryx’s continued openness to making acquisitions.

Rubin: “That is a key pillar of our strategy. I think we’ve been pretty vocal since we did [a convertible debt offering] last August that M&A is important to us. We’ve historically focused on picking up very strong development teams and tuck-in IP...As we move forward, there may be opportunities for us to play a little bit bigger.

But ultimately, that’s going to be a function of who’s going to be available, and at what price, and how we strategically think about the target. But M&A fundamentally is important to our ongoing strategy. So to the extent that [this environment] creates opportunity, we would be participants."