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Alteryx Omits Names of Big Customers, Warns of Slower Revenue Growth
Critical audit matter gives analytics firm broad discretion in recognizing revenue.
February 17, 2021
Alteryx (AYX), an analytics automation platform, grew sales 18.5% in 2020, down from 65% and 93% respectively the prior two years. In its 2019 10-K, Alteryx warned of the potential for a slowdown:
“...our growth rates may slow and our business would be adversely impacted.”
In its 2020 10-K, Alteryx issues a harsher warning:
“...growth of our revenue has slowed and may continue to slow or revenue may decline…”
Estimates indicate Alteryx’s revenue growth rate is expected to decelerate approximately 5% from the prior year, to 13.2% in 2021. The company provides a clue in its most recent annual report, hinting in new language that customers may be opting for shorter term contracts:
“...decreases in term length in our contracts with customers…”
Later, Alteryx adds new language to its latest annual that provides additional detail about potential pushback regarding customer contracts:
“...existing customers may attempt to renegotiate contracts and obtain concessions, including, among other things, longer payment terms or modified subscription dates..”
Behind these warnings is a new strategy. New language in the annual suggests customer pushback may be because Alteryx is now prioritizing contract size:
“In 2021, our sales strategy will place an increased emphasis on the annual contract value of our customer contracts, which may result in a decrease in contract term length and affect total revenue recognized during a period.”
Alteryx’s customer count grew in 2020. It reports having 7,100 customers, including 760 of the world’s top 2,000 companies. The latest annual report includes new customer names— Anheuser Busch, Biogen, and Visa— not mentioned last year.
In light of the new warnings, analysts and investors would be smart to ask Alteryx’s new CEO and CRO whether companies named in last year’s annual report as customers but omitted from the 2020 report are still customers. The companies no longer named in the latest report include Nasdaq (NAS), Siemens AG (SIEGY), Toyota (TM), Twitter (TWTR), and Uber (UBER).
In recognizing revenue from its subscription-based software licenses, Alteryx allocates the transaction price to each performance obligation based on its relative standalone selling price (SSP). Though not flagged as a critical accounting matter in the prior year’s annual report, Alteryx’s latest 10-K reveals that no SSP exists for certain performance obligations:
“However, certain performance obligations are not sold on a stand-alone basis; therefore, significant judgment is required to estimate the SSP.”
Deloitte has been Alteryx’s auditor for two years. It’s not clear why Deloitte flagged the SSP issue as a critical audit matter this year but not last. In October, Alteryx’s founder and CEO relinquished the role “effective immediately.”
The abruptness of the exit followed by the critical audit matter may help explain the warnings regarding future revenue if the new Chief Executive and Chief Revenue Officer recognize subscription revenue less aggressively. It may also explain the new emphasis on larger dollar contracts as Alteryx recognizes more revenue at the beginning of a subscription term.
Related: SAP, ORCL, CRM, MSFT, TIBX, SPLK
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