Tableau Q2 FY2015 beats estimates, increases outlook, market hammers the stock
- Summary:
- Tableau Q2 FY2015 beat out analyst expectations but that wasn't enough to prevent the stock price from being hammered. It's hard to catch a break when you've done so well.
Once again, Tableau beat market expectations with an eye popping $149.9 million in total revenue for Q2 FY2015, up 65% on the previous year. The company increased its outlook guidance for the full year to a range of $617-627 million. The market rewarded Tableau with a price haircut that at time of writing stands at 18.8%.
Some say the stock price was overweight because of inflated expectations. It is a topic exercises the minds of some CEOs I meet. They worry that over inflation of the stock price will impact their ability to hire the best people. Hence they try, as Tableau is doing, to offer conservative guidance.The trouble with that is when you keep beating estimates, analysts end up building those expectations into the stock price, even if they are following the guidance. .
I say that sell side analysts have once again demonstrated that they serve as a massive distraction for CEOs. Back to the numbers.
Tableau is able to sustain a very high rate of investment in both R&D and marketing because its gross margin is close to 90%. That should please any investor and especially those who are also looking for high growth. But while the 65% growth looks spectacular, license sales growth slowed from 74% in Q1.That was top of mind for some analysts. But as Thomas Walker, CFO Tableau confirmed on the analyst call:
As the numbers get larger and larger become harder, from a percentage standpoint, to grow. I mean our overall expectation, we're going to grow the [topline] and the guidance last quarter was 54%, and so we delivered up 65% so we're actually very happy with our performance and how we're executing.
As I've mentioned before, I'm not necessarily going to guide to the upside or anything like that because it's not prudent for us to do that.
Therein lies a conundrum. Based upon the company's forward outlook, the beat of $8.8 million on the top line is unlikely to be repeated for the rest of the year. Analysts that want more will, in these circumstances, ignore the CEIs
The good news is that international growth is moving ahead at a good clip. Tableau reported international revenue at $36.7 million for the quarter, up 83% year over year. The company added 3,000 new customers and recorded 233 transactions in excess of $100,000. On the call, Christian Chabot, CEO Tableau confirmed that the company's 'land and expand' strategy is working well and that Tableau expects the positive impact to continue. No surprise there.
Chabot's comments about moving to cloud and investments in an EU data center were interesting:
Tableau believes the right strategy for customers over the coming years with regard to cloud versus on-premise is, in short, to be both. That's what we refer to as one of our hybrid strategies, and we're continuing investing in both simultaneously as a result. In fact, we have quite a few [customers] who use our cloud solutions and our on-premise solutions. And so, as the industry evolves and data use continues to grow and more data becomes in the cloud, we do expect over the years for Tableau to become more and more of a cloud-based business.
Flash forward to a distant date, maybe eight years or 10 years, it may be that all of our business is in the cloud.
Chabot left details about the data center hanging in the air, merely hinting at further news in the second half of the year.
Tableau must have come off the call somewhat disappointed. There were many repeat questions about deal size and volume which have been answered over and over in the past. There were repeat questions about Tableau 9, the latest version of the solution that has been discussed ad nauseum. My sense is that analysts struggled to find questions that help bolster the share price. It is therefore no surprise that the stock price took a hammering. Whether the company management is concerned or relieved is unknown but at least the ordeal of another quarter's grilling is over.