Key Takeaways From Tableau’s Q1 Earnings

Tableau Software‘s (NYSE:DATA) stock price rose nearly 7% during after-hours trading after the company announced its Q1 earnings. After seeing impressive growth through 2016, the company continued the momentum, reporting revenues of around $199.9 million, an increase of 16% over the prior year quarter. The licensing revenue grew marginally, though this was largely due the transition from a perpetual licensing to subscription model, with the latter reducing upfront revenue significantly. The quarter saw the addition of over 3,300 new customer accounts, which took the overall customer count to over 57,000. The company was able to close 10 six figure deals and around 294 transactions greater than $100,000 in the quarter (+10% year over year). Earlier in the month, the company revised its subscription pricing structure across all product lines. With reduced upfront costs across all product lines, we expect increased adoption of the company’s products. Moreover, investors seem to have taken this news positively as the stock price surged nearly 10% after the announcement.

The company’s continued efforts in expanding international reach and higher spending on research and development has led to a 16% increase in operating expenses. We expect the net loss to broaden sequentially as the company will continue to invest significantly in order to remain competitive against software giants Microsoft, Salesforce and SAP.

Product Innovation And Effective Pricing – Key To Growth

The company generates its revenues from licensing and maintenance of its products and services. Licensing revenues saw 1% year over year growth while maintenance and service revenues jumped nearly 37% in the last quarter. With the number of customers increasing every quarter, maintenance revenues are expected to grow in the near future.

The company said it launched Tableau 10.2 in Q1, which added advanced mapping capabilities with a new spatial file connector. This new connector greatly simplifies how organizations can leverage their geographical data infrastructure. With the Tableau 10.3 in its beta testing phase, we expect further uptake of the product as the new version come with a PDF connector, which will enable users to connect to PDF files.

With increased customer demand and competition from the low cost Microsoft Power BI, Tableau introduced subscription based pricing for all its product lines. This will likely reduce the revenues in the near term, but is in line with the company’s long term growth vision. Moreover, with the increased uptake of the cost effective alternative, the company should be able to offset a part of reduced revenues.

The company generated over 71% of its revenue from the U.S. and Canada. However, since the markets appear saturated, the growth has slowed down. With support in various languages and presence of direct and indirect sales channels, the company is extensively targeting growth in international markets. International revenues witnessed 22% growth and constituted 29% of the company’s overall revenues, which highlights the company’s returns on its increased global footprint.

Way Forward

Going forward, the company expects its growth momentum to continue into the year ahead. In the current quarter, the company expects to generate revenues in the range of $205 million to $215 million, with the average of the guidance representing 6% year-over-year growth. For the full year, the company expects to generate revenues in the range of $850 million to $890 million, with the average of the guidance representing 5% year-over-year growth. The company indicates an increased adoption rate internationally as the demand for data analytics grows globally.

Please refer to our complete analysis for Tableau

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