Key Takeaways From Tableau’s Q3 Earnings
After announcing its Q3 earnings, Tableau Software‘s (NYSE:DATA) stock price dipped by 12% in after-hours trading on Thursday, November 2. The company missed both its revenue and EPS guidance for the quarter, though it did sustain its growth momentum from the previous two quarters of the year, reporting revenues of around $215 million, an increase of 4% over the prior year quarter. Licensing revenue declined by over 15%, though this was largely due to the transition from a perpetual licensing to subscription model, with the latter reducing upfront revenue significantly. With reduced upfront costs across all product lines, we expect increased adoption of its products going forward.
The quarter saw the addition of over 4,000 new customer accounts, which took the overall customer count to over 65,100. Tableau was able to close 13 six figure deals and around 337 transactions greater than $100,000 in the quarter. The company’s continued efforts in expanding international reach and higher spending on research and development led to an 11% increase in operating expenses. However, this was a relatively slower rate of growth, as the company has prioritized keeping expenses in check. We expect its net loss to broaden sequentially going forward, as the company will continue to invest significantly in order to remain competitive against software giants Microsoft, Salesforce and SAP.
Subscription Pricing And Product Innovation Drove Adoption
- Can Salesforce’s Acquisition of Tableau Reduce Annual Operating Expense In the Next 3 Years?
- How Will Salesforce.com’s Gross Profits Be Impacted Due to Tableau Acquisition?
- Tableau’s Revenue Grow But Miss Consensus, Continuous Expansion To Fuel Growth?
- Tableau’s Increasing Customer Base To Fuel Growth In Q1 2019
- What Is Tableau’s Expected Revenue For FY 2019?
- Tableau Reports Record Revenues, Will Subscription Licensing Continue To Push This Growth?
Tableau’s licensing revenues saw a 15% year over year decline, while maintenance and service revenues jumped nearly 30% in the last quarter. With the number of customers increasing every quarter, maintenance revenues are expected to see solid growth in the near term.
The company launched Tableau 10.4 in Q2, with a feature to add certification to data sources. With increased customer demand and competition from Microsoft Power BI, Tableau introduced subscription-based pricing for all its product lines. This will likely put pressure on revenues in the near term, but is in line with the company’s long term growth vision. In the upcoming version, Tableau will be available on Linux, which should further its reach.
Tableau generated over 70% of its revenue from the U.S. and Canada, but growth in these relatively mature markets has slowed down. As such, the company is aggressively targeting growth in international markets. International revenues witnessed 12% growth and constituted 30% of the company’s overall revenues (200 basis points above the prior year quarter), which highlights the returns from its increased global footprint.
Way Forward
Going forward, Tableau expects its growth momentum to continue into the year ahead. In the current quarter, the company expects to generate revenues in the range of $235 million to $245 million, with the midpoint of the guidance representing 6% year-over-year growth.
We currently have a price estimate of $62 for Tableau, which is more than 10% below the current market price.
Please refer to our complete analysis for Tableau