Alteryx Inc.

Alteryx Inc. (NYSE: AYX) is a self-service data analytics software company that provides a subscription-based platform, enabling organizations to prepare, blend and analyze data from a multitude sources and ease data-driven decisions.

Key highlights 

• Robust revenue guidance: For FY2021, the management highlighted strong revenue growth and expects it to be in a range of USD 555-565 million, while ARR to be approximately USD 625 million and net income between USD 68.5-72 million. For Q1 2021, the revenue would be around USD 104-107 million. 

• Sequential growth: Despite the turmoiled period in 2020, the company maintained its pace and witnessed a spirited performance in revenue, both quarterly and on an annual basis. The Company is continuously working closely with customers; thus, its presence is increasing along volume, which is appreciable. 

Source: Company 

• Higher ARR: The company derives a significant portion of its revenue from subscriptions for the use of its platform, which is typically billed annually in advance. The company has maintained its pace in its ARR and registered a growth of 32% in FY2020 over the previous corresponding period. The rise in ARR reflects the confidence of its customers in the services provided by the company.

Source: Company 

• Increasing customer base: The company is accelerating the secular shift towards self-service analytics. As a result, it has an opportunity to expand its current customer base of approximately 7,100 customers. Its platform has been adopted by organizations across various industries and sizes in more than 90 countries, including over 760 of the Global 2000 companies.

Source: Company 

• Penetrating international markets: The company is focusing on increasing its penetration in international markets. The management believes that the global opportunity for self-service data analytics solutions is significant and should continue to expand. Through this strategy, we believe the company would engage more global companies as its customers and earn more revenues. 

Financial overview of FY2020

Source: Company

• In FY2020, the company posted higher revenues at USD 495.3 million, which increased by 19% against USD 417.9 million in the previous corresponding period. The revenue got support from higher numbers of customers and higher ARR, compared against the last corresponding period.
• The reported period's gross profit stood at USD 451.5 million, against USD 378.8 million in pcp, while the gross margin remained unchanged at 91%. 
• On the back of higher operating expenses such as R&D, Sales and Marketing and G&A expenses, the company posted an operating loss of USD 3.9 million, against a profit of USD 37.9 million. 
• Due to the above-stated reason, coupled with higher interest expense, the company reported a net loss of USD 24.3 million in 2020, against a profit of USD 27.1 million. 

Risks associated with investment

The IT and related services are prone to price competition due to the emergence of several industry players, which might dampen the company’s margin. Evolving industry standards, currency fluctuations etc. are some other crucial risks. 

Valuation Methodology (Illustrative): EV to Sales 

Note: All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

The company expect 2021 would be a year of transformation. It intends to scale its product, operations, and customer focus for delivering significant business value through the power of analytics and automation software. The company is continuously showing spirited performance where it has registered a growth in revenue and ARR. Moreover, the company has increased its customer base and further targeting the international markets. Additionally, the management has shared a higher growth number for 2021. Recently we saw a correction in the stock mainly due to the management’s commentary on posting losses in Q1 2021, but we believe the company would post improved performance in FY21. Therefore, based on the above rationale and valuation, we recommend a “Buy” rating at the closing price of USD 82.0 on March 25, 2021. We have considered Oracle Corp, Zendesk Inc, Dynatrace Inc. as the peer group for the comparison.

1-Year Price Chart (as on March 25, 2021). Source: Refinitiv (Thomson Reuters)

Arcturus Therapeutics Holdings Inc.

Arcturus Therapeutics Holdings Inc. (Nasdaq: ARCT) is a clinical-stage mRNA medicine and vaccines company. The company has a diverse pipeline of RNA therapeutics and vaccine. The company’s product includes mRNA vaccine programs for SARS-CoV-2 (COVID-19) and Influenza, and other programs.

Key Updates:

• Acquisition of mRNA Manufacturing Technology from Alexion Pharmaceuticals: On February 22, 2021, the company acquired an exclusive license from Alexion Pharmaceuticals, which includes patent-pending inventions relating to nucleic acid purification technologies. In accordance with the terms of the license agreement and in exchange for the license, the group issued 74,713 shares of common shares of ARCT to Alexion on February 19, 2021 at a price consideration of USD 66.92 per share. The above acquisition would optimize the manufacture of mRNA therapeutic candidates with an increased purity profile.
• Encouraging Clinical Updates:

1. The company’s pipeline includes ARCT-021, vaccine for COVID-19. Currently, ARCT is conducting its Phase 2 clinical study, wherein it has tested the candidate on more than 500 participants across the USA and Singapore. Meanwhile, the group is focusing on its Phase 3 study, which is anticipated to begin in Q2FY21. ARCT-021 single shot immunogenicity profile in Phase 1/2 study results favourably, providing additional support for the potential efficacy of the ARCT-021 vaccine.
2. The group also received approval from Health Canada to enroll subjects into Phase 1b study for ARCT-810, a Therapeutic medicine for Ornithine Transcarbamylase (OTC) deficiency. Phase 2 multiple dose study of the above product is expected from Q2FY21.
3. The corporation also conducting a study on Therapeutic medicine for Cystic Fibrosis and has Completed successful pre-IND interaction with FDA.

• Pipeline:

Source: Company

FY20 Financial Highlights:

• ARCT declared its full-year result, wherein the company posted revenue of USD 9.539 million v/s USD 20.789 million in FY19.
• The period was marked by higher research and development expense (USD 57.846 million v/s USD 33.640 million in FY19), increase in general and administrative costs (USD 23.217 million v/s USD 12.662 million in FY19).
• Net loss widened to USD 72.148 million v/s USD 25.991 million in the previous financial year.
• Cash and cash equivalent stood higher at USD 462.895 million, as compared to USD 71.353 million in FY19.                    

FY20 Income Statement Highlights (Source: Company Report)

Risks: The product of the company are subjected to various regulatory approvals, and a delay or cancellation of the same would impact the company’s overall operations. 

Stock Recommendation:

The collaboration with Alexion Pharmaceuticals would extend the substantial intellectual property portfolio held by ARCT, wherein the company can start manufacturing high purity mRNA vaccine and therapeutic products at scale, which is a key positive. Moreover, the group has an impressive pipeline, which includes vaccine related to COVID 19, medicines related to Hepatic and Respiratory diseases. On the valuation front, the stock is available at an EV to Sales multiple of 5x on NTM basis, which is significantly lower compared to the industry (Biotechnology & Medical Research) median of 15.6x. Hence, considering the above rationale, we suggest a ’Speculative Buy’ recommendation on the stock at the closing price of USD 42.15 on March 25, 2021.

One-Year Price Chart (as on March 25, 2021). Source: Refinitiv (Thomson Reuters)

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