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Wall Street Rewards Tableau’s Stronger Revenue Despite Big Loss

The data visualization specialist surpassed revenue expectations but earnings loss worse than expected.

Tableau Software Corp. is back in Wall Street’s good graces -- and it only took three months.

To be sure, Tableau still posted a big loss -- $45.6 million -- for Q1 of 2016.  It just lost a lot less than Wall Street was expecting. Or did it?

First, the backstory. When Tableau reported its Q4 2015 earnings in early February, Wall Street had a panic attack. The data visualization darling reported a net loss of $0.57 per share -- Wall Street was expecting net earnings of $0.16 per share.  The company narrowly missed its revenue targets, too.

What’s more, Tableau warned investors to expect more losses in Q1 of 2016: between -$0.08 and -$0.12 per share, on revenue of $165 million or less. When trading resumed the next morning (February 5), Tableau’s stock lost almost half its value -- 48.82 percent.

Fast forward to today, when Tableau reported its first quarter results for the 2016 fiscal year.

Tableau crushed its promised revenue targets (generating almost $172 million in revenue) but fell far short of its Q1 earnings guidance. In fact, Tableau’s $45.6 million loss translates into a loss of $0.62 per share, which massively outstrips its revised guidance. By most reasonable metrics, Tableau’s performance in Q1 of 2016 was worse than its Q4 2015 results, which sent Wall Street into a panic. Tableau’s $45.6 million is nearly 250 percent larger than any prior quarterly loss.

It’s also much bigger than the $41.3 million loss Tableau reported in Q4 of 2015, which triggered a massive sell-off of its stock. This time around, investors responded positively, however: Tableau’s stock was up almost 10 percent in after-hours trading, relative to its end-of-day close. What gives?

Did Tableau’s license revenue growth, which (from Wall Street’s perspective) slowed precipitously in Q4, come roaring back? Strictly speaking, no: licensing revenue was up by 14 percent, year over year, in Q1. In the fourth quarter of 2015, Tableau grew its licensing revenues by 31 percent relative to Q4 of 2014. Most software companies with $500 million or more in annual revenue would kill for 31 percent growth. However, Wall Street viewed this as a significant come down from Tableau’s performance in Q3 of 2015, when licensing grew by 57 percent relative to the year-ago period.

In Q1 of 2016, then, Tableau’s licensing revenue growth slowed significantly from the prior quarter (14 percent in Q1 compared to 31 percent in Q4 of 2015) and the year-ago period (74 percent).

If Wall Street’s initial reaction is any indication, however, that’s nothing to worry about.  Why?

Is it because Tableau is adding a massive number of new customer accounts? Yes and no. Yes, Tableau is adding a massive number of new customers. No, this number isn’t massive relative to Q4 of 2015. For example, in today’s earnings call, Tableau announced it had added 3,500 new customer accounts in Q1 of 2016. In the fourth quarter of 2015, by contrast, it added more than 3,600 new customers. If anything, Tableau has upped its game in this regard recently. In Q4 of 2014, for example, it added 2,600 new accounts; in Q1 of 2015, it also added 2,600 new accounts.

Is it because Tableau’s reporting stronger international sales growth? True, international sales were up 52 percent, year over year; in Q1 of last year, however, Tableau nearly doubled its international sales from Q1 of 2014, with an 89 percent increase in international revenues. Besides, in Tableau’s troublesome Q4, international sales were up by 63 percent, year over year. (That was only slightly off Tableau’s third-quarter numbers, when it grew its international revenues by 75 percent, and not far off from Q4 of 2014, when Tableau’s international revenues were up by 86 percent.)

Again, what gives? Why did Wall Street punish Tableau for a big loss in Q4 of 2015 -- only to reward it for an even bigger loss in the first quarter of this year? Why didn’t Wall Street punish Tableau when it lost money in Q1 of 2015 ($13.8 million), Q2 of 2015 ($18 million), or Q3 of 2015 ($13.2 million)? To be sure, Tableau’s growth is slowing, but isn’t that to be expected? The data visualization pioneer is generating more than $650 million a year in revenue, after all.

Could it be that Wall Street doesn’t understand -- and doesn’t care to understand -- what Tableau is doing? What it does that makes it new, different, valuable, and, 15 years on, still unique? Couldn’t the same be said about Wall Street’s ability to appropriately value Qlik Inc., Teradata Corp., and other one-time high-fliers? Is there so much noise in the market -- with so many competing claimants generating so many competing (and invariably counter-factual) claims -- that Wall Street can’t separate the germs of wheat from the husks of chaff? Is that it?

Or is it rather that Wall Street just doesn’t care: that it prioritizes growth at any cost, and explosive, unsustainable growth most of all?

We’ll have to wait and see.

About the Author

Stephen Swoyer is a technology writer with 20 years of experience. His writing has focused on business intelligence, data warehousing, and analytics for almost 15 years. Swoyer has an abiding interest in tech, but he’s particularly intrigued by the thorny people and process problems technology vendors never, ever want to talk about. You can contact him at evets@alwaysbedisrupting.com.


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