Tableau Software (DATA) had a bit of a rocky road to get to today’s acquisition by Salesforce (CRM) for $15.7 billion in stock. Over the past few years, Tableau has had to fend off intense competition in the data analytics software space, while at the same time deal with the transition to a subscription model, which raised the ratable bookings mix, creating revenue growth headwinds.
Back in 2016, Tableau was going through a tough time, fighting increased competition from smaller upstarts trying to use price as a weapon as well as much larger rival Microsoft. In one trading session in February 2016, Tableau shares lost nearly half their value after the company was forced to issue downside revenue guidance for the year. The stock in February 2016 slumped to a low of $36.60, off 72% from the high reached the previous July.
In Tableau’s final quarter of 2016, its ratable license bookings accounted for 20% of total license bookings. After delivering 2015 revenue growth of 58%, the company’s top-line growth rate in 2016 slowed considerably to 27%. The growth slowdown was a drag on the stock price, which ended the year at $42.15, off 55%.
In September 2016, Adam Selipsky was named Tableau’s new CEO. Hired away from Amazon’s AWS unit, Selipsky was charged with helping Tableau improve overall sales execution and better manage the transition to more ratable business. Given Selipsky’s experience with the cloud (he was VP of marketing, sales and support at AWS), investors liked that he could lead Tableau’s efforts with Tableau Online, the company’s analytics platform fully hosted in the cloud.
In addition to the positive CEO news, there was an encouraging trend building under the surface. By the end of 2016, the benefits of the ratable mix shift were becoming more evident. Tableau’s deferred revenue in 2016 rose 57%, representing acceleration from 53% growth in the previous year. As the subscription mix expanded, Tableau saw improved visibility.
Starting in 2017, the competitive dynamics moved somewhat in Tableau’s favor. A number of the smaller players either closed up shop, got acquired or gave up on cutthroat pricing.
Tableau in early 2017 boosted its talent pool by hiring Dan Miller as executive VP of worldwide field sales. Miller, an industry veteran with more than 30 years of experience (including stints at Oracle, Juniper, Hewlett-Packard and Sun Microsystems), was brought on because he had held a variety of senior sales positions and knew how to sell to the enterprise.
As for Microsoft, there was the impression in the field in 2017 that the software giant had taken its foot off the gas in the analytics market. Meanwhile, Tableau kept chugging along, keeping customers happy with solid technology upgrades and attractive subscription terms. By the final quarter of 2017, the company’s ratable license mix had reached 51% and normalized license bookings were showing accelerated growth. Tableau’s stock price in 2017 rebounded 64%.
In January 2018, Tableau officially debuted its Hyper data engine, which delivered query speeds that were up to five times faster than the previous version. The improved performance meant quicker insights and decision-making on large data sets. The company also released a new data preparation product, which integrated directly into the Tableau analytical workflow.
Tableau in April of last year introduced three new subscription offerings—Creator, Explorer and Viewer—that provide analytics capabilities tailored to different skill levels within an organization, ranging from power users down to casual users.
The role-based subscriptions saw healthy demand out of the gate because they made it easy to tailor Tableau to everyone in an organization, regardless of skill set. The low-priced Viewer offering enables large deployments across the enterprise. In 2018, Tableau shares advanced 73%.
While Tableau still faces revenue headwinds from its shift to subscriptions, the bulk of the transition is now in the past. In Q4, the ratable mix reached 79%. Tableau management said it sees the figure approaching 90% by the end of 2019. In Q1, top-line growth accelerated to 15% from 10.5% in Q4. Management has been calling for revenue growth to accelerate further in the second half of 2019 thanks to an easing of the subscription transition headwinds.
Tableau’s newer metrics performed well in Q1, with total annual recurring revenue (ARR)—made up of both maintenance and subscriptions—coming in at $902 million, up 41% year over year (matching the Q4 growth rate). Subscription ARR of $510.1 million rose 115%. For 2019, the midpoint of the revenue guidance range indicates growth of 19%. The upwardly revised 2019 ARR guidance range of $1.13 billion to $1.16 billion represents midpoint growth of 36%.