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Shares of Tableau Software (NYSE: DATA) fell 13.3% in November, according to data from S&P Global Market Intelligence, after the data-visualization specialist announced weaker-than-expected quarterly results and underwhelming forward guidance.
Tableau stock fell more than 14% in the three days following its third-quarter report early last month. Revenue climbed 4% year over year, to $214.9 million, which translated to adjusted net income of $6.4 million, or $0.08 per diluted share. Both figures fell below investors' expectations for earnings of $0.09 per share on revenue of $219 million.
To be fair, however, Tableau's anemic top-line growth is somewhat misleading given its transition to subscription licenses. That shift means lower revenue upfront, but a more predictable, steady stream of sales over the long term.
"Customers are embracing our subscription offerings even faster than expected," added Tableau CEO Adam Selepsky. "Forty-five percent of our license bookings were sold on a subscription basis this quarter, nearly triple the percentage a year ago, as more and more customers turn to subscription to better address their analytics needs with lower upfront cost and reduced risk."
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Tableau's subscription annual recurring revenue more than tripled over the past year, to $139.2 million, while total annual recurring revenue was up 46%, to $526.2 million.
During the subsequent conference call, Tableau management told investors to expect fourth-quarter revenue of $235 million to $245 million -- well below the $251 million that analysts were expecting. But here again, that assumes a significantly higher chunk of subscription licenses as Tableau customers opt out of the old perpetual license model.
In the end, I think this change is a favorable one for Tableau, and patient investors should be more than pleased with where the company stands.
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