Talend S.A.
Q1 2018 Earnings Call Transcript

Published: 11 May 2018

[Operator:]

Good day and welcome to the Talend’s First Quarter 2018 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Lisa Laukkanen. Please go ahead.

[Lisa Laukkanen:]

Thank you. This is Lisa Laukkanen, Investor Relations for Talend, and I’m pleased to welcome you to Talend’s first quarter 2018 conference call. With me on the call today is Talend’s CEO, Mike Tuchen; and Interim CFO, Ram Bartov. During the course of today’s presentation, our executives will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial performance or operating performance, and involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from those contemplated by these forward-looking statements. Forward-looking statements in this presentation include, but are not limited to, statements related to our business and financial performance and expectations and guidance for future periods, our expectations regarding our strategic product initiatives and other related benefits, and our expectations regarding the market. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release that we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available as of the date hereof. You should not rely on them as predictions of future events, and we disclaim any obligation to update any forward-looking statements except as required by law. Please note that other than revenue, or as specifically stated, the financial measures to be discussed on this call will be on a non-IFRS basis. The non-IFRS financial measures are not intended to be considered in isolation, or as a substitute for results prepared in accordance with IFRS. We have provided a reconciliation of the non-IFRS financial measures to the most directly comparable IFRS financial measure in our press release. Now, let me turn the call over to Mike Tuchen, Talend’s CEO.

[Mike Tuchen:]

Thanks, Lisa, and thank you all for joining us today. We’re pleased to report a strong start to the year, as we continue our enterprise and cloud momentum. We achieved record revenue of $46.8 million in the first quarter up 42% year-over-year. Some of the highlights of the March quarter include, our subscription revenue grew 44% year-over-year. This was driven by our industry leading cloud and big data solutions, which delivered a combined subscription revenue growth of over 100% year-over-year. We continue to see the ongoing market shifts in the cloud, which is fueling our cloud subscription growth and is increasingly becoming a key growth driver for our overall business. Enterprise subscription customers grew by 46% in Q1 to 380 customers and represented approximately two thirds of our subscription revenue. We continue to be pleased with our momentum with large enterprise customers. And finally, our Asia Pacific region continued to explode with revenue growth over 100% for the fourth quarter in a row. Our strong financial results in the first quarter were driven by continued adoption by large global enterprises, growth in international markets and continued success in growing our installed base through our land-and-expand strategy. As we’ve noted in the past quarters, we continue to see cloud adoption accelerate and more customers deploying Talend in the cloud. As a result, our cloud business is quickly becoming an important overall company growth driver. In the first quarter, we signed our largest cloud agreement to date with the U.S. based leading global organization in the healthcare sector with more than 20,000 employees. The firmest team with Talend and one of cloud partners, Snowflake to manage their moves to the cloud and migrate their on-premise data warehouse and other applications to Snowflake. The company is using Talend for both pure cloud as well as hybrid cloud premise scenarios. A $7 billion European base supplier production plants, services and equipment for a range of industrial sectors also selected Talend Cloud in the first quarter. The company was a long-time user of our open source offering and shows the transition to Talend Cloud to support their adoption of Microsoft Azure, as part of the cloud for the strategy. This is a great reminder of the power of our open core business model, and how even very large enterprise customers can begin their journey with Talend using one of our three open source product. Highlighting the global reach and broad industry deal with Talend Cloud, we also signed up a state-owned electricity infrastructure company in APAC, which serves more than 800,000 homes and businesses. In Q1, our overall dollar base net expansion rate was 121% on a constant currency basis. This is the 16th consecutive quarter that we’ve had a dollar based net expansion rate over 120%. Cloud also played a role and driving our expansion revenue in the first quarter. One example is Wolters Kluwer, a global services company. Wolters, which serves a range of legal, finance and healthcare markets, began their journey with Talend in 2014 to support their on-premise integration needs, and then this quarter moved to Talend Cloud. Another kind of expansion in Q1 was the popular retail subscription service that increased their Talend Cloud subscription. Other examples of significant land-and-expand agreements during the quarter include Yahoo! JAPAN. Yahoo! JAPAN is one of the most popular online services in the country. Their web portal was number one in most internet sectors in Japan, attracting more than 41 million monthly active users with more than 75 billion monthly page views, which of course, generates massive volumes of data. They chose Talend to provide access to data business insights to over 100 online services. Talend Clean qualifies, transforms multiple petabytes of data and delivers self-service data to all our employees across the group. Yahoo! JAPAN selected the Talend in Q3 2017 and this quarter, are expanding their Talend used cases. In addition, one of top 10 banks in the U.S. signed a new agreement for more big data licenses worth over $200, 000. The bank is using Talend across the enterprise to extract value from their data, and deliver personalized services to their customers. On the other side of the world, a large bank in Singapore also increases down with Talend during the first quarter by adding more users for the real-time big data used cases to lower data into a data like. FleetCor Technologies, which provides fuel cars and workforce payment products and services renewed their agreement with us in Q1 and added new services. FleetCor customers include businesses, commercial fleets, oil companies, petroleum marketers, and governments in 53 countries. The company has standardized its technology investments at the enterprise level, selecting Talend as the gate to global fleet net, their B2B platform, which supports billions of Mastercard and Visa transactions per year. Talend provides new real-time data transport between partners, banks, customers and systems such as sales force and entity business objects, in the multiple cloud environments on AWS and Microsoft Azure. With a simplification of systems and proxies, customers benefit from a better user experience while FleetCor revenue and its teams get data by manage business and region at their fingertips. Other enterprise land-and-expand agreements include a win with Western Union, a leading global payment services company. In 2016, they selected Talend for their data like project, because of our native big data capabilities. Based on the success of this early project, which continued to increase the number of users including added seats in Q1 if they roll out new services across business units. We continue to be pleased with our momentum with large enterprise customers. As noted earlier, enterprise subscription customers grew by 46% in Q1, representing approximately two thirds of subscription revenue. Some of the large international wins during Q1, including Virgin Money UK, which offers a range of financial solutions such as savings, mortgages, credit cards, currency services, and investment products to over 3 million customers. Virgin Money is aiming to broaden its appeal to the retail banking market, and extend its offering into current accounts to the equation of the data driven, customer centric digital bank. One of their goals was to ensure the bank that readily exploit, new cloud infrastructure, and services, using Talend, it took only a few weeks to all of the existing bank data to the cloud as part of the successful proof-of-concept. In addition to responding their move to the cloud, Talend will also assist in helping Virgin Money UK need regulatory requirements, including the EUs, GDPR. As part of this support Talend will help pinpoint personally identifiable information and track linear to demonstrate compliance through end-to-end metadata. Another significant win for the quarter was with one of the world’s major mobile operators across Scandinavia, Central and Eastern Europe and Asia. Four of the different global business units selected Talend in the first quarter of this year to start the big data journey. Talend is providing a universal data platform to address big data and IoT challenges without the need for specialized hand-coding skills. Talend won the business on both our technology set and our cost effectiveness. In another big win during the quarter, Talend beat out IBM and Informatica to earn a big data agreement with an international business unit of another large multinational telecommunications company. selected for our feature set, Talend will support a major governance initiative. As discussed in the previous earnings calls, Talend has a number of customers involved in online gaming, including Paddy Power Betfair. These firms have a particularly data need given the nature of their business in a requirement to not only ensure the highest level of data accuracy, but also drive the flow of massive data volumes in the near real-time. In the first quarter, Talend added a new European customer and the game experience, Sky Betting and Gaming. Also in Q1, in collaboration with the partner of Deloitte, we won a $150,000 agreement with one of the largest privately held agribusinesses in the U.S. to help them with a big data link migration project. Hermes Parcelnet processes over 300 million parcels each year through a network of nearly 14,000 independent carriers to provide door-to-door delivery for retailers in the UK. Hermes Digital Future’s program drives new customer centric innovations such as identifying potential delivery issues before they happen. To enable this Hermes ismoving from an on-premise traditional data warehouse on Oracle to an AWS cloud environment using SEPR. Talend was selected this quarter to move their on-premise data to AWS as one of them just near real-time data improving the data quality using our batching and merging capabilities. Another notable win in the quarter was with one of the world’s largest multinational beverage companies that owns one of the most iconic beer brands in the world. They selected Talend Data Fabric to establish a common data management architecture deploying Microsoft Azure that consolidates and replaces over 20 different systems worldwide. Our Asia-Pac team continues to perform extremely well with growth continuing at over 100% year-over-year. In addition to the expansion opportunity with Yahoo! JAPAN mentioned earlier. here are a couple of examples of the types of new wins we’re seeing in the region. One of our biggest wins in Australia this quarter was with the Australian taxation office. The ATO gathers large amounts of data from many different sources and Charlestown for a real-time big data capabilities along with cell service and stewardship. Talend along with Cerbia, one of our top partners in the region with part of a program to simplify meaning of the data inside the ATO’s enterprise data hub. MYSTAYS, one of the largest business hotel chains in Japan, also chose Talend this quarter to help them consolidate data from a number of reservation systems. The company has been using a combination of hand-coding and our open source solution with the Talend oriented enterprise solutions recognizing that they required more capabilities and greater scalability. We continue to strengthen our relationships with our ecosystem partners. We had a significant cloud win this quarter with the Fortune 500 international healthcare services company working with Capgemini. The company selected Talend and Capgemini for a multi-year project to migrate their systems to Microsoft Azure. During the quarter, we unveiled expanded support offerings to our global partner program. Design for Talend’s ISD, [indiscernible] SI and technology partners, the program offers enhanced training, support and services, such as an improved certification program and new cloud and big data boot camps. The program has ended helping partners better sell and deliver successful projects leveraging Talend solutions. More recently, this past week at Talend Connect renounced the latest in a series of joint partner in go-to-market solutions. If you recall, we’ve previously spoken to you about joint solutions around key customer pin points such as GDPR compliance. At Connect, we announced the new solution, we acknowledge it, called Cartridge MDM 360. This is a self-service cloud data like management solution customized for healthcare and life sciences environment. The solution has based on Talend’s master data management solutions and AWS’s data technologies including S3, Aurora and Neptune. Lastly, I’d like to briefly touch on our CFO Search. Well, I don’t have a specific update for you today, our process is going well and we continue to be quite selective as we search for the best possible candidates. In the meantime, we’re pleased to have Ram Bartov, our controller in the role of Interim CFO. Let me now turn the call over to Ram to discuss your Q1 financial update in more detail and provide our outlook.

[Ram Bartov:]

Thanks, Mike. Today we’ll review the financial results for the first quarter as well as provide our outlook for the second quarter and fiscal year 2018. Total revenue for the first quarter was $46.8 million, an increase of $13.9 million from the first quarter of 2017, representing 42% year-over-year growth. Our subscription revenue for the quarter was $39.8 million, an increase of $12.3 million from the first quarter of 2017 or 44% year-over-year growth. In constant currency, subscription revenue grew 35% year-over-year. The strong demand for our big data and cloud offerings continued to drive growth in subscription revenue, which delivered combined growth of over 100% year-over-year. Our cloud SAS subscription revenue in the first quarter grew more than 100% year-over-year and we expect this trend to continue as Talend continues to invest our R&D effort in our cloud offering, which now includes data and big data Integration, data prep and with more offerings to come over the course of 2018. Our big data and cloud products now together represent our largest product category and make up more than 50% of our subscription revenue in the first quarter. From a geographic perspective, the Americas represented 46% of subscription revenue in the first quarter and grew 34% year-over-year. In the first quarter, Asia Pacific grew by more than 100% year-over-year although Asia Pacific still represents a small percentage of our subscription revenue in the first quarter that shows great potential and has grown above 100% for now four consecutive quarters. We also see growth being driven by our enterprise customers, the finest companies with $100,000 or more of annualized subscription revenue, where their number grew by 46% and reached $380,000 this quarter. Approximately, two thirds of subscription revenue was derived from these enterprise customers in Q1 2018. Professional services revenue for the quarter was $7 million, an increase of $1.7 million or 32% from the prior year quarter. As we discussed in past earning calls, Talend had made strong investments in enabling our systems integrator ecosystem in order to have sufficient implementation capacity for our customers. Our priority is to focus on strategic consulting revenues while depending more on our SI ecosystem for the broader implementation services. for the quarter ending March 31, 2018, our net dollar base expansion rate was 121% in constant currency. it has been above 120% in constant currency for now 16 consecutive quarters. I would like to remind investors that our net dollar based expansion rate can fluctuate quarter-over-quarter reflecting the mix of new versus existing customers in the reported quarter. Before moving to profit and loss items, I would like to point out that unless otherwise specified, all of the expense and profitability metrics I will be discussing going forward are non-IFRS results, a full reconciliation between IFRS and non-IFRS results can be found in our earnings press release issued today and available on our website. Our total gross margin for the first quarter was 77% up from 76% from the first quarter of 2017. Operating expenses for the first quarter were $41.2 million, an increase of $11.1 million from the first quarter of 2017. Sales and marketing expenses for the quarter were $25 million, an increase of 29% year-over-year. The increase was primarily the result of higher personnel expense due to increased headcount. we expect that our sales and marketing expense will continue to grow in absolute dollars as we continue to invest in our marketing programs, our international expansion identify and retain top Talend and global promotional activities to strengthen our brand awareness. our sales and marketing headcount increased from the prior year by 23% to 367 employees. R&D expenses for the quarter were $8.1 million, an increase of 49% year-over-year. The increase was driven by an increase in staff expenses due to great headcount primarily in France. Additionally, R&D expenses include amortization expense of $400,000 related to the intangible asset purchased and the Restlet SAS acquisition in the fourth quarter of 2017. our R&D headcount reached 236 employees at the end of the quarter representing 17% growth over the same period of last year. G&A expenses for the quarter were $8.1 million, an increase of 52% year-over-year. The increase for the quarter was largely attributable to increase in staff expenses due to greater headcount and increases in professional services and outside services related to being a public company. our G&A headcount reached 111 employees representing 25% growth from the same period in the prior year. We expect our G&A expenses to continue to increase as we invest in our infrastructure, incur additional compliance cost related to being a public company and support our global expansion. We ended the quarter with 913 full-time employees, compared to 722 employees at the end of the first quarter of 2017. We incurred an operating loss for the quarter of $5.4 million compared to the first quarter of the prior year’s operating loss of $5.2 million. Expressed as a percentage of revenue, operating loss was 11%, compared to an operating loss of 16% in the first quarter of 2017. As we have stated, we continue to expect quarterly fluctuations in operating margins, net loss for the quarter was $5.3 million compared to a net loss of $5.5 million in the prior year period. Free cash flow for the quarter was $5.1 million compared to free cash flow of $2 million in the first quarter in the prior year. We intend to continue our balance plan approach and going forward, we anticipate remaining approximately free cash flow break-even on an annualized basis with normal seasonal quarterly fluctuations. The adoption of IFRS 15 contributed approximately $1.9 million to our subscription revenue as we recognize the component of the subscription revenue upfront. On the cash flow, the change in deferred revenue for Q1 2018 was negative $3.6 million, which includes the IFRS 15 revenue benefit, the shortening of subscription duration and an FX fluctuation. If you back tell these three factors, we would have a positive change in deferred revenue of approximately $2 million, which is consistent with prior quarters. turning to the balance sheet as of March 31, 2018, we had cash and cash equivalents of approximately $95.4 million. As we discussed during our IPO and on all our prior earnings calls, I would like to remind investors that we do not view calculated billings as a good leading indicator of the performance of our business. Calculated billings do not take into account changes in pre-built subscription duration, professional services, call terming of subscription contracts and certain renewal dynamics. We provided forward guidance on a revenue basis, as we believe this is a more meaningful and accurate reflection of our business operations and financial position. however, we would like to note the deferred revenue for the balance as of December 31, 2017, was recognized utilizing the prior year standards and deferred revenue balance as of March 31, 2018, reflects the new accounting standard under IFRS 15. The impact from IFRS 15 to deferred revenue for the March period with a reduction of approximately $12 million. As discussed during our prior earnings call, we were targeting a prebuilt subscription duration of 1.1 years for our new business sales in 2018. in the first quarter, pre-built subscription duration came in approximately on target at 1.07 years. this intended lower pre-built subscription duration is consistent with our previously announced strategy to minimize discounts and reduce the complexity of our sales cycle. Before I give our guidance, I would like to emphasize some key financial highlights. Our net dollar base expansion rate continues on its strong performance, where it has now been above 120% for 16 consecutive quarters. our subscription revenue grew by 44% year-over-year, partly driven by our strong growth of big data and cloud, which now make up more than half of our subscription revenue. our operations in Asia Pacific are continuing to drive top-line growth with over 100% revenue growth for now over four consecutive quarters. As I indicated earlier, we adopted IFRS 15, which is the IFRS equivalent of ASC 606 on January 1, 2018, on a modified retrospective approach. As a reminder under the new standards, we’re required to split out the performance obligations from on-premise and self-hosted subscription revenue stream meaning we have to recognize the licensing revenue upfront and spread the revenue, support revenue over the duration of the remaining subscription term. I want to highlight, however, that we are only required to make this change to the on-premise and self-hosted subscription revenue stream and not our SaaS subscription stream. There will be no change to our SaaS subscription revenue, which we expect to continue to grow and become a larger portion of our overall subscription revenue. the overall impact to our top-line is minimal given the talend is an open source company and therefore the value of the license portion we are now required to recognize upfront is relatively small. Additionally, under the new standards, we’ll be required to amortize sales commission over the expected lifetime value of the customer, which is expected to be approximately five years. Both of the affect on our revenue and self expense, it is expected to have a marginal positive impact to our revenue and to the bottom line. Specifically, as it pertains to how we’ll report going forward and the impact on our guidance is that we expect to see a marginal improvement of approximately 2% to 3% on our top-line for the full year, because we will now recognize approximately 10% upfront and a more significant improvement to EBIT due to the amortization of the commission expense. These positive impacts will vary and fluctuate on a quarterly basis depending on various factors including the amount of commissions and the contribution of our SaaS subscription revenue. in Q1, the subscription revenue benefit was 4.8% and we saw no benefit on the commission expense. Now, for Q2 and 2018 fiscal year guidance, which assumes similar business conditions in foreign exchange rates as of March 31, 2018. For the second quarter of 2018, total revenues expected to be in the range of $48.8 million to $49.8 million. loss from operations is expected to be in the range of $8.6 million to $7.6 million and non-IFRS loss from operations is expected to be in the range of $4 million to $3 million. Net loss is expected to be in the range of $8.9 million to $7.9 million and non-IFRS net loss is expected to be in the range of $4.3 million to $3.3 million. Net loss per basic and diluted share is expected to be in the range of $0.30 to $0.26, and non-IFRS net loss per share is expected to be in the range of $0.14 to $0.11, basic and diluted weighted average share count of 29.8 million shares. for the full year of 2018, total revenue is expected to be in the range of $202.6 million to $204.6 million. loss from operations is expected to be in the range of $32.4 million to $30.4 million and non-IFRS loss from operations is expected to be in the range of $13.8 million to $11.8 million. Net loss is expected to be in the range of $33.3 million to $31.3 million and non-IFRS net loss is expected to be in the range of $14.8 million to $12.8 million. net loss per basic and diluted share is expected to be in the range of $1.11 to $1.04 and non-IFRS net loss per share is expected to be in the range of $0.49 to $0.43. Basic and diluted weighted average share count of 30 million shares. Thank you. And let me turn the call back to Mike for some final remarks.

[Mike Tuchen:]

Thank you, Ram. Talend delivered a strong performance in the first quarter. I’m pleased with the execution of our team as we continue to bring industry leading solutions to the market. In closing, having spent the early part of the week with hundreds of our premier customers and partners at our user conference, Talend Connect. I’m more excited than ever by the opportunity I had. the event which we held in New York included key notes from some of our bigger partners like Amazon and Microsoft, customer presentations from companies AstraZeneca and TD Bankhigh-level vision assumes that numbers of the Talend team and my personal favor handed on technology demonstrations. Containerization and the latest techniques that serverless computing and machine learning the demonstration helped highlight how we’re helping our customers remain on the cutting edge of the data revolution. We intend to capitalize on our product leadership to add new customers while expanding the use of our software within existing customers. with a tremendous market opportunity ahead of us as the market is in the middle of the wealth [ph] generation shift to cloud and big data, we believe that Talend is uniquely positioned to capture share and drive revenue growth. With that, Ram and I would be happy to take your questions. operator?

[Operator:]

[Operator Instructions] And we’ll take our first question from Bhavan Suri with William Blair.

[Bhavan Suri:]

Hey, guys. Thanks for taking my questions and congrats. Hey Mike.

[Mike Tuchen:]

Hey, Bhavan.

[Bhavan Suri:]

Hey, I just wanted to touch on two quick things here. The first, just on sales productivity, obviously, you’re investing. You’ve seen nice growth in Asia, but just a sense overall, of where sales capacity addition and sales of productivity came in relative to your expectations and then what does the guidance in 2018 assume?

[Mike Tuchen:]

Yeah, a great question. if you go back a couple of years, we’ve been seeing big gains in sales productivity between 14 to 15 and 15 to 16 and so on. And it leveled off in 2017, and where we are right now, in the first quarter of 2018 is consistent where – with where we’ve been over the last several quarters. So, it always bumps up and down in any given quarter, but we’ve been fairly consistent now. So, the days of those big improvements in sales productivity aren’t with us right now. We obviously keep looking for ways to continue to do better job of training and better job of hiring. but I think the easy gains are behind us. So right now, we’re assuming consistent sales productivity with what we saw in 2017.

[Bhavan Suri:]

Got it. And then I just want to follow up with something probably a little more strategic here, this week you announced the serverless multi-cloud deployment, and the economics just look really, really compelling. So as you – as you sort of think about that I’d love to understand sort of how you expect that impact the business, I mean sort of the early customer conversation adoption, how that looking, because again the economics on this piece look really interesting?

[Mike Tuchen:]

Yeah. It really comes back to the core concept of – there’s just a mass amount of innovations happening around the industry right now. Serverless containers are one of them beyond to do that multi-cloud, because we don’t charge for run-time, and because we can run natively across each of the different clouds, it means that we can – our interest that our customers are lined up directly. So, we can help them take advantage of all of these outperforming innovations happening in the massive competition between the major cloud. And so what we showed on stage, the folks that missed it was relative to our own offering of how our run times, how much we would cost to run data integration and the cloud, it’s about a 7.5x improvement, relative to our legacy competitors that have their own – what we call a data text, because they charge for their proprietary run-time, it’s literally 87 times cheaper. So, just a dramatic difference in the data economics for processing data scale and what that means is in the world, where things like IoT and mobile data and social data, and so on is just creating its tidal wave of data. We’re allowing companies to really unleash enormous amount of innovation and do it in a way that just completely disrupts their existing data economics. And we think that allows them to keep up with this tidal wave of data without having to somehow increase their IT budget in the lockstep with the doubling of data every couple of years.

[Bhavan Suri:]

Got it. It’s helpful. Thanks guys and nice job there. Thanks.

[Mike Tuchen:]

Thanks, Bhavan.

[Operator:]

And we’ll take our next question from Raimo Lenschow with Barclays.

[David Rainville:]

Hey, this is actually David Rainville dialed in for Raimo. Thanks for taking my question, and also thanks for the color on deferred revenue balance without the impact from the accounting change that’s helpful. Maybe just the high level question and then a follow-up if I may, it’s nice to see that your partnership with Snowflake is already paying dividends, I think when they raise money at the end – beginning of the year, they talked about tripling revenues, thousands of customers, I’m just curious, if you could give us a sense of how much just an opportunity for Talend in the coming years?

[Mike Tuchen:]

Yeah. We’re very bullish on Snowflake. David, I think you were at the Talend Connect this week. is that right?

[David Rainville:]

Indeed, yeah.

[Mike Tuchen:]

Yeah. So already you’re there. And as you know, so you saw me on stage, and you saw the partnership there. So we’re very, very bullish on a Snowflake. We think they’re doing a terrific job. And I think it’s overall reflective of the pivot of companies really moving much more aggressively to the cloud, and Snowflake is the probably most capable data warehouse there is standing the benefit from that. And we – because we have the best integration with Snowflake if you need to do anything high scale or anything complex, we’re really the tool of choice for that, that’s clearly helpful to us. And what I’d say is, to me, rather focusing on any one vendor much as we love Snowflake. I would point to you just the broader move to the cloud and our positioning is being that premier multicloud solutions that allows you to take advantage of really any of the speed data technologies and any of the cloud. And really have the best solution for all of that at disruptive data economics that really is our overall story. But, yes we do love that Snowflake has and we think that’s an opportunity for us to continue to partner with them and build our businesses in lockstep with their businesses.

[David Rainville:]

That makes sense, thanks for that. And I was wondering if you could give us some color on maybe what you’re seeing within the cloud and big data business to that 100% number that you gave us again this quarter. I’m sure you can’t break out what the relative size is, but maybe what you’re seeing on-prem versus cloud and Hadoop versus the guys like Snowflake, that would be very useful.

[Mike Tuchen:]

Yeah. Well, from a differential growth perspective, it’s very, very clear that we’re seeing a pronounced move to the cloud in the data world. And there’s some things that are always going to be premise resident, but – and there’s some things that will always be cloud resident, but there’s a lot of stuff in the middle that could go either way, and what we’re finding right now is that customers, where they have the choice they’re choosing to push it in the cloud, and if that’s really pushing, our cloud grows dramatically faster than our on-premise growth of any sort whether it’s Hadoop or anything else. And so we’re seeing a lot of the big data scenarios that would have been done on-premise a couple of years ago, are now increasingly being on in the cloud. And I think that continued rotation of the cloud is probably going to – if anything accelerates over the coming years. I don’t see really any reason for it to slow down or stop. So we’re very, very bullish on the cloud clearly.

[David Rainville:]

Thanks to this. Congrats again.

[Mike Tuchen:]

Thank you, David.

[Operator:]

And we’ll take our next question from Jesse Hulsing with Goldman Sachs.

[Jesse Hulsing:]

Yeah, thank you. I want to – Mike, I wanted to get an update on Europe. And from the prepared remarks, it sounds like Asia Pacific is doing very well and the Americas are doing very well, but there wasn’t a whole lot on Europe, and I know you made some changes to sales leadership and in the second half of last year, how’s that progressing, and was there any impact from that on the quarter?

[Mike Tuchen:]

I’d say, once you back up currency effect in Europe, you would see the impacts of the attrition that we had in the back part of the year. But that being said, Europe now, with the new folks on board, they’re ramping well, they’re hitting their ramp quarters and they’re actually a little ahead of that. So we really like the dynamic of what’s going on in Europe, but we still have another couple of quarters of finishing that productivity ramp there before I’d say that we’re really back to business as usual. So like the progress, like where we are, given the attrition that we had, but not completely back to where we would have been – where we would have hoped to have been a year ago. Let’s put it that way.

[Jesse Hulsing:]

Yeah, that’s fair. And competitively, as you shift to the cloud and your messaging seems very, very cloud focused for the last couple of quarters to investors and just in general, if you shift to the cloud, does the competitive landscape also change, are you still seeing Informatica predominantly or are there a new set of cloud based competitors that you’re seeing in data integration?

[Mike Tuchen:]

I mean, there definitely are a different competitive set in the cloud. Our number one competitor whether it’s premise or cloud is hand-coding and that remains true in the cloud, that it does on-premise. Our number two after that it’s probably actually still Informatica in the cloud although I think it’s the prevalence is going to be lower in the cloud, there’s what we saw in the cloud is, we don’t really see IBM at all, I don’t know if you know to have a cloud solution, we don’t see [indiscernible], our third biggest software competitor on-premise. And so after Informatica, we start seeing a whole raft of new entrants, really, really small players, and a couple of kind of what I classify is holdouts or walking wounded or whatever you want to call it, SnapLogic in gigabits of the world. And so, I would describe the competitive set up in the cloud as being really more favorable than on-prem, because you don’t have that kind of incumbency effect, right. On-prem, you’ve got the IBMs and Informaticas and [indiscernible] did have a very, very strong position, because they’ve been working with customers for a decade or more in some cases, and in many cases if you’re – if the customer is looking end-to-end across their business, there’s a whole bunch of traditional scenarios it’s really directly in the wheel house as the big legacy incumbents. In the cloud none of that’s true. None of – now have any incumbent footprint, but the scenarios were actually in our wheel house, not in theirs. And the economics in our wheel house to do some of the stuff that we’re talking about earlier on the call, the surveillance containers and so on. And so not only are we seeing customers move that way, but we think it starts tilting the competitive set up more in our direction than where spin on-premise.

[Jesse Hulsing:]

Okay. And just to follow up on that point. Are the challenges in the cloud as acute as they are on-prem, if you’re looking at doing ETL or data integration on Redshift or Snowflake versus doing it on Hadoop on-prem, is there – is it the same set of problems, and it’s just as hard to do it in the cloud, or other differences there?

[Mike Tuchen:]

There’s a part of the problem that’s dramatically easier, and there’s another part of the problem that’s exactly the same as it is on-prem. The part this dramatically easier, is all of the kind of deployment can fix stuff, right. Setting up, I’ll take the big data example. Setting up a premise, a Hadoop complex is really challenging. And so it takes a very sophisticated IT Department to do that successfully, big sophisticated IT shops have seen a bunch of success, and continue to do that, but folks that aren’t that sophisticated struggle, and where is turning up a big data, data like environment in the cloud, is really very simple and you can do that in a few hours or a couple of weeks spending and how complex you’re trying to do it. And that’s just a radically different thing. Now on the other hand, the data complexity is exactly the same, see your data problem of saying what are my data source is, and how I’m going to blend them together, how do I clean them up, all of the core stuff of what you do with Talend, is really identical whether you’re doing on-premise or the cloud. And so the problem be, I think a lesser value added problem of a setup some config and particularly, you’re getting your data clusters working stuff that we wouldn’t normally participate in any way, get the whole ideas during the cloud, which is a good thing for us and for our customers, but the data challenge itself is really identical.

[Jesse Hulsing:]

Thanks, Mike. Helpful.

[Mike Tuchen:]

Thank you.

[Operator:]

And we’ll take our next question from Taylor Radke with Citi.

[Taylor Radke:]

Hey, good afternoon, good evening. Mike, I wanted to ask you about the broader enterprise opportunity, obviously you’ve had a ton of success, in kind of the big data in cloud environments. But if you talk to people in the data integration space, I mean really it seems like you’re still just kind of scratching the surface in terms of what the Informaticas and IBMs of the world are up to. So I’m just curious how you balance here go-to-market in R&D investments between targeting the high growth big data in cloud opportunity while at the same time, you have this huge installed base, who we seem to be competing really well against in this new market, but we’d just be curious to hear how you’re thinking about kind of balancing investment between the new and the old?

[Mike Tuchen:]

From my perspective, it’s really simple. We focus on the new period, and the reason is this for a traditional premise kind of scenario, the incumbents have been working on those things for 20 years, and they’re in the deep upper right quadrant for something like Gartner for exactly that, that’s their real house is what they’re good at. And by and large, most companies that have a big premise environment and all the large companies in the world, they’ve already chosen one of the big incumbents, and if it’s working, it’s rare they’re going to want to rip it out. And so it would be a really poor use of our engineering investment, to go after that to be player number three, four, five, and it’s fairly wealth of space that has deeply entrenched incumbents. What we do in contrast is, you look at all of the new next generation scenarios that the incumbents don’t sell at all well, where every company in the world is trying to do more up and it requires a shift from what they’re doing right now, moving to the cloud, moving to real-time, moving to self-service and machine learning and big data kind of scenarios. All of that are the problems we’re focusing 100% of our effort, because we’re the best in the world at those problems and we want to make sure that as customers look to move into this new world that it’s really obvious that we’re the best solution. And if so the payback for our engineering dollars in new scenarios is just dramatically better than trying to go and be a ME2 player in a very well thought traditional data scenario on-premise, really if there is no brand at the top level.

[Taylor Radke:]

Great. thanks, and that’s helpful. So I guess if we think about, you really just focused on the new, and as you’ve said for multiple quarters. the new, the big data and cloud revenue has been growing by multiples of your overall top-line growth rate and increasing as a mix, so would you expect that at some point when you get even more scale that that could kind of reaccelerate the business just from a mixed shift or do you think kind of just 30% to 40% constant currency top-line growth rate is kind of a sustainable future, but you know maybe, for a long time, because we’re still in the early innings of the cloud?

[Mike Tuchen:]

Really, the latter, we’re not really planning or modeling any kind of top-line re-acceleration at this point. And so we’re comfortable with the growth rate that we’re seeing and we certainly have the market and the opportunity to do that. And so that really is our top-level plan.

[Taylor Radke:]

Thank you.

[Mike Tuchen:]

Thank you.

[Operator:]

And we’ll take our next question from Jack Andrews with Needham.

[Jack Andrews:]

Good afternoon. Thanks for taking my question. Mike, one of our impressions from attending Talend Connect this week is that you’re – it looks like you’re trying to build a breath of capabilities to focus on other types of workers besides just the core developer. And so I was just wondering is that driven by your customer demand and pull for these capabilities or are you looking at broader trends like yourself service and your affectively anticipating move towards broadening out your product set.

[Mike Tuchen:]

I’d say both. When we talk to our customers, one of the questions we ask is in your team in your data team, what are the mix of roles, and we literally walk through and say if this percentage of data engineers, which is a classic role that we’ve been targeting for the last bunch of years since we started the company. How many of them are data analysts? How many of them are data scientists and what we’ve been seeing has been a market shift towards more and more of the non-data engineer roles. And so the obvious observation to us is well, directly in the middle of our existing customers that we’re talking to, they have all of these other roles that are expanding. and then they talk to us about oh and then within the other groups within the company, the roles are all non-data engineers, and data scientists, and data analysts and so on. And so, once you start hearing that over and over again, see that pattern, you’ll start realizing that there is a large and growing opportunity in providing an ability for all of the different roles to work together, these are at the conference, we call that data as a team’s sport, because when companies really want to have to become truly data driven and really start taking advantage of the opportunity to leverage data to drive their entire business. they need to have everyone who is manipulating data to – or everyone who’s watched to be a part of that data revolution, has to have the ability to manipulate data and so what that means is if we only had offerings for the data engineer, we would be missing out on a lot of what customers want to do. And so that’s where the focus on all of the different self-service rolls plural are. And you saw to release the new data streams are carrying is one of those examples at the conferences here, which is something we’re very excited about.

[Jack Andrews:]

Great. Thanks for your perspective.

[Mike Tuchen:]

Thanks, jack.

[Operator:]

And we’ll take our next question from Mark Murphy with JPMorgan.

[Matt Costa:]

Good afternoon. this is Matt Costa on the phone for Mark Murphy, so congrats on the constant currency net expansion rate above 120% for four years now. how do you see the sustainability or durability of this expansion within your customer base going forward. And then can you talk about any tailwinds that you’re seeing from GDPR and the uptick of the metadata management solution that’s remained to that, addressing that problem? I know you alluded to it a little bit talking about Virgin Money UK, but any other details will be helpful.

[Mike Tuchen:]

You bet. Well, I stay with the net expansion rates of 120% kind of bounced around up and down since then for four years, I’d empirically, it’s a fairly sustainable thing and we’re pretty pleased with that. In terms of GDPR, it’s clearly been a tailwind and will continue to be a tailwind, it looks like for the next several quarters at least, but I think the way to think about GDPR is not as a one-time thing. All right, GDPR is really the beginning of a really a wave of government compliance kind of initiatives, right. The European Union is starting to think about what are the next steps beyond GDPR, the U.S. with all the Facebook conversations, seems to be poised to do something similar as well. And so I think what we’re going to see is a worldwide push for more and more privacy and security regulations going forward. And so for us, we clearly have an important role to play with things like metadata as you talked about and match data management being two key aspects of helping customers prepare for GDPR today, but also prepared for what I believe is an onslaught of new compliance regulations and privacy regulations world wide going forward.

[Matt Costa:]

Great, thanks. And just one more I know the sort of on-premise releases are taking place after the cloud releases, has there been any sort of driver in the clouded option that you’ve seen or it’s the clouded option just sort of been overwhelmingly strong to mask any effect from that sort of release cycle?

[Mike Tuchen:]

Yeah. the recycler only a few weeks apart at this point, so it’s really not a big deal and it’s actually the other way around given the demands we’re seeing in the cloud that drove our release cycle to be cloud first. And the premise that follows up. So for example, the data stream’s new product launch that it’s mentioned it’s cloud only. And in that case, the thing that we’ve launched so far is just a free pairing in the cloud. We have our production commercial release in the cloud coming up in the next few months. And then only after that does this show up on-premise. We’ve already had a few customers at the conference say, hey, I want to buy that right now and I’m a premise customer, so how to get our hands on that. So well, you just release cycle it, if you want to use our cloud version, you can get it here and one of them even said. You know what let me talk through my security guys and let me see if I can make that work. So it may actually result in a little bit of incremental boost towards the cloud for scenarios like that, but by and large, it’s – you were doing it in reaction to the demand that we’re seeing and we see anything else being very much a secondary or tertiary effect.

[Matt Costa:]

Got it. Thank you, Mike.

[Mike Tuchen:]

Thank you.

[Operator:]

And we’ll take our next question from Brent Bracelin from KeyBanc.

[Brent Bracelin:]

Thanks for taking the question here. I wanted to drill down into a couple of areas, starting with big data and cloud trends. You were kind of having along at north of 100% kind of growth that actually downtick to 90% I think in Q3 and then 80% in Q4. Now, it’s reaccelerating back to kind of triple-digit growth. So walk us through the drivers there, is that just strictly a bigger mix of cloud and the reason I ask is one of your big data partners obviously has had some sales disruptions and just trying to figure out what’s driving the growth rate and should we be nervous that when your big data partners is dealing with some sales disruption?

[Mike Tuchen:]

Well, I would say for sure we’re seeing a pronounced move to the cloud in terms of a customer buying behavior. And so our cloud business is growing substantially faster than our premise new business right now today, and we expect that to continue to be the case. So, I can’t really speak for what’s going on in their business, but I would say that if they don’t have a viable cloud strategy that’s really starting to push their top-line, then it would be a concern for me. So for us, yeah, we’re very much kind of owning on the cloud in terms of what we’ve been building for the last couple of years moving our roadmap, starting at the end of last year to do the cloud releases first and be cloud first. And we see that really is being a long-term trend. We see premise that do is being – it’s not that it’s somehow going away it’s still plugging along, but it’s not the growth driver that it used to be and it’s just because of the complexity large sophisticated customers will have a lot of success and continue to have a lot of success with it, but customers without that depth of skill set sophistication are finding it just a lot of user to do it up in the cloud.

[Brent Bracelin:]

Makes sense very clear there. Second area I want to drill down on was the new subscription contribution in the quarter, very consistent net expansion ratio there. but the employed here is the new subscription growth rate, I think the highest in well over a year, what’s driving the momentum on new subscription. Is it larger lands, is it the cloud mix, are you seeing shortening sales cycle, improving sales productivity, what drove the strength in a new subscription contribution this quarter that certainly accelerated from where it’s been last year.

[Mike Tuchen:]

Yeah. What I’d say is we’re seeing consistent expansion rates as you can see from the net expansion rate being in the 120s. And so really, I think what we’re seeing is, we now have some larger customers that are continuing to expand and that’s certainly helpful. And so the size of some of our big customers is continuing to grow. The other thing that we’ve seen of course just mechanically that we talked about last quarter and we’ll continue to see for the next few quarters is the boost from IFRS 15 is helping us as well. Let’s not forget about that, that’s where I think $1.90 million for the quarter.

[Brent Bracelin:]

Got it. That’s certainly helpful. And then last year, Mike, obviously, sales force volume kind of MuleSoft kind of promoting this concept of integration cloud. I know you’re focused on data integration. they’re focused on application integration, but could you just talk about what that acquisition means to you to the industry and is it positive-negative, what’s your take on the sales force MuleSoft acquisition there?

[Mike Tuchen:]

Yeah. I think in the longer-term, it’s broadly positive for us. but it clearly highlights the strategic value of integration. What sales force did was looked at and said, hey, we’re trying to provide an overall suite of applications to help companies drive their digital transformations. in order for us to provide that suite, we need to have the connective tissue that connects the suite together and connects it into the other systems their companies have. And so MuleSoft was always that connective tissue for the applications. We’re that connective tissue for data. And so I believe that if companies recognize the overall requirement and value of integration, I think that’s going to be a tailwind for us as well. I think the other kind of secondary thing and a little bit of a longer-term piece is that generally customers prefer a third-party independent integration solution. And so you know it remains to be seen if customers start to, who aren’t sales force centric, start to look for alternatives to MuleSoft. now, MuleSoft and we have fairly little actual technical overlap, but there could be a longer-term opportunity for us if that preference for an independent solution starts to show itself in the coming years.

[Brent Bracelin:]

All right. Makes sense. Thanks for answering the questions here. That’s all I have.

[Mike Tuchen:]

All right, great. Thank you.

[Operator:]

With no other questions, that will conclude today’s conference call.