Talend S.A.
Q3 2017 Earnings Call Transcript

Published: 10 Nov 2017

[Operator:]

Good day everyone and welcome to today’s Talend Third Quarter 2017 Earnings Conference. Today’s call is being recorded. And at this time it’s my pleasure to turn the conference over to Cynthia Hiponia, Talend Investor Relations. Please go ahead.

[Cynthia Hiponia:]

Thank you. This is Cynthia Hiponia, Talend Investor Relations, and I’m pleased to welcome you to Talend’s conference call to discuss its third quarter 2017 earnings results. With me on the call today is Talend’s CEO, Mike Tuchen; and CFO, Thomas Tuchscherer. 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 our future financial or operating performance, and involve known and unknown risks, uncertainties and other factors that may cause our 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 the 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 to us as of the date hereof, and 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 otherwise specifically stated, the financial measures to be discussed on this call will be on a non-IFRS statement. 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 these non-IFRS financial measures to the most directly comparable IFRS financial measure in our press release. Let me now turn the call over to Mike Tuchen, Talend’s CEO.

[Mike Tuchen:]

Thanks, Cynthia, and thank you all for joining us today. We’re pleased with our third quarter results. We achieved record revenue of $38.4 million in the third quarter up 40% year-over-year while substantially improving our operating leverage. Some of the highlights of the September quarter include our industry leading big data and cloud solutions delivered a combined subscription revenue growth rate above 90% year-over-year. Our subscription revenues were 44% year-over-year. Our non-IFRS operating margins improved to minus 6% in the quarter compared to minus 19% in the year ago period. We’re pleased to announce our first acquisition of the public company, which closed this week. Talend announced the acquisition of Restlet a leader in cloud-based API design and testing. The company is based Nantes, France that we already have developments there, which will make the integration seamless. The Restlet acquisition will accelerate Talend’s cloud offering allow data share using API. This allows our customers to deliver stickier and government data as a service. We see this acquisition is highly complementary to Talend’s existing offering and expect to deliver new capabilities in our cloud platform based in the Restlet technology in the first half of next year. Now, turning back to third quarter. We’re seeing large global enterprises continuing to adopt Talend. In the third quarter, we saw 59% increased in the number of enterprise customer over the same period last year. Let me walk through some key customer wins and expansions in Q3. An example of a new enterprise customer, we’re pleased to announce that Yahoo Japan became a customer during Q3. Yahoo Japan’s web portal is the most visited website in Japan. The rapidly adapting big data technology is to deliver new web-based services to customers. Yahoo Japan, is building one of the world’s largest data link that will combined data in new ways and enabled thousands of users with those service access. Yahoo Japan select the talent versus native architecture, modern intuitive user interface and future proof approach that allows them to access the best technology today and be ready for whatever comes next. One of Americas fastest growing TV, internet and voice companies and one of our largest cable operators in the U.S. built on first data link using hand coded. However, the IT team quickly realized they’re working to be key top with the rapid innovation in the big data industry without a book. It shows Talend for our future proof in date of architecture that allows them to develop lots and then later plug in new technologies as they need to change. One of the world’s largest banking and financial services organizations is undertaking a massive re-platform into discuss and add new capabilities part of the over $200 million legacy, data warehouse and analytics retirement program. The company believes through our huge opportunities to save money, while becoming more data driven. In particular, we using cloud ware and Talend to address broad and cyber security in real time and more efficiently address regulatory reporting requirements. The selected town for multi quality approach data stock cogeneration, cost effectiveness and predictability. We continue to see cloud adoption accelerate. In Japan, NTT Docomo was another great customer win for town in combination with AWS. NTT Docomo is a leading Japanese telecommunications company building a cloud based enterprise data lake on AWS to improve efficiency and collaboration across the entire portfolio of companies. These standardize on Talend and AWS including Redshift, S3 and EMR to integrate 50 gigs of data today from internal and external equipment. This like to Talend after proof-of-concept that shows significantly better time to value with the 10 times improvement in productivity compared to other vendors remain coverage. Talend’s adopt versus the competition with dramatically better usability and productivity including deep native support for AWS. Another key growth driver from Talend is expansion in international and emerging markets. In addition to Yahoo Japan and NTT Docomo, we had several notable international customer wins in Q3. Covan is the top Villebon insurance company in France. They’re creating a 360 degree review with our customers, so they can deliver superior service and support across their business units. Talend was selected because of our ease of use, implementation speed, real time capabilities and tight integration with sales force. Our AEMO manages Australia’s gas and electricity markets. Talend majority to insight to generate predictive models of their business. Talend was chosen based on a rapid time of value and our ability to allow AEMO to maximize their investment in Microsoft Azure. We believe that our ability to retain and extend subscription revenue overtime with an indicator of our position at the strategic solutions provider and the long term value of the Talend. In the third quarter our dollar based net expansion rate was the 123% on the constant currency basis. This is the 14th quarter in a row then we’ve had a dollar based net expansion rate over 120%. BMW one of the world’s largest automotive and motorcycle manufactures selected Talend a year ago and is now significantly increased their investment to standardize all of the data congesting and processing in Microsoft Azure across three header classes. Their goal is to integrate every data source in the company including their factories, vendors, suppliers, sales and even their powers in the big data system and use it as a central hub to support data scientists and new business innovations across the company. One of the world’s largest manufacturing companies our U.S. based Fortune 50 company as we’ve been working with Talend for nearly five years. They believe they can save hundreds of millions of dollars will becoming more data driven using cloud indicated technologies. As part of this they’re consolidating multiple data warehouse project into a single data link running on Amazon. They standardize on Talend as a key foundation for this project and with additional subscription purchased in Q3 now have over $2.5 million in annual subscription with Talend. All of the above customer wins and expansions are strong market validation of the leadership of Talend’s next generation integration solutions and our ability to support enterprise companies as they make their inevitable transition to modern hybrid and multi-cloud environments. Reinforcing our commitment to remain on the cutting edge of technology, we recently unveil the fall 2017 release of Talend’s integration cloud. This release offers self service data preparation to empower business users with greater access to data, long haul and IT to maintain control and governance. In addition we launch a new European data center to meet the growing demand for our cloud solutions in Europe. We also introduced a new Data Governance and Compliance solution to address the European Union’s new General Data Protection Regulation or GDPR. With further validation of our market leadership, we were pleased to be recognized as a leader in Gartner’s 2017 Magic Quadrant for Data Integration Tools before. We significantly improved our position in the Leaders Quadrant over 2016, based on our ability to execute. More recently for the first time, we also moved into Leaders Quadrant in Gartner 2017 Magic Quadrant for Data Quality Tools. We believe this recognition demonstrates, the changing of the guard from the data integration space. In today’s modern cloud and big data landscape, Talend is well positioned to continue to take share in the coming years that’s the large legacy in common continue to struggle with the changes reshaping the market. We continue to strengthen our relationships with our ecosystem partners. In Q3, we launched a new developer community to provide support, education, and inspiration to users of Talend’s enterprise solutions and open source products. Our community is an important component of Talend’s overall ecosystem, but also includes our retailers, technology partners and system integrators. Let me now turn the call over to Thomas who will discuss our financial reports in more detail and provide our outlook for Q4 and the full year of 2017.

[Thomas Tuchscherer:]

Thanks Mike. Today, I will review the financial results for the third quarter of fiscal year 2017 as well as provide our outlook for the fourth quarter and fiscal year 2017. Total revenue for the third quarter was $38.4 million, an increase of $11 million from the third quarter of 2016 representing 40% year-over-year growth. Our subscription revenue for the quarter was $32.9 million an increase of $10 million from the third quarter of 2016 or 44% year-over-year growth. In constant currency subscription revenue grew 41% year-over-year. The strong demand for our big data and cloud offerings continue to drive growth in subscription revenue, which combined grew over 90% year-over-year. This is down slightly from prior quarters with big data and cloud have grown above 100% for 10 consecutive quarters. Our big data and cloud products now together represent our largest product category and make up more then a third of our subscription revenue. From a graphic perspective the Americas represented 48% of subscription revenue and grew at 45% year-over-year. Although still a small portion of our subscription revenue Asia-Pacific is continuing to show strong potential and growing above the 100% for the second consecutive quarter. We also see growth being driven by our enterprise customers defined as companies with $100,000 or more of annualized subscription revenue, where their number grew by 59% to which 335 in this quarter. Professional services revenue for the quarter was $5.5 million an increase of $1 million or 23% from the prior year quarter. The increase was primarily due to implementation services and training for new customers. For the quarter ending September 30, 2017 our net dollar based expansion rate was 123% in constant currency. It has been above 120% in constant currency for new 14 consecutive quarters. I’d like to remind that investors that our net dollar base 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 that 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 second quarter increased to 79% from 76% for the same period a year ago. The increase was primarily due to higher subscription revenue mix and also better gross margins across both our professional services and subscription businesses. Operating expenses for the third quarter were $32.6 million, an increase of $6.5 million or 25% year-over-year. The increase in dollar terms was driven primarily by an increase in sales and marketing expenses. Sales and marketing expenses for the quarter were $20.1 million, an increase of 20% year-over-year. The increase was primarily the result of higher personal expenses due to growing headcount. We have observed higher sales attrition this quarter relative to earlier quarters in a year. This higher attrition was mainly driven by sales management changes primarily in Europe. We expect to compensate for the higher attrition by increased recruiting efforts in the sales team in the fourth quarter. We expect our sales and marketing expenses will continue to grow in absolute dollars as we invest in our international expansion, identify and retain top talent and strengthen our brand awareness. Our sales and marketing headcount increased from the prior year by 28% to approximately 334 employees. R&D expenses for the quarter was $6.2 million, an increase of 30% year-over-year. The increase was driven by an increase in staff expenses due to greater headcount especially in France. Our new R&D reached 216 employees at the end of this quarter representing 20% growth over the same period of last year. G&A expenses for the quarter were $6.3 million an increase of 41% year-over-year. The increase was largely attributable to increase in staff expenses due to greater headcount Talend increases in professional and outside services related to being a public company. We also have the $0.3 million of non-recurring expenses related to the F3 perspective securities filing in September. Our G&A headcount reached 98 employees on September 30, 2017 representing 20% growth from the same quarter in the prior year. We ended the quarter with approximately 816 full time employees compared to 649 employees at the end of the third quarter from the prior year. We incurred an operating loss for the quarter of $2.2 million compared to the third quarter of the prior year’s operating loss of $5.1 million. Our business expense substantial improvement in operating leverage as our operating margin improved to minus 6% from minus 19% in the same quarter a year ago. The magnitude of the margin improvement should not be seen as indicative of future performance, due to many reasons including the sales attrition that I mentioned previously. Net loss for the quarter improved to $3.1 million compared to a net loss of $5.4 million in the prior year period. Free cash flow for the quarter was negative $3.4 million compared to free cash flow of $1.3 million in the third quarter in the prior year. Year-to-date free cash flows were up negative $2.5 million or minus 2% expressed to the percentage of revenue. We intend to continue our balanced plan approach and going forward we anticipate remaining approximately free cash flow breakeven on an annualized basis with normal seasonal quarterly fluctuations. Turning to the balance sheet; as of September 30, 2017, we had cash and cash equivalents of approximately $94.6 million. As we discussed during our IPO and all of our prior earnings call, 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 does not take into account changes in pre-billed subscription duration, professional services and our subscription contracts in certain renewal dynamics. We provide forward guidance on a revenue basis as we believe this is a more meaningful and accurate reflection of our business operation and financial position. As discussed in our prior earnings calls, we are targeting a pre-billed subscription duration of 1.25 years for our new business sales in 2017. This quarter pre-billed subscription duration came in slightly in slightly ahead of plan at approximately 1.1 years. This intended lower pre-billed subscription durations consistent with our previously announced strategy to minimize discount and reduce negotiation complexity in our sales cycle. Before I give our guidance, I would like to emphasize some key financial highlights. Our net dollar based expansion rate has been above 120% for now 14 consecutive quarters reflecting our efficient open source supported lead generation approach and strong customer retention and up-sell. Our subscription revenue grew by 41% in constant currency partly driven by 90% plus revenue growth of our big data and cloud offerings. Our operations in U.S. and Asia-Pacific are continuing to drive very strong top line growth. Now for the Q4 and 2017 fiscal year guidance, which includes the Restlet acquisition and assumes similar business conditions and foreign exchange rates as of October 31, 2017. For the fourth quarter 2017 total revenue expectations are raised to be in the range of $41 million to $42 million. Non-IFRS loss from operations is expected to be in the range of negative $9.2 million to negative $8.2 million, as we step up our recruiting efforts in sales and marketing. Net loss is expected to be in the range of negative $13.1 million to negative $12.1 million and non-IFRS net loss is expected to be in the range of negative $9.3 million to negative $8.3 million. Net loss for basic and diluted share is expected to be in the range of $0.45 to $0.41. And non-IFRS net loss per share is expected to be in a range of $0.32 to $0.28. Basic and diluted weighted average share count of $29.2 million shares. For the full year 2017, total revenue expectations are raised to be in the range of $148.1 million to $149.1 million. Non-IFRS loss from operation is expected to improve slightly and be in the range of negative $21.1 million to negative $20.1 million. Net loss is expected to be in the range of negative $33.4 million to negative $32.4 million. And non-IFRS net loss is expected to be in the range of negative $2.6 million to negative $22.6 million. Net loss for basic and diluted share is expected to be in the range $1.15 and $1.12. And non-IFRS net loss per share is expected to be in a range of $0.81 to $0.78. Basic and diluted weighted average share count of $29 million shares. Thank you. Let me turn the call back to Mike for some final remarks.

[Mike Tuchen:]

Thank you, Thomas. As you saw in our earnings release today, Thomas has deiced to step down as our CFO, but will remain in his role where we search for his replacement. During Thomas’ eight years at Talend he build the first class finance organization, and was a key member of the team to took the company public last year. I’ve enjoyed working with Thomas over the last four years, and I wish him the best of luck in his next steps. I’d like to take a moment now to announce that Steve Singh is the new Chairman of Talend’s board. Steve is the former Founder of Concur and Concur Chairman and CEO of Docker. His deep expertise and passion for the software industry and as an experienced building where the world’s most successful public company to be invaluable in helping Talend through its next phase of growth. The appointment of Steve is Chairman as part of Talend’s transition from a private company board to an independent diverse experience public company board that allowing the company’s growth strategy and growth trajectory. The September quarter marked our sixth quarter we’ve reported as a public company. I’m pleased with the execution of our team as we continue to bring industry leading solutions to the market. As Thomas mentioned, more sales leadership changes over the last 18 months have less than more sales turnover then we originally anticipated in those regions. We’re attracting world class sales talent on a global basis ramping them more effectively than ever before. At our Financial Analyst Day next week, we’ll outline our current views on the market in industry as well as our strategical growth in both the go-to-market and technology perspective. We excited to have you meet our deep bench of Talend’s executives at a share definition for our business. Several of our customers are walking through their best solutions and how does deploying Talend across their IT infrastructure. Our goal is to showcase as Talend has well position today in over the next few years, as innovations in the cloud and big data platforms continue to reshape our customers manage their data. For those unable to written in person, event will be webcast live on our investor relations website. With that Thomas and I would be happy take your questions.

[Operator:]

[Operator Instructions] And we’ll go first to Raimo Lenschow with Barclays.

[Raimo Lenschow:]

Well, I like that new name, thank you.

[Mike Tuchen:]

Hey Raimo

[Raimo Lenschow:]

Hey. Just – can you talk towards the changes or the – Eastern Europe like is – was it like a top level leadership and then try to couple of this sales guards [ph] with them when they left or how do we have to think and how quickly can you fix that?

[Mike Tuchen:]

Yes. So what it was as we made in three of the sales areas in Europe. We’ve made sales changes – leadership changes in the last 18 months. And most of the attrition actually is the new sales leader coming in and choosing the team that would like to go forward with, but there is – there was actually a couple of examples of exactly what you mentioned was minority of the situation, but that was…

[Thomas Tuchscherer:]

There was a key as well.

[Mike Tuchen:]

In terms of what we’re doing right now is, we’re obviously doubling down on hiring, and I’d say the one piece of good news that sitting in the middle of this is that our ability to hire and ramp of sales reps to success is better than it’s ever been. When we – kind of did a hiring surge in Q1 as you know and we’ve been watching that cohort closely to see how we’ve done and they’ve done better each quarter relative to their ramps quarter than any other cohort we ever hired. So we like our ability to hire and ramp new sales reps, which is one of the reasons why the new sales leaders were able to be a little more aggressive in choosing their team.

[Raimo Lenschow:]

Yes. Okay, perfect. That helps. And then can you talk a little bit about the competitive field, I mean if you look obviously the Gartner Magic Quadrant and you moved up there, but it is kind of the old Magic Quadrant in terms of what we’re kind of trying to address there, and so we see some legacy players still kind of showing up there okay. Can you just help us to understand a little bit like how that whole field is evolving and maybe at some point you have like a slightly different quarter on there, but just talk us through how that occur in competitive field is looking?

[Mike Tuchen:]

As we’ve been talking about for a number of quarters, we believe that the real battle over the next several years is going to shape out in a couple of ways. Number one, we’re really the company best positioned to be the next gen leader. But the battle is going to faced up between us a number of new entrants that don’t drop anywhere really in the Magic Quadrant yet. And the real wildcard is whether Informatica can pick themselves off the ground and really become relevant in that next generation in the next year or two.

[Raimo Lenschow:]

Yes, okay. Perfect. Thank you. Thomas all the best for you, I wondered I didn’t say.

[Thomas Tuchscherer:]

Thanks Raimo.

[Operator:]

We’ll go next to Jesse Hulsing of Goldman Sachs.

[Jesse Hulsing:]

Yes, thank you. And Thomas thank you very, it’s been pleasure working with you. Big shoe is to fell. Mike, can you give us an update on, I guess that how to deal sizes are trending both on initial LANs and on the expense. I mean it seems like the types of engagements that you’re getting pulled into, I think you mentioned a big bank, I want that are getting increasingly strategic. Are you seeing initial ASPs also climb and expansion size is climb?

[Mike Tuchen:]

Yes, I think both those things are true, as a matter of fact we’ll talk about all of that next week at the Analyst Day. And we’ve got some stats and Brad will walk you through some of the dynamics there. But yes, we’re seeing that the way he praised is LAN bigger and extend bigger.

[Jesse Hulsing:]

Great. And it’s been a while since we’ve really heard a business update on data preparation and sounds like you’ve added some features in the latest release, but how is interested trending and you see potential for that evolve in the real product cycle in the next few quarters?

[Mike Tuchen:]

I remain excited by – what we did this time around we put in the cloud, and so what we’ve been doing in the last several quarters has been rolling more and more of our product set into our next gen cloud architecture. And so this quarter it was data prep and again next week we’ll talk about how ease that evolved over the next couple of quarters. Today for us is still, I’m just given the size of the business in the early ramp of that is still a small part of what we do. We get a ton of interest from our customers it’s a product as soon as you see and it generate excitement, they immediately want to try to put at the work. But I’d still say whenever you bring a new product particularly one that fell to a new audience, which is really opening up the whole self service data analyst audience to ask, it takes time to figure out exactly how to sell it. So we’re still remain early, is still growing like mad, but from a small a base.

[Operator:]

We will go next to Bhavan Suri of William Blair.

[Bhavan Suri:]

Hey guys, can you hear me. Okay.

[Mike Tuchen:]

Hey, Bhavan.

[Thomas Tuchscherer:]

Hi, Bhavan.

[Bhavan Suri:]

Hi, Thomas will have a private discussion about this change.

[Thomas Tuchscherer:]

And by the way you shared, I’m opened to your suggestion.

[Bhavan Suri:]

Right, right. That’s been a pleasure working with you, best of luck. I guess my first question is really on the partner channel. In your last quarter called out that SI was setting an inflection. You talk about largest site training for 1500 customers in town – 1500 resources sorry, consultants in Talend. Could you just an uptick there sort of how that billed out is contributed either the quarter with a solid, obviously that be sort of sort of growth we think through the next two to three years.

[Mike Tuchen:]

So again we will give an update on that, on the training numbers will actually give some overall tax that next week. We remain super excited about the ecosystem build out. And it for us particularly as we drive into the enterprise having the support of the large SIs, is just a critical part helping make large customer successful. So we really like the – we like that as the tail end and I don’t think I have a staff right now at my finger tips on what the specific competition was in Q3, but as it remains an important part of our business and increasingly so as we move up in the enterprise.

[Bhavan Suri:]

Fair enough. I look forward to next week. I guess maybe just one for Thomas you too, and obviously really saw as a rebound again in bookings, I understand volatility and all the rest of the duration, but just some comment of how both you and add-on booking were and renewal trend to across expectations this quarter. In lining with something that was incrementally better we love just little more color there?

[Thomas Tuchscherer:]

Sure. I mean our net dollar base expansion rate has been you saw the stat is 123% so in terms of up sell to the exiting customer base, I think it’s been trending very similarly to the prior quarters so I wouldn’t call out a specific change on our up sell. And what I did call those during some of the – some of our remarks was our pre-billed subscription duration came in a slightly lower than what we planned 1.1 years, but otherwise…

[Bhavan Suri:]

Right, which I would have negative impact on billings right?

[Mike Tuchen:]

Correct, correct. But what it does is its get this closer to the target that we want to be next year in the year actually we’re on it we’re, got a little ahead of ourselves on that glide path which is a good thing, and yes of course that’s the headwind to billings.

[Bhavan Suri:]

All right, guys. Thank you, congrats. I look forward to see you next week. Thanks.

[Thomas Tuchscherer:]

Thanks a lot.

[Operator:]

[Operator Instructions] Walter Pritchard with Citi. Please go ahead, sir.

[Walter Pritchard:]

Hi, thanks. Two questions on Q4 and just how you think about next year I know you are not giving specific guidance, but relative to the Restlet acquisition and then the sales attrition that you’ve talked about in the quarter. Was there any impact on Q4 either a benefit from Restlet’s revenue or some headwind that you might be accounting for from the – from what you’ve seen on the sales attrition side?

[Mike Tuchen:]

Yes. So Restlet is basically a pure technology tuck-in and it’s exactly in line with what we’ve hypothesized about in the last few quarters. A small great team with great technology and effectively zero revenue so that will be – I mean nothing coming in from that. It really is, for us will bring something to market sometime in the first half and starting early bookings ramp in the back part of next year. So I really would expect a bunch of revenue to show up until 2019. In terms of Q4 we’ll have more sales reps that are new and earlier in their ramp than we had expected given the fact we had workers and than we expected, but Thomas gave the guidance and that’s how we see the business at this point.

[Thomas Tuchscherer:]

Walt, I take on R&D line, I mean in the guidance that we give for Q4, there’s going to be we have approximately 17 additional heads. That are going to be obviously consolidated into our P&L in Q1 and Q4 from November 8 onwards, right. So and that’s included in the guidance.

[Walter Pritchard:]

Got it, great. And then I guess Mike, on the on the competitive side with Restlet, its feels like you and MuleSoft example in some the other API players been sort of strangers and I not really overlapping too much in competitively and I’m wondering – do you think that changes do you think your you know your overlap becomes more and any thoughts just generally on the competitive landscape in that area?

[Mike Tuchen:]

It’s a great question. And I’m very glad you asked that, because we really don’t expect this to increase the overlap with MuleSoft. What MuleSoft in really all of the existing API players are doing is helping people compose the application, and connect applications to applications through an API. And we’re doing something very different. We’re helping companies, connect data and shared data across security premise. So if you need to share datas with customer partner supplier or from one cloud to another from premise to cloud that’s what we’re doing. So it’s all about connecting to data, it’s nothing new it connecting from application to application. And it really that’s the state that we play in being all about data and it’s something that we’re going to have to educate our market a little bit, but it’s something that our customers have been asking for quite a lot because its unreserved part of the market.

[Walter Pritchard:]

Thanks. Thanks Mike, and thanks Thomas for the interactions over the last few years.

[Mike Tuchen:]

Thanks.

[Thomas Tuchscherer:]

Thanks Walter.

[Operator:]

And will go next to Mark Murphy at J.P. Morgan. Please go ahead, sir.

[Matt Costa:]

Hi god afternoon, this is Matt Costa on for Mark Murphy. So the change in the absolute number of customers paying you over $100,000 was the highest it’s been at least since we’ve been tracking. Do you view this as a sustainable or is it going to probably revert to you mean to 20’s or 30’s where it’s sort of been historically?

[Mike Tuchen:]

Go ahead, its a great question I don’t know, if I have that level of forecast stability on that.

[Thomas Tuchscherer:]

So I mean if you look them, if you look at historically in terms of the number of customers of under its been increasing very steadily. And I think we’ve published stats over the last two years. So I think that the trend is likely going to continue that it’s going to increase steadily. Or we don’t expected to decline right, I mean we’re placing a lot and we’re investing a lot of the company’s resources on addressing these enterprise great customers. So therefore I wouldn’t expect that number of enterprise customers to decline.

[Mike Tuchen:]

Yes. In terms of what I expect the pace of growth to accelerate or stay stable, I would say it’s – we’re seeing larger and larger customer deals, bigger and bigger extend deals. I’m trying to connect that back to the number of customers that cross over that boundary or get added in the new customer about 100K of which you’re seeing increasingly more of them. It’s possible that it continues that roughly the same pace of new ads every quarter, but again not that it’s a metric that we follow, but we don’t have a specific quarterly target a prior in our economy.

[Matt Costa:]

Sure. And then to follow-up on Jesse’s question. Can you talk about some of the feedback you’re getting on the Talend data preparation cloud I think it’s only been avail for testing I’m not for very long so I’m just wondering if there’s been any feedback you can mention?

[Mike Tuchen:]

Yes. I mean it’s been available for about two weeks maybe one or two weeks. And the feedback is the customers love how quick and easy ways to get started. This is literally and you guys did absolutely I will all try it through our website, quick sign up and you’re live on it and like to can fill out a couple fields and let go. And so that obviously current form is there for someone that wants to try it out or is already have one of our cloud customers and we want to add this functionality. And that was a missing piece of functionality for people that are using our cloud product. This is something that we’ve gotten a lot of expressions of interest in.

[Matt Costa:]

Okay. Thank you very much.

[Operator:]

[Operator Instructions] And we will go next to Brent Bracelin at KeyBanc. Please go ahead.

[Brent Bracelin:]

Thanks for taking the question here. I just start out with APAC triple digit growth there for the second consecutive quarters. Can you just remind us was there a leadership change there, was there an investment that you’ve made over the last years, you’re sort of see the fruits of what’s driving triple digit growth now for two consecutive quarters in APAC and what’s the pipeline opportunity in that region?

[Mike Tuchen:]

Yes. That is exploding for us. We brought in a new sales leader at the end of last year and he’s been really – and we’ve alongside that been investing in the region and the results clearly speak for themselves in the pipeline is off the chart. Our CTO just got back from APAC, I’m going to APAC in a couple of weeks. And it’s really exciting time in the market and for us out there APAC. And what you’ll see – what we one of the things that we will talk about next week is as we’ve chosen focus regions to invest in and then the results that you see something to that on the revenue. And we’ll talk about that next week in Analyst Day. We chose the year before we chose the U.S. as really the focus region and double down there and then you saw the results from that. And then we’re still seeing results from that. And last year at the end of last year we really choose to double down in Asia and we’re very much seeing a result in that now.

[Brent Bracelin:]

Fair enough, thank you. And then I guess for Thomas here, gross margins 79% obviously nice list sequentially from 77.6% in the prior quarter, 76% in the prior years. So is that all just mix shift as you think about the pros service is growing slower than subscription or walk me through how we should think about the gross margin profile and then if you could remind us what the target gross margin profile is?

[Thomas Tuchscherer:]

Sure. So actually our long-term target model, we’re looking at a total gross margin of between 79% to 82%. So we’re pretty happy obviously with the performance in Q3. So you’re right, I mean part of the 79% total gross margin came from a revenue mix shift. And the other part came from just better gross margins across both the professional services business as well as the subscription or the support business. Now and be very careful in terms of I would model out or I wouldn’t – going for in terms of where we expect our gross margin to be in the in the next few quarters. As Mike mentioned we are investing a lot into our cloud based offering and we would expect a lot of our – we would expect additional expenses in our cost of goods sold in terms of subscriptions related to our cloud based offering. So I think that, as I mentioned, I know in prior earnings call that my – that might depress slightly our subscription gross margin going forward and in the next few quarters.

[Brent Bracelin:]

Helpful color. And I’ll extend my regards as well here’s been great working with you and certainly you will be missed. Thank you.

[Thomas Tuchscherer:]

Thanks Brent.

[Operator:]

And we’ll go next to Edward Parker of BTIG.

[Edward Parker:]

Hi, thanks. Just a quick clarification on the higher than expected attrition, that in fact looking materially relative to your forecast and so do be able quantify that?

[Mike Tuchen:]

It’s accounted for in the forecast, and clearly, who is in fact we’re talking about, the reason why we brought it up we now have more sales reps that are earlier in their ramp than we had initially anticipated to this point in the year. So we thought it was worth bringing it up, but of course that’s the impact is into the guidance that Thomas gave for Q4.

[Edward Parker:]

Got it. Thank you

[Operator:]

And I have no additional questions at this time. We’ll turn the program back over toe Talend’s CEO, Mike Tuchen. Please go ahead sir.

[Mike Tuchen:]

Perfect. Well thank you all for joining us today. And we look forward to seeing most of all of you next week at our first Analyst Day in New York City at the NASDAQ on Tuesday.

[Operator:]

And ladies and gentlemen once again that does conclude today’s conference. And again I’d like to thank everyone for joining.