Talend S.A.
Q4 2017 Earnings Call Transcript

Published: 14 Feb 2018

[Operator:]

Good day everyone and welcome to the Talend Fourth Quarter and Fiscal Year 2017 Earnings Call. Today’s Conference is being recorded. At this time for opening remarks I’d like to turn the program over to Lisa Laukkanen, Investor Relations. 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 conference call to discuss fourth quarter and fiscal year 2017 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 performance 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 contained 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 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. Let me now 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 finish to the year. as we continue to drive enterprise and Cloud momentum. We achieved record revenue of $41.5 million in in the fourth quarter up 36% year-over-year. Some of the highlights on December quarter include our overall subscription grew 40% year-over-year. That was driven by our industry leading Cloud and Big Data solutions which delivered a combined subscription revenue growth rate close to 80% year-over-year. We experienced a particularly strong quarter in the Cloud with subscription revenue increasing more than 100% year-over-year. Going forward we see Cloud subscription growth as an increasingly important metric as the ongoing market shifts to the Cloud continues to drive our business. Enterprise subscription customers grew 58% in Q4 and represented approximately two thirds of our subscription revenue. We continue to be pleased with our momentum with large enterprise customers. Finally, our Asia Pacific region continues to explode with the revenue growth over 100% for the third quarter in a row. Our strong financial results in the fourth quarter were driven by continued adoption by large global enterprises, growth in international markets and continued success in growing our installed base through our random [ph] expanded strategy. As I mentioned earlier we continue to see Cloud adoption accelerate and our Cloud business becoming increasingly important growth driver for the company. During the quarter we saw a record demand for Talend Cloud which is the division of Talend Data Fabric. Within that we saw a higher tax rate of Talend Data for our Cloud to Talend Cloud. In fact, we were pleased this lead our Talend data for our Cloud has already reached half of sales for that product line during the fourth quarter after its launch in October. Some of our notable Cloud wins and expansions in Q4 includes, one of Americas most successful trucking and logistics company which manages several 100,000 vehicles chose Talend to create a Cloud data warehouse with Amazon Web Services to analyze new sensor data and moving from an on-premise vehicle data warehouse to the Cloud. In particular, Talend was selected because we are strong, real time Big Data capabilities in the Cloud. In Japan one of the top five global fashion manufacturers continues to expand their use of Talend at AWS in their ecommerce business. They are developing a comprehensive 360-degree view of their customers including analyze each end customers' online experience to drive real time personalize product recommendations that increase their revenue per visitor. Another example of a Cloud vendor in the quarter, is OC Channel [ph], a global software company with more 8000 clinics was moving into Cloud as they replaced their legacy [indiscernible]. Talend was selected due to our ease of use and our ability to be up and running in a matter of days. [indiscernible] Pharmaceuticals is one of the fastest growing providers of specialty generic pharmaceuticals in the U.S. In a head to head comparison they realized that they can meet their Big Data, quality and did the integration needs with a single product from Talend rather than three products from Informatica. Talend was selected in a little over about. [indiscernible] Trust is a residential and commercial lender. They have outgrown their legacy infrastructure they are moving to the Cloud data warehouse. Talend Cloud was selected because of the ease of use for non-IT users will contain a quality and future group architecture. Big Data also continues to be an important driver for our business. One of the top five pharmaceutical companies in the world selected Talend to build their real time Big Data lake. When compared to solutions from Informatica and Talend they selected us because of our proven fact record, simple pricing model, and superior performance on Big Data. With Talend they are able to reduce their dependence on hand coding increased productivity and significantly modernize their data management approach. One of North America's top size commercial bank is a long-term user of legacy integration tools. Like many customers they realize these solutions did not support their modern data usage. They initially turned to hand coding to build their data but in Q4 they mostly found that they improved scalability and performance while lowering their overall maintenance process. Southern California Edison is one of the nation's largest electric utilities delivering power to 15 million people across southern California. Talend was selected to help them migrate from Teradata to Cloudera and SAP HANA to address new use cases more aggressively. Another key growth driver for Talend is expansion in international and emerging markets. Our Asia PAC region continues to explode with growth over a 100% as I mentioned earlier and I'd like to share a few examples of customer wins in that region with you. And the vision of one of Australia's largest telecommunications company is experiencing rapid and their existing data warehouse did not see increase effectively. With Talend and AWS will drive self-service analytics with built in governance in data quality to take their business to the next level. Nomura Research Institute is the largest Japanese IT consulting firm with 10,000 employees. After realizing the hand coding will not scale to meet their business needs, they expect the Talend to drive Big Data projects and increase their productivity by 5x. Mitsubishi UFJ is the world's second largest bank holding company with US$1.8 trillion in assets. They selected Talend for their new legal compliance project to increase productivity and secure capabilities with AWS. We believe that our ability to retain and expand subscription revenue over time is an indicator of our position as a strategic solutions provider and the long-term value of the Talend data fabric. In the fourth quarter our dollar based net expansion rate was 125% on a constant-currency basis. This is the 16th consecutive quarter we've had a dollar based net expansion rate over 120%. NTT Docomo, we mentioned in Q3 is a new customer expanded the subscription in Q4. NTT Docomo is a leading Japanese telecommunications company that’s building an enterprise data lake on AWS. They tripled the total number of users in Q4 based on the success of the initial project. BMW also increased their business with Talend. BMW is another example of a company that standardized on Talend for their data lake project. As they scale global clusters they continue to add Talend subscriptions to support additional projects. One of the largest global payment services in the world, selected Talend in 2016 for their data lake project because of our native Big Data capabilities. The success of that project they increased the Talend subscription to support the roll out of new services across business in Q4. We continue to strengthen our relationship with our ecosystem partners, thanks to strong support from several leading providers of IT consulting services in 2017 we continued to ramp the number of trained Talend consultants in the marketplace. Over the course of the year our partners consultants completed over 6,400 courses on Talend. This is up from 1,700 courses in 2016 and represents an increase of more than 3.5x. Cognizant led the way earlier in 2017 by embedding our on-demand training directly in their internal learning management system, the momentum continued in Q4 as we announced we've struck a similar agreement with Capgemini. In the fourth quarter we also continued to deepen our relationships with leading Cloud platform providers. In November we announced the collaboration with AWS and Cognizant as at quick start solutions to streamline customer deployment to Cloud Data Lakes. More recently we announced that Talend has achieved gold competency in Co-Sell Partner Status on the Microsoft Azure platform. Partnerships like these helps demonstrate Talend's technical leadership and commitment to our customer success in the Cloud. In Q4 we also unveiled new solutions for GDPR and governing data right including net of data management as it enables end to end flexibility and transparency to help customers manage risk and maintain compliance. We have alluding deadline with GDPR will be a tailwind for our business in 2018. Let me now turn the call over to Thomas who will discuss our financial results in more detail and provide our outlook for Q1 and the full year 2018.

[Thomas Tuchscherer:]

Thanks Mike. Today, I will review the financial results for the fourth quarter and fiscal year 2017 as well as provide our outlook for the first quarter and fiscal year 2018. Total revenue for the fourth quarter was $41.5 million, an increase of $11.1 million from the fourth quarter of 2016, representing 36% year-over-year growth. Total revenue for the quarter was $148.6 million, an increase of $42.6 million since 2016 representing 40% year-over-year growth. Our subscription revenue for the quarter was $35.2 million an increase of $10 million from the fourth quarter of 2016 or 40% year-over-year growth. In constant currency subscription revenue grew 34% year-over-year. Subscription for fiscal 2017 was $125.9 million a year-over-year increase of $37.3 million or 42% in constant currency. The strong demand for our Big Data and Cloud offerings continue to drive growth in subscription revenue, which both grew in the fourth quarter at close to 80% year-over-year, and by a 100% for the fiscal year. Our Cloud SAAS subscription revenue in the fourth quarter grew more than the 100% year-over-year and we expect this trend to continue as Talend continues to invest R&D for efforts in our Cloud offering, which now includes Talend Big Data integration, data prep and with more options to come over the course of the year. Our Big Data and Cloud products now together represents our largest product category and make up more than 40% of our subscription revenue in the fourth quarter. From a geographic perspective the Americas represented 48% of subscription revenue in the fourth quarter and grew at 36% year-over-year. For the full fiscal year, the Americas represented 49% of subscription revenue and grew at 47% year-over-year. In the fourth quarter as well as the full year Asia Pacific grew by more than a 100% year-over-year. Although Asia-Pac is still only represented 6% of our subscription revenue in the fourth quarter and continues to show great potential and has grown above the 100% for now three consecutive quarters. We also see growth being driven by our enterprise customers defined as companies with $100,000 or more of annualized subscription revenue, where their numbers grew by 58% and reached 353 this quarter. Approximately two thirds of subscription revenue were direct from these enterprise customers in Q4 of 2017 up from 57% a year ago. Professional services revenue for the quarter was $6.4 million an increase of $1.1 million or 20% from the prior year quarter. For 2017 professional services revenue was $22.7 million an increase of 5.3 million or 31% from the prior year. As we discussed in past earnings call and during our November analyst day Talend has made strong investments in enabling our system integrator eco system so that 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. As a result, our consulting revenue has declined as a percentage of total revenue and this has served as a headwind to our overall revenue growth. This quarter our year-over-year growth in potential services declined to 20%, down from 33% in the second quarter of this year and 23% in the third quarter of this year resulting in slightly less than expected professional services revenue for the quarter. For the quarter ending December 31, 2017 our net dollar-based expansion rate was 125% in constant-currency. It has been above 120% in constant-currency for now 15 consecutive quarters. I’d like to remind 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 we'll 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 both the fourth quarter and the full year was 77% up from 76% from the full year of 2016. Operating expenses for the fourth quarter were $40.1 million, an increase of $11.4 million from the fourth quarter of 2016. Operating expenses for the fiscal year were a $135.2 million, an increase of $31.9 million from 2016. The increase in dollar terms for both the quarter and the year was driven primarily by an increase in sales and marketing and R&D expenses. Sales and marketing expenses for the quarter were $25 million, an increase of 36% year-over-year. Sales and marketing expenses for 2017 were $84.6 million, an increase of 27% year-over-year. The increase was primarily the result of higher personal expenses due to growing headcount. We expect our sales and marketing expenses will continue to grow in absolute dollars as we invest in our marketing programs to support our growth, in addition to identifying top talent. Our sales and marketing headcount increased from the prior year by 23% to approximately 355 employees and we believe we now have fully cut off from the higher than expected attrition in our sales headcount we had discussed in our last earnings call and we look forward to them ramping to productivity in the current quarters. R&D expenses for the quarter were $7.5 million, an increase of 52% year-over-year. R&D expenses for 2017 were $25.2 million, an increase of 36% year-over-year. The increase was driven by an increase in staff expenses due to greater headcount including the 16 new employees from the Restlet acquisition. Our R&D headcount reached 238 employees at the end of this quarter representing 27% growth over the same period last year. G&A expenses for the quarter were $7.6 million, an increase of 43% year-over-year. G&A expenses for the full year 2017 were $25.3 million, an increase of 41% year-over-year. The increase from both the quarter and the year is likely attributable to increase in staff expenses due to greater headcount and increases in professional and outside service industry related to being a public company. In the fourth quarter we also had a total of $0.7 million of non-recurring expenses related to the Restlet acquisition, and an underwritten block [ph] trade from our shareholders. For the full year [indiscernible] expenses related to the two following off in March and November as filing of our shopper description statements in August as well as the acquisition related expenses totaled 1.7 million. Our G&A headcount reached 103 employees representing 22% growth from the same quarter 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 also support global expansion. We ended the year with approximately 886 full time employees compared to 679 employees at the end of 2016. We incurred an operating loss for the quarter of $8.2 million compared to the fourth quarter of the prior year’s operating loss of $5.5 million. Expressed as a percentage of revenue operating loss was 20% compared to an operating loss of 18% in the fourth quarter of 2016. As indicated in our guidance for the fourth quarter we have reinvested a substantial amount of our profitability outperformance in Q3 back into Q4, so that we can start 2018 with a solid foundation. We had invested in marketing programs to increase our piping [ph] coverage, recruited [indiscernible] sales headcount and also substantially invested in our R&D organization. For fiscal year 2017 we incurred an operating loss of 22.2 million compared to an operating loss of 22.7 million in 2016. As a percentage of revenue operating loss for the year improved to 14% from 21% in 2016. As we have stated last quarter we do not anticipate sustained operating margin improvement on a quarterly sequential basis we continue to expect quarterly fluctuations. Net loss for the quarter was $8.1 million compared to a net loss of $2.7 million in the prior year period. Net loss for the year was 22.7 million compared to a net loss of 20.9 million in 2016. Free cash flow for the quarter was a loss of $2 million compared to free cash flow of $2.2 million in the fourth quarter in the prior year. For 2017 free cash flow was a loss of 4.5 million compared to free cash flow of 2 million in 2016. Included in the 4.5 million we had approximately 1 million of outflows that were related to the nonrecurring expenses that I mentioned previously. 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 December 31, 2017, we had cash and cash equivalents of approximately $87 million. As we discussed in 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 billing does not take into account changes in pre-billed subscription duration, professional services concerning [ph] a 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 were targeting a pre-billed subscription duration of 1.25 years for our new business sales in 2017. In the fourth quarter pre-billed subscription duration came in slightly higher than target at 1.37 years. Including our renewal bookings our blended pre-bill subscription duration came in at 1.24 years. We intend to continue to lower pre-billed subscription duration which is consistent with our previously announced strategy to minimize discount 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-based expansion rate continues on a strong performance where it has now been above 120% for 16th consecutive quarters. Our subscription revenue grew by 40% year-over-year partly driven by our strong growth in Big Data and Cloud which sounds like up more than 40% of subscription revenue. Our operations in Asia Pacific are continuing to drive top-line growth reaching about 100% in our three consecutive quarters. I would also like to remind those of you that I've attended an Analyst Day last November and discuss the impact of adopting the new accounting standards under IFRS 15 or the U.S. equivalent ASP 606 which we adopted on January 1, 2018 on a modified retrospective approach. Under the new standards, we are required to split out the performance obligations from our on-premise and start host and subscription revenue stream which consists of two components; the license obligation and the support obligation. Now we will have to recognize the revenue of the license obligation upfront and spread the support revenue over the duration of subscription term. However, I want to highlight if this change will only impact the on-premise and self-hosting subscription revenue streams and not our SaaS subscription revenue stream. There will be no change to the recognition of our SaaS subscription revenue which is expected to continue to grow and become a larger portion of our overall subscription revenue. The overall impact to our top-line is minimal given that Talend is an open source company and therefore the value of the license portion we are required to recognize upfront is relatively small and stands at approximately 10% of the total subscription value. Additionally, under the new standards, we will be required to amortize sales commissions over the expected lifetime value of the customer, which is approximately 5 years. Both of these effects on our revenue and sales expenses is expected to have a marginal positive impact to our revenue and the stronger positive impact to our bottom line. Specifically, as it pretends to how we will report going forward, and the impact on our guidance, we expect to see marginal improvements of approximately 2% to 3% on our revenue for the year. The positive impact on our operating margin is expected to be more significant and will add approximately 3% to 5% to our operating margin. Including both the revenue and sales commission effects, our operating margin will be positively impacted by approximately 5% to 8%. 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. Now for the Q1, 2018 fiscal year guidance, which assumes similar business conditions and foreign exchange rates as of January 31, 2018. For the first quarter of 2018, total revenue expectations are to be in the range of $45.3 million to $46.3 million. Non-IFRS loss from operations is expected to be in the range of $5.5 million to $4.5 million. That loss is expected to -- in the range of $10.6 million to $9.6 million. And non-IFRS net loss is expected to be in the range of $5.8 million to $4.8 million. Net loss per basic and diluted share is expected to be in the range of $0.36 to $0.33 and non-IFRS net loss per share is expected to be in the range of $0.20 to $0.16. Basic and diluted weighted average share count of 29.4 million shares. For the full year 2018, total revenue expectations are to be in the range of $200 million to $202 million. Non-IFRS loss from operations is expected to be in the range of $13.3 million to $12.3 million. Net loss is expected to be in the range of $31.3 million to $30.3 million and non-IFRS net loss is expected to be in the range of $14.3 million to $13.3 million. Net loss per basic and diluted share is expected to be in the range of $1.05 to $1.01. And non-IFRS net loss per share is expected to be in a range of $0.48 to $0.44. Basic and diluted weighted average share count of 29.9 million shares. Thank you. Let me turn the call back to Mike for some final remarks.

[Mike Tuchen:]

Thank you, Thomas. In 2017 Talend drove a strong performance across the business. [indiscernible] execution with our team as we continue to bring industry leading solutions to the market. We significantly strengthened our Cloud capabilities including strong multi Cloud support to help our customers execute their needs with the Cloud. We received industry recognition including being recognized as a leader in Gartner's 2017 magic quadrant for data integration tools report, we significantly improved our position in the leader quadrant over 2016, based on our ability to execute, and for the first time we also moved into the leader's quadrant in Gartner's 2017 magic quadrant for data quality tools. In Q4 we acquired Restlet, a leader in Cloud based API design and testing, the Restlet acquisition will accelerate Talend offering around data sharing in the Cloud using APIs and is highly complementary to Talend's existing offerings. We completed two successful follows on offers for existing shareholders over the course of 2017 which enabled us to meaningfully increase our public float. We're pleased on that participation with both new and existing investors. During 2017 we increased our investments in sales, marketing and R&D, in order to capitalize on the tremendous market opportunity and drive 40% revenue growth for the full year. At the same time, we maintained approximately breakeven cash flow and significantly improved our operating leverage. With that Thomas and I would be happy to take your questions. Operator?

[Operator:]

Thank you. [Operator Instructions] We'll hear first from Bhavan Suri with William Blair and Company.

[Bhavan Suri:]

I guess I wanted to touch on a couple of things, maybe Thomas for you really quickly on the short term deferred growth that was accelerated meaningfully, I mean I know you sort of talked about duration ticking up but the short term will just be indicative of one-year type contract, so I want to understand what drove that acceleration?

[Thomas Tuchscherer:]

As far I mentioned the blended overall duration which came up at about -- I think I mentioned 1.24 years, so our blended duration came in [indiscernible] target and it's our new [ACV] component which came in slightly higher than our 1.25, but you got to keep in mind that our renewal bookings are actually pretty substantial, as a percentage of total bookings, so that accelerated or help accelerated our short term deferred, so they're not only impacted by new ACV, but also by renewal ACV bookings.

[Bhavan Suri:]

And then Mike for you obviously you called up sales attrition in Europe second quarter, third quarter call potential impact on '18 bookings it's been kind of top of mind question for investors, I guess if you look at our situation I would love to understand, did the attrition have any impact or is there any impact over the guidance on attrition, then how is the effort to fill the open positions progressing in terms of just find the right sales talent?

[Mike Tuchen:]

So, we really accelerated our hiring in Q4 and actually caught up to where we hope to be at the end of the year and so we're fully hired. We didn’t actually achieve or did see much if any sales restriction in Q4 but that’s not unusual for enterprise sales company. So, at this point we are looking forward to seeing those folks ramp. And I guess two other quick data points, I think we mentioned at the analyst day that we have been seeing a faster ramp this year and last year in 2017 than we had in any of the previous years. And additionally, Q4 we actually set a new record for our sales productivity per head. And so even though we were in terms of fully ramped heads over the course of Q4 we had fewer than we hope per person they were really performing extremely well. And so, we really like the outlook now going into 2018 as those newly hired reps ramp fully.

[Operator:]

We will hear next from Raimo Lenschow with Barclays.

[Raimo Lenschow:]

First question Mike, you talked a little bit about some of the competitive wins you had. Can you talk a little bit about how the field is playing out at the moment around [speak to year] there is a lot of comps, more like I see, kind of want to make their name and then some [indiscernible] to make better noise now like how that -- some of that might be noise? So, can you talk a little bit of what you are seeing in reality in the field?

[Mike Tuchen:]

For us the competitive situation really hasn’t changed that much overtime. And a lot of that is due to the fact that our number one competitors actually hand coding and our number two competitor is our own open source product. So, it's not until he gets to number three that you see the first actual other software competitor and that being Informatica sold by IBM. I continue to say and said in last few earnings call I think Informatica is making some smart move. I think they are well behind and it's still very easy for our sales team to demonstrate the technical superiority in Big Data to Cloud use cases. So, our win rates remain strong. I still believe that it's going to be a little bit of horse race over the next few quarters or maybe the next few years to see whether the main competition ends up being a revitalized Informatica as they continue to make smart choices or one of these new players. I would say as well it's interesting that we have had a number of reach outs in the last few months from some of these smaller competitors, it seems we might be interested in buying them and so I think that might tell you a lot about some of the dynamics out there in market as well.

[Raimo Lenschow:]

And then the other thing is like I'm sure you remember like a bit over a year ago AWS announced something around data integration and now in the market for a year but you also announced today like an -- new partnership, good working relationship with them and with Azure. How do you -- a year into this now how is this whole your Cloud work playing out within doing something themselves but then also strongly working with you still?

[Mike Tuchen:]

Yes, I think it's going to remain co-opetition scenario pretty much for the foreseeable future and that’s very, very similar to have the all data base will played out, for everyone of data base measures have their own data integration play and yet the independent third parties like Informatica really got the majority of the market. And we see really the same dynamics here. AWS is still very new in the market and they are still serving a very specific set of use cases so they, I don’t know if they came up in the competitive radar yet. But we know well, and overtime that co-opetition relationship will evolve. But they can be great partners, our relationship with Microsoft continues to expand. And I think that's going to be very strong sort of relationships for the foreseeable future.

[Operator:]

We'll go next to Tyler [indiscernible] with Citi.

[Unidentified Analyst:]

Hey thanks for taking my question. I noticed you've talked about Cloud and Big Data separately this time into two categories. And it sounds like Cloud is really starting to take off more so than it gets it. Can you just talk about what you're seeing in the Cloud relative to what are your expectation were and give us a sense for the mix between Cloud and Big Data?

[Mike Tuchen:]

Right. When we think about the market, the majority of what we're doing in the Cloud actually happens to be Big Data and the Cloud. And so, I try to do my best to explain sometimes when we're talking about Big Data it's from [ph] Big Data. But as you look at the number of the customer examples that we cited, when we gave Big Data examples, we talked about a whole bunch of them being in AWS. for example, just because we're doing a whole lot of Big Data in the Cloud. What I'm trying to separate right now is customers that are using our own SaaS service separate from self-hosting our software either in the Cloud or on-premise. And if that category of customers using our own SaaS software that's really exploding right now. And it makes sense. And as we said few times roughly a third of our business is being hold into the Cloud. For those guys, it's just a whole lot simpler and easier to use our Cloud service for that, because you're live in seconds it's always up-to-date. And all of the kind of things that you would expect the Cloud is elastic and so on. And we see that really not just benefitting from the overall move of the Cloud but even within our business gaining share just because of just the so much simpler way to consume our software.

[Unidentified Analyst:]

Thank you. And a follow up related to I think with the first question from the --. But on the billings outsider I talked about the billing just the short term this period. But on the renewals was there any kind of pull in of renewals or early renewals that hit in Q4 that maybe drove higher short term differed revenues than expected.

[Thomas Tuchscherer:]

Yeah, there is nothing meaningfully different in terms of seasonality if relative to the 10-Q for that we have last year. So, I wouldn't call out anything specific at us on-renewal bookings or early renewal booking.

[Unidentified Analyst:]

Yeah. And I guess if we think about your exposure to enterprise customers which I think at least the deals over the folks finding over $100,000 that seems to continue to increase. Would you anticipate that could drive increased seasonality, a lot of subscription businesses that we follow over the year to see more and more deals fall in to Q4. Would you expect that that could happen overtime or still ways off than that?

[Thomas Tuchscherer:]

So Q4 is our biggest quarter both on renewals as well as our new business bookings. And it has been as well for the past few years. I think that's going to continue obviously going forward in 2018 and the future years it is going to become heavier or a more seasonally quarter as a percentage of total bookings for the year, I think it's probably going to remain within the same percentage in terms of overall bookings, so I wouldn't expect our Q4 to grow to a much greater percentage of total bookings, going forward.

[Operator:]

We'll go now to Brent Bracelin with KeyBanc Capital Markets.

[Unidentified Analyst:]

Hello this is [Clark Jefferies] on for Brent. Mike I was wondering if there's anything you call out on the investment of on-premise data lakes, do you see it has market where there is still lot of modernization to happen, and maybe specifically are there industries that are still going to have large initiatives such as fraud detection maybe in the financial services sector and they're not looking for a Cloud data lake anytime soon?

[Mike Tuchen:]

What we're seeing right now is that classically the high compliant kind of industries healthcare, finserv, to electrics and insurance still are doing a bunch of work on prem, and premise data lakes are a very-very topical concept there and we're seeing a ton of deployment and expansions within that as I am sure you're hearing from some of our new partners as well. That being said, we're seeing from a very large number of people a ton of interest in deployments now in building Cloud data, we gave a number of examples of those, in the customer wins for Q4, and the reasons are simple, again it's just -- it's so much simpler to just simply turn something on and buy it by the hour if you will, than buy some hardware and lay down the bits and all the other steps you need to go through to build on a premise complex. And so, we think that the playing field is going to be increasingly tilted to the Cloud as it has been for the last couple of years so we see that pace accelerating, and to your point it's not binary, there're still our industries that are very aggressively building out data lakes on premise but we see the kind of center of mass shifting pretty rapidly.

[Unidentified Analyst:]

And just one follow-up in terms of APAC and Cloud adoption, is there sort of a higher then overall proportion Cloud deployments, higher than the one third new business being in the Cloud in APAC and is the situation where they want to make a Cloud data lake, and then they realize the integrated data tool or data integration is not sufficient and then they turn to you fulfill that?

[Mike Tuchen:]

What we're seeing in APAC, a really strong mix of both the data and Cloud, they get a premise and Cloud including the data in the Cloud and so I guess the macro observation I'd make is that a lot of those customers never really invested that heavily in the last generation of the classic on premise relation of data warehouse and so as they are going through their kind of data driven transformation right now, they're adopting kind of next generation technologies and self-service is absolutely a part of that, we're seeing a ton of interest right now and it -- we'll see -- I'd say they're in the race for some of our biggest potential deployments over the course of 2018, out there in the conversations we're having.

[Operator:]

[Operator Instructions] will hear now from Matt [Indiscernible] from JPMorgan.

[Unidentified Analyst:]

I am calling on behalf of Mark Murphy. Thomas, can you help us understand sort of your currency assumptions as it relates to guidance, just any color on sort of how that's impacting to the positive or negative your guidance for Q1 or for the year?

[Thomas Tuchscherer:]

So, for Q1 and for the year we're taking that currency as of the end of January as I mentioned during the prepared remarks and the biggest currency that has an impact on our income statement is obviously the euro dollar and there the assumption that we are taking is positive 1.2.

[Unidentified Analyst:]

And then I appreciate the explanation on IFRS 15 impact guidance. Can you go through one more time the impact on operating margin I know you've [Multiple Speakers]?

[Thomas Tuchscherer:]

So, for the year we're expecting an improvement of our growth rate of about 2% to 3% and that flows obviously for trade to the operating margin and the sales commission amortization we are going to be amortizing over the five years sort of that's adding an incremental 3% to 5% so that in total both of those effects are going to improve our operating margin by about 5% to 8% for the year.

[Unidentified Analyst:]

And then I'm pretty sure but correct me if I'm wrong, Restlet mostly a people technology acquisition there is no revenue and recent material way from Restlet is there?

[Thomas Tuchscherer:]

No there is no it was just mainly an engineering team that we brought over in our north office in France.

[Mike Tuchen:]

Yes, and as we've said at the time we will be launching our first offerings based on that in the second half of 2018 and it will start seeing an early ramp of bookings in the second half and that'll translate into early revenue over the course of 2019 but it's really doesn’t have any top line impact to speak off in 2018.

[Unidentified Analyst:]

And then last quick one did you mentioned the number of customers paying over 100,000 in annual subscription revenue?

[Thomas Tuchscherer:]

Yes, I believe that’s 353.

[Operator:]

And with no other questions, I will conclude today's conference. We thank you all for joining us.