TLND q3, why it dropped 45%

SPLK went from selling high dollar perpetual license products to selling it as a subscription via SaaS. This hurt their revenue growth as they were exchanging large sales dollars for relatively small subscription revenue, but it was clear that their revenue growth would resume. That’s actually when I bought. It was clear their revenue growth would pick up.

I don’t follow TLND. Is their cloud revenue is growing 100% YOY because they are transitioning from perpetual license to cloud subscription? Or are these completely new product offerings?

TWLO of course lost uber as a customer but completely replaced them so it’s sort of different.

Their legacy business has basically stopped signing up new accounts, so almost all revenue growth in their main business is from existing customers.

This brings up an important question, who is getting the customers instead of them?

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Based on that, let’s assume then do 22% revenue growth 2019 to $251 million next year from $206 million this year…net gain $45 million of which $22.5 million would be cloud ARR.

That cloud then grows 100% YoY for several years according to TLND. The cloud subscription revenue would look approx. as follows:

2020 $90 million
2021 $180 million
2022 $360 million
2023 $720 million

If in 2019 $22.5M was new cloud ARR since they have said cloud grows at 100% yoy we can back calculate that cloud rev was $22.5M in 2018. Based on that your estimates of 2020-23 cloud rev stated above assuming 100% yoy growth seem correct.

I wish TLND becomes more transparent and breaks out their cloud rev in future and removes all this mystery.

As I know Bear knows, and I think 12x just stated, cloud revenue is not going to continue growing at 100%+ rates as the numbers get larger. If Talend were still doing that at any material numbers Talend would be an enormous must buy. But this is just not happening.

Mongo was growing its Atlas at 800%, it is now fallen to 400%. That is at low 8 figure quarterly revenues. That is fantastic! But still, 400% growth is not going to continue indefinitely. We will probably need to nigler through with 200%, then 100% into Atlas.

I am with Bear, why believe anything management says when management went out of its way to give the appearance that cloud was much more meaningful, when it was not. True, we could step back and go - whoa, wait a minute, something does not add up. But the point is, as investors, why should we have to go through the calculation. If we can do it, so can the competition, so why not just give us the numbers to begin with?

Whatever the case, capital losses can be valuable things to take during such times. Hidden revenue is one thing, but I lose faith not only when management is less than forthcoming but also when a story and a narrative falls apart when compared to reality. WHERE IS THE VALUE PROPOSITION?

Big Data is exploding. AI is exploding. The need to make use of Big Data is exploding. These three things are not in question. And yet, despite this, Talend’s business is not exploding! 100% cloud growth…who cares when the numbers are so small.

The narrative is this Big Data needs to be found, organized, cleaned, and this is new business critical stuff. The reality is that Talend does a good job of it, but its value proposition is not evidenced by the numbers equating to the critical need. There is a disconnect. Disconnects are the one thing I most dislike in an investment.

That is not to say the disconnect does not sometimes resolve itself and that I can get too critical, which is easy to do when a stock personally disappoints you as you feel mislead. So don’t just listen to em. I just do not see where Talend is a Twilio, or a Pivotal. Both TWilio and Pivotal give us their “hidden” revenue numbers. Talend does not. Nutanix does, Talend does not.

Tinker

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solid points Tinker… thanks for articulating…
cant wait to get out TLND tomorrow.

My company is rolling out crm software. They are using Salesforce.com. I have not heard one person say we are using it because it’s cloud based software. It’s because before we used lotus notes which was very cumbersome as well as manually updating excel spreadsheets kept on shared drives and on people’s desktop. And there are a lot of tracking tools we previously did not have.

Salesforce would have probably been selected even if it was on premise. We have used this software in the past and will continue to do so, it just so happens more and more business software seems cloud based. So to crm the important thing is they got a sale based on the quality of their product.

So that’s what I’m trying to understand with Talend. If their cloud based products are also available on premise then cloud sales are little more than a ratio of their sales. The decision to go with Talend is made then the decision is how to pay for it and run it.

If intuit suddenly started using cloud based accounting software rather than going down and getting TurboTax (which they did), and their cloud sales skyrocket, all they are doing is cannibalizing their disk software based sales. I understand there are variables but that’s the gist of it. If intuit announces TurboTax cloud went up 200% in sales and growing as a percentage of sales I’m not going to expect intuit to suddenly start growing at 100% a few years from now because cloud sales took over. It just means people aren’t buying the software disc each year and they’ll continue plodding along as they always have.

Just trying to understand if I’m missing something here because I don’t follow Talend and was wondering if I understand it correctly, that they didn’t just roll out a bunch of new products.

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12x, you are correct. There. is only. so much data. to be moved and the cloud is a more cost effective means to move it pursuant to Talend. In fact Talend would like its customers to move to the cloud. But yes, the cloud is not an addition to their on-premise other than Talend probably feels that once people move to the cloud they will use the product more often, and thus that would be incremental business.

All in all one has to be concerned when one starts off with what I have calculated, using an $8 million estmate for cloud revenues now, that Talend was boisterously proclaiing they were a CLOUD company when their quarterly revenue was $10,000 or less in cloud.

Why do this? Cloud is a big buzzword. Cloud speaks of the future and differentiates from legacy ETL, altough ETL itself is simply a legacy technology. Cloud gives Talend a competitive advantage over its more “stodgy” competirors. All of this touted by Talend.

There was an article 2 months ago, and this is probably the best leading indicator of a coming market swoon, and that is when insider buys reach near or record lows (this happened a month or so before this current crash - and anecdotally I have seen this correlation very solid in the past). The newsletter author indicated what he sees happening is personal insider buys diappearing but corporate buy backs increaseing so to maximize earnings so that insiders can better sell their stock

Of course proving such motive is not so easy. But point being that Talend portrayed its cloudiness in order to maximize the ability to sell appreciated stock options.

Some will say, yeah, yeah, but maybe cloud is now, finally a real business. Maybe it is. Each to their own. I will not do busienss with Wells Fargo after how they screwed over their customers. Their rehabilitative commercials or not. We know exactly how they feel about their customers and in regard to Talend, how they feel about their passive outside investors (us).

TTD has a similar issue at present. Connected TV Ads growing for at least 2, if not 3 quarters at 10,000x. This just means that these ad numbers are very tiny. Might have started out at $1,000 or even less, and may not even be $100k yet. Not quite fair to tout them as going wild, they grew an out of our minds 10,000 fold yet again this quarter!

How many quarters in a row has TTD touted this? I know it is at least 2, and it ir probably at least 3, if not more. And it always ends with just how extremely enormous the opportunity is, mind boggling large.

For a multibillion dollar company there is nothing mind-boggling about 1 penny growign to 10,000 to 100,000 pennies. It should barely be an asterisk until it is a real business. It is not a “real” business as of yet.

But with TTD it will be incremental revenues, unlike with Talend.

Tinker

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Cross post from NPI that relates to Tinker’s post here as well:

Tinker,

Agreed with the TTD/CTV analogy that you can’t help but consider after the Talend collapse. There is no reason to believe CTV is producing even a scant amount of overall sales. The 21x/10x measurements could have started at the very first CTV “impression” bought. TTD would be giving us some numbers if it was meaningful. Green would be shouting it from the rooftops more than likely.

The difference here is the rest of the business is booming. They only give growth numbers on channel specifics (audio grew 200%, mobile video 100%, CTV 10x, Mobile In App nearly 100%). So we really don’t know, like with CTV, what any of that means. We do know that total mobile comprises 46% and display is now less than 30%. I also can’t really parse out what actually comprises the remaining 25% or so of the business. Certainly, CTV is somewhere in there, but we have to assume it is meaningless at this point. Is audio separate from mobile? Native? I really don’t know.

But I don’t necessarily need to know as they as the company continues to show steady growth in the 50% neighborhood.

So, no. I don’t like what they are reporting either. At this point, we really can’t glean much from the numbers they use. What I do know is that Green has done an incredible job of elucidating their plan and executing on it. Let’s look back to his early decision to differentiate on the demand side to eliminate conflicts of interest. It has paid off very well. He seems to have an incredibly deep understanding of the industry and how to position the company to be successful. I tend to believe what he tells us about CTV and China (even with my paranoia of the Chinese market).

A.J.

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On a side note, their Conference call is pretty disastrous for hadoop. They basically say on-prem is going away.

Not a side note, in my view, but a big driver of business results (or lack thereof).

But, let me back up a bit. There’s a bunch of people on this board who believe that they don’t need to understand a business in order to make money investing in that business. I’m a simpler person, and so I do need to understand what a business actually does and how they intend to make money before being comfortable investing in it.

What I personally see with Talend right now is confirmation that if you’re investing based exclusively on financial data, then you’re at risk of that financial data turning on a dime (or at least a quarter - pun intended). Maybe that’s why so many people here track their companies not just weekly, but daily. However, I find that when I understand the business model I have better insight into what’s coming, and more importantly am able to put events into proper perspective, including a longer term perspective.

I’ve been very negative on Hadoop-related businesses for a while. It’s not just a complicated technology, it’s got quite a functional negatives that severely restrict its TAM. I never got into TLND precisely because Talend’s business was built around the dual declining markets of on-premise Hadoop deployments. I say dual because generally new cloud deployments are outpacing on-premise deployments, AND Hadoop usage is declining (or at least not growing substantially). (BTW, these trends are MDB’s friends! But, that’s for a different thread.)

Here’s what Talend’s CEO says about that: existing customers are actually still purchasing premise Hadoop at a pretty aggressive pace, but new customers are by and large aren’t, and pretty much not at all…But what they’re choosing is to do it in the cloud, because it’s just a well of lot simpler and cheaper to do it there. (https://www.fool.com/earnings/call-transcripts/2018/11/07/ta… )

And then this is probably killed the stock: So the deceleration in growth is happening faster than we had anticipated… we’re not getting the kind of large enterprise deployments on the cloud. So in this matter of fact that we’re not getting them on premise Hadoop either, but we used to see deals that were – few deals above 500K and every now and then, deals above $1 billion of new ARR in any given quarter…because the cloud deals now are almost entirely to new customers and customers with any new technology to tend to start smaller.

This has all the earmarks of classic disruption. What’s intriguing is that Talend didn’t get caught completely flat-footed. They have had a cloud solution in the market to pick up the new business. But, it shouldn’t be surprising that the new business didn’t scale up quickly enough to replace the old business without any fall off in revenue. (I have concerns about Nvidia in the next several years in that regard, but again, that’s for another thread).) As the CFO points out: cloud deal size is up 25% year-over-year in Q3…We did win a number of cloud deals over a 100K in the quarter, and so we’re seeing good steady momentum upwards.

It would appear that Talend management deserves some credit for being reasonably well positioned to survive a disruptive shift in the market. Yeah, they got caught underestimating how fast the market would turn, but many companies fail to see the disruption coming at all.

And then there’s Stitch. As much attention as this has gotten, I don’t think it’s enough. Stitch may be the key for Talend’s eventual turn-around (if indeed it does pull that off). Stitch is a self-service platform (another self-service platform is Tableau) that simplifies data ingestion into the cloud, including multi-cloud. The service starts as low as $100/month currently.

Stitch is way easier and cheaper than Talend in this data ingestion piece. That makes Stitch a door-opener for companies or departments within enterprises that are getting started with data warehousing. “The first part of what we do is take data from somewhere and put it somewhere else,” Tuchen said. “They do it in a far simpler and faster way than we do.” Talend also provides data transformation services, a market Stitch chose not to address.

Talend sees Stitch as a way to ease customers into ETL. Organizations typically adopt ETL tools for new data warehousing projects but “but shortly after that they find they need to clean up the data, correct it and blend it together,” Tuchen said. “We can solve that problem, and because we have a relationship [via Stitch], it gives us chance to be in the conversation.” https://siliconangle.com/2018/11/07/talend-shares-fall-weak-…

Or, as ZDNet postulates: But longer run, the real goal of the acquisition is for Talend to apply the expertise of the Stitch team – which will remain in Philadelphia where it’s always sunny – to applying their design thinking to some of the flagship products. In that sense, it could become sort of a reverse acquisition, where the skills of the 30-person acquired company rub off on the parent that numbers over a thousand in staff. With deeper pockets, Talend intends to expand the Stitch team. https://www.zdnet.com/article/talend-buys-stitch-to-extend-i… (emphasis added)

Again, that kind of acquisition not only of technology but of brain power and a different way of looking at solutions, are the hallmarks of disruption in play, and if you’re read Christensen you’ll see that Talend appears to be making the right moves.

Of course, this doesn’t mean Talend will eventually be successful. It’s certainly a longer term play than a quarter or two. Neither Mr. Market nor Saul’s Board engage in that kind of long term investing strategy. But, this has me intrigued and I’m putting TLND on my watch list and may even take a nibble while sentiment is down. I do find the ETL business incredibly boring, but if Stitch can be the self-service door opener for Talend, it might just be able to ride the trend instead of fighting it.

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Not to beat a dead-horse here, but management in every conference call for the past 2 years have completely misled us.

Feb 2016 – Dec earnings report
Record revenue of $30.5 million, up 45% and the eighth consecutive quarter of accelerating revenue growth, driven by over 100% growth in big data and cloud.

And since then, every CC they’ve hammered on about their cloud growth.

Back in feb 2016, annual cloud revenues may have been 2 mil (using 8 million now), or less than 2% of revenues. Now it’s about 4%.

Yeah I’m out of TLND and into NVDA. I think I’ve learned my lesson regarding management who hide their numbers. I guess in hindsight, this one was obvious, compared with others who completely misled their NRR numbers.

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Bendubya, The “best” part about that 2016 call is their cloud revenue was probably around 400k when they said that. They were harping about growing revenue 100% when they only increased cloud 200k annually! Makes me angry all over again.

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