I recently started a position in Talend (TLND) that I thought I’d share with the board in case anyone has any thoughts to add, questions, challenges, concerns, or any other kind of input.
Data Integration is yet another rapidly growing area within the “big data” landscape, and Talend is carving out a niche especially integrations including cloud sources, and with Hadoop…or at least that’s my take after reading Bert’s article with his thoughts on what their secret sauce is and how their solution is better than Informatica’s, etc. I completely admit not being able to make that distinction for myself, but I think Talend’s growth thus far speaks volumes, and I also believe big data is such an emerging tsunami that there will be plenty of integrations to go around, whether Talend gets all of them or not.
Here’s Bert’s article: http://seekingalpha.com/article/4012659-talend-getting-know-…
It’s his usual phenomenal deep dive but it’s now a little dated. They’ve now reported 2 quarters of earnings since it came out.
Here’s a little introductory video that explains what they do: https://youtu.be/7ZkwC6H3wk0
Hortonworks recommends them too: http://hortonworks.com/hadoop-tutorial/data-integration-with…
Basically, before Hortonworks can do your Hadoop distribution, your data has to be collected and organized. That’s what Talend does in general, and they specialize in some high growth areas including Hadoop.
Financially speaking?
They have a massive amount of deferred revenue, though they do not share the amount. Evidently it is large enough that they were FCF positive for 2016 even though EPS was solidly negative (the non-GAAP loss equalled about 22% of revenue).
With more of this deferred revenue lump showing up as recognized revenue each quarter, revenue growth on their quarterly income statements has been accelerating.
June Q: 38%
Sep Q: 40%
Dec Q: 46%
For the Dec 2016 quarter they point out:
-Total quarterly revenue of $30.5 million, for an eighth consecutive quarter of accelerating revenue growth
-Quarterly subscription revenue of $25.2 million, an increase of 48% year-over-year in constant currency
So basically it’s quite obvious that, like with HDP, that deferred subscription revenue is growing a lot faster than the revenue they recognize. Needless to say that’s very encouraging, and it seems like their 31% expected growth in 2017 is sure to be beaten solidly. I mean honestly even to be conservative they probably could have predicted 40% growth. But I guess big beats are nice?
Valuation wise I’d say it’s reasonable for a SaaS company, even without adjusting for all that deferred revenue. PS is just under 7, which is a lot but they have a lot of recurring revenue (84% of their 2016 revenue was subscription revenue). And though it’s clearly not “cheap,” that’s a lower PS than SHOP, PAYC, SPLK, HUBS, and many others I’ve looked at. But then, they aren’t growing like SHOP (yet) and they’re not profitable like PAYC or even SPLK.
Just a few numbers than might be helpful:
Market cap: ~730M
2016 Revenue: 106M
2016 non-IFRS EPS: -0.83
Dollar-Based Net Expansion Rate in Q4 was 125%
And since I have it handy here’s the revenue trend:
D16 S16 J16 M16 D15 S15 J15
31 27 25 23 21 20 18
Guidance
Q1 2017: Revenue between 31.4M - 32.4M, non-IFRS EPS -0.18 to -0.14
2017 FY: Revenue between 141.5M - 143.5M, non-IFRS EPS -1.09 to -1.03
As I said above, I expect they’ll handily beat on all of that. They also noted that they’re spending a lot to grow, on both sales and R&D. But they also mentioned that they intend to stay FCF positive. Seems like the right strategy.
A note on volume
I want to point out that this is not a well known company and the stock is not traded much, relatively. The volume is very light compared to even HDP. It’s not traded even 10% as much as SHOP or PAYC. So obviously that’s a consideration.
France?
From Bert: Talend was founded in France, but it is headquartered in Redwood City, CA. It reports using IFRS standards that are equivalent to US GAAP. Currently, more than 50% of the company’s revenues are coming from outside of the US, which suggests it has a pretty substantial geographic runway to accelerate sales growth in this country. On the other hand, currency fluctuations will be more noticeable for this company than is the case for some of the other names in the software space.
Thought this was kind of weird…the CC was certainly in English and I don’t detect any accents, so…whatever? Currency fluctuation obviously hasn’t put a damper on revenue, so personally I don’t see any problem.
Conclusions
The big points to me are the fact that growth is actually accelerating and that like HDP they are actually growing their billings and deferred revenue faster than the revenue they recognize. That seems to foreshadow accelerating growth for some time to come. I’m not sure why guidance is so seemingly ultra-conservative, but that’s how it seems to me.
I liked it enough to start a position and start following it.
Bear