May 28, 2020

peramd

Connecting people

Edited Transcript of TLND earnings conference call or presentation 6-May-20 8:30pm GMT

SURESNES May 14, 2020 (Thomson StreetEvents) — Edited Transcript of Talend SA earnings conference call or presentation Wednesday, May 6, 2020 at 8:30:00pm GMT

Talend S.A. – CFO

Talend S.A. – CEO & Director

* David A. Griffin

Good day and welcome to the Talend’s First Quarter 2020 Earnings Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Lauren Sloane. Please go ahead.

Thank you. This is Lauren Sloane, Investor Relations for Talend, and I’m pleased to welcome you to Talend’s First Quarter Fiscal Year 2020 Conference Call. With me on the call today is Talend’s CEO, Christal Bemont; and CFO, Adam Meister.

During the course of today’s presentation, our executives will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial 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 made 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 strategic product initiatives and the related benefits; our expectations regarding the market, including the impact of the COVID-19 pandemic on our market, business and operations. 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 contemplated, projected or implied by any forward-looking statements. These risks include those set forth in the press release that we issued earlier today as well as those more fully described in the Risk Factors section of our Form 10-K, forms 10-Q and other reports and filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us of the date hereof. You should not rely on them as predictions of future events, and we disclaim any obligation to update any forward-looking statements, except as required by law.

Please note that other than revenue or as otherwise specifically stated, the financial measures to be discussed on this call will be on a non-GAAP basis. The non-GAAP financial measures are intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. We have provided a reconciliation of these non-GAAP financial measures on the most directly comparable GAAP financial measures in our press release.

Talend customers that are referenced by name today do not endorse any vendor, product or service, and do not advise any company for selection or use of technologies, products, services or vendors.

Now let me turn the call over to Christal Bemont, Talend’s CEO.

——————————————————————————–

Christal Bemont, Talend S.A. – CEO & Director [3]

——————————————————————————–

Thank you, Lauren. Welcome to our Q1 2020 earnings call. We hope you are all safe and well. We are pleased to report a strong Q1 despite the complexities related to the COVID-19 pandemic. This is the first quarter for nearly half of Talend’s executive team, including myself. We had a great deal to accomplish in our first quarter and have made tremendous progress. As such, I want to express my gratitude to the entire Talend team for delivering a fantastic quarter.

We achieved record revenue of $68 million. We ended the quarter with $246 million in total ARR, which was up 22% on a constant currency basis. Our Q1 performance was driven by the growth of our cloud solutions. Cloud ARR now stands at $61 million, up 154% on a constant currency basis, and we now have over 2,500 cloud customers.

We are living in an unprecedented environment as we collectively confront the COVID-19 pandemic. And as such, Talend has taken a number of measures to ensure we navigate effectively through these times, particularly to ensure the safety of our employees and to best support our customers and partners. To help our customers, we quickly responded by creating a COVID-19 task force to respond rapidly to customer inquiries.

Talend’s business strategy is focused on showing our customers the value Talend can provide in utilizing data to drive business outcomes. Our mission is to make data useful for all organizations and ensure that our customers always have access to the trusted data they need to be successful. COVID-19 has amplified the need for fast and accurate data now more than ever, and the value Talend can provide as a strategic business partner to our customers has grown even stronger.

In many cases, our customers have pivoted how they are using Talend. A number of customers like global pharmaceutical companies are now using our solutions in their work to analyze COVID-19. Regional hospitals such as Dutch Hospital Data are using Talend to report COVID data to national health record systems. And researchers are using Talend to organize and integrate their clinical trial data, which includes COVID-19 testing. We are proud of the role Talend has played in enabling our customers in their mission.

Since joining Talend, we have focused on 3 key areas that directly fuel our growth strategy. These areas will lay a foundation for efficient, long-term sustainable growth and will continue to be the themes we expand throughout the year. Let me walk you through these areas of focus and then provide Q1 highlights, which demonstrate the progress we are making.

First, we are building a world-class global sales, marketing and customer success organization that will drive growth and fulfill our objective of being the leading global data integration and integrity platform. This includes unifying a complete go-to-market team to maximize demand, increasing sales execution and delivering quick time-to-value for our customers. The focus is on enabling our business to run more efficiently through digital experiences, including discovery, trial, purchase, deployment, adoption and expansion of our solutions.

Second, operating at speed and scale requires we instrument our business to support volume and velocity of the growth that we are targeting. This means optimizing every aspect of our operational systems, processes and telemetry.

Third, expanding our leadership in the industry around innovation across all elements of data integration and data integrity. I expect us to be the market and thought leaders serving our customers’ needs from traditional ETL and ELT integration to data streaming and beyond.

Executing on these areas of focus will ensure we bring the most valuable products to the market that anticipate the needs of our customers, making it easy for them to engage and receive service and support through a high-volume, low-touch model that not only benefits our customers but also our shareholders.

Let me now share how these efforts are already showing up in our Q1 results. In the face of a global pandemic and disruptive economic conditions, the team, led by our CRO, Ann-Christel Graham, executed a strong quarter. Customer growth and overall performance was largely driven by early improvements in our sales discipline, targeted at improving the effectiveness and the efficiency of our sales process. This was demonstrated by holding all key sales performance metrics of linearity, average deal size, sales cycle and win rate in line with past performance while showing improvements on in-quarter pipeline execution. The team drove a material increase in the percentage of closed expansion business developed from in-quarter, sourced and nurtured pipeline.

Additionally, we are seeing execution benefits in all theaters across the globe. For example, in EMEA, during the first 90 days, the team developed and implemented new, rigorous sales processes to drive consistent and predictable business in the enterprise and mid-market segments. These processes directly contributed to a strong Q1 finish in EMEA. We expect to see the strength of our EMEA team play a significant role in our future growth. APAC also played a material role in the outcome of our quarter as the highest sales growth region, and we’re very pleased with their performance given the impacts of the pandemic was felt earlier in that region. NORAM continues to be the largest contributor to our sales global footprint, and we are excited about the opportunity in NORAM as the cloud market continues to surge.

And finally, our ability to execute with speed was demonstrated in the power of our Frictionless model, where here, we saw shorter sales cycles and faster time-to-value for our customers. This and many other difficult journeys will be critical to our future and our ability to drive scale through low-touch, low-cost customer acquisition.

Building a customer-first mentality is critical to a world-class go-to-market organization. Jamie Kiser, our Chief Customer Officer, is leading this area to deliver a seamless customer deployment, adoption and expansion experience to every customer, enabling them to maximize value from the Talend Data Fabric platform. In the first 90 days, we have begun this work to improve the experience for our customers by realigning our customer success resources under one team to ensure scale and consistency. And despite remote work and curtailed travel adjustments, we still saw more than 70% of our cloud customers go live with their first use cases in under 60 days. While results from these initiatives will continue over the months ahead, we are pleased with the impact already evident in our Q1 results.

As companies continue to drive digital transformation, the need for our Data Fabric platform becomes central to how businesses are run. I believe that fact will only become more pronounced as businesses think about their own operating plans in a post-COVID-19 world.

As I talk to business leaders, there are a few things that come up consistently. First, customers are working to instrument their businesses with the goal of enabling real-time exchanges and business processes. Second, they are looking to enhance every part of the customer experience with digital touch points. These initiatives demand the immediate access to trusted data that Talend enables and, because of this, affords us the opportunity to be at the center of how companies run their businesses. Third, we are seeing a progression in how our customers are using and valuing data. This is evident not only in our customers’ use cases, but also has become apparent as we are now having discussions elevated in the organization, which focus on how Talend can be a strategic business partner, not simply a use case for specific projects.

Let me walk you through a few customer stories during the quarter that demonstrated our strategic wins and ability to expand relationships with existing customers. These reflect the universal need and appeal of our solutions that attract a wide range of companies from across industries. A notable new win for Talend last quarter was Covanta, a leader in sustainable waste and energy solutions with approximately $2 billion a year in revenue. Covanta is aggressively pursuing a cloud data and analytics strategy to maximize the efficiencies of its facilities and minimize downtime. Covanta selected Talend over MuleSoft, IBM and Informatica to deliver a continuous flow of trusted data into its predictive and prescriptive analytics engine. Their data has become a common language that encourages cooperation across departments for mutual gains. With shrinking organizational silos, Covanta can rely on its data to quickly identify revenue and profit optimization opportunities. After a few short months, they note seeing a cost of delivering new value to the business is decreasing at an accelerated rate.

During the quarter, we also earned the business of a Fortune 100 manufacturer. Working with Accenture, the customer will build a cloud data mart in AWS to give their member dealers across the country access to real-time information such as parts and inventory and pricing as well as real-time equipment connectivity for predictive services and maintenance. Our ability to connect to a wide range of data sources and deliver high-quality data in real-time pertains to this win.

A large U.S. retailer involved in the automotive industry was another new logo win for Talend in Q1. With thousands of retail locations across the U.S. and Canada, the retailer wanted to deliver a seamless customer experience and gain better visibility across their entire supply chain. To achieve these goals, the company needed to improve their data pipeline through its cloud data warehouse. Competing against IBM, Talend demonstrated the speed, efficiency and expertise to operate successfully in the company’s Snowflake environment and help them realize the full potential of their cloud infrastructure.

Showcasing the power of our Frictionless channel and our ability to expand relationships with customers efficiently, last quarter, we earned the business from a midsized information services company. Over our 10-day sales cycle, the entirety took place over e-mail. The Stitch Data Loader customer upgraded from a pay-as-you-go, self-service model to an enterprise-level subscription plan to give them the volume and predictable costs needed to continue to grow their business.

We also signed an expansion agreement with a leading provider of credit rating services for global capital markets. Talend enables the company to scale the amount of data it ingests and improves their data quality. The ratings provider has been on call 24/7 to respond quickly to market expectations during the current crisis by integrating political, macroeconomic and industry expertise into their analyses to deliver a connected view of COVID-19’s global impact over a range of scenarios. With Talend, the company can certify, package and monetize its trusted data sets.

As part of our objective to innovate continually to assert our market leadership, in the first quarter, we announced the winter release of Talend Data Fabric, our flagship platform. The latest update continues to strengthen our cloud capabilities and partnerships with new advanced support for Microsoft Azure, Amazon Web Services and Google Cloud. The release also introduces a new data inventory app that boosts companies’ data government programs by rapidly detailing what information they have, where it’s located and who has access to it. In addition, the winter release offers new tools to ensure the quality of data within a company. This includes an in-flight data quality feature that eliminates bad data before it enters the enterprise and an automatic trust score that delivers an immediate health assessment of corporate information.

We continue to strengthen our relationship with our ecosystem partners. We recently expanded our partnership with Databricks to provide reliable quality data for machine learning workloads to quickly unlock insights for users’ business needs. We also announced the availability of Talend Cloud in Microsoft Azure marketplace as part of our effort to reach more customers operating on Azure. We believe our continued collaboration with our partners will help elevate our message on the strategic value of data integration and data integrity.

For the remainder of 2020, we will stay focused on our strategic initiatives to build a sustainable growth engine, enhance our position in the market and prepare us for a strong future. With a watchful eye on the macro environment, we will balance the near-term conditions with a growth mindset and keep a relentless focus on the 3 key objectives we have already begun to lay the foundation for in Q1. We will continue to invest in building out our world-class sales, marketing and customer success teams with a focus on execution and alignment in the field and across the organization. We will develop digital capabilities to support the customer life cycle while evolving our relationship and support of our customers to become strategic business partners. The optimization of our internal systems will be managed through a centralized, dedicated team focused on laying a foundation for high-growth and scalability across the business.

And finally, in the area of innovation and driving leadership in the market, we will focus on helping our customers solve the biggest problems surrounding data and ensuring we play a material role in how they use data to make critical business decisions and drive business outcomes. We will further expand upon our data intelligence capability by exposing quality metrics to trust scores that allow all users to have confidence in their data and thus, their decision-making.

Additionally, we look to expand the spectrum of data types that we make available to create more real-time context around critical data assets. We see that data is an active, dynamic and ever-changing series of events, and our role to ensure the entirety of it can be effectively and efficiently leveraged by our customers. I expect that these 3 areas of focus will lay the foundation for long-term growth and position Talend to capitalize on the market shift to the cloud.

Now let me tie these comments on our vision for Talend and the areas of enhancement to my earlier comments on the impact of COVID-19 on our business. As with every business, we are not immune to macroeconomic impacts and we do expect headwinds as a result of COVID-19. We expect an impact in demand that is consistent with other areas in software and reflect the overall budgetary constraints. We have shifted our demand generation strategy to compensate for the vacuum in live events. Increasing our digital mix was an intentional strategy coming into this year, and the current situation has only pushed us faster and further.

Our business is well diversified across segments, regions and industries. Approximately 20% of our customer base is in high-impact industries, including travel, retail and energy. This is likely to be where we will see pressure on sales and renewals as budgets are tightened.

We are closely focused on key leading indicators of performance and will adjust as necessary to the environment. At the same time, we will not lose sight of the investments and strategic decisions we need to make to create long-term value for our customers and shareholders. Our cloud ARR scale and growth speak to our significant progress to date and underscores the importance of these investments.

Our ability to prove value to our customers as they navigate this period will be a testing ground for our strategy, and we will emerge stronger and more efficient as a result of the clarity of mission and focus this establishes in how we operate. We’re encouraged by our strong performance in Q1 as well as the pace of demand and linearity we see in Q2.

I’ll conclude by thanking our employees, customers and partners. Talend’s purpose, our guiding principle, is to change the way the world makes decisions. We’ve come together as a team with the resolve to deliver on that purpose and the opportunity ahead of us.

And with that, I will turn the call over to Adam.

——————————————————————————–

Adam Meister, Talend S.A. – CFO [4]

——————————————————————————–

I’ll echo Christal’s thanks to our employees for their agile response to COVID-19 and their dedication to our customers and partners.

Let me walk you through our results for the quarter and provide context on the impact of the crisis on our outlook. We’re very pleased with our performance in Q1. The consistency of execution, agility of the sales team and visibility in the pipeline were all strong through the entire quarter. We adapted quickly to the situation and saw little impact to our Q1 results.

ARR grew to $245.9 million at the end of Q1, up 22% year-on-year on a constant currency basis. FX had a large impact on sequential net new ARR this quarter that masks our strong performance. Cloud ARR grew to $61.1 million compared to $53.9 million at the end of Q4 and $24.4 million at the end of Q1 last year, representing 154% year-on-year constant currency growth. Our continued cloud momentum is clear in the ARR results, which included $1.3 million of migration by an on-premise customer in this quarter. As of March 31, we now have more than 2,500 cloud customers. We ended the quarter with 598 customers at $100,000 or more of ARR, up 20% year-on-year. These customers represent 66% of ARR as of the end of Q1.

For the quarter ended March 31, our dollar-based net expansion rate was 111% in constant currency. The impact of COVID-19 will put some pressure on renewals and expansions this year that may affect this metric.

Total revenue for the first quarter was $68.1 million, up 18% year-on-year and above the high end of our guidance range. Subscription revenue for the first quarter was $60.9 million, up 22% year-on-year or 24% on a constant currency basis. Professional services revenue was $7.2 million in the first quarter, a decrease of 8% year-on-year. As we have stated, professional services slowed as cloud sales had required a lower professional services attached compared to on-premise sales. We expect this trend to continue for the year.

As Christal mentioned, we saw strong performance in EMEA and are pleased with the continued strength in APAC and NORAM. We believe our geographic diversification is a positive, as the timing of the pandemic impact and recovery will vary across the globe.

Before moving to profit and loss items, I would like to point out that unless otherwise specified, all expense and profitability metrics I will be discussing going forward are non-GAAP results. A full reconciliation between our GAAP and non-GAAP results can be found in our earnings press release issued today, which is posted on the Investor Relations portion of our website.

For the first quarter, our total gross margin was 79%, and subscription gross margin remained at 87%. We expect a modest impact to gross margins in 2020 as we continue scaling our cloud operations. Professional services gross margin was 12% this quarter. We incurred an operating loss for the quarter of $3.8 million or 6% compared to an operating loss of $9.4 million or 16% in the first quarter of 2019. This improvement was partly due to the efficiencies in the business and partly due to lower expenses such as T&E due to COVID. Free cash flow for the quarter was $0.4 million compared to negative $8.4 million in the prior year period. Cash and cash equivalents ended at $177.8 million as of March 31, 2020.

Let me summarize some of the puts and takes shaping our thinking before moving to our outlook. We’re closely monitoring the lead indicators across pipeline generation, deal cycles, renewals and receivables to inform our forecast. We did see an impact on pipeline generation in Q1 from COVID and shifted our strategy fully to digital and virtual events. It appears to be back on the right trajectory now but from a lower base. A handful of deals were impacted at the end of March, which we offset with other short-cycle transactions. We are being conservative on sales cycles and close rates this quarter given the expected budgetary constraints. We’re watching customers in highly impacted industries closely for renewals and receivables. As mentioned earlier, we did see some pressure on renewals and downsells in Q1, and for now our forecast assumes that this will continue for the second half of the year.

There was a dip in March in collection efficiency, and we had a few requests for flexible payment terms but nothing particularly significant. We’re managing our hiring and expenses carefully as we monitor this situation. We do plan to adjust our spending in light of COVID while maintaining our momentum on key investments. This is an important year for investment across go-to-market, product and operations to more efficiently scale and enhance our market position. Our cash burn may increase versus initial expectations but by no more than $5 million for the year.

Our outlook for Q2 reflects these assumptions and foreign exchange rates as of April 30, 2020. For the second quarter of 2020, total revenue is expected to be in the range of $65 million to $67 million. This assumes a 1% headwind to subscription growth from FX and a little over a $1 million sequential decline in professional services revenue. Non-GAAP loss from operations is expected to be in the range of $10 million to $9 million. Non-GAAP net loss is expected to be in the range of $10.6 million to $9.6 million. Non-GAAP net loss per share is expected to be in the range of $0.34 to $0.31. This is based on a basic and diluted weighted average share count of 31.5 million shares. Q2 and Q3 will account for most of the expected cash burn for the year.

Given the macro uncertainty, at this time, we are withdrawing our full year 2020 guidance. We’ll continue to provide quarterly guidance and will revisit full year when the economic outlook stabilizes.

I do want to focus on Cloud ARR for a moment. Our Cloud ARR has reached significant scale and explosive growth. We’re excited about its trajectory coming off of a strong Q1 and the opportunity from here. The current environment will impact cloud relative to our initial target for the year, but the demand drivers and opportunities remain strong for new customers and expansions. We do expect COVID will dampen customer demand for migration projects in the near term. We’ll continue to report Cloud ARR each quarter, including the impact of migrations, so that you can track our progress.

The current environment underscores the importance of data speed and trust for businesses to gain insight into their operations and make decisions quickly and with confidence. We will continue to invest in product innovation to advance our technology leadership, our go-to-market strategies and continue to deliver the best customer experiences, all priorities in line with the objectives Christal discussed. We believe these actions will enable us to emerge from the crisis even stronger as a company.

With that, we will open the call to questions. Operator?

================================================================================

Questions and Answers

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Instructions) Our first question today comes from David Griffin of William Blair.

——————————————————————————–

David A. Griffin, William Blair & Company L.L.C., Research Division – Analyst [2]

——————————————————————————–

Congrats on a solid performance here. So you mentioned that around 20% of the customer base is in the higher impacted industries, which is helpful. I’m wondering if you can just kind of expand on that a little bit and maybe just talk about what you’re hearing from customers in those industries as it pertains to potential downsells later in the year or maybe split deals or even some signs of expected changes or requests for changes in contract terms, payment terms and things of that nature.

——————————————————————————–

Christal Bemont, Talend S.A. – CEO & Director [3]

——————————————————————————–

Sure. David, yes, let me go ahead and try to answer a few of those pieces, and then I’ll give Adam a shot at some of the future things that we’re looking at. What we’re seeing right now is there’s kind of 2 things that are occurring. One is the conversations we’re having with our customers today is that there’s a group of the customers that fit into that 80% that really have a reason to want to look at analyzing their business in ways that they’ve never had to look at before, that’s causing them to have a conversation with us. The 20% that you’re referring to are really the industries that we’re seeing widely impacted that are really hitting the pause button would be the best way I would explain it. And either because of other priorities or because of budgetary constraints, they’re taking a moment to go focus on other things. And so what we’re seeing is that we’re having a much more engaged relationship on that 80%, and that’s where we’re getting super-prescriptive in the conversations that we’re having and the impact that we can have on those businesses. And then on the 20%, see now, we’re seeing that — they’re saying that we’re going to be talking to later on in a future year or hitting the pause button for a period of time, that we’ll revert back to. So it’s — we’re seeing a little bit of the combination of both of those. And I think at this point, that’s where we see a very positive climb in the area of the 80% where we’re having good trajectory and then where we have a little bit of uncertainty in terms of the timing on the other 20%. And then, Adam, I don’t know if you have…

——————————————————————————–

Adam Meister, Talend S.A. – CFO [4]

——————————————————————————–

Yes, I’ll just — I’ll layer in. I think that Christal’s commentary on the concept of kind of a pause is important. For us, right now, I think a lot of companies are just feeling out the situation, trying to determine where things go from here. And as a result, projects that can wait or big decisions that were teed up to be made, if you are in one of those industries, it’s totally reasonable that you want to take a couple of weeks and see how things unfold. The important piece here is that the demand environment overall and the underlying need for data integration and governance doesn’t really change, and we’re just thinking about it as potentially a little bit of a shift. And so we’re going to keep watching carefully. And I think towards the back half of Q2, as we start to see as typically a ramp in deal closures, we’ll have a better sense for how impacted those customers really are. I think we only saw a little bit of it in Q1 at all, and I think a lot of our conservatism here is mainly just about the level of uncertainty versus clear trends that we’re already observing in our business.

——————————————————————————–

David A. Griffin, William Blair & Company L.L.C., Research Division – Analyst [5]

——————————————————————————–

Got it. That’s helpful. And then my second question is around migration activity, some helpful disclosures there. I was hoping, maybe you could talk a little bit more about the nature of the $1.3 million of cloud migrations and kind of where pipeline development there came in relative to your expectations. And then on the customers that did migrate during the quarter, it’d be great just to get some color on whether you saw any expansions in there and maybe just directionally what the overall conversion rate look like.

——————————————————————————–

Adam Meister, Talend S.A. – CFO [6]

——————————————————————————–

Yes. So for the pool of migrations we saw, $1.3 million, a relatively small number, but we didn’t expect it to be a huge ramp early in the year anyways. So we were pretty pleased with where it landed. But as I mentioned in my prepared comments, we do think that you will just see a dampened impact or a dampened demand environment for those projects. It’s — they take time. They take resources, and those are precious commodities for any business right now. And so again, it doesn’t come down to — the demand is not ultimately there. So it’s a question of when our customers can prioritize it.

There was a decent amount of expansion associated with some of those deals. That $1.3 million, just to reiterate the way we describe it, really reflects just the on-prem value that shifted to cloud. So we’re not going to break out exactly how much expansion there is, but it is a trend that we’ve seen in the migrations we’ve done. And in terms of further color on what those really consist of, it’s a mix. There are some customers that are up for renewal, and they see cloud as a natural kind of evolution or upgrade path. There’s others that have a bigger cloud migration strategy shift to digital transformation that we fit as a part of. It really is a mix. And I think as we mentioned in our last earnings call, we’ve got really a dedicated team that’s designed to build the pipeline here to pattern-match and identify kind of what the motions from the customers’ perspective are so that we can best align resources and just frankly make sure our customers are successful as they make the cloud move.

——————————————————————————–

Operator [7]

——————————————————————————–

Our next question comes from Raimo Lenschow of Barclays.

——————————————————————————–

Raimo Lenschow, Barclays Bank PLC, Research Division – MD & Analyst [8]

——————————————————————————–

Good start, Christal and Adam. The — Christal, first question is for you, and then I have a follow-up for Adam. When you started the one big notion around the sales motion words to kind of try to engage slightly more strategically, just trying to try to sell more value, like what have you seen from your sales force and how that’s taking up that message and then bringing that message into the market? Obviously, I’m aware, like we called it all a little bit different now. But like what have you seen in terms of early signs of people kind of signing up to that kind of new positioning?

——————————————————————————–

Christal Bemont, Talend S.A. – CEO & Director [9]

——————————————————————————–

Yes. Happy to answer. Raimo, nice to hear from you. Well, first of all, I’m extremely pleased with the results of the quarter. I think it was executed really, really well in the face of a number of things. But to specifically answer your question, this is an evolution that’s taking place that will continue to take place over the entirety of this year. But what I’m hearing that is really matching the needs of the market right now is a conversation around not only quickly solving problems but the elevation of the conversation to other business and constituents within the organization that’s around health and quality and integrity of the data. So where we’re really seeing things land are specifically around not just how we can facilitate the data that’s moving but also how we can do that in a way that ensures that it is good quality data and the governance of that data. And so those conversations are starting to really take hold in the form of not only being able to elevate the conversation but to also be something that I think people value more now than ever where before, people could look at patterns of data that they could trust to gauge their business. And the reinstrumentation that’s required now for people to really consider how they’re going to operate in the face of uncertainty is — comes down to being able to trust the data and get access to all of it as quickly as possible. So the conversations have started to take place, I think, in a way that are showing up to not only match the current conditions but in a way that I think will continue to increase our value with our customers and our future customers.

——————————————————————————–

Raimo Lenschow, Barclays Bank PLC, Research Division – MD & Analyst [10]

——————————————————————————–

Okay. Perfect. And then one for Adam. Like as you think about renewal, receivables, et cetera, like do you — like what are you seeing there in terms of like is it more a delay? Or is it more like a slightly lower negotiation in terms of — so you have to kind of be slightly more flexible, and that will impact cash a little bit because, obviously, you need to work with your customer base? Like can you kind of double-click on that a little bit?

——————————————————————————–

Adam Meister, Talend S.A. – CFO [11]

——————————————————————————–

Sure. Yes, happy to. So I did mention, we did see a little bit higher downsell trend in Q1 than we had expected. And so we think that, that’s largely overlapping with some of those highly impacted industries. And so we saw the customers there that either negotiated a little bit lower on renewal or decided to forgo a handful of the licenses that they had with us. Importantly, we didn’t see really impact to customer churn. And so I think that those are all accounts that as long as we can continue to make them successful, we’ll expand over the long term. My priority is absolutely maintaining kind of ARR base as we think about discussing renewals with customers. And so we’ve got some flexibility with our balance sheet to manage flexible billing terms or payment schedules. And to the extent we can help customers that are feeling a little bit more of the tension in this environment, we’re able to do that. And we think that will accrue to the benefit of our relationship.

There’s a good example of a company in the travel space that came to us, requested flexible billings given their own cash flow crunch. And we were able to negotiate a 2-year transaction but quarterly payments. That’s a perfect example of something that I think is a win-win, where we’re helping them get through this tough period, but we’re also able to lock in a long-term relationship.

——————————————————————————–

Operator [12]

——————————————————————————–

Our next question comes from Jack Andrews of Needham.

——————————————————————————–

Jon Philip Andrews, Needham & Company, LLC, Research Division – Senior Analyst [13]

——————————————————————————–

Congratulations on the results. Christal, I was wondering if you could talk a little bit more about the execution around elevating your strategic message. You’ve got — it sounds to me like you’ve got a couple of different variables going on. One is just, again, talking about the strategic value of Talend. And the other variable you addressed was sort of pivoting more towards digital channels. So how do we think about the net effect of these 2 variables on your business? Is there any — is it too early? Or are there any changes that you see in terms of sales cycles, deal sizes moving through the pipeline? Any commentary around that?

——————————————————————————–

Christal Bemont, Talend S.A. – CEO & Director [14]

——————————————————————————–

Yes, happy to. I think there — the first thing is that looking at holding in Q1 the key metrics that I mentioned, steady, I think, was one of the first signs that it’s starting to take hold relative to what we would have expected to see some impacts on those under other conditions as well as when you start to look across the globe and start to see consistency in the performance and the way that we’re executing, the ability to balance the conditions that we faced with bringing in new hygiene and new rigor as well as elevating the message, that’s a lot to get your arms around, quite frankly. And so the ability to move through the quarter in the way that we did looks to be a really good indication that the beginning of the process is really taking hold. Again, seeing very early signs in Q2 is something similar to seeing us off to a great start. So I think the message resonates because it has an opportunity to not only solve the current problem that’s in front of people today around the necessity of data but data that they can trust. And it’ll continue as when you see the winter release that we were referencing, the ability to really look at those trust scores and to be able to take something tangible to people that they have the ability to have confidence in the decisions that they’re making based on our ability to give them kind of the health of their data, if you will.

When you look at how we operate, which is the other piece on creating a digital motion, that’s really important to not only our business today but how we’ll continue to evolve our business and really making sure that we can find ways of bringing customers through and supporting them and, quite frankly, expanding our relationship with them through the entire customer life cycle in a very digital way that allows them to self-serve where needed and also allows us to provide things in a very timely manner in a way that shows up better for our customers. And so the productivity, the efficiencies that we can gain within our business, has an opportunity for us to not only serve our customers better but also run this business more effectively.

So I see the 2 as complementary, one as to how we run the business and the other is the message that we have and the value we bring. And both are in the early stages of evolving, but I’m very pleased with the way that it’s showing up, especially in light of those conditions.

——————————————————————————–

Jon Philip Andrews, Needham & Company, LLC, Research Division – Senior Analyst [15]

——————————————————————————–

Great. That’s great. Really appreciate the detail around that. And then just as a follow-up question. Adam, I was wondering if you could maybe unpack the 2Q outlook a bit by region, if you could. Specifically wondering about APAC, that’s historically been your fastest-growing region. That was perhaps first impacted by the COVID-19 situation. So I was wondering if there’s any rebound you might be seeing there now that things are opening up or any sort of lessons learned geographically that you could see on your business.

——————————————————————————–

Adam Meister, Talend S.A. – CFO [16]

——————————————————————————–

Yes. Good question. So I’ll just reiterate one thing that Christal was walking through. The execution was really strong across the whole globe this last quarter, and we are really pleased to see that consistency. And so I think that, that’s a really good setup as we go into Q2. APAC actually did very well in Q1 and was our strongest growth region again. And it’s starting to be a pretty large base. We have high expectations in Q2 that they maintain that high-growth position. I wouldn’t say that it’s particularly tied to an expectation that they’re further through recovery at this point versus other regions. I think it’s still a little too soon to tell if the economic environment there is really opening back up. We’ve obviously got Singapore and some other countries that have seen a little bit of a reversion back from what they thought was a good rebound. So we’re going to watch it carefully. But I’d say the underlying principle from a geo perspective for the guide is really the consistency we saw in Q1 that we’re able to maintain into Q2.

——————————————————————————–

Operator [17]

——————————————————————————–

Ladies and gentlemen, that concludes today’s question-and-answer session. And also, it ends Talend’s First Quarter 2020 Earnings Call. Thank you for your participation. You may now disconnect.