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Talend (NASDAQ:TLND)
Q2 2018 Earnings Conference Call
Aug. 6, 2018 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Talend second-quarter fiscal-year 2018 earnings call. Today's call is being recorded. At this time, I would like to turn the call over to Lisa Laukkanen. Please go ahead.

Lisa Laukkanen -- Investor Relations

Thank you. This is Lisa Laukkanen, investor relations for Talend. And I'm pleased to welcome you to Talend's second-quarter 2018 conference call. With me on the call is today is Talend's CEO Mike Tuchen; and Interim CFO Ram Bartov.

During the course of today's presentations, 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 unknown risks and uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those contemplated in these forward-looking statements. Forward-looking statements in this presentation include but are not limited to statements related to our business, financial performance and expectations and guidance for future periods, and our expectations regarding our strategic product initiatives, and their 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 detailed in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as 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 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. Talend customers that are referenced by name today do not endorse any vendor, product or service and do not advise any company on selection or use of technologies, products, services or vendors. And now, let me turn the call over to Mike Tuchen, Talend's CEO.

Mike Tuchen -- Chief Executive Officer

Thanks, Lisa, and thank you all for joining us today. We're pleased to report strong second-quarter results as we continue our cloud and enterprise momentum. We achieved record total revenue of $49.8 million in the second quarter, up 39% year over year, while substantially improving operating leverage. Some of the highlights of the June quarter include: Our subscription revenue also grew 39% year over year.

We continue to see the ongoing market shift to the cloud, which is fueling our cloud subscription growth, which grew over 100% year over year for the eighth quarter in a row. Enterprise subscription customers grew by 47% in Q2 to 427 customers and represented approximately 67% of our subscription revenue. We continue to be pleased with our momentum with large enterprise customers. Revenue from the Asia-Pacific region continued to grow over 100% for the fifth quarter in a row.

And finally, our non-IFRS operating margins improved by 600 basis points on a year-over-year basis to minus 7%, as we continue to make progress improving the profitability profile of the company. Our financial results in the second quarter were driven by the growth in our cloud business, in addition to continued adoption by large global enterprises, growth in international markets, and continued success in growing our installed base through the land-and-expand strategy. Cloud and big data solutions delivered a combined subscription revenue growth of 69% year over year. As we've noted in past quarters, we continue to see cloud adoption accelerate as more customers deploy Talend in the cloud.

As a result, our cloud business is quickly becoming an important overall company growth driver as shown by this growth of over 100% year over year. We expect our cloud business to become an increasing component of bookings in the coming year. At the same time, we're seeing on-premise big data becoming less of a contributor. While still smaller than our big data business today, our cloud business is growing on a faster trajectory than what we had experienced with big data a few years ago, and we have an exceptional competitive position in the cloud integration world.

In the second quarter, we secured a new cloud customer with British American Tobacco, U.K.'s is fourth largest company by market cap. As part of their business transformation, British American Tobacco needs to integrate both on-premise and cloud applications into a Microsoft Azure environment to allow an integrated reporting. The company wanted visibility to near-realtime data in over 40 of their end markets, optimizing the way their trade marketing, distribution and sales teams work together. After vigorous proof of concept, British-American Tobacco selected Talend cloud.

They chose Talend because it's simply a better fit for their complex, hybrid cloud environment. Another notable win for Q2 was with one of the most prestigious schools in Australia, with 60,000 students and over 6,000 academic staff from over 130 countries. The university uses Cloudera, running in AWS, that supports multiple data analytics groups across the institution. Talend cloud was chosen after successfully delivering a proof of concept in one and a half days, the work that took the competition, which in this case was Informatica, over 14 days.

Talend cloud also outperformed the competition in ingesting a large amount of data from both on-prem and SaaS applications. We also signed a cloud win with TI Media, formerly Time Incorporated U.K. The company's 40-plus brands reached 16.4 million U.K. adults monthly, across print and digital.

Its market-leading portfolio spans a range of interest areas from entertainment and women's lifestyle to luxury, sports and technology. TI Media is building a data warehouse in Snowflake to provide a 360-degree view of their customers and also comply with the GDPR requirements. TI Media needed to quickly create a governed data warehouse, that they can expand and tailor to their needs. In particular, they appreciated Talend's open architecture and native cogeneration approach, that they could easily introduce into the existing IT environment with no vendor lock-in.

TI Media is already loading data from their existing sources into a centrally assessable data warehouse that's supporting their analytics with an elastic SaaS cost model. In Q2, our overall dollar-based net expansion rate was 124% on a constant-currency basis. This is the 17th consecutive quarter that we've had a dollar-based net expansion rate over 120%. One good example of a successful land and expand with existing customers was with Auchan retail, the 13th largest food retailer in the world with over EUR 50 billion in revenue, and nearly 4,000 point-of-sale locations worldwide.

As part of the Auchan Retail Transformation plan, the company's IT department is running projects in 14 countries. The goal is to align information systems in each country, with Auchan Retails' global IT strategy. Talend is the backbone of the exchange platform, which includes data integration, application integration and APIs, and supporting this platform is a key part of the IT transformation in each of the countries. Auchan Retail is using a cloud-based strategy offering all countries a turnkey SaaS solution.

Another notable expansion example is TD Bank, a top 10 bank in North America that's making significant investments to enhance their customer experience. TD Bank started using Talend to collect petabytes of information through multiple sources for a centralized data lake. The company has shifted its focus to becoming more metadata driven and being able to identify data and track it end to end. A second part of their data evolution involves empowering teammates in the business groups by giving them access to Talend's data preparation tool, so they can seamlessly interact with their data.

This is allowing IT to move from a supporting role in the business to a partner role, and helping them solve business problems and drive results. TD Bank's invest in Talend for its enterprise integration layer continues to accelerate the company's role as a technology innovator, and it's providing the best customer experience possible. We're pleased to recognize TD for recently becoming the No. 1 bank in Canada.

In another big win during the quarter, a major U.S. broadcaster expanded its cloud footprint with Talend in Q2. Talend worked with Cognizant, Microsoft Azure and Snowflake to deploy a cloud-based data lake for the broadcaster. The company wanted to enable its sports marketing group to better analyze customer insights and enhance their engagement campaigns by building a customer data warehouse.

The company wanted to measure the effectiveness of their marketing campaigns and get a 360-degree view of segmentation and attribution data. Leveraging a single source for data, the company now has a solution in the cloud that provides greater data access, control and scalability. We continue to be pleased with our momentum with large global enterprise customers. As noted earlier, enterprise subscription customers grew by 47% in Q2, representing approximately 67% of subscription revenue.

A significant enterprise win for us last quarter was with American management and IT consulting firm, Booz Allen Hamilton. The company wanted to rearchitect their existing enterprisewide financial system to modernize data processing, management and delivery. The solution needed to pull data from multiple data sources across the company, including both commercial and home-grown applications. Booz Allen Hamilton selected Talend because it performed the heavy-lifting required within their complex and mission-critical environment and provides the flexibility to move into the cloud in the future.

The company expects Talend to help them scale to near real-time, tie in data governance and eventually move their solution from on-prem to hybrid to cloud, while achieving significant increases in efficiency. A division of a Fortune 100 conglomerate also selected Talend to expand a cloud-based data lake to include data for transportation analytics. The company is combining data from schedules, weather, trains and rails to improve overall transportation performance. Additionally, in Q2, we continue to grow our footprint in all aspects of data management for a top size U.S.

bank. Some examples of where they are using Talend include their customer cloud environment, business intelligence for their card business, cross channel visualization, and data quality exception tracking. Talend has been deemed the preferred enterprise alternative to the previous incumbent, which was Ab Initio. We can handle the bank's enterprise requirements, such a scale, functionality, number of sources and targets and security with an attractive business model.

Talend helps the bank move away from legacy solutions that are difficult to maintain, cost too much, and don't work with new cloud digital and big data technologies. Our APAC team continues to perform extremely well with growth continuing at over 100% year over year. Here are some the large wins during Q2 from the region: Talend cloud was selected by AXA General Insurance. Founded in 1998, the insurance company's headquartered in Tokyo, Japan.

AXA General Insurance formerly kept everything on premise in a managed corporate data lake. The company decided to move to a cloud platform in order to improve operational efficiency and reduce costs. AXA General Insurance built their new data lake on AWS and upgraded to Talend cloud. Talend Cloud proved to be the best solution, providing a flexible and secure integration of their existing database and cloud based-systems including S3, Redshift and EMR.

Another example from the region is with the Australian Taxation Office. Talend won an agreement with the ATO in Q1, to help them build a real-time data lake. This quarter, the ATO added more licenses to support a major data quality project. On the products front, we continue to make significant investments in our enterprise capabilities with Talend cloud.

In particular, we enhanced our support for dev ops, with improved integration with Maven and Git, enhanced connectively with Salesforce, improved our enterprise security and improved our data prep and data stewardship capabilities. Talend is fully committed to making sure our customers are able to embrace the continuous innovation going on in the market. The latest example of this is serverless computing, which continues to be a major focus area for Talend. Serverless computing is a game changer for our customers, who are reducing their cloud computing costs by 67% while at the same time seeing a 50% improvement in performance.

And because of our unique approach, our customers can enjoy these benefits with any cloud they choose. Finally, we're thrilled to welcome Mark Nelson and Brian Lillie to our Board of Directors. Mark is currently EVP of product development at Tableau, and brings more than 25 years of experience in software development, engineering and SaaS infrastructure. Mark's expertise will be instrumental in helping grow Talend's global leadership position in the cloud.

Brian Lillie served as chief product officer at Equinix, and has more than two decades of experience in enterprise software and cloud computing, as both a practicing CIO, as well as in leading product strategy. We're looking forward to leveraging Brian's deep experience and unique combination of skills in the cloud and IT sector in our board conversations going forward. The addition of Mark and Brian to our board continues to transition to a fully outside public company board to help guide Talend toward its next stage of growth. Let me now turn the call over to Ram.

He'll discuss our Q2 financial results in more detail and provide our outlook.

Ram Bartov -- Interim Chief Financial Officer

Thanks, Mike. Today I will read the financial results for the second quarter, as well as provide our outlook for the third quarter and fiscal year of 2018. Total revenue for the second quarter was $49.8 million, an increase of $13.9 million from the second quarter of 2017, representing 39% year-over-year growth. Our subscription revenue for the quarter was $42 million, an increase of $11.7 million from the second quarter of 2017, or 39% year-over-year growth.

In constant currency, subscription revenue grew 34% year over year. The strong demand for Talend cloud offerings continued to drive growth in subscription revenue. Our cloud SaaS subscription revenue in the second quarter grew more than 100% year over year for the eighth consecutive quarter, and we expect this trend to continue as Talend continues to invest R&D efforts in our cloud offering, which now includes data, big data integration, data prep and with more offerings to come over the course of 2018. Our big data and cloud products now together represent our largest product category and make up approximately 50% of our subscription revenue in the second quarter.

From a geographic perspective, EMEA represented 47% of subscription revenue in the second quarter, and grew 39% year over year. In the second quarter, APAC grew by more than 100% year over year. Although Asia Pacific still represents a small percentage of our subscription revenue in the second quarter, it shows great potential and has grown above 100% for now five consecutive quarters. We also see growth being driven by our enterprise customers, as defined as companies with $100,000 or more of annualized subscription revenue, where their number grew by 47% and reached 427 customers this quarter.

67% of Talend's subscription revenue was derived from these enterprise customers in Q2 2018. Professional services revenue for the quarter was $7.7 million, an increase of $2.2 million or 40% from the prior-year quarter. As we discussed in past earnings calls, Talend has made strong investment in enabling our systems' integrator ecosystem in order to have sufficient implementation capacity for our customers. Our priority is to focus on strategic consulting revenue while depending more on our systems integrator ecosystem for the broader implementation services.

For the quarter ending June 30, 2018, our net-dollar expansion rate was 124% in constant currency. It has been above 120% in constant currency for now 17 consecutive quarters. I would like to remind investors that our net dollar based 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, unless otherwise specified, all of the expense and profitability metrics I'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 the second quarter was 77%, the same as what we had in the same period last year. Operating expenses for the second quarter were $42 million, an increase of $9.7 million from the second quarter of 2017. Sales and marketing expense for the quarter were $26.3 million, an increase of 31% year over year.

The increase was primarily the result of higher personnel expenses due to increased headcount. We expect that our sales and marketing expenses will continue to grow in absolute dollars as we continue to invest in our International expansion, identify and retain top talent, and engage in global promotional activities to strengthen our brand awareness. Our sales and marketing headcount increased from the prior year by 28% to 400 employees. R&D expenses for the quarter were $8.4 million, an increase of 38% year over year.

The increase was driven by an increase in staff expenses due to an increase in headcount, especially in France. Additionally, there was an increase in amortization expense of $0.3 million in the quarter related to the intangible assets purchased in the Restlet SAS acquisition in the fourth quarter of 2017. Our R&D headcount reached 251 employees at the end of the quarter, representing 21% growth over the same period of last year. G&A expenses for the quarter were $7.3 million, an increase of 21% year over year.

The increase for the quarter was largely attributable to increase in staff expenses due to greater headcount, the expansion of the leadership team, and increases in professional and outside services related to being a public company. Our G&A headcount reached 120 employees, resenting 30% 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 costs related to being a public company, and support our global expansion. We ended the quarter with 989 full-time employees compared to 765 employees at the end of the second quarter of 2017.

We incurred an operating loss for the quarter of $3.6 million compared to the second quarter of the prior year's operating loss of $4.5 million. Expressed as a percentage of revenue, operating loss was 7% compared to an operating loss of 13% in the second quarter of 2017. We continue to make progress in our operating leverage as we continue our path toward profitability. As we have stated, we continue to expect quarterly fluctuations in operating margins.

Net loss for the quarter was $3.6 million compared to a net loss of $5.8 million in the prior year period. Free cash flow for the six-month period was $3.1 million compared to free cash flow of $1 million in the same period in the prior year. 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 and quarterly fluctuations. The adoption of IFRS 15 contributed approximately $0.6 million to our subscription revenue as we recognized a component of the subscription revenue upfront.

The FX impact on deferred revenue was a negative $3.6 million in Q2 of 2018. Turning to the balance sheet. As of June 30, 2018, we had cash and cash equivalents of approximately $93 million. As we discussed during our IPO, and on all of our prior earnings calls, I would like to remind investors that we do not view calculated billing as a good indicator of the performance of our business.

Calculated billings does not take into account changes in pre-billed subscription duration, professional services, co-terming of subscription contracts, certain renewal dynamics and as mentioned earlier, FX fluctuation. We provide forward guidance on a revenue basis as we believe this is a more meaningful and accurate reflection of our business operations and financial position. As discussed during our prior earnings calls, we were targeting a pre-billed subscription duration of 1.1 years for our new business sales in 2018. In the second quarter, pre-billed subscription duration came in approximately on target at 1.09 years.

This intended lower pre-billed subscription duration is consistent with our previously announced strategy to minimize discounts and reduce the complexity of our sales cycle. Before I give guidance, I would like to emphasize some key financial highlights. Our net dollar base expansion rate continues on its strong performance, where it has now been above 120% for 17 consecutive quarters. Our subscription revenue grew by 39% year over year, driven in large part by our strong growth of big data and cloud, and strong performance in Europe.

Our operations in APAC have continued to drive top-line growth with over 100% revenue growth for now five consecutive quarters. Our operating margin improved 600 basis points from a negative 13%, a year ago, to a negative 7% in the second quarter of 2018. This substantial operating margin improvement shows our commitment toward income statement profitability. As I indicated earlier, we adopted IFRS 15, which is the IFRS equivalent of ASAC 606 on January 1, 2018, on a modified retrospective approach.

Specifically in Q2, IFRS 15 reporting contributed to improvement of 1.4% on a revenue growth and $807,000 of lower commission expenses. Now for the Q3 and 2018 fiscal year guidance, which assumes similar business conditions and foreign exchange rates as of July 31, 2018. Third quarter of 2018. Total revenue is expected to be in the range of $51.6 million to $52.6 million.

Loss from operations is expected to be in the range of negative $10.5 million to negative $9.5 million, and non-IFRS loss from operations is expected to be in the range of negative $3.4 million to negative $2.4 million. Net loss is expected to be in the range of negative a $10.8 million to negative $9.8 million, and non-IFRS net loss is expected to be in the range of negative $3.7 million to negative $2.7 million. Net loss per basic and diluted share is expected to be in the range of a negative $0.36 to $0.33, and non-IFRS net loss per share is expected to be in the range of negative $0.12 to negative $0.09. Basic and diluted weighted average share count of 30 million shares.

Full year of 2018, total revenue is expected to be in the range of $204.6 million to $206.6 million. Loss from operations is expected be in the range of negative $39.3 million to negative $37.3 million, and non-IFRS loss from operations is expected to be in the range of a negative $15.1 million to negative $13.1 million. Net loss is expected to be in the range of negative $39.7 million to a negative $37.7 million, and non-IFRS net loss is expected to be in the range of negative $15.5 million to negative $13.5 million. Net loss per basic and diluted share is expected to be in the range of a negative $1.32 to negative $1.26, and non-IFRS net loss share is expected to be in the range of negative $0.52 to negative $0.45.

Basic and diluted weighted average share count of 30 million shares. Thank you. And let me turn the call back to Mike for some final remarks.

Mike Tuchen -- Chief Executive Officer

Thank you, Ram. Talend delivered a strong performance in the second quarter. I'm pleased with the execution by our team as we continue to bring industry-leading solutions to the market. This summer marks our second anniversary as a public company, and I'm proud of achievements we made.

Recently, Talend was named a leader in the Forrester Wave for big data fabric, earning the highest score of any vendor in both the current offering and strategy categories. We had a very strong showing in this report, earning the highest possible scores, five out five, in six of the 12 subcategories evaluated by Forrester Research, including vision, ability to execute and professional services. And more recently, for the third consecutive time, we secured our position as a leader in the 2018 Gartner Magic Quadrant for data integration tools, which acknowledges our completeness of vision and ability to execute. Gartner and Forrester are two of the largest independent analyst firms in the world and both continue to recognize Talend as a leader.

For Talend we believe this is a very strong validation of our market approach and focus. This is another year where we are seeing the incumbents fade in the reports and Talend becoming stronger. Talend has a clear advantage for where the market is going in modern-cloud scenarios. We view these accolades as validation of the technology and market progress we've made as the world transitions to next generation data platforms.

With that, Ram and I would be happy to take your questions. Operator?

Questions and Answers:

Operator

[Operator instructions] We'll take our first question from Bhavan Suri with William Blair & Company.

Bhavan Suri -- William Blair & Company -- Analyst

Hey, guys. Thanks for taking my question. Congrats, especially on the enterprise business. I guess, Mike, just starting off on the enterprise business.

You've seen some really solid strength there now for a few quarters, and you've talked a little bit in the past about segmenting sort of the base there, or the sales force to really focus on enterprise. Just some update on the progress there. Is that what's driving some of the enterprise activity you've seen and sort of -- just -- how is that compared to your broader efforts, the whole sales force vis-a-vis this enterprise focus?

Mike Tuchen -- Chief Executive Officer

Yes. Bhavan, it's a great question. We are continuing the same approach that we talked about in Q1. So it's -- going into 2018, we expanded the number of the Enterprise segment team, and I think we more or less doubled it from last year.

And we haven't done anything different in Q2 relative to Q1. But that really reflects our offering continuing to become more and more Enterprise capable, and more and more the de facto choice for large companies looking at modernizing their infrastructure and making next generation bets. And we're saying, on that note, a lot of exciting momentum on our cloud business in the enterprise, and I think we'll be talking about that a lot more in the coming quarters.

Bhavan Suri -- William Blair & Company -- Analyst

Thanks, Mike. And then I guess when I look at the cloud business vis-a-vis the sort of on-prem data lake or big data business, you sort of had a shift there and you've sort of seen growth reaccelerate or be really solid in sort of the cloud-based business, but less so in sort of the on-premise [Inaudible] side of the house. Just -- what are the puts and takes and sort of when you look at that business, it sort of decel-ed -- the combined business, and reaccelerated and sort of bouncing around. How should we think about puts and takes and what that might look like for the rest of the year?

Mike Tuchen -- Chief Executive Officer

It really is reflecting, as you stated, differential growth rates between what's going on in premise Hadoop versus what's going on in the cloud, and the cloud is just exploding. I mean, it's really the bullet train right now. And it's actually, believe it or not, cloud is accelerating quarter on quarter to some really eye-popping numbers. So we're seeing the on-premise Hadoop, I think gradually decelerating down versus last year.

I'd say right now, year to date, probably consistent with what you're seeing from the other players there, sub-30% growth in terms of sales and it will bounce around from one quarter to the next, but I think year to date, that's what we're seeing. Of course, cloud is actually accelerating and you know our current expectation is that cloud becomes the biggest single segment of our business by the middle or so of next year, and it may become as much as half of our business by the end of next year. And so it is a really, really exciting transformation for us right now.

Bhavan Suri -- William Blair & Company -- Analyst

Got it. That’s helpful. Thanks for taking my questions, guys. Appreciate it and nice job.

Mike Tuchen -- Chief Executive Officer

OK. Thanks, Bhavan.

Operator

We'll go next to Jesse Hulsing with Goldman Sachs.

Jesse Hulsing -- Goldman Sachs -- Analyst

Yes, thanks for taking my question. Mike, how do the deal sizes compare in a typical cloud deal versus an on-prem deal? Is it similar more or less, just curious there.

Mike Tuchen -- Chief Executive Officer

So for apples-to-apples, the cloud deals are relatively similar to on-prem and actually interestingly a notch higher on an apples-to-apples basis. We're still -- when you look at the -- across the entire product line, we're just now getting the full scope of the business into the cloud. And so historically, the -- we haven't been selling the full product line in the cloud , only some of the smallest SKUs. So -- but when you compare those SKUs to their on-prem equivalents, we're actually selling at slightly higher ASPs in the cloud.

And what's really happening now, in Q2, was we've seen a really rotation upwards as we're selling larger and larger deals in the cloud. And that was what I -- I was kind of hinting out a moment ago. I'd say, let's keep talking about it over the next couple of quarters. Assuming that trend continues, it's a really exciting part of our business right now.

Jesse Hulsing -- Goldman Sachs -- Analyst

And if I look at cash flow billings, I know you guys of deemphasize that metric but to kind of clean up some of the currency headwind stuff, if I look at cash flow billings, growth accelerated versus the first quarter and seasonally it was quite a bit stronger than last year. Is that just cloud momentum or are you starting to see some of those reps in Europe that you hired at the end of last year start to ramp?

Mike Tuchen -- Chief Executive Officer

So clearly, Europe was a -- an out-of-the-park success for us. And we talked a lot in the second half of last year about the attrition that we saw, and how we we're rehiring and waiting for those reps to ramp and so on and so forth. And it's -- I'd say it's gone as well or better than we could've hoped. The team is absolutely kicking butt right now, you saw in the report, Europe grew 39% year on year and clearly firing on all cylinders.

So yes, that European hiring retention ramp went incredibly well. And we also, for what it's worth, brought in a new overall European sales leader, and that person has been extremely enthusiastically received. And we couldn't be more excited to have him on board.

Jesse Hulsing -- Goldman Sachs -- Analyst

Great. Thank you.

Mike Tuchen -- Chief Executive Officer

Thanks, Jesse.

Operator

We'll go next to Raimo Lenschow with Barclays.

Raimo Lenschow -- Barclays Capital -- Analyst

Hey, thanks for taking my question – questions. Mike, can you talk a little bit -- if you talk cloud, you mentioned Snowflake a couple of times. What's sort of projects are you seeing there that you guys getting pulled into? Or is it like sitting on top of a data lake and tried to pull data out? Or what are you actually doing there?

Mike Tuchen -- Chief Executive Officer

So Snowflake is doing a number of things. And so as we're working with them on some of their bigger and more complex kind of customers, what we're seeing them do is being a -- probably at this point, one of the most capable cloud data warehouses in the world. And so someone who's looking at moving from an Oracle or a Teradata -- a premise data warehouse to a cloud data warehouse or even just augmenting one, Snowflake is a really interesting choice for that. We do see them in addition as a kind of the relational adjunct to a data lake scenario.

Most data lakes have both a unstructured kind of file system storage -- in Amazon, that would be S3, as well as relational capabilities. They can easily be, and have been in some of the deals, the relational capability in a data lake scenario. But what I would say is that the way we think about them is -- as really one of the most highest performance relational engines right now in the cloud.

Raimo Lenschow -- Barclays Capital -- Analyst

And what I was trying to get to Mike, so -- what are you doing as part of these projects? Like is it kind data ingestion into them? Or how do I have to think about you in this new world?

Mike Tuchen -- Chief Executive Officer

Yes, I mean, anything to do with data ingestion, data integration is a problem that we'll solve. And typically, if you're building a large data lake or data warehouse, either one, you've got to take data from a number of different sources and clean it up and blend it together, and then put it into either the refined part of your data lake, or into a relational engine, like Snowflake, for downstream analytics. And so that's the part of the problem that we solve. And it really is -- whether we're working with a Snowflake or a Redshift, or Google BigQuery, or an Azure SQL data warehouse, the problem that we solves ends up being really, really similar across all of them.

Raimo Lenschow -- Barclays Capital -- Analyst

OK, that helps. And like one last question for me is like -- I guess you went kind of down that path a little bit on the billing side. So like obviously you tell us not to use it, obviously, we have some big FX moves that kind of hurt you. And you went -- commented around your performance around Europe being strong, in Asia, it's -- from your -- how has the U.S.

done that respect like? So overall would this kind of been a very good quarter, because I don't look at the billings growth. I can -- there were some questions [Inaudible] on the back of that one.

Mike Tuchen -- Chief Executive Officer

Yes, so our overall revenue growth in the quarter was 39%. APAC grew over 100% as we mentioned, and Europe grew 39%. And so therefore, mathematically the U.S. grew slower than it grew 31%, I believe was the number.

And really what's going on in the U.S. is exactly that rotation that we talked about from premise, big data to the cloud, and the U.S. got much more tied to the premise big data business back in years past. And so they have a bigger rotation to do than the rest of the world.

The rest of the world never really did really as much premise big data, so they're able to do more or less a rotation to the cloud as an incremental thing, whereas in the U.S., we're substituting from one to the other. And so that right now is -- as we're going through that transition, the U.S. is most impacted from the shift away from premise big data.

Raimo Lenschow -- Barclays Capital -- Analyst

Got it. That’s helpful. Thank you.

Mike Tuchen -- Chief Executive Officer

Thanks, Raimo.

Operator

We'll go next to Tyler Radke with Citi.

Tyler Radke -- Citi -- Analyst

Hey, Mike, a question just to follow-up on the last point. You said in the U.S. it's -- it's kind of substitution from premise big data to the cloud. And guess I'm just trying to understand, if I look at that big data versus cloud business broadly as the whole company.

Do you see that business, if you were to combine the two, decelerating, accelerating in the next two quarters? I'm just trying to understand how big of a headwind the big data is in terms of that combined bucket?

Mike Tuchen -- Chief Executive Officer

Yes, it's a great question. We haven't actually done the math. I'd say right now, cloud is still smaller than big data but growing not only at a crazy pace, but quite a bit faster than the big data stuff ever grew back in its early days. And so when we look forward, the one progression that we have done, or the one projection that we've done is that cloud becomes our single biggest segment around about the middle of next year, on the path of being half of our sales in -- by the end of next year.

So that's kind of the forward look that we've done. I've not trying to build out -- and that's on a sales perspective. We've not tried to build out a revenue based view of it because that's the trailing measure. We can do that, it's a new question, but I don't have that at our fingertips right now.

Tyler Radke -- Citi -- Analyst

So I guess, from a new sales or bookings perspective, next year when cloud is the biggest piece, would you expect -- I guess are you anticipating that the big data continues to slow, and where do you think it slows down to? Does it start to decline or does it just level off at maybe a high single digit, double-digit growth rate?

Mike Tuchen -- Chief Executive Officer

For triangulation purposes, for us internally, here are our planning assumptions. 2016 for us, big data grew over 100%, on a stand-alone basis. And so I'll talk about our breakout big data on a stand-alone basis for just a moment. It grew over 100% in '16.

It grew roughly 50% in '17 and right now, I'd say it's growing sub-30s year to date, and it probably continues roughly on that path for the 2018, for the rest of the year. On that trajectory, if you kind of walk you through, I expect big data is going to be -- if it cracks double-digit growth, that would probably be a good thing. If it's flat, that's probably a baseline assumption for us right now. So anything that grows, that it been growing above flat is good news for us.

And next year is really all about cloud growth is what's going to drive the top line.

Tyler Radke -- Citi -- Analyst

Got it. And do you think the top line, given the strong growth in big data, you should see kind of top line growth rates better than where things are now, given the mix shift?

Mike Tuchen -- Chief Executive Officer

I'd say -- I'm not in a position to be giving guidance for 2019 right now. But I'd say we'll give guidance for that by the end of the year. And I do like what we've set up for cloud growth for next year, let's put it that way.

Tyler Radke -- Citi -- Analyst

OK, fair enough. Just lastly, on a clarification question on Europe. Ram described strong performance in Europe. And I guess if I look at the revenue, it looked like it might have decelerated from Q1 and possibly that's currency.

But with the comment on a strong performance, was that related to bookings, or was that a revenue comment? Because it looked like it decelerated from the Q1 growth rate.

Mike Tuchen -- Chief Executive Officer

On a bookings basis, it definitely accelerated. What'd it do on a revenue basis?

Ram Bartov -- Interim Chief Financial Officer

It did slightly...

Mike Tuchen -- Chief Executive Officer

Oh, it's because of the delayed -- OK. There is a kind of a quirk of the IFRS accounting thing that caused a one-time small bump in Q1 that obviously didn't recur in Q2. On a bookings basis, we've seen continuous acceleration in Europe over the last several quarters is that sales team got fully hired and got productive.

Tyler Radke -- Citi -- Analyst

OK, great. Appreciate all the colors. Thank you.

Mike Tuchen -- Chief Executive Officer

Yes.

Operator

We'll go next to Jack Andrews with Needham.

Jack Andrews -- Needham & Company -- Analyst

Thanks, good afternoon. Mike, I want to follow up on your comments in the prepared remarks about you mentioned something along the lines of having, you felt, an exceptional competitive position in the cloud. But I was just wondering if you could draw out a bit more what -- how do you see the landscape in the cloud that is -- competitively that is perhaps different than the on-premise world?

Mike Tuchen -- Chief Executive Officer

Well what's happening right now is in the cloud, for complex cloud scenarios, there really are only two players that matter. It's us and Informatica. And Informatica has an architectural challenge, drag around this proprietary runtime and the business model challenge that goes along with that. And so really any high-volume, real-time advanced analytics kind of scenarios, data lake kind of scenarios, self-service kind of scenarios, we bring really strong competitive advantage.

And so -- that's -- just given that those scenarios that I just described are really the next generation scenarios that's representative of a lot of the demand today and even more of it tomorrow, we really like that setup.

Jack Andrews -- Needham & Company -- Analyst

That's great. And then just as a follow-up. Is there any update you can provide in terms of perhaps some -- how some of the products you launched at Talend Connect are doing so far?

Mike Tuchen -- Chief Executive Officer

Yes, I'd say given that -- in Talend Connect, we pretty much talked exclusively about cloud, and the cloud business is not only exploding but even accelerating quarter on quarter, I'd say they're doing pretty well. They were -- we were -- and what we announced were really by-and-large updates to existing products that we were -- paying products. We have some products in beta that aren't yet being charged for. But in terms of the rest of what we're talking about, there are updates to our existing products.

And so I'd say the uptick in growth and the momentum of that really demonstrates that being well received by the market.

Jack Andrews -- Needham & Company -- Analyst

Great. Well, thanks for taking my questions.

Mike Tuchen -- Chief Executive Officer

You bet. Thank you.

Operator

[Operator instructions] We'll go next to Mark Murphy with JPMorgan.

Matt Coss -- J.P. Morgan -- Analyst

Hi, good afternoon. This is Matt Coss on for Mark Murphy. Are you able to share the duration for renewal bookings and then also the blended duration for the new and renewal bookings?

Mike Tuchen -- Chief Executive Officer

I think we have shared that in the past, do you have it off hand?

Ram Bartov -- Interim Chief Financial Officer

Yes. It's, it's 1.09. It's the same as our prepaid earnings.

Mike Tuchen -- Chief Executive Officer

So it's the same, the blended average and the individual for renewals is the same...

Ram Bartov -- Interim Chief Financial Officer

Is the same as the prepaid duration.

Mike Tuchen -- Chief Executive Officer

At 1.09. Yes, there you go.

Matt Coss -- J.P. Morgan -- Analyst

OK, got it. That's helpful. And then can you give us a sense of the sort of the non-Cloud, non big data revenue growth rates? And then any critical inputs that we should inform our thinking about regarding that side of the business?

Mike Tuchen -- Chief Executive Officer

I don't have that at my fingertips. I think it's -- at this point it's relatively flat. If our overall growth rate was 39% and we told you that half of business is big data and cloud, and that's going a 69%, you can do some math and come to the conclusion that roughly about 34.5% of the 39% growth came from big data and cloud. And so the other 4.5% growth came from everything else.

And that's just math in my head, that you can do from the other numbers that we released. And so I think -- but I think it also does answer your question.

Matt Coss -- J.P. Morgan -- Analyst

And yes, sure, that's helpful. And then it looks like the pace of sales hiring, the number of people in sales and marketing you hired accelerated quarter over quarter. And year over year a little bit -- are you accelerating hiring at this point or just opportunistically adding where you can? What does sales hiring look like for the rest of the year?

Mike Tuchen -- Chief Executive Officer

So we are right now in Q2, it was a business-as-usual quarter for us. In general, most of the hiring happens in the first half. And then Q3 is relatively quiet, typically from a sales hiring perspective, and then in Q4, you really start stepping on it again, building into the following year. And so built into our guidance is an expectation that we're now starting to step on it again in the back half of this year in preparation for 2019.

But I would say that the -- the pace of sales hiring that you saw in Q2 was our -- just standard operating plan. There was really nothing unusual about it.

Matt Coss -- J.P. Morgan -- Analyst

All right. Thank you, Mike.

Mike Tuchen -- Chief Executive Officer

Yes, you bet.

Operator

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

Clarke Jeffries -- KeyBanc Capital Markets -- Analyst

Hi, this is Clarke Jeffries on for Brent. Mike, just on your comments on how large the cloud business could be for next year, correct me if I'm wrong, but I think previously you talked about that as being a deployment choice. Customers are using the SaaS solution compared to the on-premise solution. And that comparison being primarily the data integration or is there a comparable big data platform on premise.

When you talk about that number of potentially 50% next year, is that inclusive of things like data streams in all SaaS-based products, in which case migrating SaaS-based -- or migrating current solutions to SaaS could be kind of a tailwind for that number?

Mike Tuchen -- Chief Executive Officer

Yes. So what we're thinking of is all SaaS-based offerings. So anything where the customer is buying some aspect of Talend Cloud. And so it would absolutely include data streams, it would include the cloud addition of the big data offering or any of the other offerings that we have.

And so -- yes, sure, if -- I was thinking about it in terms of new sales in particular, was kind of the prediction that we're doing, if a customer were to take their existing renewal from a premise solution, and renew it into a cloud solution, that would be sort of outside the numbers, not even a tailwind. It's sort of outside the number of the forecast that we gave. It would be nice to see but it's not something that we're currently predicting right now.

Clarke Jeffries -- KeyBanc Capital Markets -- Analyst

All right. And then any initial expectations for kind of what that duration of that business would look like? I mean, sort of implications for free cash flow?

Mike Tuchen -- Chief Executive Officer

I think right now durations are relatively stable at that somewhere between 1.0 and 1.1. The one thing that may end up being a somewhat further headwind to that in the coming years, is the advent of more flexible billing terms, whether it be monthly or purely hourly pay as you go. And so I say stay tuned on that as we -- as we see more of that in the mix, we'll see what the overall impact is. But our assumptions are right now that we're going to probably stay overall in that 1.0 to 1.1 range is my guess.

Clarke Jeffries -- KeyBanc Capital Markets -- Analyst

All right. Great. Thank you very much.

Mike Tuchen -- Chief Executive Officer

You bet.

Operator

And with no further questions in the queue, I would like to turn the call back over to management for any additional or closing remarks.

Mike Tuchen -- Chief Executive Officer

Yes, super. Well thank you, guys, and we look forward to talking more soon.

Operator

[Operator signoff]

Duration: 61 minutes

Call Participants:

Lisa Laukkanen -- Investor Relations

Mike Tuchen -- Chief Executive Officer

Ram Bartov -- Interim Chief Financial Officer

Bhavan Suri -- William Blair & Company -- Analyst

Jesse Hulsing -- Goldman Sachs -- Analyst

Raimo Lenschow -- Barclays Capital -- Analyst

Tyler Radke -- Citi -- Analyst

Jack Andrews -- Needham & Company -- Analyst

Matt Coss -- J.P. Morgan -- Analyst

Clarke Jeffries -- KeyBanc Capital Markets -- Analyst

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