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Talend S.A. (NASDAQ:TLND)
Q2 2020 Earnings Call
Aug 7, 2020, 8:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

[Operator Instructions] Good day and welcome to Talend Second Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Lauren Sloane. Please go ahead ma'am.

Lauren Sloane -- Primary IR Contact

Thank you. This is Lauren Sloane, Investor Relations for Talend and I'm pleased to welcome you to Talend Second Quarter Fiscal Year 2020 Conference Call. With me on the call today is Talend CEO, Christal Bemont and CFO, Adam Meister. During the course of today's presentation, our executives will make forward-looking statements with the meaning of federal securities laws. Forward-looking statements generally relate to future events or future financial and 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 in this presentation include but are not limited to, statements related to our business and financial performance and expectations and guidance for future periods, our expectations regarding our strategic product initiative and the related benefits, and our expectations that are in the market, including impact of the COVID-19 pandemic. Our expectations and beliefs regarding these matters may not materialize in 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 were issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of 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, other than revenue or 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 not intended to be considered in isolation or in substitute for results prepared in accordance with GAAP. We have provided a reconciliation of these non-GAAP financial measures to the most direct 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 on selection or use of technologies products, services, or vendors. With that, let me turn the call over to Christal Bemont, Talend's CEO.

Christal Bemont -- Chief Executive Officer

Thank you, Lauren. Welcome to our Q2 2020 earnings call. We hope you're all safe and well. We, like many of you, are now in our fifth month of working remotely, and I'm so grateful for our team and how they've not only adapted but excelled in these unprecedented times. We are pleased to report strong results despite the ongoing uncertainty caused by COVID-19. We continue to work closely with our customers that have to meet market challenges. Many have resulted in digital transformation initiative and in turn feeling the move to the cloud. Talend has especially been meaningful during this time as data transformation is key to a digital transformation. Talend provides solutions that facilitate a real-time delivery of trusted data, enabling our customers to effectively reinstrument their business and make critical business decisions with confidence. Let me walk you through some of the key highlights for the quarter before providing an update on the strategic priorities we laid out last quarter. Our success in Q2 was driven by our cloud growth engine and the early benefits derived from our ongoing strategic initiatives. We achieved total revenue of $67.7 million.

We ended the quarter with $255.9 million in total ARR, which was up 19% on a constant currency basis. Cloud ARR now stands at $75 million, up 130% on a constant currency basis. And we now have over 2800 cloud customers, let me take a moment to further drill in on cloud. We are seeing strength in the addition of new enterprise customer logos such as Subaru, Info Group, Scotiabank, and Energy Australia. We also continue to see growth within accounts with companies such as Bayer converting on-premise license to cloud. At the same time a significant part of our Q2 cloud success is the growth from our high volume business driven by Stitch, and last cloud migrations were strong at $45.7 million. We see migrations as a validation of our vision for the future in cloud, and a reaffirmation of confidence in the partnership with Talend, increasingly customers and prospects do recognize the superior value proposition of cloud as witnessed by the strength in both net new, as well as client expansions and migration. Our on-premise business remains an important asset. It represents a key source of future cloud customers as well as current revenue, and the stability of the business is indicative of the value and support we continue to deliver to our customers, as I discussed on our last call improvement in our go-to-market strategy, and building a world-class go-to market organization that will deliver sustainable long-term growth is one of my key priorities.

Earlier this year we began to work to enhance our go-to-market strategy focused on the efficiencies and the effectiveness of our team. As a result in Q2, we found improvements in a number of areas including an increase in early quarter linearity, an increase in the velocity of deals we closed, and also an increase in the percentage of deal sourced and closed within the quarter. Further fueling our momentum, Talend marketing has transformed our brand identity, and is increasing awareness for Talend as a strategic business partner. With new positioning aligned to meaningful business outcomes, and a unique value proposition centered on the delivery of trusted data. We are cutting through the market clutter with a message that is resonating for companies of all sizes and across all industries. We have also significantly ramped our overall demand program, including our digital demand initiatives that are helping us drive pipeline, and efficiently attract and nurture prospects at scale. In tandem with marketing initiatives, we also continue to demonstrate our customer first approach in mentality. In Q2 our customer success team worked to improve the overall experience for both new and existing Talend customers. This includes the launch of an enhanced community platform, and the migration of 25,000 members.

The action brings together community members and customers on a single platform for the first time, which will help simplify engagements and enables us to scale far more easily in the future. In addition to leveraging our broad community, we have also streamlined and enhanced our enterprise grade success offerings with enhanced training, technical support, and access to Talend best practices. We are working to help our customers implement Talend faster, drive increased kind of value, and also increasing the number of skilled Talend experts in the field. I believe our customer first focuses at Talend as a strategic business partner to our customers and is a critical mentality required to create a world-class go-to-market organization and grow awareness of Talend in the market. With these initial changes to our go-to-market strategy in place and as we start to see results. We will continue to refine our strategy to enhance the refine our strategy to enhance sales efficiencies to capitalize on the cloud opportunity in front of us. Now, let me share with you some customer proof points from Q2. Imperfect Foods, a fresh produce and grocery delivery service in the U.S. is a new cloud logo in Q2 that demonstrates our ability to land rapidly and grow with the customers, as their needs evolve.

The company evaluated five trended five [Indecipherable] before ultimately selecting Talend to ingest data from a variety of sources into Google BigQuery. They initially signed up as a Stitch pay-as-you-go customer but moved to Stitch Enterprise in under two weeks to meet the significant spike in demand of services due to COVID-19. With the move, the company is able to seamlessly scale its operations and process more data to better understand and meet customer needs. Another great new cloud logo win for us last quarter was with NHS Digital, the national provider of information, data and IT systems for health and social care in England. NHS Digital will implement a new strategic platform that includes Talend, Databricks, and AWS replacing its legacy environment. The use of Talend will help to ensure NHS Digital can on-board datasets quickly and make available trend governed data for analytics and reporting. Next is Energy Australia, one of the leading gas and electric suppliers in Australia, which is another new logo for us in Q2. The utility company evaluated solutions from Oracle and Neosoft and selected Talend because we provide greater automation support, faster data processing time, and self-service capabilities. Working with Deloitte, Energy Australia will use Talend with AWS to automatically collect vast amounts of smart meter data in far shorter intervals to meet the new regulatory requirement. The company will also use Talend with Snowflake to run churn analysis and less offer type recommendations to retain and grow customer base. And evident from our customer wins in Q2, we continue to strengthen our relationships with ecosystem partners, which is helping to fuel our overall cloud transition. Further to this, Talend's achieved elite status in the Snowflake partner network in Q2, an accomplishment to demonstrate to Snowflake customers that Talend delivers optimal performance and works seamlessly with the cloud data platform. I'm pleased to report that Talend was recognized as a leader in the Forrester Wave Enterprise Data Fabric evaluation.

Talend received the highest scores of any vendor in the report current offering category and for key capabilities, including data quality, lineage, and catalog. We believe the recognition and high scores validate our market vision and ability to deliver for customers today. Talend believes the customers are choosing its Data Fabric solution because it helps address all of their digital programs including cloud data warehousing, advanced analytics, customer 360 and customer experience initiatives. Companies also select Talend Data Fabric knowing that whatever they develop, we will be able to take advantage of the latest cloud innovation. I'm also pleased to announce that last week Talend was also recognized by Gartner as a leader in the Magic Quadrant for Data Quality. As data quality is quickly becoming the linchpin of data management, we are very proud to be identified as a leader for the third year in a row. This year's Magic Quadrant research indicates that data quality shouldn't be designed as a stand-alone solution. Instead, data quality is a core discipline within Data Management.

We could not agree more with this analysis. Within our Talend Data Fabric, data quality is delivered as a pervasive capability that spans across our platform. We believe being recognized as a leader not only highlights our capacity to build a vision for data quality, but also validates our ability to help organizations succeed in their digital transformation journey. Introduced on our last earnings call, I talked about the automatic trust scores we brought to the market in the winter release of Talend Data Fabric. We believe Talend Trust Score is an important breakthrough. As mentioned, data is at the heart of digital transformation and technology such as IoT, machine learning and precision analytics are vital to the company's long-term viability. Yet as important as data is, until now there hasn't been an easy way to verify the data powering decision. Talend Trust Score begins to fill this blind spot giving users an at-a-glance view of the trustworthiness of any data set and a way the resolve problems that may exist. The Talend Trust Score extends the value we offer to our customers and enables us to play, an even more critical role as a strategic business partner to their business. We believe there is an opportunity to continue to expand the capabilities of the Talend Trust Score and develop new industry standards for how individuals and companies measure the overall health and performance of company data. Expect to hear more about this in future calls. As we look to the second half of the year, we will continue to focus on our cloud strategy which we firmly believe present Talend the best opportunity to create long-term sustainable growth.

Talend Cloud is the future, and we expect to see continued momentum and validation of our cloud strategy. With our relentless commitment to our strategic initiatives, along with the significant opportunity in cloud, we are pleased to reintroduce our pre-COVID target we provided at the beginning of the year to achieve $100 million in cloud ARR by the end of this year. We believe in the value Talend provides to our customers, now, more than ever. And I am proud of all of what we have accomplished. While I have just hit on the number of points regarding our strategy, performance in go-to market, this only scratches the surface of Talend's exciting cloud future. As Adam will discuss, we will hold an Investor Day in November, during which will be able to explore each of these topics in more depth. I'll conclude by thanking our employees, customers, and partners. And with that, I'll turn the call over to Adam.

Adam Meister -- Chief Financial Officer

I'll echo Christal's thanks to our employees and appreciation for how quickly they have adapted to this environment. We're pleased with our performance in Q2 and delivered solid results in the face of COVID headwinds. And I'll walk you through the details for the quarter. We provide an update on our outlook for the remainder of 2020. We ended the quarter with record cloud ARR $75 million representing 130% year-over-year constant currency growth. The sequential growth from $61.1 million at the end of Q1 was driven by the addition of over 300 new logos, strong net expansion of existing customers and $5.7 million of premise to cloud migration in the quarter. Migrations in Q2 benefited for a few large customers moving faster than anticipated. We now have over 2800 cloud customers. Total ARR grew to $255.9 million at the end of Q2 at 19% year-over-year on a constant currency basis. Total revenues for the second quarter was $67.7 million, up 12% year-over-year and above the high end of our guidance range. Subscription revenue for the second quarter was $60.9 million at 16% year-on-year, 17% on constant currency basis. We continue to see success with larger deals to enterprise customers. We ended the quarter with 614 customers at 100,000 or more of ARR.

These customers represent 66% of ARR as of the end of Q2. As Christal mentioned, we also saw solid performance in our volume business with bookings up significantly quarter-over-quarter due to a greater emphasis on driving velocity and shortening deal cycles. The success in both ends of the business is a positive early indicator of the precision that [Indecipherable] is instilling in outgoing market motion. Our results were particularly pleasing considering headwind at the current environment. As we expected going into the quarter, we did see an impact overall demand and new deal generation in the quarter, particularly in travel, retail, and energy. We've adapted our demand generation strategy in response and this remains a focus for us when we enter the second half of the year. We will appropriately conservative on our planning for Q2 on downtime and production efficiency as well. Also slightly below long term averages, but better than our expectation going into Q2. We believe with the current macro environment, we continue to put pressure on renewals and expansions this year that may affect retention rates. For the quarter ended June 30, our dollar based net expansion rate was 110% in constant currency. Professional services revenue was $6.9 million in the second quarter.

This is above our expectations as the team quickly adapted to deliver services and implementations remotely. Before I move 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 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 second quarter, total gross margin was 80% and subscription gross margin remained at 87%. We expect a modest impact of subscription gross margin as we continue scaling our cloud operations. Professional services gross margin was 15% this quarter. We incurred an operating loss for the quarter of $7 million or 10% compared to an operating loss of $6.3 million or 10% in the second quarter of 2019. Stronger top line performance and careful expense management through the quarter benefited operating loss versus our guidance. Free cash flow for the quarter was negative $15.8 million. Cash and cash equivalents ended at $165 million as of June 30, 2020. As I noted in our last earnings call, Q2 and Q3 will account for most of the expected cash during this year. Q2 will be the trough in free cash flow, assuming current business conditions continue. We are pleased with our performance this quarter. However, we continue to operate in an uncertain environment. We continue to closely monitor leading indicators across our pipeline generation, deal cycles, renewals and receivables to inform our forecast. We do expect COVID will pressure IT spending through the remainder of the year. We are managing our expenses in light of the current environment, but we'll continue to invest in the business where we believe there is an opportunity to grow our market share and scale efficiency.

Our outlook for Q3, reflects these factors, assumes current business conditions and foreign exchange rates as of July 31, 2020. For the third quarter of 2020 total revenue is expected to be in the range of $69.2 million to $70.2 million. Non-GAAP loss from operations is expected to be in the range of $11.6 million to $10.6 million. Non-GAAP net loss is expected to be in the range of $12.4 million to $11.4 million. Non-GAAP net loss per share is expected to be in the range of $0.39 to $0.36 cents. This is based on a basic and diluted weighted average share count of 31.7 million shares. With the greater visibility we gained over the last quarter, we are also pleased to reinstate our full year guidance. Total revenue is now expected to be in the range of $277.5 million to $279.5 million. Non-GAAP loss from operations is expected to be in the range of $36 million to $34 million. Non-GAAP net loss is expected to be in the range of $38 million to $36 million. Non-GAAP net loss per share is expected to be in the range of $1.20 to $1.13. This is based on a basic and diluted weighted average share count of 31.6 million shares. Free cash flow is expected to be in the range of negative $37 million to negative $32 million narrowing our prior guidance and reflecting our strong Q2 top line performance. We are also recommitting to our guidance in reaching $100 million of cloud ARR by the end of 2020.

We believe that approximately $15 million of net new cloud ARR for the year will come from migration. We'll continue to report our progress quarterly again, Fiscal. The recent move in FX rate positively impacts our full year guidance by approximately $3 million, offset headwind associated with COVID. You can see that from our reinstated FY 20 guidance which is above our original guidance. Though the COVID impact has been modest to our results, and our cloud business continues to perform very well. As Christal mentioned, we will be hosting a virtual Investor Day on November 18 to provide a deep review on our product strategy, go-to-market initiatives, longer-term financial targets and our overall outlook for the business. We look forward to sharing our vision for the future with you. There's a massive cloud opportunity in front of Talend and the ongoing macroeconomic uncertainty underscores the importance of every business in place in real time trusted data at the center of critical business decisions. We believe our continued momentum validates our cloud strategy and the operational changes we've implemented over the first half of the year. We will continue to invest responsibly in our go-to-market initiatives, product innovation, and our operations to capture our sized share of the cloud opportunity. Continuing to drive this strategy is what we truly believe will drive a long-term sustainable growth for Talend. With that, we'll open the call to questions, operator.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Sorry about that, and we'll go ahead and take our first question from Bhavan Suri with William Blair. Please go ahead.

Bhavanmit Singh Suri -- William Blair -- Analyst

Thanks for taking my question and nice job there, especially with the cloud ARR. Almost 30% of revs or the ARR versus 15% a year, that's pretty significant jump, so that's great to see. I guess maybe the first question for Christal, just as you think about your initiatives coming in. And you haven't talked about that the go-to-market the ability to build trust and the governance of data. And I think about North America and EMEA just got to get some color how is that trending vis-a-vis expectations? It's obviously going well, as you think about where you are, is there more you can do more things that you could do, more knobs maybe you can turn here to drive and accelerate that? Are we still early or is this exactly what you thought it would be. [Indecipherable], and then I've got a quick follow-up.

Christal Bemont -- Chief Executive Officer

Well, first I'd say while it's an amazing quarter from our account with COVID and the navigation of what we knew with uncertain times, so the team did an amazing job with that and navigated the strategic initiatives very well. Specifically, to your question, we we're early and we're going to continue to see compounded improvements that will continue throughout the rest of this year and we'll continue to see it next year into 2021 as well. So I think in many of the categories that I just talked about, you'll start to see that show up even stronger. And so I think there are more knobs certainly to turn and in the November 18 that we talked about at the Investor Day, we'll really lay out and frame for you how we see 2021 in our strategy, which we can go into a little bit more detail there.

Bhavanmit Singh Suri -- William Blair -- Analyst

Got it. Got it. And then maybe to you or for Adam, just put some numbers, if you can around the Snowflake partnership maybe not in dollars, in a number of deals or something on those lines. And then how should we think about the incremental contribution to growth from that partnership. I guess, given your drive to add partners, now with respect to similar announcement, but how should we think about the Snowflake partnership and partnerships in general in terms of the drive and their competition growth? Thank you.

Christal Bemont -- Chief Executive Officer

Yeah. I'll take that one. The partners that we have in our ecosystem are massively important to us. We have 600 joint customers with Snowflake and we see it as a material part of every quarter, and we would continue to see that well into the future. And I think it's going to play a really important role as you know, all of our partners do, it's critical and it will continue to grow.

Bhavanmit Singh Suri -- William Blair -- Analyst

Got it. Thank you for taking my questions and thanks, guys.

Christal Bemont -- Chief Executive Officer

Thank you.

Operator

Thank you. Go ahead Andy. Our next question from Raimo Lenschow with Barclays. Please go ahead.

Raimo Lenschow -- Barclays Bank -- Analyst

Hey, thank you. Congrats from me as well. Two quick questions. So first Christal, the main change to the sales force was to kind of move toward more solution selling rather than just being product-driven organization like what's the progress you've seen so far since you started that initiative?

Christal Bemont -- Chief Executive Officer

Hello, we are seeing a great deal of progress from the work that interests of doing. I think it's a combination of a few things. So it's working really closely and being coupled with our marketing strategy and the conversations that we're bringing to the market that really expand the value and how we show up to think about, the role that we play in our customers' outcomes of data, not just the delivery of data to and from and the oversight and governance but the ability for us to really demonstrate in not only our messaging but then in our sales cycles. The role that we play that goes beyond just the integration fees and so it's it's an evolution of that messaging and bringing that to the field and I think where you will see that show up is in that Talend Trust Score is really the first opportunity that will seek to drive that home. So it's not only the execution that we are just talking about a moment ago but it's also that messaging that you're referring to that I think is really starting to land.

Raimo Lenschow -- Barclays Bank -- Analyst

Yeah. Okay, perfect. That's helpful. And then, so we are also tracking a little bit like cloud usage, cloud lock-ins, and what we saw this quarter for the first time or last month actually to be more precise like it's Stitch kind of being ahead of the other private cloud competitors. What are you seeing there in terms of like customers understanding your cloud message to how Stitch and kind of balance in together and hence the uptick and the competitive dynamic there?

Christal Bemont -- Chief Executive Officer

I'm so excited about Stitch. Stitch has been critical. It was one of the things when I walked in the door that I just thought the massive opportunity for us Raimo and I couldn't agree with you more is, you know, the opportunity that we have right now and how it's set up in Q2 was amazing and it really is driven in a really frictionless way, in some cases, we're off to really nice land and expand in other cases. And so it's a really big part of our future and I think we're really only getting started with what the potential is. It's something that a strong value proposition for us that allows us to really serve multiple news cases in multiple ends of the market.

Raimo Lenschow -- Barclays Bank -- Analyst

Okay, perfect. Thank you. Then, one last question, Adam, if you look at the cloud run rate and then the number you kind of guided for the year, is there anything in terms of the second half that would kind of slow you down on cloud that we need to be of like one of factors etc., would like renewals that are not happening or something to kind of give an offset to the overall underlying momentum? I'm just kind of looking at my Q2 number and then your full-year number and just thinking second half is durable really, but there might be some other factors in there?

Adam Meister -- Chief Financial Officer

Yeah, thanks Raimo. So just to reiterate, we're super pleased with the momentum on cloud. It's been an it's been tremendous to see the progress they have continued. The migration number, as I mentioned in my prepared comments, also very, very strong, the selection of the handful of customers actually moving faster than we even anticipated toward that $15 million goal for the year. And so, there's nothing we're seeing really in that in that piece of the business that's indicating an outsize headwind. COVID being the impact to business overall, of course, as you'd expect cloud has been relatively immune to it and so as we go into the back half of the year, we want to be prudent in terms of how we're thinking about planning, but we're really excited to continue to see the cloud business fire on all cylinders.

Raimo Lenschow -- Barclays Bank -- Analyst

Perfect. Well done. Congratulations.

Operator

We'll go ahead and take our next question from Tyler Radke with Citi. Please go ahead.

Tyler Maverick Radke -- Citigroup -- Analyst

Thanks, good afternoon, Adam and Christal. I wanted to ask you a couple of questions on the cloud. So I'm just curious where you're seeing the strongest demand in terms of used cases, mainly Snowflake, is it Redshift, Databricks, and then I'm sorry if I missed it Adam, did you kind of quantify the impact of conversions from on-premise to cloud ARR?

Adam Meister -- Chief Financial Officer

I'll take the last part of that first. Yeah, we had $5.7 million on from cloud migrations in Q2.

Christal Bemont -- Chief Executive Officer

Yeah, I'll address the first part. We're seeing it across all segments, all markets, at different ends of the spectrum in terms of segmentation as well as industries. So, cloud is digital transformation for sure is a big driver. But it's one of the things that I think is showing up the migrations that we just talked about and then net new business as well.

Tyler Maverick Radke -- Citigroup -- Analyst

Got it and Christal, I know one of the things that you talked about in terms of your initiatives as CEO with engaging potentially different users outside of your traditional data integration, or ETL folks and perhaps even expanding some of capabilities of data quality, and I'm looking at potentially different changes to pricing and packaging. I'm just curious, have you been able to kind of engage different folks in the organization yet? And what do you think we are in terms of potential changes to pricing or packaging?

Christal Bemont -- Chief Executive Officer

Yeah, it's a really good question. I would say we are on, in evolution of the conversations that we're having. You can probably hear even just be and see in our messaging that we believe through the customers that we have, in the partners that we have, the expanded value which is really the most important thing that we're going to focus on above and beyond anything else. Where can we add value to our customers in the outcomes that they're trying to achieve and we see that there is a gap right now and there's a missing component that has to do with the information being something that they can trust as we talked about Talend trust and the ability to have explainability, the ability for them to be able to fix it. But the ability for them to really think about the impact of lacking something beyond quality of data and what that means to a business. So this conversation is showing up not only in our product but our ability to have a conversation with multiple constituents across a company. So we're really pleased with where we're at with it right now. It will continue to evolve. But no matter what we do with anything with pricing or packaging, it will always start with how do we provide the most value we possibly can to impact the outcomes of our customers as it relates to data. And that's what we associate ourselves with as it relates to making sure that we have long-term sustainable growth in this business but that we really build a customer business. This is about building customers for life.

Tyler Maverick Radke -- Citigroup -- Analyst

Thank you, both.

Christal Bemont -- Chief Executive Officer

Thank you.

Operator

Thank you. We'll go ahead and take our next question from Jack Andrews with Needham. Please go ahead.

Jack Andrews -- Needham. -- Analyst

Good afternoon and congratulations on the results. I want to ask a little bit more on the cloud migration side of things. So it sounds like you outperformed on that metric in the quarter and you're sticking with your initial $15 million guide for the year, but could you just help us understand what's happening underneath the surface? Is this $15 million opportunity for 2020 really just organically happening with your customer base and their behavior or are you inserting your sales force to help push some customers along to cloud migration at this point?

Adam Meister -- Chief Financial Officer

Hey, Jack. I will take that one. So as we walk into this year, we're really early in the migration conversation with our customers. And over the last few quarters, now, we felt that we've got a much better degree of visibility and how to predict and how to help them along in that journey. It absolutely requires a conversation and I think our team is getting very sharp now on how to navigate those conversations with customers. I'll tie back to Christal's earlier answer around value proposition. Migrations are all about demonstrating to the customer what the incremental value is with the cloud. We have been laying out that path with them of where our product road map is really going and encouraging them to shift really from a position of strength. And so I think that you'll continue to see both our sales and support organizations involved in helping customers along that journey, but we'll get better at it, we'll get faster at it and we'll be able to do it in a more automated way over time. The number that we saw in Q2 was incredibly strong and as I mentioned, it was a handful of customers on the larger side that moved a little faster than we had even initially anticipated. We're really pleased to see that right now, we're having success in accounts of all size. Our migrations and that's a demonstration that this is really something that will be applicable to our entire premise base over time. I think that's a really important driver for our cloud over the next couple of years.

Jack Andrews -- Needham. -- Analyst

Great. Thanks for the color on that. And then this is follow-up question. Can I ask about how you're thinking about the prioritization of R&D between cloud, which seems to be, as Christal mentioned, in the future versus your existing on-premise products? Are you thinking about releasing maybe cloud-only features now as part of your future product releases that are essentially leading the way now?

Christal Bemont -- Chief Executive Officer

The cloud is our future for sure. Everything that we see in the direction of not just where we're headed, but all of the momentum that we've just expressed in this call already, the future's cloud. And so we are going to for sure place our bet there and it will be about making it as simple as possible for our customers to receive the value that we are just talking about.

Adam Meister -- Chief Financial Officer

And I'll add on there a couple of specifics maybe our API product capabilities are all in time with cloud-based inventory is a product that we released a couple of months, but we're very excited about it. That is entirely cloud based as well. We've really not just in this year, but last year and before I have shifted all of our new R&D efforts toward kind of the cloud native approach and so you'll continue to see us release new function capabilities that are around that are really designed for and only available in the cloud.

Jack Andrews -- Needham. -- Analyst

Great, thanks for taking my questions.

Operator

[Operator Closing Remarks]

Duration: 37 minutes

Call participants:

Lauren Sloane -- Primary IR Contact

Christal Bemont -- Chief Executive Officer

Adam Meister -- Chief Financial Officer

Bhavanmit Singh Suri -- William Blair -- Analyst

Raimo Lenschow -- Barclays Bank -- Analyst

Tyler Maverick Radke -- Citigroup -- Analyst

Jack Andrews -- Needham. -- Analyst

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