Talend (TLND) delivered first-quarter results last week that showed accelerating revenue growth. Even though operating results looked good, the stock has steadily declined since the release.
The digital world we live in produces a ton of data, which is doubling in quantity every two years. Experts estimate that nearly 80% of data scientists' time is spent preparing data to be analyzed, which is extremely time consuming and inefficient.
Talend minimizes the time required for data preparation, offering a Data Fabric platform that pulls real-time information from disparate programs -- such as those for analytics, payments, and cybersecurity. The company estimates that $374 billion is spent each year on the integration of system services and that $17 billion of that is spent directly on software to assist with the integration. With 2017 revenue of only $150 million, there is plenty of opportunity for Talend to grow and help companies derive insights more accurately and efficiently.
The company continues to invest heavily in itself to address this large market opportunity. We again saw the top line expand, but significant operating expenses pushed earnings further into the red. Let's take a closer look at what happened during their first quarter.
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Talend results: The raw numbers
| Metric | Q1 2018 | Q1 2017 | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $46.8 million | $32.9 million | 42% |
| Operating income | ($10.2 million) | ($7.1 million) | N/A |
| Adjusted earnings per share | ($0.18) | ($0.19) | N/A |
Adjusted earnings have removed the effects of stock-based compensation and the amortization of acquired intangibles. Data source: Talend. Table by author.
What happened with Talend this quarter?
Talend continues to strengthen its partnerships with cloud providers and is expanding the value of the applications on its platform.
- Subscription revenue increased by 44% to $40 million, making up 85% of the company's total top line.
- Subscription revenue within Talend's Cloud and Big Data segments was especially strong, growing more than 100% year over year. Revenue in the Asia-Pacific region also grew by more than 100% for the fourth straight quarter.
- Talend outlined plans for several new self-service applications it plans to launch in 2018. These will make its platform more useful for customers, which could improve customer retention.
- The number of enterprise customers -- those who contribute subscription revenue of greater than $100,000 per year -- increased by 46% to 380. Talend's "land-and-expand" strategy appears to be working, announcing new large-scale customer wins at Yahoo Japan, Western Union, a "Top 10 U.S. bank", and a leading U.S. healthcare company.
- Talend Data Streams was released as a complement to Amazon.com marketplace.
What management had to say
CEO Mike Tuchen elaborated on his company's plans to offer both public and private cloud-based products, as well as what to expect in the coming year. In a company press release he said:
We had a strong start to the year with record first quarter revenue of $46.8 million, up 42% year-over-year. Our solid financial results were driven by strong subscription revenue growth of 44% and continued success with large enterprise customers. Business adoption of the cloud is accelerating and driving more customers to deploy Talend in the cloud. We anticipate our cloud momentum will continue as we roll out our new cloud product roadmap in 2018 and collaborate more closely with leading cloud partners.
Looking forward
Talend raised its full-year 2018 revenue forecast to $203.6 million, which is a notch higher than the $200 million it guided for last quarter and would represent 33% full-year growth over 2017. The company also expects a 2018 operating loss of $31.4 million, which would be a wider loss than last year's.
After the progress made last quarter with revenue and enterprise customer growth, it seems likely that Talend is being conservative with its forward-looking guidance. Regardless of managing Wall Street's expectations, long-term investors should continue to evaluate the company's partnerships with the cloud titans and watch for an expanding average order size -- which would indicate scalability of their platform and improving margins.
