Talend Tempers Guidance (Again) as Recurring Revenue Soars

Talend (TLND) announced third-quarter 2019 results on Wednesday after the markets closed, detailing an enviable combination of new customer growth, the sustained strength of its budding cloud platform, and its continued shift toward recurring sales.

After briefly jumping in Thursday's early trading, however, shares of the cloud-integration technology leader gave up their gains to trade down around 1% this afternoon as of this writing. Let's dive in, then, for a better understanding of what drove Talend this quarter, starting with its headline numbers:

GAAP = generally accepted accounting principles. Data source: Talend.

We should note that Talend's GAAP results above include the impact of items like stock-based compensation and acquisition expenses. Adjusted for those items, Talend's (non-GAAP) net loss narrowed slightly from the same year-ago period to $2.6 million, or $0.08 per share.

For perspective, these results were well above Talend's guidance provided in August, which called for a wider adjusted per-share loss of $0.25 to $0.22 on lower revenue in the range of $61.5 million to $62.5 million.

Breaking it down further, Talend's top-line growth was driven entirely by a 23.5% increase in subscriptions revenue to $55.1 million, while professional services revenue climbed slightly from the same year-ago period to $7.5 million.

Consequently, annual recurring revenue (ARR) grew to $224.8 million, up from $218 million last quarter and good for growth of 24% year over year (or 27% at constant currencies). Talend Cloud represented around 49% of new ARR this quarter, and Talend Cloud revenue more than doubled on a year-over-year basis for the 13th straight quarter.

Talend's dollar-based net expansion rate also arrived at 114% on a constant-currency basis. Anything above 100% indicates existing clients are opting to spend more with their renewed contracts.

IMAGE SOURCE: GETTY IMAGES.

"We continue to bolster our market position..."

Relatedly, during the subsequent conference call, Talend CEO Mike Tuchen noted the company now counts more than 2,000 cloud customers among its nearly 4,000-customer base -- up from around 1,500 cloud customers and 3,500 total clients three months ago, respectively.

In a prepared statement, Tuchen called it "another solid quarter," elaborating:

We continue to bolster our market position by delivering the latest integration tools to deliver data with speed and trust. We have expanded our relationships with cloud ecosystem partners to drive broader market adoption. Additionally, we strengthened our balance sheet through a successful convertible note offering, which will provide additional capital to make further investments in the cloud as the business continues to scale.

Looking ahead to the fourth quarter, Talend expects revenue of $65.4 million to $66.4 million, with an adjusted net loss per share of $0.22 to $0.19. Analysts, on average, were modeling revenue and profitability near the high end of both ranges.

As such, Talend narrowed its full-year 2019 outlook to call for revenue of $246.5 million to $247.5 million (from $246 million to $248 million previously), while improving its targets for a full-year adjusted net loss of $0.83 per share to $0.80 per share (compared to expectations for a per-share loss of $0.92 to $0.98 before).

All told, with the exception of its seemingly light fourth-quarter outlook -- and keeping in mind that Talend has a habit of underpromising and overdelivering -- there was nothing not to like about Talend's latest quarterly update. I think it's only a matter of time before its stock price better reflects the impressive momentum its underlying business is enjoying.