Q3 2021 Cloudera Inc Earnings Call
Thursday Thursday, Thursday Thursday
Good afternoon. My name is Chris and I will be your conference operator today. Welcome to the third quarter of 2021 Financial results conference call came in second place in a listen-only mode to prevent background noise after the speakers remarks. There will be an opportunity to ask questions. If you'd like to ask a question during this time something for a star lawyer on your telephone keypad. If you'd like to withdraw your question, press the pound key. Please note this conference is being recorded. Your host is Kevin Cook VP Finance corporate development and not just relations Kevin. You may begin your conference.
Thank you operator. Good afternoon, and welcome to Cloudera third quarter fiscal 2021 Financial results conference call. We will be discussing the results announced in our press release issued after market close Thursday. We have also from clutter as investor relations web site which in combination with our press release provide additional information as well as greater, excessive from Cloudera with me or Rob Dyrdek.
president and chief executive officer
officer Arun Murphy Chief product officer and my chief marketing officer during the course of this call. We will make forward-looking statements regarding future events and the future financial performance of the Comfort generally these statements are identified by the use of words such as expect believe anticipate intend in other words that denote future events. These forward-looking statements are subject to material risk and and not certainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release and on this conference call these risk factors are described in our press release and are more fully detailed under the caption risk factors in our annual report on form 10-K our quarterly reports on form 10-q and our other filings with the SEC.
During this call. We will present both gaap and non-gaap financial measures non-gaap Financial measures exclude stock-based compensation expense amortization.
You have acquired intangible assets and extraordinary non-cash real estate impairment charges and these non-gaap measures are not intended to be considered in isolation from a substitute for or Superior to our gaap results. And we encourage you to consider all measures when analyzing clatters performance all references to operating income are to non-gaap operating income for complete information regarding our non-gaap financial information the most directly comparable gaap measures in a quantitative reconciliation of those figures. Please refer to today's press release regarding our third quarter results for fiscal 2021. The press release wage also been furnished to the SEC as part of a current report on form 8-k in addition, please note the date of this conference call is December 3rd, 2020 and any forward-looking statement that we met today are based on assumptions that we believe to be reasonable as of the state including those related to the impacts of COVID-19 on our business and global economic conditions the forward-looking guidance, we will dead.
will provide today is based on our assumptions as to the macroeconomic environment in which we will be operating those assumptions are based on the facts as we know them today many of these assumptions relate to matters that are beyond our control and changing rapidly including but not limited to the time frames for and severity of social distancing and other mitigation requirements related to COVID-19 and the impact of COVID-19 on our customers and partners and its impact on the economy as a whole significant changes in the future weather related to COVID-19 or other factors could cause us to modify our guidance undertake no obligation to update these statements as a result of new information or future events now Rob Bearden CEO
Thank you, Kevin. Good afternoon, everyone off purchases and debt issuance has announced a short time ago in our quarterly results, press release. We continue to execute extremely well in Q3 total revenue in the third quarter was 2018 million dollars subscription revenue is under $97 and non-gaap operating income was $49 billion annualized recurring Revenue reach $756 billion dollars off at the conclusion of the quarter representing 12% year-over-year organic growth. The total number of customers are exceeded $100,000 a day or or was it out level at 1008 the number generator or greater than $1000000 free from 172 last quarter to $179 in Q3. It was an excellent performance and what remains a difficult operating birth
Based on the pandemic. It's especially encouraging. But even while we wait for the CP product cycle to be reflected in the financials or even subscription revenues and they are has been consisting of several quarters. Also, we delivered another extraordinary result on the bottom line evidencing significant operating leverage in the business in general spend more time on operating profitability in a few minutes. Now, let's turn it update on require a data platform. It may be useful to outline our priorities and expectations for CDP represents. The next generation of dead interested in advanced analytics is a hybrid multi Cloud platform. It's the industry's first Enterprise stated Cloud driven by the rapid innovation of the open source community and Enterprise stating Cloud sports do public and private Cloud implementations across the complete data lifecycle in a secure environment.
That means you can solve problems for a wide variety of use cases ranging from data collection and Reporting and artificial intelligence.
Vantage about CDP public and private along with our shared data experience capabilities. Our customers are able to optimize the performance cost and security of every business application in order to get the best of both worlds the Speed and Agility of the public cloud in the security and performance of the private Cloud all managed for a Commons console is the interoperability of city public and private that delivers the true hybrid Cloud functionality. Our Enterprise customers are demanding as you know, we began our hybrid Cloud Journey was seeking public Cloud just over a year ago since that time you've been back-ordered work delivering a series of discrete public cloud services, including cloud-native data warehousing machine learning capabilities and more recently. We delivered CDP private cloud in August of this year off as a Cornerstone of our product strategy CT private functions with the same user experience Club.
GPS to 4 and Packers public cloud and private cloud.
In a sheer security governance framework that STX disempower CDP private customers to achieve public cloud, like ease-of-use scalability and agility dog separation of computer stores. And you said kubernetes container technology uses the user experience as nearly identical in public and private clouds. Most importantly. The foundation is CDP private Cloud City public Cloud provides our customers with the flexibility and run their workloads of the safest and most cost-effective environment for their unique needs its interoperability between. So you can public and private makes the total cost of ownership for most these cases significantly lower for customers when compared to public Cloud only offerings. And this is one of the many reasons on customers are so excited about our Enterprise data Cloud Solutions.
CDP private Cloud now died in a hybrid Cloud nearing completion were beginning to see an acceleration of vibrations from our Legacy products to CDP. In fact, we've already seen more than a hundred fifty customers make the need to see people cry.
When you combine that with the public Cloud adoption we can now comfortably state that more than 10% of our customer base has beginning the deceit EP. It's also noteworthy that more than 50% $1000000 plus customers had initiated their migration to cdk demonstrating their commitment to Cloudera migrating existing customers to see the thing is now be primary objective of our faith and we said aggressive migration targets for two people and Beyond
In terms of CD maintain a rapid rate of innovation on the platform in September. We announced three exciting new and upcoming public cloud services, which are often she operational database exceeding data visualization. These new services are designed specifically for data specialist cooking daily Engineers data analyst and data scientist or smarter and faster, but they the life cycle integration is what enables a specialist to work on the same data securely and efficiently no matter where that data May reside or where the analytics off GDP daily engineering I guess a powerful Apache spark service on kubernetes includes key productivity-enhancing capability CDP, operational database is a hyperbole a single database service that provides unparalleled scale and performance for business-critical operational applications and lastly CDP data visualization simplifies the curation Dead.
2 dashboards reports and charts democratizing access to data and analytics across and organizations scaled these new Services complement the existing public Cloud offerings wage, which received the data Hub data warehouse and cdk machine learning. We now have a compelling set of cloud-native services and support multiple analytics functions this brief message explaining opportunity proceeded to you as it becomes increasingly useful to data scientist State Engineers data analyst application developers and data managers and will continue to introduce new public services with the full data lifecycle in mind.
As mentioned previously. So you'd be public Cloud adoption is going well. In fact, the number of customers increased by more than 40% since we last reported a quarter of the quarter remains relatively small in general customers who are renewing that they are doing so on the basis of the C. Map with plans to take advantage of our hybrid platform Liberty public and private Cloud typically customers are migrating existing workloads to see people are the cloud in adopting City public Cloud to build new applications and services that these cases but regardless of how customers are getting started one thing seems to be consistently true. Ivory multi-cloud is a strategy. Our customers are deploying.
This is the fastest path for our customers to get there existed were close to see the public cloud and then expand their usage from their customer customers utilizing data Hub include a number of global organizations such as Experian TP. I am from Indonesia. And Celine says from Spain is our customers gain experience with CP data Hub. They tend to use more specialized services like machine learning CDP machine learning offers purpose-built tools and functions specifically designed for data scientists and Engineers, the service provides simple powerful and my workspaces with secure self-service access the internet.
Examples of customers using machine-learning included Globe Telecom which is attention provider in the Netherlands and surest essay, which is a credit services provider in Brazil with one of the other primary use cases for public cloud is the data warehousing service like the machine learning service. It's best for new use cases new workloads.
Using containerization technology to extract SQL queries from the dating analyst CVP data warehouse provides easy access to Virtual Warehouse has its support complex reports and Enterprise boards as well as data Marts for interactive ad hoc analysis. The service also offers auto-scaling Auto suspend and resume functions optimize performance and cost money examples of customers. You can see the data warehouse include IQ view, which is a large Life Sciences provider internet, which is an e registry provider headquartered in Canada.
nuclear these customers
Reduce more than one TV service. They can start with any CDP service and easily add Newman's this is the strategy reflecting the typical data lifecycle customers are using multiple choice services to deliver complex business use cases, like fraud prevention customer churn reduction customer 360. What's more the recent release a CD private cloud is enabling customers like clothes and iqvia Implement these types of use cases across the hybrid Cloud. This is consistent with our Enterprise data Cloud strategy and reflects the differentiation and customer base with you and see
Now let's shift to some other strategic updates. We made an important acquisition to 3.
Is streaming analytics company based in Austin Texas, that's a tourist the leader in SQL streaming enabling SQL queries to be performed on data streams is highly differentiated of Technology empowers developers data scientists and analysts is self-service streaming data needs. We Bill real-time data pipelines models dashboards and applications and then store brings category on a ship mind sharing the central intellectual property to our cloud data when streaming services it'll also allow us to offer containerize services for cough. Can I find link which I am in the most complete solution set in this fast-growing Market, we believe the ability to offer all through streaming Technologies is a significant competitive advantage.
It's exemplified by the acquisition will increasingly focused on delivering Solutions in high growth segments of the data management analytics Market make a stand-alone often. And as part of our plan with data streaming in real time analytics on stream date is one of those segments. In fact the ITC worldwide big data analytics software report forecasts that the continuous analytics software Market wage includes data streaming will grow from 2.1 billion and 2021 to 4.4 billion and 20 24-in flying at 20% compound annual growth rate getting this close Outlook page. You can expect us to put more resources into the data streaming and real-time analytics sector. Similarly. I want to highlight our performance in machine learning and AI along with streaming fax machine learning and AI business is one of our fastest-growing segments.
It's just partially a result of having invested early and understanding the data scientist for some of them and supporting their workplace as distinct from that of the data engineers and developers in Q3 RC Coke machine learning service was recognized as a leader about the forestry. That's way for network based Predictive Analytics in machine learning. This is very satisfying result after many years of development Dispatch live stream and you can expect us to continue to pay significant resources behind machine learning and AI opportunity.
Well as I hope you've heard he made a great deal of demonstrable progress and keep through so now let's have Jim take us through the financial results gym. Thanks, everyone wage order for Cloudera reflecting stability in the business and consistently strong execution on all measures total revenue was $218 and increase of 10% year-over-year month subscription. Revenue was $197 and increase of 18% year-over-year.
Daniel
Recurring revenue for fiscal year Q3 with $756 million up 12% over last year.
No information regarding definitions and Trends can be found in today's press release or the supplemental materials on Cutters investor relations website as indicated. We concluded Q3 with 1008 customers who started at or have grown to more than $100,000 of a r r we expanded customers representing greater than $1000000 with a r r to $179 from 1072 last quarter which represents a 23% increase year-over-year also gains in Q3 was similar to Q2 with respect to non-paying users of the software becoming subscription customer.
The 3rd order was marked by record possibility for the company greater. Operating profit is a reflection of a core merger pieces as well as outstanding executions and sustained Revenue agent.
In addition like many other companies we have seen short-term Financial benefits and costs associated with endemic in Q3 are offering margins came in at roughly six percentage points higher than normal levels off due to lower travel good marketing and Facilities cost.
As I reviewed the remainder of the income statement know that unless otherwise stated all references to expenses and operating results are on a non-gaap basis historical non-gaap results are refugees. The Gap results in the press release issued earlier today our run Gap measures exclude stock-based compensation and possession of m&a related intangibles and any extraordinary non-cash real estate office charges.
Total gross margin for Q3 was 85% compared to 77% in Q3 of last year driven by subscription gross margin of 91% up from 86% in the year ago.
Total operating expenses were $135 for the third quarter of continuing a post-merger trend toward a lower expense structure. These operating expenses were 62% of the total loss in Q3 official 21 as compared to 81% of total revenue in Q3 of last year.
I'll bring income was $49 for the third quarter representing an operating margin of 23% a substantial Improvement of twenty seven percentage points compared to Q3 of last year.
Operating cash flow for the third quarter was $18 bringing year-to-date operating cash flow to 119 million top-line growth good Collections and ongoing operational efficiency are driving our strong cash flow.
I think for sure was fifteen cents in the third quarter compared to a loss per share of $0.03 in the third quarter of fiscal 2020. No turning to the balance sheet. We exited to 3 with $558 in cash cash equivalents marketable Securities and restricted cash box for $559 at the conclusion of cute to managers were three million dollars in a quarter month payment contract liabilities, which comprise deferred revenue and other contract liabilities were 468 million at the end of the third quarter RPO was 827 million up 21% off the year heard fourteen percent over last year.
Provided initial guidance for fiscal to 4 and updated guidance for the fiscal year, which is subject to the disclaimer is providing that the beginning of the call regarding forward-looking information.
For total revenue to be between $219 and $222 representing approximately 4% compared to Q4 last year with sucking Revenue in the range of $190. The 202 million approximately 10% Year-over-year one Gap operating income is our primary bottom-line metrics. We expect operating income for the fourth quarter to be in the range of thirty-five to forty million or roughly 17% of Revenue.
13 per share for Q4 is projected to be $0.10 to $0.12 for fiscal year 2021. We expect total revenue to be between $862 and $865 representing approximately 9% bill with subscription Revenue in the range of 775 to 778 million approximately 16% Year-over-year operating income for fiscal 2021 to be in the range of $131 to $136 million.
As discussed we do not anticipate that the dramatic increase in operating profit in Q3 can be repeated. We expect our operating expenses to increase monthly relative to Q3 often resulting in operating income margin of approximately 15% for fiscal year 21 operating margin is projected to remain at approximately these levels for the foreseeable future. We will confirm you just see the benefits of scale and increasing operational efficiencies offset by resumption of certain expenses to priests endemic levels coupled with a modest increase in product sales and marketing expenses as PDP continues to gain traction.
34 share for fiscal 2021 is projected to be 40 to 42 cents and on Alternate back to rock or something proofing remarks.
Jim Shorkey Ford marks, achieving substantial operating income margins and increasing cash flow and strong management operational efficiency gains and cost discipline and then evaded at a remarkable rate having dated Services as well as private Cloud offerings this fiscal year. We believe that we're the only vendor that can provide true hybrid multi Cloud Solutions and deliver on the Enterprise data collaboration with a customer base has large oil and continues to expand its usage of our offerings. We built strategic relationships including expanding our hyperscale cloud provider Partnerships. Armour products are being widely embraced by customers existing and new
as a result the board, I'd never felt more confident about our competitive position and strategy than we believe that
cheers, representing attractive investment opportunity
based on this conviction. We're announcing today a share repurchase authorization of $500 in addition to the existing $74 authorization. That's outstanding job on this return of capital primarily proof Barnes and your institutional term line, which we believe to be closed during the current quarter based on the strength of our business and the leveraged-loan debt market conditions wage, even after completion of the table million dollars a share repurchases a substantial balance sheet flexibility more than $500 in cash and is evidenced by a recent operating income performance with respect to continue to generate significant cash flow. We plan to use the cash balance and future cash generation recording investing store employees from the accomplishments that I just outlined in many more months. I want to thank our partners customers in the community for their continued support.
As a reminder Chief product officer and they call us and chief marketing officer or available for Q&A with Jim and I she's a call.
Ladies and gentlemen as a reminder to queue for a question, please press star followed by your name roster.
Our first question comes from Chad Penance with craig-hallum - open great.
Quarter and and the guide looks great. So just a couple of things pretty pretty material migrations to the private Cloud read what kind of what are the expectations as we look out and I know it's still early but we look out, you know, six twelve months, you know with the with the existing customers that are migrating. What's the
Potential for expansion just you know on the private Cloud side from a use case standpoint. Can you elaborate on that. How are you? Thanks for joining us off. We're going through and quite frankly.
Trying to get pattern recognition on what that looks like. The good news is we now have that public and private out in the market and and that's very helpful because that now offer our customers Define and establish what their what their data architecture looks like with the migration of which workloads are going to be with the order and sequence and you're going to be what's going on part of what's going to be on public the typical pattern that we're seeing.
Right now is biggest majority of the existing workloads go to private and then they will in many cases expand and add incremental wage. Some of those would be private. Some of those will be public and then that new will tend to be start on public and then Leverage The on out from data sets for you know, better views more holistic view of data.
Perfect. And then maybe one quick follow-up for Jim just you know, in terms of obviously interesting times right now still in the pandemic, but just in terms of how you're thinking about seasonality of of bookings in the current quarter relative to Prior years and and and and maybe a follow-up if I can on that for either one of you just kind of your your level of or or IBM's level of the interest in in activity that you expect in this quarter, especially around the private Cloud product things.
So I'll start with the seasonality peace and then I'll turn up the wrong to talk about IBM's interests. So the typically we do around thirty-five to forty percent of our booking into for so we're a seasonal business like most enterprise software this key for it's it's a tough.
Question two two models. So we initially anticipated back in Independence started that the light would potentially start resuming normal fee incurred for that's clearly not the case. We're looking at obviously a second second wave of virus impacts. So we've modeled that Q4 looks a lot like cute 3 and 6 to 2 in terms of customer demand seasonality that might mean that that is on the lower end of that thirty-five to forty percent range, but it's it's tough subject right now.
And I'll pick up the the question that on an IBM very similar story actually with with our just call customer base has you know, we got a number of customers with IBM a great relationship great partnership go to market continues to strengthen and those customers tend to be the high-end Enterprises that have very very strong interest in new be the biggest portion their workloads right now to see private, you know, it's a it's a really big value proposition not only in terms of just being able to separate storage compute the value that brings up the ease-of-use. He's a bad man, you know in the in the in the value creation that open shift brings to the CDP private platform and on a monthly basis were week. We have over 150 customers that are in nation right now to CDT in many many more than that that are
In detail planning phase how that splits between our independent customers and your customers with IBM. Remember Partners. Honestly can't tell you but the the migrations back to be private or a really happening and that that starts to also Now open up in and move adoption to see the key public as well. So hopefully that captured your question it does thanks much nice job. Thanks again. Next question is from Mark Murphy with JPMorgan Carolina's open.
Yes, thank you very much, and I will.
My congrats Jim I'm curious which metric you think we should index to as a best indication of cloud errors growth in Q3. I'm looking across our breath 12% the c r p o growth. I think you said it was 14% subscription Revenue growth of 18% Which one do you think is best of representing it off? And then do you have any thought on how to model the way our our growth specifically in Q4 which probably kind of ties in with what you were talking about a moment ago.
Yeah, so for sure ARR is the single best metric to look at our top-line growth. Let's get it's it's a representation of the economic value of customers at the last day of the quarter it normalizes for the effects of the merger accounting changes the shift a hundred percent open source software m c r p o is pretty close but there are some artifacts in RPO. For example, you have customers that may have 10 slice Provisions in their contract that get excluded from our POS wet are still uh exact value in a r r and that we get the economic value suck at this point you to there are and by the way, if you look at over the past four quarters as compared to see our po over the past four quarters, the average is essentially the exact same wage.
So AR are my coordinates metric going back to how the model ARR from our perspective since our our is a surrogate for bookings. That's often why the great number? It captures almost all the economic activity that occurs in the quarter and therefore it's hard to offer the same level prediction as you would for some of the other numbers. What I would say is a r r should Trend very similar to software Revenue Trends over time and I'll leave it at that.
Okay, and then I had a I had a quick follow-up in terms of the consumption Revenue either layering into the to the model for CD public Rob. I know you
yeah, so in the very long run we look at some of the same models that you probably look out as well. It says a portion of our customers workloads will be running on premise. Of course, when we running in the private cloud and of course the Republic in in the public Cloud the public Cloud promotion will probably be a third maybe 50% over time. The consumption piece is is difficult to estimate at this this page in terms of exactly how fast we're going to get there. But we do believe that the public Cloud will be a significant portion of our business and the primary way that were going to be pricing there is on consumption.
Okay. Thank you very much.
Our next question is from Tyler Radtke with City your lungs.
Hey, thanks and good afternoon. I wanted to follow up on your comments on some of the customer momentum. You're seeing with CDP private. I think you talked about 10% of the overall customer base wage starting to move and and fifty percent of the million dollar plus if you just give us a sense for how far through the migration on those customers are when you think they'll be completely migrated and you know, what kind of financial impact up with the you know up cells. Have you seen thus far?
Okay. Sure. Yeah, thanks for joining the call today. I appreciate so if you can imagine they're varying states of where they are in their migration, you know, just just from a grounding standpoint. I will transfer to especially the the big Enterprise is Nino plus customers that are truly running major portions of their business and their mission-critical workload high value creation applications big data sets. Typically that big grow and expand fairly fairly aggressively off. So it has to be very methodical process for moving into the new environment with its public or private. And so we've been engaging with all the customers in varying degrees capacity to make sure that there's a very clean migration plan that we if we go through and the goal is to make it make it really dead.
Look and feel like an upgrade. But but again that depends on which releases collateral which Legacy they're running and you know Furious things that goal is to be able to make that that move as an upgrade. But even as an upgrade Bill still have to go through a dead test process, make sure that all of the security processes are clean all the queries run correctly all the data usage over and they tend to do it in phases. So with Thursday is the backdrop. I think we'll see of the hundred fifty probably twenty 25% of those have more than 50% dear existing Legacy environment in production in first quarter of next year and then an acceleration birth
Of the balance of the customer base in the second and third quarter and also be on that first ten PM that we have moved in right now that will accelerate because there's a number of of others that are in the plan change basically just not started the actual migration and you know, we'll be able to bring more to lie for over the next ninety hundred twenty days that will also offer is migration and and help help move this migrations forward a little faster.
Forgot answer to question.
Yeah. No, thanks. I appreciate the details. I just clarify one thing and then I have a follow-up when you say you want to treat these migrations as an upgrade. Is that does that mean, you know an upgrade and in terms of financial, you know impact in terms of higher revenue, or is it or is it just you know, you're trying to obviously pitched if you have a much stronger of our product and you know, theoretically the customers more willing to expand if there's if there's more features I just wanted to clarify if if that was meant that was meant as a financial, Okay? No, no. No, I'm sorry. Well, it was really a more of a technical reference if you will upgrading from when released to the next that was the the really the context. I bought it from the standpoint, of course, it represents opportunity because there's you know, there's pretty strong value creation but moving from the Legacy to see private or public bath.
They also tend to want to expand and consume more experiences whether that's the entire full lifecycle data management, or if it's just awful experience, whether that the streaming or machine learning and AI or our date engineering or data warehousing Solutions, so it represents an opportunity not only to as we move the CDP, they can expand the amount of data under management would also then there's a tremendous amount of value creation of bringing and consuming and leveraging more the the life cycle experiences on top of that and it's great value exchange and obviously represents more modernization course.
Got it. And if I could just sneak in one more it's kind of a higher level question, but I don't know if Jim or Rob or wants to take it but you know, obviously you've seen your expenses wage a lot, you know part of that is driven by, you know, lower TNT because the Cove it I think headcount has been kind of training down as well. You know, it sounds like you're you're really going after a lot of different markets where there's a lot of competition, you know, whether it's data warehousing now getting into streaming sequel where you know, you have obviously a large kind of uh, play off that space. Uh, you know, you're going up against folks in in data science and I guess how how are you thinking about just balancing, you know investing in in those very lucrative but highly competitive markets with the the need to kind of continue to show Leverage in in the financial model and we I guess how should we think about your your head count edges?
you think you have enough folks to kind of make the Investments and and build the products in in those markets you know today thanks, Christian so let me do my best to make sure I heard it correctly and inclusively so what we did what we've done is made a very concerted effort home uh to be efficient in our head count and we moved a lot of headcount offshore vary from the from the dev and support standpoint but also from the back office standpoint wage in the lower cost GA regions and we've been very successful in that model and so that that allows us to bring very very highly skilled resources in a better cost efficiencies and and we were able to concentrate those skill sets in particular areas from that soot are wage
category very nicely
So from from a personal financial model leverage, you know, you're seeing the benefit of that leverage being picked up in the office line on the market that we serve recognize that what we're very focused on is enabling the Enterprise data Cloud capability. And so that means being able to provide a hybrid multi-cloud data platform that managing the entire life cycle of data. So bring that data under management from point of origination through the stream be able to take up to an Engineering Process for that. It's stored in the either an operational store or a traditional data warehouse.
And do that across a hybrid multi Cloud platform leveraging a single-pane-of-glass to manage one framework for security issue, that's managed metadata and all the winners that comes with that. So well that does cross many of the point solution departmental level areas. We believe we're the most competitive and really only true Enterprise data cloud provider that enables that full life cycle of data across a huge multi Cloud platform with one framework for security and governance. And that's really what our Enterprise is that we serve in the global mm. The man it's no it's not they're more interested in having a holistic data architecture strategy that encompasses hydrate and multi clowns and can manage that end-to-end data lifecycle dead.
And that's what we're bringing forward with CDP and the reception we're getting from our customer base is great and is we're introducing that to new customers and Prospects. It's getting really really strong reception.
And and let me let me just jump in on some of the the financial elements. So one of the things that we're certainly trying to signal with this quarter is the almost unprecedented impact in operating margins that you've seen in Cloudera over the past few years or even the past year won't continue for the foreseeable future. So we've reached our interim Target of profitability Thursday and from a business standpoint CDP is at a level where we can start investing for growth and as you're well aware things move slowly in terms of the investor cycle to the booking cycle in the subscription software industry, you have to invest early in sales and products and you have to sell it and then eventually shows up in Revenue. So going back to talk to one of your questions on the financial model. Our profitability is pretty much where we think it should be for right now, and we're looking to invest in the success of CDP. Therefore as we continue age.
Operational efficiencies in the business will reinvest in growth on a go-forward basis.
Yeah, and this is just just to add on to the original question the fundamental, you know Advantage we have the Competitive Edge we have is the integration between the cock like we feel like that integration, especially with the security downstairs and the fact that he can do a streaming with engineering or senior machine learning these four or five Market. We don't they don't we don't think of ourselves of having to go like head-to-head every single feature function of there on a on a stand-alone basis our sort of advantage of all the comparative to what I'll do represent a better value proposition by purely the work shift integration in some ways we can think of it as you know, sort of why Microsoft teams is doing well compared to a stand-alone product off. The integration itself is the value proposition, especially for the customer base. They go after which is also high-end Enterprise.
Thanks again for all the targets.
Our next question is from Jack Andrews. But if you need em, your loan is open. Good afternoon. Thank you for taking my home screen and consume your discreet cloud services. How do you envision the long-term profile street services should look like within your understand customers and how should we think about the impact customers consume cloud services?
Yes. How you doing? Thanks for joining. It really goes back to Tom Green made those customer services many of that is want to be able to continue multiple services. In fact, most of our most of our customers are not just consuming more but there could be multiple multiple of the services, you know, they want to provide streaming, uh within that and streaming with ML all the way down through our data engineering Solutions month. And so what what the real goal is is to make it easy for them to get started bring the data under manage and then let them be able to to turn each of those services on continuously wage. And and the reason that's so cost-effective or excuse not cost-efficient to them is the integration that the range talking about. They don't have to bring and Stitch together multiple points.
Solutions they can just continue to turn those Individual Services on as a continuous flow and it'd be assured that it has a common security and governance framework that goes down in Tire life cycle data like and and so that just opens up a number of different use cases that they can they can apply and and make sure that if they do it consistently and repeatedly across the Enterprise.
Great. Thank you. Makes sense. And your last you've talked about how your sales team's focus and FYI 21 will be my customers. Can you talk about the calories takes off?
Okay, great. So the goal this is
Want to think they're stitching on the road question. One of the things that we're really focused on is making those migrations is straightforward as possible, you know, and that's going to come and downstream tools that we're going to be busy during we're very focused on providing too long that's going to help us migrations move forward, you know, the goal is to make it feel like an upgrade from a release to release now that that has a lot of variable factors. Depending on what releases running and you know some of their environmental conditions, but we're we're aggressively focused on how we get that customer base for they've ever we're also am very focused on each of these of the platform so that a lot of the functions that may have required Professional Services can actually be done on a self-service basis blueberry very focused on that the digital transformation that the next been reading. We're getting a lot of good success there and see a good dog.
Person that takes the customers and and things that are able to do in their migrations now to CBP both private and public.
So hopefully that answer your question.
Thank you. That's very helpful. Next question is from the same tree with Bernstein research your line is open.
Congrats on a great quarter question for a room if I look at the TCL commented on how you see Zero damage or lower TCO with TDP public and private than the alternative. How do you put can you help me understand how you have a lower total cost of ownership vs. Some of the mega scale Cloud vendors that have you know, such a large-scale advantage and can cuddle in the infrastructure and then sent home if you can help me kind of quantify, you know, what does the actual tto difference look like in dollar percentage terms both in the private cloud in public Cloud vs alternative. Thank you.
A great question since birth if you look at the kind of clothes or like typically what we see much like, you know, whether you go to a single proprietor and bunch of by a bunch of services, right? You have to buy a monitoring service wage of a bad Health Service and planning services and so on and security service and so on all of this kind of comes down to them.
Like so what happens if you look at the overall package, it's a fully integrated data passed on and the even better part is it's available on every cloud you might want to care and now typically I care about you know one maybe two it also a lot of our existing customers have massive Footprints. So besides that if you can think of it in terms of you know, not just the product costs, but also the the people that you need to manage this infrastructure and security environment and and you know under functionality the fact that you can do this in one goal versus, you know, buying either three different numbers and integrating them yourself and think integration tax or having to buy it from 11112 Floyd or but then by different sources of different price points and the fact that there are boundaries in the PDP provides a massive or you know, lifting the PCOS then you know will be also see is typically can go ahead of the head head head to head against one of the world. They're the number that we have.
a couple of years of investment which are highly
Differentiated all over that's our security pieces of the following pieces. So not very commonly. Now when you go head-to-head against one of the services on the open-source Loop Services, their their services with Pure Performance standpoint will come out, you know anywhere from you know, two or three times faster based on, you know individuals that when you combine when you when you think of that and that. Your cost the overall PTO from people scale and just pure software we look, you know, a really attractive proposition, especially for the customers. We serve them, you know teachers are super excited.
Very helpful context I appreciate that. I just a quick follow-up now that you've usage-based pricing. It seems like the volume of data growth and existing Enterprise customer workloads. Just that sheer data volume off exponentially alone should be pretty notable Tailwind your Revenue growth. Just wondering if you have a sense of kind of across your entire install base of customers what the average gross it is of of data across those were closed.
Yeah, so your specific question is average rate of data in the in the world is growing at fifty to a hundred percent a year. When a customer base. I don't know the exact rate probably ask that or or maybe slightly left in terms of the ability to monetize it we are shipping to usage-based pricing was shifting to consumption based pricing for processing which in some respects is as important. If not more important the long run by if I can touch base, I mean pricing per quart vs code that allows us to share the benefit of more as well with the customers with all that said we're still at the very early stages. So I would expect them in the long run to have a be a modest. He'll win in terms of opportunity few percentage points every year for many years in a row, but we're just start getting started.
That's great. Super helpful. Congrats guys for the next quarter.
Good. Thanks. Thank you. Our next question is from freecaddie with Barclays. Your line is open. Hey there boss you on the subscription Revenue guy for three Q. You guys guided to a sequential Decline and I know if there was a comparative guide but this quarter know your limits on a big eyes and sighs about a 2% sequential increase. So I'm wondering, you know, if you guys are still something if there's a pipeline that you're a little bit more excited about you know, how is the demand environment this quarter versus the last quarter?
I'll I'll start in rock and then if you wanted to so what's going to be the overall demand environment is very similar in Q4 is it was the Q3? So we're still in the middle of town. It's still a headwind. Although we believe we're more resilient than most against that that headwind regarding the sequential up and down that goes to the seasonal nature of our business office. So Q4 is our biggest quarter of the Year. Therefore we tend to see a sequential increase in revenue and they are are heading into a Jeep for Q3 to Q4 and then into q1 as well be for two Q one so it's a seasonality. It's driving the the sequential changes more than anything else.
Got it.
By the cloud, you know from some of your early customers. I was hoping you know, if you could share kind of expansion rates that you're sold from those initial customer and just as a follow-up to that as well, you know, can you give us an idea of what time of what type of time commitment and and cost commitment it takes for customers to rule number to the new CD private cloud?
Yeah, so I appreciate you joining the call this world today. So again, it goes back to we are we want this to be much as possible feel like an upgrade from release to release for our customers when they go from either the the Legacy Cloud Airport Works platform to see the king that has a lot of different factors involved in some cases. It's more complex in some cases. It's even more straightforward and so, you know, costs will vary depending on
Where they are in their existing Legacy platform which release and but but what we've done is we focused on making sure that we have dedicated teams that will help them through our planning process and implementation process so that we make sure we have very very clean blueprints for them. And as time goes by we're going to give them more and more to life that will actually help help them through that process and you know, very thorough of migration guides it it will help them Implement those Blueprints and in in the through it so long time and and costs. But but our goal is to help them get their very cleanly and in as quickly as possibly so does that suck at the question you were looking for? Yeah. Thank you. And and I guess the the expansion rates that you're from some of your earlier to be part of cloud customers that are a little bit more mature.
Yeah, yeah. So on the expensive, you know, it's it's expansion on private that's got a couple of Dimensions to it. And but it really does is it opens up to the public and so on the private life, you know, obviously after they after they moved from the Legacy environments to see the P private they can expand not only incremental data under under management page, but they can begin to apply more and more use cases to that environment because you know recognize, you know, it's a much easier environment to operate it's much easier to scale because what we've done with a separation of storage and compute and all the all the things is in value that that brings from the scale up and down standpoint the efficiencies of of home where you should that that clearly brings. So it makes it much easier to bring more use cases on more data under management and a much more wage.
cost effective way that
I'm running in the in the traditional on from Legacy environment. What it also does is it gives them the ability to very cleanly Embrace that management of of the entire life cycle or data leveraging streaming and machine learning, you know through the through the data engineering and and ultimately into the warehouse and capabilities, you know all leverage and then I'll put that does then is open up the the public Cloud to your for expansion use cases, you know and being able to bring them kinds of workloads up and down quickly and and to be able to achieve quick scale out and you know see DP is very very well suited for that month and it begins then to to you the public t or expansion, uh, um much faster than just organically. So we're you know, that's the pattern that we're now ma'am.
Let me get to add if you're looking for a quantification of that expansion rate. I'll repeat what prompted earlier he soon in the cycle to get that pattern recognition CDT private Cloud on kubernetes came out in August, um our customer set as with with told you the the majority of them are in heaven a regulated Industries, which has made them very resilient. It also makes them very careful as they adopt new technologies. So many of our customers are evaluating the software or get through security having it running on a single set of servers right now. So we'll take us a little bit of time before we have enough data to really be able to quantify the answer to that question.
Thank you and congrats on the on the awesome corner.
Yeah, thank you very much.
Our next question is from is Angie thing with Morgan Stanley your line is worth it.
Hey, this is Mark reunion for sanjit saying thanks for taking our questions look in terms of marketing CDP, you know marketing CDP going to Market with it. Are you targeting certain use cases or kind of a solution sales whether it be you know, or data warehousing or selling CDP?