Q4 2021 Cloudera Inc Earnings Call
Good afternoon. My name is Gabriel and I will be your conference operator today welcome to cloud era of fourth quarter fiscal 2021 financial results Conference call. All participants have been placed in listen only mode to prevent background noise. After the speakers' remarks, there'll be opportunity to ask questions.
If you would like to ask the question. During this time simply press Star then the number one on your telephone keypad, if you'd like to withdraw the question rest of the turnkey. Please note. This conference is being recorded your host is Kevin Cook VP Finance corporate development and Investor Relations. Kevin You May begin your conference.
Thank you operator, good afternoon, and welcomed the cloud era as fourth quarter of fiscal 2021 financial results Conference call. We will be discussing the results announced in our press release issued after market close today we.
We've also posted today's prepared remarks, and supplemental materials on clutter of Investor Relations website, which in combination with our press release provide additional information as well as greater accessibility to today's quarterly conference call.
From the cloud era with me are Rob Bearden, President and Chief Executive Officer, Jim framed pool of Chief Financial Officer of room, Murphy, Chief product Officer, and Nick Hulse, 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 company generally the statement.
Were identified by the use of words, such as expect believe anticipate intend and other words that denote future events. These forward looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. We caution you to consider the important <unk>.
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.
<unk> 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 of acquired intangible assets and extraordinary noncash real estate impairment charges. 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 clutter of performance all references to operating income or to non-GAAP operating income for complete information regarding our non-GAAP financial information the most directly comparable GAAP measures and the quantitative reconciliation of those figures.
Please refer to today's press release regarding our fourth quarter results for fiscal 2021. The press release has also been furnished to the SEC as part of the current report on form 8-K. In addition, please note that the date of this conference call is March 10, 2021, and any forward looking statements that we make.
They 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 <unk>.
Forward looking guidance, we 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 timeframes for and severity of social distancing.
And the 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 whether related to COVID-19, or other factors could cause us to modify our guidance. We undertake no obligation to update these statements as a result of new information.
<unk> or future events now Rob Bearden CEO.
Thank you, Jeff and good afternoon, everyone. Thank you for joining us to discuss our fourth quarter and full year fiscal 2021 results to date quickly reflect on FY 'twenty one accomplishments discuss how we're positioned for the current fiscal year end review on financial results in Q4 the beach.
And all we executed extremely well in Q4 throughout fiscal year, 'twenty, one and the opportunity for cloud era has never been March.
Well, it's the beginning with the performance in the fourth quarter.
Total revenue was $227 million subscription revenue was $207 million and non-GAAP operating income was $50 million.
Annualized recurring revenue reached $778 million of the conclusion of the quarter, representing 10% year over year organic growth.
It is noteworthy that either of data platform of CDP demonstrated significant momentum in the core.
Customers migrating the CVT increased from about 10% of our customer base at the time, we reported Q3 from more than 15% of our customer base today, which is well ahead of plan.
Impressively IRR from the CDC, Mao Tse $60 million of tow.
The wires.
Completion of theirs.
No year over year growth comparison for CDC as we've always had heightened kind of offerings of the market for a few months.
And these are all the migrations really validate customer demand for our hybrid cloud platform and the new <unk>.
New stations that we addressed with CDP.
The use cases enabled a full day of lifecycle from day collection, the reported predictive analytics and AI mis adoption momentum and enthusiastic customer feedback in the strikes that we have the wide strategy and it's worked.
The adoption of CDP for hybrid data cloud and data Wi Fi for use cases is what will drive future growth and we're happy with the progress today and we will spend more time on each of these items wider on the call.
So in fiscal 'twenty, one we delivered on the number of key objectives. The set us up for continued success.
I'll mention just a few of these accomplishments.
From a product perspective, we delivered the industry's first cloud native hybrid and multi cloud data and analytics platform that meets the.
The needs of large enterprise customers from mission critical data driven applications.
In addition, we developed an integrated suite of analytics capabilities. The surface use cases throughout the lifecycle of data from the edge to AI.
We also completely rebuilt our data platform with a modern containerized architecture.
<unk> compute and storage, marking the definitive at end of the Hadoop era, and empowering our customers to migrate to the hybrid day cloud architecture.
And we executed on a number of critical digital and business transformation initiatives, making everything from CDP trials, the customer support Astro and the easier for our customers and more efficient for our business.
From a partnership standpoint, we expanded our hyperscale cloud provider relationships and solidified our partnership with IBM Red hat, particularly for our private cloud.
Importantly, we also show the steady organic growth above the expectations against the <unk>.
You should see that drove operating income margins on a non-GAAP basis from negative 5% for fiscal 2022 of past of 17% from fiscal 2021.
In closing FY 'twenty, one was a year of important transformational work.
Designed the position the company for growth and the capture the market opportunities. The right ahead of us so.
So as we consider the opportunity for fiscal 'twenty. Two we remain firmly convinced that enterprises will require a hybrid and multi cloud data architecture for many years to come in.
The slices want the agility ease of use of the elasticity of the public cloud and the performance security and cost advantages of the planet.
And only see you've taken deliver but.
Enabling our customers with a modern platform to manage their hybrid architecture of analytics applications.
Just briefly discuss cdp's traction today from.
Many of our customers the general availability of CDP private cloud late last fall started the beginning of the migrations from legacy flatter on <unk> products the CDP.
Over the course of just a few months nearly 300 customers have begun to do some or all of their workloads the CDP.
This represents for the 15% of the customer base. It is excellent traction since last quarter.
For example on Q4, we saw strong customer adoption of CDP hybrid private and public cloud customers like Telecom Italia Exxonmobil Limbaugh.
We were pleased with this power from the short time that our hybrid day cloud offering with CDP spending by the.
And in terms of the economic impact of the CDC, we're seeing that on customers, who deploy CDC are going faster than the rest of our customer base. We only have two quarters of history that these customers had the net expansion rate in excess of 120% for the Q3 and Q4 cohort of CVP of doctors.
And this growth is consistent with our customers moving the modern hybrid data architecture, and beginning to deploy new use cases on the client.
We believe that most of our customers will move the bulk of their existing workloads the CDP private cloud first.
So many of our customers have large datasets and manage mission critical applications that may not be good candidates for public cloud deployments the rich.
<unk> is to create a modern hybrid data architecture, and the selectively leverage public cloud infrastructure to extend existing use cases, and the build complementary new loans.
There is of public cloud platform.
<unk> enables customers to easily and rapidly develop new use cases, using cloud native services since the introduction of the CDP public cloud we've made major advances on threat.
Functionality and quality to meet the requirements of the existing and new enterprise customers as the.
The result, we're now positioned to benefit from the key industry trends of data and workloads movement to the cloud and customer demand for hybrid solutions.
So based on the current momentum we're expecting the majority of our existing customers will initiate migrations to CDP this year.
Fully engaged with these customers the system with that migration planning and the accelerate the rate of which the clusters of workloads are moving to CVC.
As the result, we believe that we can grow CVP AOR to more than $250 million in.
In fiscal 2022.
Moving to talking a minute more about our priorities in fiscal 'twenty two to meet these goals without the staff.
Okay now that we've covered on our accomplishments in FY 'twenty, one discussed our strategic outlook for FY 'twenty, two and sharing our progress on customer migrations, let's now turn our attention to the technology and functionality of that distinguishes CDP in the market.
So as the level set for everyone Cdp's of hybrid multi cloud data platform and an integrated suite of analytics applications. It has two form factors of public cloud and private cloud, which share of common security governance and management framework is powered by cloud era SPX. This.
Those are the hybrid data architecture, which allows our customers to optimize the performance cost and securely of data driven applications across the entire enterprise and this is a completely new architecture. That's the.
Board from what people use of <unk>.
This allows for easy migration from those legacy platforms to this next generation data.
And this interoperability of CDC public imply that it's highly differentiated delivering true hybrid cloud functionality.
CDP offers our customer one holistic environment spans multiple public and private clients.
So the separation of compute and storage and its use of cooperman of these container technology also means that the user experience is nearly identical and the CDP public and profit.
Fortunately <unk> also secured by the Saar and supports the full lifecycle of data.
That means CDP can solve real business problems on a wide variety of use cases for both structured and unstructured day range.
Moving from streaming analytics the AI.
And all of the strategy of definitely hybrid and multi cloud the advancements we've made recently with our public cloud services are important.
Each of the services is built to deliver tremendous value in terms of the Tcs and ROI for our customers and this was clearly demonstrated on a recent cloud data warehouse study conducted by an independent third party analyst firm and it was published by the Giga.
And then the stakeholder valuation was an analytics performance test that was derived from the industry standard TPC benchmark.
CDP data warehouse and the field test, 20% faster and more cost effectively.
Our nearest competitor.
And I would encourage you to check out the results for yourself on the gig on website.
And while we are understandably proud of our performance from the cloud data warehousing space. We're also making significant progress on our Caribbean machine learning solutions firmly remains one of our fastest growing business our strategy of software. The most comprehensive set of functionality for enterprise use cases, including the ingestion blood management.
The messaging and real time analytics the.
Our of CDP public cloud streaming and flow management has quickly become two of the most popular use cases.
Also the later this month, we plan to deliver the streaming simple capabilities. We gained through the this store acquisition in CDP private cloud.
This functionality will enable our customers to query real palm springs through an intuitive user interface that includes visualization of dashboard and capabilities.
Given the increased adoption of our streaming offerings on data and business.
Complimentary of our success on streaming CEB machine Marvin empowers our customers to rapidly build machine learning models and deliver production use cases with integrated security income as you may recall in Q3, our CDP machine learning service was recognized as a leader enforcer of recent way from notes.
The base predictive analytics and machine line.
This quarter, we introduced the revolutionary new way to deliver enterprise and they'll use cases, either of peanuts or apply the ml prototypes of these are pre packaged applications that enable complete machine learning projects to be deployed with one click directly from CDP machine work.
And some examples of the prebuilt apps that we've made the viable include churn of modeling deep learning anomaly detection demand forecasting and model components in this effort significantly enhances our offering in the fast growing the MLA.
Okay.
So as you've seen we've delivered several new and highly differentiated solutions in FY 'twenty.
Our R&D efforts will now be focused primarily on simplifying migrations to our CDP hybrid platform and delivery of cloud native services on CDP public cloud.
We'll also make very targeted adjustments to our go to market model as the year unfolds the accelerate growth enable of cloud first business model the focus more on new customer acquisition.
Specifically, we have several key priorities for fiscal 'twenty two.
The first is to promote hybrid data cloud on the.
This effort is already well underway as evidenced by the strong performance from the CVP in Q4 total.
Early indications are the customer demand remains high and CVP adoption will continue to accelerate.
So I think we have significantly more innovation planned for CDP in this fiscal year.
We are dedicated more than 65% of our R&D dollars to public cloud services and hybrid cloud product development net.
Now, let's discuss we see big opportunities in streaming ml on applied a on.
And together these are our fastest growing businesses and we intend to enhance our differentiation in each of these areas throughout fiscal 'twenty two.
The next over the course of FY 'twenty, two we're making the deliberate shift in our go to market focus from almost exclusively existing customers, but also now attracting the.
We will accelerate our business transformation of the advanced digital customer engagement, including increased marketing spend with a portion of directed a customer segments flow our traditional large enterprise customer base and this is on the lower customer acquisition costs and expand our market opportunity the mid size enterprises and line of business.
In addition to targeting new segments, we plan to formalize our efforts to attract non paying users of our software. This is really pretty straightforward now nearly all of our compiled software is accessible only with the subscription.
So it's adopting the red hat distribution model, we've already had meaningful success in converting non paying users to subscribers and we intend to expand on the success in FY 'twenty two.
Finally as mentioned we have begun the pre package of handful of our most common at the highest impact machine learning AI use cases in the form of applied in the on prototypes.
Just one quick apps make it easy for customers to deploy machine learning AI use cases, using CDP machine learning.
There seems to be of strong market demand for applied ml and AI on the package.
Package this way and we believe these prototypes will accelerate CVP ml consumption.
As a result, we plan to invest in the development and.
Of the additional prebuilt machine learning apps throughout the course of the year.
So as you can see we remain focused on making it easier for our customers to gain valuable insights from their data.
We believe that our hybrid and multi cloud strategy of supply for our customers on our business.
We're entering FY 'twenty, two with the new level of momentum of customer migrations to the CDP or accelerating with our CDP hybrid and multi cloud solutions that are now on market.
That said there is still much to the must continue to simplify and harden our products to make them easier to use and ready to address our customers' mission critical use case.
We must also accelerate our business transformation to a cloud first go to market model that includes new customer acquisitions.
And so before Jim takes us through the numbers, let me close with a quick update on the new strategic partnerships.
As many of you guys semiconductor technologies become increasingly important from machine learning on this.
It is critical that advances in analytics software to match the advances in silicon and are optimized for Gpus.
The cloud era, and the video the partner to deliver massively accelerated process.
Enterprise data engineering and data science workflows on CDP.
And within the Gpus natively integrated in the CVT customers will now be able to more rapidly perform data workflows across any on premise public cloud or hybrid cloud the bolt deployments at lower cost.
We're excited to partner with Nvidia and we expect this alliance to help differentiate our solutions in many ways. So I'll stop there Jimmy Please now review the financials.
Thanks, Rob Hello, everyone fiscal Q4 was another very strong quarter in the face of a pretty tough operating environment.
Total revenue was $227 million, an increase of 7% year over year.
Descriptions revenue was $207 million, an increase of 14% year over year.
Annualized recurring revenue for fiscal Q4 was $778 million up 10% over the same period last year.
For fiscal year 2021, total revenue was $869 million, an increase of 9% over fiscal 2020, and subscription revenue was $783 million up 17% year over year.
Information regarding definitions and trends can be found in today's press release or the supplemental materials on the <unk> Investor Relations Web site.
As we enter our new fiscal year I'd like to begin with an update on our reported financial and nonfinancial metrics that we use to manage the business. Some of the metrics that we've tracked and reported in the past of lost their utility of predictive character as our business model has evolved.
Will cease using some metrics and begin to introduce others for fiscal year 'twenty two for.
For example, when we were predominantly an on premises business, we used to tell the customers only after they reached $100000 of AOR.
To complete the fiscal 'twenty, one disclosure, we concluded Q4 with 1005 customers, who started at or have grown to more than $100000 of AOS.
But this number is much less useful than in the past because we expect many of our new customers to come to us as CDP public cloud customers acquired with reduced involvement from our sales force of convincing an economic relationship based on consumption revenue of a.
A few dollars per hour. This is exactly what we want to have happened from a cloud first standpoint.
It is likely to take several quarters before such a customer eclipses $100000 of Aon.
To be clear of the expected ramp of new customers will be modest in the first few quarters of fiscal year 'twenty two as we focus on supporting our existing base as it upgrades the CDP and the.
This regard $1 billion plus <unk> customers are still important and we will continue to track. These in.
In the fourth quarter.
We increased the number again by record amounts from 179 in Q3 to 190 in Q4, an increase of 23% year over year.
As fiscal 'twenty two progresses.
We expect the contribution to our growth from new customers to increase occur.
Accordingly, we will disclose the proportion of our growth from new customers versus existing customers in Q4 of fiscal 'twenty. One three percentage points of the 10 percentage points of AOR growth came from new customers.
With respect the CDP, we will above of the metrics matched the state of the business. The primary measure of progress of the short term is the continued adoption of CDP product by the customer base and total <unk> for CDP.
Therefore, we will track and share the percentage of existing customers that have initiated an upgrade of CDP as well as the AOR of dollar value and growth rates for CDP.
For additional context, while the fourth quarter was marked by record profitability. Our operating margin came in roughly four percentage points higher than normalized Q4 levels due to lower travel and facilities costs because of the pandemic.
The loans pandemic related items, we reviewed our real estate portfolio and have taken a $36 million impairment charge to reflect the anticipated sublease income will be less than lease payments.
<unk> expense is reflected in our GAAP results and is excluded from non-GAAP expenses and profitability metrics. Please see the supplemental materials on our Investor Relations website for further information.
As I review the remainder of the income statement note that unless otherwise stated all references to expenses and operating results are on a non-GAAP basis historical non-GAAP results are reconciled the GAAP results of the press release issued earlier today, our non-GAAP measures exclude stock based compensation amortization of M&A related intangible assets and extraordinary noncash real estate impairment charges.
Total gross margin for Q4 was <unk> 85 per cent compared to 79% in Q4 of last year, driven by subscription gross margin of 91% up from 88% in the year ago period.
Overall operating income was $50 million for the fourth quarter, representing an operating margin of 22% a substantial improvement of 17 percentage points compared to Q4 of last year.
Operating cash flow for the fourth quarter was $37 million topline growth and ongoing operational efficiencies are driving our strong cash flow.
Diluted earnings per share was 15 cents on the fourth quarter compared to <unk> in the fourth quarter of fiscal 2020.
For the full year of fiscal 2021 total gross margin was 83 per cent compared to 76 per cent for fiscal 2020.
While subscription gross margin for the full year was 90 per cent compared to 87 per cent for last year.
Operating expenses in fiscal 'twenty, one of $572 million or 66 per cent of revenue compared to $646 million or 81 percentage of revenue in fiscal 2020.
Operating income was $147 million for fiscal 2021, representing an operating margin of 17% a 22 percentage point improvement from fiscal year 2020.
Operating cash flow for the year was $156 million, an improvement of $193 million from the year ago period.
Diluted earnings per share was 45 in fiscal 2021 compared to a loss per share of <unk> 13 fiscal year 2020.
Turning to the balance sheet, we exited Q4 with $773 million of cash cash equivalents marketable securities and restricted cash up from $568 million at the conclusion of Q3.
In December we executed a term loan of $500 million on favorable terms equating to 3% to 5% floating rate for seven years.
At that time of the board also approved a corresponding $500 million share repurchase authorization and.
In the fourth quarter $314 million of the loan proceeds were used to repurchase 26 million shares of common stock.
Total contract liabilities were $608 million at the end of the fourth quarter.
Our <unk> was $954 million up 9% year over year current RPI grew 13% over last year.
Capital expenditures were $3 million in the quarter and $10 million for the full year.
I will conclude by providing initial guidance for fiscal Q1 interest fiscal year 'twenty, two which is subject to the disclaimers provided at the beginning of the call regarding forward looking information.
We expect Q1 total revenue to be between 216 in $218 million, representing approximately 3% growth compared to Q1 of last year with subscription.
<unk> revenue in the range of $195 million to $197 million up approximately 5% year over year.
Non-GAAP operating income is our primary bottom line metrics, we expect operating income for the first quarter to be in the range of $28 million to $33 million of roughly 14% of revenue.
Diluted earnings per share for Q1 is projected to be seven sets the nine cents.
For fiscal year 2022, we expect total revenue to be between 907 and $927 million.
Representing approximately six percentage growth.
With subscription revenue in the range of $822 million to $832 million up approximately 6% year over year.
We expect to steadily the plant revenue from traditional products with revenue from CDP throughout fiscal 'twenty to buy.
By the second half revenue CDP public cloud consumption revenue and CDP expansion activity will begin to push our higher.
Driven by CDP momentum, we expect <unk> to grow by at least 10% year over year for the first two quarters of fiscal year 'twenty two.
And one or two percentage points faster for the second half of the year.
Once again <unk> is the best measure of recurring economic activity and normalizes for the effects of accounting M&A and the shift toward 100% open source software.
In fiscal 2022, <unk> is expected to grow faster than subscription revenue due to an intentional decline in non recurring revenue, particularly.
Particularly nonrecurring engineering.
Non recurring revenue is reflected in the subscription revenue on the income statement.
Non recurring revenue is an artifact of our on premises business and is not strategic we.
We are managing down these commitments to focus resources on hybrid cloud development, specifically, we expect our nonrecurring revenue to decline from $48 million in fiscal 'twenty, one to approximately $20 million in fiscal year 'twenty two.
To be clear of the recurring component of subscription revenue is expected to grow in line with <unk> at 10% or higher.
With respect to spending using fiscal year 'twenty, one as the baseline we expect the following trends from fiscal year 'twenty two.
Gross margins will be relatively flat as increased operational efficiencies are offset by slightly higher initial costs associated with the support of customers on new offerings.
Sales and marketing will increase as a percentage of revenue as we make investments in the hybrid data cloud market opportunity and plan CDP adoption.
Spence will growth due to increased resources associated with traditional go to market motions as well as investments in digital transformation in particular of creating new go to market motions to build awareness and drive consumption of CDP and.
In addition, we anticipate travel expenses to increase in the second half of the year.
R&D will be flat as a percentage of revenue as we shift the focus of our engineering teams away from the heavy work required to develop CDP the building of increased functionality and extending cdp's reach G&A.
G&A expenses, excluding expand and facilities expenses will continue to decline slightly.
These trends will result in fiscal year 'twenty, two operating margins of approximately 16% down slightly from fiscal year 'twenty, one due to the accelerated investments in sales and marketing to support the CDP growth.
We expect operating income for fiscal 2022 to be in the range of 137% to $147 million for the year, we expect operating cash flow to be slightly above operating income despite absorbing approximately $16 million of interest expense.
Diluted earnings per share for fiscal 'twenty, two is projected to be 35% to 39 says.
Now I'll turn the call back to Rob.
Thanks, Joe.
Q4 is the clean quarter on the outlook for cloud era of is better than it's been for some time.
<unk> demonstrated consistently strong execution for several quarters, we've entered the fleet products launched cloud native services, we've stabilized our existing customer base from one of their commitment of our new offerings now I'm excited to be moving through this transformational phase with the view towards more rapid growth.
We've got the $900 million plus revenue strength and it takes time for CDP adoption impact that number.
Typically of CDP public cloud isn't entirely consumption based revenue.
That said, it's our hybrid data cloud is driving customer engagement sort.
So the hybrid cloud trend combined with the exceptional market opportunity for analytics and AI.
Physicians cloud era of nicely. These.
These markets are at the very early stages development. The CDP enables us to innovate in the faster pace of the aggressively acquiring customers.
The multiyear transition to establish ourselves as the hybrid data cloud category leader, but we're focused on the long term.
This year, we plan to methodically advance toward our market rate growth objectives, while operating with the sense of urgency on achieving our FY 'twenty two objectives. So on.
I'll leave it there except to say thanks to all of those who helped us bring us to this point in addition to Jim of myself.
<unk>, the chief product officer in the call Center, Chief Marketing Officer are also available with Gemini for Q&A software. Please begin the Q&A portion of the call.
Thank you and as a reminder to ask the question you will need to press star one on your telephone to withdraw your question simply press the pound key.
Your first question will come from the line of Chad Bennett with Craig Hallum. Please go ahead.
Great. Thanks for taking my questions. So you gave off a lot of metrics, there, which of which are great and it's great to break out the CDP, a RR and your expectations, there, but just trying to unpack.
Robyn and Jim probably the the.
120 per cent plus net expansion and in the CDP customers or your base that's migrated the CDP.
For the Q3 and Q4 cohort.
Yes.
Just in plain English.
What does that mean, just you know what.
Whether they were on the Horton works distribution of cloud era of distribution before.
Kind of Annualizing.
The contract and you're seeing of 120 per cent can you just give further color there.
Yes sure.
Chad Thanks for joining appreciate the question.
So yeah.
The point you just foundational so we've only got two quarters of cohort Q3 total of CDP customers of.
Excuse me the legacy customers moving the CDP recognizing also that the really Q3 was not a full quarter of having full CDP hybrid and market holistically right to win the full quarter. So what we're seeing from that is the.
The customers, whether they'd be legacy clatter or Horton works that are moving workloads, the CDP and acquiring the CDP entitlements were seeing the net expansion rate for those portions of workloads to grow at a faster net expansion rate than the traditional.
Additional legacy environments.
And they are tracking at about 120 per cent of that net expansion rate, which is which is a great signal.
It plays very much into the value creation of CDP hybrid platform and the ability to expand use cases.
And of high value way and the many degrees of also of low friction way, Okay, and let me just jump in on the how we measure it. So we looked at the customers that graduated to the CDC customers in Q3 and Q4, they make up of a cohort. We then compared their Q4 <unk> from last year to Q4.
<unk> this year and that results in the net expansion rate calculation. So it's that group of customers is growing faster.
Then our average customer and it's quite frankly growing at very nice rates and the drivers very principally of that at our CDP just represents more capabilities generally its the.
Astra and the easier to get workloads in and the gain insights into the into the data and the leverage the the use case experiences.
And it's quicker.
The <unk> in a better TCE of than the than the legacy platforms that they were traditionally had been traditionally operating on recognizes the last piece of that share.
<unk>.
Is that our customer base as you know of.
Running these very mission critical.
Use cases and of our very large datasets, so the migrations of CDP and the hybrid environment.
Has to be a very well thought through migratory approach.
And we're heavily engaged in the system the customer base on how to get there in a in a methodical.
It will weigh on our mindful way.
And so it is a and sometimes multi month and can be multi quarter process as they work in the CDP.
Okay, and then maybe one follow up for me so if I try to connect the dots between the the guide, especially for subscription for the year.
And and you know what what appeared to be a pretty decent C. R. P. O numbers and you know I know you don't like talking about billings, but billings looked actually fairly good.
Is it is it as simple as answer as you know the nonrecurring engineering revenue headwind of I think roughly 28 million or can you just kind of give me an update on how churn played out in the quarter, maybe how the IBM partnership played out the quarter you know of.
And you know as you're.
Anything that changed relative to your outlook.
In the last few months.
Yes, So let me start with some of the numbers and then I'll turn it over to Rob for some of the color on business. So you know the big news so to speak in the guidance and that is the the deceleration of nonrecurring engineering revenue. That's a conscious strategic decision that we've made to refocus our engineering team on the hybrid.
<unk>.
Versus I'll say the.
Partner certifications and other types of things you do in a legacy on Prem business.
So that's one element the.
The billings piece.
Probably pulled ahead about $40 million more billings out of Q1, and hence the fiscal year 'twenty two.
On a above expectations and that's a reflection of the conversations we're having with customers on CDP right now so.
We're fighting migration plans were.
Selling of professional services and that has caused our services bookings to be good in the quarter and it caused a number of contracts that would normally have been signed in Q1 to be signed in Q4. So so that's certainly good news, but it's a left pocket right pockets of it shifts from some billings out of the next year.
Beyond that I'll say, where a 10% grower, we've said that for a while and as the CDP gains traction.
Accelerate to 11 and 12 as we believe that will occur in the second half of this year.
The anything you would add.
Yes, just very simply the N or are we.
We have moved away from was very very conscious and it is an absolute reflection of.
Of our shift into CDP.
The migration and adoption that we're and traction that we're seeing with that.
We want to make sure that we're allocating our R&D resources onto the platform that's going to give us the highest return on that CDP for hybrid environment.
<unk> is doing in R. R.
The co Dev and the legacy platform. That's just a dollar on a dollar out of.
And the old legacy World and those resources are exponentially better applied.
On the CDP and driving the acceleration of ultimately of the adoption for CDP and <unk> and we're seeing the acceleration of that that adoption happen before very items. This quarter as you can see on the numbers.
Okay. Thanks for the color.
Absolutely thanks for joining.
Our next question on come from <unk> Singh of Morgan Stanley. Please go ahead.
Hi, Thank you for taking the questions and congrats on the on and get into the year out of.
Similar question around the <unk> trajectory I think firstly, we look at the $60 million going to 250 million into next year.
You look at some of the components of that how should I think about net new versus expansion versus migrations and when customers do you expand.
Our migrate rather is that going to be sort of a dollar for dollar it can be more of a compression of effect or is that it will be sort of net neutral to there.
The thing here on.
Net net.
Yes Sanjay.
Hey, Thanks for the question. Thanks for join it also.
Well, so let me take the first part of that Didnt, Jim's probably can add some color to it.
So.
Look I think I think what we are very focused on is when we look at the the the two.
Traction in the acceleration as we as we looked at quarter to quarter going from 10% of the customer base adopting CDP from last quarter to 15%.
In Q4 significant acceleration.
That's driven by the more completeness and stability of increased functionality and candidly ease of use and the ease of migration to the CDP.
A lot of backlog to get the CDP.
And.
And that is driving the consistency and expansion of the net expansion rate.
That we've seen in the Q3 Q4 cohort.
Right now tracking at about 120 per cent.
So it's actually now that you're now to your question.
For the portion of workloads, the need and are able to migrate within the customer base is migration.
Plan.
As they acquire CD P entitlements.
The base is the dollar for dollar, but the net expansion is tracking well above the legacy expansion.
In addition to that what it does is it allows.
The net new workloads to also come online when.
For the hybrid environment, whether it be public or private and so it's just unlocking a lot of the of the backlog of workloads and datasets that wanted to be applied on the existing.
Use cases that customers had been running.
And so that momentum is building really nicely, we're pleased with the progress.
And we're continuing to make sure that we're really leaning in both from an assistant standpoint in migration as well as making sure from a tech completion and tooling the.
Move those migrations long in an accelerated way.
Yeah, I'll just add some quantitative pieces, so regarding the new versus the migration versus expansion.
Three points of our growth as of Q4 came from new we expect that to be roughly the same for the next quarter or two and then as CDP matures as our go to market efforts against that new opportunity increase we expect the portion of growth from new to increase in the back half of the year so that the.
<unk> of it but I'm on.
What is the piece Mike.
<unk> is going to be a big piece and underneath of migration. There is there is an element that will be a short term drag on <unk> growth and that is as customers move from a term license.
Two a prepaid consumption on the public cloud.
We recognize revenue on the consumption side of our business when it's consumed so youll go from potentially seeing a slight revenue drag at first when customers start moving to the cloud until their usage of kicks in.
<unk> of our quarters later, so that that is factored into our guidance as well so the biggest piece of the 62 two.
$2 50 is the migration of coupled with expansion.
Yes.
That's super helpful. Thank you both of that and then just one quick follow up again on a on a similar topic, but this one on form factor as you put it Rob.
Public cloud versus private what.
Where do we stand in terms of public cloud all of that.
The $16 million and it sounds like the driver for that new business coming in the door in the second half of next year is going to be driven by public cloud. Its the first of all on Thats been you've got the very explicit about.
Public cloud driving near term the next couple of quarters in quite some time. So I just wanted to get your latest thoughts on the mix of on the <unk>.
Form factors going into next year.
Sort of like so we think about CDP in terms of hybrid and obviously it has the public and private form factor.
And like what what are customers one of be able to have that high to enable the hybrid multi cloud data platform and and those workloads will move fluidly between private and public and across public clouds.
On.
And so we're not breaking out deliberately the amount of revenue allocation of consumption by tier if you will meaning public or private.
We as you see we've had acceleration of CDP in terms of current quarter at $60 million.
We are seeing of with the with momentum behind CDP in its adoption of our projections.
The CDP of generated a $250 million.
On a R. R in FY 'twenty two.
And that will be distributed as we've talked about between private and public.
I appreciate the thoughts thanks.
Yeah, absolutely. Thanks, thanks for joining changing.
Our next question on come from Rishi Jewel area of D. A Davidson. Please go ahead.
Hey, guys. Thanks, so much for taking my questions I wanted to start by by drilling a little bit into the guidance and specifically for next quarter.
Like if I look at the subscription guidance, even adjusting for the mix shift away from non recurring it is still calling for a sequential decline.
My estimates are correct, maybe maybe help us.
I understand what's going on in that guidance and what assumptions are being made into there.
And then maybe alongside that Jim I know you don't like billings, but.
We think about the billings guidance for Q1, maybe can you walk us through a couple of the puts and takes of of billings, you're talking about it being down double digits year over year, how much of that is from pull forward into Q4, as you mentioned versus CDP chefs of going from prepaid to a consumption based.
And then the headwinds from from obviously, the nonrecurring shaft and then I've got a follow up to the multipart question.
Yes so.
The sequential change in revenue subscription revenue in particular in.
Q4 to Q1 is driven by three things.
First and foremost of the number of days in the quarter that that's a little bit more than a 3% per test on the revenue.
The second piece is that.
Although were mostly vast majority of open source software, we still have some proprietary software on the proprietary software piece. There is upfront revenue that is associated with the functional.
Punctual IP.
Given the fact that close to 40% of our bookings occur in Q4, we have a seasonally high.
That shows up in revenue.
Once again this is why aren't the best measure, but youll see a big decline in net hip number from Q4 to Q1.
And the last piece of it is if you go on in the supplemental materials you can see the NR piece. So <unk> is also non recurring revenue is also stepping down Q4 to Q1, so those three things.
Our are what's driving the sequential decline if you strip out the nonrecurring revenue piece and you look at near over a year of growth rates for our recurring revenue.
Roughly 10% year over year.
On the billings piece.
Once again, if you move $40 million of Q4 billings back to Q1 and do the year over year math of Q.
One of the full year I think you'll see the growth rates net loss.
Estimate what revenue per car.
Alright got it. Thanks, that's helpful and then just on on CDP.
As a percentage of the business I appreciate the disclosure and great to see it at 8% around there of total air or how should we be thinking about that that number trending over time, I mean should just be a slow ramp up share gradually.
Massively accelerate maybe you can just help us understand what how we should be thinking about the mix shift on CDP as a kind of a total of era.
Yeah.
I'll start so.
Big picture, we think that more than half of our customers.
We have started a journey to CDP by the end of the Smith.
If you look at our guidance well no guidance cost items for our growth that means that we should have well over $400 million worth of <unk>.
So David with customers, who have started that journey now exactly how far they will each of them will progress and which of the skus will be entitled the rent CDP.
Just at the very start of this journey. So that's where the 250 comes from we're pretty confident.
I'm very confident of the $2 50 number how quickly it progresses to that $2 50.
How much upside there is above that $2 50.
I will tell you a lot more in 90 days.
But we're very very encouraged by the acceleration that's happening.
Behind the.
Over and above the adoption models that we had been anticipating and I think it's of Great Testament to the capability of CDP the value. It brings in the in the TCE O the disk drive it.
Wonderful. Thank you so much guys.
Thanks for your question will come from Jack Andrews of Needham. Please go ahead.
Good afternoon, and thanks for taking my question.
Rob you mentioned that obviously wanted to key metrics here is just overall adoption of CDP products. So I was just wondering if there's a way to parse out you know and in more detailed maybe which parts of CDP of really gaining traction you mentioned some of them around AI machine learning streaming, but just sort of way to maybe you can provide.
Some context from metrics around you know the penetration of the individual components and if there's a way to something.
Go deeper into.
How how these individual parts, maybe driving broader adoption of the CDB platform.
Yeah, I think I think that's really the real power behind the model and that.
You think about CDP as we've talked about in two form factors public and private.
On the highly differentiation of value creation as.
The interoperability for between public and private to enable a true hybrid hybrid data architecture, and then the be able to enable the entire Wi cycle of data.
And those analytics applications across that hybrid data with the common security and governance platform and framework right.
So with that.
What we what we see then is the the initial motion is the legacy customer base between cloud era, and the <unk> moving to CDP as a hybrid platform distributing their workloads between private and public the biggest portion of initially goes on.
Private than we see expansion.
To either depending on the workload type public or private that embodies the phase one and generally comes with.
He has the numbers as we talked about in the initial cohorts are driving about 120% net expansion.
Phase two then becomes around that adding net new workloads to either public or private but irrespective on the CDP and then within that sort of in parallel and beyond as vin, enabling the analytics applications.
For the hybrid platform and so those and the end of <unk>.
Two fastest growing.
Use cases that we have right now that we've indicated I think in previous calls remains consistent.
Now at end of our model through the year is streaming Nf L.
Those were growing well above our corporate growth rates.
Market sort of accelerating we're getting we're getting great acknowledgment of our leadership in the spaces.
Ed.
We're not breaking out the numbers instead of essentially we're seeing about roughly 25% of our IRR is.
Driven from those two use cases in particular.
And what we're now.
Seeing is incremental.
The net of them if you will as we talked about in some of our prepared remarks.
Talking about from a pair of remarks, the things that we're doing with apps and those sort of the prebuilt app for machine learning.
And as you.
As Youre aware of just refresh everybody on the call.
Most of the many of our customers.
And the big regulated industry that are heavily data driven.
And digital transformations are underway in those industries and across our customers and those who are in health care.
Manufacturing telco financial services.
On.
What they have done is built those mission critical applications and use cases for things like anomaly detection.
The demand forecasting churn money laundering network load management et cetera, et cetera, et cetera, we've been able to leverage our relationships from a co dev standpoint, and be able to take those industry templates put them across the machine learning.
That form and be able to get high value sing.
Single click through to deploy these the workloads on the CDP and a very accelerated timeframe. So that's driving incremental expansion across our customer base and also allowing us to move to acquiring new customers and new market sectors and expanding our presence in existing.
Industries, we've got strongholds in so it's beginning to have a compounding effect.
And it's just.
It's a great Testament to CDP now coming online.
And the.
The improvement in the ease of use of the.
The platform and now we're able to type of the lifecycle of experiences lay on to CDP hybrid create more value more traction and as we talked about again. This is another great example of why.
We don't want to spend resources on doing.
Legacy NR or work that don't have return on impact of the future we prefer to move those resources on the things like building more.
And more of the lifecycle service functionality, because it's going to accelerate adoption of CDP and drive net expansion faster.
I really appreciate that answer that that's super helpful. On just as a quick follow up Rob you had mentioned that one of your new.
<unk> would you touched on here in your answer was just the.
Bringing the bar, bringing onboard new customers to caldera and I was wondering if you you referenced sort of targeting line of business users as well as some potential mid market enterprises I was wondering if you could just shed some light on on how you plan to.
Target those because to my recollection I feel like those of different personas, then caldera has historically targeted.
It has been good question and I appreciate you putting that out there.
As absolute of very fundamental one core priority for us as the company certainly for me, but as a core operating.
And so just just quickly reflecting the room refresh everybody as we've been making the CDP transformation from the existing legacy platforms to CDP.
That has been a very big effort, because we have to make sure that cdp's hybrid platform is mission critical application ready.
To run those enterprise viable workloads at scale for our customers.
And.
And so to do that we've been largely focused on finishing the platform delivering the tech and making sure that we're servicing our customer base extraordinarily well on a high value high touch way.
And we were extraordinarily focused on our legacy customer base, helping them be successful in their current operating environments. As importantly on parallel helping them plan the blueprint of their migration to CDP to enable their hybrid data strategies right.
And as you see from the numbers we've delivered.
Certainly only in the last few months, having CDP hybrid available in market, but the work we've done with our legacy customer base and the planning process. We've gone through to get them moving is clearly showing up very quickly moving from 10% to 15% of the customer base the seed.
Driving $60 million of an IRR and another incremental 30 35 per cent of the customer base by the end of the year moving us to around the 250 plus million dollars CDP.
But what that really now does.
Give us the ability with the completion.
And of CDP.
Now leverage the war the making this team has been driving around digital transformation.
And the go to market motion the Scott and his team have built to now we can take through our product packaging.
Through our digital motion.
And get to a new customer base in the mid market that we've not been able to cost effectively either touch or cover as.
As well as now be able to take.
Either digitally and award of the lifecycle of experiences on a very targeted basis to the line of business users all of which will will drive net new adoption in terms of those CDP platform as well as the lifecycle of applications.
So we're super excited as you can tell.
The work that the team's been doing certainly over the last 12 to 15 months has put us in this position that now we can roll in and execute on line with the completion of the product and the enablement of the go to market motion and the digital transformation progress that we've made over the last 12 months.
Got it no that's really helpful. Thank you for taking my questions.
The next question, Thanks, Jack and the same.
The Crane of Bernstein. Please go ahead.
Hi, gentlemen, thanks for taking my question I was wondering if you could give me a.
A little bit of elaboration on how the pipeline in Q4.
Both for new customers as well.
Listing customer expansion, maybe compares to that end in Q2, and Q3, and then regarding the CRP O growing 16% over 50% faster than <unk>. This quarter to me that feels incredibly bullish and I think I understand the dynamics, there, but I would love to hear kind of in your words.
The third grade level of explanation of how to reconcile the much faster <unk> growth with <unk>. Thanks.
Okay.
I'll start with the <unk>.
The pipeline real briefly rough net color so.
My notes on RPM.
Show that total RPM growth on a year over year basis or is 9% current RPI on a year over year basis of 13%. So the 13 percentage just a couple of points higher than our 10 per cent AOR growth.
<unk> does not include.
The contracts with termination for convenience and Theres. Some other factors that will cause it to move slightly differently than <unk>.
I will say if you look at our current RPI of over the past several quarters, you'll see the growth rate averaging can be roughly <unk> now I'll always putting you back. The <unk> is the best measure for both of the economic activity that exists as of the end of the quarter and a predictor of where revenue is going to be in the future.
Regarding the pipeline in Q4.
The pipeline growth in Q4 is good.
And Virgin rates are also very good in the quarter. So we're pleased with how the market's developing.
On the new versus existing right now our focus is still primarily on our existing customers. The efforts that Rob talks about on new are forming now they're starting to gain traction, but we arent really counting on the big difference in the amount of new bookings until the back half of the year.
Right.
Yes.
Just to quickly touch on that.
There has been a lot of work that's been done in a very disciplined operating cadence.
Within our overall.
Motion to go from building.
<unk> for the various segments from the field digital and direct.
As well as make really learning and being very effective becoming much more efficient in converting that pipeline ultimately in the monetization.
And being able to do that in a way where we've been able to.
The move into the mid begin to move toward the mid market and line of business and make those conversions.
In a way that will be contributory in this year going forward and we will have the ability to build and expand on on the net new in those new sectors. The other thing that we're seeing really pretty strong benefit from is obviously the things that we're able to do in that digital motion that's been affected.
It is I think also contributing to the net expansion rate as the customers were moving to CDP with other line of businesses adopting those lifecycle.
Analytics applications. So again, we're seeing a compounding effect that's the.
And the great work that's happened in the in the digital transformation of the go to market motion disappoints.
Scott, making their teams of the enabled and the hard work they've put in over the last year.
Got it got it Super helpful. I Must've, misheard I thought I heard of 16% CRP of growth, but 13% makes a little bit more sense vis vis the the AOR growth.
Quick follow up question, the net dollar expansion rate of net retention rate.
Whatever you prefer to call. It how does that compare for those that have migrated to the CDP public versus those that have migrated to the.
Private and I ask that as an aspirational question recognizing you may not have enough data yet on the CDP public side.
And what's going to Echo what Rob said earlier, that's not how we look at the business. The these customers are moving to the CDP cloud hybrid cloud public and private.
We don't have it broken out.
Got it okay, great well, thanks, very much congrats guys.
Yes, Thanks I appreciate the time.
Our next question will come from the haul trucks of Northland. Please go ahead.
Alright.
Thank you.
Yeah.
Thanks for taking my question. So I just wanted to the the air or for the quarter was 10% year over year growth versus 12% in the prior quarter.
And.
Arguably it was an easier.
Year over year growth compare so what's the narrative on why there was a deceleration here.
Yes.
So.
Let me I'll start and Rob can add color so.
For this year, what we've been characterizing it as roughly a 10% growth as we're going through this transition to the CDP and in any given quarter, you'll see a move around so we were 10 11 12 10. So part of this is just the normal ins and outs of bookings.
That we've had in the quarter our.
Our Q4 last year was actually a pretty good quarter. So so so if you look at the sequential growth in Q4 of last year, you know the comp was up.
Good.
A piece of it I touched upon earlier and that is we're starting to see customers migrate to CDP and CDP public cloud, sometimes that migration. It takes the form of the prepaid credit where they're swapping out.
The $1 million of term license per $1 million of prepaid credits and as Theyre starting of CDP public cloud their usage and therefore, our revenue may be less on the public cloud than it was on Prem.
Yes.
Think of it very simply as really a timing issue.
So as they move from more closed that were being paid for on the subscription basis. The workloads that are on the consumption basis. It takes a bit of time for those consumption dollars to catch up with the subscription dollars, but I'll point out.
I'll point out that it's much better and healthier for us as a company and the financial model as we're making this transition to that target environment.
Okay, Great and then the.
<unk> heard of 5% net expansion rate, that's a phenomenal number that's great.
Congratulations.
I think the husband the ask a couple of times in different ways. Let me try to ask the explicitly that her 20 per cent net expansion rate can you break that down between increased nodes and increased functionality of slash basically getting increased price for the <unk>.
The peak.
Okay.
We're on.
We're not breaking it out at that level of granularity at this point.
And what we're seeing is that that expansion is really not use case driven.
As used case driven excuse me.
It's not price driven and so what that does is it increases the amount of consumption <unk> spend because obviously, they're using more of the platform in the in the levers that we have there right.
And.
So it's.
You want to think about it is dollar for dollar from legacy of state.
As is on CDP, but what happens is it unlocks incremental use cases incremental datasets that they want to add to that inside.
And it just accelerates and we are seeing as you see.
The continued acceleration and we think that will continue to exist on a on a go forward basis and just for clarity because.
Of the questions have been asked a couple of times CDP is about hybrid and so those work flow those workloads and use cases are going to be fluid between public and private cloud and so right now we're not breaking out.
The percentage of.
The allocation between the various form factors right.
Because that was sort of more predictive and healthy and true.
As the AAR our expansion.
Of the of leveraging CDP as the hybrid platform and Thats, where were seeing really nice traction again, it's driven by use case expansion incremental dataset expansion.
And those of whats, obviously, giving us better in the.
And and priest.
Net expansion rate.
Excellent. Thank you very much.
And your next question will come from Pat Wall Ravens of JMP. Please go ahead.
Oh, great. Thank you and congratulations on all of the progress on moving to the CDP. It it's of a.
The market will shift.
Rob if I can just ask you.
Because obviously the stocks yeah on whatever 10% of the aftermarket and there's clearly some confusion here. So did the did the performance of the sales organization meet your.
Our objective in Q4.
Pat Thanks for joining appreciate the question, yes, absolutely were astoundingly, yes, absolutely Oh, Okay alright.
Alright, great.
Not be happier Holistically is you guys, who know me you always want more but.
But I'm very very pleased with the execution not just in Q4, but through the year not just in terms of either the delivery.
All of the of delivery, especially given we're in a complete work from home remote environment.
And it's impressive results under any scenario.
But it's not just the delivery, but it's also the setup for the go forward that I'm most pleased with.
And how we built we're going to have the ability to build off of those momentum certainly in terms of execution, but even below that water on the.
The overall digital motion from creating awareness.
Going through a digital education process generating a great pipeline and getting very very efficient and the conversion of that pipeline to.
To the position of monetization that's what I'm.
Incredibly happy about because that gives us the setup and the platform for obviously continued scale in the being very tough on executing the model. We've outlined for you guys, but as importantly give us the ability to start touching the new market sectors I, we've talked about the mid market go into line of business and it's giving us.
The platform.
And reach to be able to now go implement and execute on that and that's a long that's a very long, yes, but it's much more than about just yes happy about the execution.
Alright, that's great and then my follow up Jim is gonna be per year, which is I'm sure you realized as youre preparing for this called the.
Stock was going to do on the aftermarket what its doing and so why do you think is like if there's one or two really important things of that you need to think we need to take away from this and then maybe we don't understand as well as we should what are they.
Yeah.
The NR or <unk> dynamics once again, we put a slide in our supplemental deck to try to give greater transparency.
And the messaging is once again, our growth of 10% for the first part of next year accelerating in the second half.
The recurring element of subscription revenue will be growing at that same rate of <unk>. So so you can see that the entire story in terms of.
Soft revenue growth guidance for next year is I'll do the NR.
And then as we discussed at the conscious very strategic decision. We made over the course of last year, the Reprioritise, our engineering resources towards the hybrid cloud.
Okay, great. Thank you both.
Thanks, Pat Thanks for the question.
We have no further questions at this time I will now turn the call back over to the presenters for closing remarks.
Oh, Great Hey, we appreciate everybody's participation.
Shouldn't be.
More excited about the execution of the team and the opportunity that's in front of us.
We've still got a lot of work to do as you know, we're we're very focused on execution incredibly pleased with CDP its progress the adoption rate we're seeing in it.
Obviously focused on continuing to make it easier to use faster to migrate to but we are clearly delivering the hybrid data platform, that's leading the industry and we know from a back that the enterprise requires of hybrid data architecture of many years to kind of and we're incredibly well positioned.
<unk> with us and looking forward the a great FY 'twenty two with the team and with all of you. So stay tuned and look forward to seeing you guys of about another 90 days.
Have a great rest of the week stay healthy and safe.
Yes.
Okay.
Concludes today's conference call. Thank you for joining you may now disconnect.
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