Talend Has a Strong IPO

Open source integration software vendor Talend has gone against the trend. In what has been seen as a tough market for IPOs, Talend had a strong IPO. It opened trading on the NASDAQ exchange under the ticker TLND at $27.66 after pricing its IPO at $18 and raising $94.5 million.

Talend’s Offerings

Talend is a French company with its headquarters in Redwood City, Calif. It was founded in 2006 by Fabric Bonan and Bertrand Diard. It sells software that helps organizations organize their existing databases and information resource. Its data platform Talend Data Fabric and open source approach simplifies the development process, reduces the learning curve, and decreases total cost of ownership to realize the full business potential of data faster.

Its products cater to all integration needs ranging from cloud integration, application integration to data integration. It has more than 1,300 customers, including Air France, Citi, Sony, and General Electric. Maintaining this client base and attracting large new corporate clients was the part of the reason Talend chose to go public.

It currently has more than 120 close partners including Cloudera, Hortonworks, MapR, Amazon Web Services, Accenture, and Capgemini. It recently introduced the commercial version of Talend Data Preparation, a governed self-service solution for accelerating data usage and collaboration.

Talend’s Financials

Talend recently reported second quarter results that beat revenue and earnings forecasts. Second quarter revenue was $25.4 million, up 38% over the year and exceeding analyst estimates of $24.4 million. International Financial Reporting Standards (IFRS )net loss was $8.1 million compared to IFRS net loss of $4.3 million a year ago. Non-IFRS net loss per diluted share was $1.84 compared with $0.97 per diluted share a year ago. Its pro-forma non-IFRS net loss was $0.31 per share, beating analyst estimates of $0.34.

Subscription revenue was $21.2 million for the second quarter of 2016, up 40% over the year and accounted for 84% of total Q2 revenue. Professional services revenue was $4.2 million for the second quarter of 2016, 30% y-o-y and accounted for 16% of the revenue.

For the third quarter of 2016, Talend expects revenue in the range of $26 million to $27 million. IFRS net loss is expected to be in the range of $8.7 million to $7.7 million or $0.31 to $0.28 per share and non-IFRS net loss is expected to be in the range of $7.5 million to $6.5 million $0.27 to $0.24 per share. Analysts expect loss of $0.25 per share on revenue of $25.7 million.

For the full year 2016, the company expects revenue in the range of $103 million to $105 million. IFRS net loss is expected to be in the range of $29.7 million to $27.7 million or $1.15 to $1.07 per share and non-IFRS net loss is expected to be in the range of $26.1 million to $24.1 million $1.01 to $0.93 per share. Analysts expect revenue of $101.6 million and loss of $0.97 per share.

Before going public, Talend generated revenue of $76 million in 2015. Its subscription revenue grew 39% over the year to $62.7 million. Net loss was $22 million for 2015.

Talend was a venture funded company and had raised $101.58 million from investors including Balderton Capital, Bpifrance, Chausson Finance, Galileo Partners, Idinvest Partners, Iris Capital, Silver Lake Partners, Silver Lake Sumeru, and Sumeru Equity Partners. Although it is unprofitable, what I like is that it hasn’t set unrealistic expectations with a billion dollar valuation.

Its stock is currently trading at $28.30 with a market cap of $786 million. It slid from a high of $34.49 following the confusion over its earnings, which was mostly a case of lost in translation. Analysts were disappointed with its high non-IFRS net loss, but the company clarified later that they should be looking at the pro-forma non-IFRS net loss, which beat analyst estimates.

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