Talend CEO: managing ‘quality’ of data is a market set to explode
Shares of data integration and transformation specialists Talend are up roughly 12% at a recent $31.54 since the company reported earnings on May 6th, delivering a beat on both the top and the bottom line, and forecasting revenue this quarter in line with consensus, a big relief in an environment where COVID-19 has made forecasting a very precarious business.
As she has done before, chief executive Christal Bemont spoke with Capital Market Labs following the report. Bemont took over in January from Mike Tuchen, so she came in after the start of the quarter, though before the COVID-19 lockdown.
Highlights of the chat included a very upbeat assessment by Bemont of how Talend staff were able to keep momentum going in the quarter despite the imposition of shelter-in-place measures at the beginning of march.
While cultivating something of “a healthy paranoia, which I think you have to have at this time,” Bemont expressed a conviction there’s increased opportunity in a “new normal.”
“We believe that on the other side of this there's a great opportunity even more so than maybe we saw coming into it.
Of particular focus is “data quality,” an area where she sees a potential “explosion” of demand.
“Just having more data doesn't do anyone any good. It’s having access to the data that, then, refine it into a place where it’s quality data, that then you can go to do something with.”
To recap, Talend delivered revenue of $68.12 million, up 18%, year over year, and a net loss of 13 cents per share. That was better than consensus for $65 million and a 16-cent net loss.
For the current quarter, the company sees revenue in a range of $65 million to $67 million, and a net loss of 31 cents to 34 cents. That compares to consensus for $66.5 million and negative 40 cents per share.
Capital Market Labs: How has this transition been for you to have people offsite and keep things coordinated?
Christal Bemont: Well, I have to tell you, if I had to guess how most organizations would work, and not having the experience and the muscle built with Talend to know exactly what that would look like, having just come in, I am beyond pleased, and just thrilled with how well people transitioned into the off-site working.
And the roles that are, like, typical customer-facing, the majority of people were out, and you know, and that’s more the distribution. And I’ve been quite amazed at how well people have altered their course of interaction, and not let productivity or results slip as a result of it.
It’s amazing. And especially because they have a lot of other things going on. It’s not like just working remote, it’s all the other things that we are talking about.
So, I’ve been — I probably wouldn’t have given this kind of outcome as — meaning, the productivity levels — because I would have thought, well, certainly it would decrease. I’ve been amazed, I’ve been very pleased with it.
CML: The valley went into lockdown earlier than some other places in the country…
CB: Yeah, it’s like the second week of March. It was that Friday, I think, right around the second week. And it was then kind-of pushed a couple times. And now through May.
CML: Right, it seems to be the Valley is expecting that through this month things will stay as they are…
CB: Pretty much, yeah, I think for all intents and purposes. And then kind of what will be after that, you know, TBD.
So we’re looking at a little bit of a new norm, I think, to be quite honest. To some degree.
CML: Right. Congratulations, it’s a nice quarter, and a nice outlook. I throw it open to you first, Christal, what things would you like to emphasize that you think investors should take away from the results and outlook.
CB: Well I really appreciate that, and thank you for your compliment. I’m really incredibly proud of the team in a couple of different ways.
One in how they showed up to really adjust to all the things we were just talking about to perform on a number of different levels that drove to better-than-expected outcomes. And then we had a number of employees as well as our customers that really showed up to participate in trying to solve for COVID-19.
I think on all of those levels just, you know, because one alone isn’t really you know like, they’re great to, great to see.
But I think when you look at the combination of how this company came together.
How, you know, how the results showed up in the numbers, and then how — the impact from a contribution to trying to, you know, resolve COVID-19, or at least, you know, do a better job with it, on the data front, it was really just good to see that.
So I think it was the whole thing coming together that was really a great testament to people as well as results.
Yeah, I think the other thing is just the, you know, kind of what we’re seeing from our customers, and how their customers, and even the market, how it’s, you know, kind of — what now for them? And you know digital transformation is probably more prevalent than ever right now.
But I think the fact that for the first time in maybe my history, certainly, maybe all of our history, is that the patterns and the things that people look out for to go make the decisions and make informed decisions no longer exist in the same way that they apply to these conditions.
Everyone’s kind of looking at a whole new set of data and trying to figure out what their new norm looks like. And because of that, it really started to call the importance of having data that is all the data, the complete set, but the data that you can really trust.
And it really starts to spearhead this, this idea around how important the quality of it is and the integrity of the data. Those are things that I really started to see become prevalent throughout the quarter.
CML: And, Christal, do you see that there’s a net impact to take rates or cross-selling of any kind? How’s the willingness of people to spend now versus what it was 60 days ago?
CB: It varies. There are the — the blessing that we have right now is we’re very diversified in a lot of ways.
So we’re diversified in the industries we serve, certainly like, very, almost like an equal mix. We’re diversified in geographies, and we’re diversified on size of customers.
So, it starts with having — we’re not over-indexed to any one area. And that helps us right away. Because there are differences that we see.
Like, healthcare is really under a lot of strain right now. But health care is an area where we’re really seeing a lot of people, a lot of our customers as well as prospects, need to have data more than they’ve ever needed data before.
And so I think that it depends. We’re seeing you know what you would expect in some like travel and leisure and some of these places where their priorities and their ability to spend has just been recalibrated.
And we’re seeing I think the ones that you see across the entire macro view. But we are seeing, equally, you know, people that have — the importance has been elevated. So, it’s a blend of what I’m seeing.
But definitely there are people that just have said, I need to hit the pause button.
Something interesting that happened in Q1: almost dollar-for-dollar on this statement, for every deal or dollar that was delayed into a future quarter, we were able to replace in the quarter with deals that came to us that weren’t in our pipeline prior to that, prior to the quarter.
And that’s a pretty, that’s kind of the stat that I look at that substantiates kind of the thing that I believe we’re seeing, is, some are saying, I have to pause, and then others are saying, I need this now and the urgency just increased.
CML: And are those — Is it clear, Christal, to what extent those are coming from, are there direct deals or are they channel deals? Does it matter?
CB: It is a combination. Partners are really important to us and they definitely played a big role in our Q1 performance. But we’re seeing the story around Q1 is its the blend.
I’ve looked for every indicator that, what’s the one thing that is, like, absolute. And it doesn’t exist right now.
I’m actually looking for still the absolute of what is the one thing that is, like, either not working or working really, really well. And it really is a blend.
So we’re seeing it come through fast in some cases, meaning that the deals like I just mentioned in Q1.
And then we’re seeing it come — and then we’re seeing some that are obviously seeing the places that you would kind of expect based on what you’re seeing in the industry. But the rest of it is a blend, really.
CML: And so you have not just from your CEO role Christal but from your former chief revenue officer role have a sense probably of dynamics that can happen.
And so how do you prepare yourself and the team going forward? Because what’s happening this quarter may not be what happens in you know 90 days after this quarter or even 30 days….
CML: So how do you prepare for that? Because there are flows and things can change….?
CB: Yeah, it’s a very intentional mindset. And there’s two or three things that it’s centered around.
The very first one is a decision about whether you’re going to continue to work on the things that are critical to your business evolving. And that is a mindset that says in the face of these unprecedented times, not knowing the degree of impact or the length, are you going to hunker down and just hold on, and survive, or are you going to come out stronger?
And we’ve made the very intentional decision that we’re going to continue to invest and work on things.
Because our belief is that these things that are happening right now are going to require people to need things that Talend provides.
And we believe that on the other side of this there’s a great opportunity even more so than maybe we saw coming into it. So I first root it in, what’s our belief system?
The secondary part of that is, taking how we look at the business, on a much smaller scale in terms of timeframe. So this isn’t looking at monthly or quarterly patterns.
I literally am looking at a different sets of variables or key indicators. New ones that we’ve never looked at. I wouldn’t say never looked at, but they weren’t the things that we would pattern our business on.
But I’m looking at very short time lines, and I’m looking at multiple variables, key indicators that tell me, do I see trouble coming.
And, I think, saying in a very healthy, realistic view that you should expect that we’re going to see different things but just not knowing if or when you will, helps you stay really healthy, a healthy paranoia, which I think you have to have at this time.
CML: Are there — I’m sorry, Christal, are there any examples you can give of what those kinds of things are?
CB: Sure. I mean, some of the things that we’re talking about right now, really dissecting, are there going to be pieces of not just these big macro trends on, you know, industry, but a couple layers deeper on, what within those things?
So, like, for example, who are the people that are going to be able to let’s just take an SMB, the SMB kind of segment. We typically fall at the high end of the SMB segment.
And so we, we’re really the upper end of mid-market. So when I look at that, you know, SMB, if you look at it as a whole, and you just take that at the wholesale comment, you might look and say, that’s a huge risk.
But when you really start peeling back and start looking under the covers two or three layers and say, who, within these big swatches of your business are actually in a situation where they need what we have, versus the ones that just completely hit the pause button for some period of time, it really causes you to start going two or three levels deeper on not just taking a blanket statement and saying, OK everything in SMB is going to be in a tough state.
It’s probably more going more narrow in the view versus that it’s completely different categories.
It’s getting really granular into finding the places and the people that are needing this data integration, data integrity, as part of how they move forward. And that is where we’ve been spending a lot of our time.
CML: Which means, it sounds to me like, you follow some customers and some customer segments more than others, perhaps, with your resources to be optimally attuned to them.
CB: Totally. This is about high efficiency and high effectiveness. Really focusing on — this isn’t the point where you want a massive amount of a pipeline to go work on a bunch of deals.
You want to be extremely prescriptive. It fits nicely with the movement we were making to pattern towards that in our field execution.
You know, I come from a belief system of you know it is quality over quantity.
And the more effective and efficient you can be with your resources and the better you can be tuned to knowing exactly what the message is that that’s going to resonate with the right people, that solves the right problems, and you really focus on treading through that, I’m not trying to cast for everyone, I’m trying to be very specific to the problems we can solve for the people who need us to solve them right now.
CML: What did — when you said on the other side, I think you said, Christal, the other side of this, meaning, whatever takes place in months, quarters, years to come — you seem to say to me that you think that there is some expanded opportunity for Talend. Can you tell me what you think that might be?
CB: Well, it goes back to just the core beliefs that I have around, is the space that we fill still relevant, and will it continue to be relevant?
And I believe the answer is yes, holistically and wholeheartedly. In the ability to integrate data.
The expansion of that’s going to be, I believe, data is a very active, moving event that happens where there’s lots of different types of data that we need to make sure that we’re making available to our customers, so they have a complete set of data to look at.
Because the more types of data that they have, the more complete and maybe even different picture that they have. And those types of data sources just continue to expand by the minute.
So I believe that that just continues to grow. I think the part that I’m really, I think, most excited about but also see maybe a potential explosion around, is how important it is to make sure that the quality piece of it continues to be expanded for people to be able to have meaningful outcomes.
And so just, so, this is where the first part to create a problem. Just having more data doesn’t do anyone any good. It’s having access to the data that, then, refine it into a place where it’s quality data, that then you can go to do something with.
And it’s those two things together that I believe because of just the nature of our world, and how many different sources we have, and how quickly data keeps popping up in lots of different realms, that that will continue to be the case.
Why I think that it’s going to continue to be more important than ever, is, I think this is a moment in time in our world where people have to reinvent themselves, meaning, the customers that we have.
And they’re going to have to continue to look at things in a completely different way, and be challenged to show up differently to serve their customers differently and to do business in a way that they’ve never, not only physically, but also how they instrument their business.
And so, this is just an inflection point that I think just puts the pressure on how important those two things are.
CML: And does that translate, Christal, to going further into the stack from mere ETL automation to other aspects, does it expand the portfolio?
CB: Yeah, I think it does over time. I think it has us looking at ways that we can look at different types of, you know, I’ll just, use the quality piece of it for a minute.
You know, how do we continue to expand the quality attributes and the aspects of what was just delivered in winter and the winter release with the inventory where you can see exactly what your health of your data looks like?
Like, that’s a pretty important topic or concept that if you go to someone and you say, Hey, what is, you know, if you sat down with customer XYZ and said, you know, what is the status or health of your data, it’s a very difficult question for people to answer right now.
I don’t know that most people could. And so I started to think about the quality index and the health index of what goes into that, and how important that can be for a lot of different aspects of a business. And so, I believe that’ll continue to expand.
And then the different types of data like I mentioned on the earnings call: streaming data, looking at IoT data, how do we find what’s the next data that’s going to be available that maybe we’re not thinking about?
I think there will be expansion into the quality aspect, and then also the different data sources, and how we leverage data more effectively.
CML: Is there anything you wanted to add, Christal, that we haven’t gone over?
CB: I think we got everything. I just appreciate the time, and it was great to speak with you again.
CML: Congratulations. Seems like you’re doing a great job out of the gate. So, keep up the good work!
CB: Thank you, my friend.
CML: Thank you, stay safe.
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