Cloudera, Inc. (CLDR) - 10-Mar-2021
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10-Mar-2021
Cloudera, Inc. (CLDR)
Q4 2021 Earnings Call
Total Pages: 23
1-877-FACTSET www.callstreet.com Copyright © 2001-2021 FactSet CallStreet, LLCCloudera, Inc. (CLDR) Corrected Transcript
Q4 2021 Earnings Call 10-Mar-2021
CORPORATE PARTICIPANTS
Kevin D. Cook James W. Frankola
Vice President-Corporate Development & Investor Relations, Cloudera, Chief Financial Officer, Cloudera, Inc.
Inc.
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc.
.....................................................................................................................................................................................................................................................................
OTHER PARTICIPANTS
Chad Michael Bennett Zane Chrane
Analyst, Craig-Hallum Capital Group LLC Analyst, Sanford C. Bernstein & Co. LLC
Sanjit K. Singh Nehal Sushil Chokshi
Analyst, Morgan Stanley & Co. LLC Analyst, Northland Securities
Rishi N. Jaluria Patrick Walravens
Analyst, D.A. Davidson & Co. Analyst, JMP Securities LLC
Jack Andrews
Analyst, Needham & Co. LLC
.....................................................................................................................................................................................................................................................................
MANAGEMENT DISCUSSION SECTION
Operator: Good afternoon. My name is Gabriel and I will be your conference operator today. Welcome to
Cloudera's 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 will be a opportunity to ask
questions. [Operator Instructions] Please note this conference is being recorded.
Your host is Kevin Cook, VP-Finance, Corporate Development & Investor Relations. Kevin, you may begin your
conference.
.....................................................................................................................................................................................................................................................................
Kevin D. Cook
Vice President-Corporate Development & Investor Relations, Cloudera, Inc.
Thank you, operator. Good afternoon and welcome to Cloudera's fourth quarter fiscal 2021 financial results
conference call. We will be discussing the results announced in our press release issued after market close today.
We have also posted today's prepared remarks and supplemental materials on Cloudera's 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 Cloudera with me are Rob Bearden, President and Chief Executive Officer; Jim Frankola, Chief Financial
Officer; Arun Murthy, Chief Product Officer; and Mick Hollison, 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
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Q4 2021 Earnings Call 10-Mar-2021
company. Generally, these statements are 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 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 of acquired intangible assets and extraordinary non-
cash 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 Cloudera's 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 and a 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 a 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
today are based on assumptions that we believe to be reasonable as of this date including those related to the
impacts of COVID-19 on our business and global economic conditions.
The 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 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 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 or future events.
Now, Rob Bearden, CEO.
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc.
Thank you, Kevin. Good afternoon, everyone. Thanks for joining us to discuss our fourth quarter and full year
fiscal 2021 results. Today, we'll quickly reflect on FY 2021 accomplishments, discuss how we're positioned for the
current fiscal year and review our financial results in Q4 in detail. In all, we executed extremely well in Q4,
throughout fiscal year 2021 and the opportunity for Cloudera has never been larger.
Let's begin with our 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 at the conclusion of the quarter, representing 10% year-over-year organic growth. It is noteworthy that
Cloudera Data Platform, or CDP, demonstrated significant momentum in the quarter.
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Customers migrating to CDP increased from about 10% of our customer base at the time we reported Q3 to more
than 15% of our customer base today, which is well ahead of plan. Most impressively, ARR from CDP now
exceeds $60 million of total ARR. Please note that there is no year-over-year growth comparison for CDP as
we've only had hybrid cloud offerings in the market for few months now.
And these early migrations really validate customer demand for our hybrid data cloud platform and the new use
cases that we address with CDP. These use cases enable the full data life cycle, from data collection, to
reporting, predictive analytics and AI. This adoption momentum and enthusiastic customer feedback
demonstrates that we have the right strategy and it's working.
The adoption of CDP for hybrid data cloud and data life cycle use cases is what will drive future growth and we're
very happy with our progress to-date. And we'll spend more time on each of these items later in the call. So, in
fiscal 2021 we delivered on a number of key objectives that set us up for continued success this year.
And I'll mention just a few of these accomplishments: First, from a product perspective, we delivered the industry's
first cloud-native hybrid and multi-cloud data and analytics platform that meets the needs of large enterprise
customers for mission-critical, data-driven applications. In addition, we developed an integrated suite of analytics
capabilities that service use-cases throughout the life cycle of data, from the Edge to AI.
We also completely rebuilt our data platform with a modern, containerized architecture that separates compute
and storage, marking the definitive end of the Hadoop era and empowering our customers to migrate to the hybrid
data cloud architecture they want. And we executed on a number of critical digital and business transformation
initiatives, making everything from CDP trials to customer support faster and 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 offerings. Importantly, we also produced steady
organic growth above expectations, and gained efficiencies that drove operating income margins on a non-GAAP
basis from negative 5% for fiscal 2020 to a positive 17% for fiscal 2021.
In closing, fiscal 2021 was a year of important transformational work designed to position the company for growth
and to capture the market opportunities that are right ahead of us. So, as we consider the opportunity for fiscal
2022, we remain firmly convicted that enterprises will require a hybrid and multi-cloud data architecture for many
years to come.
Enterprises want the agility, ease of use and elasticity of the public cloud and the performance, security and cost
advantages of the private cloud and only CDP can deliver both, enabling customers with a modern platform to
manage their hybrid architecture and analytics applications.
Now let's briefly discuss CDP's traction to-date. For many of our customers, the general availability of CDP
Private Cloud late last fall started the beginning of their migrations from legacy Cloudera and Hortonworks
products to CDP. Over the course of just a few months, nearly 300 customers have begun to move some or all of
their workloads to CDP.
This represents more than 15% of the customer base and is excellent traction since last quarter. For example, in
Q4 we saw strong customer adoption of CDP hybrid, Private and Public cloud by customers like Telecom Italia,
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ExxonMobil and Daimler and we're extremely pleased with this progress in the short time that our hybrid data
cloud offering with CDP has been available.
In terms of the economic impact of CDP, we're seeing that our customers who deploy CDP are growing faster
than the rest of our customer base. We only have two quarters of history, but these customers had a net
expansion rate in excess of 120% for the Q3 and Q4 cohort of CDP adopters. And this growth is consistent with
our customers moving to modern hybrid data architecture and beginning to deploy new use cases in the cloud.
We believe that most of our customers will move the bulk of their existing workloads to CDP Private Cloud first.
As you know, many of our customers have large data sets and manage mission-critical applications that may not
be good candidates for public cloud deployments. Their objective is to create a modern, hybrid data architecture
and to selectively leverage public cloud infrastructure to extend existing use cases and to build complementary
new ones.
As a public cloud platform, CDP enables customers to easily and rapidly develop new use cases using cloud-
native services. And since the introduction of CDP Public Cloud, we've made major advances in product breadth,
functionality and quality to meet the requirements of both the existing and new enterprise customers.
As a result, we're now in a position to benefit from the key industry trends of data and workload 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, and we're fully engaged with these
customers to assist them with that migration planning and to accelerate the rate at which the clusters and
workloads are moved to CDP.
As a result, we believe that we can grow CDP ARR to more than $250 million in fiscal 2022. And we're going to
talk in a minute more about our priorities in fiscal 2022 to meet these goals that I just outlined.
Okay. Now that we've covered our accomplishments in FY 2021, discussed our strategic outlook for FY 2022 and
shared our progress on customer migrations, let's now turn our attention to the technology and functionality that
distinguishes CDP in the marketplace. So, to level-set for everyone, CDP is a hybrid multi-cloud data platform in
an integrated suite of analytics applications. It has two form factors, public cloud and private cloud, which share a
common security, governance and management framework that's powered by Cloudera SDX. This delivers a
hybrid data cloud architecture, which allows our customers to optimize the performance cost and security of data-
driven applications across their entire enterprise. And this is a completely new architecture that's divorced from
what people used to regard [indiscernible] (00:11:52).
But this allows for easy migration from those legacy platforms to this next-generation data cloud. And this
interoperability of CDP Public and Private is highly differentiated, delivering true hybrid cloud functionality. CDP
offers our customer one holistic environment that spans multiple public and private clouds. And CDP's separation
of compute and storage and its use of Kubernetes container technology also means that the user experience is
nearly identical in CDP Public and Private.
Importantly, CDP is also secured by design and supports the full life cycle of data. That means CDP can solve
real business problems in a wide variety of use cases for both structured and unstructured data, ranging from
streaming analytics to AI. And although this strategy is definitely hybrid in multi-cloud, the advancements we've
made recently with our public cloud services are important.
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Each of these services is built to deliver tremendous value in terms of TCO and ROI for our customers. And this
was clearly demonstrated in a recent cloud data warehouse study conducted by an independent third-party
analyst firm, and it was published by GigaOm. And in this particular evaluation was an analytics performance test
that was derived from the industry standard TPC Benchmark. CDP Data Warehouse ran the field test 20% faster
and more cost-effectively than our nearest competitor. And I'd encourage you to check out the results for yourself
on the GigaOm website.
And while we're understandably proud of our performance in the cloud data warehousing space, we're also
making significant progress in our streaming and machine learning solutions. Streaming remains one of our
fastest-growing businesses. Our strategy is to offer the most comprehensive set of functionality for enterprise use
cases including ingestion, flow management, messaging and real-time analytics.
As part of CDP Public Cloud, streaming and Flow Management have quickly become two of the most popular use
cases. Also later this month, we plan to deliver the streaming SQL capabilities we gained through the Eventador
acquisition in CDP Private Cloud. This functionality will enable our customers to query real-time streams through
an intuitive user interface that includes visualization and dashboarding capabilities, driving increased adoption of
our streaming offerings by data and business [indiscernible] (0:14:21).
Complementing our success and strength, CDP Machine Learning empowers our customers to rapidly build
machine learning models and deliver production use cases with integrated security and governance. As you may
recall in Q3, our CDP Machine Learning Service was recognized as a leader in Forrester's recent Wave for
Notebook-Based Predictive Analytics and Machine Learning.
In this quarter, we introduced a revolutionary new way to deliver enterprise ML use cases. Cloudera AMPs or
Applied ML Prototypes. These are prepackaged applications that enable complete machine learning projects to
be deployed with one click directly from CDP Machine Learning. And some examples of the pre-built apps that
we've made available include churn modeling, deep learning, anomaly detection, demand forecasting, and model
compliance. And this effort significantly enhances our offering in the fast-growing ML/AI markets.
Okay. So, as you've seen, we've delivered several new and highly-differentiated solutions in FY 2021. Our R&D
efforts will now be focused primarily on simplifying migrations to our CDP hybrid platform and delivering cloud-
native services on CDP Public Cloud. We've also made very targeted adjustments to our go-to-market model as
the year unfolds to accelerate growth and enable a cloud-first business model that focuses more on new
customer acquisition.
Specifically, we have several key priorities for fiscal 2022. The first is to promote hybrid data cloud adoption. This
effort is already well under way as evidenced by the strong ARR performance in CDP in Q4. Early indications are
that customer demand remains high and CDP adoption will continue to accelerate.
Second, [ph] we've significantly newer (00:16:12) innovation plan for CDP in this fiscal year. We're dedicating
more than 65% of our R&D dollars to public cloud services and hybrid cloud product development. And as
discussed, we see big opportunities in streaming ML and applied AI. And together, these are our fastest-growing
businesses and we intend to enhance our differentiation in each of these areas throughout fiscal 2022.
And next, over the course of FY 2022, we're making a deliberate shift in our go-to-market focus from almost
exclusively existing customers to also now attracting new ones. We'll accelerate our business transformation to
advanced digital customer engagement, including increased marketing spend, with a portion directed at customer
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segments [indiscernible] (00:16:57) our traditional, large enterprise customer base. This is designed to lower our
customer acquisition costs and expand our market opportunity to midsize enterprises and a lot of business users.
In addition to targeting these segments, we plan to formalize our efforts to attract nonpaying users of our
software. This is really pretty straightforward and nearly all of our compiled software is accessible only with a
subscription. And since adopting the Red Hat distribution model, we've already had meaningful success in
converting nonpaying users to subscribers and we intend to expand on this success in FY 2022.
Finally, as mentioned, we have begun to prepackage a handful of our most common and highest-impact machine
learning AI use cases in the form of Applied ML Prototypes. These one-click apps make it easy for customers to
deploy machine learning AI use cases using CDP Machine Learning. There seems to be a strong market demand
for applied ML and AI apps. But if packaged this way, we believe these prototypes will accelerate CDP ML
consumption. And as a result, we plan to invest in the development of 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 firmly believe that our hybrid and multi-cloud strategies [indiscernible] (00:18:21) for our customers and
our business. And we're entering FY 2022 with a new [indiscernible] (00:18:26) customer migrations to CDP are
accelerating with our CDP hybrid and multi-cloud solutions that are now in market.
That said, there's still much to do. And as we continue to simplify and harden our products, it'll make them easier
to use and ready to address our customers' mission-critical use cases. We must also accelerate our business
transformation to 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 a new strategic partnership.
As many of you know, semiconductor technology's become increasingly important for machine learning and AI.
And it's critical that advances in analytic software match the advances in silicon that are optimized for GPUs. And
as a result, Cloudera and NVIDIA have partnered to deliver massively accelerated processes for enterprise data
engineering and data science workflows on CDP. And with NVIDIA, GPUs natively integrated into CDP,
customers will now be able to more rapidly perform better workflows across any on-premise public cloud or hybrid
cloud deployments at lower cost, and we're excited to partner with NVIDIA and expect this alliance to help
differentiate our solutions in many ways. So I'll stop there.
Jim, would you please now review the financials?
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James W. Frankola
Chief Financial Officer, Cloudera, Inc.
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. Subscription 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. Note, information regarding definitions and trends can be found in
today's press release or the supplemental materials on Cloudera's Investor Relations website.
As we enter a new fiscal year, I'd like to begin with an update on recorded financial and non-financial metrics that
we use to manage the business. Some of the metrics that we have tracked and reported in the past have lost their
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utility, a predictive character as our business model has evolved. We will cease using some metrics and begin to
introduce others for fiscal year 2022.
For example, when we were predominantly an on-premises business, we used to help customers only after they
reached $100,000 of ARR. To complete the fiscal 2021 disclosure, we concluded Q4 with 1,005 customers who
started at or have grown to more than $100,000 of ARR. 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 and commencing an economic relationship based on consumption
revenue of a few dollars per hour, this is exactly what we want to have happen from a cloud-first standpoint.
However, it is likely to take several quarters before such a customer eclipses $100,000 of ARR. To be clear, the
expected ramp in new customers will be modest in the first few quarters of fiscal year 2022 as we focus on
supporting our existing base as it upgrades to CDP. In this regard, million-dollar plus ARR customers are still
important and we will continue to track these. In the fourth quarter, we increased this number again by a record
amount from 179 in Q3 to 190 in Q4, an increase of 23% year-over-year.
As fiscal 2022 progresses, we expect the contribution to ARR growth from new customers to increase.
Accordingly, we will disclose the proportion of ARR growth from new customers versus existing customers. In Q4
of fiscal 2021, 3 percentage points of the 10 percentage points of ARR growth came from new customers.
With respect to CDP, we will evolve the metrics to match the state of the business. The primary measure of
progress in the short term is the continued adoption of CDP products by the customer base, and total ARR for
CDP. Therefore, we will track and share the percentage of existing customers that have initiated an upgrade to
CDP as well as the ARR dollar value and growth rate for CDP. For additional context, while the fourth quarter was
marked by record profitability, our operating margin came in roughly 4 percentage points higher than normalized
Q4 levels due to lower travel and facilities costs because of the pandemic.
Among pandemic-related items, we reviewed our real estate portfolio and have taken a $36 million impairment
charge to reflect that anticipated sublease income will be less than lease payments. This 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 to GAAP results in
the press release issued earlier today. Our non-GAAP measures exclude stock-based compensation,
amortization of M&A-related intangible assets, and extraordinary non-cash real estate impairment charges.
Total gross margin for Q4 was 85% 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. Top line growth and ongoing operational
efficiencies are driving our strong cash flow. Diluted earnings per share was $0.15 in the fourth quarter compared
to $0.04 in the fourth quarter of fiscal 2020.
For the full year of fiscal 2021, total gross margin was 83% compared to 76% for fiscal 2020 while subscription
gross margin for the full year was 90% compared to 87% for last year. Operating expenses in fiscal 2021 were
$572 million or 66% of revenue compared to $646 million or 81% 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
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Q4 2021 Earnings Call 10-Mar-2021
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 $0.45 in fiscal 2021 compared to a loss per share of $0.13 in fiscal
year 2020.
Now, turning to the balance sheet. We exited Q4 with $773 million in cash, cash equivalents, marketable
securities and restricted cash, up from $568 million at the conclusion of Q3. Note, in December, we executed a
term loan of $500 million on favorable terms, equating to 3.25% floating rate for seven years. At that time, the
board also approved a corresponding $500 million share repurchase authorization. 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. RPO was $954 million, up 9% year-over-year. Current RPO
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 and for fiscal year 2022, 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 million and $218 million, representing approximately 3% growth compared to Q1 of
last year, with subscription 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 metric. We expect operating income for the first
quarter to be in the range of $28 million to $33 million or roughly 14% of revenue. Diluted earnings per share for
Q1 is projected to be $0.07 to $0.09.
For fiscal year 2022, we expect total revenue to be between $907 million and $927 million, representing
approximately 6% growth, with subscription revenue in the range of $822 million to $832 million, up approximately
6% year-over-year. We expect to steadily supplant revenue from traditional products with revenue from CDP
throughout fiscal 2022. By the second half, growing CDP Public Cloud consumption revenue and CDP expansion
activity will begin to push ARR higher. Driven by CDP momentum, we expect ARR to grow by at least 10% year-
over-year for the first two quarters of fiscal 2022 and 1 or 2 percentage points faster for the second half of the
year. Once again, ARR 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, ARR is expected to grow faster
than subscription revenue due to an intentional decline in nonrecurring revenue, particularly nonrecurring
engineering.
Nonrecurring revenue is reflected in subscription revenue on the income statement. Nonrecurring revenue is an
artifact of our on-premises business and is not strategic. 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 2021 to approximately $20 million in fiscal year 2022. To be clear, the recurring component of
subscription revenue is expected to grow in line with ARR at 10% or higher.
With respect to spending, using fiscal year 2021 as a baseline, we expect the following trends in fiscal 2022.
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 percent of
revenue as we make investments in the hybrid data cloud market opportunity and planned CDP adoption.
Expense will grow due to increased resources associated with traditional go-to-market motions as well as
investments in digital transformation, in particular, creating new go-to-market motions to build awareness and
drive consumption of CDP. In addition, we anticipate travel expenses to increase in the second half of the year.
R&D will be flat as a percent of revenue as we shift the focus of our engineering teams away from the heavy work
required to develop CDP, to building increased functionality and extending CDP's reach. G&A expenses,
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excluding expanded facilities expenses, will continue to decline slightly. These trends will result in fiscal year 2022
operating margins of approximately 16%, down slightly from fiscal year 2021 due to the accelerated investments
in sales and marketing to support CDP growth. We expect operating income for fiscal 2022 to be in the range of
$137 million 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 2022 is
projected to be $0.35 to $0.39.
Now, I'll turn the call back to Rob.
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc.
Thanks, Jim. Q4 was a clean quarter and the outlook for Cloudera is better than it's been for some time. We've
demonstrated consistently strong execution for several quarters. We've introduced new products and launched
cloud-native services. We've stabilized our existing customer base and won their commitment to our new
offerings. And I'm excited to be moving through this transformational phase with a view towards more rapid
growth. We've got a $900 million plus revenue stream and it takes time for CDP adoption to impact that number,
particularly as CDP Public Cloud is an entirely consumption-based revenue model.
That said, it's our hybrid data cloud that's driving customer engagement. So, the hybrid cloud trend, combined
with the exceptional market opportunity for analytics and AI, positions Cloudera nicely. These markets are at the
very earliest stages of development, and CDP enables us to innovate at a faster pace and to aggressively acquire
new customers. It's a multi-year 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 a sense of urgency in achieving our FY 2022 objectives.
So, I'll leave it there except to say thanks to all those who've helped bring us to this point. In addition to Jim and
myself, Arun Murthy, Chief Product Officer; and Mick Hollison, our Chief Marketing Officer, are also available with
Jim and I for Q&A.
So, operator, please begin the Q&A portion of the call.
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QUESTION AND ANSWER SECTION
Operator: Thank you. [Operator Instructions] Your first question will come from the line of Chad Bennett with
Craig-Hallum. Please go ahead.
.....................................................................................................................................................................................................................................................................
Chad Michael Bennett
Analyst, Craig-Hallum Capital Group LLC Q
Great. Thanks for taking my questions. So, you gave off a lot of metrics there, which are great, and it's great to
break out the CDP ARR in your expectations there. But just trying to unpack, Rob and Jim probably, the 120%
plus net expansion in the CDP customers or your base that's migrated to CDP for the Q3 and Q4 cohort. I guess,
just in plain English, what does that mean, just whether they were on Hortonworks distribution or Cloudera
distribution before you're kind of annualizing the contract and you're seeing 120%? Can you just give further color
there?
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Yeah. Sure. Hey, Chad. Thanks for joining. Appreciate the question. So, yeah, I'd like [ph] to point you to
(00:33:06) just foundational. So, we've only got two quarters of cohort, Q3, Q4 of legacy customers moving to
CDP, recognizing also that really Q3 was not a full quarter of having full CDP Hybrid in market holistically, right, it
wasn't a full quarter. So, what we're seeing from that is the customers, whether they be legacy Cloudera or
Hortonworks that are moving workloads to CDP and acquiring CDP entitlements, we're seeing the net expansion
rate for those portions of workloads to grow at a faster net expansion rate than the traditional legacy
environments, and they're tracking at about 120% of that net expansion rate, which is a great signal. It plays very
much into the value creation of CDP hybrid platform and the ability to expand use cases in a high value way and
to many degrees also a low friction way. Yeah.
.....................................................................................................................................................................................................................................................................
James W. Frankola
Chief Financial Officer, Cloudera, Inc. A
And let me just jump in on how we measure it. So, we looked at the customers that graduated to be CDP
customers in Q3 and Q4. They make up a cohort. We then compare their Q4 ARR from last year to Q4 ARR this
year and that results in a net expansion rate calculation. So, that group of customers is growing faster than our
average customer and is quite frankly growing at a very nice rate.
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Yeah. And the drivers, very principally, of that ARR, CDP just represents more capabilities generally. It's faster
and easier to get workloads in and to gain insights into the data and to leverage the use case experiences. And
it's quicker ROI and a better TCO than the legacy platforms and had them traditionally operating on.
Recognize as the last piece of that, Chad, is that our customer base, as you know, are running these very
mission-critical use cases and are very large data sets. So, the migration to CDP and the hybrid environment has
to be a very well-thought-through migratory approach, and we're heavily engaged in assisting the customer base
on how to get there in a methodical way and a mindful way. And so it is a sometimes multi-month and can be
multi-quarter process as they leg into CDP.
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Q4 2021 Earnings Call 10-Mar-2021
Chad Michael Bennett
Analyst, Craig-Hallum Capital Group LLC Q
Okay. And then maybe one follow-up for me. So, if I try to connect the dots between the guide, especially for
subscription for the year, and what appear to be pretty decent CRPO numbers, and I know you don't like talking
about billings, but billings looked actually fairly good. Is it as simple as answer is 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? And is there anything that changed
relative to your outlook in the last few months?
.....................................................................................................................................................................................................................................................................
James W. Frankola
Chief Financial Officer, Cloudera, Inc. A
Yeah. So, let me start with some of the numbers and I'll turn it over to Rob for some of the color in business. So,
you know the big news, so to speak, in the guidance and that is the deceleration of nonrecurring engineering
revenue. That's a conscious and strategic decision that we've made to refocus our engineering team on the hybrid
cloud 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 billings piece, we probably pulled ahead about $40 million more billings out of Q1 and hence fiscal year 2022
above expectations, and that's a reflection of the conversations we're having with customers on CDP right now.
So, we're [ph] starting (00:37:37) migration plans. We're selling 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, that's certainly good news. But it's a left pocket, right pocket; it shifts some billings out of next year. Beyond
that, I'll say we're a 10% ARR grower. We've said that for a while. And as CDP gains traction, we'll accelerate to
11% and 12%, as we believe will occur in the second half this year. Rob, anything you want to add?
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Yeah. Just very simply, the NRR that we have moved away from was very, very conscious. And it is an absolute
reflection of our shift into CDP, the migration and adoption 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 in
that CDP for hybrid environment versus doing NRR co-dev in the legacy platform. It's just a dollar in, a dollar out
in the old legacy world. And those resources are exponentially better applied on to CDP and driving the
acceleration ultimately of the adoption for CDP. And we're seeing the acceleration of that adoption happen before
our very eyes this quarter, as you can see in the numbers.
.....................................................................................................................................................................................................................................................................
Chad Michael Bennett
Analyst, Craig-Hallum Capital Group LLC Q
Okay. Thanks for the color.
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Absolutely. Thanks for joining.
.....................................................................................................................................................................................................................................................................
Operator: Your next question will come from Sanjit Singh of Morgan Stanley. Please go ahead.
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Q4 2021 Earnings Call 10-Mar-2021
Sanjit K. Singh
Analyst, Morgan Stanley & Co. LLC Q
Hi. Thank you for taking the questions and congrats on a good end to the year. I had a similar question around
the ARR trajectory. I think, first, when we look at the $60 million going to $250 million into next year. If we look at
some of the components of that, how should I think about net new versus expansions versus migrations? And
when customers do expand or migrate rather, is that going to be sort of a dollar for dollar? Is it going to be more
of a compressionary effect or is that going to be sort of net neutral to their preexisting ARR commitment?
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Sanjit, hey, thanks for the question. Thanks for joining also. Just let me take the first part of that and then Jim is
probably going to add some color to it. So, look, I think what we are very focused on is when we look at the
traction and the acceleration, as we looked at quarter to quarter going from 10% of the customer base adopting
CDP the last quarter to 15% in Q4, significant acceleration. That's driven by the more completeness and stability
of an increased functionality and, candidly, ease of use and the ease of migration to CDP. A lot of backlog to get
to CDP and that is driving the consistency and expansion of the net expansion rate that we've seen in the Q3 and
Q4 cohort right now tracking at about 120%.
And so, it's actually, now to your question, for the portion of workloads that need and are able to migrate within
that customer base's migration plan, as they acquire CDP entitlements, the base is a dollar for dollar, but the net
expansion is tracking well above the legacy expansion. In addition to that, what it does is it allows net new
workloads to also come online, whether for the hybrid environment, whether it be public or private. And so, it's just
unlocking a lot of the backlog of workloads and data sets that wanted to be applied on the existing use cases that
customers have 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 to move those migrations along in an accelerated way.
.....................................................................................................................................................................................................................................................................
James W. Frankola
Chief Financial Officer, Cloudera, Inc. A
Yeah. And I'll just add some quantitative pieces. So, regarding the new versus migration versus expansion, 3
points of our ARR 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's a piece of it, but a modest piece.
Migration is going to be a big piece. And underneath migration, there's an element that will be a short-term drag
on ARR growth. And that is, as customers move from a term license to a prepaid consumption on the public
cloud, we recognize revenue on the consumption side of our business when it's consumed. So, you'll go from
potentially seeing a slight revenue drag at first when customers start moving to the cloud until their usage kicks in
months or quarters later. So, that is factored into our guidance as well. So, the biggest piece of the $60 million to
$250 million is the migration coupled with expansion. $60 million to $250 million, yes.
.....................................................................................................................................................................................................................................................................
Sanjit K. Singh
Analyst, Morgan Stanley & Co. LLC Q
That's super helpful. Thank you, both, for that. And then just one quick follow-up again on a similar topic, but this
one on form factor, as you put it, Rob, public cloud versus private. Where do we stand in terms of public cloud of
that $60 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. So, first of all, I've seen you guys be very explicit about public cloud
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Q4 2021 Earnings Call 10-Mar-2021
driving near-term ARR over the next couple of quarters in quite some time. So just wanted to get your latest
thoughts on the mix of – on the form factors going into next year?
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Certainly. So, we think about CDP in terms of hybrid and, obviously, it has public and private form factor. And
what our customers want is to be able to enable the hybrid multi-cloud data platform. And those workloads will
move fluidly between private and public and across public clouds. And so, we're not breaking out deliberately the
amount of revenue allocation or consumption by tier, if you will, meaning public or private. As you see, we've had
acceleration to CDP in terms of current quarter at $60 million. We are seeing with the momentum behind CDP
and its adoption in our projections that CDP would generate a $250 million ARR in FY 2022. And that will be
distributed as we talked about between private and public.
.....................................................................................................................................................................................................................................................................
Sanjit K. Singh
Analyst, Morgan Stanley & Co. LLC Q
Appreciate the time. Thanks a lot.
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Yeah, absolutely. Thanks. Thanks for joining, Sanjit.
.....................................................................................................................................................................................................................................................................
Operator: Your next question will come from Rishi Jaluria with D.A. Davidson. Please go ahead.
.....................................................................................................................................................................................................................................................................
Rishi N. Jaluria
Analyst, D.A. Davidson & Co. Q
Hey, guys. Thanks so much for taking my questions. I wanted to start by drilling a little bit into the guidance and
specifically for next quarter. If I look at the subscription guidance even adjusting for the mix shift away from
nonrecurring, it is still calling for a sequential decline, if my estimates are correct. Maybe help us 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 as we think about the billings guidance for
Q1, maybe can you walk us through a couple of the puts and takes 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 shifts
are going from prepaid to consumption base and then the headwinds from obviously the nonrecurring shift? And
then I've got a follow-up to that multi-part question.
.....................................................................................................................................................................................................................................................................
James W. Frankola
Chief Financial Officer, Cloudera, Inc. A
Yes. So, the sequential change in revenue, subscription revenue in particular, in Q4 to Q1 is driven by three
things. First and foremost, the number of days in the quarter, that's a little bit more than [indiscernible] (00:47:16).
The second piece is that although we're mostly vast majority of open source software, we still have some
proprietary software.
On the proprietary software piece, there's up-front revenue that is associated with FIP, functional IP. Given the
fact that close to 40% of our bookings occur in Q4, you have a seasonally high FIP that shows up in revenue. And
this is why ARR is the best measure, but you'll see a big decline in that FIP number from Q4 to Q1.
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Q4 2021 Earnings Call 10-Mar-2021
And the last piece of it is, and if you go into the supplemental materials, you can see the NRR piece. So NRR is
also nonrecurring revenue, is also stepping down Q4 to Q1. So those three things are what's driving the
sequential decline. If you strip out the nonrecurring revenue piece and you look at year-over-year growth rates for
our recurring revenue, that's 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 for both Q1 and for the full year, I think you'll see growth rates that will approximate [indiscernible]
(00:48:33).
.....................................................................................................................................................................................................................................................................
Rishi N. Jaluria
Analyst, D.A. Davidson & Co. Q
Yeah, got it. Thanks. That's helpful. And then just on CDP, the percent of the business, I appreciate the disclosure
and great to see that 8% around there of total ARR. How should we be thinking about that number trending over
time? I mean, should just be a slow ramp-up, should it gradually or massively accelerate? Maybe just help us
understand how we should be thinking about the mix shift on CDP as a percent of the total ARR? Thanks.
.....................................................................................................................................................................................................................................................................
James W. Frankola
Chief Financial Officer, Cloudera, Inc. A
Yeah. I'll start. So, big picture, we think that more than half our customers will have started a journey to CDP by
the end of this year. If you look at our guidance – well, not guidance, [ph] soft (00:49:25) guidance for ARR
growth, that means that we should have well over $400 million worth of ARR associated with customers who have
started that journey.
Now, exactly how far each of them will progress and which of their SKUs will be entitled to run CDP, we're just at
the very start of this journey. So that's where the $250 million comes from. We're pretty confident – very confident
of the $250 million number. How quickly it progresses to that $250 million, how much upside there is above that
$250 million, we'll be able to tell you a lot more in 90 days.
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Yeah. But we're very, very encouraged by the acceleration that's happening behind the – over and above the
adoption models that we have been anticipating. And I think it's a great testament to the capability of CDP, the
value it brings in the TCO that it's driving.
.....................................................................................................................................................................................................................................................................
Rishi N. Jaluria
Analyst, D.A. Davidson & Co. Q
All right. Wonderful. Thank you so much guys.
.....................................................................................................................................................................................................................................................................
Robert G. Bearden
President, Chief Executive Officer & Director, Cloudera, Inc. A
Thank you, Rishi.
.....................................................................................................................................................................................................................................................................
Operator: Our next question comes from Jack Andrews of Needham. Please go ahead.
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