Cloudera: Fiscal 2Q20 Financial Results

(in $ million)	2Q19	2Q20	6 mo. 19	6 mo. 20
Revenue	113.0	196.7	182.6	318.9
*Growth*		74%		*249%*
Net income (loss)	(28.9)	(87.0)	(81.3)	(190.2)

Cloudera, Inc. reported results for its second quarter of fiscal year 2020 ended July 31, 2019.

Total revenue for the second quarter was $196.7 million, and subscription revenue was $164.1 million. Annualized recurring revenue grew 16% Y/Y.

“We executed better in Q2, exceeding expectations on all our financial measures. Most importantly, we delivered an initial release of our cloud-native data management and analytics offering, Cloudera Data Platform. We already have a select group of customers evaluating this rich set of public cloud services, CDP Data Hub, Data Warehouse, and ML,” said Marty Cole, COB and interim CEO. “We are focused on meeting our customers’ demands for hybrid and multi-cloud solutions that support use cases from the Edge to AI. That is the promise of CDP and the enterprise data cloud. Also, our internal metrics and pipeline generation have materially improved from Q1 levels. Together with solid execution in our second quarter, we are ‘on plan’ for achieving our objectives for this fiscal year.”

All numbers reported for prior periods are presented for Cloudera on a standalone basis since the merger with Hortonworks, Inc. closed on January 3, 2019, and, as such, there is no comparative year-over-year financial information for the combined company.

For 2FQ20:

GAAP loss from operations was $89.1 million, compared to a GAAP loss from operations of $29.4 million for 2FQ19.
Non-GAAP loss from operations was $7.4 million, compared to a non-GAAP loss from operations of $8.3 million for 2FQ19.
Operating cash flow, which includes $13.3 million of merger-related payments, was negative $33.0 million, compared to operating cash flow of negative $23.6 million for 2FQ19.
GAAP net loss per share was $0.31 per share, based on weighted-average shares outstanding of 276.8 million shares, compared to a GAAP net loss per share of $0.19 per share for 2FQ19, based on weighted-average shares outstanding of 149.5 million shares.
Non-GAAP net loss per share was $0.02 per share, based on weighted-average shares outstanding of 276.8 million shares, compared to a non-GAAP net loss per share of $0.05 per share for 2FQ19, based on weighted-average shares outstanding of 149.5 million shares.

As of July 31, 2019, the company had total cash, cash equivalents, marketable securities and restricted cash of $508.6 million.

Recent Business and Financial Highlights
• Annualized recurring revenue was $681.9 million, representing 16% year-over-year growth
• Non-GAAP subscription gross margin for the quarter was 86%
• Operating cash flow was negative $33.0 million, including $13.3 million of merger-related payments
• Customers with annualized recurring revenue greater than $100,000 were 953, up 24 from the previous quarter
• Delivered the initial release of cloud-native data management and analytics offering, Cloudera Data Platform, including Data Hub, Data Warehouse, and ML public cloud services
• New open source licensing and distribution framework, aligning Cloudera’s model with the industry standard set by Red Hat
• Entered into an agreement to acquire Arcadia Data, a provider of cloud-native AI-powered business intelligence and real-time analytics
• Expanded partnership with IBM resulting in best historical customer bookings quarter with IBM
• The firm was named an Overall Leader for Analytical Data Infrastructure by Dresner Advisory Services in their 2019 Industry Excellence Awards

Outlook for 3FQ20, ending October 31, 2019:
• Annualized recurring revenue in the range of $685 million to $695 million
• Total revenue in the range of $187 million to $190 million
• Subscription revenue in the range of $162 million to $164 million
• Non-GAAP net loss per share in the range of $0.08 to $0.06 per share
• Weighted-average shares outstanding of approximately 283 million shares

Outlook for FY020, ending January 31, 2020:
• Annualized recurring revenue in the range of $685 million to $720 million
• Total revenue in the range of $765 million to $775 million
• Subscription revenue in the range of $645 million to $655 million
• Operating cash flow in the range of negative $80 million to negative $65 million, including $60 million of non-recurring merger-related payments
• Non-GAAP net loss per share in the range of $0.28 to $0.24 per share
• Weighted-average shares outstanding of approximately 280 million shares

Comments

Following the merger with Hortonworks, closed on January 3, 2019, and where Cloudera will own 60% of combined company and Hortonworks 40%, the public company has just decided to acquire certain assets of Arcadia Data, a deal announced on September 4, 2019. (see today's news)

Acquired company is a provider of cloud-native AI-powered business intelligence and real-time analytics. The entire Arcadia engineering organization was integrated into the buyer. Arcadia was already a Cloudera's partner and they have many joint customers.

It's the third acquisition of the company, the first one being in 2017 Fast Forward Labs, in ML applied AI.

Following the former quarter, Cloudera expected for 2FQ20 revenue in the range of $180 million to $183 million or a quarterly decline between 2% and 4%. Final result is $197 million, up 5% Q/Q. Furthermore it previewed sales in the range of $745 million to $765 million for FY20 and now expects a little more, $765 million to $775 million.

But Y/Y comparisons on financial figures are not meaningful as a consequence of the merger with Hortonworks.

The past quarter, the firm won 59 new clients and concluded the period with 929 customers, these figures being 24 and 953 respectively for current three-month period. Largest customers remain stable and continue to expand consumption of company's offering with more than 140 customers pending in excess of $1 million of annualized recurring revenue (ARR).

Hyperscale cloud providers remain primary company's competitors.

Marty Cole, chairman and interim CEO since last August 1:
"As discussed in connection with Q1 results, in Q1, we experienced a booking shortfall due to weaker than expected pipeline entering the quarter and the impact of the merger integration. The improvement we saw in pipeline generation at the conclusion of Q1 has persisted.
"Overall, I'm pleased with our execution in Q2, but we've got more work to do to restore higher top line growth.
"The other major development in Q2 was the announcement of changes in our licensing and distribution model. We've aligned our model with the industry standards set by Red Hat. Red Hat's practices are well-understood and have been broadly accepted by enterprise customers in the open source community. As a result of these changes, all Cloudera software will be licensed under an OSI-validated open source license. We expect that proprietary Cloudera software offerings will be provided under an open source license beginning early next year. Applied to former proprietary products and new product innovation, the terms of this license will serve to protect our intellectual property investments from encroachment by public cloud providers."

Jim Frankola, CFO:
"With improved execution and the launch of CDP, we expect churn to decline to a 12% to 13% annualized rate in the second half of the year.
"As you may recall, we had planned to reach $125 million of annualized cost savings by the end of this fiscal year. We're ahead of schedule and have already achieved this annualized target in Q2.
"We anticipate Q3 ARR to be in the range of $685 million to $695 million and Q4 ARR to be in the range of $685 million to $720 million."