BRAZIL – 2021/03/19: In this photo illustration the Talend Data Fabric logo seen displayed on a … [+]
Nearly five years ago, a software company with a Parisian parent company went public. Its stock has since risen at an average rate of 19% to about $64 a share — $2 short of the price at which it is scheduled to be taken private in the third quarter of 2021.
Unless some other company comes along and offers a much higher price, I see no reason to buy now.
But the twisty journey of Talend, a Redwood City, Calif.-based “open-source data integration company,” is a fascinating yarn — including a skilled public company CEO Michael Tuchen who took over in January 2014, changed its strategy, took it public in 2016, and was replaced seven years later.
Christal Bemont, an alumna of business travel and expense software provider Concur (acquired in 2014 by SAP), has been Talend’s CEO since January 2020.
Her future at Talend is unclear in the wake of the March 2021 announcement that Thoma Bravo, a private equity firm, is paying $2.4 billion to take Talend private by the third quarter of 2021.
Talend’s Expectations-Beating Fourth Quarter
Talend supplies open source software through its Data Fabric platform which “integrates data and applications” in traditional and cloud computing environments.
Deriving most of its revenues from the Americas, Talend’s products include “cloud data lakes, google cloud platform, cloud for Snowflake, AWS Cloud, data integration, API and application integration,” according to Morningstar.
A key part of Talend Data Fabric is its Talend Trust Score that “assesses data stored on Snowflake’s
Talend’s growth is slowing down. After all, the company’s three-year compound revenue growth rate of 24.6% is faster than its fourth quarter 2020 growth — which exceeds its 2021 growth guidance.
How so? According to SeekingAlpha, Talend’s fourth quarter revenues grew 17% to $78.9 million — about $3 million more than expected while its net loss of $19.6 million was nearly $8 million worse than the year before.
Talend’s 2020 revenue of $287.5 million was 16% higher than it was in 2019. Sadly, its negative free cash flow nearly doubled in 2020 to -$32.7 million from -$16.7 million in 2019.
Talend’s 2021 guidance — of 14% top line growth — fell slightly below analysts’ expectations. For 2021, Talend forecast revenues in the range between $327 million and $329 million — the midpoint of which falls $1.28 million short of market expectations of $329.28 million, noted SeekingAlpha.
Why is Talend’s growth slowing down? One problem could be that the data integration market is a very competitive — hosting rivals such as Informatica, IBM, SAP and Oracle. Landing in Gartner’s 2020 Magic Quadrant as a leader in the Data Integration Tool market was not enough to accelerate the company’s revenue growth.
How Mike Tuchen Turned Around Talend
Talend was founded in 2005. But as I learned in my June 2018 Forbes interview with him, Tuchen signed on as CEO in January 2014 in the middle of a round of fund-raising for the company.
He had a strong background in the software industry but had never taken a company public or been CEO of one thereafter. He had previously been CEO — from May 2008 to October 2012 — of security data and analytics provider Rapid7. (I recently interviewed Rapid7’s current CEO. Corey Thomas).
Tuchen oversaw a change in strategy which resulted in considerable growth. As he told me in June 2018, “When I joined the board in 2013 we had about 300 people and [in June 2018 we had] 1,000. Our revenue was about $50 million in 2013 and we [expected] $203 million in 2018 revenue [36.6% more than 2017 revenue],” he explained.
After Tuchen became CEO, Talend changed is marketing strategy. As he said, “In 2013, we sold to mid-market companies and lower enterprise customers. But the market was confused about the company. 72% of our customers stayed with us each year and we had no clear advantage in our position. We needed to be more efficient about how we sold. We changed the team, the strategy, and the way we set and hit goals.”
The changes Tuchen made worked — resulting in a 73% increase in sales productivity. “We changed our strategy from being a low-end disrupter to a next generation leader. Due to rapid changes such as the move to the cloud and the use of data lakes [— a storage repository that holds raw data in its native format until it is needed —] we had an opportunity to be a leader.”
Talend focused on a specific set of customer groups. “We targeted early adopters in financial services, retail, high technology and manufacturing (companies using sensor data). We improved the way we described our product benefits and the way we hired and trained our sales people. Since they were meeting their goals right away, our attrition rate dropped,” according to Tuchen.
In January 2020 Christal Bemont Steps In As Talend CEO
By January 2020, Tuchen was out — replaced by Bemont, a former Concur sales executive. According to SiliconANGLE, Tuchen left voluntarily after Talend recruited Bemont as a chief revenue officer with the potential to become CEO.
Bemont — credited with helping to drive 25% annual growth at Concur during her 15 year career there — brought with her a “support staff” including Ann-Christel Graham, as CRO, and Jamie Kiser, as chief customer officer.
It’s unclear to me why Tuchen left — but a bad quarter in late 2018 may have had something to do with it. According to SiliconANGLE, Talend stock plunged 35% in one day “on a weak forecast it blamed on softer-than-expected license sales.”
By January 2020, the stock was up 20%, to just over $42 per share. Yet it was still some 40% below its Fall 2018 high of $70.
In an April 13 interview, Bemont told me that she joined Talend with a realization she had while at Concur that the value of applications depend on the quality of the data you put into them.
This drove Talend’s decision to provide its customers with a data Trust Score so they know how much to rely on its accuracy when making decisions.
Bemont’s Management Philosophy
Bemont is inspired by CEOs — such as T-Mobile’s former CEO John Legere — who remake the company they run to meet the changing needs of customers. As I wrote in July 2016, Legere did what “almost every company should do. He listened to his customers complain about his company and his competitors and systematically repaired the damage.”
Bemont seems to have taken that mindset to her CEO post at Talend. As she said, “How do you action things? How do you put things out there that are specific, measurable, and quantifiable? How do you bring the company along even when it flies in the face of what you did in the past because the customer wants something new?”
Bemont had this experience at Concur. “In 2005, our leadership decided it was time to stop providing expense reporting services to customers. We spent our whole lives on efficiency. We asked ‘Why are we doing this?’ We decided the answer was to help companies control spending” — to keep some of the money that would appear on expense reports from being spent in the first place.
Bemont sees Talend as being in the same position Concur was back then. She aspires to motivate everyone — as Legere did at T-Mobile — by creating a movement which gets all employees thinking in unison.
As she said, “It only works if people can bring their unique individual selves to work. What energizes them? What are we good at? I have an hourglass on my desk. We have only so many days on earth. What am I taking from your life?”
Bemont believes people should spend time doing things that they are passionate about. “I want to be a force multiplier. If you’re not happy here I need you to find your happy place. I will help you find it. I will even help negotiate your salary. I’ll give you my cell phone number.”
15 Months Later Talend Announces Sale To Thoma Bravo
When she joined, she told SiliconANGLE that Talend “should look toward becoming a billion-dollar company.” Perhaps Talend’s board decided that was not happening fast enough.
15 months after she became CEO, Talend announced that Thoma Bravo take it private.
Thoma Bravo has acquired many software companies and taken some of them public. As I wrote in March 2018, it bought SailPoint in 2014 and took it public in 2017.
Thoma Bravo’s current portfolio includes Qlik, Flexera, Riverbed, Blue Coat and Barracuda Networks as well as security brands Sophos, Veracode, ConnectWise, and Imperva.
Thoma Bravo thinks it can fix what ails Talend. As Seth Boro, a managing partner at Thoma Bravo, said. “We are confident we can apply our experiences working with market-leading software companies to accelerate Talend’s growth and complete its transition to the cloud,” according to SeekingAlpha.
Talend said that selling the company was a good idea. Echoing Chairman Steve Singh’s statement, the company sent me an April 15 email saying, “We believe that the transaction [will] benefit Talend and our stakeholders, including our employees, customers, and shareholders. At a company level, Thoma Bravo would provide Talend with additional expertise, capital, and resources to execute against our vision, accelerate our product innovation, and continue our transition to the cloud.“
Bemont’s future with Talend “hasn’t been discussed at this stage,” according to the email.
Patient investors should keep an eye out for this company in a few years to see if Thoma Bravo will take it public again.
