Cloudera has filed its long-awaited S-1 form with the U.S. Securities and Exchange Commission, paving the way for an IPO in the next several weeks.
S-1 forms serve a dual purpose: First, they seek to sell potential investors on the company’s value and future prospects. Secondly, S-1s include a vast amount of caveats, laying out all the potential risk factors the company faces, from competitive pressure to natural disasters.
Apart from that, S-1s can shine a light on interesting, heretofore undisclosed details about a company’s operations. In all three respects, Cloudera’s S-1 delivers. Here are some of the key takeaways customers and potential prospects should know.
Profitability remains elusive: The big data platform vendor has operated at a loss and will likely continue to do so for the near term. In its fiscal years ending Jan. 31, 2016 and Jan. 31 of this year, it had revenue of $166 million and $261 million, respectively, for an impressive 57 percent growth rate. However, it posted a net loss of $203.1 million in fiscal 2016 and $187.3 million in fiscal 2017. One silver lining is that losses shrunk while revenue grew. It remains to be seen whether Cloudera can continue on that path.
Cloud revenue shift underway: Cloudera sells its platform through term subscriptions on the cloud or on-premises, as well as with a consumption model for the cloud. It focuses sales efforts on Global 8,000 enterprises, and currently 18 percent of its Global 8,000 customers are running its technology in the cloud. As Constellation Research VP and principal analyst Doug Henschen notes, cloud deployments are the fastest-growing part of Cloudera’s business. Post-IPO, cloud should come into even greater focus for the company, but it will have to navigate the revenue-model shift under public scrutiny from investors.
Cloudera noted the challenge ahead in the S-1:
[A]s an increasing amount of our business may move to our cloud‑based solutions for transient workloads and the use of our consumption‑based pricing model may represent a greater share of our revenue, our revenue may be less predictable or more variable than our historical revenue from a time period-based subscription pricing model. Moreover, a consumption‑based subscription pricing model may ultimately result in lower total cost to our customers over time, or may cause our customers to limit usage in order to stay within the limits of their existing subscriptions, reducing overall revenue or making it more difficult for us to compete in our markets.
Broad coverage: Cloudera has done a good job of spreading out its business across verticals, with “significant” revenue in banking, technology, business services, telecommunications, public sector, consumer, healthcare and life sciences, according to the S-1. More than a quarter of its revenue came from outside the U.S. in its fiscal year ended Jan. 31, and no single customer accounts for more than 10 percent of its overall revenue, the document states.
Big deals, but hard-won: Most Cloudera customers aren’t just kicking the tires. Those spending more than $500,000 on annual subscriptions represent greater than 60 percent of Cloudera’s customer base, according to the S-1.
However, Cloudera has had to work for that business, as the S-1 notes. Its sales cycles are typically four to nine months but can take more than 18 months in some cases. Post-IPO, Cloudera will be pressured to squeeze down those sales cycles.
Headcount rising fast: Cloudera added 330 employees between Jan. 31, 2016 and Jan. 31 of this year. That’s a 29 percent increase in a 12-month span—a significant number, to say the least. The S-1 does not break down the headcount into job roles, such as engineering or sales and marketing, but other numbers show that Cloudera has invested more heavily in the latter of late.
In its fiscal 2016, Cloudera spent $99.3 million on research and development. That rose only slightly, during its fiscal 207, to $102.3 million. In contrast, sales and marketing spend was $161.1 million in its fiscal 2016 and $203.1 million in its fiscal 2017.
Intel inside: Intel has invested $766.5 million to date in Cloudera stock, and is also a paying customer of its platform. The relationship goes beyond investment, as the S-1 notes:
Among many tangible examples of joint development, Intel and Cloudera collaborated on optimized data encryption speed through use of arithmetic acceleration built into the Intel architecture. Intel and Cloudera also collaborated to develop Spot (incubating project), an open source cybersecurity analytics platform built on open data models that provides advanced threat detection using big data analytics and machine learning.
Cloudera achieves “differentiated performance” on Intel architecture today and will in the future, according to the S-1.
Despite the close relationship, Intel faces some restrictions over its ultimate influence on Cloudera. Under terms laid out in the S-1, Intel can only hold up to a 20 percent share in Cloudera post-IPO. It can get around this if another investor buys more than a 20 percent stake, or by acquiring Cloudera outright.
Constellation’s Henschen recently attended Cloudera’s analyst day event in San Francisco. Go here to read his in-depth analysis of the company’s strategy, market position and the road ahead.
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