Company Overview
Cloudera, the leading big data vendor, just filed for a $200M IPO with Morgan Stanley leading the offering. They plan to trade under the ticker “CLDR” on the NYSE. Cloudera was founded in 2008 and most recently valued at $4.1B by Intel in a 2014 financing.
Cloudera has become the leading big data management platform of choice for large enterprises. They help large organizations become data driven through their “hybrid open source software” (HOSS) model, where they take the best open source software available and combine it with their own, proprietary applications that are sold to customers. The company is growing fast — they did $200.3M of subscription revenue in FY’17 (January fiscal end), up from $119.2M in FY’16, a 68% increase YoY. They ended last quarter at $225M of implied ARR (annual recurring revenue), up from $147M in FY’16, a 53% increase YoY. Cloudera is also losing a significant amount of money. In FY’17, their non-GAAP operating loss was $(140.3)M, a (54)% margin. Cloudera has over 1,000 total customers and 495 Global 8000 customers, which represented 73% of their revenue last year. They ended FY’17 with 1,470 FTEs and are headquartered in Palo Alto, CA.
The vast majority of Cloudera’s business is selling commercial applications on top of Hadoop. Hadoop is an open source software framework for processing large datasets using MapReduce, but it’s difficult to use, so companies like Cloudera and their competitors HortonWorks and MapR offer commercial applications and support/services. Cloudera does offer support for other open source projects and has 26 in total, 18 of which were created by Cloudera. Cloudera is the center of gravity for many open source big data projects and as open source software explodes within enterprises, Cloudera is poised to take advantage.
Cloudera charges customers on a per node basis, regardless if deployed in the cloud or on premise. The company also has significant services revenue, which was $60.8M in FY’17 and 23% of total revenue. Given Cloudera’s 495 Global 8000 customers represented 73% of their revenue last year, simple math reveals those customers are worth on average ~$330K in subscription ACV, although customers over $500K in subscription revenue represented 60% of total subscription revenue last year. Cloudera sells through a direct sales force but also has a strong partner ecosystem, with over 2,500 resellers, integrators and other registered vendors under their Connect partner program. Cloudera has high net dollar retention, which was on average 139% for the past 8 quarters. No customer represented more than 10% of revenue over the past 2 years either. Here is an illustration of their product platform:
Source: Company S-1
Market Opportunity
Cloudera believes their market will be $65.6B by 2020 and includes their core markets of (i) dynamic data management systems (ii) cognitive/AI systems and content analytics software and (iii) predictive analytics software. Tangential markets include parts of the database management systems market. The company also cites the explosion of data being created as a market driver, with IDC estimating that approximately 440 times more information will be created in 2020 than in 2005.
Competition
Cloudera doesn’t name any specific competitors, but states competition from data management, analytics and machine learning vendors, public cloud infrastructure providers (i.e. AWS and Azure), and other open source companies. Their biggest pure-play competitors are HortonWorks and MapR. HortonWorks went public in late 2014 and MapR is rumored to be eyeing an IPO too.
Investors
Cloudera has raised ~$1B from investors and strategics like Intel, Accel, Greylock, GV (Google Ventures), Meritech, In-Q-Tel, Ignition Partners and MSD Capital. 5%+ pre-offering VC shareholders include Accel (16.3%) and Greylock (12.5%). Their largest investor, Intel, is at 22.0%.
Financials and Metrics
Like other recent enterprise software IPOs, Cloudera is growing fast but losing money. They did $261M in revenue in FY’17, up 57% YoY. GAAP net loss was $(187)M last year. They don’t disclose detailed customer count metrics, but they have over 1K total customers, so average subscription ACV is ~$225K, although most of their subscription revenue comes from their large customers as I mentioned above. Cloudera isn’t a pure-play SaaS company (18% of customers deploy in the cloud), but I looked at their sales efficiency nonetheless. They had a 24-month average payback period over the past 7 quarters, and last quarter’s was 36 months (non-GAAP). Outputs of other metrics are below:
Annual GAAP P&L (000's)
Source: Company S-1
Quarterly Subscription Revenue ($M)
Source: Company S-1
Implied Ending ARR Over Past 8 Quarters ($M)
Cloudera is growing their implied ARR quickly, although their net new ARR quarter-over-quarter is lumpy. Over the past year they added over $78M of net new ARR.
Source: Company S-1
Net Dollar Expansion Rate
Source: Company S-1
Non-GAAP Operating Margin
Source: Company S-1
Cohort Output from S-1
Source: Company S-1
Cash Flows (000's)
Source: Company S-1
Quarterly P&L / Metrics (000's)
Source: Company S-1
Valuation
While Cloudera isn’t a pure SaaS company, I think they will get a high-growth SaaS/cloud multiple, and an NTM (next-twelve-months) revenue multiple makes sense as a valuation metric. I used FY’18 as a proxy and added a range of growth rates. Some simple math shows illustrative ranges below:
Note: Enterprise value ranges and growth rates are illustrative.
Cloudera is one of the most important technology companies in the big data space. Despite their significant losses, they are growing fast and margins are improving. Cloudera’s market opportunity is also massive and there are many secular trends strongly in their favor. I imagine they have a successful offering. Congrats to the team on building an amazing company.
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