UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM 10-K
_______________________________________________
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from________to________
Commission File Number: 001-38069
CLOUDERA, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
26-2922329
(I.R.S. employer identification no.)
_______________________________________________
395 Page Mill Road
Palo Alto, CA 94306
(650) 362-0488
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock, $0.00005 par value per share
CLDR
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
_______________________________________________
Indicate by a check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 7(a)(2 (B) of the Securities Act
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
☐
☐
☐
☐
The aggregate market value of voting stock and non-voting common equity held by non-affiliates of the Registrant as of July 31, 2019, the last business day of the Registrant's most recently
completed second fiscal quarter, based on the closing price of $5.98 for shares of the Registrant’s common stock as reported by the New York Stock Exchange on such date, was approximately
$1.4 billion.
As of February 28, 2020, there were 295,190,516 shares of the registrant’s common stock outstanding.
Information required in response to Part II and Part III of Form 10-K is hereby incorporated by reference to portions of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders
to be held in 2020. The Proxy Statement will be filed by the Registrant with the Securities and Exchange Commission no later than 120 days after the end of the Registrant’s fiscal year
ended January 31, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
Note About Forward-Looking Statements
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
TABLE OF CONTENTS
Part I
Part II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreement with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Part III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Signatures
Exhibits, Financial Statement Schedules
Form 10-K Summary
Part IV
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NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the “Management's Discussion and Analysis of Financial Condition and Results of Operations,” contains
forward-looking statements within the meaning of the federal securities laws regarding future events and our future results that are based on our current
expectations, estimates, forecasts and projections about our business, our results of operations, the industry in which we operate and the beliefs and assumptions of
our management. Words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “would,” “could,” “should,” “intend” and “expect,” variations of
these words, and similar expressions are intended to identify those forward-looking statements. These forward-looking statements are only predictions and are
subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any
forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Report under the
section entitled “Risk Factors” in Item 1A of Part I and elsewhere herein, and in other reports we file with the Securities and Exchange Commission (SEC). While
forward-looking statements are based on the reasonable expectations of our management at the time that they are made, you should not rely on them. We undertake
no obligation to revise or update publicly any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except
as may be required by law.
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ITEM 1. BUSINESS
Overview
PART I
At Cloudera, we believe that data can make what is impossible today, possible tomorrow. We empower people to transform complex data into clear and
actionable insights. Powered by the relentless innovation of the open source community, we advance digital transformation for the world's largest enterprises. We
deliver a modern enterprise data platform to manage and secure the data lifecycle from the Edge to AI, spanning any cloud or data center. We are an enterprise data
cloud company.
We pioneered the creation of the enterprise data cloud category. An enterprise data cloud is multi-function, hybrid and multi-cloud, secure and governed, and
open and extensible. An enterprise data cloud offers cloud-native agility, elasticity and ease-of-use.
Since our founding in 2009, we have been a leader in multi-function data management and analytics software, including flow management, streams
management, data engineering, data warehousing, streaming analytics, operational databases and machine learning. These solutions function together on the same,
or diverse, data sets. In addition, we provide support, professional services and training relating to our offerings. Fundamental to our offerings is shared data
experience (SDX) technologies, providing consistent security, governance, lineage and metadata management across the data lifecycle for both on-premises and
public cloud deployments. Customers implement our software primarily on-premises in data centers, or operate it on the public cloud infrastructure of Amazon
Web Services (AWS), Microsoft Azure (Azure), Google Cloud Platform (GCP), IBM Cloud and Oracle Cloud. Our products integrate the latest innovations in
open source data management technology for enterprise-grade performance, scalability and security.
In 2019, we introduced Cloudera Data Platform (CDP), our cloud-native data platform for the enterprise data cloud built on open-source software. CDP
increases customers’ flexibility and workload deployment options by integrating cloud-native services to create hybrid, multi-cloud capabilities for multi-function
data management and analytics. Our customers favor the ability to optimize the performance, cost and security of workloads using data anywhere and across any
environment, including multiple public clouds, private cloud and data centers. We believe that our traditional offerings, taken together with our recently released
CDP products and our CDP roadmap, position us as a leader in the emerging enterprise data cloud category.
Our Offerings
We offer software subscriptions and public cloud services for the recently released CDP solution-set and software subscriptions for our traditional on-premises
data platforms. Subscriptions include software access rights and technical support. We also provide professional services for the implementation and use of our
software subscriptions, machine learning expertise and consultation, training and education services.
In late 2019 we introduced a change in our software licensing policy, adopting a 100% open source model based on the Apache Software License (ASL) and
the Affero General Public License (AGPL). We expect these licensing changes to be fully implemented in calendar year 2020. As part of the licensing policy
change, we will distribute compiled binaries of our new software releases only to customers under an active subscription agreement. This policy change began with
the release of CDP Data Center in November 2019 and is expected to apply to our future open source software releases.
Our CDP offerings include:
•
CDP Data Center. CDP Data Center is our next-generation on-premises platform, providing enterprise data management and analytics built for hybrid
cloud and optimized for bare metal. CDP Data Center also serves as a straightforward onramp to our future private cloud offerings. It delivers high
performance SQL analytics, real-time stream processing and management, granular attribute-based access control and dynamic column filtering and row
masking. It unifies the latest open-source analytics – Spark, Impala, Hive, HBase, Kafka, Hadoop, and more – into a multi-function system.
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•
CDP Data Hub for AWS and Azure. CDP Data Hub for AWS and Azure is an enterprise cloud service to manage and secure the data lifecycle. It
simplifies management with pre-built templates, dashboards and workload analytics for data engineering, data marts, operational database, flow
management and stream clusters. Data Hub rapidly secures data lakes, automatically configuring the most critical functions with point and click
simplicity, with Cloudera SDX security and governance.
• CDP Data Warehouse for AWS and Azure. CDP Data Warehouse for AWS and Azure is a cloud-native auto-scaling, highly concurrent and cost-
effective analytics service that ingests high scale data anywhere, from structured, unstructured and edge sources. It supports hybrid and multi-cloud
infrastructure models by seamlessly moving workloads between on-premises and any cloud for reports, dashboards, ad-hoc and advanced analytics, with
consistent security and governance.
• CDP Machine Learning for AWS and Azure. CDP Machine Learning for AWS and Azure is a cloud-native service that easily deploys machine
learning workspaces, giving data science teams instant, self-service access to project environments, resources, tools and machine learning workflows with
governed business data anywhere.
Our traditional on-premises data platform offerings include:
• Cloudera Enterprise Data Hub (EDH). EDH combines our Cloudera Data Warehouse, Cloudera Operational DB, and Cloudera Data Science and
Engineering products with our SDX technology. It allows companies to execute multiple analytic functions against a shared set of governed and secure
data in public clouds, private clouds and data centers in bare metal configurations.
•
•
•
Cloudera Data Warehouse. Cloudera Data Warehouse is a modern data warehouse that delivers an enterprise-grade, hybrid cloud solution designed for
self-service analytics. It has the flexibility to optimize traditional data warehouses, and support data lake or data mart use cases. It is powerful, scalable
and affordable—enabling organizations to share petabytes of data across thousands of users with security, governance and availability.
Cloudera Operational DB. Cloudera Operational DB enables stream processing and real-time analytics on continuously changing data. It delivers a
secure low latency, high-concurrency experience that processes data from multiple sources (including IoT), powered by HBase, a column-based NoSQL
store for unstructured data, and Kudu, a relational store for structured data.
Cloudera Data Science and Engineering. Cloudera Data Science and Engineering enables users to streamline, simplify, and scale big data processing
regardless of where data is stored – on-premises, across public clouds, or both. It accelerates exploratory data science and machine learning models at
scale by taking advantage of massive parallel compute and expanded data streams.
• Hortonworks Data Platform (HDP). HDP is a scalable data management platform that helps organizations securely store, process and analyze any data
asset. With HDP, organizations can easily build and deploy modern data architectures on-premises and in the cloud. It is an enterprise grade platform that
provides all of the components necessary to manage large, multi-source data sets.
•
•
Cloudera DataFlow (CDF). CDF is a scalable, real-time streaming data platform that collects, curates and analyzes data so customers gain key insights
for immediate actionable intelligence. CDF is designed for data-in-motion use cases, such as real-time stream processing, data provenance and data
ingestion from IoT devices and other sources. CDF supports secure and governed data ingestion, data transformation and content routing.
Cloudera Data Science Workbench. Cloudera Data Science Workbench enables self-service data science for the enterprise. Cloudera Data Science
Workbench is a multi-user, multi-language development environment for data science and machine learning applications. It manages the various steps of
the model
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development lifecycle including versioning, dependency management, scheduling, multi-user collaboration and training models on disparate types of
compute.
Other Technologies and Services
We continue to innovate and develop new technologies and services to extend our market leadership. These offerings include:
•
•
Cloudera SDX. Cloudera SDX, shared data experience, enables common security, governance, lineage and metadata management for multiple analytic
functions throughout the data lifecycle, running against shared or overlapping sets of data in any cloud or data center. SDX provides comprehensive
functionality to set up initial data lake security as well as the critical functions to keep it secure. SDX also applies to machine learning models as well as
data. SDX provides the ability to track changes in machine learning models, which is critical for understanding and validating why model results change.
As a result, SDX allows customers to set policies and rules for data and models once and have them persist through any range of workloads without
regard to where the job is run. This portability provides customers the freedom to run multiple analytics anywhere they want without public cloud lock-in
or proprietary data formats. SDX makes building enterprise applications that require multi-function analytics less expensive to deploy and more secure.
Cloudera Workload XM. Cloudera Workload XM is an analytic workload experience management cloud service. It provides enhanced visibility and
actionability to efficiently migrate, analyze, optimize and scale analytic workloads, resulting in reduced migration risk, faster troubleshooting and root
cause analysis, greater uptime and higher resource utilization. Customers can quickly gain access to the performance of specific queries and jobs to ensure
their highest priority workloads do not compete for resources with less essential queries. Workload XM is able to optimize Cloudera analytic workloads
(on-premises and cloud), as well as third party analytic workloads. This enables optimal utilization of cloud infrastructure by third party cloud analytics
which helps avoid runaway cloud costs. For Cloudera analytics, Workload XM delivers more effective management of infrastructure for better utilization
and overall infrastructure return on investment.
Our Differentiation
Cloudera empowers organizations to become data-driven enterprises by maximizing the value of their most valuable asset – their data – to grow, connect and
protect their business. With CDP, we are building the industry’s first enterprise data cloud, which will enable our customers to manage and secure the complete
data lifecycle from the Edge to AI on any cloud and data center. The key benefits and differentiators of our solutions include:
•
End-to-end data lifecycle integrated from the Edge to AI. We provide an integrated suite of multi-function data management and analytics that enables
customers to collect, enrich, analyze, serve and predict with their data to operationalize data insights faster and easier than standalone, siloed analytics
services typical of most other cloud data services. Addressing real-world business problems generally requires the entire data lifecycle working together
on the same data. Examples include connected and autonomous vehicles, optimizing 5G mobile networks, anti-money laundering, fraud detection and risk
modeling. Point providers of analytics services generally only offer one or two services. Cloud service provider offerings typically are not integrated,
having been acquired and built independently. CDP performs and manages multiple analytic functions of the data lifecycle – flow management, streams
management, data engineering, data warehousing, streaming analytics, operational databases and machine learning.
• Hybrid and multi-cloud deployments at scale. Our platforms allow enterprises to manage the data lifecycle for both long-lived and transient workloads
across environments, mixing on-premises and public cloud infrastructure, including all major public cloud vendors – AWS, Azure, GCP, IBM Cloud and
Oracle Cloud. Customers can deploy, configure and monitor their clusters and workloads at scale from a centralized interface across these environments.
We offer configurable monitoring, reporting and robust troubleshooting to provide management of large, growing data sets and concurrent use cases.
Cloud service providers offer only a single cloud with some offering options to extend their cloud on-premises; they do
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•
•
•
not offer multi-cloud, hybrid cloud or private cloud capabilities. Point service providers may operate across multiple clouds, but not hybrid and private
clouds. CDP manages and secures the data lifecycle on any cloud and data center.
Enterprise-grade data security and governance with SDX. Our platform uses proprietary authentication, network isolation, user-and role-based
permissions, access logging, auditing, lineage and encryption including sophisticated key management to provide comprehensive, enterprise-grade data
security across multiple analytic workloads. The native security features of our platforms require no additional third-party licenses, reducing costs to our
customers. In addition, our platforms enable regulatory and industry-specific compliance through comprehensive data governance, including data
discovery, data lineage, metadata tagging and policy enforcement. CDP secures the data lifecycle on any cloud or data center.
Cloud-native platform. CDP offers cloud-native services for the data lifecycle that leverage containers and kubernetes technologies. These services are
simple, fast and easy for enterprise IT to deliver to business intelligence (BI) analysts, data scientists, data engineers and developers. Cloud-native
services simplify the use of our platforms by eliminating the need to install, manage and update our software. We also enable customers to address a new
set of elastic and transient workloads that would otherwise be impractical to run in a data center. CDP delivers cloud-native simplicity across public and
private clouds.
Enable customers to leverage open source innovation. Our platforms integrate the latest innovations in open source data management technology. We
were the first data platform vendor to incorporate Spark and have demonstrated continuous commitment to open source through our adoption of projects
such as NiFi, Kafka, Flink, Impala, Hive, HBase, Spark and more. We enable customers to capitalize on the business value of the latest open source
technologies through our integrated, secure and high-performance platform. As announced, we expect our primary solutions to be 100% open source in
the future.
• High performance scalability for low total cost of ownership. Our platforms deliver performance improvements over legacy systems at lower cost. Using
our software, customers can scale to hundreds of petabytes of data under management, and select the infrastructure environment – cloud and/or datacenter
– that is most cost-effective and appropriate for each use case.
Our Strategy
Our strategy is to be a leader in the emerging enterprise data cloud market. We aim to empower our customers to drive insights from complex data in any
cloud or data center, and to manage and secure the data lifecycle. Key elements of our strategy include:
•
•
•
•
Deliver the enterprise data cloud. We have delivered initial CDP public cloud services for AWS and Azure as well as CDP Data Center software for on-
premises implementations. We plan to invest in additional CDP cloud-native analytics experiences and CDP Private Cloud.
Grow our addressable market by expanding our multi-function analytic offerings and the range of use cases our platform can support. We intend to
introduce complementary technology and offerings as well as to develop our platform’s capabilities in order to support a wider range of data types, access
patterns and use cases.
Accelerate existing customer expansion by cross-selling products and helping existing customers adopt CDP. The faster existing customers move to
CDP, the faster they can extract greater value from all of their data through hybrid cloud solutions. We intend to broaden our relationships with existing
customers by helping them identify new use cases and modernize their data architectures with CDP Public and CDP Private Cloud analytic cloud services.
Continue to acquire new customers. We focus our go-to-market efforts on large enterprises and large public sector organizations globally. We target
these organizations because they capture and manage the majority of the world’s data and operate highly complex IT environments with use cases that
require multiple analytic functions working together.
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•
•
•
Leverage our partner ecosystem. We intend to maintain strong engagement with our partner ecosystem to gain increased reach and greater distribution of
our software, develop new applications, accelerate customer expansion and penetrate new markets.
Extend our position as an open source leader for data management and analytics. We intend to continue to pioneer data-related open source software to
manage and secure the data lifecycle on any cloud or data center.
Cultivate a passion for solving the world’s greatest challenges through data. We aim to create a culture and build passion among our employees, our
partners and our customers for using data to solve the world’s biggest problems.
Customers
We focus on the largest corporate enterprises and public sector organizations globally. These organizations are likely to realize the greatest value from
utilizing our enterprise-grade platforms. As of January 31, 2020, we had approximately 1,900 customers.
No individual customer represented more than 10 percent of revenue in the years ended January 31, 2020, 2019, or 2018.
Customer Support, Services and Education
We have built a company culture that focuses on consistently delivering value for our customers and ensuring their success and satisfaction. We deliver
exceptional support, professional services and training to ensure our customers get the most out of our technology. We offer technical assistance through our large
and experienced global support organization. Built on powerful predictive analytics using our own technology, we proactively monitor our customers’ platforms to
prevent issues before they arise, avoid common cluster misconfigurations, and suggest optimization based on similar cases at other customers. Our predictive
analytics allow us to proactively initiate a substantial fraction of our support engagements for customers, before they realize that they have a problem themselves.
In addition, our services organization provides expertise for adoption and optimization of our solutions. Our experienced solution architects, business value
consultants and training professionals enhance the customer experience with personalized assistance, from implementation and best practices to education and
online training. These services help our customers accelerate time to value, modernize their data architecture, and maximize insight from their data.
We believe that we can further advance the clients’ goals through education. In addition to offering online training, we have trained thousands of individuals
through January 31, 2020. Through the Cloudera Academic Program, we provide access to curriculum, software and training to colleges and universities to
accelerate the adoption of our platform.
Sales and Marketing
We primarily sell through our direct sales force, which comprises field and inside sales personnel. Our sales methodology includes field personnel dedicated
primarily to acquiring new customers and field personnel dedicated primarily to expanding our relationships with existing customers.
Our sales force is supported by sales engineers with deep technical expertise and responsibility for pre-sales technical support, solutions engineering for our
end-customers, and technical training for our channel and strategic partners.
We generate customer leads, accelerate sales opportunities, and build brand awareness through our marketing programs and through our strategic partner
relationships. Our marketing programs target both the C-suite and the line of business owners, technology professionals and risk professionals, as well as software
developers and data scientists.
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Our principal marketing programs include:
•
•
•
webinars, user conferences and events that we sponsor;
cooperative marketing efforts with partners; and
use of our website.
Partners and Strategic Alliances
We believe that strong engagement with our partner ecosystem affords us increased reach and greater distribution of our software, enhancing our field
organization’s efforts. We have developed a large partner network in order to facilitate the establishment of industry standards, ensure an open ecosystem for our
customers, accelerate the adoption of our platform and extend our sales capabilities and coverage. Over 3,000 vendors – a variety of systems integrators, resellers,
software and OEM partners, managed service providers, data systems vendors and cloud and platform vendors have registered under our Cloudera Connect partner
program to gain access to marketing, sales, training and support resources.
Our partners and strategic alliances include:
•
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Systems integrators and resellers. Hundreds of systems integrators offer professional services to create custom solutions built on our platform for their
customers across a variety of industry verticals. Resellers offer our platform to their customers in combination with their products and services.
Software and OEM partners. Our technology partners offer solutions designed to work with or built on our platform. Hundreds of certified solutions have
been tested and validated to run on our platform.
• Managed services and data systems vendors. We ensure that our platform is tested and made available by managed services providers and is
interoperable with a variety of traditional data systems vendors.
•
Cloud and platform vendors. To ensure our customers can run our software in any environment, we nurture relationships with public cloud providers and
other enterprise platforms to integrate and achieve the highest interoperability across architectures.
Research and Development
Our research and development organization is responsible for the design and development of our solutions. We focus on developing new services and
technologies and further enhancing the functionality, reliability and performance of our existing solutions.
Competition
We operate in an intensely competitive data management, analytics and machine learning market that is characterized by the constant development of new
products and continued innovation, particularly in the open source community and among the major public cloud infrastructure providers.
Our main sources of current and potential competition fall into five categories:
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public cloud providers who offer proprietary data management, machine learning and analytics services, such as AWS, GCP and Azure;
legacy data management product providers such as HP, IBM, Oracle and Teradata;
strategic and technology partners who may also offer our competitors’ technology or otherwise partner with them;
cloud-only data management companies and open source companies; and
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•
internal IT organizations that provide open source self-support for their enterprises.
As the market for data management and analytics platforms continues to grow and offerings based on the open source data management ecosystem continue to
gain traction, we expect more highly specialized vendors will enter the market or larger competitors will bundle solutions with their products more effectively.
The principal competitive factors in our market include:
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ability to integrate data management and analytics function across the data lifecycle;
ability to deploy data management and analytics in a variety of infrastructure environments, including hybrid and multi-cloud capability;
ability to identify and leverage innovative open source technologies;
ability to secure and govern use cases in a consistent manner across analytic functions and cloud and on-premises environments;
ability to manage hybrid and multi-cloud environments from a single centralized interface;
product price, functionality, and ease of use;
enablement of machine learning and other advanced technologies;
enterprise-grade performance and features such as scalability, security, cost of ownership and ease of deployment and use of applications;
breadth, depth and quality of application functionality;
domain expertise and understanding of customer requirements across verticals;
ability to innovate and respond to customer needs rapidly;
quality and responsiveness of services and support organizations and level of customer satisfaction;
brand awareness and reputation;
size of customer base and level of user adoption; and
ability to integrate with legacy and other enterprise infrastructures and third-party applications.
We believe that we compete favorably on the basis of these factors. Our ability to remain competitive will largely depend on our ongoing performance in the
areas of public cloud, hybrid cloud, multi-cloud and private cloud as well as industry adoption of enterprise data cloud technologies.
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Intellectual Property
Intellectual property is an important aspect of our business, and we actively seek protection for our intellectual property as appropriate. To establish and
protect our proprietary rights, we rely upon a combination of patent, copyright, trade secret and trademark laws and contractual restrictions such as confidentiality
agreements, licenses and intellectual property assignment agreements. We maintain a policy requiring our employees, contractors, consultants and other third
parties to enter into confidentiality and proprietary rights agreements to control access to our proprietary information. These laws, procedures and restrictions
provide only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.
Furthermore, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States, and we therefore may be unable to
protect our proprietary technology in certain jurisdictions. Moreover, our platform incorporates software components licensed to the general public under open
source software licenses such as the Apache 2.0 Software License. We obtain many components from software developed and released by contributors to
independent open source components of our platform. Open source licenses grant licensees broad permissions to use, copy, modify and redistribute our platform.
As a result, open source development and licensing practices can limit the value of our software copyright assets.
As of January 31, 2020, we had been granted 41 U.S. patents and had 9 U.S. patent applications pending. Our patents expire between 2020 and 2036. We also
had 14 issued patents and four patent applications pending in foreign jurisdictions. We continually review our development efforts to assess the existence and
patentability of new intellectual property. We pursue the registration of our domain names, trademarks and service marks in the United States and in certain
locations outside the United States. To protect our brand, we file trademark registrations in some jurisdictions.
Employees
As of January 31, 2020, we had 2,723 full-time employees. Of these employees, 1,429 are in the United States and 1,294 are in international locations. None
of our employees is represented by a labor union or covered by collective bargaining agreements. We have not experienced any work stoppages. We consider our
relationship with our employees to be good.
Corporate Information
We were incorporated in the state of Delaware in June 2008. In January 2019, we completed a merger with Hortonworks, Inc, pursuant to which Hortonworks,
Inc. became a subsidiary of Cloudera. Our principal executive offices are located at 395 Page Mill Road, Palo Alto, California 94306 and our telephone number is
(650) 362-0488. Our website address is www.cloudera.com. Website references are intended to be inactive textual references only, and the information on, or that
can be accessed through, our website is not part of this Annual Report on Form 10-K. Our common stock is listed on the New York Stock Exchange under the
symbol “CLDR.”
Unless the context indicates otherwise, the terms “Cloudera,” “the Company,” “we,” “us,” and “our” refer to Cloudera, Inc., a Delaware corporation, together
with its consolidated subsidiaries, unless otherwise noted.
Cloudera, the Cloudera logo, and other registered or common law trade names, trademarks, or service marks of Cloudera appearing in this Annual Report on
Form 10-K are the property of Cloudera. This Annual Report on Form 10-K contains additional trade names, trademarks and service marks of other companies that
are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a
relationship with us, or endorsement or sponsorship of us by these other companies. Solely for convenience, our trademarks and tradenames referred to in this
Annual Report on Form 10-K appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the
fullest extent under applicable law, our rights, or the right of the applicable licensor, to these trademarks and tradenames.
Available Information
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to
Sections 13(a), 14 and 15(d) of the Securities and Exchange Act of 1934, as amended. The SEC maintains a website at http://www.sec.gov that contains reports,
proxy and
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information statements, and other information regarding us and other companies that file materials with the SEC electronically. Copies of our reports on Forms 10-
K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically through our corporate website at www.cloudera.com as soon as reasonably
practicable after we file such material electronically with, or furnish to, the SEC.
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ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business,
financial condition, results of operations, cash flows, growth prospects, and the trading price of our common stock.
Risks Related to our Business
We have a history of losses, and we may not become profitable in the future.
We have incurred net losses since our founding in 2008, including net losses of $336.6 million, $192.6 million and $369.7 million for the years ended
January 31, 2020, 2019, and 2018, respectively, and expect to continue to incur net losses for the foreseeable future. As a result, we had an accumulated deficit of
$1.5 billion as of January 31, 2020. These losses and accumulated deficit reflect the substantial investments we made to acquire new customers, commercialize our
platform, participate in the open source development community and develop our proprietary software components, and continue to develop our platform. In
addition, as a result of our merger with Hortonworks, we have incurred substantial transaction and purchased intangible amortization costs. Furthermore, to the
extent we are successful in increasing our customer base, we may also incur increased losses because customer acquisition costs and upfront costs associated with
new customers are higher in the first year than the aggregate revenue we recognize from those new customers in the first year.
We expect to continue to make significant future expenditures related to the development and expansion of our business, including:
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investments in our research and development team and in the development of new solutions and enhancements of our platform, including contributions to
the open source data management ecosystem;
investments in sales and marketing, including expanding our sales force, increasing our customer base, increasing market awareness of our platform and
development of new technologies;
expanding of our operations and infrastructure, including internationally;
hiring additional employees; and
incurring costs associated with general administration, including legal, accounting and other expenses related to being a public company.
As a result of these increased expenses, we will have to generate and sustain increased revenue to be profitable in future periods. Further, in future periods, our
revenue growth rate could decline, and we may not be able to generate sufficient revenue to offset higher costs and achieve or sustain profitability. If we fail to
achieve, sustain or increase profitability, our business and operating results could be adversely affected.
If the market for our data management, machine learning and analytics platform develops more slowly than we expect, our growth may slow or stall, and our
operating results could be harmed.
The market for a data management, machine learning and analytics platform is relatively new, rapidly evolving and unproven. Our future success will depend
in large part on our ability to penetrate the existing market for data management, machine learning and analytics platforms, as well as the continued growth and
expansion of that market. It is difficult to predict customer adoption and renewals of our subscriptions, customer demand for our platform, the size, growth rate and
expansion of this market, the entry of competitive products or the success of existing competitive products. Our ability to penetrate the existing market for data
management, machine learning and analytics platforms and any expansion of that market depends on a number of factors, including the cost, performance and
perceived value associated with our platform, as well as potential customers’ willingness to adopt an alternative approach to data collection, storage and
processing. If we or other data management providers experience security incidents, loss of customer data, disruptions in delivery or other problems, the market for
data management, machine learning and analytics platforms as a whole, including our solutions, may be negatively affected. Furthermore, many potential
customers have made significant investments in legacy data collection,
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storage and processing software and may be unwilling to invest in new solutions. If data management, machine learning and analytics platforms do not achieve
widespread adoption, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions,
security or privacy concerns, competing technologies and products, decreases in corporate spending or otherwise, it could result in decreased revenue and our
business could be adversely affected.
We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of
operations.
The market for data management, machine learning and analytics platforms is intensely competitive and characterized by rapid changes in technology,
customer requirements, industry standards and frequent new product introductions and improvements. We anticipate continued challenges from current
competitors, which in many cases are more established and enjoy greater resources than us, as well as by new entrants into the industry. If we are unable to
anticipate or effectively react to these competitive challenges, our competitive position could weaken, and we could experience a decline in our growth rate or
revenue that could adversely affect our business and results of operations.
Our main sources of current and potential competition fall into five categories:
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public cloud providers who include proprietary data management, machine learning and analytics offerings, such as Amazon Web Services, Google Cloud
Platform and Microsoft Azure;
legacy data management product providers such as HP, IBM, Oracle and Teradata;
strategic and technology partners who may also offer our competitors’ technology or otherwise partner with them, including our strategic partners who
provide Partner Solutions (as defined below) as they may offer a substantially similar solution based on a competitor’s technology;
cloud-only data management companies and open source companies; and
internal IT organizations that provide open source self-support for their enterprises.
Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as:
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greater name recognition, longer operating histories and larger customer bases;
larger sales and marketing budgets and resources and the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of
products;
broader, deeper or otherwise more established relationships with technology, channel and distribution partners and customers;
wider geographic presence or greater access to larger customer bases;
greater focus in specific geographies;
greater ease of use for cloud-only deployments;
lower labor and research and development costs;
larger and more mature intellectual property portfolios; and
substantially greater financial, technical and other resources to provide support, to make acquisitions and to develop and introduce new products.
In addition, some of our larger competitors have substantially broader and more diverse product and service offerings and may be able to leverage their
relationships with distribution partners and customers based on other
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products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing our platform, including by selling
at zero or negative margins, product bundling or offering closed technology platforms. Potential customers may also prefer to purchase from their existing
suppliers rather than a new supplier regardless of platform performance or features. As a result, even if the features of our platform are superior, customers may not
purchase our solutions. These larger competitors often have broader product lines and market focus or greater resources and may therefore not be as susceptible to
economic downturns or other significant reductions in capital spending by customers. If we are unable to sufficiently differentiate our solutions from the integrated
or bundled products of our competitors, such as by offering enhanced functionality, performance or value, we may see a decrease in demand for those solutions,
which could adversely affect our business, operating results and financial condition.
In addition, new innovative start-up companies, including emerging cloud-only data management companies, and larger companies that are making significant
investments in research and development, may introduce products that have greater performance or functionality, are easier to implement or use, or incorporate
technological advances that we have not yet developed or implemented or may invent similar or superior products and technologies that compete with our
platform. Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their
resources.
Some of our competitors have made or could make acquisitions of businesses or enter into partnerships that allow them to offer more competitive and
comprehensive solutions. As a result of such arrangements, our current or potential competitors may be able to accelerate the adoption of new technologies that
better address customer needs, devote greater resources to bring these products and services to market, initiate or withstand substantial price competition, or
develop and expand their product and service offerings more quickly than we do. These competitive pressures in our market or our failure to compete effectively
may result in fewer orders, reduced revenue and gross margins and loss of market share. In addition, it is possible that industry consolidation may impact
customers’ perceptions of the viability of smaller or even mid-size software firms and consequently customers’ willingness to purchase from such firms.
We may not compete successfully against our current or potential competitors. If we are unable to compete successfully, or if competing successfully requires
us to take costly actions in response to the actions of our competitors, our business, financial condition and results of operations could be adversely affected. In
addition, companies competing with us may have an entirely different pricing or distribution model. Increased competition could result in fewer customer orders,
price reductions, reduced revenue and gross margins and loss of market share. Further, we may be required to make substantial additional investments in research,
development, marketing and sales in order to respond to such competitive threats, and we cannot assure you that we will be able to compete successfully in the
future.
We may acquire or invest in companies and technologies, which may divert our management’s attention, and result in additional dilution to our stockholders.
We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions or investments,
including our merger with Hortonworks.
As part of our business strategy, we have acquired companies in the past and may evaluate and consider potential strategic transactions, including acquisitions
of, or investments in, businesses, technologies, services, products and other assets in the future. For example, on January 3, 2019, we completed our merger with
Hortonworks. We also may enter into relationships with other businesses to expand our solutions or our ability to provide services. An acquisition, investment or
business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the
businesses, technologies, products, personnel or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to
work for us, their technology is not easily adapted to work with ours, or we have difficulty retaining the customers of any acquired business due to changes in
ownership, management or otherwise. Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions
may often be subject to conditions or approvals that are beyond our control. Consequently, these transactions, even if undertaken and announced, may not close.
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Even if we are able to complete acquisitions or enter into alliances and joint ventures that we believe will be successful, such transactions are inherently risky.
Acquisitions, including the completed merger with Hortonworks, involve many risks, including the following:
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an acquisition may negatively impact our results of operations because it:
– may require us to incur charges, including integration and restructuring costs, both one-time and ongoing, as well as substantial debt or liabilities,
including unanticipated and unknown liabilities,
– may cause adverse tax consequences, substantial depreciation or deferred compensation charges,
– in the future may require the amortization, goodwill and other intangible assets, or
– may not generate sufficient financial returns for us to offset our acquisition costs;
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we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that
we acquire, particularly if key personnel of the acquired company decide not to work for us;
an acquisition and the related integration process may be complex, expensive and time consuming, and may disrupt our ongoing business, divert
resources, increase our expenses and distract our management;
an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about
continuity and effectiveness of service from either company;
an acquisition may result in increased regulatory and compliance requirements;
an acquisition may result in increased uncertainty if we enter into businesses, markets or business models in which we have limited or no prior experience
and in which competitors have stronger market positions;
we may encounter difficulties in maintaining the key business relationships and the reputations of the businesses we acquire, and we may be dependent on
unfamiliar affiliates and partners of the companies we acquire;
we may fail to maintain sufficient controls, policies and procedures, including integrating any acquired business into our control environment;
we may fail to achieve anticipated synergies, including with respect to complementary software or services;
we may obtain unanticipated or unknown liabilities, including intellectual property or other claims, or become exposed to unanticipated risks in
connection with any acquisition; and
an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience.
If we are unable to address these difficulties and challenges or other problems encountered in connection with any future acquisition or investment, we might
not realize the anticipated benefits of that acquisition or investment, we might incur unanticipated liabilities or we might otherwise suffer harm to our business
generally.
To the extent we pay the consideration for any future acquisitions or investments in cash, the payment would reduce the amount of cash available to us for
other purposes. The merger with Hortonworks resulted in, and future acquisitions or investments could also result in, dilutive issuances of our equity securities or
the incurrence of debt, contingent liabilities, amortization expenses, or impairment charges against goodwill on our balance sheet, any of which could harm our
financial condition and negatively impact our stockholders.
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We have invested significantly in our Cloudera Data Platform (CDP) offering and if it fails to achieve market adoption our business, results of operations and
financial condition could be harmed.
We introduced CDP Public Cloud in September 2019, and Data Center in November 2019. We have less experience with marketing, determining pricing for
and selling CDP, and we are continuing to refine our approach to selling, marketing, pricing and supporting adoption of this offering. We have directed, and intend
to continue to direct, a significant portion of our financial and operating resources to develop and grow CDP, including offering trials to existing and potential
customers. We cannot guarantee that CDP will be adopted broadly. If we are unsuccessful in our efforts to drive customer adoption of CDP, or if we do so in a way
that is not profitable or fails to compete successfully against our current or future competitors, our business, results of operations and financial condition could be
harmed.
Because of the characteristics of open source software, there may be fewer technology barriers to entry in the open source market by new competitors and it
may be relatively easy for new and existing competitors with greater resources than we have to compete with us.
One of the characteristics of open source software is that the governing license terms generally allow liberal modifications of the code and distribution thereof
to a wide group of companies and/or individuals. As a result, others could easily develop new software products or services based upon those open source
programs that compete with existing open source software that we support and incorporate into our platform. Our recently announced licensing model changes
might be ineffective to slow or alter these competitive dynamics. Such competition with use of the open source projects that we utilize can materialize without the
same degree of overhead and lead time required by us, particularly if the customers do not value the differentiation of our proprietary components. It is possible for
new and existing competitors, including those with greater resources than ours, to develop their own open source software or hybrid proprietary and open source
software offerings, potentially reducing the demand for, and putting price pressure on, our platform. In addition, some competitors make open source software
available for free download or use or may position competing open source software as a loss leader. We cannot guarantee that we will be able to compete
successfully against current and future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions,
reduced revenue and gross margins and loss of market share, any one of which could seriously harm our business.
If our customers do not renew or expand their subscriptions, or if they renew on less favorable terms, our future revenue and operating results will be harmed.
Our future success depends, in part, on our ability to sell renewals of subscriptions and expand the deployment of our platform with existing customers. While
we generally offer subscriptions of up to three years in length, our customers often purchase one-year subscriptions which generally do not provide for automatic
renewal or a right to terminate the subscription early. Our customers may not renew or expand the use of their subscriptions after the expiration of their current
subscription agreements. In addition, our customers may opt for a lower priced edition of our platform or decrease their usage of our platform. Our existing
customers generally have no contractual obligation to expand or renew their subscriptions after the expiration of the committed subscription period and given our
limited operating history, we may not be able to accurately predict customer renewal rates. Our customers’ renewal and/or expansion pricing rates may decline or
fluctuate as a result of factors, including, but not limited to, their satisfaction with our platform including CDP, and our customer support, the frequency and
severity of software and implementation errors, our platform’s reliability, the pricing of our subscriptions and services or of competing solutions or services, the
effects of global economic conditions and their ability to continue their operations and spending levels. If our customers renew their subscriptions, they may renew
for shorter contract lengths, less usage or on other terms that are less economically beneficial to us. Our implementation of a "pay wall" for the distribution of some
of our software solutions might prove ineffective at improving our renewal and/or expansion rates with existing customers or deal close rates with new customers.
We have limited historical data with respect to rates of customer subscription renewals, so we may not accurately predict future renewal trends. We cannot assure
you that our customers will renew or expand their subscriptions, and if our customers do not renew their agreements or renew on less favorable terms or for less
usage, our revenue may grow more slowly than expected or decline and our business could suffer.
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Achieving renewal or expansion of subscriptions may require us to increasingly engage in sophisticated and costly sales efforts that may not result in
additional sales. In addition, the rate at which our customers expand the deployment of our platform depends on a number of factors, including general economic
conditions, the functioning of our solutions, the ability of our field organization, together with our partner ecosystem, to assist our customers in identifying new use
cases, modernizing their data architectures, and achieving success with data-driven initiatives and our customers’ satisfaction with our customer support. If our
efforts to expand penetration within our customers are not successful, our business may suffer.
We have a limited operating history, which makes it difficult to predict our future results of operations.
We have a limited operating history, which limits our ability to forecast our future results of operations and subjects us to a number of uncertainties, including
our ability to plan for and anticipate future growth. Our historical revenue growth should not be considered indicative of our future performance. Further, in future
periods, our revenue growth could slow or our revenue could decline for a number of reasons, including slowing demand for our solutions, increasing competition,
a decrease in the growth of our overall market, or our failure, for any reason, to continue to capitalize on growth opportunities and merger integration plans. We
have also encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as determining
appropriate investments of our limited resources, market reception of our platform and open source model, competition from other companies, attracting and
retaining customers, hiring, integrating, training and retaining skilled personnel, developing new solutions and unforeseen expenses. If our assumptions regarding
these risks and uncertainties, which we use to plan our business, are incorrect or change, or if we do not address these risks successfully, our operating and
financial results could be adversely affected.
Our sales cycles can be long, unpredictable and vary seasonally, particularly with respect to large subscriptions, and our sales efforts require considerable time
and expense.
Our results of operations may fluctuate, in part, because of the resource-intensive nature of our sales efforts, the length and variability of the sales cycle for our
platform and the difficulty in making short-term adjustments to our operating expenses. The timing of our sales is difficult to predict. The length of our sales cycle,
from initial evaluation to payment for our subscriptions is generally four to nine months, but can vary substantially from customer to customer. Our sales cycle can
extend to more than 18 months for some customers. Our sales efforts involve educating our customers about the use, technical capabilities and benefits of our
platform, solutions and open source model. Customers often undertake a prolonged evaluation process, which frequently involves not only our platform but also
those of other companies. Some of our customers initially deploy our platform on a limited basis, with no guarantee that these customers will deploy our platform
widely enough across their organization to justify our substantial pre-sales investment. As a result, it is difficult to predict exactly when, or even if, we will make a
sale to a potential customer or if we can increase sales to our existing customers. Large individual sales have, in some cases, occurred in quarters subsequent to
those we anticipated, or have not occurred at all. If our sales cycle lengthens or our substantial upfront investments do not result in sufficient revenue to justify our
investments, our operating results could be adversely affected.
We have seasonal and end-of-quarter concentration of our sales, which impacts our ability to plan and manage cash flows and margins. Our sales vary by
season, with the fourth quarter typically being our largest. In addition, within each quarter, most sales occur in the last month of that quarter. Therefore, it is
difficult to determine whether we are achieving our quarterly expectations until near the end of the quarter, with seasonality magnifying the difficulty for
determining whether we will achieve annual expectations. Most of our expenses are relatively fixed or require time to adjust. Therefore, if expectations for our
business are not accurate, we may not be able to adjust our cost structure on a timely basis and margins and cash flows may differ from expectations.
We do not have an adequate history with our subscription or pricing models to accurately predict the long-term rate of customer adoption or renewal, or the
impact these will have on our revenue or operating results.
We have limited experience with respect to determining the optimal prices and pricing models for our solutions, especially as we develop new offerings such
as the Cloudera Data Platform. As the markets for our solutions mature, or as new competitors introduce new products or services that compete with ours, we may
be unable to attract new
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customers at the same price or based on the same pricing model as we have used historically. Moreover, large customers, which are the focus of our sales efforts,
may demand greater price concessions. Additionally, the renewal rate of our large customers may have more significant impact period to period on our revenue and
operating results. As a result, in the future we may be required to reduce our prices, which could adversely affect our revenue, gross margin, profitability, financial
position and cash flow. In addition, as 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.
Our results may fluctuate significantly from period to period, which could adversely impact the value of our common stock.
Our results of operations, including our revenue, net revenue expansion rate, gross margin, profitability and cash flows, may vary significantly in the future,
and period-to-period comparisons of our operating results may not be meaningful. Accordingly, our results for any particular period should not be relied upon as an
indication of future performance. Our financial results may fluctuate from period to period as a result of a variety of factors, many of which are outside of our
control. Fluctuation in periodic results may adversely impact the value of our common stock. Factors that may cause fluctuations in our periodic financial results
include, without limitation, those listed elsewhere in this “Risk Factors” section and those listed below:
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the budgeting cycles and purchasing practices of our customers, including their tendency to purchase in the fourth quarter of our fiscal year, near the end
of each quarter, and the timing of subsequent contract renewals;
the achievement of milestones in connection with delivery of services, impacting the timing of services revenue recognition;
subscriptions from large enterprises;
price competition;
our ability to attract and retain new customers;
our ability to expand penetration within our existing customer base;
the timing and success of new solutions by us and our competitors;
the timing and success of our product releases;
changes in customer requirements or market needs and our ability to make corresponding changes to our business;
changes in the competitive landscape, including consolidation among our competitors or customers;
general economic conditions, both domestically and in our foreign markets;
natural disasters, acts of war, terrorism, epidemics, or pandemics and other health crises, including the ongoing coronavirus pandemic;
the timing and amount of certain payments and expenses, such as research and development expenses, sales commissions and stock-based compensation;
our inability to adjust certain fixed costs and expenses, particularly in research and development, for changes in demand;
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increases or decreases in our revenue and expenses caused by fluctuations in foreign currency exchange rates, as an increasing portion of our revenue is
collected, and expenses are incurred and paid in currencies other than the U.S. dollar;
the cost of and potential outcomes of existing and future claims or litigation, which could have a material adverse effect on our business;
potential impairment of goodwill and intangible assets;
future accounting pronouncements and changes in our accounting policies; and
changes in tax laws, tax regulations and governmental regulations.
Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our operating results. This
variability and unpredictability could result in our failure to meet our revenue or other operating result expectations or those of investors for a particular period.
The failure to meet or exceed such expectations could have a material adverse effect on our business, results of operations and financial condition that could
ultimately adversely affect our stock price.
Because we derive substantially all of our revenue from a single software platform, failure of this platform to satisfy customer demands or to achieve increased
market acceptance could adversely affect our business, results of operations, financial condition and growth prospects.
We derive and expect to continue to derive substantially all of our revenue from our data management, machine learning and analytics platform. As such, the
market acceptance of our platform is critical to our continued success. Demand for our platform is affected by a number of factors beyond our control, including
continued market acceptance, the timing of development and release of new products by our competitors, technological change, any developments or
disagreements with the open source community and growth or contraction in our market. We expect the growth and proliferation of data to lead to an increase in
the data analysis demands of our customers, and our platform may not be able to scale and perform to meet those demands or may not be chosen by users for those
needs. If we are unable to continue to meet customer demands or to achieve more widespread market acceptance of our platform and solutions, our business
operations, financial results and growth prospects will be materially and adversely affected.
Security and privacy breaches may hurt our business.
Any security breach, including those resulting from a cybersecurity attack, or any unauthorized access, unauthorized usage, virus or similar breach or
disruption could result in the loss of confidential information, damage to our reputation, early termination of our contracts, litigation, regulatory investigations or
other liabilities. If our security measures or the security measures we have provided to customers are breached as a result of third-party action, employee error,
malfeasance or otherwise and, as a result, someone obtains unauthorized access to our customers’ confidential information, our reputation may be damaged, our
business may suffer and we could incur significant liability.
Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target. As a
result, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived security breach occurs, the
market perception of our security measures could be harmed and we could lose sales and customers.
In addition, many of our customers use our platform to store and process vast quantities of private and otherwise sensitive data that are critical to their
businesses. They may have a greater sensitivity to security defects in our products than to defects in other, less critical, software products. An actual or perceived
security breach or theft of the business-critical data of one of our customers, regardless of whether the breach is attributable to the failure of our products or
services, could adversely affect the market’s perception of our security products. Moreover, if a high-profile security breach occurs with respect to another data
management, machine learning and analytics platform provider, our customers and potential customers may lose trust in the security of data management,
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machine learning and analytics platforms generally, which could adversely impact our ability to retain existing customers or attract new ones.
We have been, and may in the future be, subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to
pay significant damages and could limit our ability to use certain technologies.
Companies in the software and technology industries, including some of our current and potential competitors, own large numbers of patents, copyrights,
trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition,
many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may
be brought against them. The litigation may involve patent holding companies or other adverse patent owners that have no relevant product revenue and against
which our patents may therefore provide little or no deterrence. From time-to-time, third parties, including certain other companies, have asserted and may assert
patent, copyright, trademark or other intellectual property rights against us, our partners or our customers. We or our customers have received, and may in the
future receive, notices that claim we have misappropriated, misused or infringed other parties’ intellectual property rights, and, to the extent we gain greater market
visibility, we face a higher risk of being the subject of intellectual property infringement claims, which is not uncommon with respect to the enterprise software
market.
There may be third-party intellectual property rights, including issued or pending patents, that cover significant aspects of our technologies, or the
technologies in our platform or business methods. We may be exposed to increased risk of being the subject of intellectual property infringement claims as a result
of acquisitions, such as our merger with Hortonworks, and our incorporation of open source software into our platform, as, among other things, we have a lower
level of visibility into the development process with respect to such technology or the care taken to safeguard against infringement risks. Any intellectual property
claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate and could divert our management’s attention and other
resources. These claims could also subject us to significant liability for damages, potentially including treble damages if we are found to have willfully infringed
patents or copyrights. These claims could also result in our having to stop using, distributing or supporting technology found to be in violation of a third-party’s
rights. We might be required to seek a license for the intellectual property, which may not be available on reasonable terms or at all. Even if a license were
available, we could be required to pay significant royalties, which would increase our operating expenses. As a result, we may be required to develop alternative
non-infringing technology, which could require significant effort and expense. If we cannot license or develop technology for any infringing aspect of our business,
we could be forced to limit or stop sales of our offerings and may be unable to compete effectively. Any of these results could adversely affect our business
operations and financial results.
Third parties may also assert such claims against our customers or partners whom we typically indemnify against claims that our solutions infringe,
misappropriate or otherwise violate the intellectual property rights of third parties, including in the third-party open source components included in our platform, as
well as our own open source and proprietary components. As the numbers of products and competitors in our market increase and overlaps occur, claims of
infringement, misappropriation and other violations of intellectual property rights may increase. Also, to the extent we hire personnel from competitors, we may be
subject to allegations that they have been improperly solicited or have divulged proprietary or other confidential information.
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.
Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under patent and other intellectual property laws
of the United States and other jurisdictions outside of the United States so that we can prevent others from using our inventions and proprietary information. If we
fail to protect our intellectual property rights adequately, our competitors may gain access to our technology, and our business may be harmed. In addition,
defending our intellectual property rights may entail significant expense. Any of our patents, trademarks or other intellectual property rights may be challenged by
others or invalidated through administrative process or litigation. While we have patents and patent applications pending, we may be unable to obtain patent
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protection for the technology covered in our patent applications or the patent protection may not be obtained quickly enough to meet our business needs. In
addition, our existing patents and any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third
parties.
Moreover, despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our platform or offerings or obtain and use
information that we regard as proprietary. We generally enter into confidentiality or license agreements with our employees, consultants, vendors and customers,
and generally limit access to and distribution of our proprietary information. However, we cannot be certain that we have entered into such agreements with all
parties who may have or have had access to our confidential information or that the agreements we have entered into will not be breached. We cannot guarantee
that any of the measures we have taken will prevent misappropriation of our technology. Because we may be an attractive target for cybersecurity attacks, we may
have a greater risk of unauthorized access to, and misappropriation of, our proprietary information.
Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain, and we also may face
proposals to change the scope of protection for some intellectual property right. Effective patent, trademark, copyright and trade secret protection may not be
available to us in every country in which our products or services are available. The laws of some countries may not be as protective of intellectual property rights
as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. Also, our involvement in standard setting activity
or the need to obtain licenses from others may require us to license our intellectual property. Accordingly, despite our efforts, we may be unable to prevent third
parties from using our intellectual property.
We may be required to spend significant resources to monitor and protect our intellectual property rights and we may conclude that in at least some instances
the benefits of protecting our intellectual property rights may be outweighed by the expense. We may initiate claims or litigation against third parties for
infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in
significant expense to us and divert the efforts of our technical and management personnel.
We do not control and may be unable to predict the future course of open source technology development, including the ongoing development of open source
components used in our platform, which could reduce the market appeal of our platform and damage our reputation.
We do not control many aspects of the development of the open source technology in our platform. Different groups of open source software programmers
collaborate with one another to develop the software projects in our platform. Given the disparate inputs from various developers, we cannot control entirely how
an open source project develops and matures. Also, different open source projects may overlap or compete with the ones that we incorporate into our platform. The
technology developed by one group for one project may become more widely used than that developed by others. If we acquire or adopt a new technology and
incorporate it into our platform but a competing technology becomes more widely used or accepted, the market appeal of our platform may be reduced and that
could harm our reputation, diminish our brand and result in decreased revenue.
If open source software programmers, many of whom we do not employ, or our own internal programmers do not continue to develop and enhance open
source technologies, we may be unable to develop new technologies, adequately enhance our existing technologies or meet customer requirements for
innovation, quality and price.
We rely to a significant degree on a number of open source software programmers, or committers and contributors, to develop and enhance components of our
platform. Additionally, members of the corresponding open source project management committees, many of whom are not employed by us, are primarily
responsible for the oversight and evolution of the codebases of important components of the open source data management ecosystem. If the open source data
management committers and contributors fail to adequately further develop and enhance open source technologies, or if the committees fail to oversee and guide
the evolution of open source data management technologies in the manner that we believe is appropriate to maximize the market potential of our solutions, then we
would have to rely on other parties, or we would need to expend additional resources, to develop and enhance our platform. We also must devote adequate
resources to our own internal programmers to support their continued development and enhancement of open source technologies, and if we do not do so, we may
have to turn
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to third parties or experience delays in developing or enhancing open source technologies. We cannot predict whether further developments and enhancements to
these technologies would be available from reliable alternative sources. In either event, our development expenses could be increased and our technology release
and upgrade schedules could be delayed. Delays in developing, completing or delivering new or enhanced components to our platform could cause our offerings to
be less competitive, impair customer acceptance of our solutions and result in delayed or reduced revenue for our solutions.
Our software development and licensing model could be negatively impacted if the Apache License, Version 2.0 is not enforceable or is modified so as to
become incompatible with other open source licenses.
Important components of our platform have been provided under the Apache License, Version 2.0. This license states that any work of authorship licensed
under it, and any derivative work thereof, may be reproduced and distributed provided that certain conditions are met. It is possible that a court would hold this
license to be unenforceable or that someone could assert a claim for proprietary rights in a program developed and distributed under it. Any ruling by a court that
this license is not enforceable, or that open source components of our platform may not be reproduced or distributed, may negatively impact our distribution or
development of all or a portion of our solutions. In addition, at some time in the future it is possible that important components of the open source projects in our
platform that may be distributed under a different license or the Apache License, Version 2.0, which governs Hadoop, Spark and other current elements of our
platform, may be modified, which could, among other consequences, negatively impact our continuing development or distribution of the software code subject to
the new or modified license.
Further, full utilization of our platform may depend on software, applications, hardware and services from various third parties, and these items may not be
compatible with our platform and its development or available to us or our customers on commercially reasonable terms, or at all, which could harm our business.
Our use of open source software in our solutions could negatively affect our ability to sell our platform and subject us to possible litigation.
Our solutions include software covered by open source licenses, which may include, by way of example, GNU General Public License and the Apache
License. We do not own all of the open source technology in our platform and the ownership of the open source technology in our platform may not be easily
determinable by us. Rather, we rely on the Apache Software Foundation (ASF) as well as certain other third-party open source contributors to ensure that the open
source contributions to our platform are properly owned by the committers and contributors who contribute the open source technology and that such contributions
do not infringe on other parties’ intellectual property rights. Moreover, the terms of certain of the open source licenses have not been interpreted by United States
or other courts, and there is a risk that such licenses could be construed in a manner that is incompatible with our current business model, imposing unanticipated
conditions or restrictions on our ability to market our solutions. We, our customers and the ASF may have received, or may in the future receive, notices that claim
we have misappropriated, misused or infringed other parties’ intellectual property rights, and, to the extent products based on the open source data management
ecosystem gain greater market visibility, we, our customers, and the ASF, face a higher risk of being the subject of intellectual property infringement claims. In
addition, we or our customers could be subject to lawsuits by parties claiming ownership of (or that different license terms apply to) what we believe to be open
source software, or seeking to enforce the terms of an open source license. By the terms of certain open source licenses, we could be required to release the source
code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open
source software in a certain manner. In the event that portions of our proprietary software are determined to be impacted by an open source license, we could be
required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our
technologies and services, each of which could reduce or eliminate the value of our technologies and cause us to have to significantly alter our current business
model. These claims could also result in litigation (including litigation against our customers or partners, which could result in us being obligated to indemnify our
customers or partners against such litigation), require us to purchase a costly license or require us to devote additional research and development resources to
change our solutions, any of which could have a negative effect on our business and operating results. In addition, if the license
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terms for the open source code change, we may be forced to re-engineer our solutions or incur additional costs to find alternative tools. Further, changes in our
software licensing model may impact future revenue growth rates.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as
open source licensors generally do not provide warranties, support, indemnity or assurance of title or controls on origin of the software. Further, some open source
projects have known vulnerabilities and architectural instabilities and are provided on an “as-is” basis. Many of these risks associated with usage of open source
software, such as the lack of warranties or assurances of title, cannot be eliminated, and could, if not properly addressed, negatively affect the performance of our
platform and our business. In addition, we are often required to absorb these risks in our customer and partner relationships by agreeing to provide warranties,
support and indemnification with respect to such third-party open source software. While we have established processes intended to alleviate these risks, we cannot
assure that these measures will reduce these risks.
Because our business relies on the Apache Software Foundation, our business could be harmed by the decisions made by the ASF or claims or disputes
directed at the ASF or reputational harm otherwise suffered by the ASF.
Our business relies on the ASF, a non-profit corporation that supports Apache open source software projects. We do not control nor can we predict the
decisions the ASF will make with respect to the further development and enhancement of open source technologies which may impact our business. For example,
the reduction or elimination of support of Hadoop, Spark or other technologies by the ASF, the migration of Hadoop, Spark and other open source data
management technology to an organization other than the ASF, or any other actions taken by the ASF or the Hadoop project may impact our business model.
Moreover, if the ASF is subject to claims, disputes or otherwise suffers reputational harm, our business, results of operations, financial condition and growth
prospects could be harmed if customers perceive our solutions to be risky or inferior to data management solutions which do not rely on the ASF for continued
development and enhancement of open source technologies.
Real or perceived errors, failures, bugs or disruptions in our platform and solutions could adversely affect our reputation and business could be harmed.
Our platform and solutions are very complex and have contained and may contain undetected defects or errors, especially when solutions are first introduced
or enhanced, or as we develop new platform such as CDP. In addition, our platform employs open source software and to the extent that our solutions depend upon
the successful operation of open source software in conjunction with our solutions, any undetected errors or defects in this open source software could prevent the
deployment or impair the functionality of our solutions, delay new solutions’ introductions, result in a failure of our solutions, result in liability to our customers,
and injure our reputation.
If our platform is not implemented or used correctly or as intended, inadequate performance and disruption in service may result. Moreover, as we acquire
companies, such as through our merger with Hortonworks, and integrate new open source data management projects, we may encounter difficulty in incorporating
the newly-obtained technologies into our platform and maintaining the quality standards that are consistent with our reputation.
Since our customers use our platform and solutions for important aspects of their business, any errors, defects, disruptions in service or other performance
problems could hurt our reputation and may damage our customers’ businesses. Furthermore, defects in our platform and solutions may require us to implement
design changes or software updates. Any defects or errors in our platform and solutions, or the perception of such defects or errors, could result in:
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expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate or work around errors or defects;
loss of existing or potential customers or channel partners;
delayed or lost revenue;
delay or failure to attain market acceptance;
delay in the development or release of new solutions or services;
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negative publicity, which will harm our reputation;
warranty claims against us, which could result in an increase in our provision for doubtful accounts;
an increase in collection cycles for accounts receivable or the expense and risk of litigation; and
harm to our results of operations.
Although we have contractual protections, such as warranty disclaimers and limitation of liability provisions, in our standard terms and conditions of sale, they
may not fully or effectively protect us from claims by customers, partners or other third parties. Any insurance coverage we may have may not adequately cover all
claims asserted against us, or cover only a portion of such claims. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds
in litigation and divert management’s time and other resources.
If we are unable to hire, retain, train and motivate qualified personnel and senior management, our business could be harmed.
Our future success depends, in part, on our ability to continue to attract, integrate and retain qualified and highly skilled personnel. In particular, we are
substantially dependent on the continued service of our existing engineering personnel because of the complexity of our platform and are also highly dependent on
the contributions of our executive team. The loss of any key personnel could make it more difficult to manage our operations and research and development
activities, reduce our employee retention and revenue, disrupt our relationships with our employees, customers and vendors, and impair our ability to compete. Any
significant leadership change or senior management transition involves inherent risk and any failure to ensure the timely and suitable replacement and a smooth
transition could hinder our strategic planning, execution and future performance. Although we have entered into employment offer letters with our key personnel,
these agreements have no specific duration and constitute at-will employment. We do not maintain key person life insurance policies on any of our employees. The
loss of one or more of our key employees could seriously harm our business. If we are unable to attract, integrate, or retain the qualified and highly skilled
personnel required to fulfill our current or future needs, our business, financial condition and operating results could be harmed.
Our senior management has substantially changed over the last year, including, for example, the recent departures of our former chief executive officer,
Thomas Reilly and interim chief executive officer, Martin Cole. We have a new chief executive officer, Robert Bearden, who started in January 2020.
Competition for highly skilled personnel is often intense, especially in the San Francisco Bay Area where we have a substantial presence and need for highly
skilled personnel. We may not be successful in attracting, integrating or retaining qualified personnel to fulfill our current or future needs. We have from time to
time experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. In addition,
job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of
our common stock declines, it may adversely affect our ability to hire or retain highly skilled employees. In addition, we may periodically change our equity
compensation practices, which may include reducing the number of employees eligible for equity awards or reducing the size of equity awards granted per
employee. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be harmed.
We have experienced rapid growth in recent periods and expect our growth to continue. If we fail to effectively manage our growth, our business and operating
results could be adversely affected.
We have experienced and may continue to experience rapid growth in our headcount and operations, which has placed and will continue to place significant
demands on our managerial, administrative, operational, financial and other resources. For example, our employee headcount increased from 1,648 employees as
of January 31, 2018 to 2,723 employees as of January 31, 2020. This growth has placed, and any future growth will place, significant demands on our management
and our operational and financial infrastructure. To manage this growth effectively, we must continue to improve our operational, financial and management
systems and controls by, among other things:
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recruiting, training, integrating and retaining new employees, particularly for our sales and research and development teams;
developing and improving our internal administrative infrastructure, particularly our financial, operational, compliance, recordkeeping, communications
and other internal systems;
• managing our international operations and the risks associated therewith;
• managing our employees, infrastructure and operations associated with the merger with Hortonworks;
• maintaining high levels of satisfaction with our platform among our customers; and
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effectively managing expenses related to any future growth.
If we fail to manage our growth, or if we fail to implement improvements or maintain effective internal controls, our costs and expenses may increase more
than we plan and our ability to expand our customer base, enhance our platform, develop new solutions, expand penetration within existing customers, respond to
competitive pressures or otherwise execute our business plan, our business and operating results could be adversely affected.
Because we recognize a substantial portion of our subscription revenue from our platform over the subscription term, downturns or upturns in new sales and
renewals will not be immediately reflected in our operating results.
We generally recognize subscription revenue ratably over the term of the subscription period. As a result, most of the revenue we report in each quarter is
derived from the recognition of deferred revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed
subscriptions, or a reduction in expansion rates, in any single quarter could have only a small impact on our revenue results during that quarter or subsequent
period. Such a decline or deceleration, however, will negatively affect our revenue or revenue growth rates in future quarters. Accordingly, the effect of these
changes or events may not be fully reflected in our results of operations until future periods. Given the ratable nature of our revenue recognition, our subscription
model also makes it difficult for us to rapidly increase our revenue through additional sales in any period. We may be unable to adjust our cost structure to reflect
the changes in revenue. In addition, a significant majority of our costs are expensed as incurred, while revenue is generally recognized over the life of the customer
agreement. As a result, increased growth in the number of our customers could result in our recognition of more costs than revenue in the earlier periods of the
terms of our agreements.
Our revenue growth depends in part on the success of our strategic relationships with third parties and their continued performance.
We seek to grow our partner ecosystem as a way to grow our business. To grow our business, we anticipate that we will continue to establish and maintain
relationships with third parties, such as resellers, OEMs, system integrators, independent software and hardware vendors and platform and cloud service providers.
In addition, we work closely with select vendors (Partner Solutions) to design solutions to specifically address the needs of certain industry verticals or use cases
within those verticals. As our agreements with strategic partners terminate or expire, we may be unable to renew or replace these agreements on comparable terms,
or at all. Moreover, we cannot guarantee that the companies with which we have strategic relationships will continue to devote the resources necessary to expand
our reach, increase our distribution and increase the number of Partner Solutions and associated use cases. In addition, customer satisfaction with Partner Solutions
may be less than anticipated, negatively impacting anticipated revenue growth and results of operations. Further, some of our strategic partners offer competing
products and services or also work with our competitors. As a result of these factors, many of the companies with which we have strategic alliances may choose to
pursue alternative technologies and develop alternative products and services in addition to or in lieu of our platform, either on their own or in collaboration with
others, including our competitors. If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the
marketplace or to grow our revenue could be impaired and our operating results may suffer. Even if we are successful in establishing and maintaining these
relationships with third parties, we cannot assure you that these relationships will result in increased customer usage of our platform or increased revenue.
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The sum of our revenue and changes in contract liabilities or remaining performance obligations (RPO) may not be an accurate indicator of business activity
within a period.
Investors or analysts sometimes look to the sum of the revenue and changes in contract liabilities or RPO as indicators of business activity in a period for
businesses such as ours. They may use this information to estimate billings or bookings. However, these measures may significantly differ from underlying
business activity for a number of reasons including:
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Since a relatively large number of transactions occur at the end of the quarter, and invoicing or enablement of those transactions may or may not occur
before the end of the quarter based on a number of factors including receipt of information from the customer, volume of transactions and holidays, a shift
of a few days has little economic impact on our business, but may shift contract liabilities or RPO from one period into the next;
• multi-year upfront billings that may distort trends;
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subscriptions that have deferred start dates;
services that are invoiced upon delivery; and
changes in revenue recognition resulting from ASC 606 adoption.
Accordingly, we do not believe that estimated billings is an accurate indicator of future revenue for any given period of time. However, many companies that
provide subscriptions report changes in estimated billings as a key operating or financial metric, and it is possible that analysts or investors may view this metric as
important. Thus, any changes in our estimated billings could adversely affect the market price of our common stock. Moreover, estimating bookings from RPO is a
newer analytical technique, and it may not be an accurate indicator of future revenue for our company for any given period of time.
If our new products, components or enhancements to our platform do not achieve sufficient market acceptance, our financial results and competitive position
will suffer.
We spend substantial amounts of time and money to research and develop new products, such as CDP. In addition, we spend time and money to research and
develop new components and enhancements of our platforms to incorporate additional features, improve functionality or add other enhancements in order to meet
our customers’ rapidly evolving demands. When we develop a new product, component or enhancement to our platform, whether open source or proprietary, we
typically incur expenses and expend resources upfront to develop, market and promote the new component. Therefore, when we develop and introduce new
products, components or enhancements to our platform, they must achieve high levels of market acceptance in order to justify the amount of our investment in
developing and bringing them to market.
Our new products, components or enhancements to our platform and changes to our platform could fail to attain sufficient market acceptance for many
reasons, including:
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our failure to predict market demand accurately in terms of platform functionality, including curating new open source projects, and to supply a platform
that meets this demand in a timely fashion;
delays in releasing to the market our new components or enhancements to our platform to the market;
defects, errors or failures;
complexity in the implementation or utilization of the new components and enhancements;
negative publicity about the platform’s performance or effectiveness;
introduction or anticipated introduction of competing platforms by our competitors;
poor business conditions for our end-customers, causing them to delay IT purchases; and
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reluctance of customers to purchase platforms incorporating open source software or to purchase hybrid platforms.
If our new products, such as CDP, or our new components or enhancements and changes do not achieve adequate acceptance in the market, our competitive
position will be impaired, and our revenue will be diminished. The adverse effect on our financial results may be particularly acute because of the significant
research, development, marketing, sales and other expenses we will have incurred in connection with the new solutions or enhancements.
If we do not effectively hire, retain, train and oversee our direct sales force, we may be unable to add new customers or increase sales to our existing
customers, and our business may be adversely affected.
We continue to be substantially dependent on our direct sales force to obtain new customers and increase sales with existing customers. There is significant
competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part,
on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth, particularly in international markets. In addition,
partly due to our merger with Hortonworks, a large percentage of our sales force is relatively new to our company. New hires require significant training and may
take significant time before they achieve full productivity, especially as the legacy Hortonworks sales personnel and legacy Cloudera sales personnel learn to sell
products previously offered by the other company, as well as new offerings developed by the combined company. Our recent hires and planned hires may not
become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business
or plan to do business. In addition, growth of our direct sales force leads to increasing difficulty and complexity in its organization, management and leadership, at
which we may prove unsuccessful. If we are unable to hire and train a sufficient number of effective sales personnel, we are ineffective at overseeing a growing
sales force, or the sales personnel we hire are otherwise unsuccessful in obtaining new customers or increasing sales to our existing customer base, our business
will be adversely affected.
As we expand internationally, our business will become more susceptible to risks associated with international operations.
We have expanded internationally and intend to continue such international expansion. For example, we sell the various editions of our platform through our
direct sales force, which is comprised of inside sales and field sales personnel, and is located in a variety of geographic regions, including the United States, Europe
and Asia, and have customers located in approximately 100 countries as of January 31, 2020. We intend to continue to expand internationally.
Conducting international operations subjects us to risks that we have not generally faced in the United States. These risks include:
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challenges caused by distance, language, cultural and ethical differences and the competitive environment;
heightened risks of unethical, unfair or corrupt business practices, actual or claimed, in certain geographies and of improper or fraudulent sales
arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements;
foreign exchange restrictions and fluctuations in currency exchange rates, including that, because a majority of our international contracts are
denominated in U.S. dollars, an increase in the strength of the U.S. dollar may make doing business with us less appealing to a non-U.S. dollar
denominated customer;
application of multiple and conflicting laws and regulations, including complications due to unexpected changes in foreign laws and regulatory
requirements;
risks associated with trade restrictions and foreign import requirements, including the importation, certification and localization of our solutions required
in foreign countries, as well as changes in trade, tariffs, restrictions or requirements;
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new and different sources of competition;
potentially different pricing environments, longer sales cycles and longer accounts receivable payment cycles and collections issues;
• management communication and integration problems resulting from cultural differences and geographic dispersion;
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potentially adverse tax consequences, including multiple and possibly overlapping tax structures, the complexities of foreign value-added tax systems,
restrictions on the repatriation of earnings and changes in tax rates;
greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods;
the uncertainty and limitation of protection for intellectual property rights in some countries and the risk of potential theft or compromises of our
technology, data or intellectual property in connection with our international operations, whether by state-sponsored malfeasance or other foreign entities
or individuals;
increased financial accounting and reporting burdens and complexities;
lack of familiarity with local laws, customs and practices, and laws and business practices favoring local competitors or partners;
increased exposure to natural disasters, acts of war, terrorism, epidemics, or pandemics and other health crises, including the ongoing coronavirus
pandemic; and
political, social and economic instability abroad, terrorist attacks and security concerns in general.
The occurrence of any one of these risks could harm our international business and, consequently, our results of operations. Additionally, operating in
international markets requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required
to operate in other countries will produce desired levels of revenue or profitability.
Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the
risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.
Our business in countries with a history of corruption and transactions with foreign governments increase the risks associated with our international activities.
As we operate and sell internationally, we are subject to the Foreign Corrupt Practices Act (FCPA), the United Kingdom Bribery Act of 2010 (the UK Bribery
Act), and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties for the purpose of
obtaining or retaining business. We have operations, deal with and make sales to governmental customers in countries known to experience corruption, particularly
certain emerging countries in Africa, East Asia, Eastern Europe, South America and the Middle East. Our activities in these countries create the risk of
unauthorized payments or offers of payments by one of our employees, consultants, sales agents or channel partners that could be in violation of various anti-
corruption laws, even though these parties may not be under our control. While we have implemented policies and controls intended to prevent these practices by
our employees, consultants, sales agents and channel partners, our existing safeguards and any future improvements may prove to be less than effective, and our
employees, consultants, sales agents or channel partners may engage in conduct for which we might be held responsible. Violations of the FCPA, the UK Bribery
Act and other laws may result in severe criminal or civil sanctions, including suspension or debarment from U.S. government contracting, and we may be subject
to other liabilities, which could negatively affect our business, operating results and financial condition.
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We are subject to governmental export control, sanctions and import laws and regulations that could subject us to liability or impair our ability to compete in
international markets.
Because we incorporate encryption functionality into our platform (including any products comprising the platform), we are subject to certain U.S. export
control laws that apply to encryption items. As such, our platform may be exported outside the United States through an export license exception; an export license
is required to certain countries, end-users and end-uses. If we were to fail to comply with such U.S. export controls laws, U.S. customs regulations, U.S. economic
sanctions, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and
managers for willful violations, and the possible loss of our export or import privileges. Obtaining the necessary export license for a particular sale or offering may
not be possible and may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws and economic
sanctions prohibit the export of products to certain U.S. embargoed or sanctioned countries, governments and persons, as well as for prohibited end-uses.
Monitoring and ensuring compliance with these complex U.S. export control laws is particularly challenging because our platform and related services are widely
distributed throughout the world and are available for download without registration. Even though we take precautions to ensure that we and our reseller partners
comply with all relevant export control laws and regulations, any failure by us or our reseller partners to comply with such laws and regulations could have
negative consequences for us, including reputational harm, government investigations and penalties.
In addition, various countries regulate the import of certain encryption technology, including through import permit and license requirements, and have
enacted laws that could limit our ability to distribute our platform or could limit our end-customers’ ability to implement our products in those countries. Changes
in our products or changes in export and import regulations in such countries may create delays in the introduction of our platform into international markets,
prevent our end-customers with international operations from deploying our products globally or, in some cases, prevent or delay the export or import of our
platform to certain countries, governments or persons altogether. Any change in export or import laws or regulations, economic sanctions or related legislation,
shift in the enforcement or scope of existing export, import or sanctions laws or regulations, or change in the countries, governments, persons, or technologies
targeted by such export, import or sanctions laws or regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell our
platform to, existing or potential end-customers with international operations. Any decreased use of our platform or limitation on our ability to export to or sell our
platform in international markets could adversely affect our business, financial condition and operating results.
We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results.
Our sales contracts are primarily denominated in U.S. dollars, and therefore substantially all of our revenue is not subject to foreign currency risk. However, a
strengthening of the U.S. dollar could increase the real cost of our platform to our customers outside of the United States, which could adversely affect our
operating results. In addition, an increasing portion of our operating expenses is incurred and an increasing portion of our assets is held outside the United States.
These operating expenses and assets are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. If we
are not able to successfully hedge against the risks associated with currency fluctuations, our operating results could be adversely affected.
Our failure to raise additional capital could reduce our ability to compete and could harm our business.
We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for the foreseeable future. However, if we change
our business strategy, we may need to raise additional funds in the future, and we may not be able to obtain additional debt or equity financing on favorable terms,
if at all. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the per share value of our
common stock could decline. Furthermore, if we engage in debt financing, the holders of debt would have priority over the holders of common stock, and we may
be required to accept terms that restrict our ability to incur additional indebtedness. We may also be required to take other actions that would otherwise be in the
interests of the debt holders and force us to maintain specified liquidity or other ratios, any of which could harm our business, operating results and financial
condition.
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We are exposed to the credit risk of some of our resellers and customers and to credit exposure in weakened markets, which could result in material losses.
Most of our sales are on an unsecured basis. Although we seek to mitigate these risks, we cannot be certain that these efforts will be effective in reducing our
credit risks, especially as we expand our business internationally. If we are unable to adequately control these risks, our business, results of operations and financial
condition could be harmed.
Federal, state, foreign government and industry regulations, as well as self-regulation related to privacy and data security concerns, pose the threat of lawsuits
and other liability.
We collect and utilize demographic and other information, including personally identifiable information, from and about our employees and our existing and
potential customers and partners. Such information may be collected from our customers and partners when they visit our website or through their use of our
products and interactions with our company and employees such as when signing up for certain services, registering for training seminars, participating in a survey,
participating in polls or signing up to receive e-mail newsletters.
A wide variety of domestic and international laws and regulations (including, for example, the General Data Protection Regulation that became effective in
May 2018, and the California Consumer Privacy Act that became effective on January 1, 2020) apply to the collection, use, retention, protection, disclosure,
transfer and other processing of personal data. These data protection and privacy-related laws and regulations are evolving and may result in regulatory and public
scrutiny and escalating levels of enforcement and sanctions. Our failure to comply with applicable laws and regulations, or to protect such data, could result in
enforcement action against us, including fines, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill
(both in relation to existing customers and prospective customers), any of which could have a material adverse effect on our operations, financial performance and
business. Evolving and changing definitions of personal data and personal information within the European Union, the United States, and elsewhere may limit or
inhibit our ability to operate or expand our business. Even the perception of privacy concerns, whether or not valid, may harm our reputation, inhibit adoption of
our products by current and future customers or adversely impact our ability to attract and retain workforce talent.
Loss, retention or misuse of certain information and alleged violations of laws and regulations relating to privacy and data security, and any relevant claims,
may expose us to potential liability and may require us to expend significant resources on data security and in responding to and defending such allegations and
claims. In addition, future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other
obligations could impair our customers’ ability to collect, use or disclose data relating to individuals, which could decrease demand for our platform, increase our
costs and impair our ability to maintain and grow our customer base and increase our revenue.
A portion of our revenue is generated by sales to government entities and heavily regulated organizations, which are subject to a number of challenges and
risks.
A portion of our sales are to governmental entities. Additionally, many of our current and prospective customers, such as those in the financial services and
health care industries, are highly regulated and may be required to comply with more stringent regulations in connection with subscribing to and deploying our
platform. Selling to these entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any
assurance that these efforts will result in a sale. Government and highly regulated entities often require contract terms that differ from our standard arrangements
and impose compliance requirements that are complicated, require preferential pricing or “most favored nation” terms and conditions, or are otherwise time
consuming and expensive to satisfy. If we undertake to meet special standards or requirements and do not meet them, we could be subject to increased liability
from our customers or regulators. Even if we do meet them, the additional costs associated with providing our services to government and highly regulated
customers could harm our margins. Moreover, changes in the underlying regulatory conditions that affect these types of customers could harm our ability to
efficiently provide our services to them and to grow or maintain our customer base.
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Additionally, government certification requirements for platforms like ours may change and in doing so restrict our ability to sell into certain government
sectors until we have attained the revised certification. Government demand and payment for our solutions may be impacted by public sector budgetary cycles and
funding authorizations, with funding reductions or delays adversely affecting public sector demand for our solutions. Additionally, government entities routinely
investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government entity refusing to continue
buying our solutions, a reduction of revenue, fines or civil or criminal liability if the audit uncovers improper or illegal activities, which could adversely impact our
operating results. Furthermore, engaging in sales activities to foreign governments introduces additional compliance risks specific to the FCPA, the UK Bribery
Act and other similar statutory requirements prohibiting bribery and corruption in the jurisdictions in which we operate.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive
management and qualified board members.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the rules and regulations of the listing standards of the New York
Stock Exchange and other applicable securities rules and regulations. Compliance with these rules and regulations have increased our legal and financial
compliance costs, made some activities more difficult, time-consuming or costly and increased demand on our systems and resources, particularly since we are no
longer an “emerging growth company.”
The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The
Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In
order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant
resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely
affect our business and operating results. Although we have already hired additional employees to comply with these requirements, we may need to hire more
employees in the future or engage outside consultants, which will increase our costs and expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies,
increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying
interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by
regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to
disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in
increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If
our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to
their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.
The rules and regulations applicable to public companies make it more expensive for us to obtain director and officer liability insurance, and we may be
required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and
retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
As a result of disclosure of information in this Annual Report on Form 10-K and in filings required of a public company, our business and financial condition
are more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our
business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time
and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.
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If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable
regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the listing
standards of the New York Stock Exchange. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and
financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial
reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be
disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and
forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive officer and
principal financial officer. We are also continuing to improve our internal control over financial reporting. In order to maintain and improve the effectiveness of
our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant
resources, including accounting-related costs and significant management oversight.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in
our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any
difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may
result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also
could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the
effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that are filed with the SEC.
Our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting as of the
end of our fiscal year. Our independent registered public accounting firm has to issue a report that is adverse in the event it is not satisfied with the level at which
our internal control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over
financial reporting could have a material and adverse effect on our business and operating results and could cause a decline in the price of our common stock.
If we have material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be
materially misstated. Moreover, failure to demonstrate continued compliance with Section 404 of the Sarbanes-Oxley Act could subject us to regulatory scrutiny
and sanctions, impair our ability to raise revenue, cause investors to lose confidence in the accuracy and completeness of our financial reports, subject us to
stockholder or other third-party litigation as well as investigations and delisting, as applicable, by the New York Stock Exchange, the SEC, or other regulatory
authorities, and negatively affect the trading price of our common stock.
Our financial results may be adversely affected by changes in accounting principles applicable to us.
Generally accepted accounting principles in the United States (GAAP) are subject to interpretation by the Financial Accounting Standards Board (FASB), the
SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. For example, in February 2016, the FASB issued ASU 2016-
02, Leases (Topic 842) (Topic 842), which became effective for us on February 1, 2019. Under the Topic 842 standard, most leases are required to be recognized
on the balance sheet as right-of-use assets and corresponding lease liabilities. Refer to Note 2 in the notes to our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K for additional information on Topic 842 and its impact on our consolidated financial statements. Additionally, in
May 2014, the FASB issued accounting standards update No. 2014-09 (Topic 606), Revenue from
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Contracts with Customers, which became effective for our annual reporting period for the year ended January 31, 2019. Under Topic 606, revenue is recognized
when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in
exchange for those goods or services. The adoption of Topic 606 has had a material impact on the amount and timing of revenue recognition. See Note 2 in the
“Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K regarding the effect of new accounting
pronouncements on our consolidated financial statements. These or other changes in accounting principles could adversely affect our financial results. Any
difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and
harm investors’ confidence in us.
Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.
We are subject to income taxation in the United States and numerous foreign jurisdictions. Determining our provision for income taxes requires significant
management judgment. In addition, our provision for income taxes is subject to volatility and could be adversely affected by many factors, including, among other
things, changes to our operating or holding structure, changes in the amounts of earnings in jurisdictions with differing statutory tax rates, changes in the valuation
of deferred tax assets and liabilities and changes in tax laws. We could be subject to tax examinations in various jurisdictions. Tax authorities may disagree with
our use of research and development tax credits, intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. While we
regularly assess the likely outcomes of these examinations to determine the adequacy of our provision for income taxes, there can be no assurance that the
outcomes of such examinations will not have a material impact on our operating results and cash flows.
In addition, we may be subject to the examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities. We regularly
assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no
assurance that the outcomes from these continuous examinations will not have an adverse effect on our results of operations.
The enactment of legislation implementing changes in the United States of taxation of international business activities or the adoption of other tax reform
policies could materially impact our financial position and results of operations.
Recent changes to United States tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits and the deferral of certain tax
deductions until earnings outside of the United States are repatriated to the United States, as well as changes to United States tax laws that may be enacted in the
future, could impact the tax treatment of our foreign earnings. Due to expansion of our international business activities, any changes in the United States taxation of
such activities may increase our worldwide effective tax rate and adversely affect our financial position and results of operations.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended (the Code), a corporation that undergoes an “ownership change” is
subject to limitations on its ability to utilize its pre-change net operating losses (NOLs) to offset future taxable income. If our NOLs are subject to limitations
arising from previous ownership changes, our ability to utilize NOLs could be limited by Section 382 of the Code. Future changes in our stock ownership, some of
which are outside of our control, could result in an ownership change under Section 382 of the Code. Furthermore, our ability to utilize NOLs of companies that we
may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other
unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. For these reasons, we may not be able to
utilize a portion of the NOLs reflected on our balance sheet, even if we attain profitability.
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We have business and customer relationships with certain entities who are stockholders or are affiliated with our directors, or both, and conflicts of interest
may arise because of such relationships.
Some of our customers and other business partners are affiliated with certain of our directors or hold shares of our capital stock, or both. For example, we have
entered into strategic relationships and/or customer relationships with Intel Corporation (Intel). Our director, Rosemary Schooler, is an employee of Intel, and Intel
is a stockholder. We believe that the transactions and agreements that we have entered into with related parties are on terms that are at least as favorable as could
reasonably have been obtained at such time from third parties. However, these relationships could create, or appear to create, potential conflicts of interest when
our board of directors is faced with decisions that could have different implications for us and these other parties or their affiliates. In addition, conflicts of interest
may arise between us and these other parties and their affiliates. The appearance of conflicts, even if such conflicts do not materialize, might adversely affect the
public’s perception of us, as well as our relationship with other companies and our ability to enter into new relationships in the future, including with competitors
of such related parties, which could harm our business and results of operations.
Adverse economic conditions may negatively impact our business.
Our business depends on the overall demand for information technology and on the economic health of our current and prospective customers. Any significant
weakening of the economy in the United States or Europe and of the global economy, more limited availability of credit, a reduction in business confidence and
activity, decreased government spending, economic uncertainty and other difficulties, such as the coronavirus pandemic, may affect one or more of the sectors or
countries in which we sell our applications. In addition, geopolitical developments, such as existing and potential trade wars and other events beyond our control,
such as the coronavirus pandemic, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets. For
example, in response to the coronavirus pandemic, we have shifted certain of our customer events to virtual-only experiences and we may deem it advisable to
similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future. Moreover, global economic and political uncertainty may
cause some of our customers or potential customers to curtail spending, and may ultimately result in new regulatory and cost challenges to our international
operations. In addition, a strong dollar could reduce demand for our products in countries with relatively weaker currencies. These adverse conditions could result
in reductions in sales of our applications, longer sales cycles, reductions in subscription duration and value, slower adoption of new technologies and increased
price competition. Any of these events could have an adverse effect on our business, operating results and financial position.
Our business is subject to the risks of epidemic or pandemic events, earthquakes, fire, power outages, floods and other catastrophic events, and to interruption
by man-made problems such as terrorism.
A significant health crisis, epidemic or pandemic (including the ongoing coronavirus pandemic), or a natural disaster, such as an earthquake, fire or a flood, or
a significant power outage could have a material adverse impact on our business, financial condition and results of operations. Our corporate headquarters are
located in Palo Alto, California, in a region known for seismic activity, and we have significant offices in San Francisco, Austin and New York City in the United
States and internationally in Bangalore, Budapest, London, Ireland and Singapore. Further, if an epidemic or pandemic or a natural disaster or terrorist event occurs
in a region from which we derive a significant portion of our revenue, customers in that region may delay or forego purchases of our products, which may
materially and adversely impact our results of operations for a particular period. For example, the west coast of the United States contains active earthquake zones
and the eastern seaboard is subject to seasonal hurricanes while New York and the United Kingdom have suffered significant terrorist attacks. Additionally, we
rely on our network and third-party infrastructure and enterprise applications, internal technology systems and our website for our development, marketing,
finance, customer support, operational support, hosted services and sales activities. In the event of a major epidemic or pandemic, earthquake, hurricane or
catastrophic event such as fire, power loss, floods, telecommunications failure, cyber-attack, war or terrorist attack, we may be unable to continue our operations
and may endure system interruptions, reputational harm, delays in our development of solutions, lengthy interruptions in our services, breaches of data security and
loss of critical data, all of which could have an adverse effect on our operating results. All of the aforementioned risks may be augmented if the business continuity
plans for us and our service providers prove to be inadequate. To the extent that any of the above results in delays or cancellations of
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customer orders, or the delay in the deployment of our products, our business, financial condition and results of operations could be adversely affected.
Risks Related to Ownership of Our Common Stock
The stock price of our common stock has been, and may continue to be, volatile or may decline regardless of our operating performance.
The market price for our common stock has been, and may continue to be, volatile. Since shares of our common stock were sold in our initial public offering
in April 2017 at a price of $15.00 per share, our stock price has ranged from $4.89 to $23.35, through January 31, 2020. The market price of our common stock
may continue to fluctuate significantly in response to numerous factors, many of which are beyond our control, including the factors included in this Risk Factors
section as well as:
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overall performance of the equity markets;
actual or anticipated fluctuations in our operating results or net revenue expansion rate;
changes in the financial projections we may provide to the public or our failure to meet these projections;
failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or
our failure to meet these estimates or the expectations of investors, even if we meet our own projections;
recruitment or departure of key personnel, including as a result of our merger with Hortonworks;
the economy as a whole and market conditions in our industry;
rumors and market speculation involving us or other companies in our industry;
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;
actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
developments or disputes concerning our intellectual property or our offerings, or third-party proprietary rights;
announced or completed acquisitions of businesses or technologies by us or our competitors, including our merger with Hortonworks;
our ability to achieve the planned synergies in the merger with Hortonworks;
dilution associated with our merger with Hortonworks;
changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
changes in accounting standards, policies, guidelines, interpretations or principles;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
lawsuits threatened or filed against us;
other events or factors, including those resulting from war, incidents of terrorism, pandemics, including the ongoing coronavirus pandemic, or responses
to these events; and
sales of shares of our common stock by us or our stockholders.
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In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity
securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those
companies. Stockholders have, from time to time, instituted securities class action litigation following periods of market volatility. For example, after we
announced earnings for the quarter ended April 30, 2019, our stock price dropped and several securities litigation lawsuits were initiated. The current securities
litigation cases, as well as any future securities litigation that we may become involved in, could subject us to substantial costs, divert resources and the attention of
management from our business, and adversely affect our business, results of operations and cash flows.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume
could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. We
do not have any control over these analysts. If one or more of the analysts initiate research with an unfavorable rating or downgrade our common stock, provide a
more favorable recommendation about our competitors, publish inaccurate or unfavorable research about our business or cease coverage of us or fail to publish
reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.
Our directors, executive officers and principal stockholders continue to have substantial control over us, which could limit your ability to influence the
outcome of key transactions, including a change of control.
Our directors, executive officers and our stockholders who own greater than 5% of our outstanding common stock, together with their affiliates, beneficially
own, in the aggregate, approximately 44.9% of our outstanding common stock, based on the number of shares outstanding as of February 28, 2020. As a result,
these stockholders, if acting together, have the ability to influence or control matters requiring approval by our stockholders, including the election of directors and
the approval of mergers, acquisitions or other extraordinary transactions. In addition, these stockholders, acting together, have the ability to influence or control the
governance, management and affairs of our company. They may also have interests that differ from yours and may vote in a way with which you disagree, and
which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our
company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately
affect the market price of our common stock.
Icahn Enterprises L.P. and certain of its affiliates (collectively, the Icahn Group) holds approximately 18.6% of our outstanding common stock, based on the
number of shares outstanding as of February 28, 2020. Intel holds approximately 8.8% of our outstanding common stock, based on the number of shares
outstanding as of February 28, 2020. As such, the Icahn Group and Intel could have considerable influence over matters such as approving a potential acquisition
of us. The Icahn Group and Intel’s investment in and position in our company, including the various agreements we entered into with them respectively, could also
discourage others from pursuing any potential acquisition of us, which could have the effect of depriving the holders of our common stock of the opportunity to
sell their shares at a premium over the prevailing market price.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate
that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in
the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may
never occur, as the only way to realize any future gains on their investments.
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Defensive measures in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more
difficult and may prevent attempts by our stockholders to replace or remove our current management.
Our restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change in control of our company.
These provisions could also make it difficult for stockholders to elect directors who are not nominated by the current members of our board of directors or take
other corporate actions, including effecting changes in our management. These provisions include:
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a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of
our board of directors;
the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and
voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death
or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
the requirement that a special meeting of stockholders may be called only by the chairman of our board of directors, our chief executive officer, our lead
director, if any, or a majority vote of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to
take action, including the removal of directors;
the requirement for the affirmative vote of holders of at least 662/3% of the voting power of all of the then outstanding shares of the voting stock, voting
together as a single class, to amend the provisions of our restated certificate of incorporation relating to the issuance of preferred stock and management
of our business or our amended and restated bylaws, which may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited
takeover attempt;
the ability of our board of directors to amend our amended and restated bylaws, which may allow our board of directors to take additional actions to
prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the amended and restated bylaws to facilitate an unsolicited takeover
attempt;
the requirement that in order for a stockholder to be eligible to propose a nomination or other business to be considered at an annual meeting of our
stockholders, such stockholder must have continuously beneficially owned at least 1% of our outstanding common stock for a period of one year before
giving such notice, which may discourage, delay or deter stockholders or a potential acquirer from conducting a solicitation of proxies to elect their own
slate of directors or otherwise attempting to obtain control of us or influence over our business; and
advance notice procedures with which stockholders must comply in order to nominate candidates to our board of directors or to propose matters to be
acted upon at a stockholders’ meeting, which may discourage, delay or deter stockholders or a potential acquirer from conducting a solicitation of proxies
to elect their own slate of directors or otherwise attempting to obtain control of us or influence over our business.
In addition, because we are incorporated in Delaware, we are governed by the provisions of the anti-takeover provisions of the Delaware General Corporation
Law, which may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a
period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. Although we
believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board
of directors, they would apply even if
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an offer rejected by our board was considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is
responsible for appointing the members of our management.
Our restated certificate of incorporation and amended and restated bylaws contain exclusive forum provisions for certain claims, which could limit our
stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or
proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General
Corporation Law, our restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the
internal affairs doctrine.
Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability
created by the Securities Act or the rules and regulations thereunder and in March 2020, we amended and restated our restated bylaws to provide that the federal
district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of
action arising under the Securities Act (a Federal Forum Provision). Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of
the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow
the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal
Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and
cannot be brought in state court. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability
created by the Exchange Act or the rules and regulations thereunder and neither the exclusive forum provision nor the Federal Forum Provision applies to suits
brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the
Exchange Act or the rules and regulations thereunder must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with
the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our
exclusive forum provisions, including the Federal Forum Provision. These provisions may limit our stockholders’ ability to bring a claim in a judicial forum they
find favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other
employees. Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation and/or amended and restated
bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could
harm our business, operating results and financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We currently lease approximately 225,000 square feet of space for our current corporate headquarters in Palo Alto, California under a lease agreement that
expires in 2027 with an option to renew for an additional seven years. In addition, we entered into a five-year sublease agreement with a third-party subtenant for
approximately 105,000 square feet of this space. Upon the completion of merger with Hortonworks, we added approximately 92,000 square feet of space in Santa
Clara, California under a lease agreement that expires in 2026 and we anticipate that we will vacate our current corporate headquarters in Palo Alto and relocate
our corporate headquarters to this space during fiscal 2021. We intend to sublease such vacated space in Palo Alto for the remainder of the lease term after our
planned relocation.
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We lease office spaces in various locations throughout the United States primarily for local sales and professional services personnel. Our foreign subsidiaries
lease office space in a number of countries in Europe, North America, Asia, South America and Australia for our international operations, primarily for local sales
and professional services personnel.
We believe that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, suitable additional space will be available
to accommodate expansion of our operations.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see Note 9 in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on
Form 10-K, which is incorporated herein by reference.
Further, from time to time, we are a party to or act as an indemnitor to our customers or partners on various litigation matters, and we or our customers or
partners are subject to claims that arise in the ordinary course of business. In addition, we or our customers or partners have received, and may in the future receive,
various types of claims including potential claims from third parties asserting, among other things, infringement of their intellectual property rights.
Future litigation may be necessary to defend ourselves, or our customers or partners on indemnity matters, by determining the scope, enforceability and
validity of third-party proprietary rights or by establishing our proprietary rights. Further, the ultimate outcome of any litigation is uncertain and, regardless of
outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors.
While we are not aware of other pending legal matters or claims, individually or in the aggregate, that are expected to have a material adverse impact on our
business, consolidated financial position, results of operations or cash flows, our analysis of whether a claim may proceed to litigation cannot be predicted with
certainty, nor can the results of litigation be predicted with certainty. Accordingly, there can be no assurance that existing or future legal proceedings arising in the
ordinary course of business or otherwise will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information for Common Stock
Our common stock has been listed on the New York Stock Exchange under the symbol “CLDR” since April 28, 2017. Prior to that date, there was no public
PART II
trading market for our common stock.
Holders
As of February 28, 2020, we had 128 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders
and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future.
We expect to retain future earnings, if any, to fund the development and growth of our business.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item will be included in our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within
120 days of the fiscal year ended January 31, 2020, and is incorporated herein by reference.
Unregistered Sales of Equity Securities
We had no unregistered sales of our securities in fiscal 2020 not previously reported.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Subsequent to January 31, 2020, we established a share repurchase program. See Note 16 in the "Notes to Consolidated Financial Statements" included in Part
II, Item 8 of this Annual Report on Form 10-K for additional information.
Stock Performance Graph
The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18
of the Exchange Act of 1934, (Exchange Act), or otherwise subject to the liabilities thereunder, and shall not be deemed to be incorporated by reference into any of
our filings under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Index and the S&P
500 Information Technology Index. The graph assumes $100 was invested at the market close on April 28, 2017 which was the initial trading day of our common
stock following the IPO. Data for the S&P 500 Index and the S&P 500 Information Technology Index assume reinvestment of dividends. The offering price of our
common stock in our IPO, which had a closing stock price of $18.10 on April 28, 2017, was $15.00 per share.
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The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common
stock.
Company/Index
Cloudera, Inc.
S&P 500 Index
S&P 500 Information Technology Index
Base Period
04/28/2017
1/31/2018
1/31/2019
1/31/2020
$
100.00 $
103.43 $
74.59 $
100.00
100.00
118.44
128.17
113.42
125.30
56.85
135.29
180.31
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated statement of operations data for the years ended January 31, 2020, 2019 and 2018 and the selected consolidated balance sheet data
as of January 31, 2020 and 2019 have been derived from our audited consolidated financial statements and related notes included elsewhere in this Annual Report
on Form 10-K. The selected consolidated statement of operations data for the years ended January 31, 2017 and 2016 and the selected consolidated balance sheet
data as of January 31, 2018, 2017 and 2016, have been derived from our audited consolidated financial statements that are not included in this Annual Report on
Form 10-K. The consolidated statements of operations data for each of the years ended January 31, 2020, 2019, 2018 and 2017 and the selected consolidated
balance sheet data as of January 31, 2020, 2019 and 2018 set forth in the tables below are in compliance with the Accounting Standards Update (ASU) No. 2014-
09, Revenue from Contracts with Customers (Topic 606). The consolidated statement of operations data for the year ended January 31, 2016 and the selected
consolidated balance sheet data as of January 31, 2017 and 2016 set forth in the tables below do not reflect the adoption of Topic 606 and continue to be reported
under the standards in effect for those periods. Further, we have included the financial position and results of operations of Hortonworks in our consolidated
financial statements for fiscal years 2020 and 2019 from January 3, 2019, the date when we completed the Hortonworks merger. See Note 4 in the "Notes to
Consolidated Financial Statements" included in Part II, Item 8 of this Annual Report on Form 10-K. You should read the following selected consolidated financial
data in conjunction with our consolidated financial statements and the accompanying notes and the information in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” contained elsewhere in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of
the results that may be expected for any other period in the future.
Consolidated Statements of Operations Data:
Revenue:
Subscription
Services
Total revenue
Cost of revenue:(1) (2) (4)
Subscription
Services
Total cost of revenue
Gross profit
Operating expenses:(1) (2) (3) (4)
Research and development
Sales and marketing
General and administrative
Total operating expenses
Loss from operations
Interest income, net
Other income (expense), net
Net loss before provision for income taxes
Provision for income taxes
Net loss attributable to common stockholders
Net loss per share, basic and diluted
Weighted-average shares used in computing net loss per share, basic
and diluted(5)
2020
2019
2018
2017
2016
Years Ended January 31,
(in thousands, except per share data)
$
667,826 $
406,333 $
302,617 $
208,335 $
126,365
794,191
117,739
114,763
232,502
561,689
263,566
467,541
170,336
901,443
73,608
479,941
63,329
72,785
136,114
343,827
173,814
253,164
110,613
537,591
69,676
372,293
70,902
87,133
158,035
214,258
215,695
287,196
85,539
588,430
64,208
272,543
38,704
48,284
86,988
185,555
102,309
185,421
55,907
343,637
119,150
46,898
166,048
30,865
44,498
75,363
90,685
99,314
161,106
34,902
295,322
(339,754)
(193,764)
(374,172)
(158,082)
(204,637)
11,687
185
(327,882)
(8,700)
9,011
(2,478)
(187,231)
(5,418)
5,150
1,429
(367,593)
(2,079)
2,431
(547)
(156,198)
(2,187)
2,218
386
(202,033)
(1,110)
(336,582) $
(192,649) $
(369,672) $
(158,385) $
(203,143)
(1.20) $
(1.21) $
(3.24) $
(4.35) $
(6.21)
$
$
280,772
159,816
114,141
36,406
32,724
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(1) Amounts include stock-based compensation expense as follows:
2020
2019
2018
2017
2016
Years Ended January 31,
Cost of revenue – subscription
Cost of revenue – services
Research and development
Sales and marketing
General and administrative
$
16,599 $
9,959 $
24,826 $
1,426 $
(in thousands)
17,609
75,554
63,360
47,232
11,492
41,430
27,918
26,566
31,843
100,143
90,420
42,774
1,803
5,606
5,757
7,122
Total stock-based compensation expense
$
220,354 $
117,365 $
290,006 $
21,714 $
3,363
4,301
23,048
19,187
13,691
63,590
(2) Amounts include amortization of acquired intangible assets as follows:
2020
2019
2018
2017
2016
Years Ended January 31,
(in thousands)
Cost of revenue – subscription
Sales and marketing
Total amortization of acquired intangible assets
$
$
11,213 $
3,251 $
2,230 $
1,997 $
68,811
5,878
1,493
1,723
80,024 $
9,129 $
3,723 $
3,720 $
1,732
1,723
3,455
(3) In January 2017, we donated 1,175,063 shares of our common stock to the Cloudera Foundation. We recorded a non-cash charge of $21.6 million for the fair value of the
donated shares, which was recognized in general and administrative expense for the year ended January 31, 2017.
(4) On April 27, 2017, the effective date of our IPO, the liquidity event-related performance condition was achieved for the majority of our restricted stock units (RSUs) and
became probable of being achieved for the remaining RSUs. We recognized stock-based compensation expense using the accelerated attribution method with a cumulative
catch-up of stock-based compensation expense in the amount of $181.5 million during fiscal 2018, attributable to service prior to such effective date. See Note 10 to the
"Notes to Consolidated Financial Statements" included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
(5) See Note 2 and Note 14 in the "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this Annual Report on Form 10-K for an explanation of the
calculations of our basic and diluted net loss per share and the weighted-average number of shares used in the computation of the per share amounts.
Consolidated Balance Sheet Data:
Cash and cash equivalents
Marketable securities, current and noncurrent
Working capital
Total assets
Deferred revenue, current and noncurrent
Redeemable convertible preferred stock
Total stockholders’ equity (deficit)
2020
2019
2018
2017
2016
As of January 31,
(in thousands)
$
107,638 $
158,672 $
43,247 $
74,186 $
375,554
127,953
378,546
304,397
2,299,790
2,196,643
541,677
507,569
—
—
399,422
281,141
751,811
237,400
—
181,480
110,616
442,544
217,424
657,687
35,966
362,279
142,717
512,887
158,175
657,687
1,438,369
1,562,069
428,174
(483,756)
(343,509)
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Non-GAAP Financial Measure
In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), we believe the following non-GAAP financial
measure is useful in evaluating our operating performance.
Other Financial Statement Data:
Non-GAAP operating loss
$
(39,376) $
(67,270) $
(80,443) $
(111,074) $
(137,592)
2020
2019
2018
2017
2016
Years Ended January 31,
(in thousands)
We define non-GAAP operating loss as loss from operations before stock-based compensation expense, amortization of acquired intangible assets and
donation of our common stock to the Cloudera Foundation. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP
financial measure, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business,
operating results or future outlook. Our management uses, and believes that investors benefit from referring to, this non-GAAP financial measure in evaluating our
operating results, as well as when planning, forecasting, budgeting and analyzing future periods. We also use non-GAAP operating loss in conjunction with
traditional GAAP measures to communicate with our board of directors concerning our financial performance.
We believe non-GAAP operating loss provides investors and other users of our financial information consistency and comparability with our past financial
performance and facilitates period to period comparisons of operations. We believe non-GAAP operating loss is useful in evaluating our operating performance
compared to that of other companies in our industry as this metric generally eliminates the effects of certain items that may vary for different companies for
reasons unrelated to overall operating performance. Our definition may differ from the definitions used by other companies and therefore comparability may be
limited. In addition, other companies may not publish this or similar metrics. Thus, our non-GAAP operating loss should be considered in addition to, not as a
substitute for or in isolation from, measures prepared in accordance with GAAP.
We compensate for these limitations by providing investors and other users of our financial information a reconciliation of loss from operations to non-GAAP
operating loss, the related GAAP financial measure. We encourage investors and others to review our financial information in its entirety, not to rely on any single
financial measure and to view non-GAAP operating loss in conjunction with loss from operations. The following table provides a reconciliation of loss from
operations to non-GAAP operating loss:
2020
2019
2018
2017
2016
Years Ended January 31,
(in thousands)
Loss from operations
Stock-based compensation expense
Amortization of acquired intangible assets
Donation of common stock to the Cloudera Foundation
Non-GAAP operating loss
$
(339,754) $
(193,764) $
(374,172) $
(158,082) $
(204,637)
220,354
80,024
—
117,365
290,006
9,129
—
3,723
—
21,714
3,720
21,574
63,590
3,455
—
$
(39,376) $
(67,270) $
(80,443) $
(111,074) $
(137,592)
For the reasons set forth below, we believe that excluding the components described below provides useful information to investors and others in
understanding and evaluating our operating results and future prospects in the
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same manner as we do and in comparing our financial results across accounting periods and to financial results of peer companies.
•
•
•
Stock-Based Compensation Expense. We exclude stock-based compensation expense from our non-GAAP financial measure consistent with how we
evaluate our operating results and prepare our operating plans, forecasts and budgets. Further, when considering the impact of equity award grants, we
focus on overall stockholder dilution rather than the accounting charges associated with such equity grants. The exclusion of the expense facilitates the
comparison of results and business outlook for future periods with results for prior periods in order to better understand the long-term performance of our
business.
Amortization of Acquired Intangible Assets. We exclude the amortization of acquired intangible assets from our non-GAAP financial measure. Although
the purchase accounting for an acquisition necessarily reflects the accounting value assigned to intangible assets, our management team excludes the
GAAP impact of acquired intangible assets when evaluating our operating results. Likewise, our management team excludes amortization of acquired
intangible assets from our operating plans, forecasts and budgets. The exclusion of the expense facilitates the comparison of results and business outlook
for future periods with results for prior periods in order to better understand the long-term performance of our business.
Donation of Common Stock to the Cloudera Foundation. During the fourth quarter of fiscal 2017, we issued 1,175,063 shares of our common stock to the
Cloudera Foundation for no consideration. This resulted in a one-time non-cash charge of $21.6 million, which was recorded in general and
administrative expenses on the consolidated statement of operations. Our management team does not consider this expense when evaluating our operating
performance and we do not expect to make future grants of shares to the Cloudera Foundation and therefore consider this charge non-recurring and
exclude the GAAP impact of the donation when evaluating our operating results. The exclusion of the expense facilitates the comparison of results and
business outlook for future periods with results for prior periods in order to better understand the long-term performance of our business.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial
statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include,
but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. Our
fiscal year end is January 31, and references throughout this Annual Report to a given fiscal year are to the twelve months ended on that date.
This section of this Annual Report on Form 10-K generally discusses fiscal years 2020 and 2019 items and year-to-year comparisons between fiscal years
2020 and 2019. Discussions of fiscal year 2019 items and year-to-year comparisons between fiscal years 2019 and 2018 that are not included in this Annual
Report on Form 10-K can be found in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2019, which was filed with the SEC
on March 29, 2019.
Overview
At Cloudera, we believe that data can make what is impossible today, possible tomorrow. We empower people to transform complex data into clear and
actionable insights. Powered by the relentless innovation of the open source community, we advance digital transformation for the world's largest enterprises. We
deliver a modern enterprise data platform to manage and secure the data lifecycle from the Edge to AI, spanning any cloud or data center. We are an enterprise data
cloud company.
In January 2019, we completed the merger with Hortonworks, Inc. (Hortonworks), a publicly-held company headquartered in Santa Clara, California (the
Hortonworks merger). The combined company operates under the Cloudera name. We have included the financial results of Hortonworks in our consolidated
financial statements from the date when we completed the Hortonworks merger.
We generate revenue from subscriptions and services. Please see “Components of Results of Operations - Revenue” for further details.
We market and sell our platform to a broad range of organizations, although we focus our selling efforts on the largest enterprises globally. We target these
organizations because they capture and manage the vast majority of the world’s data and operate in highly complex IT environments. We market our platform
primarily through a direct sales force while benefiting from business driven by our ecosystem of technology partners, resellers, original equipment manufacturers
(OEMs), managed service providers, independent software vendors and systems integrators. As of January 31, 2020, we had approximately 1,900 customers.
We have a broad customer base that spans industries and geographies. For the years ended January 31, 2020, 2019 and 2018, no customer accounted for more
than 10% of our total revenue. We have significant revenue in the banking and financial services, manufacturing, technology, business services,
telecommunications, public sector, consumer and retail, and healthcare and life sciences verticals, and continue to expand our penetration across many other data-
intensive industries. Sales outside of the United States represented approximately 38%, 34% and 30% of our total revenue for the years ended January 31, 2020,
2019 and 2018, respectively.
Our business model is based on a “land and expand” strategy designed to use the initial sale as a foothold to increase revenue per customer by increasing the
amount of data and number of use cases each customer runs through our platform. After an initial purchase of our platform, we work with our customers to identify
new use cases that can be developed on or moved to our platform, ultimately increasing the amount of data managed on our platform as well as the number and
size of our platform deployments.
In December 2019, a novel strain of coronavirus was reported in Wuhan, China. The World Health Organization has declared the outbreak to constitute a
"pandemic." The extent of the impact of the coronavirus on our operational and financial performance will depend on certain developments, including the duration
and spread of
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the outbreak, impact on our customers and our sales cycles, impact on our customer, employee or industry events, and effect on our vendors, all of which are
uncertain and cannot be predicted. For example, in response to the coronavirus pandemic, we have shifted certain of our customer events to virtual-only
experiences and we may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future. At this
point, the extent to which the coronavirus may impact our financial condition or results of operations is uncertain. Due to our subscription-based business model,
the effect of the coronavirus may not be fully reflected in our results of operations until future periods, if at all.
Components of Results of Operations
Revenue
We generate revenue from subscriptions and services. Subscription revenue relates to term (or time-based) subscription agreements for both open source and
propriety software, including support. Subscription arrangements are typically one to three years in length but may be up to seven years in limited cases.
Arrangements with our customers typically do not include general rights of return. Services revenue relates to professional services for the implementation and use
of our subscriptions, machine learning expertise and consultation, training and education services and related reimbursable travel costs. We price our subscription
offerings based on the number of servers in a cluster, or nodes, core or edge devices, data under management and/or the scope of support provided. Our consulting
services are priced primarily on a time and materials basis, and to a lesser extent, a fixed fee basis, and education services are generally priced based on attendance.
Cost of Revenue
Cost of revenue for subscriptions primarily consists of personnel costs including salaries, bonuses, travel costs, benefits and stock-based compensation for
employees providing technical support for our subscription customers, allocated shared costs (including rent and information technology) and amortization of
certain acquired intangible assets from business combinations. Cost of revenue for services primarily consists of personnel costs including salaries, bonuses,
benefits and stock-based compensation, fees to subcontractors associated with service contracts, travel costs and allocated shared costs (including rent and
information technology).
Operating Expenses
Research and Development. Research and development expenses primarily consist of personnel costs including salaries, bonuses, travel costs, benefits and
stock-based compensation for our research and development employees, contractor fees, allocated shared costs (including rent and information technology),
supplies, and depreciation of equipment associated with the continued development of our platform prior to establishment of technological feasibility and the
related maintenance of the existing technology.
Sales and Marketing. Sales and marketing expenses primarily consist of personnel costs including salaries, bonuses, travel costs, sales-based incentives,
benefits and stock-based compensation for our sales and marketing employees. In addition, sales and marketing expenses also include costs for advertising,
promotional events, corporate communications, product marketing and other brand-building activities, allocated shared costs (including rent and information
technology) and amortization of certain acquired intangible assets from business combinations. Most sales-based incentives are capitalized and expensed over the
period of benefit from the underlying contracts.
General and Administrative. General and administrative expenses primarily consist of personnel costs including salaries, bonuses, travel costs, benefits and
stock-based compensation for our executive, finance, legal, human resources, information technology and other administrative employees. In addition, general and
administrative expenses include fees for third-party professional services, including consulting, legal and accounting services, merger related costs, other corporate
expenses, and allocated shared costs (including rent and information technology).
Interest Income, net
Interest income primarily relates to amounts earned on our cash and cash equivalents and marketable securities.
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Other Income (Expense), net
Other income (expense), net primarily relates to foreign currency transactions, realized gains and losses on our marketable securities, and other non-operating
gains or losses.
Provision for Income Taxes
Provision for income taxes primarily consists of income taxes for certain foreign jurisdictions in which we conduct business. A valuation allowance is
established, when necessary, for any portion of deferred income tax assets where it is considered more likely than not that it will not be realized.
Significant Impacts of Stock-based Compensation Expense
We have granted restricted stock units (RSUs) to our employees and members of our board of directors under our 2008 Equity Incentive Plan (the 2008 Plan),
and our 2017 Equity Incentive Plan (the 2017 Plan). Prior to our IPO that was completed in May 2017, the employee RSUs vested upon the satisfaction of both a
service-based condition and a liquidity event-related performance condition. The service-based vesting condition for these awards was generally satisfied pro-rata
over four years. The liquidity event-related performance condition was achieved for the majority of our RSUs and probable of being achieved for the remaining
RSUs on April 27, 2017, the effective date of our IPO. We recognized stock-based compensation expense using the accelerated attribution method with a
cumulative catch-up of stock-based compensation expense in the amount of $181.5 million during fiscal 2018, attributable to service prior to such effective date.
The total stock-based compensation expense recorded on the effective date of our IPO associated with the achievement of the liquidity event-related
performance condition was as follows (in thousands):
Cost of revenue – subscription
Cost of revenue – services
Research and development
Sales and marketing
General and administrative
Total stock-based compensation expense
$
15,292
19,695
65,250
58,219
23,080
$
181,536
As a result of the Hortonworks merger, we issued 4,076,157 stock options to purchase shares of our common stock and RSUs for 7,704,004 shares of our
common stock to Hortonworks employees in exchange for their outstanding Hortonworks stock options and awards. The total fair value of the stock-based awards
assumed is $63.5 million which is being recognized as stock-based compensation expense over a weighted-average period of 1.5 years from the completion of
merger. Additionally, we recognized $13.1 million of stock-based compensation expense during the year ended January 31, 2019 due to the acceleration and
modification of certain stock awards assumed as part of the Hortonworks merger.
We incurred $20.9 million and $6.2 million of additional stock-based compensation expense during the years ended January 31, 2020 and 2019, respectively,
due to the acceleration and modification of stock awards held by certain former employees and former board members.
Results of Operations
The consolidated statements of operations data for each of the years ended January 31, 2020, 2019 and 2018 set forth in the tables below are in compliance
with the new standards under Topic 606. Further, the results of operations for the year ended January 31, 2020 reflect the results of operations of the combined
entity while the year ended January 31, 2019 included Hortonworks' results of operations from January 3, 2019 to January 31, 2019 as we completed our merger
with Hortonworks on January 3, 2019.
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The following table sets forth our results of operations for the periods indicated:
Revenue:
Subscription
Services
Total revenue
Cost of revenue:(1) (2)
Subscription
Services
Total cost of revenue
Gross profit
Operating expenses:(1) (2)
Research and development
Sales and marketing
General and administrative
Total operating expenses
Loss from operations
Interest income, net
Other income (expense), net
Net loss before provision for income taxes
Provision for income taxes
Net loss
(1) Amounts include stock-based compensation expense as follows:
Cost of revenue – subscription
Cost of revenue – services
Research and development
Sales and marketing
General and administrative
Total stock-based compensation expense
(2) Amounts include amortization of acquired intangible assets as follows:
Cost of revenue – subscription
Sales and marketing
Total amortization of acquired intangible assets
51
Years Ended January 31,
2020
2019
2018
(in thousands)
$
667,826 $
406,333 $
126,365
794,191
117,739
114,763
232,502
561,689
263,566
467,541
170,336
901,443
73,608
479,941
63,329
72,785
136,114
343,827
173,814
253,164
110,613
537,591
302,617
69,676
372,293
70,902
87,133
158,035
214,258
215,695
287,196
85,539
588,430
(339,754)
(193,764)
(374,172)
11,687
185
(327,882)
(8,700)
9,011
(2,478)
(187,231)
(5,418)
5,150
1,429
(367,593)
(2,079)
$
(336,582) $
(192,649) $
(369,672)
Years Ended January 31,
2020
2019
2018
(in thousands)
$
$
$
$
$
$
$
$
16,599 $
17,609 $
75,554 $
63,360 $
47,232 $
9,959 $
11,492 $
41,430 $
27,918 $
26,566 $
24,826
31,843
100,143
90,420
42,774
220,354 $
117,365 $
290,006
Years Ended January 31,
2020
2019
2018
(in thousands)
11,213 $
68,811
80,024 $
3,251 $
5,878
9,129 $
2,230
1,493
3,723
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The following table sets forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenue:
Years Ended January 31,
2020
2019
2018
Revenue:
Subscription
Services
Total revenue
Cost of revenue:(1) (2)
Subscription
Services
Total cost of revenue
Gross margin
Operating expenses:(1) (2)
Research and development
Sales and marketing
General and administrative
Total operating expenses
Loss from operations
Interest income, net
Other income (expense), net
Net loss before provision for income taxes
Provision for income taxes
Net loss
(1) Amounts include stock-based compensation expense as a percentage of total revenue as follows:
Cost of revenue – subscription
Cost of revenue – services
Research and development
Sales and marketing
General and administrative
Total stock-based compensation expense
(2) Amounts include amortization of acquired intangible assets as a percentage of total revenue as follows:
Cost of revenue – subscription
Sales and marketing
Total amortization of acquired intangible assets
52
84 %
16
100
15
14
29
71
33
59
22
114
(43)
2
—
(41)
(1)
85 %
15
100
13
15
28
72
36
53
23
112
(40)
2
(1)
(39)
(1)
81 %
19
100
19
23
42
58
58
77
23
158
(100)
1
1
(98)
(1)
(42)%
(40)%
(99)%
Years Ended January 31,
2020
2019
2018
2 %
2
10
8
6
28 %
2 %
2
9
6
6
25 %
Years Ended January 31,
2020
2019
2018
1 %
9
10 %
1 %
1
2 %
7 %
9
27
24
12
79 %
1 %
—
1 %
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Revenue
Subscription
Services
Total revenue
As a percentage of total revenue:
Subscription
Services
Total revenue
$
$
Years Ended
January 31,
Change
2020
2019
Amount
%
667,826
$
(dollars in thousands)
406,333
$
261,493
126,365
73,608
52,757
794,191
$
479,941
$
314,250
84 %
16 %
100 %
85 %
15 %
100 %
64 %
72 %
65 %
The increase in subscription revenue for the year ended January 31, 2020, as compared to the prior fiscal year, was primarily attributable to the Hortonworks
merger which resulted in volume driven increases in subscription sales to new customers.
The increase in services revenue for the year ended January 31, 2020, as compared to the prior fiscal year, was primarily attributable to the Hortonworks
merger which resulted in increases in services sales to new customers.
Cost of Revenue, Gross Profit and Gross Margin
Cost of revenue:
Subscription
Services
Total cost of revenue
Gross profit
Gross margin:
Subscription
Services
Total gross margin
Cost of revenue, as a percentage of total revenue:
Subscription
Services
Total cost of revenue
Years Ended
January 31,
Change
2020
2019
Amount
%
(dollars in thousands)
$
$
$
117,739
$
63,329
$
114,763
72,785
232,502
$
136,114
$
54,410
41,978
96,388
561,689
$
343,827
$
217,862
86 %
58 %
71 %
63 %
82 %
9 %
71 %
15 %
14 %
29 %
84 %
1 %
72 %
13 %
15 %
28 %
The increase in cost of revenue for subscription during the year ended January 31, 2020, as compared to the prior fiscal year, was primarily due to our merger
with Hortonworks. Specifically, there were increases of $27.6 million in employee-related costs including salaries and benefits as a result of increased headcount,
$8.0 million in amortization of intangible assets, $7.1 million in allocated shared cost, and $6.6 million in stock-based compensation.
The increase in cost of revenue for services during the year ended January 31, 2020, as compared to the prior fiscal year, was primarily due to our merger with
Hortonworks. Specifically, there were increases of $22.6 million in
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employee-related costs including salaries and benefits as a result of increased headcount, $10.3 million in third party contractor services required to support the
added Hortonworks customer base, and $6.1 million in stock-based compensation.
Subscription gross margin decreased from 84% for the year ended January 31, 2019 to 82% for the year ended January 31, 2020, primarily due to one-time
Hortonworks merger related valuation adjustments to deferred subscription revenue obligations and, as such, we expect these margins to improve over the next few
quarters.
Services gross margin increased from 1% for the year ended January 31, 2019 to 9% for the year ended January 31, 2020, primarily due to a 72% increase in
services revenue, while the increase in cost of services revenue was 58% as explained above.
Operating Expenses
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating expenses, as a percentage of total revenue:
Research and development
Sales and marketing
General and administrative
Total operating expenses
Research and Development
Years Ended
January 31,
Change
2020
2019
Amount
%
263,566
$
467,541
170,336
(dollars in thousands)
173,814
$
89,752
253,164
110,613
214,377
59,723
901,443
$
537,591
$
363,852
$
$
52 %
85 %
54 %
68 %
33 %
59 %
22 %
114 %
36 %
53 %
23 %
112 %
The increase in research and development expenses during the year ended January 31, 2020, as compared to the prior fiscal year, was primarily due to our
merger with Hortonworks. Specifically, there were increases of $35.2 million in employee-related costs including salaries and benefits as a result of increased
headcount, $34.1 million in stock-based compensation, and $6.6 million in allocated shared costs.
Sales and Marketing
The increase in sales and marketing expenses during the year ended January 31, 2020, as compared to the prior fiscal year, was primarily due to our merger
with Hortonworks. Specifically, there were increases of $83.6 million in employee-related costs including salaries, benefits and travel as a result of increased
headcount, $62.9 million in intangible amortization, $35.4 million in stock-based compensation, $15.5 million in marketing programs as required to support the
combined company, and $5.6 million in allocated shared costs.
General and Administrative
The increase in general and administrative expenses during the year ended January 31, 2020, as compared to the prior fiscal year, was primarily due to our
merger with Hortonworks. Specifically, there were increases of $23.3 million in employee-related costs including salaries and benefits as a result of increased
headcount, $20.7 million in stock-based compensation, $16.0 million in consulting services mainly driven by post-merger related activities, $7.4 million in
contractor services, and $4.4 million in allocated shared costs. Increases in general and administrative costs were partially offset by a decrease of $22.8 million in
merger-related costs.
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Interest Income, net
Interest income, net
Years Ended
January 31,
Change
2020
2019
Amount
%
$
11,687 $
(dollars in thousands)
9,011 $
2,676
30 %
Interest income, net increased primarily due to higher average interest rates on our investments in marketable securities during the year ended January 31,
2020.
Other Income (Expense), net
Other income (expense), net
Years Ended
January 31,
Change
2020
2019
Amount
%
$
185 $
(2,478) $
2,663
(107)%
(dollars in thousands)
Other income, net during the year ended January 31, 2020 was primarily due to foreign exchange gains as compared to other expense, net during the year
ended January 31, 2019 due to foreign exchange losses.
Provision for Income Taxes
Provision for income taxes
Years Ended
January 31,
Change
2020
2019
Amount
%
$
8,700 $
(dollars in thousands)
5,418 $
3,282
61 %
Provision for income taxes increased primarily due to our merger with Hortonworks, specifically relating to foreign income taxes on foreign earnings and tax
withholding on international sales during the year ended January 31, 2020 as compared to the prior fiscal year.
Seasonality
We have seasonal and end-of-quarter concentration of our sales, which impacts our ability to plan and manage cash flows and margins. Our sales vary by
season with the fourth quarter typically being our strongest sales quarter, and the first quarter typically being our largest collections and operating cash flow
quarter. In addition, within each quarter, most sales occur in the last month of that quarter.
See “Risk Factors—Our sales cycles can be long, unpredictable and vary seasonally, particularly with respect to large subscriptions, and our sales efforts
require considerable time and expense.”
Liquidity and Capital Resources
As of January 31, 2020, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $483.2 million which are held for
working capital purposes. Our cash equivalents are comprised primarily of money market funds and our marketable securities are comprised of asset-backed
securities, corporate notes and obligations, commercial paper, municipal securities, certificates of deposit and U.S. treasury securities. To date, our principal
sources of liquidity have been payments received from customers for our subscriptions and services, the net proceeds we received through the sale of our common
stock in our IPO in May 2017, our follow-on offering in October 2017 and private sales of equity securities. Further, we acquired $49.0 million of cash, cash
equivalents and marketable securities as a result of the Hortonworks merger.
On March 3, 2020, our board of directors authorized a share repurchase program of up to $100 million of the Company’s outstanding shares of common stock.
Share repurchases may be made through open market purchases,
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block trades and/or privately negotiated transactions in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, subject
to market conditions, applicable legal requirements, and other relevant factors. Repurchases may also be made under Rule 10b5-1 plans, which permit shares of
common stock to be repurchased through pre-determined criteria. The timing, volume and nature of the repurchases will be at the discretion of our management
based on their evaluation of the capital needs of the Company, market conditions, applicable legal requirements and other factors. The program does not have an
expiration date, and it may be suspended or discontinued at any time. As of the date of this filing, we used $26.0 million to repurchase 3.9 million shares of
common stock at an average repurchase price of $6.56 per share under the repurchase program.
We believe that our currently available resources will be sufficient to meet our cash requirements for at least the next twelve months. Our future capital
requirements may vary materially from those currently planned and will depend on many factors, including our net expansion rate, the timing and extent of
spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our subscriptions and services
and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses,
services and technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity-
linked and debt financing arrangements. We cannot assure you that any additional financing will be available on terms favorable to us, or at all. If adequate funds
are not available on acceptable terms, or at all, we may not be able to adequately fund our business plans and it could have a negative effect on our operating cash
flows and financial condition.
The following table summarizes our cash flows for the periods indicated:
Net cash (used in) provided by operating activities
Net cash (used in) provided by investing activities
Net cash (used in) provided by financing activities
Effect of exchange rate changes
Net (decrease) increase in cash, cash equivalents and restricted cash
Operating Activities
Years Ended January 31,
2020
2019
(in thousands)
(36,826) $
(5,659)
(6,957)
(1,607)
(51,049) $
34,273
61,959
5,626
(1,118)
100,740
$
$
Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their subscription agreements.
Payments from customers for these subscription agreements are generally received near the beginning of the annual contract period. We also generate cash from
the sales of our services offerings. Our primary uses of cash from operating activities are for employee related expenditures and leased facilities.
Net cash used in operating activities was $36.8 million during fiscal 2020 compared to $34.3 million in net cash provided by operating activities during fiscal
2019. Operating cash flow declined during fiscal 2020 compared to fiscal 2019 primarily due to costs associated with combining the Cloudera and Hortonworks
businesses.
For the year ended January 31, 2020, net cash used in operating activities mainly consisted of our net loss of $336.6 million, adjusted for stock-based
compensation expense of $220.4 million, depreciation and amortization expenses of $92.2 million, amortization of deferred costs of $47.6 million, non-cash lease
expense of $45.6 million, and net cash outflow of $104.1 million from changes in assets and liabilities. The outflow from changes in assets and liabilities was
primarily due to an increase of $68.6 million in deferred contract costs related to commissions earned, an increase of $36.7 million in deferred revenue as a result
of increased subscription sales and timing of amounts billed to customers compared to revenue recognized during the same period, cash payments of $51.1
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million for operating leases, and cash outflow of $23.0 million primarily from changes in other operating assets and liabilities.
For the year ended January 31, 2019, net cash provided by operating activities mainly consisted of our net loss of $192.6 million, adjusted for stock-based
compensation expense of $117.4 million, amortization of deferred costs of $30.6 million, depreciation and amortization expenses of $17.4 million, and net cash
inflow of $62.9 million from changes in assets and liabilities. The inflow from changes in assets and liabilities was primarily due to a decrease in accounts
receivable of $54.2 million due to the timing of invoicing compared to the receipt of cash from customers, an increase in deferred revenue of $36.6 million due to
the timing of amounts billed to customers compared to revenue recognized during the same period, an increase of $39.7 million in deferred costs due to the
difference in timing of payment of deferred costs and recognition of these costs, and cash inflow of $10.4 million primarily from changes in other operating assets
and liabilities.
Investing Activities
The changes in cash flows from investing activities primarily relate to the timing of our purchases, maturities and sales of our investments in marketable
securities, cash acquired or used for business combinations, and investments in capital and other assets to support our growth.
Net cash used in investing activities was $5.7 million during fiscal 2020 compared to $62.0 million in net cash provided by investing activities during fiscal
2019. Investing cash flow declined during fiscal 2020 compared to fiscal 2019 primarily because of the cash acquired in fiscal 2019 as part of our merger with
Hortonworks with no similar activity in fiscal 2020.
For the year ended January 31, 2020, net cash used in investing activities consisted of purchases of marketable securities of $494.3 million, capital
expenditures for purchases of property and equipment of $7.2 million, and cash used in a business combination of $4.5 million, partially offset by sales and
maturities of marketable securities of $500.3 million.
For the year ended January 31, 2019, net cash provided by investing activities consisted primarily of sales and maturities of marketable securities of $492.2
million and cash acquired from the business combination with Hortonworks of $42.6 million, partially offset by purchases of marketable securities of $462.7
million and capital expenditures for purchases of property and equipment of $10.1 million.
Financing Activities
The changes in cash flows from financing activities primarily relate to net proceeds from or used for employee stock plans.
Net cash used in financing activities was $7.0 million during fiscal 2020 compared to $5.6 million in net cash provided by financing activities during fiscal
2019. Financing cash flow declined during fiscal 2020 compared to fiscal 2019 primarily due to an increase in taxes paid related to net share settlement of
restricted stock units.
For the year ended January 31, 2020, net cash used in financing activities consisted of taxes paid related to the net share settlement of restricted stock units of
$32.6 million, partially offset by proceeds from the exercise of stock options and withholdings under our employee stock plans of $25.7 million.
For the year ended January 31, 2019, net cash provided by financing activities consisted of proceeds from the exercise of stock options and withholdings under
our employee stock plans of $21.8 million, partially offset by taxes paid related to the net share settlement of restricted stock units of $16.2 million.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.
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Contractual Obligations and Commitments
The following table summarizes our non-cancelable contractual obligations as of January 31, 2020:
Operating leases (1)
Total contractual obligations
Total
Less than 1 Year
1‑‑3 Years
4-6 Years
More than 6
Years
Payments Due by Period
$
$
261,074 $
26,153 $
112,612 $
95,943 $
26,366
261,074 $
26,153 $
112,612 $
95,943 $
26,366
(in thousands)
(1)
We lease our facilities under long-term operating leases, which expire at various dates through 2031. The lease agreements frequently include provisions which require
us to pay taxes, insurance, or maintenance costs. See Note 8 in the "Notes to Consolidated Financial Statements" included in Part II, Item 8 of this Annual Report on Form 10-K
for details.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). The preparation
of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and
expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. We
believe that our significant accounting policies, which are discussed in Note 2 to our consolidated financial statements, and the accounting policies discussed
below, involve a greater degree of complexity, involving management’s judgments and estimates. Accordingly, these are the policies we believe are critical to
understanding our financial condition and historical and future results of operations.
Revenue Recognition
We generate revenue from subscriptions and services. Subscription revenue relates to term (or time-based) subscription agreements for both open source and
propriety software including support. Subscription arrangements are typically one to three years in length but may be up to seven years in limited cases.
Arrangements with our customers typically do not include general right of returns. Services revenue relates to professional services for the implementation and use
of our subscriptions, machine learning expertise and consultation, training and education services and related reimbursable travel costs.
We price our subscription offerings based on the number of servers in a cluster, or nodes, core or edge devices, data under management and/or the scope of
support provided. Our consulting services are priced primarily on a time and materials basis, and to a lesser extent, a fixed fee basis, and training services are
generally priced based on attendance.
We determine revenue recognition through the following steps, which are described in more detail below:
•
•
•
•
•
Identification of the contract or contracts with a customer
Identification of the performance obligation(s) in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligation(s) in the contract
Recognition of revenue when, or as, a performance obligation is satisfied
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Our agreements with customers often include multiple subscriptions and/or professional services elements, and these elements are sometimes included in
separate contracts. We consider an entire customer arrangement to determine if separate contracts entered into at or near the same time should be considered
combined for the purposes of revenue recognition. We work with partners in various capacities whereby we are typically responsible for providing the actual
product or service as a principal.
At contract inception, we assess the subscription and services product offerings or bundle of product offerings in our contracts to identify performance
obligations that are distinct. A performance obligation is distinct when it is separately identifiable from other items in a bundled package and if a customer can
benefit from it on its own or with other resources that are readily available to the customer. To identify our performance obligations, we consider all of the product
offerings promised in the contract. We have concluded that our contracts with customers do not contain warranties that give rise to a separate performance
obligation.
The transaction price is the total amount of consideration we expect to be entitled to in exchange for the product offerings in a contract. Sales, value-added and
other taxes we collect from customers concurrent with revenue-producing activities are excluded from revenue. In the instance where our contracts with customers
contain variable consideration, we estimate variable consideration primarily using the expected value method.
Once we have determined the transaction price, the total transaction price is allocated to each performance obligation in a manner depicting the amount of
consideration to which we expect to be entitled in exchange for transferring the product(s) or service(s) to the customer (allocation objective). If the allocation
objective is met at contractual prices, no allocations are performed. Otherwise, we allocate the transaction price to each performance obligation identified in the
contract on a relative stand-alone selling price basis.
In order to determine the stand-alone selling price, we conduct a periodic analysis that requires judgment and considers multiple factors that are reasonably
available and maximizes the use of observable inputs that may vary over time depending upon the unique facts and circumstances related to each performance
obligation. To have observable inputs, we require that a substantial majority of the stand-alone selling prices for a product offering fall within a pricing range. If a
directly observable stand-alone selling price does not exist, we estimate a stand-alone selling price range by reviewing external and internal market factor
categories, which may include pricing practices, historical discounting, industry practices, service groups and geographic considerations. There is also no hierarchy
for how to estimate or otherwise determine the stand-alone selling price for product offerings that are not sold separately, however, we maximize the use of
observable data. We believe that this analysis results in an estimate that approximates the price we would charge for the product offerings if they were sold
separately.
The following describes the nature of our primary types of revenue and the revenue recognition policies and significant payment terms as they pertain to the
types of transactions we enter into with our customers.
Subscription Revenue
Subscription revenue relates to term (or time-based) subscriptions to our platform, which includes both open source and proprietary software and related
support. Subscriptions include internet, email and phone support, bug fixes, and the right to receive unspecified software updates and upgrades released when and
if available during the subscription term. Revenue for subscription arrangements is recognized ratably beginning on the later of the date access is made available to
the customer or the start of the contractual term of the arrangement. Subscription revenue also includes revenue related to functional intellectual property that is
generally recognized on the date access is made available to the customer.
As part of a subscription, we stand ready to help customers resolve technical issues related to the installed platform. The subscriptions are designed to assist
throughout a customer’s lifecycle from development to proof-of-concept, to quality assurance and testing, to production and development. Subscription is generally
offered under renewable, fixed fee contracts where payments are typically due annually in advance and may have a term of one year or multiple years. The
contracts generally do not contain refund provisions for fees earned related to services performed. A subscription is viewed as a stand-ready performance
obligation comprised of a series of distinct days of service that is satisfied ratably over time as the services are provided. A time-elapsed output method is used to
measure progress because our efforts are expended evenly throughout the period given the nature of the promise is a
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stand-ready service. Unearned subscription revenue is included in deferred revenue and other contract liabilities. On occasion, we may sell engineering services
and/or a premium subscription agreement that provides a customer with development input and the opportunity to work more closely with our developers.
Services revenue
Services revenue is derived primarily from customer fees for consulting services engagements and education services. Our professional services are provided
primarily on a time and materials basis and, to a lesser extent, a fixed fee basis, and education services are generally priced based on attendance. Time and material
contracts are generally invoiced based upon hours incurred on a monthly basis and fixed fee contracts may be invoiced up-front or as milestones are achieved
throughout the project. Services revenue is typically recognized over time as the services are rendered. Depending on the nature of the professional services
engagement (e.g., time and materials basis, fixed fee basis, etc.), various measures of progress may be used to recognize revenue. These measures of progress
include recognizing revenue in an amount equal to and at the time of invoicing, a measure of time incurred relative to remaining hours expected to be delivered, or
other similar measures. These measures depict our efforts to satisfy services contracts and therefore reflect the transfer of control for the services to a customer.
Business Combinations, Goodwill and Intangible Assets
We allocate the fair value of purchase consideration in a business combination to tangible assets, liabilities assumed, and intangible assets acquired based on
their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is allocated to
goodwill. The allocation of the purchase consideration requires management to make significant estimates and assumptions, especially with respect to intangible
assets. These estimates can include, but are not limited to, future expected cash flows from acquired customers and acquired technology from a market participant
perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently
uncertain and unpredictable, and, as a result, actual results may differ from estimates. During the measurement period, which is up to one year from the acquisition
or merger closing date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of
the measurement period, any subsequent adjustments are recorded to earnings.
We assess goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of the asset may not be
recoverable. We test goodwill using the two-step process. In the first step, we compare the carrying amount of the reporting unit to the fair value based on the fair
value of our common stock. If the fair value of the reporting unit exceeds the carrying value, goodwill is not considered impaired and no further testing is required.
If the carrying value of the reporting unit exceeds the fair value, goodwill is potentially impaired, and the second step of the impairment test must be performed. In
the second step, we would compare the implied fair value of the goodwill to its carrying amount to determine the amount of impairment loss, if any.
Acquired finite-lived intangible assets are amortized over their estimated useful lives. We evaluate the recoverability of our intangible assets for possible
impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured
by a comparison of the carrying amounts to the future undiscounted cash flows the intangible assets are expected to generate. If such review indicates that the
carrying amount of our intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any such impairment
charge during the periods presented.
Recent Accounting Pronouncements
See “Recently Adopted Accounting Standards” and “Recently Issued Accounting Standards” in Note 2 to our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. Our market
risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates. Information relating to quantitative and qualitative
disclosures about these markets risks is described below.
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Interest Rate Risk
Our primary exposure to market risk relates to interest rate changes. We had cash and cash equivalents and marketable securities totaling $483.2 million and
$537.2 million as of January 31, 2020 and 2019, respectively, which were held for working capital purposes. Our cash equivalents are comprised primarily of
money market funds and our marketable securities are comprised of asset-backed securities, corporate notes and obligations, commercial paper, municipal
securities, certificates of deposit and U.S. treasury securities. Our investments are made for capital preservation purposes. We do not hold or issue financial
instruments for trading or speculative purposes. A hypothetical 100 basis point change in interest rates would change the fair value of our investments in
marketable securities by $3.8 million and $3.8 million as of January 31, 2020 and 2019, respectively.
Foreign Currency Risk
Our revenue and expenses are primarily denominated in U.S. dollars. For our non-U.S. operations, the majority of our revenue and expenses are denominated
in other currencies such as Euro, British Pound Sterling, Australian Dollar, Chinese Yuan, Hungarian Forint, Singapore Dollar and Indian Rupee. Fluctuations in
foreign currencies impact the amount of total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign subsidiaries upon the
translation of these amounts into U.S. dollars. As the U.S. dollar fluctuates against certain international currencies, the amounts of revenue and deferred revenue
that we report in U.S. dollars for foreign subsidiaries that transact in international currencies may also fluctuate relative to what we would have reported using a
constant currency rate.
For the year ended January 31, 2020, approximately 20% of our revenue and approximately 16% of aggregate cost of sales and operating expenses were
generated in currencies other than U.S. dollars. For the year ended January 31, 2019, approximately 17% of our revenue and approximately 19% of aggregate cost
of sales and operating expenses were generated in currencies other than U.S. dollars.
For the year ended January 31, 2020, we recorded foreign exchange transaction losses of less than a million. For the year ended January 31, 2019, we recorded
a loss on foreign exchange transactions of $2.5 million. To date, we have not had a formal hedging program with respect to foreign currency, but we may in the
future if our exposure to foreign currency should become more significant. For the year ended January 31, 2020, a hypothetical 10% increase or decrease in current
exchange rates could have had a $4.2 million impact on our financial results.
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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as part of this Annual Report on Form 10-K:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
63
66
67
68
69
71
73
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Cloudera, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cloudera, Inc. (the Company) as of January 31, 2020 and 2019, the related consolidated
statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years
in the period ended January 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2020 and 2019, and the results of its operations and
its cash flows for each of the three years in the period ended January 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of January 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 27, 2020 expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended January 31, 2020 due
to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
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Description of the Matter
Revenue Recognition – Identifying and evaluating terms and conditions in contracts
As discussed in Note 2 to the consolidated financial statements, the Company derives its revenues primarily
from subscription and services fees. The Company determines revenue recognition following the five-step
framework in Accounting Standards Codification 606, Revenue from Contracts with Customers. Management
applies significant effort and judgment in identifying and evaluating any non-standard terms and conditions in
customer contracts which may impact the determination of performance obligations or the timing of revenue
recognition.
Auditing revenue recognition was challenging and complex due to the significant amount of effort and
judgment required in the identification and evaluation of non-standard terms and conditions in customer
contracts that impact revenue recognition.
How We Addressed the Matter
in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s
process and controls to identify and evaluate non-standard contract terms that impact the timing of revenue
recognition.
Our substantive procedures included, among others, reviewing a sample of executed contracts and purchase
orders to evaluate the contractual terms with the customer, and evaluating the timing and amount of revenue
recognition for a sample of individual sales transactions. We also evaluated the accuracy of the Company’s
contract review documentation, specifically related to the completeness of identification and evaluation of
significant non-standard terms as well as the timing of revenue recognition.
We have served as the Company’s auditor since 2011.
San Jose, California
March 27, 2020
/s/ Ernst & Young LLP
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Cloudera, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Cloudera, Inc.’s internal control over financial reporting as of January 31, 2020, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Cloudera,
Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated
financial statements of the Company and our report dated March 27, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Jose, California
March 27, 2020
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CLOUDERA, INC.
Consolidated Balance Sheets
(in thousands, except share and par value data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Marketable securities, current
Accounts receivable, net
Contract assets
Deferred costs
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Marketable securities, non-current
Intangible assets, net
Goodwill
Deferred costs, non-current
Restricted cash
Operating lease right-of-use assets
Other assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
Accrued compensation
Other contract liabilities, current
Other accrued liabilities
Operating lease liabilities, current
Deferred revenue, current
Total current liabilities
Operating lease liabilities, non-current
Deferred revenue, non-current
Other contract liabilities, non-current
Other liabilities
TOTAL LIABILITIES
Commitments and contingencies (Note 8 and Note 9)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.00005 par value; 20,000,000 shares authorized, no shares issued and outstanding at January 31, 2020 and
2019
Common stock $0.00005 par value; 1,200,000,000 shares authorized at January 31, 2020 and 2019; 295,167,761 and
268,818,627 shares issued and outstanding at January 31, 2020 and 2019, respectively
Additional paid-in capital
Accumulated other comprehensive gain (loss)
Accumulated deficit
TOTAL STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
See accompanying notes to consolidated financial statements.
66
As of
January 31,
2020
2019
$
107,638 $
253,361
249,971
4,648
54,776
37,507
707,901
21,988
122,193
605,236
590,361
35,260
3,352
204,642
8,857
158,672
322,005
242,980
4,824
32,100
38,281
798,862
27,619
56,541
679,326
586,456
36,913
3,367
—
7,559
$
$
2,299,790 $
2,196,643
3,858 $
61,826
12,225
22,297
19,181
460,561
579,948
192,324
81,116
810
7,223
861,421
—
15
8,185
53,590
17,177
24,548
—
390,965
494,465
—
116,604
1,296
22,209
634,574
—
13
2,923,905
2,711,340
273
(1,485,824)
1,438,369
$
2,299,790 $
(42)
(1,149,242)
1,562,069
2,196,643
CLOUDERA, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Table of Contents
Revenue:
Subscription
Services
Total revenue
Cost of revenue:(1) (2)
Subscription
Services
Total cost of revenue
Gross profit
Operating expenses:(1) (2)
Research and development
Sales and marketing
General and administrative
Total operating expenses
Loss from operations
Interest income, net
Other income (expense), net
Loss before provision for income taxes
Provision for income taxes
Net loss
Net loss per share, basic and diluted
Weighted-average shares used in computing net loss per share, basic and diluted
(1) Amounts include stock-based compensation expense as follows (in thousands):
Cost of revenue – subscription
Cost of revenue – services
Research and development
Sales and marketing
General and administrative
(2) Amounts include amortization of acquired intangible assets as follows (in thousands):
Cost of revenue – subscription
Sales and marketing
See accompanying notes to consolidated financial statements.
67
Years Ended January 31,
2020
2019
2018
$
667,826 $
406,333 $
126,365
794,191
117,739
114,763
232,502
561,689
263,566
467,541
170,336
901,443
73,608
479,941
63,329
72,785
136,114
343,827
173,814
253,164
110,613
537,591
302,617
69,676
372,293
70,902
87,133
158,035
214,258
215,695
287,196
85,539
588,430
(339,754)
(193,764)
(374,172)
11,687
185
(327,882)
(8,700)
9,011
(2,478)
(187,231)
(5,418)
5,150
1,429
(367,593)
(2,079)
$
$
(336,582) $
(192,649) $
(369,672)
(1.20) $
(1.21) $
(3.24)
280,772
159,816
114,141
Years Ended January 31,
2020
2019
2018
$
16,599 $
9,959 $
17,609
75,554
63,360
47,232
11,492
41,430
27,918
26,566
24,826
31,843
100,143
90,420
42,774
Years Ended January 31,
2020
2019
2018
$
11,213 $
68,811
3,251 $
5,878
2,230
1,493
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CLOUDERA, INC.
Consolidated Statements of Comprehensive Loss
(in thousands)
Net loss
Other comprehensive income (loss), net of tax:
Foreign currency translation (loss) gain
Unrealized gain (loss) on investments
Total other comprehensive income (loss), net of tax
Comprehensive loss
Years Ended January 31,
2020
2019
2018
(336,582) $
(192,649) $
(369,672)
(935)
1,250
315
34
756
790
349
(625)
(276)
(336,267) $
(191,859) $
(369,948)
$
$
See accompanying notes to consolidated financial statements.
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Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share data)
CLOUDERA, INC.
Redeemable Convertible
Preferred Stock
Shares
Amount
Balance as of January 31, 2017
74,907,415 $ 657,687
Common Stock
Shares
38,156,688 $
Amount
2
$
Additional
Paid-In
Capital
192,795 $
Accumulated
Other
Comprehensive
Loss
Shares issued under employee stock
plans
Vested restricted stock units
converted into shares
Conversion of redeemable
convertible preferred stock to
common stock in connection with
initial public offering
Issuance of common stock in
connection with initial public
offering, net of offering costs
Issuance of common stock in
connection with follow-on public
offering, net of offering costs
Stock-based compensation expense
Shares issued related to business
combination
Shares withheld related to net
settlement of restricted stock units
Unrealized loss on investments
Foreign currency translation
adjustment
Net loss
Balance as of January 31, 2018
Shares issued under employee stock
plans
Vested restricted stock units
converted into shares
Stock-based compensation expense
Shares issued in a business
combination
Shares withheld related to net
settlement of restricted stock units
Unrealized gain on investments
Foreign currency translation
adjustment
Net loss
Balance as of January 31, 2019
Shares issued under employee stock
plans
Vested restricted stock units
converted into shares
Shares issued under employee stock
purchase plan
Stock-based compensation expense
Shares withheld related to net
settlement of restricted stock units
Unrealized gain on investments
Foreign currency translation
adjustment
Net loss
—
—
—
—
5,281,193
9,974,266
(74,907,415)
(657,687)
74,907,415
—
—
17,250,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,000,000
—
358,206
(3,600,767)
—
—
—
145,327,001
3,827,218
9,079,901
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(720,193)
—
—
—
268,818,627
4,395,673
—
23,273,233
2,497,928
—
(3,817,700)
—
—
—
—
—
—
—
—
—
—
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
(556) $ (586,921) $
(394,680)
—
—
—
—
—
—
—
—
(625)
349
—
—
—
21,435
—
—
657,687
—
235,366
—
—
—
—
—
—
46,008
290,006
2,081
(59,781)
(625)
349
(369,672)
(369,672)
—
—
—
—
—
756
34
—
—
—
—
22,179
—
117,365
—
1,202,428
—
—
—
(16,218)
756
34
(192,649)
(192,649)
21,435
—
657,683
235,365
46,008
290,006
2,081
(59,781)
—
—
—
22,179
—
117,365
(16,218)
—
—
—
1,385,592
(832)
(956,593)
428,174
2,711,340
(42)
(1,149,242)
1,562,069
12,676
—
12,156
220,354
(32,621)
—
—
—
—
—
—
—
—
1,250
(935)
—
—
—
—
—
—
—
12,676
2
12,156
220,354
(32,621)
1,250
(935)
—
(336,582)
(336,582)
—
—
4
1
—
—
—
—
—
—
—
7
—
—
—
—
—
—
—
13
—
2
—
—
—
—
—
—
Balance as of January 31, 2020
— $
295,167,761 $
15
$ 2,923,905 $
273
$ (1,485,824) $ 1,438,369
—
111,304,700
6
1,202,422
See accompanying notes to consolidated financial statements.
69
Table of Contents
CLOUDERA, INC.
Consolidated Statements of Cash Flows
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Years Ended January 31,
2020
2019
2018
$
(336,582) $
(192,649) $
(369,672)
Depreciation and amortization
Non-cash lease expense
Stock-based compensation expense
Accretion and amortization of marketable securities
Amortization of deferred costs
Loss (gain) on disposal of fixed assets
Release of deferred tax valuation allowance
Changes in assets and liabilities:
Accounts receivable
Contract assets
Prepaid expenses and other assets
Deferred costs
Accounts payable
Accrued compensation
Accrued expenses and other liabilities
Other contract liabilities
Operating lease liabilities
Deferred revenue
Net cash (used in) provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities and other investments
Proceeds from sale of marketable securities and other investments
Maturities of marketable securities and other investments
Cash used in business combinations, net of cash acquired
Cash acquired in business combination
Capital expenditures
Proceeds from sale of equipment
Net cash (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock in initial public offering
Net proceeds from issuance of common stock in follow-on offering
Taxes paid related to net share settlement of restricted stock units
Proceeds from employee stock plans
Net cash (used in) provided by financing activities
92,156
45,640
220,354
(2,294)
47,552
414
—
(8,956)
176
(8,456)
(68,575)
(4,089)
5,570
109
(5,438)
(51,059)
36,652
(36,826)
17,428
—
117,365
(1,406)
30,634
(25)
—
54,231
(1,891)
16,497
(39,665)
3,795
(17,962)
5,413
5,922
—
36,586
34,273
12,102
—
290,006
512
23,284
(111)
(806)
(28,780)
(285)
(16,194)
(34,557)
(667)
5,179
7,664
12,509
—
57,548
(42,268)
(494,252)
(462,737)
(620,329)
86,739
413,557
(4,500)
—
(7,203)
—
(5,659)
—
—
(32,621)
25,664
(6,957)
56,702
435,478
—
42,557
(10,086)
45
79,069
321,552
(1,937)
—
(12,954)
145
61,959
(234,454)
—
—
(16,218)
21,844
5,626
237,422
46,008
(59,781)
23,673
247,322
See accompanying notes to consolidated financial statements.
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CLOUDERA, INC.
Consolidated Statements of Cash Flows
(in thousands)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash — Beginning of period
Cash, cash equivalents and restricted cash — End of period
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Purchases of property and equipment in accounts payable and other accrued liabilities
Fair value of common stock issued as consideration for business combinations
Fair value of equity awards assumed
Conversion of redeemable convertible preferred stock to common stock
Right-of-use assets obtained in exchange for new operating lease liabilities
$
$
$
$
$
$
$
See accompanying notes to consolidated financial statements.
72
(1,607)
(51,049)
162,039
(1,118)
100,740
61,299
110,990 $
162,039 $
1,067
(28,333)
89,632
61,299
7,760 $
4,775 $
2,694
45 $
208 $
— $
1,154,230 $
48,197 $
— $
— $
1,130
2,081
—
— $
657,687
7,392 $
— $
—
Table of Contents
CLOUDERA, INC.
Notes to Consolidated Financial Statements
1. Organization and Description of Business
Cloudera, Inc. was incorporated in the state of Delaware on June 27, 2008 and is headquartered in Palo Alto, California. We sell subscriptions and services for
an integrated suite of data analytics and management products from the Edge to artificial intelligence (AI). Our offerings are based predominantly on open source
software, utilizing data stored natively in public cloud object stores as well as in various open source data stores.
Unless the context requires otherwise, the words “we,” “us,” “our,” the “Company” and “Cloudera” refer to Cloudera, Inc. and its subsidiaries taken as a
whole.
In January 2019, we completed our merger of Hortonworks, Inc. (Hortonworks), a publicly-held company headquartered in Santa Clara, California, and a
provider of enterprise-grade, global data management platforms, services and solutions. We have included the financial results of Hortonworks in our consolidated
financial statements from the date of completion of our merger.
During the year ended January 31, 2019, we adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606).
The consolidated financial data for the years ended January 31, 2020, 2019 and 2018 and as of January 31, 2020 and 2019 included in this Form 10-K is in
compliance with this standard.
2. Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of Cloudera, Inc. and its wholly owned subsidiaries which are located in various countries,
including the United States, Australia, China, India, Germany, Ireland, The Netherlands, Singapore, Hungary and the United Kingdom. All intercompany balances
and transactions have been eliminated upon consolidation. The financial statements are prepared in accordance with accounting principles generally accepted in the
United States (GAAP).
Fiscal Year
Our fiscal year ends on January 31. References to fiscal 2020, for example, refers to the fiscal year ended January 31, 2020.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Significant items subject to such estimates include the useful lives of property and equipment and intangible
assets, allowance for doubtful accounts, stock-based compensation expense, bonus attainment, self-insurance costs incurred, the fair value and useful lives of
tangible and intangible assets acquired and liabilities assumed resulting from business combinations, the evaluation for impairment of intangible assets and
goodwill, estimated period of benefit for deferred contract costs, estimates related to our revenue recognition such as, the assessment of elements in a multi-
element arrangement and the valuation assigned to each element and contingencies, and the incremental borrowing rate used in discounting of our lease liabilities.
These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using
historical experience and other factors; however, actual results could differ significantly from these estimates.
Segments
We operate as two operating segments – subscription and services. Operating segments are defined as components of an enterprise for which separate financial
information is evaluated regularly by the chief operating decision maker, who is our chief executive officer, in deciding how to allocate resources and assess
performance.
In January 2019, we completed our merger with Hortonworks. The combined company operates under the Cloudera name. We have integrated Hortonworks
into our ongoing business operations and our chief operating
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decision maker evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. Our consolidated
financial statements for the year ended and as of January 31, 2019 include the impact of the Hortonworks merger, and our results of operations for the year ended
January 31, 2020 reflect the results of operations of the combined entity.
Foreign Currency Translation
The functional currency of our foreign subsidiaries is generally the local currency. The gains and losses resulting from translating our foreign subsidiaries’
financial statements into U.S. dollars have been reported in accumulated other comprehensive income (loss) on the consolidated balance sheet. Assets and
liabilities are translated at exchange rates in effect at the balance sheet date. Equity is translated at the historical rates from the original transaction period. Revenue
and expenses are translated at average exchange rates in effect during the period. Foreign currency transaction gains and losses are included in other income
(expense), net on the statement of operations.
Cash, Cash Equivalents and Restricted Cash
Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less from the date of purchase. Restricted cash
represents cash on deposit with financial institutions in support of letters of credit outstanding in favor of certain landlords for office space.
Cash as reported on the consolidated statements of cash flows includes the aggregate amounts of cash and cash equivalents and the restricted cash as shown on
the consolidated balance sheets. Cash as reported on the consolidated statements of cash flows consists of the following (in thousands):
Cash and cash equivalents
Restricted cash (1)
Cash, cash equivalents and restricted cash
As of January 31,
2020
107,638 $
2019
158,672 $
3,352
3,367
110,990 $
162,039 $
2018
43,247
18,052
61,299
$
$
(1) The restricted cash balance as of January 31, 2019 decreased to $3.4 million from $18.1 million as of January 31, 2018 as a result of the removal of restrictions on letter
of credit funds.
Marketable Securities
We have investments in various marketable securities which are classified as available for sale. We determine the appropriate classification of marketable
securities at the time of purchase and reevaluate such determination at each balance sheet date. The investments are adjusted for amortization of premiums and
discounts to maturity and such amortization is included in interest income, net on the statement of operations. Changes in market value considered to be temporary
are recorded as unrealized gains or losses in other comprehensive income (loss). Realized gains and losses and declines in value judged to be other than temporary
on available-for-sale securities are included in other income (expense), net on the statement of operations. The cost of securities sold is based on the specific-
identification method.
Concentration of Credit Risk and Significant Customers
Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, restricted cash and
accounts receivable. Our cash is deposited with high credit quality financial institutions. At times such deposits may be in excess of the Federal Depository
Insurance Corporation insured limits. We have not experienced any losses on these deposits.
As of January 31, 2020 and 2019, no single customer represented more than 10% of accounts receivable. For the years ended January 31, 2020, 2019 and
2018, no single customer accounted for 10% or more of revenue.
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Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount. We generally do not require collateral and estimate the allowance for doubtful accounts based on the
age of outstanding receivables, historical experience, customer creditworthiness and existing economic conditions. If events or changes in circumstances indicate
that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and an allowance is recorded accordingly.
Past-due receivable balances are written off when internal collection efforts have been unsuccessful in collecting the amount due. As of January 31, 2020 and 2019,
allowance for doubtful accounts was $0.8 million and $0.2 million, respectively. The movements in the allowance for doubtful accounts were not significant for
any of the periods presented.
Property and Equipment, Net
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization of property and equipment is
calculated using a straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs that do not extend the life or improve the
asset are expensed when incurred.
The estimated useful lives of our assets are as follows:
Computer software
Computer equipment
Furniture and office equipment
Leasehold improvements
2 years
2-3 years
3 years
Shorter of remaining lease term or estimated useful life
We review property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
recoverable. An impairment loss is recognized when the total of estimated undiscounted future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount. Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value.
There was no impairment of property and equipment during the years ended January 31, 2020, 2019 or 2018.
Leases
As a result of the adoption of ASU 2016-02, Leases (Topic 842), we have also made changes to our accounting policies with respect to leases. At the inception
of a contract, we determine whether the contract is or contains a lease. All leases with a term greater than one year are recognized on the balance sheet as right-of-
use (ROU) assets and lease liabilities. We have elected the short-term leases practical expedient which allows any leases with a term of 12 months or less to be
considered short-term and thus will not have a lease liability or ROU asset recognized on the balance sheet.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from
the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease
term at commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at
commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis
over a similar term an amount equal to the lease payments in a similar economic environment. The operating lease ROU asset also includes any lease payments
made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease, which we do not include
in our minimum lease terms unless the options are reasonably certain to be exercised. Lease expense for minimum lease payments is recognized on a straight-line
basis over the lease term.
We have lease agreements with lease and non-lease components which we have elected to account for as a single lease component. On the lease
commencement date, we establish assets and liabilities for the present value of
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estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are depreciated over the lease term to operating expense.
Additionally, we have entered into subleases for unoccupied leased office space. Any impairments to the ROU asset, leasehold improvements or other assets
as a result of a sublease are recognized as an operating expense in the period the sublease is executed. Any sublease payments received in excess of the straight-line
rent payments for the sublease are recorded as an offset to operating expenses and recognized over the sublease life.
Goodwill and Intangible Assets
Goodwill represents the excess of the fair value of purchase consideration in a business combination over the fair value of net tangible and intangible assets
acquired. Goodwill amounts are not amortized, but rather tested for impairment at least annually or more often if circumstances indicate that the carrying value
may not be recoverable.
Intangible assets are amortized over their useful lives. Each period we evaluate the estimated remaining useful life of our intangible assets and whether events
or changes in circumstances warrant a revision to the remaining period of amortization.
We evaluate the recoverability of our long-lived assets, including intangible assets, for possible impairment whenever events or circumstances indicate that the
carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future
undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of
these assets, then the carrying amount of such assets is reduced to fair value.
There were no impairments of goodwill or intangible assets during the years ended January 31, 2020, 2019 or 2018.
Business Combinations
We use our best estimates and assumptions to assign fair value to tangible and intangible assets acquired and liabilities assumed at the acquisition or merger
date. Such estimates are inherently uncertain and subject to refinement. We continue to collect information and reevaluate these estimates and assumptions and
record any adjustments to the preliminary estimates to goodwill provided that we are within the measurement period. Upon the conclusion of the measurement
period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the
consolidated statements of operations.
Capitalized Software Costs
Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when
the product is available for general release. There is generally no significant passage of time between achievement of technological feasibility and the availability
of our software for general release, and the majority of our software is open-source. Therefore, we have not capitalized any software costs through January 31,
2020. All software development costs have been charged to research and development expense in the consolidated statements of operations as incurred.
Comprehensive Loss
Comprehensive loss represents the net loss for the period plus the results of certain changes to stockholders’ equity (deficit) that are not reflected in the
consolidated statements of operations.
Revenue Recognition
We generate revenue from subscriptions and services. Subscription revenue relates to term (or time-based) subscription agreements for both open source and
propriety software including support. Subscription arrangements are typically one to three years in length but may be up to seven years in limited cases.
Arrangements with our
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customers typically do not include general right of returns. Services revenue relates to professional services for the implementation and use of our subscriptions,
machine learning expertise and consultation, training and education services and related reimbursable travel costs.
We price our subscription offerings based on the number of servers in a cluster, or nodes, core or edge devices, data under management and/or the scope of
support provided. Our consulting services are priced primarily on a time and materials basis, and to a lesser extent, a fixed fee basis, and training services are
generally priced based on attendance.
We determine revenue recognition through the following steps, which are described in more detail below:
•
•
•
•
•
Identification of the contract or contracts with a customer
Identification of the performance obligation(s) in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligation(s) in the contract
Recognition of revenue when, or as, a performance obligation is satisfied
Our agreements with customers often include multiple subscriptions and/or professional services elements, and these elements are sometimes included in
separate contracts. We consider an entire customer arrangement to determine if separate contracts entered into at or near the same time should be considered
combined for the purposes of revenue recognition. We work with partners in various capacities whereby we are typically responsible for providing the actual
product or service as a principal.
At contract inception, we assess the subscription and services product offerings or bundle of product offerings in our contracts to identify performance
obligations that are distinct. A performance obligation is distinct when it is separately identifiable from other items in a bundled package and if a customer can
benefit from it on its own or with other resources that are readily available to the customer. To identify our performance obligations, we consider all of the product
offerings promised in the contract. We have concluded that our contracts with customers do not contain warranties that give rise to a separate performance
obligation.
The transaction price is the total amount of consideration we expect to be entitled to in exchange for the product offerings in a contract. Sales, value-added and
other taxes we collect from customers concurrent with revenue-producing activities are excluded from revenue. In the instance where our contracts with customers
contain variable consideration, we estimate variable consideration primarily using the expected value method.
Once we have determined the transaction price, the total transaction price is allocated to each performance obligation in a manner depicting the amount of
consideration to which we expect to be entitled in exchange for transferring the product(s) or service(s) to the customer (allocation objective). If the allocation
objective is met at contractual prices, no allocations are performed. Otherwise, we allocate the transaction price to each performance obligation identified in the
contract on a relative stand-alone selling price basis.
In order to determine the stand-alone selling price, we conduct a periodic analysis that requires judgment and considers multiple factors that are reasonably
available and maximizes the use of observable inputs that may vary over time depending upon the unique facts and circumstances related to each performance
obligation. To have observable inputs, we require that a substantial majority of the stand-alone selling prices for a product offering fall within a pricing range. If a
directly observable stand-alone selling price does not exist, we estimate a stand-alone selling price range by reviewing external and internal market factor
categories, which may include pricing practices, historical discounting, industry practices, service groups and geographic considerations. There is also no hierarchy
for how to estimate or otherwise determine the stand-alone selling price for product offerings that are not sold separately, however, we maximize the use of
observable data. We believe that this analysis results in an estimate that approximates the price we would charge for the product offerings if they were sold
separately.
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The following describes the nature of our primary types of revenue and the revenue recognition policies and significant payment terms as they pertain to the
types of transactions we enter into with our customers.
Subscription revenue
Subscription revenue relates to term (or time-based) subscriptions to our platform, which includes both open source and proprietary software and related
support. Subscriptions include internet, email and phone support, bug fixes, and the right to receive unspecified software updates and upgrades released when and
if available during the subscription term. Revenue for subscription arrangements is recognized ratably beginning on the later of the date access is made available to
the customer or the start of the contractual term of the arrangement. Subscription revenue also includes revenue related to functional intellectual property that is
generally recognized on the date access is made available to the customer.
As part of a subscription, we stand ready to help customers resolve technical issues related to the installed platform. The subscriptions are designed to assist
throughout a customer’s lifecycle from development to proof-of-concept, to quality assurance and testing, to production and development. Subscription is generally
offered under renewable, fixed fee contracts where payments are typically due annually in advance and may have a term of one year or multiple years. The
contracts generally do not contain refund provisions for fees earned related to services performed. A subscription is viewed as a stand-ready performance
obligation comprised of a series of distinct days of service that is satisfied ratably over time as the services are provided. A time-elapsed output method is used to
measure progress because our efforts are expended evenly throughout the period given the nature of the promise is a stand-ready service. Unearned subscription
revenue is included in deferred revenue and other contract liabilities. On occasion, we may sell engineering services and/or a premium subscription agreement that
provides a customer with development input and the opportunity to work more closely with our developers.
Services revenue
Services revenue is derived primarily from customer fees for consulting services engagements and education services. Our professional services are provided
primarily on a time and materials basis and, to a lesser extent, a fixed fee basis, and education services are generally priced based on attendance. Time and material
contracts are generally invoiced based upon hours incurred on a monthly basis and fixed fee contracts may be invoiced up-front or as milestones are achieved
throughout the project. Services revenue is typically recognized over time as the services are rendered. Depending on the nature of the professional services
engagement (e.g., time and materials basis, fixed fee basis, etc.), various measures of progress may be used to recognize revenue. These measures of progress
include recognizing revenue in an amount equal to and at the time of invoicing, a measure of time incurred relative to remaining hours expected to be delivered, or
other similar measures. These measures depict our efforts to satisfy services contracts and therefore reflect the transfer of control for the services to a customer.
Contract Assets
Contract assets consist of the right to consideration in exchange for product offerings that we have transferred to a customer when that right is conditional on
something other than the passage of time (e.g., performance prior to invoicing on fixed fee service arrangements with substantive acceptance terms). We record
unbilled accounts receivable related to revenue recognized in excess of amounts invoiced as we have an unconditional right to invoice and receive payment in the
future related to those fulfilled obligations. When we have unconditional rights to consideration, except for the passage of time, a receivable are recorded on the
consolidated balance sheets. We do not typically include extended payment terms in our contracts with customers.
Contract Liabilities
Contract liabilities represent an obligation to transfer product offerings for which we have received consideration, or for which an amount of consideration is
due from the customer (e.g., subscription arrangements where consideration is paid annually in advance). Contract liabilities are comprised of short-term and long-
term deferred revenue and other contract liabilities. Deferred revenue consists of amounts invoiced to customers but not yet recognized as revenue. Our contract
balances are reported as net contract assets or liabilities on a contract-by-contract basis at the end of each reporting period.
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Contract Costs
Contract costs, consisting primarily of sales commissions and payroll taxes, that are incremental to obtaining a subscription contract with a customer are
capitalized and recorded as deferred costs. We expect to recover deferred contract costs over the period of benefit from the underlying contracts. The amortization
period for recovery is consistent with the timing of transfer to the customer of services to which the capitalized costs relate. Contract costs that relate to an
underlying transaction are expensed commensurate with the recognition of revenue as performance obligations are satisfied. Contract costs that are incurred in
excess of those relating to an underlying transaction are not considered commensurate with recognition of revenue as performance obligations are satisfied, and are
amortized on a straight-line basis over the expected benefit period of five years. Commissions for services are treated as a separate class with a contract duration of
less than a year and are expensed as incurred. Contract costs were $90.0 million and $69.0 million as of January 31, 2020 and 2019, respectively. For the years
ended January 31, 2020, 2019, and 2018, amortization expense for the contract costs were $47.6 million, $30.6 million and $23.3 million, respectively, and there
was no impairment loss in relation to the costs capitalized. We do not incur direct fulfillment-related costs of a nature required to be capitalized and amortized.
Cost of Revenue
Cost of revenue for subscriptions and services is expensed as incurred. Cost of revenue for subscriptions primarily consists of personnel costs such as salaries,
bonuses and benefits and stock-based compensation for employees providing technical support for our subscription customers, allocated shared costs (including
rent and information technology) and amortization of certain acquired intangible assets. Cost of revenue for services primarily consists of personnel costs for
employees and subcontractors associated with service contracts, travel costs and allocated shared costs.
Research and Development
Research and development costs are expensed as incurred and primarily include personnel costs, contractor fees, allocated shared costs, supplies, and
depreciation of equipment associated with the development of new features for our subscriptions prior to the establishment of their technological feasibility.
Advertising Expenses
Advertising is expensed as incurred. Advertising expense was $15.4 million, $6.9 million, and $6.4 million for the years ended January 31, 2020, 2019 and
2018, respectively.
Stock-Based Compensation
We recognize stock-based compensation expense for all stock-based payments. Employee stock-based compensation cost is estimated at the grant date based
on the fair value of the equity for financial reporting purposes and is recognized as expense over the requisite service period. Prior to our IPO, the fair value of our
common stock for financial reporting purposes was determined considering objective and subjective factors and required judgment to determine the fair value of
common stock for financial reporting purposes as of the date of each equity grant or modification.
We calculate the fair value of options and purchase rights granted under the ESPP based on the Black-Scholes option-pricing model. The Black-Scholes model
requires the use of various assumptions including expected term and expected stock price volatility. We estimate the expected term for stock options using the
simplified method due to the lack of historical exercise activity. The simplified method calculates the expected term as the midpoint between the vesting date and
the contractual expiration date of the award. The expected term for the ESPP purchase rights is estimated using the offering period, which is typically six months.
We estimate volatility for options and ESPP purchase rights using volatilities of a group of public companies in a similar industry, stage of life cycle, and size. The
interest rate is derived from government bonds with a similar term to the option or ESPP purchase right granted. We have not declared nor do we expect to declare
dividends. Therefore, there is no dividend impact on the valuation of options or ESPP purchase rights. We use the straight-line method for employee expense
attribution for stock options and ESPP purchase rights.
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We have granted RSUs to our employees and members of our board of directors under our 2008 Equity Incentive Plan (2008 Plan) and our 2017 Equity
Incentive Plan (2017 Plan). RSUs granted generally vest upon the satisfaction of a service-based vesting condition only, which is typically satisfied pro-rata over a
period of three to four years.
In fiscal 2020, 2019 and 2018, stock-based compensation expense was recorded based on awards that were ultimately expected to vest, and such expense was
reduced for forfeitures as they occurred. In fiscal 2017, stock-based compensation expense was recorded based on awards that were ultimately expected to vest,
and such expense was reduced for estimated forfeitures. When estimating forfeitures, we considered voluntary termination behaviors as the trend in actual option
forfeitures.
We estimate the fair value of options and other equity awards granted to non-employees using the Black-Scholes method. Stock-based compensation expense
is recognized over the vesting period on a straight-line basis.
Income Taxes
We account for income taxes under the liability method, whereby deferred tax assets and liabilities are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income.
A valuation allowance is established when, in management’s estimate, it is more likely than not that the deferred tax asset will not be realized.
Any liability related to uncertain tax positions is recorded on the financial statements within other liabilities. Penalties and interest expense related to income
taxes, including uncertain tax positions, are classified as a component of provision for income taxes, as necessary.
Net Loss Per Share
We follow the two-class method when computing net loss per common share as we issue shares that meet the definition of participating securities. The two-
class method determines net income (loss) per common share for each class of common stock and participating securities according to dividends declared or
accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be
allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been
distributed. Prior to the automatic conversion into shares of common stock as a result of our IPO, our redeemable convertible preferred stock contractually entitled
the holders of such shares to participate in dividends, but did not contractually require the holders of such shares to participate in our losses. Diluted net loss per
share is the same as basic net loss per share in all periods, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-
dilutive.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a
liability has been or will be incurred and the amount of the liability can be reasonably estimated. Legal costs incurred in connection with loss contingencies are
expensed as incurred.
Recently Adopted Accounting Standards
We adopted the following accounting standards in the first quarter of fiscal 2020:
•
•
ASU 2018-07, Compensation-Stock Compensation Improvements to Nonemployee Share-Based Payment Accounting (Topic 718)
ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income
The adoption of the above listed accounting standards did not have a material impact on our consolidated financial statements for the year ended January 31,
2020.
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In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to
accounting for income taxes. The standard is effective for annual reporting periods and interim periods within those years, beginning after December 15, 2020,
with early adoption permitted. We have early adopted this standard in the fourth quarter of fiscal 2020 for our year ended January 31, 2020. The adoption of the
new accounting standard had no material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as amended, which requires lessees to recognize lease liabilities and corresponding
ROU assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing
arrangements. We adopted the new standard on February 1, 2019 using the modified retrospective transition approach by applying the standard to all leases
existing at the date of initial application and not restating comparative periods. Under this transition method, the application date of the new standard begins in the
reporting period in which we have adopted the standard. We have elected the package of practical expedients permitted under the transition guidance, which
allowed us not to reassess (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) the
accounting for any initial direct costs for any expired or existing leases. We have also elected the short-term lease exception and will not recognize ROU assets or
lease liabilities for qualifying leases (leases with a term of less than 12 months from lease commencement).
As a result of the adoption of Topic 842, we recognized ROU assets and lease liabilities for operating leases of $235.9 million and $247.3 million,
respectively, as of February 1, 2019. The aggregate lease liability differs from the ROU asset primarily due to lease incentives that are recognized over the life of
the leases, and timing differences between when lease payments are remitted to lessors and when ROU asset amortization expense is charged to earnings. We
currently have no finance leases. The adoption of the new lease accounting standard had no impact on cash provided by or used in operating, investing or financing
activities on our consolidated statements of cash flows. The adoption of the new lease accounting standard did not impact our statements of operations nor
previously reported financial results. See Note 8 to our consolidated financial statements for further information on the implementation of the standard.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
(ASU 2016-13), which requires an entity to utilize a new impairment model known as the current expected credit loss model in place of the currently used incurred
loss method. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s
current estimate of credit losses expected to be incurred over the life of the financial instrument. For trade receivables, loans, and other financial instruments, an
entity will be required to use a forward-looking expected loss model to recognize credit losses that are probable. It also eliminates the concept of other-than-
temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a
reduction in the amortized cost basis of the securities. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial
Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to eliminate inconsistencies and provide clarifications to
the transition requirements of ASU 2016-13. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial
Instruments-Credit Losses, to provide clarification guidance in the following areas: (i) expected recoveries for purchased financial assets with credit deterioration;
(ii) transition relief for troubled debt restructurings; (iii) disclosures related to accrued interest receivables; (iv) financial assets secured by collateral maintenance
provisions; and (v) conforming amendment to subtopic 805-20. The standard is effective for annual reporting periods and interim periods within those years,
beginning after December 15, 2019, and requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the
guidance is effective. We will adopt this standard on February 1, 2020 using the modified retrospective adoption approach. We do not anticipate that ASU 2016-13
will have a material impact on our consolidated financial statements and disclosures based on the composition of the Company's historical credit loss activity,
investment portfolio and current market conditions.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU
2017-04), which eliminates step two from the goodwill
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impairment test. Under this standard, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its
fair value up to the amount of goodwill allocated to that reporting unit. The standard is effective prospectively for annual reporting periods and interim periods
within those years, beginning after December 15, 2019. We will adopt this standard on February 1, 2020. We do not anticipate that ASU 2017-04 will have a
material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which
amends ASC 820, Fair Value Measurement (ASU 2018-13). ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing,
modifying, or adding certain disclosures. The standard is effective for annual reporting periods and interim periods within those years, beginning after December
15, 2019. We will adopt this standard on February 1, 2020 using the prospective adoption approach. We do not anticipate that ASU 2018-13 will have a material
impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation
Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) (ASU 2018-15), which
aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing
implementation costs incurred for an internal-use software license. The standard is effective for annual reporting periods and interim periods within those years,
beginning after December 15, 2019. We will adopt this standard on February 1, 2020 using the prospective adoption approach. We do not anticipate that ASU
2018-15 will have a material impact on our consolidated financial statements.
We continue to assess the potential impacts of the new standards, including the areas described above, however, we do not know or cannot reasonably estimate
quantitative information, beyond that discussed above, related to the impact of the new standards on the consolidated financial statements at this time.
3. Revenue from Contracts with Customers
The following table reflects our contract liabilities balances (in thousands):
Deferred revenue, current
Other contract liabilities, current
Deferred revenue, non-current
Other contract liabilities, non-current
Total contract liabilities
As of January 31,
2020
460,561 $
$
12,225
81,116
810
2019
390,965
17,177
116,604
1,296
$
554,712 $
526,042
Significant changes in the contract liabilities balances during the periods ended January 31, 2020 and 2019 are as follows (in thousands):
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February 1, 2018
Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period
Increases due to invoicing prior to satisfaction of performance obligations
Increases from a business combination
January 31, 2019
Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period
Increases due to invoicing prior to satisfaction of performance obligations
January 31, 2020
Remaining Performance Obligations
Contract Liabilities
249,950
$
(228,167)
270,759
233,500
526,042
(407,004)
435,674
554,712
$
The transaction price allocated to remaining performance obligations represents contracted revenue that has been billed but not recognized, and unbilled non-
cancelable amounts that will be recognized as revenue in future periods. Transaction price allocated to the remaining performance obligation is influenced by
several factors, including seasonality, the timing of renewals and average contract terms.
During the year ended January 31, 2020, net revenue recognized from our remaining performance obligations satisfied in previous periods was not material
and was primarily related to contract modifications.
As of January 31, 2020, approximately $877.2 million of revenue is expected to be recognized from remaining performance obligations in the amount of
approximately $585.2 million over the next 12 months and approximately $292.0 million thereafter.
Other Practical Expedients
We elected to apply a practical expedient related to significant financing components. The practical expedient states that the promised amount of consideration
for the effects of a significant financing component is not adjusted if we expect, at contract inception, that the period between when the we transfer a promised
product offering to a customer and when the customer pays for that product offering will be one year or less.
4. Business Combination
On January 3, 2019, we acquired all outstanding stock of Hortonworks, a provider of enterprise-grade, global data management platforms, services and
solutions for approximately $1.2 billion in consideration consisting of common stock and equity awards assumed. We have included the financial results of
Hortonworks in our consolidated financial statements from the date of merger. The transaction costs associated with the merger were approximately $22.8 million,
which were included in general and administrative expense in our consolidated statement of operations for the year ended January 31, 2019. The merger-date fair
value of the consideration transferred for Hortonworks was approximately $1.2 billion, which consisted of the following (in thousands except for share data):
Common stock (111,304,700 shares)
Fair value of share-based compensation awards assumed
Total
Fair Value
1,154,230
48,197
1,202,427
$
$
The $1.2 billion fair value consideration transferred was determined based on $10.37 per share, the closing price of our stock on the closing date of the merger
with Hortonworks (the Closing Date), for all shares of Hortonworks common stock outstanding immediately prior to the Closing Date. The fair value of the post
share conversion of 4.1 million stock options, 0.9 million of performance restricted stock units and 9.0 million restricted stock units assumed
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was determined using the Black-Scholes option pricing model for stock option awards and observable market price of our common stock for valuation of
performance and restricted share units. The share conversion ratio of 1.305 was applied to convert Hortonworks’ outstanding equity awards for Hortonworks’
common stock into equity awards for shares of our common stock. Further, we assumed stock-based awards with a total fair value of $63.5 million, which will be
recognized as stock-based compensation expense over a weighted-average period of 1.5 years from the Closing Date. Additionally, we recognized $13.1 million of
additional stock-based compensation expense during the year ended January 31, 2019 due to the acceleration and modification of certain stock awards assumed as
part of our merger with Hortonworks.
The following table summarizes the fair values of assets acquired and liabilities assumed as of the Closing Date (in thousands):
Cash and cash equivalents
Marketable securities, current
Accounts receivable, net
Prepaid expenses and other assets
Property and equipment, net
Intangible assets
Accounts payable
Accrued compensation
Other accrued liabilities and long-term liabilities
Deferred revenue
Total net assets acquired and liabilities assumed
Fair Value
40,886
8,103
165,958
23,512
8,091
682,600
(2,888)
(31,007)
(12,163)
(233,500)
649,592
$
$
The $552.8 million excess of purchase consideration over the fair value of total net assets acquired and liabilities assumed was recorded as goodwill. Goodwill
of $525.2 million and $27.6 million was allocated to our subscription and services segments, respectively, based on the forecasted post-merger financial results of
the subscription and services segments.
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The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the Closing Date:
Unbilled contracts
Customer relationships
Trade names
Total identified intangible assets
Fair Value
Estimated Useful Life
(in thousands)
18,300
661,600
2,700
682,600
$
$
(in years)
2
10
1
Unbilled contracts represent the fair value of Hortonworks’ customer contracts that had yet to be billed as of the Closing Date. Customer relationships
represent the fair value of the underlying relationships with Hortonworks’ customers. Trade names represent Hortonworks’ trademarks, which consumers associate
with the source and quality of Hortonworks’ products and services. The estimated fair values of the intangible assets acquired were determined based on a
combination of the income and market approaches to measure the fair value of unbilled contracts, customer relationships, and trade names. The fair value of
unbilled contracts and customer relationships was measured based on the income approach, specifically the multi-period excess earnings method. The fair value of
the trade names was determined using the relief-from-royalty method. The estimated remaining useful life of the customer relationships intangible is approximately
10 years, which approximates the mean and median of a benchmarking dataset from similar mergers or acquisitions over the last 7 years, focusing on transactions
where customer relationships is the primary asset of the transaction. The estimated remaining useful life of unbilled contracts is based on the period over which the
support and services are expected to be rendered and the estimated remaining useful life of trade names is based on our expected time frame to phase out the
Hortonworks trade names.
The goodwill balance of $552.8 million is attributable to the expansion of our product offerings and expected synergies of the combined workforce, products
and technologies with Hortonworks. The goodwill balance is not deductible for U.S. income tax purposes.
The amounts of revenue and net loss of Hortonworks included in our results from the transaction date of January 3, 2019 through January 31, 2019 are as
follows (in thousands):
Revenue
Net loss
29 Days Ended January 31,
2019
$
19,597
(9,226)
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5. Cash Equivalents and Marketable Securities
The following are the fair values of our cash equivalents and marketable securities as of January 31, 2020 (in thousands):
Cash equivalents:
Money market funds
Marketable securities:
Asset-backed securities
Corporate notes and obligations
Commercial paper
Municipal securities
Certificates of deposit
U.S. treasury securities
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
$
34,596 $
— $
— $
34,596
68,194
199,226
46,460
20,865
14,996
24,563
235
891
7
65
19
33
—
—
—
—
—
—
68,429
200,117
46,467
20,930
15,015
24,596
Total cash equivalents and marketable securities
$
408,900 $
1,250 $
— $
410,150
The following are the fair values of our cash equivalents and marketable securities as of January 31, 2019 (in thousands):
Cash equivalents:
Money market funds
Commercial paper
Certificates of deposit
Reverse repurchase agreements
Marketable securities:
Asset-backed securities
Corporate notes and obligations
Commercial paper
Certificates of deposit
U.S. treasury securities
Foreign government obligations
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
$
29,966 $
— $
— $
29,966
9,157
3,999
5,000
63,626
140,710
101,712
46,551
21,949
4,000
1
1
—
16
136
9
21
—
—
—
—
—
(57)
(111)
(1)
(1)
(14)
—
9,158
4,000
5,000
63,585
140,735
101,720
46,571
21,935
4,000
Total cash equivalents and marketable securities
$
426,670 $
184 $
(184) $
426,670
Maturities of our noncurrent marketable securities generally range from one year to three years at both January 31, 2020 and 2019.
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The contractual maturities of investments in available-for-sale securities were as follows (in thousands):
Due within one year
Due after one year through five years
Total investments in marketable securities
January 31, 2020
January 31, 2019
Amortized Cost
Estimated Fair
Value
Amortized Cost
Estimated Fair
Value
$
$
273,582 $
274,058 $
380,461 $
135,318
136,092
46,209
408,900 $
410,150 $
426,670 $
380,335
46,335
426,670
The unrealized loss for each of these fixed rate marketable securities was not material as of January 31, 2020 and 2019. We do not believe any of the
unrealized losses represent an other-than-temporary impairment based on our evaluation of available evidence as of January 31, 2020 and 2019. We expect to
receive the full principal and interest on all of these marketable securities and have the ability and intent to hold these investments until a recovery of fair value.
Realized gains and realized losses on our cash equivalents and marketable securities are included in other income (expense), net on the consolidated statement
of operations and were not material for the years ended January 31, 2020, 2019 and 2018.
Reclassification adjustments out of accumulated other comprehensive loss into net loss were not material for the years ended January 31, 2020 and 2019.
6. Fair Value Measurement
Our financial assets and liabilities consist principally of cash and cash equivalents, marketable securities, restricted cash, accounts receivable, and accounts
payable. We measure and record certain financial assets and liabilities at fair value on a recurring basis. The estimated fair value of accounts receivable and
accounts payable approximates their carrying value due to their short-term nature. Cash equivalents, marketable securities and restricted cash are recorded at
estimated fair value.
All of our cash equivalents and marketable securities are classified within Level 1 or Level 2 because the cash equivalents and marketable securities are valued
using quoted market prices or alternative pricing sources and models utilizing observable market inputs.
We follow a three-level valuation hierarchy for disclosure of fair value measurements as follows:
Level 1 Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation
with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Assets Measured at Fair Value on a recurring Basis
The following table represents our financial assets according to the fair value hierarchy, measured at fair value as of January 31, 2020 (in thousands):
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Cash equivalents:
Money market funds
Marketable securities:
Asset-backed securities
Corporate notes and obligations
Commercial paper
Municipal securities
Certificates of deposit
U.S. treasury securities
Total financial assets
Level 1
Level 2
Total
$
34,596 $
— $
34,596
—
—
—
—
—
—
68,429
68,429
200,117
200,117
46,467
20,930
15,015
24,596
46,467
20,930
15,015
24,596
$
34,596 $
375,554 $
410,150
The following table represents our financial assets according to the fair value hierarchy, measured at fair value as of January 31, 2019 (in thousands):
Cash equivalents:
Money market funds
Commercial paper
Reverse repurchase agreements
Certificates of deposits
Marketable securities:
Asset-backed securities
Corporate notes and obligations
Commercial paper
Certificates of deposit
U.S. treasury securities
Foreign government obligations
Total financial assets
Level 1
Level 2
Total
$
29,966 $
— $
29,966
—
—
—
—
—
—
—
14,950
—
9,158
5,000
4,000
63,585
140,735
101,720
46,571
6,985
4,000
9,158
5,000
4,000
63,585
140,735
101,720
46,571
21,935
4,000
$
44,916 $
381,754 $
426,670
We value our Level 1 assets using quoted prices in active markets for identical instruments. We value our Level 2 assets with the help of a third-party pricing
service using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data, or pricing models such as
discounted cash flow techniques. We use such pricing data as the primary input, to which we have not made any material adjustments during the periods presented,
to make our determination and assessments as to the ultimate valuation of these assets.
We have no Level 1, 2 or 3 liabilities and no Level 3 assets. There were no transfers between Level 1 and Level 2 assets for the years ended January 31, 2020
and 2019.
Assets Measured at Fair Value on a Nonrecurring Basis
Certain of our assets, including intangible assets and goodwill, are measured at fair value on a nonrecurring basis, when they are deemed to be other-than
temporarily impaired. There were no impairment charges recognized during the years ended January 31, 2020, 2019 and 2018.
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7. Balance Sheet Components
Property and Equipment, Net
The cost and accumulated depreciation and amortization of property and equipment are as follows (in thousands):
Computer equipment and software
Office furniture and equipment
Leasehold improvements
Property and equipment, gross
Less: accumulated depreciation and amortization
Property and equipment, net
As of January 31,
2020
2019
22,489 $
12,672
24,236
59,397
(37,409)
21,988 $
18,259
11,907
24,316
54,482
(26,863)
27,619
$
$
Depreciation expense was $12.1 million, $8.3 million and $8.4 million for the years ended January 31, 2020, 2019 and 2018, respectively.
Intangible Assets
Intangible assets consisted of the following as of January 31, 2020 (in thousands):
Developed technology
Customer relationships and other acquired intangible assets
Unbilled contracts
Total
Gross Fair
Value
Accumulated
Amortization
Net Book
Value
$
$
17,570 $
(11,321) $
671,447
18,300
(80,847)
(9,913)
6,249
590,600
8,387
707,317 $
(102,081) $
605,236
Weighted Average
Remaining Useful Life
(in years)
2.0
8.9
0.9
8.7
Intangible assets consisted of the following as of January 31, 2019 (in thousands):
Developed technology
Customer relationships and other acquired intangible assets
Unbilled contracts
Total
Gross Fair
Value
Accumulated
Amortization
Net Book
Value
$
$
11,986 $
(9,258) $
671,097
18,300
(12,036)
(763)
2,728
659,061
17,537
701,383 $
(22,057) $
679,326
Weighted Average
Remaining Useful Life
(in years)
1.9
9.9
1.9
9.6
Amortization expense for intangible assets was $80.0 million, $9.1 million and $3.7 million during the years ended January 31, 2020, 2019 and 2018,
respectively. The significant increase in fiscal 2020 relates to the amortization of intangible assets recognized as part of our merger with Hortonworks in January
2019.
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The expected future amortization expense of these intangible assets as of January 31, 2020 is as follows (in thousands):
2021
2022
2023
2024
2025
2026 and thereafter
Total amortization expense
Goodwill
The following table represents the changes to goodwill (in thousands):
Balance at January 31, 2018
Hortonworks merger
Balance at January 31, 2019
Other (1)
Balance at January 31, 2020
(1) Other consists of certain purchase accounting adjustments related to our merger with Hortonworks and to a business combination.
Accrued Compensation
Accrued compensation consists of the following (in thousands):
$
77,941
69,074
66,722
66,211
66,160
259,128
$
605,236
$
33,621
552,835
586,456
3,905
$
590,361
Accrued salaries, benefits and commissions
Accrued compensation-related taxes
Accrued bonuses
Employee stock purchase plan withholdings
Other
Total accrued compensation
Other Accrued Liabilities
Other accrued liabilities consist of the following (in thousands):
Accrued professional costs
Accrued taxes
Accrued travel
Other (1)
Total other accrued liabilities
As of January 31,
2020
2019
27,067 $
15,205
13,409
2,732
3,413
61,826 $
20,563
11,797
14,832
1,902
4,496
53,590
As of January 31,
2020
2019
6,182 $
5,164
1,574
9,377
22,297 $
6,500
3,731
2,751
11,566
24,548
$
$
$
$
(1) Other includes amounts owed to third-party vendors that provide marketing, corporate event planning, cloud-computing services, self-insurance costs and amounts due for
the settlement of certain marketable securities.
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8. Leases
We have entered into various non-cancelable operating lease agreements for our facilities. Our leases have various expiration dates through September 2031.
Many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be
reasonably assured at lease commencement.
As described within Note 2, we adopted ASU 2016-02, Leases, as of February 1, 2019, which requires, among other changes, operating leases with terms
exceeding twelve months to be recognized as ROU assets and lease liabilities on the consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term
at commencement date. The lease term is determined to be the non-cancelable period including any lessee renewal options which are considered to be reasonably
certain of exercise. The interest rate implicit in the lease contracts is typically not readily determinable. As such, we utilized the appropriate incremental borrowing
rate based on information available at the commencement date, which is the rate incurred to borrow on a collateralized basis over a similar term in a similar
economic environment.
Components of lease expense are summarized as follows (in thousands):
Operating lease cost
Short-term lease cost
Sublease income
Net lease cost
Lease term and discount rate information are summarized as follows:
Weighted Average Remaining Lease Term (years)
Weighted Average Discount Rate
Maturities of lease liabilities as of January 31, 2020 are as follows (in thousands):
2021
2022
2023
2024
2025
2026 and thereafter
Total lease payments
Less imputed interest
Present value of lease liabilities
We expect to receive $31.3 million of sublease rental proceeds in the next five years as of January 31, 2020.
91
Twelve Months Ended January
31, 2020
$
$
$
$
$
45,640
2,276
(15,730)
32,186
As of January 31, 2020
6.8
6 %
Minimum Lease Payments,
Gross
30,038
39,497
35,823
36,453
35,617
83,646
261,074
(49,569)
211,505
As of January 31, 2019, prior to the adoption of Topic 842, future minimum lease payments under non-cancelable operating leases was as follows (in
thousands):
2020
2021
2022
2023
2024
2025 and thereafter
Total minimum lease payments
9. Commitments and Contingencies
Letters of Credit
Minimum Lease Payments,
Gross
$
$
42,293
41,475
37,172
34,249
35,190
115,481
305,860
As of January 31, 2020 and 2019, we had a total of $19.9 million and $20.0 million, respectively, in letters of credit outstanding in favor of certain landlords
for office space. These letters of credit renew annually and expire at various dates through 2027.
Legal Proceedings
On June 7, 2019, a purported class action complaint was filed in the United States District Court for the Northern District of California, entitled Christie v.
Cloudera, Inc., et al., Case No. 5:19-cv-3221-LHK. The complaint named as defendants Cloudera, its former Chief Executive Officer, its Chief Financial Officer
and a former officer and director, asserting alleged class claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (Exchange Act) and SEC
Rule 10b-5. Two substantially similar class action complaints, entitled Zarantonello v. Cloudera, Inc., et al., Case No. 5:19-cv-4007-LHK, and Dvornic v.
Cloudera, Inc., et al., Case No. 5:19-cv-4310-LHK, were subsequently filed against the same defendants in the same court on July 12, 2019 and July 26, 2019,
respectively. The suits have been consolidated under the name, In re Cloudera, Inc. Securities Litigation, Case No. 5:19-cv-3221-LHK. The court subsequently
appointed lead plaintiffs and lead counsel, and a consolidated amended complaint was filed on February 14, 2020. The consolidated amended complaint asserts
claims against the Company and three individual defendants under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5, based on allegedly false and
misleading statements between April 28, 2017 and June 5, 2019. It also adds as defendants ten current or former directors or officers of the Company and Intel
Corporation and asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, on behalf of all persons who acquired Cloudera stock pursuant or
traceable to the S-4 registration statement filed in connection with Cloudera’s January 2019 merger with Hortonworks, and alleging that the registration statement
contained untrue statements of material fact and omitted material facts. The complaint seeks, among other things, an award of damages and attorneys’ fees and
costs. On March 18, 2020, the court vacated its prior order appointing lead plaintiffs and lead counsel and reopened the lead plaintiff process. Cloudera believes
that the allegations in the action are without merit.
On June 7, 2019, a purported class action complaint was filed in the Superior Court of California, County of Santa Clara, entitled Lazard v. Cloudera, Inc., et
al., Case No. 19CV348674. The complaint named as defendants Cloudera, thirteen individuals who are current or former directors or officers of the Company, and
Intel Corporation. The complaint alleged that the registration statement contained untrue statements of material fact and omitted material facts. Two substantially
similar suits, entitled Franchi v. Cloudera, Inc., et al., Case No. 19CV348790, and Cannizzo v. Cloudera, Inc., et al., Case No. 19CV348974, were subsequently
filed in the same court on June 11, 2019 and June 14, 2019, respectively. The suits have been consolidated under the name In re Cloudera, Inc. Securities
Litigation, and the consolidated amended complaint purports to assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 on behalf of all
persons who acquired Cloudera stock pursuant or traceable to
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the S-4 registration statement filed in connection with Cloudera’s January 2019 merger with Hortonworks, and alleges that the registration statement contained
untrue statements of material fact and omitted material facts. Plaintiffs seek, among other things, an award of damages and attorneys’ fees and costs. Cloudera
believes that the allegations in the lawsuits are without merit.
On July 30, 2019, a purported shareholder derivative complaint was filed in the United States District Court for the District of Delaware, entitled Lee, et al. v.
Cole, et al., Case No. 1:19-cv-01422-LPS. The complaint names as defendants eleven individuals who are current or former directors or officers of the Company,
names the Company as a nominal defendant, and purports to assert claims on the Company’s behalf against the individual defendants for breach of fiduciary duty,
unjust enrichment, and alleged violation of Sections 10(b) and 20(a) of the Exchange Act. On September 5, 2019, a purported shareholder derivative complaint was
filed in the United States District Court for the District of Delaware, entitled Slattery v. Reilly, et al., Case No. 1:19-cv-01662-LPS. The complaint names as
defendants thirteen individuals who are current or former directors or officers of the Company, names the Company as a nominal defendant, and purports to assert
claims on the Company’s behalf against the individual defendants for breach of fiduciary duty, unjust enrichment, and alleged violations of Section 10(b), 14 and
20(a) of the Exchange Act. On October 16, 2019, a purported shareholder derivative complaint was filed in the United States District Court for the District of
Delaware, entitled Frentzel v. Bearden, et al., Case No. 1:19-cv-01962-LPS. The complaint names as defendants thirteen individuals who are current or former
directors or officers of the Company, and names the Company as a nominal defendant, and purports to assert claims on the Company’s behalf against the
individual defendants for breach of fiduciary duty, alleged violations of Section 14 of the Exchange Act, insider selling and misappropriation of information. All
three derivative actions are based on allegations that are substantially similar to those in the class actions filed in the United States District Court for the Northern
District of California, described above. All three derivative actions seek, among other things, an award of damages on behalf of the Company, corporate
governance reforms and attorneys’ fees and costs. The Slattery and Frentzel actions additionally seek disgorgement on behalf of the Company. The suits have been
consolidated under the name, In re Cloudera, Inc. Stockholder Derivative Litigation, Case No. 1:19-cv-01422-LPS. A consolidated amended complaint has not yet
been filed.
On September 3, 2019, a purported shareholder derivative complaint was filed in the United States District Court for the Northern District of California,
entitled Chen v. Reilly, et al., Case No. 5:19-cv-05536-LHK. That complaint names as defendants thirteen individuals who are current or former directors or
officers of the Company, names the Company as a nominal defendant, and action purports to assert claims on the Company’s behalf against the individual
defendants for breach of fiduciary duty, unjust enrichment, waste of corporate assets, and alleged violation of Section 14(a) of the Exchange Act. On September
10, 2019, a purported shareholder derivative complaint that is substantially similar to the Chen action and is brought against the same defendants, was filed in the
United States District Court for the Northern District of California, entitled Fu v. Reilly, et al., Case No. 5:19-cv-05705-LHK. Both derivative actions are based on
allegations that are substantially similar to those in the class actions filed in the United States District Court for the Northern District of California, described
above. Both derivative actions seek, among other things, an award of damages on behalf of the Company, corporate governance reforms and attorneys’ fees and
costs. The suits have been consolidated under the name, In re Cloudera, Inc. Derivative Litigation, Case No. 5:19-cv-05536-LHK. A consolidated amended
complaint has not yet been filed and the case is currently stayed.
In the ordinary course of business, we are or may be involved in a variety of litigation matters, suits, investigations, and proceedings, including actions with
respect to intellectual property claims, government investigations, labor and employment claims, breach of contract claims, tax, and other matters. Regardless of
the outcome, these litigation matters can have an adverse impact on us because of defense costs, diversion of management resources, harm to reputation, and other
factors. Future litigation may be necessary to defend ourselves, or our customers or partners on indemnity matters, by determining the scope, enforceability and
validity of third-party proprietary rights or by establishing our proprietary rights. Further, the ultimate outcome of any litigation is uncertain and, regardless of
outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors.
While we are not aware of other pending legal matters or claims, individually or in the aggregate, that are expected to have a material adverse impact on our
business, consolidated financial position, results of operations or cash flows, our analysis of whether a claim may
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proceed to litigation cannot be predicted with certainty, nor can the results of litigation be predicted with certainty. Accordingly, there can be no assurance that
existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, consolidated
financial position, results of operations or cash flows in a particular period or subject us to an injunction that could seriously harm our business.
We record a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
With respect to our outstanding legal matters, our management believes that the amount or estimable range of possible loss will not, either individually or in the
aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of litigation is
inherently uncertain. Therefore, if one or more of these legal matters were resolved against us for amounts in excess of management’s expectations, our results of
operations and financial condition including in a particular reporting period, could be materially adversely affected.
Indemnification
From time to time, we enter into certain types of contracts that contingently require us to indemnify various parties against claims from third parties. These
contracts primarily relate to (i) certain real estate leases under which we may be required to indemnify property owners for environmental and other liabilities and
other claims arising from our use of the applicable premises, (ii) our amended and restated bylaws, under which we must indemnify directors and executive
officers, and may indemnify other officers and employees, for liabilities arising out of their relationship with us, (iii) contracts under which we must indemnify
directors and certain officers for liabilities arising out of their relationship with us, (iv) contracts under which we may be required to indemnify customers or
partners against certain claims, including claims from third parties asserting, among other things, infringement of their intellectual property rights, and
(v) procurement, consulting, or license agreements under which we may be required to indemnify vendors, consultants or licensors for certain claims, including
claims that may be brought against them arising from our acts or omissions with respect to the supplied products, technology or services. From time to time, we
may receive indemnification claims under these contracts in the normal course of business. In addition, under these contracts we may have to modify the accused
infringing intellectual property and/or refund amounts received.
In the event that one or more of these matters were to result in a claim against us, an adverse outcome, including a judgment or settlement, may cause a
material adverse effect on our future business, operating results or financial condition. It is not possible to determine the maximum potential amount under these
contracts due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.
We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and certain officers.
To date, we have not incurred any material costs, and have not accrued any liabilities in the consolidated financial statements as a result of these provisions.
10. Stock-Based Compensation
We maintain two stock-based compensation plans: the 2017 Equity Incentive Plan (2017 Plan), and the 2008 Equity Incentive Plan (2008 Plan), collectively
referred to as the Stock Plans. We do not expect to grant any additional awards under the 2008 Plan. Outstanding awards under the 2008 Plan continue to be
subject to the terms and conditions of the 2008 Plan.
When we adopted the 2017 Plan in March 2017, we reserved 30,000,000 shares of our common stock for issuance, plus an additional number of shares of
common stock equal to any shares reserved but not issued or subject to outstanding awards under our 2008 Plan on the effective date of our 2017 Plan, plus, on and
after the effective date of our 2017 Plan, (i) shares that are subject to outstanding awards under the 2008 Plan which cease to be subject to such awards, (ii) shares
issued under the 2008 Plan which are forfeited or repurchased at their original issue price, and (iii) shares subject to awards under the 2008 Plan that are used to
pay the exercise price of an option or withheld
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to satisfy the tax withholding obligations related to any award. The number of shares reserved for issuance under our 2017 Plan will increase automatically on the
first day of February of each calendar year during the term of the 2017 Plan by a number of shares of common stock equal to the lesser of (i) 5% of the total
outstanding shares of our common stock as of the immediately preceding January 31 or (ii) a number of shares determined by our board of directors. On February
1, 2020, 14,758,388 additional shares were authorized for issuance by the board of directors. As of January 31, 2020, there were 13,269,006 shares of common
stock reserved and available for future issuance under the Stock Plans.
As a result of the Hortonworks merger, a total fair value of the stock-based awards assumed was $63.5 million, which is being recognized as stock-based
compensation expense over a weighted-average period of 1.5 years from the Closing Date. Additionally, we recognized $13.1 million of stock-based compensation
expense during the year ended January 31, 2019 due to the acceleration and modification of certain employee awards assumed as part of the Hortonworks merger.
During the years ended January 31, 2020 and 2019, we incurred approximately $20.9 million and $6.2 million, respectively, of additional stock-based
compensation expense related to the acceleration and modification of stock awards held by certain former employees and former board members.
Stock Options
Stock options granted generally have a maximum term of ten years from the grant date, are exercisable upon vesting unless otherwise designated for early
exercise by the board of directors at the time of grant, and generally vest over a period of three to four years, with 25% vesting after one year and then ratably on a
monthly basis for the remaining two to three years.
The following table summarizes stock option activity and related information under the Stock Plans:
Balance — January 31, 2019
Exercised
Canceled
Balance — January 31, 2020
Exercisable— January 31, 2020
Vested and Expected to Vest — January 31, 2020
Options Outstanding
Weighted-
Average
Exercise
Price
Weighted-Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
(in thousands)
5.83
2.88
15.25
5.96
5.91
5.96
4.3
—
—
2.1
2.0
2.1
$
$
$
$
154,431
—
—
70,057
70,057
70,057
Options
Outstanding
19,117,696 $
(4,395,673)
(1,191,660)
13,530,363 $
13,478,227 $
13,530,363 $
The total intrinsic value of options exercised during the years ended January 31, 2020, 2019 and 2018 was $26.2 million, $31.2 million and $64.1 million,
respectively. The intrinsic value is the difference between the current fair market value of the stock for accounting purposes at the time of exercise and the exercise
price of the stock option. As we have accumulated net operating losses, no future tax benefit related to option exercises has been recognized.
The total grant-date fair value of stock options vested during the years ended January 31, 2020, 2019 and 2018 was $1.6 million, $27.9 million and $15.2
million, respectively. The weighted-average grant-date fair value of
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employee options granted during the years ended January 31, 2019 and 2018 was $4.58 and $8.67 per share, respectively. There were no options granted during the
year ended January 31, 2020.
The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option-pricing model with the following weighted-average
assumptions:
Volatility
Risk-free interest rate
Expected term (in years)
Expected dividends
Years Ended January 31,
2019
45.0%
2.5%
5.0 years
—%
2018
45.3%
2.0%
6.1 years
—%
The unamortized stock-based compensation expense for options of $0.3 million at January 31, 2020 will be recognized over the average remaining vesting
period of 0.80 years.
Restricted Stock Units
We issue RSUs to employees and directors under the Stock Plans. Prior to our IPO in May 2017, the employee RSUs vested upon the satisfaction of both a
service-based vesting condition and a liquidity event-related performance vesting condition. RSUs granted subsequent to our IPO vest upon the satisfaction of a
service-based vesting condition only. The service-based condition for the majority of these awards is generally satisfied pro-rata over four years. For new employee
grants, the RSUs generally meet the service-based condition over a four-year period, with 25% met after one year and then ratably on a quarterly basis for the
remaining three years. For continuing employee grants, the RSUs generally meet the service-based condition pro-rata quarterly over a period of three to four years.
The liquidity event-related performance condition is satisfied upon the occurrence of a qualifying liquidity event, such as the effective date of an IPO, or six
months following the effective date of an IPO. During the quarter ended April 30, 2017, the majority of RSUs were modified such that the liquidity event-related
performance condition is satisfied upon the effective date of an IPO, rather than six months following an IPO. The modification established a new measurement
date for these modified RSUs. The liquidity event-related performance condition is viewed as a performance-based criterion for which the achievement of such
liquidity event is not deemed probable for accounting purposes until the event occurs. The liquidity event-related performance condition was achieved for the
majority of our RSUs and became probable of being achieved for the remaining RSUs on April 27, 2017, the effective date of our IPO. We recognized stock-based
compensation expense using the accelerated attribution method with a cumulative catch-up of stock-based compensation expense in the amount of $181.5 million
in fiscal 2018, attributable to service prior to such effective date.
The following table summarizes RSU activity and related information under the Stock Plans:
Balance —January 31, 2019
Granted
Canceled
Vested and converted to shares
Balance —January 31, 2020
96
RSUs Outstanding
Number of RSUs
Weighted-Average
Grant Date Fair Value
Per Share
35,058,103 $
36,075,434
(9,276,310)
(23,273,233)
38,583,994 $
13.25
8.96
12.49
11.15
10.85
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The weighted-average grant date fair value of RSUs granted during the years ended January 31, 2020, 2019 and 2018 was $8.96, $12.08 and $16.93 per share,
respectively. The total fair value of RSUs vested during the years ended January 31, 2020, 2019 and 2018 was $218.3 million, $128.7 million, and $166.7 million,
respectively.
The unamortized stock-based compensation expense for RSUs was $366.6 million as of January 31, 2020 and will be recognized over the average remaining
vesting period of 2.2 years.
Employee Stock Purchase Plan
Our ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the United States Internal Revenue Code of 1986, as amended
(Code). Purchases will be accomplished through participation in discrete offering periods. Each offering period consists of a six-month purchase period
(commencing each June 21 and December 21).
Under our ESPP, eligible employees will be able to acquire shares of our common stock by accumulating funds through payroll deductions. Our employees
generally are eligible to participate in our ESPP if they are employed by us for at least 20 hours per week and more than five months in a calendar year. Employees
who are 5% stockholders or would become 5% stockholders as a result of their participation in our ESPP, are ineligible to participate in our ESPP. We may impose
additional restrictions on eligibility. Our eligible employees are able to select a rate of payroll deduction between 1% and 15% of their base cash compensation.
The purchase price for shares of our common stock purchased under our ESPP is 85% of the lesser of the fair market value of our common stock on (i) the first
trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period. No participant has the right to
purchase shares of our common stock in an amount, when aggregated with purchase rights under all our employee stock purchase plans that are also in effect in the
same calendar year(s), that has a fair market value of more than $25,000, determined as of the first day of the applicable purchase period, for each calendar year in
which that right is outstanding. In addition, no participant is permitted to purchase more than 2,500 shares during any one purchase period or such lesser amount
determined by our compensation committee or our board of directors. Once an employee is enrolled in our ESPP, participation will be automatic in subsequent
offering periods. An employee’s participation automatically ends upon termination of employment for any reason.
We initially reserved 3,000,000 shares of our common stock for issuance under our ESPP. The number of shares reserved for issuance under our ESPP
increases automatically on February 1 of each of the first 10 calendar years following the first offering date by the number of shares equal to the lesser of (i) 1% of
the total outstanding shares of our common stock as of the immediately preceding January 31 (rounded to the nearest whole share) or (ii) a number of shares of our
common stock determined by our board of directors. On February 1, 2020, 2,951,677 additional shares were authorized for issuance by the board of directors. As
of January 31, 2020, the total number of shares available for grant under the ESPP was 2,905,694 shares.
As of January 31, 2020, $2.7 million was withheld on behalf of employees for a future purchase under the ESPP and is recorded in accrued compensation in
our consolidated balance sheets. See Note 7 for additional information.
The fair value of each ESPP grant was estimated at the grant date using the Black-Scholes option-pricing model with the following weighted-average
assumptions:
Volatility
Risk-free interest rate
Expected term (in years)
Expected dividends
2020
31.9%
1.9%
0.5 years
—%
Years Ended January 31,
2019
38.8%
2.4%
0.5 years
—%
2018
32.9%
1.2%
0.6 years
—%
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11. Income taxes
The domestic and foreign components of loss before provision for income taxes consisted of the following (in thousands):
Domestic
Foreign
Net loss before provision for income taxes
The components of provision for income taxes are as follows (in thousands):
Current:
Federal
State
Foreign
Total
Deferred:
Federal
State
Foreign
Total
$
$
$
Years Ended January 31,
2020
2019
2018
(340,542) $
(191,479) $
(372,466)
12,660
4,248
4,873
(327,882) $
(187,231) $
(367,593)
Years Ended January 31,
2020
2019
2018
— $
— $
(18)
(8,766)
(8,784)
—
—
84
84
(106)
(5,371)
(5,477)
—
—
59
59
—
(112)
(3,097)
(3,209)
917
—
213
1,130
(2,079)
Total provision for income taxes
$
(8,700) $
(5,418) $
A reconciliation of income taxes at the statutory federal income tax rate to the provision for income taxes included in the consolidated statements of operations
is as follows (in thousands):
U.S. federal statutory income tax
Research tax credits
Stock-based compensation
Change in valuation allowance
Foreign tax rate differential
Legal expenses
Federal tax rate change
Global intangible low-taxed income
Non-deductible compensation
Change in U.S. tax status of foreign entities
Other
Provision for income taxes
Years Ended January 31,
2020
2019
2018
$
68,856 $
39,318 $
124,287
6,120
(6,395)
8,566
(6,384)
—
—
(3,668)
(1,150)
(72,449)
(2,196)
10,044
(3,004)
(42,450)
(4,945)
(4,000)
—
—
—
—
(381)
7,976
(5,124)
2,907
—
—
(132,387)
—
—
—
262
$
(8,700) $
(5,418) $
(2,079)
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The deferred tax assets and liabilities were as follows (in thousands):
Deferred tax assets:
Accruals and reserves
Deferred revenue
Net operating loss carryforwards
Research and development credits and other credits
Stock-based compensation
ROU assets/lease liability
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Depreciation and amortization
Deferred revenue
ROU assets/lease liability
Deferred costs
Gross deferred tax liabilities
Net deferred tax assets
As of January 31,
2020
2019
$
7,948 $
28,621
475,390
75,168
18,428
53,048
658,603
(459,649)
198,954
(128,825)
—
(48,085)
(21,609)
(198,519)
$
435 $
13,753
—
430,220
62,869
30,946
—
537,788
(454,278)
83,510
(61,285)
(5,026)
—
(16,768)
(83,079)
431
Undistributed earnings of our foreign subsidiaries at January 31, 2020 are considered to be indefinitely reinvested and, accordingly, no provision for federal and
state income taxes has been provided thereon. Due to the Transition Tax and Global Intangible Low-Tax Income (GILTI) regimes as enacted by the U.S. Tax Cuts
and Jobs Act of 2017 (Tax Act), those foreign earnings will not be subject to federal income taxes when actually distributed in the form of a dividend or otherwise.
However, we could still be subject to state income taxes and withholding taxes payable to various foreign countries. The amounts of taxes which we could be
subject to are not material to the accompanying financial statements.
In January 2018, the FASB released guidance on the accounting for tax on the GILTI provision of the Tax Act. The GILTI provision imposes a tax on foreign
income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI
inclusions or treating any taxes on GILTI inclusions as a period cost are both acceptable methods subject to an accounting policy election. We have elected to treat
any taxes on GILTI inclusions as a period cost.
A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. We have established a valuation allowance
to offset deferred tax assets at January 31, 2020 and 2019 due to the uncertainty of realizing future tax benefits from our net operating loss carryforwards and other
deferred tax assets. The net change in the total valuation allowance for the years ended January 31, 2020 and 2019 was an increase of approximately $5.4 million
and $182.9 million, respectively.
At January 31, 2020, we have federal, California and other state net operating loss carryforwards of approximately $1.9 billion, $528.7 million and
$682.1 million, respectively, expiring beginning fiscal 2028, for federal and California purposes and fiscal 2020 for other states’ purposes.
At January 31, 2020, we have federal and state research credit carryforwards of approximately $56.9 million and $46.7 million, respectively, expiring
beginning in fiscal 2029 for federal purposes. The state credits can be carried forward indefinitely.
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Federal and state tax laws may impose substantial restrictions on the utilization of the net operating loss and credit carryforward attributes in the event of an
ownership change as defined in Section 382 and Section 383 of the Internal Revenue Code. Accordingly, our ability to utilize these carryforwards may be limited
as a result of such ownership changes. Such a limitation could result in the expiration of our net operating loss and credit carryforwards before they are utilized.
We have performed an analysis to determine whether an ownership change has occurred since inception. The analysis identified several historical ownership
changes; however, the limitations did not result in a material restriction on the use of our carryforwards. In the event we experience any subsequent changes in
ownership, the availability of our carryforwards in any taxable year could change.
For benefits to be recorded, a tax position must be more likely than not to be sustained upon examination. The amount recognized is measured as the largest
amount of benefit that is greater than 50% likely of being realized upon settlement.
The following table reflects the changes in the gross unrecognized tax benefits (in thousands):
Balance as of beginning of year
Tax positions taken in prior period:
Gross increases
Tax positions taken in current period:
Gross decreases
Gross increases(1)
Balance as of end of year
$
$
Years Ended January 31,
2020
2019
2018
18,600 $
11,700 $
9,600
—
—
600
—
5,200
24,400 $
18,600 $
(1,000)
7,900
—
2,100
11,700
(1) Includes $7.4 million from the Hortonworks merger for fiscal year 2019.
As of January 31, 2020, the total amount of gross unrecognized tax benefits was $24.4 million, of which $1.6 million, if recognized, would impact our
effective tax rate.
We recognize interest and penalties related to income tax matters in the provision for income taxes. As of January 31, 2020, we had no accrued interest and
penalties related to uncertain tax positions. We are subject to taxes in the United States and other foreign jurisdictions. In the normal course of business, we are
subject to examination by various federal, state and local taxing authorities. We are not currently under audit by the Internal Revenue Service or any other tax
authority. All tax years remain open to examination by major taxing jurisdictions in which we file returns.
12. Related Party Transactions
Certain members of our board of directors currently serve on the board of directors or as an executive of certain companies that are our customers. The
aggregate revenue we recognized from these customers was $16.2 million, $21.2 million and $19.6 million for the years ended January 31, 2020, 2019 and 2018,
respectively. There was $1.2 million and $2.5 million in accounts receivable due from these customers as of January 31, 2020 and 2019, respectively.
13. Segment Information
In January 2019, we completed our merger with Hortonworks. The combined company operates under the Cloudera name. We have integrated Hortonworks
into our ongoing business operations and our chief operating decision maker, our chief executive officer, evaluates our financial information and resources and
assesses the performance of these resources on a consolidated basis.
The results of the reportable segments are derived directly from our management reporting system and are based on our methods of internal reporting which
are not necessarily in conformity with GAAP. Our management
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measures the performance of each segment based on several metrics, including contribution margin, as defined below. Our management does not use asset
information to assess performance and make decisions regarding allocation of resources. Therefore, depreciation and amortization expense are not allocated among
segments.
Contribution margin is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Segment contribution margin includes
segment revenue less the related cost of sales excluding certain operating expenses that are not allocated to segments because they are separately managed at the
consolidated corporate level. These unallocated costs include stock-based compensation expense, amortization of certain acquired intangible assets, direct sales and
marketing costs, research and development costs, corporate general and administrative costs, such as legal and accounting, interest income, interest expense, and
other income and expense.
Financial information for each reportable segment was as follows (in thousands):
Revenue:
Subscription
Services
Total revenue
Contribution margin:
Subscription
Services
Total segment contribution margin
2020
Years Ended January 31,
2019
2018
667,826 $
406,333 $
126,365
73,608
794,191 $
479,941 $
302,617
69,676
372,293
Years Ended January 31,
2020
2019
2018
577,899 $
356,214 $
29,211
12,315
607,110 $
368,529 $
258,771
14,386
273,157
$
$
$
$
The reconciliation of segment financial information to our loss from operations is as follows (in thousands):
Segment contribution margin
Amortization of acquired intangible assets
Stock-based compensation expense
Corporate costs, such as research and development, corporate general and administrative and
other
Loss from operations
Years Ended January 31,
2020
2019
2018
$
$
607,110 $
368,529 $
(80,024)
(220,354)
(9,129)
(117,365)
(646,486)
(435,799)
(339,754) $
(193,764) $
273,157
(3,723)
(290,006)
(353,600)
(374,172)
Sales outside of the United States represented approximately 38%, 34% and 30% of our total revenue for the years ended January 31, 2020, 2019 and 2018,
respectively. No individual foreign country represented more than 10% of revenue in any period presented. All revenues from external customers are attributed to
individual countries on an end-customer basis, based on domicile of the purchasing entity, if known, or the location of the customer’s headquarters if the specific
purchasing entity within the customer is unknown.
As of January 31, 2020 and 2019, assets located outside the United States were 5% and 4% of total assets, respectively.
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14. Net Loss Per Share
The following table sets forth the calculation of basic and diluted net loss per share during the periods presented (in thousands, except per share data):
Numerator:
Net loss
Denominator:
Weighted-average shares used in computing net loss, basic and diluted
Net loss per share, basic and diluted
Years Ended January 31,
2020
2019
2018
$
$
(336,582) $
(192,649) $
(369,672)
280,772
159,816
(1.20) $
(1.21) $
114,141
(3.24)
The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share for the periods presented
because their effect would have been anti-dilutive (in thousands):
Stock options to purchase common stock
Restricted stock awards
Shares issuable pursuant to the ESPP
Total
15. Selected Quarterly Financial Data (unaudited)
2020
13,530
38,584
969
53,083
As of
January 31,
2019
19,118
35,058
724
54,900
2018
18,407
22,243
522
41,172
The following table sets forth selected summarized quarterly financial information for each of the eight quarters in fiscal 2020 and 2019 (in thousands, except
per share data):
Fiscal 2020
Revenue
Gross profit
Loss from operations
Net loss
Net loss per share, basic and diluted (*)
Fiscal 2019
Revenue
Gross profit
Loss from operations
Net loss
Net loss per share, basic and diluted (*)
April 30
July 31
October 31
January 31
Fiscal Year
$
$
$
$
$
$
187,468 $
196,711 $
198,292 $
211,720 $
126,235
(103,753)
139,581
(89,097)
140,664
(82,467)
155,209
(64,437)
(103,130) $
(87,043) $
(82,122) $
(64,287) $
(0.38) $
(0.31) $
(0.29) $
(0.22) $
103,459 $
112,979 $
118,988 $
144,515 $
70,108
(51,702)
80,847
(29,424)
89,012
(25,673)
103,860
(86,965)
(52,322) $
(28,949) $
(25,857) $
(85,521) $
(0.36) $
(0.19) $
(0.17) $
(0.45) $
794,191
561,689
(339,754)
(336,582)
(1.20)
479,941
343,827
(193,764)
(192,649)
(1.21)
(*) Net loss per share is computed independently. Therefore, the sum of the quarterly net loss per share may not equal to the total computed for the year or any cumulative
interim period.
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16. Subsequent Events
On March 3, 2020, the Company's board of directors authorized a share repurchase program of up to $100 million of the Company’s outstanding shares of
common stock. Share repurchases may be made through open market purchases, block trades and/or privately negotiated transactions in compliance with Rule 10b-
18 promulgated under the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, and other relevant factors.
Repurchases may also be made under Rule 10b5-1 plans, which permit shares of common stock to be repurchased through pre-determined criteria. The timing,
volume and nature of the repurchases will be at the discretion of our management based on their evaluation of the capital needs of the Company, market conditions,
applicable legal requirements and other factors. The program does not have an expiration date, and it may be suspended or discontinued at any time. As of the date
of this filing, we used $26.0 million to repurchase 3.9 million shares of common stock at an average repurchase price of $6.56 per share under the repurchase
program.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit
under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and
communicated to our management including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K, an evaluation was
carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures, as of the end of the period covered by this Annual Report on Form 10-K, were effective to provide reasonable assurance.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 31, 2020 based on the guidelines established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external reporting purposes in accordance with U.S. generally accepted accounting principles. Management reviewed the results of its assessment with our Audit
Committee.
The effectiveness of our internal control over financial reporting as of January 31, 2020 has been audited by Ernst & Young LLP, an independent registered
public accounting firm, as stated in their report which is included in Item 8 of this Annual Report on Form 10-K.
Changes in internal control over financial reporting.
There was no change in our internal control over financial reporting that occurred during the quarter ended January 31, 2020 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
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Inherent limitation on the effectiveness of internal control.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or procedures or our internal
control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based
in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be
detected.
ITEM 9B. OTHER INFORMATION
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
Except as set forth below, the information called for by this item will be set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders to be
filed with the SEC within 120 days after the end of the fiscal year ended January 31, 2020 and is incorporated herein by reference.
We maintain a Code of Business Conduct and Ethics that incorporates our code of ethics applicable to all employees, including all officers. Our Code of
Business Conduct and Ethics is published on the Investor Relations section of our website at www.cloudera.com. We intend to disclose future amendments to
certain provisions of our Code of Business Conduct and Ethics, or waivers of such provisions granted to the principal executive officer, principal financial officer,
principal accounting officer or controller or persons performing similar functions on this website within four business days following the date of such amendment
or waiver.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this item will be set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended January 31, 2020 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information called for by this item will be set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended January 31, 2020 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information called for by this item will be set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended January 31, 2020 and is incorporated herein by reference.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information called for by this item will be set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended January 31, 2020 and is incorporated herein by reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as a part of this Annual Report on Form 10-K:
(a) Financial Statements
PART IV
Our consolidated financial statements are listed in the "index to Consolidated Financial Statements" under Part II, Item 8, of this Annual Report.
(b) Financial Statement Schedules
All schedules have been omitted because the required information is not present or not present in amounts sufficient to require submission of the schedules, or
because the information required is included in Item 8, entitled the “Consolidated Financial Statements and Supplementary Data.”
(c) Exhibits
Exhibit
Number
3.01*
3.02*
4.01*
4.02*
4.03*
4.04*
4.05*
4.06
10.01*
10.02*
10.03*
10.04*
Exhibit Title
Form
File No.
Exhibit
Filing
Date
Filed
Herewith
Incorporated by Reference
Restated Certificate of Incorporation of the Registrant
Amended and Restated Bylaws of the Registrant
Form of Registrant’s Common Stock Certificate
Amended and Restated Investor Rights Agreement, dated as of
March 28, 2017, by and among the Registrant and certain investors
of the Registrant
Voting and Standstill Agreement, dated as of March 28, 2017, by
and between the Registrant and Intel Corporation
Confidentiality Agreement, dated as of March 21, 2014, by and
between the Registrant and Intel Corporation
Voting and Standstill Agreement, dated as of August 12, 2019, by
and among the Registrant, Mr. Carl C. Icahn, Icahn Enterprises, L.P.
and their certain affiliates
8-K
S-1
S-1
S-1
S-1
10-Q
001-38069
001-38069
333-217071
3.01
3.01
4.01
6/9/2017
3/26/2020
3/31/2017
333-217071
4.02
3/31/2017
333-217071
4.03
3/31/2017
333-217071
4.04
3/31/2017
8-K
001-38069
10.01
8/12/2019
Description of the Registrant's securities
Form of Indemnification Agreement entered into between the
Registrant and each of its directors and executive officers
2008 Equity Incentive Plan, as amended, and forms of agreement
thereunder
2017 Equity Incentive Plan, and forms of agreement thereunder
2017 Employee Stock Purchase Plan and forms thereunder
S-1
S-1
S-1/A
S-1/A
333-217071
10.01
3/31/2017
333-217071
333-217071
333-217071
10.02
10.03
10.04
3/31/2017
4/10/2017
4/10/2017
X
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Table of Contents
10.05*
10.06*
10.07*†
10.08*†
10.09*
10.10*
10.11*†
10.12*
10.13*
10.14*†
10.15*†
10.16*†
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26
10.27
21.01
Offer Letter between Thomas J. Reilly and the Registrant, dated May
22, 2013
Employment Agreement between Jim Frankola and the Registrant,
dated September 10, 2012
Lease between 495 Java Drive Associates, L.P. and the Registrant,
dated as of April 18, 2013
Lease between 395 Page Mill LLC and the Registrant, dated as of
September 6, 2016
Sublease between Rubrik, Inc. and the Registrant, dated as of February
8, 2017
Amended and Restated Collaboration and Optimization Agreement,
dated as of March 28, 2017, by and between the Registrant and Intel
Corporation
Enterprise Subscription Agreement, dated as of April 25, 2014, by and
between the Registrant and Intel Corporation
Gazzang, Inc. Amended and Restated 2008 Stock Purchase and Option
Plan
Cloudera Inc. Bonus Plan - Executive Officers and Leadership Team
(as amended March 24, 2020)
Amendment 1 to the Enterprise Subscription Agreement, dated as of
October 31, 2017, by and between the Registrant and Intel Corporation
Amendment 2 to the Enterprise Subscription Agreement, dated as of
November 17, 2017, by and between the Registrant and Intel
Corporation
Amendment No. 2 to Collaboration and Optimization Agreement, dated
as of February 1, 2018, by and between the Registrant and Intel
Corporation
Amendment 3 to the Enterprise Subscription Agreement, dated as of
March 30, 2018 by and between the Registrant and Intel Corporation
Form of the Registrant’s Severance and Change in Control Agreement
Offer Letter between Arun Murthy and the Registrant, dated December
31, 2018
Severance and Change in Control Agreement between Arun Murthy
and the Registrant, dated December 31, 2018
Executive Transition Agreement, dated June 5, 2019
Confidentiality Agreement between the Registrant and affiliates of
Icahn Enterprises L.P. dated August 12, 2019
Share Acquisition and Restriction Agreement, dated July 31, 2019,
between Thomas J. Reilly and the Registrant
Amendment to Employment Offer Letter, dated July 31, 2019, from the
Registrant to Arun C. Murthy
Offer of Employment Letter of Interim Chief Executive Officer,
effective as of July 31, 2019
Separation Agreement between Marty Cole and the Registrant, dated
January 12, 2020
Employment Agreement between Robert Bearden and the Registrant,
dated January 12, 2020
List of subsidiaries
S-1
333-217071
10.05
3/31/2017
S-1
S-1
S-1
S-1
S-1
S-1
S-8
8-K
333-217071
10.06
3/31/2017
333-217071
10.08
3/31/2017
333-217071
10.09
3/31/2017
333-217071
10.11
3/31/2017
333-217071
10.12
3/31/2017
333-217071
10.13
3/31/2017
333-217522
001-38069
4.07
10.01
4/28/2017
3/26/2020
10-K
001-38069
10.17
4/4/2018
10-K
001-38069
10.18
4/4/2018
10-K
001-38069
10.19
4/4/2018
10-K
10-K
001-38069
001-38069
10.20
10.21
4/4/2018
4/4/2018
10-K
001-38069
10.24
3/29/2019
10-K
8-K
001-38069
001-38069
10.25
10.01
3/29/2019
6/5/2019
8-K
001-38069
10.02
8/12/2019
10-Q
001-38069
10.01
9/4/2019
10-Q
001-38069
10.02
9/4/2019
10-Q
001-38069
10.03
9/4/2019
X
X
X
106
Table of Contents
23.01
24.01
31.01
31.02
32.01#
32.02#
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
___________
Consent of Independent Registered Public Accounting Firm
Power of Attorney (included on signature pages to Annual Report)
Certification of Robert Bearden, Chief Executive Officer, pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Jim Frankola, Chief Financial Officer, pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Robert Bearden, Chief Executive Officer, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Certification of Jim Frankola, Chief Financial Officer, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
XBRL Instance Document – the instance document does not appear in the
Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Definition Linkbase Document
Inline XBRL Taxonomy Extension Labels Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as inline XBRL and contained
in Exhibit 101)
X
X
X
X
X
X
X
X
X
X
X
X
X
*
†
#
Previously filed.
Confidential treatment has been granted with respect to portions of this exhibit.
This certification is deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed
incorporated by reference into any filing under the Securities Act or the Exchange Act.
ITEM 16. FORM 10-K SUMMARY
None.
107
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIGNATURES
Date: March 27, 2020
By:
/s/ Robert Bearden
CLOUDERA, INC.
Robert Bearden
Chief Executive Officer and Director
(Principal Executive Officer)
108
Table of Contents
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Robert Bearden, Jim Frankola
and Scott Reasoner, and each of them, as his or her true and lawful attorneys-in-fact, proxies, and agents, each with full power of substitution, for him or her in any
and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, proxies, and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact, proxies, and agents, or their or his or her substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name
/s/ Robert Bearden
Robert Bearden
/s/ Jim Frankola
Jim Frankola
/s/ Scott Reasoner
Scott Reasoner
/s/ Paul Cormier
Paul Cormier
/s/ Peter Fenton
Peter Fenton
/s/ Nick Graziano
Nick Graziano
/s/ Kevin Klausmeyer
Kevin Klausmeyer
/s/ Jesse Lynn
Jesse Lynn
/s/ Rose Schooler
Rose Schooler
/s/ Michael A. Stankey
Michael A. Stankey
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Date
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
109
Exhibit 4.06
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
As of January 31, 2020, Cloudera, Inc. (the “Company,” “we” or “our”) had one class of securities registered under Section 12 of the Securities Exchange Act of
1934: our common stock.
Description of Capital Stock
The following summary of the terms of our capital stock is based upon our restated certificate of incorporation and our amended and restated bylaws. The summary
is not complete, and is qualified by reference to our restated certificate of incorporation and our amended and restated bylaws, which are filed as exhibits to this
Annual Report on Form 10-K and are incorporated by reference herein. We encourage you to read our restated certificate of incorporation, our amended and
restated bylaws and the applicable provisions of the Delaware General Corporation Law for additional information.
General
Our authorized capital stock consists of 1,200,000,000 shares of common stock, $0.00005 par value per share, and 20,000,000 shares of undesignated
preferred stock, $0.00005 par value per share. The following description summarizes the most important terms of our capital stock.
Common Stock
Dividend Rights
Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled
to receive dividends out of funds legally available at the times and in the amounts that our board of directors may determine.
Voting Rights
Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative
voting for the election of directors is not provided for in our restated certificate of incorporation, which means that the holders of a majority of our shares of
common stock can elect all of the directors then standing for election.
We have entered into a voting and standstill agreement with Intel Corporation (“Intel”) which became effective upon completion of our initial public offering,
pursuant to which Intel has agreed to certain restrictions on its voting power. These restrictions include a limitation of Intel’s independent voting rights to 20% of
the aggregate voting rights of the aggregate outstanding voting capital stock of the Company. In addition, Intel and its affiliates are required to cast their collective
voting power in excess of the 20% limitation “for” or “against” the matter being voted upon, including matters that require the vote of any separate series or class
vote, in the same ratio and in the same proportion as the Company’s other stockholders, other than Intel and its affiliates, collectively voted “for” or “against” such
matter. Pursuant to the voting and standstill agreement, Intel executed an irrevocable voting proxy to us with respect to the Excess Voting Power (as defined in the
voting and standstill agreement), which became effective upon the completion of our initial public offering. Further, if Intel and its affiliates collectively hold 66%
or more of the voting power with respect any matter requiring a separate series or class vote under Section 242 of Delaware General Corporation Law, under
restated certificate of incorporation or otherwise, then Intel and its affiliates will be required to vote for or against such matter as recommended by our board of
directors. Intel’s proxy also gives us the power to effectuate this provision.
We have entered into a voting and standstill agreement with Icahn Group, pursuant to which Icahn Group has agreed to, among other things, vote all shares of
our common stock beneficially owned by the Icahn Group in favor of the Company’s director nominees at our 2020 annual meeting of stockholders. The Icahn
Group also agreed to certain customary standstill provisions, effective as of August 12, 2019 through the later of (x) the date that is thirty (30) calendar days prior
to the deadline for the submission of stockholder nominations for the Company’s 2021 annual meeting of stockholders and (y) the date thirty (30) calendar days
following the date that neither of the current Icahn-affiliated director is on our board of directors and the Icahn Group has no right to designate a replacement
director (including if the Icahn Group has irrevocably waived such right in writing) (the “Standstill Period”), prohibiting it from, among other things: (i) acquiring
beneficial ownership of more than twenty percent (20%) of the Company’s outstanding common stock, (ii) soliciting or granting proxies or consents with respect to
securities of the Company, (iii) entering into a voting agreement or forming, joining or participating in a “group” with other stockholders of the Company, other
than certain affiliates of the Icahn Group, (iv) seeking or submitting or encouraging any person to submit nominees in furtherance of a contested solicitation for the
appointment, election or removal of directors, (v) seeking, effecting or participating in any tender offer, exchange offer, merger, acquisition or business
combination of the Company or a material amount of its assets or securities, or any restructuring of the Company or (vi) submitting any proposal for consideration
by stockholders of the Company at any annual or special meeting of stockholders or through any written consent. During the Standstill Period, unless otherwise
agreed between the Company and the Icahn Group, the size of our board of directors will not exceed eleven (11) directors.
No Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights and is not subject to conversion or redemption.
Right to Receive Liquidation Distributions
Upon our liquidation, dissolution or winding‑up, the assets legally available for distribution to our stockholders would be distributable ratably among the
holders of our common stock and any participating preferred stock outstanding at that time after payment of liquidation preferences, if any, on any outstanding
shares of preferred stock and payment of other claims of creditors.
Preferred Stock
Our board of directors is authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to
time the number of shares to be included in each series, to fix the designation, powers, preferences and rights of the shares of each series and any of its
qualifications, limitations or restrictions, in each case without further action by our stockholders. Our board of directors can also increase or decrease the number of
shares of any series of preferred stock, but not below the number of shares of that series then outstanding, unless approved by the affirmative vote of the holders of
a majority of our capital stock entitled to vote, or such other vote as may be required by the certificate of designation establishing the series. Our board of directors
may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the
common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among
other things, have the effect of delaying, deferring or preventing a change in our control and might adversely affect the market price of our common stock and the
voting and other rights of the holders of our common stock. We have no current plan to issue any shares of preferred stock.
Registration Rights
Some of our stockholders have certain demand registration rights and piggyback and other registration rights with respect to shares of our comment stock held by
them, as described from time to time in our registration statements and/or periodic reports filed with the Securities and Exchange Commission.
Defensive Measures
Certain provisions of Delaware law, our restated certificate of incorporation and our amended and restated bylaws may have the effect of delaying, deferring
or discouraging another person from acquiring control of our Company. These provisions, which are summarized below, are expected to discourage certain types
of coercive takeover practices and inadequate takeover bids and encourage persons seeking to acquire control of our Company to first negotiate with our board of
directors.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an
interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and
an interested stockholder is prohibited unless it satisfies one of the following conditions:
•
•
•
before the stockholder became interested, our board of directors approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of
determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans in some
instances, but not the outstanding voting stock owned by the interested stockholder; or
at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized
at an annual or special meeting of the stockholders by the affirmative vote of at least two‑thirds of the outstanding voting stock which is
not owned by the interested stockholder.
Section 203 defines a business combination to include:
•
•
•
•
•
any merger or consolidation involving the corporation and the interested stockholder;
any sale, transfer, lease, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
subject to exceptions, any transaction that results in the issuance of transfer by the corporation of any stock of the corporation to the
interested stockholder;
subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of
any class or series of the corporation beneficially owned by the interested stockholder; and
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided
by or through the corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Restated Certificate of Incorporation and Amended and Restated Bylaw Provisions
Our restated certificate of incorporation and our amended and restated bylaws include a number of provisions that may have the effect of deterring hostile
takeovers, or delaying or preventing changes in control of our management team or changes in our board of directors or our governance or policy, including the
following:
•
•
•
•
•
Board of Directors Vacancies. Our amended and restated bylaws and restated certificate of incorporation authorize generally only our board of directors
to fill vacant directorships resulting from any cause or created by the expansion of our board of directors. In addition, the number of directors constituting
our board of directors may be set only by resolution adopted by a majority vote of our entire board of directors. These provisions prevent a stockholder
from increasing the size of our board of directors and gaining control of our board of directors by filling the resulting vacancies with its own nominees.
Classified Board. Our restated certificate of incorporation and amended and restated bylaws provide that our board is classified into three classes of
directors. The existence of a classified board could delay a successful tender offeror from obtaining majority control of our board of directors, and the
prospect of that delay might deter a potential offeror.
Stockholder Action. Our restated certificate of incorporation provides that our stockholders may not take action by written consent, but may only take
action at annual or special meetings of our stockholders. Stockholders will not be permitted to cumulate their votes for the election of directors. Our
amended and restated bylaws further provide that special meetings of our stockholders may be called only by a majority of our entire board of directors.
Our amended and restated bylaws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before
the meeting.
Holding Requirements for Stockholder Proposals and Director Nominations. Our amended and restated bylaws require continuous, beneficial ownership
of 1% of our common stock for one year for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates
for election as directors at our annual meeting of stockholders. Our amended and restated bylaws also require that specified information be provided
regarding any nominee(s), as well as the proponent, and requires the nominee(s) to agree to be bound by our corporate governance and compliance
policies and guidelines, including our insider trading, confidentiality and other policies. These provisions may delay or preclude our stockholders from
bringing matters before our annual meeting of stockholders and from making nominations for directors at our annual meeting of stockholders.
Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our amended and restated bylaws provide advance notice procedures
for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual
meeting of stockholders. Our amended and restated bylaws also specify certain requirements regarding the form and content of a stockholder’s notice.
These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for
directors at our annual meeting of stockholders.
•
•
Amendment to Certificate of Incorporation and Bylaws. Certain amendments to our certificate of incorporation require approval by the holders of at least
two-thirds of our outstanding common stock. An amendment to our bylaws requires the approval of a majority of our entire board of directors or approval
by the holders of at least two-thirds of our outstanding common stock.
Issuance of Undesignated Preferred Stock. Our board of directors has the authority, without further action by the stockholders, to issue up to 20,000,000
shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by the board of directors. The
existence of authorized but unissued shares of preferred stock enables our board of directors to render more difficult or to discourage an attempt to obtain
control of us by means of a merger, tender offer, proxy contest or otherwise.
Choice of Forum
Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, is the exclusive
forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising
pursuant to the Delaware General Corporation Law, our restated certificate of incorporation or our amended and restated bylaws; any action to interpret, apply,
enforce or determine the validity of our restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is
governed by the internal affairs doctrine. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been
challenged in legal proceedings and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. Similarly, our amended and
restated bylaws provide that the U.S. federal district courts are the exclusive forum for the resolution of any complaint asserting a cause of action arising under the
Securities Act of 1933, as amended. Although our amended and restated bylaws contain the choice of federal forum provision described above, it is possible that a
court could find that such provisions are inapplicable for a particular claim or action or that such provisions are unenforceable.
Stock Exchange Listing
Our common stock is listed on the New York Stock Exchange under the symbol “CLDR.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC. The transfer agent’s address is 6201 15th Avenue,
Brooklyn, NY 11219, and its telephone number is (800) 937-5449.
Exhibit 10.26
SEPARATION AGREEMENT
This Separation Agreement (“Agreement”) is made by and between Martin Cole (“Executive”) and Cloudera, Inc. (the
“Company”) (collectively referred to as the “Parties” or individually referred to as a “Party”) and is effective as of the date it is
signed by the Parties (the “Effective Date”).
RECITALS
WHEREAS, Executive is currently the interim Chief Executive Officer (“Interim CEO”) of the Company pursuant to the
letter agreement by and between the Company and Executive dated July 31, 2019 (the “Interim Agreement) and is a member of the
Company’s Board of Directors (the “Board”); and
WHEREAS, Executive will resign his employment as Interim CEO and resign all positions on the Board effective concurrently
herewith (the “Termination Date”); and
WHEREAS, each of the Parties hereby confirms that the resignation is not the result of a disagreement with one another on any
matter, including with respect to the Company’s operations, policies or practices or the services provided by the Executive.
NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Executive hereby agree as
follows:
COVENANTS
1. Executive’s Resignation. Executive hereby resigns his employment as Interim CEO and resigns all positions he may hold with the
Company and any of its subsidiaries or affiliated entities, and as Chair and a member of the Board and all positions he holds as a
member of a committee of the Board, effective on the Termination Date, and the Company shall process his resignation accordingly.
Executive agrees to execute any documentation reasonably necessary to confirm Executive’s resignation of employment and Board
service consistent with the terms hereof.
2. Accrued Compensation.
(a) Pursuant to the terms of the Interim Agreement, the Company shall pay Executive $40,000.00, which amount is equal to
Executive’s Stipend (as defined under the Interim Agreement) for the month of January, less any applicable withholdings and
deductions, within 30 days following the Termination Date. Executive agrees that upon receipt of this Stipend Payment, he will have
received all cash compensation payable to him in connection with his services as Interim CEO.
(b) Pursuant to the terms of the Interim Agreement, Executive’s Interim CEO RSUs (as defined below) shall become vested
with respect to 89,440 shares (the “Third Quarter RSUs”) subject thereto, which number of shares represents the number of shares
eligible to vest during the third Quarterly Vesting Period (as defined under the Interim Agreement), on the Termination Date. For the
avoidance of doubt, (i) after giving effect to the vesting of the Third Quarter RSUs, the Executive shall be fully-vested in 487,595 shares
subject to the Interim CEO RSUs, and (ii) the remaining unvested Interim CEO RSUs subject to the fourth Quarterly Vesting Period (in
the amount of 89,440 RSUs) will not be eligible to vest, and shall automatically expire and be forfeited on the Termination Date. For
purposes of this Agreement, “Interim CEO RSUs” means the award of time-based restricted stock units, as provided under the Interim
Agreement, to acquire 577,035 shares of Company common stock granted to Executive on July 31, 2019.
(c) In addition, and notwithstanding anything to the contrary in this Agreement, in connection with any termination of
employment, the Company shall pay Executive’s other vested but unpaid cash entitlements, any accrued but unpaid benefits provided
under the Company’s employee benefit plans, subject to and in accordance with the terms of those plans, and unreimbursed documented
business expenses incurred by Executive through and including the Termination Date and payable under the terms of the Interim
Agreement. Executive agrees to submit to the Company, no later than thirty (30) business days following the Termination Date any
outstanding expenses for reimbursement. To the extent Executive currently participates in the Company’s health plans and subject to
Executive’s timely and proper election of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”), Executive will have the right to continue his health insurance benefits under COBRA. The Company will provide
Executive with COBRA notices and other relevant forms under separate cover.
3. Severance Payments & Benefits. In connection with and in exchange for the Parties’ promises herein, upon the resignation of
Executive’s employment on the Termination Date, Executive will be entitled to the following:
(a) Cash Payments. Executive will receive an amount equal to $32,500.00, less any applicable withholdings and deductions,
(the “Cash Severance”) in a lump-sum that will be made on the tenth (10th) day following the Termination Date.
(b) Equity. Upon Executive’s Termination Date, each of Executive’s then-outstanding unvested Director RSUs shall accelerate
and become vested with respect to 100% of the then-unvested shares subject thereto (the “Acceleration Benefits”). For purposes of this
Agreement, “Director RSUs” means the award of restricted stock units granted to Executive on or about June 20, 2019, which is
currently unvested as to 40,140 shares of Company common stock.
Executive acknowledges and agrees that the Director RSUs and the Interim CEO RSUs are the only Company equity awards he holds
that are outstanding as of the Effective Date, and he is not entitled to receive any additional equity awards for Company common stock
on or following the Effective Date.
4. All Payments. Executive understands and agrees that except as expressly provided for in this Agreement, Executive shall not be
entitled to any other consideration, separation or change in control benefits, including, but not limited to, any severance payments, equity
acceleration benefits or any other severance benefits provided under any agreement by and between the Company and Executive or the
agreements evidencing the Director RSUs or the Interim CEO RSUs.
5. Non-Disparagement. In addition to any other existing obligations regarding non-disparagement, (i) Executive shall not make,
directly or indirectly, any negative or disparaging statements or comments, either as fact or as opinion about the Company or its current
or former products, services, agents, representatives, directors, officers, shareholders, attorneys, employees, vendors, affiliates,
successors or assigns, or any person acting by, through, under or in concert with any of them, with any written or oral statement and (ii)
the Company shall use its best efforts to ensure that the Company’s then-current executive officers and Board members shall not make,
directly or indirectly, any negative or disparaging statements or comments, either as fact or as opinion about Executive, with any written
or oral statement. Nothing in this section shall prohibit Executive or the Company or its executive officers or Board from providing
truthful information in response to a subpoena or other legal process.
6. Company Policies. Executive will continue to be bound by and comply fully with the Company’s, insider trading policy, code of
conduct, and any other policies and programs adopted by the Company regulating the behavior of its employees and Board members.
Executive confirms that upon his resignation, Executive will deliver to the Company all documents and data of any nature containing or
pertaining to such policies and programs and that Executive has not taken or retained, whether in electronic or hard copy form, any such
documents or data or any reproduction thereof.
7. Indemnification. For the avoidance of doubt, Executive will continue to be covered by the Indemnity Agreement, dated as of March
31, 2017 (the “Indemnity Agreement”), between the Company and the Executive (which Indemnity Agreement survives the
Termination Date and is incorporated by reference herein), and will remain named as an insured on the director and officer liability
insurance policy currently maintained by the Company, or as may be maintained by the Company from time to time, with respect to
actions taken (or omitted to be taken) while an officer or director of the Company or any of its subsidiaries pursuant to the terms of such
agreement and policy.
8. Arbitration. Executive and the Company agree to submit to mandatory binding arbitration, in San Mateo County, California, before a
single neutral arbitrator, any and all claims arising out of or related to this Agreement and Executive’s employment with, and services to,
the Company and the termination thereof, except that each Party may, at its or his option, seek injunctive relief in court related to the
improper use, disclosure or misappropriation of a Party’s proprietary, confidential or trade secret information. EXECUTIVE AND THE
COMPANY HEREBY WAIVE ANY RIGHTS TO TRIAL BY JURY IN REGARD TO SUCH CLAIMS. This agreement to arbitrate
does not restrict Executive’s right to file administrative claims Executive may bring before any government agency where, as a matter of
law, the Parties may not restrict Executive’s ability to file such claims (including, but not limited to, the National Labor Relations Board,
the Equal Employment Opportunity Commission and the Department of Labor). However, Executive and the Company agree that, to the
fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims. The
arbitration shall be conducted through the American Arbitration Association (the “AAA”), provided that, the arbitrator shall have no
authority to make any ruling or judgment that would confer any rights with respect to the trade secrets, confidential and proprietary
information or other intellectual property of the Company upon Executive or any third party. The arbitrator shall issue a written decision
that contains the essential findings and conclusions on which the decision is based. The arbitration will be conducted in accordance with
the AAA employment arbitration rules then in effect. The AAA rules may be found
and reviewed at http://www.adr.org. If Executive is unable to access these rules, Executive will be provided with a hardcopy. The Parties
acknowledge that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the
Parties against the other in connection with any matter whatsoever arising out of or in any way connected with this Agreement.
9. Attorneys’ Fees. If any action is brought to enforce the terms of this Agreement, the prevailing Party will be entitled to recover its
reasonable attorneys’ fees, costs and expenses from the other Party, in addition to any other relief to which the prevailing Party may be
entitled.
10. Complete and Voluntary Agreement. This Agreement and the Indemnity Agreement, constitutes the entire agreement between
Executive and the Company with respect to the subject matter hereof and, supersedes all prior negotiations and agreements, whether
written or oral, relating to such subject matter, with the exception of the equity plans and equity agreements under which the Director
RSUs and the Interim CEO RSUs are granted, in each case as modified herein. Executive acknowledges that neither the Company nor its
agents or attorneys have made any promise, representation or warranty whatsoever, either express or implied, written or oral, which is
not contained in this Agreement for the purpose of inducing Executive to execute the Agreement, and Executive acknowledges that
Executive has executed this Agreement in reliance only upon such promises, representations and warranties as are contained herein, and
is executing this Agreement voluntarily, free of any duress or coercion. For the avoidance of doubt, Executive agrees that
notwithstanding anything to the contrary in the Interim Agreement, there is no obligation to reappoint Executive to the Board or any
committee thereof.
11. Severability. The provisions of this Agreement are severable, and if any part of it is found to be invalid or unenforceable, the other
parts shall remain fully valid and enforceable. Specifically, should a court, arbitrator, or government agency conclude that: Section 5
(Non-Disparagement) is invalid or unenforceable in whole or in part, it is the intention of the Parties that the remaining subsections (or
portions thereof) of this Agreement, including Section 3 (Severance Payments & Benefits), shall remain fully valid and enforceable.
12. Modification; Counterparts; Facsimile/PDF Signatures. It is expressly agreed that this Agreement may not be altered, amended,
modified, or otherwise changed in any respect except by another written agreement that specifically refers to this Agreement, executed
by authorized representatives of each of the Parties to this Agreement. This Agreement may be executed in any number of counterparts,
each of which shall constitute an original and all of which together shall constitute one and the same instrument. Execution of a
facsimile or PDF copy shall have the same force and effect as execution of an original, and a copy of a signature will be equally
admissible in any legal proceeding as if an original.
13. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
14. Taxes. All payments made under this Agreement will be subject to reduction to reflect taxes or other charges required to be withheld
by law. To the extent (i) any payments to which Executive becomes entitled under this Agreement, or any agreement or plan referenced
herein, in connection with Executive’s termination of employment with the Company constitute deferred compensation subject to
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) Executive is deemed at the time of such
termination of employment to be a “specified” employee
under Section 409A of the Code, then such payment or payments shall not be made or commence until the earlier of (i) the expiration of
the six (6)-month period measured from the date of Executive’s “separation from service” (as such term is at the time defined in
regulations under Section 409A of the Code) with the Company; or (ii) the date of Executive’s death following such separation from
service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Executive,
including (without limitation) the additional twenty percent (20%) tax for which Executive would otherwise be liable under Section
409A(a)(1)(B) of the Code in the absence of such deferral. Upon the expiration of the applicable deferral period, any payments which
would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this paragraph shall be
paid to Executive or Executive’s beneficiary in one lump sum (without interest). Except as otherwise expressly provided herein, to the
extent any expense reimbursement or the provision of any in-kind benefit under this Agreement (or otherwise referenced herein) is
determined to be subject to (and not exempt from) Section 409A of the Code, the amount of any such expenses eligible for
reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or
in kind benefits to be provided in any other calendar year, in no event shall any expenses be reimbursed after the last day of the calendar
year following the calendar year in which Executive incurred such expenses, and in no event shall any right to reimbursement or the
provision of any in-kind benefit be subject to liquidation or exchange for another benefit. To the extent that any provision of this
Agreement is ambiguous as to its exemption or compliance with Section 409A, the provision will be read in such a manner so that all
payments hereunder are exempt from Section 409A to the maximum permissible extent, and for any payments where such construction
is not tenable, that those payments comply with Section 409A to the maximum permissible extent. To the extent any payment under this
Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term
deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to
this Agreement (or referenced in this Agreement), and each installment thereof, are intended to constitute separate payments for
purposes of Section 1.409A-2(b)(2) of the regulations under Section 409A. Any termination of Executive’s employment is intended to
constitute a separation from service and will be determined
consistent with the rules relating to a “separation from service” as such term is defined in Treasury Regulation Section 1.409A-1.
15. Press Release. The Parties shall jointly agree upon the press release as it specifically relates to the Executive’s resignation.
[SIGNATURE PAGE TO SEPARATION AGREEMENT FOLLOWS]
IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below:
EXECUTIVE
/s/ Martin I. Cole
Martin Cole
1/13/2020
Date
CLOUDERA, INC.
/s/ David Middler
David Middler
Chief Legal Officer and Secretary
1/13/2020
Date
SIGNATURE PAGE TO SEPARATION AGREEMENT
Exhibit 10.27
395 Page Mill Road | Palo Alto, CA 94304
Employment Offer Letter
January 12, 2020
Rob Bearden
Dear Rob:
On behalf of the Board of Directors (the “Board”) of Cloudera, Inc. (the “Company”), I am pleased to offer you the position of President and
Chief Executive Officer (“CEO”). We believe that you will add substantially to the team and contribute greatly to the ultimate success of the
Company by providing the same extraordinary leadership and vision that you have demonstrated at Hortonworks, as a current member of our
Board and throughout your career. Your employment with the Company will commence as soon as practicable on a date to be determined by
you and the Board, which shall be no later than January 13, 2020, (such start date, your “Start Date”) and the effective date of your
appointment as CEO shall be the Start Date. The terms of your employment with the Company will be as follows in this offer letter
agreement (this “Agreement”):
1. Position. You will serve as the Company’s President and CEO, and report to the Board. You will render such business and professional
services in the performance of your duties, consistent with your position within the Company, as will reasonably be assigned to you by the
Board. This is a full-time position. While you render services to the Company, you will not engage in any other employment, consulting or
other business activity (whether full-time or part-time) that would create a conflict of interest with the Company. Notwithstanding the
foregoing, you may manage personal investments, participate in civic, charitable, professional and academic activities (including serving as
an advisor, or on boards and committees), and serve on the board of directors (and any committees) and/or as an advisor of other for-profit
companies as set forth in Schedule A, provided that such activities do not at the time the activity or activities commence or thereafter (i)
create an actual or potential business or fiduciary conflict of interest or (ii) individually or in the aggregate, interfere materially with the
performance of your duties to the Company. By signing this Agreement, you confirm to the Company that you have no contractual
commitments or other legal obligations that would prohibit you from performing your duties for the Company. Your employment with the
Company will be for no certain duration but will be “at-will” employment, however, as described in this Agreement, you may be entitled to
severance and other benefits depending upon the circumstances of your termination of employment. Although your job duties, title,
compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at-will”
nature of your employment may only be changed in a document signed by you and a duly authorized executive of the Company (other than
you).
You will continue to serve as a member of the Board and, subject to the requirements of applicable law (including, without limitation, any
rules or regulations of any exchange on which the common stock of the Company is listed, if applicable), the Board or the appropriate
committee of the Board will nominate you for re-election to the Board at each annual meeting at which you are subject to re-election
while you continue to serve as CEO (provided that you have not tendered or announced your resignation). In the event of any future
vacancy in the Chair of the Board position, the Nominating and Governance Committee of the Board and the Board will consider you as a
candidate for appointment.
2. Location. You will work out of such location as mutually agreed to between you and the Board.
3. Compensation.
(a) Base Salary. You will initially receive an annual salary of $600,000.00, less applicable withholding, which will be paid in accordance
with the Company’s normal payroll procedures. Thereafter, your annual base salary will be determined by the Compensation Committee
of the Board of Directors (the “Compensation Committee”).
(b) Bonus. You will initially be eligible for an annual target bonus of $500,000.00 (“Target Bonus” and the portion thereof to which you
are actually entitled, the “Bonus”), less applicable withholding. If your Start Date occurs prior to January 31, 2020, your Bonus for fiscal
year 2020 will be your Target Bonus prorated upon the number of days you are employed during fiscal year 2020. Payment of your
Bonus for fiscal year 2020 will be subject to your continued employment through the end of such fiscal year. Your Target Bonus for
fiscal year 2021 will be based on the Company’s achievement of quarterly performance objectives and/or conditions that are agreed upon
by the Compensation Committee and you prior to the commencement of fiscal 2021, and shall be paid on a quarterly basis based on the
level of achievement of such performance objectives; provided, however, that the first two quarters of the Target Bonus for fiscal year
2021 are guaranteed to be paid at target-level achievement. The payment of your Bonus, for fiscal year 2021 and subsequent fiscal years,
will be subject to your continued employment through and until the end of the applicable fiscal quarter in the ordinary course of the
Company’s customary practices. Your Target Bonus for subsequent fiscal years will be based on the Company’s achievement of any
applicable performance objectives and/or conditions that are established by the Compensation Committee in accordance with its
customary practices.
(c) Equity Incentives.
i.
ii.
Initial RSU. On your Start Date (the “Grant Date”), the Board will grant you a restricted stock unit to acquire 1,616,428 shares
(the “Initial RSU”) under the Company’s 2017 Equity Incentive Plan (the “Equity Plan”). The Initial RSU will vest over three
(3) years with (i) 1/12th vesting on each of the first four Quarterly Anniversaries following December 15, 2019 (the “First Year
RSU Portion”) and (ii) subject to adoption of the Approval Resolution (as defined below), as applicable, 1/12th vesting on March
15, 2021 and on each of the seven (7) following Quarterly Anniversaries thereof (the portion of the Initial RSU eligible to vest
under this subsection (ii), the “Second & Third Year RSU Portion); provided that, subject to Section 5 below, vesting will
depend on your continued employment as CEO of the Company on the applicable time-based vesting dates, and will be subject to
the terms and conditions of the written agreement governing the grant, the Equity Plan and this Agreement.
If the Board does not adopt the Approval Resolution, the Second & Third Year RSU Portion will not be eligible to vest, and shall
automatically expire and be forfeited on March 15, 2021, even if you remain employed by the Company; provided, however (for
the avoidance of doubt), that (i) in the event of a Potential Change in Control executed on or prior to March
15, 2021, the Second & Third Year RSU Portion shall not be forfeited during the pendency of such Potential Change in Control,
but absent adoption of the Approval Resolution, shall not vest during such pendency and shall be immediately forfeited upon the
termination of such Potential Change in Control without completion thereof, and (ii) adoption of the Approval Resolution shall
not be required if either a Change in Control occurs on or prior to March 15, 2021 or if a Potential Change in Control occurs on or
prior to March 15, 2021, and such Potential Change in Control is completed even if such completion occurs after March 15, 2021,
and in such event any shares of the Second & Third Year RSU Portion that should have vested during the pendency of such
Potential Change in Control shall vest immediately prior to the completion of such Potential Chang in Control.
For purposes of this Agreement, the following terms shall have the meanings as indicated:
iii.
iv.
“Approval Resolution” means a resolution passed by the Board with fewer than two dissenters, prior to March 15, 2021,
confirming its satisfaction with your performance as CEO since the Start Date.
“Potential Change in Control” means the date of execution of a definitive agreement whereby the Company will consummate a
Change in Control if such transaction is consummated. For the avoidance of doubt, a topping offer (e.g., resulting from a “go
shop” or other “fiduciary out” in such definitive agreement or any successor agreement) shall be deemed to be the same Potential
Change in Control for purposes hereof, so long as it derived from the same company sale process and at no time was the
Company without a Potential Change in Control (other than fleetingly).
“Quarterly Anniversary” means a three (3) month anniversary of the applicable vesting commencement date, measured
successively, as applicable.
Future Equity. You shall be eligible for future equity grants as determined by and pursuant to the terms established by the
Compensation Committee.
Equity Trading Restriction. You confirm that you have terminated all Rule 10b5-1 trading plan(s) and there are no such plans
presently in place. In addition to complying with the Company’s insider trading policy (including preclearance of trades and
other dispositions), you agree that, other than as explicitly set forth below, through the one-year anniversary of your Start Date
you will not directly or indirectly dispose of, including by engaging in hedging or monetization transactions using, transfer or
pledge any shares of the Company’s common stock that you currently hold, receive upon settlement of the Initial RSU or may
receive upon the exercise or settlement of future equity grants, if any, without prior approval by resolution of the Board with
fewer than two dissenters (the “Share Restriction”). The Share Restriction will not apply to shares received upon settlement of
the Initial RSU that are disposed of to satisfy applicable tax withholdings (to the extent that the Company does not satisfy those
requirements by net withholding at settlement), and any such tax-related disposition may be made pursuant to a Rule 10b5-1
trading plan that is adopted in compliance with the Company’s insider trading policy or otherwise in compliance with the
Company’s insider trading policy. Further, the Share Restriction will not apply to shares or equity awards disposed of pursuant
to a Change in Control.
Notwithstanding anything to the contrary herein, you may enter into a new Rule 10b5-1 trading plan that is adopted in
compliance with the Company’s insider trading policy; provided that no trade may be executed under such plan prior to
the one-year anniversary of your Start Date.
(d) Board Compensation. You acknowledge that during your service as CEO pursuant to this Agreement, you shall not receive any
additional cash compensation as non-employee director of the Board and you shall not receive any new non-employee director equity
grants. Any outstanding quity granted that you received while a non-employee director will continue to vest pursuant to their terms.
4. Benefits. The Company will provide you with the opportunity to participate in the Company’s standard health, dental and other benefits
plans available to senior executives or as approved by the Board (which may include vacation or paid time off), subject to any eligibility
requirements or other limits generally imposed by such plans or programs. The Company does not currently maintain a vacation or paid time
off accrual policy with a fixed number of days for exempt, salaried staff and will not formally track the amount of personal time you spend
away from the office, and you are free to take personal time at your discretion, with pay, in accordance with the Company’s policies then in
effect; however, you will be expected to manage your time away from the office in such a way as to ensure that your work responsibilities
are adequately addressed.
5. Termination of Employment.
a. Qualifying Termination Other than During a Change in Control Period. If you are subject to a Qualifying Termination other than
during a Change in Control Period (which is addressed in Section 5(b) below), provided that (except with respect to the Accrued
Compensation (as defined below)) you deliver to the Company a signed general release of claims in favor of the Company in the form
attached hereto as Exhibit A (the “Release”) and satisfy all conditions to make the Release effective within sixty (60) days following
your termination of employment, then, you shall be entitled to:
(i)
the Accrued Compensation;
(ii) a lump sum payment equal to eighteen (18) months of your then-current Base Salary;
(iii) a lump sum payment equal to 100% of your Target Bonus (assuming target achievement level) for the then-current
fiscal year;
(iv) a lump sum payment equal to the product of (A) the Target Bonus to which you would have been entitled (calculated as if all
applicable bonus targets were achieved) for the bonus period in which the termination occurs, multiplied by (B) a fraction, the
numerator of which is the number of days for which you were employed by the Company during the bonus period and the
denominator of which is the total number of calendar days in the bonus period, less any amount of your Bonus previously
paid, if any (the “Prorated Bonus”);
(v) payment of the COBRA premiums (or reimbursement to you of such premiums) for continued health coverage for you and
your dependents until the earliest of (1) the completion of the eighteen (18) month period following your employment
termination date, (2) the date when you receive similar coverage with a new employer or (3) the expiration of you continuation
coverage under COBRA (the “COBRA Benefit”); and
(vi)
the immediate acceleration of the number of then-unvested shares subject to the Initial RSU that would have vested during the
twelve (12) month period following your employment termination date had you remained employed by the Company through
such date.
None of your other currently outstanding or then-outstanding equity grants shall be eligible for the acceleration provided under
this section.
b. Qualifying Termination During a Change in Control Period . If you are subject to a Qualifying Termination during a Change in
Control Period, and provided that (except with respect to the Accrued Compensation) you deliver to the Company the signed Release
and satisfy all conditions to make the Release effective within sixty (60) days following your termination of employment, then, (in lieu
of any benefits pursuant to Section 5(a)), you shall be entitled to:
(i) the Accrued Compensation;
(ii) a lump sum payment equal to eighteen (18) months of your then-current Base Salary;
(iii) a lump sum payment equal to 100% of your Target Bonus (assuming target achievement level) for the then-current fiscal year;
(iv) the Prorated Bonus;
(v) the COBRA Benefit; and
(vi) the immediate acceleration of all of the then-unvested shares and other equity awards.
Notwithstanding anything to the contrary herein or in any equity plan or any applicable Initial RSU award agreement, if the successor
or acquiring corporation (if any) of the Company refuses to assume, convert, replace or substitute your then-unvested shares or other
equity awards in connection with a Change in Control, the then-unvested shares and other equity awards shall become fully vested
effective immediately prior to the Change in Control.
c. Accrued Compensation and Benefits . In addition to any required payments set forth above, in connection with any termination of
employment prior to, upon or following a Change in Control (whether or not a Qualifying Termination), the Company shall pay your
earned but unpaid base salary and other vested but unpaid cash entitlements for the period through and including the termination of
employment, including unused earned vacation pay (if applicable) and unreimbursed documented business expenses incurred by you
through and including the date of termination (collectively “Accrued Compensation and Expenses”), as required by law and the
applicable Company plan or policy. In addition, you shall be entitled to any other vested benefits
earned by you for the period through and including the termination date of your employment under any other employee benefit plans
and arrangements maintained by the Company, in accordance with the terms of such plans and arrangements, except as modified
herein (collectively “Accrued Benefits” and together with the Accrued Compensation and Expenses, the “Accrued Compensation”).
Any Accrued Compensation and Expenses to which you are entitled shall be paid to you in cash as soon as administratively
practicable after the termination, and, in any event, no later than two and one-half (2-1/2) months after the end of your taxable year in
which the termination occurs. Any Accrued Benefits to which you are entitled shall be paid to you as provided in the relevant plans
and arrangement.
d. Miscellaneous. For the avoidance of doubt, the benefits payable pursuant to Sections 5(a) and
(b) are mutually exclusive and not cumulative. All lump sum payments provided in this Section 5 shall be made no later than the 60th
day following your termination of employment (unless explicitly provided otherwise above). Notwithstanding anything to the contrary
in this Agreement, (i) any reference herein to a termination of your employment is intended to constitute a “separation from service”
within the meaning of Section 409A of the Code, and Section 1.409A-1(h) of the regulations promulgated thereunder, and shall be so
construed, and (ii) no payment will be made or become due to you during any period that you continue in a role with the Company that
does not constitute a separation from service, and will be paid once you experience a “separation from service” from the Company
within the meaning of Section 409A of the Code. In addition, notwithstanding anything to the contrary in this Agreement, upon a
termination of your employment, you agree to resign prior to the time you deliver the Release from all positions you may hold with the
Company and any of its subsidiaries or affiliated entities at such time (including as a member of the Board and as a trustee under any
benefit plans), and no payment will be made or become due to you until you resign from all such positions, unless requested otherwise
by the Board.
6. Definitions. As used in this Agreement, the following terms have the following meanings:
a. “Cause” means: (w) you have been convicted of, or have pleaded guilty or nolo contendere to, any felony or crime involving moral
turpitude, (x) you have engaged in willful misconduct which is injurious to the Company or materially failed or refused to perform the
material duties lawfully and reasonably assigned to you or have performed such material duties with gross negligence or have
breached any material term or condition of this Agreement, your Employment, Confidential Information and Intellectual Property
Assignment Agreement with the Company or any other material agreement with the Company, in any case after written notice by the
Company of such misconduct, performance issue, gross negligence or breach of terms or conditions and an opportunity to cure within
thirty (30) days of such written notice thereof from the Company, unless such misconduct, nonperformance, gross negligence or
breach is, by its nature, not curable, (y) your failure to follow the Company’s policies that results in, or could reasonably be expected
to result in, material harm to the Company or (z) you have committed any act of fraud, theft, embezzlement, misappropriation of
funds, breach of fiduciary duty or other willful act of material dishonesty against the Company that results in material harm to the
Company. The term “Company” for purposes of this definition will be interpreted to include any “parent” or “subsidiary” of the
Company as such terms are defined in Rule 405 of the Securities Act of 1933, as amended, as appropriate.
b. “Change in Control” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly,
of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then
outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the
Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least
fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent
outstanding immediately after such merger or consolidation; provided that the event also qualifies as a change in control under U.S.
Treasury Regulation 1.409A-3(i)(5)(v) or 1.409A-3(i)(5)(vii).
c. “Change in Control Period” means the period commencing three (3) months prior to a Change in Control and ending twelve (12)
months following a Change in Control.
d. “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
e. “Disability” means a physical or mental incapacity or disability as a result of which you become unable to perform the essential
functions of your job at the Company (if appropriate, with reasonable accommodation) for a continuous period of ninety (90) days or
for an aggregate of one-hundred twenty (120) days in any consecutive twelve (12) month period.
f. “Good Reason” means a cessation of your employment as a result of your resignation within twelve (12) months after the occurrence of
one or more of the following without your consent: (i) a reduction of more than 10% in your total target cash compensation as an
employee of the Company, except to the extent that the Company implements an equal percentage reduction applicable to all executive
officers and management personnel; (ii) a material reduction in your duties, responsibilities or authority at the Company; (iii) a change
in the geographic location at which you must perform services which results in an increase in your one-way commute by more than
fifty (50) miles (other than a relocation to the Company’s San Francisco Bay Area offices); (iv) a successor of the Company in a
Change in Control does not assume this Agreement. A resignation for Good Reason will not be deemed to have occurred unless you
give the Company written notice of the condition within ninety (90) days after the condition comes into existence and the Company
fails to remedy the condition within thirty (30) days after receiving your written notice.
g. “Qualifying Termination” means a Separation resulting from (i) a termination by the Company of your employment for any reason
other than Cause, or (ii) your voluntarily resignation of your employment with the Company for Good Reason. Termination by death
or Disability will not constitute a Qualifying Termination.
h. “Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code.
7. Expenses. The Company will, in accordance with applicable Company policies and guidelines, reimburse you for all reasonable and
necessary expenses incurred by you in connection with your
performance of services on behalf of the Company. In addition, the Company will reimburse, upon presentation of invoices, your attorney
fees incurred for legal advice incurred in the review and finalization of this Agreement, up to an aggregate of Fifteen Thousand Dollars
($15,000.00), subject to applicable tax withholdings.
8. Background Checks. The Company reserves the right to conduct background investigations and/or reference checks on all of its potential
employees. Your job offer, therefore, is contingent upon a clearance of such a background investigation and/or reference check, if any.
Should your employment terminate due to the failure to pass a background check, that does not amount to “Cause” under this Agreement
and this Agreement will be void.
9. Evidence of Employment Eligibility. For purposes of federal immigration law, you will be required to provide to the Company
documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us
within three (3) business days of your date of hire.
10. Withholdings. All forms of compensation paid to you as an employee of the Company shall be less all federal, state, local and other
withholdings and similar taxes and payments required by applicable law, without gross-up.
11. Confidentiality; Compliance with Policies. As a Company employee, you will abide by and fully comply with Company rules and
regulations, including the Company’s insider trading policy, code of conduct, and any other policies and programs adopted by the
Company regulating the behavior of its employees, as such policies and programs may be amended from time to time to the extent the
same are not inconsistent with this Agreement, unless you consent to the same at the time of such amendment. You will be specifically
required to sign an acknowledgement that you have read and understand the Company rules of conduct included in the Company
handbook. You will be expected to sign and comply with the Employment, Confidential Information and Intellectual Property Assignment
Agreement attached as Exhibit B (the “Confidentiality Agreement”), which requires, among other things, the assignment of your rights to
intellectual property made during your employment at the Company, and non-disclosure of proprietary information.
12. Parachute Payments.
a.Best After-Tax Result. In the event that any payment or benefit received or to be received by you pursuant to this Agreement or
otherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for
this subsection (a), be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable
federal, state, local or foreign excise tax (“Excise Tax”), then, subject to the provisions of subsection (b) hereof, such Payments shall
be either (A) provided in full pursuant to the terms of this Agreement or any other applicable agreement, or (B) provided as to such
lesser extent which would result in no portion of such Payments being subject to the Excise Tax (“Reduced Amount”), whichever of
the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and other taxes and the
Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by you, on an after-tax basis, of
the greatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such
Payments may be subject to the Excise Tax. Unless the Company and you otherwise agree in writing, any determination required
under this Section shall be made
by independent tax counsel designated by the Company and reasonably acceptable to you (“Independent Tax Counsel”), whose
determination shall be conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations
required under this section, Independent Tax Counsel may make reasonable assumptions and approximations concerning applicable
taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code;
provided that Independent Tax Counsel shall assume that you pay all taxes at the highest marginal rate. The Company and you shall
furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order to
make a determination under this section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur in
connection with any calculations contemplated by this section. In the event that subsection (ii)(B) hereof applies, then based on the
information provided to you and the Company by Independent Tax Counsel, you may, in your sole discretion and within thirty (30)
days of the date on which you are provided with the information prepared by Independent Tax Counsel, determine which and how
much of the Payments (including the accelerated vesting of equity compensation awards) to be otherwise received by you shall be
eliminated or reduced (as long as after such determination the value (as calculated by Independent Tax Counsel in accordance with the
provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to you equals the Reduced Amount). If the
Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 6(b) hereof shall apply,
and the enforcement of subsection (b) shall be the exclusive remedy to the Company.
b. Adjustments. If, notwithstanding any reduction described in subsection (a) hereof (or in the absence of any such reduction), the IRS
determines that you are liable for the Excise Tax as a result of the receipt of one or more Payments, then you shall be obligated to
surrender or pay back to the Company, within one-hundred twenty (120) days after a final IRS determination, an amount of such
payments or benefits equal to the “Repayment Amount.” The Repayment Amount with respect to such Payments shall be the smallest
such amount, if any, as shall be required to be surrendered or paid to the Company so that your net proceeds with respect to such
Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall be maximized. Notwithstanding
the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zero would
not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net
amount received by you from the Payments. If the Excise Tax is not eliminated pursuant to this Section 6(b), you shall pay the Excise
Tax.
13. Section 409A. To the extent (i) any payments to which you become entitled under this Agreement, or any agreement or plan referenced
herein, in connection with your termination of employment with the Company constitute deferred compensation subject to Section 409A
of the Code and (ii) you are deemed at the time of such termination of employment to be a “specified” employee under Section 409A of
the Code, then such payment or payments shall not be made or commence until the earlier of (i) the expiration of the six (6)-month period
measured from the date of your “separation from service” (as such term is at the time defined in regulations under Section 409A of the
Code) with the Company; or (ii) the date of your death following such separation from service; provided, however, that such deferral shall
only be effected to the extent required to avoid adverse tax treatment to you, including (without limitation) the additional twenty (20%)
percent tax for which you would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of such deferral. Upon the
expiration
of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in
installments) in the absence of this paragraph shall be paid to you or your beneficiary in one lump sum (without interest).
Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this
Agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A of the Code, the amount of
any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses
eligible for reimbursement or in kind benefits to be provided in any other calendar year, in no event shall any expenses be reimbursed after
the last day of the calendar year following the calendar year in which you incurred such expenses, and in no event shall any right to
reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.
To the extent that any provision of this Agreement is ambiguous as to its exemption or compliance with Section 409A, the provision will
be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent, and for any
payments where such construction is not tenable, that those payments comply with Section 409A to the maximum permissible extent. To
the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such
payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of
Section 409A.
Payments pursuant to this Agreement (or referenced in this Agreement), and each installment thereof, are intended to constitute separate
payments for purposes of Section 1.409A-2(b)(2) of the regulations under Section 409A.
14. Indemnification. You will continue to be covered by the Indemnity Agreement by and between you and the Company dated on or around
January 3, 2019 (the “Indemnity Agreement”). In addition, you have been, or will be, named as an insured on the director and officer
liability insurance policy currently maintained by the Company, or as may be maintained by the Company from time to time.
15. Compensation Recoupment. All amounts payable to you hereunder shall be subject to recoupment pursuant to the Company’s current
compensation recoupment and forfeiture policy and any additional compensation recoupment and forfeiture policy or amendments to the
current policy adopted by the Board during the term of your employment with the Company that is applicable generally to executive
officers of the Company.
16. Non-Disparagement . I agree that following my termination of employment, I will not, directly or indirectly, make any negative or
disparaging statements or comments, either as fact or as opinion, about the Company, its current employees, officers, directors,
shareholders, products or services, business, technologies, market position or performance, and the Company agrees that neither it
(through a press release or statement by a designated Company spokesperson) nor its executive officers or members of the Board will
make, directly or indirectly, any negative or disparaging statements or comments, either as fact or as opinion, about me. Nothing in this
paragraph shall prohibit me or Company from providing truthful information in response to a subpoena or other legal process.
17. Dispute Resolution . To ensure rapid and economical resolution of any and all disputes that might arise in connection with this
Agreement, you and the Company agree that any and all disputes, claims, and causes of action, in law or equity, arising from or relating to
this Agreement or its enforcement,
performance, breach, or interpretation, will be resolved solely and exclusively by final, binding, and confidential arbitration, by a single
arbitrator, in San Mateo County, and conducted by the American Arbitration Association under its then-existing employment rules and
procedures. Nothing in this section, however, is intended to prevent either party from obtaining injunctive relief in court to prevent
irreparable harm pending the conclusion of any such arbitration. Each party to an arbitration or litigation hereunder shall be responsible for
the payment of its own attorneys’ fees.
18. Complete Agreement. This Agreement, together with the Confidentiality Agreement, represents the entire agreement between you and
the Company with respect to the material terms and conditions of your employment, and supersedes and replaces any and all prior verbal
or written discussions, negotiations and/or agreements between you and the Company (or any representative thereof) relating to the subject
matter hereof. You and the Company agree that you are not party to the Company’s Severance and Change in Control Agreement.
19. Counterparts. This Agreement may be executed (i) in counterparts, each of which shall be an original, with same effect as if the
signatures hereto were on the same instrument; and (ii) by electronic signature, facsimile or pdf. The parties agree that such facsimile or
pdf signatures shall be deemed original signatures for all purposes.
[Signature Page Follows]
To accept the Company’s offer, please sign and return this Agreement (including the attached exhibits) to the Company no later than
January 13, 2020.
AGREED AND ACCEPTED
/s/ Robert Bearden
Robert Bearden
CLOUDERA, INC.
/s/ Nick Graziano
Nick Graziano, on behalf of the Board
Schedule A
Nlyte Software Inc.
Mark 43, Inc.
Data Republic
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EXHIBIT A
Release
In consideration of the termination benefits (the “Benefits”) provided and to be provided to me by Cloudera, Inc., or any successor thereof
(the “Company”) pursuant to my employment offer letter agreement with the Company dated on or about January 12, 2020 (the
“Agreement”) and in connection with the termination of my employment, I agree to the following general release (the “Release”).
1.
On behalf of myself, my heirs, executors, administrators, successors, and assigns, I hereby fully and forever generally release and
discharge Company, its current, former and future parents, subsidiaries, affiliated companies, related entities, employee benefit plans, and,
in such capacities, their fiduciaries, predecessors, successors, officers, directors, shareholders, agents, employees and assigns (collectively,
the “Company”) from any and all claims, causes of action, and liabilities up through the date of my execution of the Release. The claims
subject to this release include, but are not limited to, those relating to my employment with Company and/or any predecessor to Company
and the termination of such employment. All such claims (including related attorneys’ fees and costs) are barred without regard to whether
those claims are based on any alleged breach of a duty arising in statute, contract, or tort. This expressly includes waiver and release of any
rights and claims arising under any and all laws, rules, regulations, and ordinances, including, but not limited to: Title VII of the Civil
Rights Act of 1964; the Older Workers Benefit Protection Act; the Americans With Disabilities Act; the Age Discrimination in
Employment Act; the Fair Labor Standards Act; the National Labor Relations Act; the Family and Medical Leave Act; the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”); the Workers Adjustment and Retraining Notification Act; the California
Fair Employment and Housing Act (if applicable); the provisions of the California Labor Code (if applicable); the Equal Pay Act of 1963;
and any similar law of any other state or governmental entity. The parties agree to apply California law in interpreting the Release.
Accordingly, I further waive any rights under Section 1542 of the Civil Code of the State of California or any similar state statute. Section
1542 states: “A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his
or her favor at the time of executing the release and that if known to him or her would have materially affected his or her
settlement with the debtor or released party.” This Release does not extend to, and has no effect upon, any wages or benefits that have
accrued or equity that has vested, and to which I have become vested or otherwise entitled to, under the Agreement, any employee benefit
plan, program or policy sponsored or maintained by the Company, or to my right to indemnification by the Company, including under the
Indemnity Agreement, dated on or about January 3, 2019 (the “Indemnity Agreement”), and continued coverage by the Company’s
director’s and officer’s insurance.
2.
In understanding the terms of the Release and my rights, I have been advised to consult with an attorney of my choice prior to
executing the Release. I understand that nothing in the Release shall prohibit me from exercising legal rights that are, as a matter of law,
not subject to waiver such as: (a) my rights under applicable workers’ compensation laws; (b) my right, if any, to seek unemployment
benefits; (c) my right to indemnity under California Labor Code Section 2802 or other applicable state-law right to indemnity; and (d) my
right to file a charge or complaint with a government agency such as but not limited to the Equal Employment Opportunity Commission,
the National Labor Relations Board, the Department of Labor, the California Department of Fair Employment and Housing, the
Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local government
agency or commission (“Government Agencies”). I further
A-1
understand that this Release and my Agreement do not limit my ability to communicate with any Government Agencies or otherwise
participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other
information, without notice to the Company. This Release and my Agreement does not limit my right to receive an award for information
provided to any Government Agencies. Moreover, I will continue to be indemnified for my actions taken while employed by the Company
to the same extent as other former directors and officers of the Company under the Company’s Certificate of Incorporation and Bylaws and
the Indemnity Agreement, and I will continue to be covered by the Company’s directors and officers liability insurance policy as in effect
from time to time to the same extent as other former directors and officers of the Company, each subject to the requirements of the laws of
the State of Delaware. To the fullest extent permitted by law, any dispute regarding the scope of this general release shall be resolved
through binding arbitration as set forth below, and the arbitration provision set forth in my Agreement.
3. I understand and agree that Company will not provide me with the Benefits unless I execute the Release. I also understand that I have
received or will receive, regardless of the execution of the Release, all wages owed to me together with any accrued but unused vacation
pay, less applicable withholdings and deductions, earned through my termination date.
4. As part of my existing and continuing obligations to Company, I have returned to Company all Company documents (and all copies
thereof) and other Company property that I have had in my possession at any time, including but not limited to Company files, notes,
drawings, records, business plans and forecasts, financial information, specification, computer-recorded information, tangible property
(including, but not limited to, computers, laptops, pagers, etc.), credit cards, entry cards, identification badges and keys; and any materials
of any kind which contain or embody any proprietary or confidential information of Company (and all reproductions thereof). I understand
that, even if I did not sign the Release, (x) I am still bound by any and all confidential/proprietary/trade secret information, non-disclosure
and inventions assignment agreement(s) signed by me in connection with my employment with Company, or with a predecessor or
successor of Company pursuant to the terms of such agreement(s) and (y) I am still bound by the covenants of Section 16 of the
Agreement.
5. I represent and warrant that I am the sole owner of all claims relating to my employment with Company and/or with any predecessor of
Company, and that I have not assigned or transferred any claims relating to my employment to any other person or entity.
6. I agree to keep the Benefits and the provisions of the Release confidential and not to reveal its contents to anyone except my lawyer, my
spouse or other immediate family member, and/or my financial consultant, or as required by legal process or applicable law unless and
until they become publicly available.
7. I understand and agree that the Release shall not be construed at any time as an admission of liability or wrongdoing by either Company
or myself.
8. I agree that following my termination of employment, I will not, directly or indirectly, make any negative or disparaging statements or
comments, either as fact or as opinion, about the Company, its current employees, officers, directors, shareholders, products or services,
business, technologies, market position or performance, and the Company agrees that neither it (through a press release or statement by a
designated Company spokesperson) nor its executive officers or other members of the Board of Directors will make, directly or indirectly,
any negative or disparaging statements or
A-2
comments, either as fact or as opinion, about me. Nothing in this paragraph shall prohibit me or Company from providing truthful
information in response to a subpoena or other legal process.
9. I agree to submit to mandatory binding arbitration, in San Mateo County, California, before a single neutral arbitrator, any and all claims
arising out of or related to this Release and my employment with the Company and the termination thereof, except that I may, at my option,
seek injunctive relief in court related to the improper use, disclosure or misappropriation of a party’s proprietary, confidential or trade
secret information. I HEREBY WAIVE ANY RIGHTS TO TRIAL BY JURY IN REGARD TO SUCH CLAIMS. This agreement to
arbitrate does not restrict my right to file administrative claims I may bring before any government agency where, as a matter of law, the
parties may not restrict my ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal
Employment Opportunity Commission and the Department of Labor). However, I agree that, to the fullest extent permitted by law,
arbitration shall be the exclusive remedy for the subject matter of such administrative claims. The arbitration shall be conducted through
the American Arbitration Association (the “AAA”), provided that, the arbitrator shall have no authority to make any ruling or judgment
that would confer any rights with respect to the trade secrets, confidential and proprietary information or other intellectual property of the
Company upon me or any third party. The arbitrator shall issue a written decision that contains the essential findings and conclusions on
which the decision is based. The arbitration will be conducted in accordance with the AAA employment arbitration rules then in effect. The
AAA rules may be found and reviewed at http://www.adr.org. If I am unable to access these rules, I will be provided with a hardcopy. I
acknowledge that I am hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties
against the other in connection with any matter whatsoever arising out of or in any way connected with this Release.
10. I agree that I have had at least twenty-one (21) calendar days in which to consider whether to execute the Release, no one hurried me
into executing the Release during that period, and no one coerced me into executing the Release. I understand that the offer of the Benefits
and the Release shall expire on the twenty-second (22nd) calendar day after my employment termination date if I have not accepted it by
that time. I further understand that Company’s obligations under the Release shall not become effective or enforceable until the eighth (8th)
calendar day after the date I sign the Release provided that I have timely delivered it to Company (the “Release Effective Date”) and that
in the seven (7) day period following the date I deliver a signed copy of the Release to Company I understand that I may revoke my
acceptance of the Release. I understand that the Benefits will become available to me at such time after the Release Effective Date, as
specified in the Agreement.
11. In executing the Release, I acknowledge that I have not relied upon any statement made by Company, or any of its representatives or
employees, with regard to the Release unless the representation is specifically included herein. Furthermore, the Release contains our entire
understanding regarding eligibility for Benefits and supersedes any or all prior representation and agreement regarding the subject matter of
the Release. However, the Release does not modify, amend or supersede written Company agreements that are consistent with enforceable
provisions of this Release such as my Agreement, proprietary information and invention assignment agreement, and any stock, stock option
and/or stock purchase agreements between Company and me. Once effective and enforceable, this agreement can only be changed by
another written agreement signed by me and an authorized representative of Company.
12. Should any provision of the Release be determined by an arbitrator, court of competent jurisdiction, or government agency to be wholly
or partially invalid or unenforceable, the legality,
A-3
validity and enforceability of the remaining parts, terms, or provisions are intended to remain in full force and effect. Specifically, should a
court, arbitrator, or agency conclude that a particular claim may not be released as a matter of law, it is the intention of the parties that the
general release and the waiver of unknown claims above shall otherwise remain effective to release any and all other claims. I acknowledge
that I have obtained sufficient information to intelligently exercise my own judgment regarding the terms of the Release before executing
the Release.
13. The Benefits provided and to be provided to me by the Company consist of the benefits and payments in accordance with Section 5 of
the Agreement.
[SIGNATURE PAGE TO GENERAL RELEASE AGREEMENT FOLLOWS]
A-4
EMPLOYEE’S ACCEPTANCE OF RELEASE
BEFORE SIGNING MY NAME TO THE RELEASE, I STATE THE FOLLOWING: I HAVE READ THE RELEASE, I
UNDERSTAND IT AND I KNOW THAT I AM GIVING UP IMPORTANT RIGHTS. I HAVE OBTAINED SUFFICIENT
INFORMATION TO INTELLIGENTLY EXERCISE MY OWN JUDGMENT. I HAVE BEEN ADVISED THAT I SHOULD
CONSULT WITH AN ATTORNEY BEFORE SIGNING IT, AND I HAVE SIGNED THE RELEASE KNOWINGLY AND
VOLUNTARILY.
EFFECTIVE UPON EXECUTION BY EMPLOYEE AND THE COMPANY.
Date delivered to employee
Executed this _____ day of
,
,
.
.
Your Signature
Your Name (Please Print)
Agreed and Accepted:
Cloudera, Inc.
By:
Date:
A-5
Employment, Confidential Information and Intellectual Property Assignment Agreement
EXHIBIT B
Employment, Confidential Information and Intellectual Property Assignment Agreement
EXHIBIT B CLOUDERA, INC.
As a condition of my employment with Cloudera, Inc., its subsidiaries, affiliates, successors or assigns (together, the
"Company"), and in consideration of my employment with the Company and my receipt of the compensation now and hereafter paid
to me by the Company, I agree to the following terms under this Employment, Confidential Information and Intellectual Property
Assignment Agreement (the "Intellectual Property Agreement"):
1.
Employment.
(a)
I understand and acknowledge that my employment with the Company is for an unspecified duration and constitutes
"at-will" employment. I acknowledge that this employment relationship may be terminated at any time, with or without good cause
or for any or no cause, at the option either of the Company or myself, with or without notice.
(b)
I agree that, during the term of my employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity related to the business in which the Company is now involved or becomes involved
during the term of my employment, nor will I engage in any other activities that conflict with my obligations to the Company.
2.
Confidential Information.
(a)
Company Information. I agree at all times during the term of my employment (my "Relationship with the
Company") and thereafter to hold in strictest confidence, and not to use except for the benefit of the Company or to disclose to any
person, firm or corporation without written authorization of the Board of Directors of the Company, any Confidential Information of
the Company. I understand that "Confidential Information" means any Company proprietary information, technical data, trade
secrets or know-how, including, but not limited to, research, product plans, products, services, customer lists and customers
(including, but not limited to, customers of the Company on whom I called or with whom I became acquainted during the term of
my Relationship with the Company), markets, works of original authorship, photographs, negatives, digital images, software,
computer programs, know-how, ideas, developments, inventions (whether or not patentable), processes, formulas, technology,
designs, drawings, engineering, hardware configuration information, forecasts, strategies, marketing,
finances or other business information disclosed to me by the Company either directly or indirectly in writing, orally or by drawings
or observation or inspection of parts or equipment. I further understand that Confidential Information does not include any of the
foregoing items which has become publicly known and made generally available through no wrongful act of mine or of others who
were under confidentiality obligations as to the item or items involved.
(b) Other Employer Information. I agree that I will not, during my Relationship with the Company, improperly use or
disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and that I will
not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or entity.
(c) Third Party Information. I recognize that the Company has received and in the future will receive from third parties
their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such
information and to use it only for certain limited purposes. I agree to hold all such confidential or proprietary information in the
strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out my work
for the Company consistent with the Company's agreement with such third party.
3. Intellectual Property.
(a) Assignment of Intellectual Property. I agree that I will promptly make full written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my right, title, and
interest in and to any original works of authorship, inventions, concepts, improvements or trade secrets, whether or not patentable or
registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time I am in the service of the Company (collectively referred to
as "Intellectual Property") and which (i) are developed using the equipment, supplies, facilities or Confidential Information of the
Company, (ii) result from or are suggested by work performed by me for the Company, or (iii) relate to the business, or to the actual
or demonstrably anticipated research or development of the Company. The Intellectual Property will be the sole and exclusive
property of the Company. I further acknowledge that all original works of authorship which are made by me (solely or jointly with
others) within the scope of and during the period of my Relationship with the Company and which are protectable by copyright are
"works made for hire," as that term is defined in the United States Copyright Act. To the extent any Intellectual Property is not
deemed to be work for hire, then I will and hereby do assign all my right, title and interest in such Intellectual Property to the
Company, except as provided in Section 3(e).
(b) Patent and Copyright Registrations. I agree to assist the Company, or its designee, at the Company's expense, in every
proper way to secure the Company's rights in the Intellectual Property and any copyrights, patents or other intellectual property
rights relating
CLOUDERA, INC. CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto,
the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem
necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns, and
nominees the sole and exclusive rights, title and interest in and to such Intellectual Property, and any copyrights, patents or other
intellectual property rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my
power to do so, any such instrument or papers shall continue after the termination of this Intellectual Property Agreement. If the
Company is unable because of my mental or physical incapacity or for any other reason to secure my assistance in perfecting the
rights transferred in this Intellectual Property Agreement, then I hereby irrevocably designate and appoint the Company and its duly
authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by me. The designation and appointment of the Company
and its duly authorized officers and agents as my agent and attorney in fact shall be deemed to be coupled with an interest and
therefore irrevocable.
(c) Maintenance of Records. I agree to keep and maintain adequate and current written records of all Intellectual Property
made by me (solely or jointly with others) during the term of my Relationship with the Company. The records will be in the form of
notes, sketches, drawings, and works of original authorship, photographs, negatives, digital images or any other format that may be
specified by the Company. The records will be available to and remain the sole property of the Company at all times.
(d) Intellectual Property Retained and Licensed. I provide below a list of all original works of authorship, inventions,
developments, improvements, and trade secrets which were made by me prior to my Relationship with the Company (collectively
referred to as "Prior Intellectual Property"), which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder; or, if no such list is attached, I represent that there
is no such Prior Intellectual Property. If in the course of my Relationship with the Company, I incorporate into Company property
any Prior Intellectual Property owned by me or in which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior
Intellectual Property as part of or in connection with such Company property.
Prior Intellectual Property:
CLOUDERA, INC. CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
Title
Date
Identifying Number
or Brief Description
(e) Exception to Assignments. I understand that the provisions of this Intellectual Property Agreement requiring assignment
of Intellectual Property to the Company are limited to Section 2870 of the California Labor Code, which is attached hereto as
Appendix A, and do not apply to any intellectual property that (i) I develop entirely on my own time; and (ii) I develop without
using Company equipment, supplies, facilities, or trade secret information; and (iii) do not result from any work performed by me
for the Company; and (iv) do not relate at the time of conception or reduction to practice to the Company's current or anticipated
business, or to its actual or demonstrably anticipated research or development. Any such intellectual property will be owned entirely
by me, even if developed by me during the time period in which I am employed by the Company. I will advise the Company
promptly in writing of any intellectual property that I believe meet the criteria for exclusion set forth herein and are not otherwise
disclosed pursuant to Section 3(d) above.
(f) Return of Company Documents. I agree that, at the time of leaving the employ of the Company, I will deliver to the
Company (and will not keep in my possession, recreate or deliver to anyone else) any and all works of original authorship,
photographs, negatives, digital images, devices, records, data, notes, reports, proposals, lists, correspondence, specifications,
drawings blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items
developed by me pursuant to my Relationship with the Company or otherwise belonging to the Company, its successors or assigns.
In the event of the termination of my Relationship with the Company, I agree to sign and deliver the "Termination Certificate"
attached hereto as Appendix B.
CLOUDERA, INC. CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
4. Notification of New Employer. In the event that I leave the employ of the Company, I hereby grant consent to notification by the
Company to my new employer or consulting client about my rights and obligations under this Intellectual Property Agreement.
5. No Solicitation of Employees, Consultants and Customers. In consideration for my Relationship with the Company and other
valuable consideration, receipt of which is hereby acknowledged, I agree that:
(a) During the period of my Relationship with the Company as an employee, officer and/or director and for a period of
twelve (12) months thereafter I shall not solicit the employment of any person who shall then be employed by the Company (as an
employee or consultant) or who shall have been employed by the Company (as an employee or consultant) within the prior twelve
(12) month period, on behalf of myself or any other person, firm, corporation, association or other entity, directly or indirectly.
(b) For a period of twelve (12) months immediately following the termination of my Relationship with the Company for any
reason, I shall not (i) either directly or indirectly solicit any existing or prospective customer, client or account of the Company with
whom I communicated or with whom I became acquainted during my Relationship with the Company; or (ii) cause or attempt to
cause any existing or prospective customer, client or account of the Company to divert from, terminate, limit or in any manner fail to
enter into any actual or potential business relationship with the Company.
6. Representations. I represent that my performance of all the terms of this Intellectual Property Agreement will not breach any
agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to my Relationship with the
Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith. I agree to
execute any proper oath or verify any proper document required to carry out the terms of this Intellectual Property Agreement.
CLOUDERA, INC. CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
7. Arbitration and Equitable Relief.
(a) Arbitration. Except as provided in Section (b) below, I agree that any dispute or controversy arising out of or relating to
any interpretation, construction, performance or breach of this Intellectual Property Agreement, shall be settled by arbitration to be
held in San Francisco, California, in accordance with the rules then in effect of the American Arbitration Association, provided
however, the parties will be entitled to full and liberal evidentiary discovery in accordance with the rules governing civil litigation in
courts of the same jurisdiction. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of
the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's
decision in any court having jurisdiction. The Company will pay the costs and expenses of such arbitration, and each of us shall
separately pay our counsel fees and expenses.
(b) Equitable Remedies. Each of the Company and I agree that disputes relating to or arising out of a breach of the
covenants contained in this Intellectual Property Agreement would likely require injunctive relief to maintain the status quo of the
parties pending the appointment of an arbitrator pursuant to this Intellectual Property Agreement. The parties hereto also agree that it
would be impossible or inadequate to measure and calculate the damages from any breach of the covenants contained in this
Intellectual Property Agreement prior to resolution of any dispute pursuant to arbitration. Accordingly, pursuant to C.C.P.
§1281.8(b), if either party claims that the other party has breached any covenant of this Intellectual Property Agreement, that party
will have available, in addition to any other right or remedy, the right to obtain an injunction from a court of competent jurisdiction
restraining such breach or threatened breach and/or to specific performance of any such provision of this Intellectual Property
Agreement pending resolution of the dispute through arbitration. The parties further agree that no bond or other security shall be
required in obtaining such equitable relief and hereby consents to the issuance of such injunction and to the ordering of specific
performance. However, upon appointment of an arbitrator, the arbitrator shall review any interim, injunctive relief granted by a court
of competent jurisdiction and shall have the discretion, jurisdiction, and authority to continue, expand, or dissolve such relief
pending completion of the arbitration of such dispute or controversy. The parties agree that any orders issued by the arbitrator may
be enforced by any court of competent jurisdiction if necessary to ensure compliance by the parties.
8. General Provisions.
(a) Governing Law; Consent to Personal Jurisdiction. This Intellectual Property Agreement will be governed by the laws
of the State of California as they apply to contracts entered into and wholly to be performed within such State. I hereby expressly
consent to the nonexclusive personal jurisdiction and venue of the state and federal courts located in the federal Northern District of
California for any lawsuit filed there by either party arising from or relating to this Intellectual Property Agreement.
CLOUDERA, INC. CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
(b) Entire Agreement. This Intellectual Property Agreement sets forth the entire agreement and understanding between the
Company and me relating to the subject matter herein and merges all prior discussions between us. No modification of or
amendment to this Intellectual Property Agreement, nor any waiver of any rights under this Intellectual Property Agreement, will be
effective unless in writing signed by the party to be charged. Any subsequent change or changes in my duties, salary or
compensation will not affect the validity or scope of this Intellectual Property Agreement.
(c) Severability. If one or more of the provisions in this Intellectual Property Agreement are deemed void by law, then the
remaining provisions will continue in full force and effect.
(d) Successors and Assigns. This Intellectual Property Agreement will be binding upon my heirs, executors, administrators
and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.
IN WITNESS WHEREOF, the undersigned has executed this Employment, Confidential Information and Intellectual
Property Assignment Agreement as of 1/12/2020.
Signature:
Name:
Address:
/s/ Robert Bearden
Robert Bearden
CLOUDERA, INC. CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
APPENDIX A
California Labor Code Section 2870. Application of provision that employee shall assign or offer to assign rights in
invention to employer.
(a)
Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of
his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or
her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or
demonstrably anticipated research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b)
To the extent a provision in an employment agreement purports to require an employee to assign an invention
otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state
and is unenforceable.
APPENDIX B
APPENDIX B CLOUDERA, INC.
Termination Acknowledgments
I confirm that I have returned any Cloudera property that is in my possession, including any equipment, records,
data, notes, reports, proposals, lists, correspondence, and specifications, and that I do not have any of these items in my
possession.
I further confirm that I have complied with all the terms of the Employment, Confidential Information and
Intellectual Property Assignment Agreement that I signed when I joined Cloudera, and that I will continue to
comply with all the terms of that agreement, including my confidentiality and non-solicit obligations therein.
This Acknowledgement does not limit any continuing obligations I have under the Intellectual Property
Agreement.
Date:
(Signature)
CLOUDERA, INC.
LIST OF SUBSIDIARIES
Exhibit 21.01
HORTONWORKS, INC.
CLOUDERA (GOVERNMENT SOLUTIONS), INC.
CLOUDERA COSTA RICA SOCIEDAD ANONIMA
CLOUDERA MEXICO, S. DE R.L. DE C.V.
CLOUDERA SOFTWARE (CANADA) INC.
CLOUDERA SOFTWARE BRASIL LTDA.
CLOUDERA COLOMBIA S.A.S.
CLOUDERA CHILE SpA.
CLOUDERA (UK) LIMITED
CLOUDERA GMBH
CLOUDERA FRANCE SARL.
CLOUDERA ITALY SRL.
CLOUDERA SPAIN, S.L.
CLOUDERA HUNGARY KFT.
CLOUDERA SWEDEN AB.
CLOUDERA K.K.
CLOUDERA (SHANGHAI) SOFTWARE CO. LTD.
CLOUDERA SINGAPORE PTE. LTD.
CLOUDERA KOREA, INC.
CLOUDERA SOFTWARE INDIA PRIVATE LTD.
DELAWARE, U.S.A.
DELAWARE, U.S.A.
COSTA RICA
MEXICO
CANADA
BRAZIL
COLOMBIA
CHILE
UNITED KINGDOM
GERMANY
FRANCE
ITALY
SPAIN
HUNGARY
SWEDEN
JAPAN
CHINA
SINGAPORE
SOUTH KOREA
INDIA
CLOUDERA (AUST) PTY LTD.
PT CLOUDERA TECHNOLOGY
CLOUDERA ISRAEL LTD.
CLOUDERA MIDDLE EAST FZ - LLC.
CLOUDERA SOUTH AFRICA PTY LTD.
CLOUDERA (NZ) PTY LTD
CLOUDERA NETHERLANDS BV
CLOUDERA INTERNATIONAL, LTD.
CLOUDERA DATA PLATFORM INDIA PVT. LTD.
AUSTRALIA
INDONESIA
ISRAEL
DUBAI
SOUTH AFRICA
NEW ZEALAND
THE NETHERLANDS
IRELAND
INDIA
Consent of Independent Registered Public Accounting Firm
Exhibit 23.01
We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-217522, 333-224134, 333-229169 and 333-230638) pertaining to
the 2008 Equity Incentive Plan, the Gazzang 2008 Stock Purchase and Option Plan, the 2017 Equity Incentive Plan, the 2017 Employee Stock Purchase Plan, the
Amended and Restated Hortonworks, Inc. 2014 Stock Option and Incentive Plan, and the Hortonworks, Inc. 2011 Stock Option and Grant Plan of Cloudera, Inc. of
our reports dated March 27, 2020, with respect to the consolidated financial statements of Cloudera, Inc., and the effectiveness of internal control over financial
reporting of Cloudera, Inc., included in this Annual Report (Form 10-K) for the year ended January 31, 2020.
/s/ Ernst & Young LLP
San Jose, California
March 27, 2020
CERTIFICATION UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Robert Bearden, certify that:
1. I have reviewed this Annual Report on Form 10-K of Cloudera, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: March 27, 2020
/s/ Robert Bearden
Robert Bearden
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, Jim Frankola, certify that:
1. I have reviewed this Annual Report on Form 10-K of Cloudera, Inc.;
CERTIFICATION UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: March 27, 2020
/s/ Jim Frankola
Jim Frankola
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, Robert Bearden, Chief Executive Officer of Cloudera, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1. the Annual Report on Form 10-K of the Company for the period ended January 31, 2020 (the “Report”) fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the
periods presented therein.
Date: March 27, 2020
/s/ Robert Bearden
Robert Bearden
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
I, Jim Frankola, Chief Financial Officer of Cloudera, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1. the Annual Report on Form 10-K of the Company for the period ended January 31, 2020 (the “Report”) fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the
periods presented therein.
Date: March 27, 2020
/s/ Jim Frankola
Jim Frankola
Chief Financial Officer
(Principal Financial Officer)