S-1 1 projectthunders-1.htm S-1 Document

As filed with the Securities and Exchange Commission on March 31, 2017
Registration No. 333-           
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM S-1 
REGISTRATION STATEMENT
Under
The Securities Act of 1933
_______________________________________________

CLOUDERA, INC.
(Exact name of registrant as specified in its charter)
Delaware
7372
26-2922329
(State or other jurisdiction of incorporation or organization)
(Primary standard industrial code
number)
(I.R.S. employer identification no.)
_______________________________________________

1001 Page Mill Road, Building 3
Palo Alto, CA 94304
(650) 362-0488
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
_______________________________________________

Thomas J. Reilly
Chief Executive Officer
Cloudera, Inc.
1001 Page Mill Road, Building 3
Palo Alto, CA 94304
(650) 362-0488
(Name, address, including zip code, and telephone number, including area code, of agent for service)
_______________________________________________

Copies to:
David A. Bell, Esq.
Niki Fang, Esq.
Fenwick & West LLP
Silicon Valley Center
801 California Street
Mountain View, CA 94041
(650) 988-8500
David Middler, Esq.,
Chief Legal Officer
Jay Wedge, Esq., Senior Counsel
Cloudera, Inc.
1001 Page Mill Road, Building 3
Palo Alto, CA 94304
(650) 362-0488
Richard C. Blake, Esq.
Heidi E. Mayon, Esq.
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
1200 Seaport Blvd.
Redwood City, CA 94063
(650) 321-2400
_______________________________________________

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
 
 
(Do not check if a smaller
reporting company)
 
_______________________________________________

CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Proposed Maximum Aggregate Offering Price(1)(2)
Amount of Registration Fee
Common Stock, par value $0.00005 per share
$ 200,000,000
$ 23,180
(1)
Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2)
Includes the aggregate offering price of additional shares the underwriters have the option to purchase to cover over-allotments, if any.
_______________________________________________

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. .
 


The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)
Issued             , 2017
                       Shares
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COMMON STOCK
______________________
Cloudera, Inc. is offering                   shares of its common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $        and $        per share.
______________________
We have applied to list our common stock on the New York Stock Exchange under the symbol “CLDR.”
______________________
We are an “emerging growth company” as defined under the federal securities laws. Investing in our common stock involves risks. See “Risk Factors” beginning on page 14.
______________________
PRICE $       A SHARE
______________________
 
Price to
Public
 
Underwriting
Discounts and
Commissions(1)
 
Proceeds to
Cloudera
Per Share
    $
 
    $
 
    $
Total
$
 
$
 
$
_______________
(1)
See the section titled “Underwriters” for a description of the compensation payable to the underwriters.
We have granted the underwriters the right to purchase up to an additional                                              shares of common stock to cover over-allotments, if any.
The Securities and Exchange Commission and state regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of common stock to purchasers on or about                                                                   , 2017.
______________________
MORGAN STANLEY
J.P. MORGAN
ALLEN & COMPANY LLC
BofA MERRILL LYNCH
CITIGROUP
DEUTSCHE BANK SECURITIES
STIFEL
JMP SECURITIES
RAYMOND JAMES


                             , 2017



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TABLE OF CONTENTS
 
______________________
We have not authorized anyone to provide you with additional information or information that is different from or to make any representations other than those contained in this prospectus or in any free‑writing prospectus prepared by or on behalf of us to which we may have referred you in connection with this offering. We and the underwriters take no responsibility for, and can provide no assurances as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and future growth prospects may have changed since that date.
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. For purposes of this prospectus, unless the context otherwise requires, the term “stockholders” shall refer to the holders of our common stock.
Through and including                , 2017 (the 25th day after the date of this prospectus) U.S. federal securities laws may require all dealers that effect transactions in our common stock, whether or not participating in this offering, to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
For investors outside the United States, neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any such free‑writing prospectus outside the United States.

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PROSPECTUS SUMMARY
This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our common stock. You should carefully consider, among other things, our consolidated financial statements and related notes and the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.
CLOUDERA, INC.
Overview
Cloudera empowers organizations to become data‑driven enterprises in the newly hyperconnected world. We have developed the leading modern platform for data management, machine learning and advanced analytics. We have achieved this position through extensive collaboration with the global open source community, continuous innovation in data management technologies and by leveraging the latest advances in infrastructure including the public cloud for “big data” applications. Our pioneering hybrid open source software (HOSS) model incorporates the best of open source with our robust proprietary software to form an enterprise‑grade platform. This platform delivers an integrated suite of capabilities for data management, machine learning and advanced analytics, affording customers an agile, scalable and cost effective solution for transforming their businesses. Our platform enables organizations to use vast amounts of data from a variety of sources, including the Internet of Things (IoT), to better serve and market to their customers, design connected products and services and reduce risk through greater insight from data. A vibrant ecosystem has developed around our platform, and a growing range of applications is being built on it. We believe that our solution is the most widely adopted big data platform.
The world is rapidly becoming interconnected through mobile, social, internet and sensor activity. International Data Corporation (IDC) estimates that by 2020 there will be 30 billion internet‑connected and mobile devices. Additionally, the quantity of information produced per year is expected to grow, with IDC estimating that approximately 440 times more information will be created in 2020 than in 2005. Developers have created data‑intensive applications to take advantage of all of this information. Traditional data management technologies cannot technologically or economically capture this data or support these applications. Enterprises are challenged to manage and use rapidly growing quantities of data of new and varying types. They are also operating in increasingly competitive and demanding regulatory environments. To achieve their business objectives, they must adopt information‑centric strategies and a data‑driven approach to problem solving. Organizations across all industries need to develop the ability to act quickly and cost‑effectively on massive amounts of data in any form from any source to gain insight, to compete effectively and to comply with laws and regulations. They need to manage all available data, wherever it may originate or reside. They need a modern open data architecture built on the latest open source technologies and designed for public cloud infrastructure.
In response, we have created our software platform and pioneered the hybrid open source software model. HOSS combines the best open source software with proprietary software to meet the exacting requirements of large enterprises. By integrating robust proprietary software with our open source platform, built on the leading data management and analytics technologies, we deliver substantially greater value to customers in managing, operating and securing their data and data architectures. Our HOSS model also meaningfully differentiates our solutions from those of our competitors, including open source “free riders” who take from, but do not contribute to, the open source community at large. This differentiation also builds long‑lived customer relationships and generates the revenue to support sustained innovation.
Our scale‑out distributed architecture delivers high performance on inexpensive industry‑standard hardware or cloud infrastructure. We allow enterprises to operate, manage and move workloads across multiple architectures, mixing on‑premises and cloud environments, including all major public cloud infrastructure providers – Amazon Web Services, Microsoft Azure and Google Cloud Platform – as well as managed service providers (MSPs). We also enable enterprises’ “multi‑cloud” strategies, allowing them to move workloads from the data center to the public cloud, among public cloud vendors, and back again, thus avoiding cloud lock‑in. In addition, our customers deploy, configure and monitor all their workloads at scale across these environments from a “single pane of glass.” This

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flexibility allows customers to constantly determine and implement the most cost‑efficient strategies. As of January 31, 2017, approximately 18% of our Global 8000 customers run our platform in the cloud.
The market for next‑generation data management, machine learning and advanced analytics is large and rapidly growing as the world increasingly connects. Our platform currently addresses three new transformative markets: (i) Dynamic Data Management Systems; (ii) Cognitive/AI Systems and Content Analytics Software; and (iii) Advanced and Predictive Analytics Software. IDC estimates that in aggregate these markets will grow from $8.7 billion in 2015 to $22.1 billion in 2020 at a combined compound annual growth rate of 20.5%. Beyond these new markets, our platform currently addresses and is disrupting traditional markets, including a significant portion of the Relational Database Management Systems and Non‑Relational Database Management Systems markets. Adding together IDC’s estimates of these new and traditional markets, we believe our total addressable opportunity including these additional markets is expected to reach $65.6 billion by 2020.
We offer our software platform on a subscription basis and focus our selling efforts on the largest 8,000 corporate enterprises globally (Global 8000) as well as large public sector organizations. We target these organizations because they capture and manage the majority of the world’s data and operate highly complex IT environments. These organizations are likely to realize the greatest value from our enterprise‑grade platform. We have achieved significant growth and global scale in a relatively short period of time, and as of January 31, 2017, we have approximately 500 Global 8000 customers. For the fiscal year ended January 31, 2017, revenue from our Global 8000 and public sector (including large public sector customers) represented 73% and 10% of total revenue, respectively. Our customers continue to expand their usage of our platform. The net expansion rate for our subscription revenue was 143% as of January 31, 2017. A growing, vibrant ecosystem has developed around our platform, and many third‑party developers have primarily standardized on it, building more than 100 industry-specific use cases, or applications, using our proprietary technology. We refer to these as Partner Solutions. As part of this ecosystem, we have developed a strategic partnership with Intel Corporation, or Intel, to optimize our software for use with Intel processors and architecture. As a result of our and Intel’s dedication to this partnership, our platform achieves differentiated performance on Intel architecture today, and is expected to achieve differentiated performance on future Intel platform technologies. We will further expand our customer opportunity through the continued growth in use cases and packaged solutions, the expansion of our partner ecosystem and the proliferation of skills, driven by ease of use and accelerating adoption of the cloud. See “Market, Industry and Other Data” for how we define Global 8000, large public sector organizations and calculate our net expansion rate.
For our fiscal years ended January 31, 2016 and January 31, 2017, our revenue was $166.0 million and $261.0 million, respectively, representing year‑over‑year growth in revenue of 57% for our most recent fiscal year. Over the same period, operating cash outflows increased from $90.5 million to $116.6 million while our net losses were $203.1 million and $187.3 million, respectively, which includes $63.6 million and $21.7 million, respectively, of stock‑based compensation expense, and a non‑cash charge of $21.6 million in connection with the donation of common stock to the Cloudera Foundation for the year ended January 31, 2017.
Industry Background
Successful organizations have always collected and analyzed data. They have used it to understand their customers, design and build their products, and address opportunities and manage risk in their businesses.
Today, large organizations are awash in vastly more data than ever before. They collect real‑time and streaming data on events and transactions, social and interaction data about their customers, news and market data about themselves and their competition, and much more. They are also operating in increasingly competitive and demanding regulatory environments. To achieve their business objectives, they must capture, secure, prepare, analyze and act on all of that data quickly.
This flood of data overwhelms data management systems created in earlier decades. Those systems were designed for the data volumes and for the analytical problems of an earlier day. They were never intended to handle the thousand‑fold or greater increase in volume, nor today’s combination and complexity of data and new data types. Those systems predated powerful new analytic techniques such as machine learning and natural language processing.

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The first organizations confronted with this combination of volume, complexity and analytic challenges were web‑scale consumer internet companies like Google, Facebook and Yahoo. Those web pioneers created a new software architecture and a collection of open source software projects to solve their data problems. That software was sophisticated and powerful, but demanded exceptional technical and operational skill of its users.
Today, boardrooms, C‑suites and line-of-business leaders across all industries are focused on developing the ability to use vast amounts of data from a variety of sources to better serve customers, design products and services and manage risk. Their organizations need technology that gives them better insights than legacy systems allow. They need new systems to compete effectively and to comply with the laws and regulations that govern them. They need an enterprise‑grade solution to manage and act on all available data, wherever it may originate or reside. They need the power and sophistication of the web‑scale consumer internet leaders, packaged for consumption by ordinary enterprises. Enterprises require a modern data management, machine learning and analytics platform.
Factors affecting the development of nextgeneration data management, machine learning and advanced analytics
A modern platform for data management, machine learning and analytics is valuable because more data often yields better answers to hard questions. It enables enterprises to look at problems at much higher resolution. It permits queries to examine not just the last month or quarter, but the last year or decade of customer behavior. Using powerful machine learning algorithms, it can examine historical data and find patterns that more accurately predict future trends. Such a platform allows enterprises to extract more value from their data and effect digital transformation.
The main factors driving complexity and challenges in extracting value from data are:
The rise of the interconnected world and the Internet of Things (IoT), which is contributing to an increasingly connected world and accelerating data generation as new types of sensors continue to proliferate and are almost always connected to a network;
The explosion of new data, as organizations are undergoing digital transformation and are digitalizing an increasing number of business activities to improve and transform operations, functions and processes, producing data at an unprecedented scale;
The proliferation of machine learning and artificial intelligence, as organizations realize the value that predictive and advanced algorithms can provide in a diverse array of applications; and
The modernization of enterprise infrastructure, as organizations seek to take advantage of the latest technological developments. In particular, there are two core trends that large enterprises are embracing today:
Open source software is playing an increasingly central role in enterprises’ technology architectures as enterprises value the rapidity of innovation, agility stemming from an open ecosystem and avoidance of vendor lock‑in; and
Public cloud infrastructure is the fastest growing type of infrastructure today with organizations enticed by the elasticity and flexibility it offers.
Requirements of the Modern Data Management and Analytics Platform
Organizations need a modern data platform with:
The ability to deploy on‑premises or in the public cloud or both. Many enterprises have data on‑premises for long‑lived workloads and rely on public cloud infrastructure for transient workloads. As a result, enterprises require a solution that provides the flexibility to store and analyze their data in a mixed infrastructure environment. In addition, enterprises require the ability to run natively on different public cloud platforms, or multi‑cloud capability, so that they can choose among competing public cloud platforms and move workloads among them to avoid cloud lock‑in.

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Access to the latest open source technologies. Collaborating across borders and company lines, the global open source software community innovates quickly. This innovation can lead to competing software projects, which creates complexity and risk for enterprises that simply want to use the best and most appropriate open source software. Enterprises need a trusted partner to play an active role in the community, contributing significantly to open source development and continuously curating the various projects to create a highly integrated, secure and high‑performance platform.
Support for machine learning. Distributed systems together with large amounts of data allow enterprises to use machine learning to understand the past and to predict the future. To perform machine learning, a data platform must support flexible schema and multiple data science languages. It must also support a new class of analytic algorithms as machine learning uses sophisticated algorithms to examine data and to extract patterns. Enterprises require a modern data management and analytics platform that powers the algorithms to apply machine learning to real business problems and real business data.
Enterprise-grade performance, features and functionality. Enterprises require a platform suited to operating in highly complex technology, business and regulatory environments, including:
Scalability and performance. Legacy data management systems do not meet the performance demands of modern data applications. These systems depend on a single or limited number of expensive, centralized computers to handle storage and processing. Huge quantities of data accessed by many users running a combination of SQL queries, text searches and machine learning technologies can simply overwhelm legacy systems. The modern data platform requires a scale‑out architecture – which combines many small, inexpensive computers and pools their storage and processing power – to meet performance demands.
Operate and manage resources across environments at scale. As data and processing needs grow, enterprises require technology that offers visibility across systems and workloads without regard to whether those assets are deployed on‑premises or in the cloud. As enterprise systems scale, centralized monitoring and management in any infrastructure environment becomes critical to data architecture operations, as well as to regulatory and policy compliance.
Data security and governance. Data is strategic, and enterprises are retaining more of it for longer – even permanently. A large concentration of data creates unique and significant security concerns. Business policy, legal and regulatory regimes impose rules as to who may use data, for what purposes and how it is safeguarded. Policy setting, enforcement and monitoring for compliance purposes demand data governance technology that reports on usage, tracks data lineage and ensures that enterprises can meet the strict privacy and other controls that apply. To appropriately safeguard data and comply with legal and regulatory requirements, enterprises must ensure proper authentication, authorization and access at every level.
Low total cost of ownership. The amount of data available for analysis has grown exponentially, but IT budgets have not. Even if legacy data management technologies could address the challenges of “big data,” they would be cost prohibitive. Enterprises require the ability to manage their data architecture at scale and the flexibility to use the infrastructure that is most cost efficient and appropriate for each use case.
Our Market Opportunity
The market for next‑generation data management, machine learning and advanced analytics is large and rapidly growing as the world increasingly connects. Our platform currently addresses three new transformative markets: (i) Dynamic Data Management Systems; (ii) Cognitive/AI Systems and Content Analytics Software; and (iii) Advanced and Predictive Analytics Software. Technologies within the first market help enterprises capture and manage the increasing volume and complexity of new data. Technologies within the latter two markets help enterprises generate insights and derive value from their data. IDC estimates that in aggregate these markets will grow from $8.7 billion in 2015 to $22.1 billion in 2020 at a combined compound annual growth rate of 20.5%.

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Beyond these new markets, our platform currently addresses and is disrupting traditional markets, including a significant portion of the Relational Database Management Systems and Non‑Relational Database Management Systems markets. Technologies within these markets represent traditional systems used by enterprises to manage their data. Adding together IDC’s estimates of these new and traditional markets, we believe our total addressable opportunity including these additional markets is expected to reach $65.6 billion by 2020.
Our Solution
Cloudera empowers organizations to become data‑driven enterprises in the newly hyperconnected world. We have developed the leading modern platform for data management, machine learning and advanced analytics. Building on the approach of web‑scale consumer internet companies, we have collaborated with the global open source community to innovate and deliver our cloud‑native platform. Our scale‑out distributed architecture delivers high performance on inexpensive, industry‑standard hardware or cloud infrastructure. We allow enterprises to operate, manage and move workloads across multiple architectures, mixing on‑premises and cloud environments, including all major public cloud infrastructure providers. We believe that our solution is the most widely adopted big data platform, with a growing range of applications being built on it.
We have pioneered the hybrid open source software development model, or HOSS. Our model is based on active participation and leadership in the open source data management ecosystem and software development process, and utilization of the very best open source technologies. As authors and participants, we contribute new projects and enhance existing projects. We also identify the best projects that are growing in popularity among developers and in adoption by enterprises. This involvement helps us recognize and champion emerging standards, as we did when we led the market by embracing Spark as a complement to the original MapReduce data processing engine.
To deliver the agility and innovation of open source software to our customers, our platform integrates 26 distinct open source projects, 18 of which were created by our engineers. We combine those curated open source projects with our robust proprietary software to form an enterprise‑grade platform. We provide a full and integrated suite of data management, machine learning and advanced analytic capabilities, affording enterprises a single platform that is agile, scalable and cost effective for transforming their businesses.
We believe our approach has a profound impact both on our customers and on the open source community. Our HOSS model delivers substantially greater value to customers in managing, operating and securing their data and data architectures. In addition, our robust proprietary software meaningfully differentiates our solutions from those of our competitors, including open source “free riders” who take from, but do not contribute to, the open source community at large. This differentiation drives the revenue to sustain investment in further innovation in the open source data management ecosystem to address a broadening set of enterprise data needs.
Key Benefits and Differentiators
These are the key benefits and differentiators of our solution.
Deployable on‑premises or in the public cloud or both. With our agnostic approach to infrastructure, enterprises store and analyze their data in the environment that best meets their performance and efficiency goals. Our solution allows enterprises to manage both long‑lived and transient workloads across environments, mixing on‑premises and public cloud infrastructure, including all major public cloud vendors – Amazon Web Services, Microsoft Azure and Google Cloud Platform. We enable enterprises’ multi‑cloud strategies, allowing them to move workloads from the data center to the public cloud, among public cloud vendors, and back again. Customers maintain and control access to their data, and they are better able to obtain attractive terms and avoid cloud vendor lock‑in.
Leverages the latest open source innovation. Our platform integrates the latest innovations in open source data management technology. In addition to our contributions to new project innovation and existing project enhancement, we are able to leverage the most significant innovations of the broader global community. For example, we were the first data platform vendor to incorporate Spark, integrating it into our platform in 2013, enhancing batch processing and enabling real‑time, streaming and machine learning

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workloads. This curation and integration is a continuous commitment as demonstrated by our adoption of projects such as Solr, Kafka, Impala and Kudu. As a result, we serve customers better and capitalize as a business on the latest open source technologies to deliver a highly integrated, secure and high‑performance platform.
Enables machine learning. Our platform is uniquely designed to enable the rapidly growing data science community and machine learning applications. Through our integration of Spark and popular data science languages like Python and R, our platform supports batch, real‑time and advanced analytics. We provide the capabilities to reliably run massively iterative algorithms, including machine learning algorithms, over large volumes of data, to support a diverse range of relational and non‑relational schemas and to express analytic workloads in multiple development and data science languages. These capabilities allow enterprises to identify trends in historical data, to recognize events in current or streaming data and to predict events in the future, continuously improving with experience.
Delivers enterprise-grade performance, features and functionality. Our platform meets the exacting requirements of large enterprises on-premises and in the public cloud, including:
Scalability and high performance. Our distributed architecture allows our customers to easily and inexpensively increase capacity to meet the speed and throughput demands of enterprise applications. Combining many small, inexpensive computers and pooling their storage and processing power in one or more “clusters,” our platform can deliver ten times or greater performance improvements over legacy systems at lower cost. As data volumes or performance requirements increase, adding more capacity or computing power is as simple as adding additional computers to the cluster. Capacity and performance expand linearly with cluster size. With just one installation of our platform, a customer can scale to hundreds of petabytes of data under management.
Integrated management at scale and across environments. Our customers can deploy, configure and monitor all their clusters and workloads at scale from a centralized interface across any mix of public cloud or on‑premises environments. We offer configurable monitoring and reporting and intuitive, robust troubleshooting to provide comprehensive management of large, growing data sets and concurrent use cases.
Data security and governance. 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 the platform. In addition, our platform enables regulatory and industry‑specific compliance through comprehensive data governance, including data discovery, data lineage, metadata tagging and policy enforcement.
Low total cost of ownership. Our scale‑out architecture delivers high performance on inexpensive industry‑standard hardware or cloud infrastructure. This architecture allows organizations to gain insights and realize value from data at much lower cost than traditional data management platforms. Our proprietary cloud automation, systems management and data management capabilities reduce the personnel required to operate clusters and workloads while meeting compliance standards. Our platform allows customers to select the infrastructure environment that is most cost‑effective and appropriate for each use case. Additionally, the native security features of our platform require no additional third party licenses, further reducing costs to customers.
Our Strategy
Key elements of our strategy include:
leading cloud innovation for big data, extending our original cloud‑native architecture;
growing our addressable market by expanding the range of applications our platform can support;
extending our position as the leader in hybrid open source software;

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continuing to rapidly acquire new customers;
accelerating existing customer expansion;
leveraging our partner ecosystem;
showcasing a data‑driven business with our own operations; and
cultivating a passion for solving the world’s greatest challenges through data.
Risks Related to Our Business and Investment in Our Common Stock
Investing in our common stock involves a high degree of risk. You should carefully consider the risks highlighted in the section titled “Risk Factors” immediately following this prospectus summary before making an investment decision. We may be unable for many reasons, including those that are beyond our control, to implement our business strategy successfully. These risks include:
we have a history of losses, and we may not become profitable in the future;
we have a short operating history, which makes it difficult to predict our future results of operations;
the market for our data management and analytics platform may develop more slowly than we expect;
we face intense competition and could lose market share to our competitors;
our customers may not renew or expand their subscriptions, or may do so on unfavorable terms;
our sales cycles can be long and unpredictable, particularly with respect to large subscriptions, and our sales efforts require considerable time and expense;
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;
our results may fluctuate significantly from period to period;
we face risks because we derive substantially all of our revenue from a single software platform, and we may fail to satisfy customer demands or achieve increased market acceptance;
we have been, and may in the future be, subject to intellectual property rights claims by third parties, and we may fail to adequately protect confidential information and our intellectual property rights; and
our directors, executive officers and stockholders who own greater than 5% of our outstanding common stock, and their affiliates, who after this offering will collectively hold more than      % of our outstanding common stock, will have the ability to influence or control the outcome of matters submitted to our stockholders for approval.
If we are unable to adequately address these and other risks we face, our business, financial condition, operating results and prospects may be adversely affected.
Corporate History and Information
We were incorporated in Delaware in 2008, and we had 1,470 full‑time employees as of January 31, 2017. Our principal executive offices are located at 1001 Page Mill Road, Building 3, Palo Alto, California 94304 and our telephone number is (650) 362‑0488. Our website address is www.cloudera.com. The information on, or that can be accessed through, our websites are not incorporated by reference into this prospectus and should not be considered part of this prospectus.

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In May 2014, in conjunction with forming our strategic partnership with Intel, Intel invested approximately $741.8 million in our capital stock, including purchasing approximately $370.9 million from us and an aggregate of approximately $370.9 million from some of our stockholders. Subsequently, Intel has purchased additional shares of our capital stock from some of our stockholders, bringing Intel’s aggregate investment in our capital stock to approximately $766.5 million as of January 31, 2017. After completion of this offering, Intel will hold approximately      % of our outstanding common stock based on the number of shares outstanding as of January 31, 2017. See “Business‑Intel Strategic Partnership” and “Certain Relationships and Related‑Party Transactions.”
Cloudera is a registered trademark of the Company. Cloudera Navigator , Cloudera Navigator Audit and Lineage, Cloudera Navigator Optimizer, Cloudera Navigator Encrypt, Cloudera Navigator Key Trustee, Cloudera Essentials, Cloudera Enterprise Data Hub, Cloudera Data Science, Cloudera Real Time, Cloudera Analytics, Cloudera Manager and Cloudera Director are some of our trademarks used in this prospectus. Solely for convenience, our trademarks, tradenames and service marks referred to in this prospectus appear without the ® , ™ and SM 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 to these trademarks and tradenames.
Other trademarks appearing in this prospectus are the property of their respective holders. For example, Apache Avro, Apache Flume, Apache Hadoop, Apache Hadoop YARN, Apache HBase, Apache Hive, Apache Impala (incubating), Apache Kafka, Apache Kudu, Apache Pig, Apache Sentry, Apache Solr, Apache Spark, Apache Spot (incubating) and Apache Sqoop are trademarks of the Apache Software Foundation. All references to Avro, Flume, Hadoop, Hadoop YARN, HBase, Hive, Impala, Kafka, Kudu, Pig, Sentry, Solr, Spark, Spot and Sqoop are to the corresponding Apache project.
Implications of Being an Emerging Growth Company
As a company with less than $1.0 billion in revenue during our last completed fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These reduced reporting requirements include:
an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting;
an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding a supplement to the auditor’s report providing additional information about the audit and the financial statements;
reduced disclosure about our executive compensation arrangements;
an exemption from the requirements to obtain a non‑binding advisory vote on executive compensation or a stockholder approval of any golden parachute arrangements; and
extended transition periods for complying with new or revised accounting standards.
We will remain an “emerging growth company” for up to five years. However, among other factors, if the market value of our common stock that is held by non‑affiliates exceeds $700 million as of any July 31 after our first annual report, we would cease to be an “emerging growth company” as of the following January 31.


8


THE OFFERING
Common stock offered by us
                shares

Common stock to be outstanding after this offering
                shares

Over‑allotment option
                shares

Use of proceeds
We intend to use the net proceeds of this offering for working capital and other general corporate purposes. In addition, 1% of the net proceeds will be used to fund the Cloudera Foundation, a California non‑profit public benefit corporation formed by us to engage in charitable activities. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, products, services, technologies or assets. See “Use of Proceeds.”

Risk factors
See “Risk Factors” beginning on page 14 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our common stock.

Proposed New York Stock Exchange ticker symbol
“CLDR”

The number of shares of common stock to be outstanding after this offering is based on 113,064,103  shares of common stock outstanding as of January 31, 2017, and excludes:
23,239,679 shares of our common stock issuable upon the exercise of stock options outstanding as of January 31, 2017, with a weighted‑average exercise price of $4.67 per share;
21,374,022 shares of our common stock subject to restricted stock units (RSUs) outstanding as of January 31, 2017, of which 3,408,712 shares of common stock subject to these RSUs will vest upon the effective date of this offering and will be issued on a date following the 180th day after the effective date of this offering;
581,084 shares of our common stock reserved for future issuance under our 2008 Equity Incentive Plan as of January 31, 2017 and 2,000,000 additional shares of our common stock reserved for future issuance after January 31, 2017, of which:
9,000 shares of our common stock are issuable upon the exercise of stock options granted after January 31, 2017 through March 30, 2017, with an exercise price of $17.85 per share;
2,130,010 shares of our common stock are subject to RSUs granted after January 31, 2017 through March 30, 2017;
711,509 shares of our common stock that were reserved for future issuance as of March 30, 2017 that will become available for future issuance under our 2017 Equity Incentive Plan in connection with this offering; and
30,000,000 additional shares of our common stock reserved for future issuance under our 2017 Equity Incentive Plan and 3,000,000 shares of common stock reserved for future issuance under our 2017 Employee Stock Purchase Plan, which plans will become effective in connection with this offering

9


and contain provisions that will automatically increase their share reserves each year, as more fully described in “Executive Compensation—Employee Benefit Plans.”
Except as otherwise indicated, all information in this prospectus assumes:
the automatic conversion of all outstanding shares of our redeemable convertible preferred stock outstanding as of January 31, 2017 into an aggregate of 74,907,415 shares of common stock immediately prior to the completion of this offering;
no exercise or cancellation of outstanding options or vesting of RSUs subsequent to January 31, 2017;
the filing and effectiveness of our restated certificate of incorporation and adoption of our restated bylaws, each of which will occur immediately prior to the completion of this offering; and
no exercise by the underwriters of their over‑allotment option to purchase up to an additional            shares of our common stock in this offering.

10


SUMMARY CONSOLIDATED FINANCIAL DATA
We have derived the summary consolidated statement of operations data for the years ended January 31, 2016 and 2017 and the summary consolidated balance sheet data as of January 31, 2017 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statement of operations data for the year ended January 31, 2015 from our audited consolidated financial statements that are not included in this prospectus. You should read the following summary consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.
 
Year Ended
January 31,
 
2015
 
2016
 
2017
 
(in thousands, except share and per share data)
Consolidated Statements of Operations Data:
 
 
 
 
 
Revenue:
 
 
 
 
 
Subscription
$
72,615

 
$
119,150

 
$
200,252

Services
36,503

 
46,898

 
60,774

Total revenue
109,118

 
166,048

 
261,026

Cost of revenue:(1) (2) (4)
 
 
 
 
 
Subscription
18,314

 
30,865

 
38,704

Services
32,148

 
44,498

 
48,284

Total cost of revenue
50,462

 
75,363

 
86,988

Gross profit
58,656

 
90,685

 
174,038

Operating expenses:(1) (2) (3) (4)
 
 
 
 
 
Research and development
66,431

 
99,314

 
102,309

Sales and marketing
103,736

 
161,106

 
203,161

General and administrative
25,041

 
34,902

 
55,907

Total operating expenses
195,208

 
295,322

 
361,377

Loss from operations
(136,552
)
 
(204,637
)
 
(187,339
)
Interest income, net
327

 
2,218

 
2,756

Other income (expense), net
(490
)
 
386

 
(547
)
Net loss before benefit from (provision for) income taxes
(136,715
)
 
(202,033
)
 
(185,130
)
Benefit from (provision for) income taxes
1,285

 
(1,110
)
 
(2,187
)
Net loss
(135,430
)
 
(203,143
)
 
(187,317
)
Deemed dividend to preferred stockholders
(43,207
)
 

 

Net loss attributable to common stockholders
$
(178,637
)
 
$
(203,143
)
 
$
(187,317
)
Net loss per share attributable to common stockholders, basic and diluted
$
(6.53
)
 
$
(6.21
)
 
$
(5.15
)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted(5)
27,347,970

 
32,723,629

 
36,405,534

Pro forma net loss per share attributable to common stockholders, basic and diluted(5)
 
 

 
$
(1.65
)
Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted(5)
 
 

 
113,259,828

Other Financial Statement Data:
 
 
 
 
 
Non-GAAP operating loss(6)
$
(100,431
)
 
$
(137,592
)
 
$
(140,331
)

11


___________
(1)
Amounts include stock‑based compensation expense as follows:
 
Year Ended
January 31,
 
2015
 
2016
 
2017
 
(in thousands)
Cost of revenue – subscription
$
996

 
$
3,363

 
$
1,426

Cost of revenue – services
1,376

 
4,301

 
1,803

Research and development
11,687

 
23,048

 
5,606

Sales and marketing
11,530

 
19,187

 
5,757

General and administrative
8,477

 
13,691

 
7,122

Total stock-based compensation expense
$
34,066

 
$
63,590

 
$
21,714

(2)
Amounts include amortization of acquired intangible assets as follows:
 
Year Ended
January 31,
 
2015
 
2016
 
2017
 
(in thousands)
Cost of revenue – subscription
$
906

 
$
1,732

 
$
1,997

Sales and marketing
1,149

 
1,723

 
1,723

Total amortization of acquired intangible assets
$
2,055

 
$
3,455

 
$
3,720

(3)
In January 2017, we donated 1,175,063 shares of 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. See Note 12 to our consolidated financial statements included elsewhere in this prospectus for further discussion.
(4)
As of January 31, 2017, we had 21,374,022 RSUs outstanding, that are generally subject to service‑based vesting condition and a liquidity event‑related performance vesting condition, of which 18,378,394 were modified subsequent to January 31, 2017. We have not recognized any stock‑based compensation expense related to these RSUs as a qualifying liquidity event has not yet occurred. In the quarter in which this offering is completed, we will recognize stock‑based compensation expense using the accelerated attribution method with a cumulative catch‑up of stock‑based compensation expense. If this offering and the modification had been completed on January 31, 2017, we would have recognized $148.2 million of stock‑based compensation expense on that date, and would have approximately $173.2 million of future period expense to be recognized over the remaining service periods through fiscal 2021. The actual stock‑based compensation expense that we record will also reflect additional expense for RSUs that vest from February 1, 2017 through the effective date of this offering. See Notes 10 and 16 to our consolidated financial statements included elsewhere in this prospectus for further discussion.
(5)
See Notes 2 , 14 and 15 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic, diluted and pro forma net loss per share attributable to common stockholders, and the weighted‑average number of shares used in the computation of the per share amounts. The weighted‑average number of shares, basic and diluted, used in computing pro forma net loss per share includes the impact of 3,408,712 shares of common stock subject to RSUs outstanding as of January 31, 2017 that will vest upon the effective date of this offering and will be issued on a date following the 180th day after the effective date of this offering.
(6)
We define non‑GAAP operating loss as loss from operations before stock‑based compensation expense, amortization of acquired intangible assets and donation of common stock to the Cloudera Foundation. For more information about our non‑GAAP operating loss and a reconciliation of our non‑GAAP operating loss to loss from operations, the most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP), see the section titled “Selected Consolidated Financial Data—Non‑GAAP Financial Measure.”

12


 
As of January 31, 2017
 
Actual
 
Pro Forma(1)
 
Pro
Forma As
Adjusted
(2)(3)(4)
 
(in thousands)
Consolidated Balance Sheet Data:
 
 
 
 
 
Cash and cash equivalents
$
74,186

 
$
74,186

 
$
Marketable securities, current and noncurrent
181,480

 
181,480

 
 
Working capital
110,616

 
110,616

 
 
Total assets
442,544

 
442,544

 
 
Deferred revenue, current and noncurrent
217,424

 
217,424

 
 
Redeemable convertible preferred stock
657,687

 

 
 
Total stockholders’ equity (deficit)
(483,756
)
 
173,931

 
 
___________
(1)
Reflects (i) the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 74,907,415 shares of common stock; and (ii) stock‑based compensation expense of approximately $148.2 million associated with RSUs, subject to a liquidity‑event related performance vesting condition, as modified, for which the service‑based vesting condition was satisfied as of January 31, 2017 and which we will recognize on the effectiveness of this offering, as further described in Notes 2 and 16 to our consolidated financial statements included elsewhere in this prospectus. However this does not reflect the issuance of 3,408,712 shares of common stock subject to these RSUs will vest upon the effective date of this offering and will be issued on a date following the 180th day after the effective date of this offering. The pro forma adjustment related to stock‑based compensation expense of approximately $148.2 million has been reflected as an increase to additional paid‑in capital and accumulated deficit.
(2)
Reflects the pro forma adjustment described in footnote (1) and the sale by us of           shares of common stock in this offering at an assumed initial public offering price of $          per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds of this offering as described in “Use of Proceeds.”
(3)
A $1.00 increase (decrease) in the assumed initial public offering price of $          per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of pro forma as adjusted cash and cash equivalents, working capital, total assets and total stockholders’ equity by $           million, assuming the number of shares we are offering, as set forth on the cover page of this prospectus, remains the same, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) each of pro forma as adjusted cash and cash equivalents, working capital, total assets and total stockholders’ equity by approximately $           million, assuming the initial public offering price per share remains the same. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price, number of shares offered and other terms of this offering determined at pricing.
(4)
Does not give effect to the use of 1% of the net proceeds of this offering to fund the Cloudera Foundation.

13


RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also impair our business, financial condition, results of operations and growth prospects.
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 $135.4 million , $203.1 million and $187.3 million for the years ended January 31, 2015 , 2016 and 2017 , respectively, and expect to continue to incur net losses for the foreseeable future. As a result, we had an accumulated deficit of $676.0 million at January 31, 2017 . 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 under our hybrid open source software (HOSS) model, and continue to develop our platform. 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:
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 upon completion of this offering.
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.
We have a short operating history, which makes it difficult to predict our future results of operations.
We have a short 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. 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 HOSS model, competition from other companies, attracting and retaining customers, hiring, integrating, training and retaining skilled personnel,

14


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.
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, 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 four categories:
legacy data management product providers such as HP, IBM, Oracle and Teradata;
public cloud providers who include proprietary data management, machine learning and analytics offerings, such as Amazon Web Services, Google Cloud Platform and Microsoft Azure;
strategic and technology partners who may also offer our competitors’ technology or otherwise partner with them, including our strategic partners who provide Partner Solutions (see “Business—Partners and Strategic Alliances”) as they may offer a substantially similar solution based on a competitor’s technology; and
open source companies, including Hortonworks and MapR, as well as 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:
greater name recognition, longer operating histories and larger customer bases;

15


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;
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 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 such as IBM Watson. 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, 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 that allow them to offer more competitive and comprehensive solutions. As a result of such acquisitions, 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 operating 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.

16


Because of the characteristics of open source software, there may be fewer technology barriers to entry in the hybrid 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 based upon those open source programs that compete with existing open source software that we support and incorporate into our platform. 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 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 and 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 operating 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 typically 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 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 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. 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.
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.
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

17


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 HOSS 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. 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 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:
the budgeting cycles and purchasing practices of our customers, including their tendency to purchase in the fourth quarter of our fiscal year, and near the end of each quarter;
the achievement of milestones in connection with delivery of services, impacting the timing of services revenue recognition;
subscriptions from the Global 8000 and other large enterprises;
price competition;

18


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;
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;
the timing and amount of certain payments and expenses, such as research and development expenses, sales commissions and stock‑based compensation, including the recording of stock‑based compensation expense as a result of the vesting and settlement of restricted stock units (RSUs) including in connection with this offering;
our inability to adjust certain fixed costs and expenses, particularly in research and development, for changes in demand;
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;
future accounting pronouncements and changes in our accounting policies; and
changes in tax laws or tax 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 analyses 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.

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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, 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 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 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.

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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 Apache Software Foundation Project Management Committees (PMCs) 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 PMCs 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 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

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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 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 may be distributed under a different license or the Apache License 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 terms for the open source code change, we may be forced to re‑engineer our solutions or incur additional costs to find alternative tools.
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

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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 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 prospectus 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.
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, machine learning and analytics platforms generally, which could adversely impact our ability to retain existing customers or attract new ones.
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. 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.

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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 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:
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;
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 and impair our ability to compete. 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.
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

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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 1,140 employees as of January 31, 2016 to 1,470 employees as of January 31, 2017. 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:
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;
maintaining high levels of satisfaction with our platform among our customers; and
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 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 are 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. For example, in 2014, we entered into a strategic collaboration and optimization agreement with Intel. In addition, we work closely with select vendors to design solutions to specifically address the needs of certain industry verticals or use cases within those verticals, which we refer to as Partner Solutions. 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

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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.
The sum of our revenue and changes in deferred revenue may not be an accurate indicator of business activity within a period.
Investors or analysts sometimes look to the sum of our revenue and changes in deferred revenue as an indicator of business activity in a period for businesses such as ours, sometimes referred to as “estimated billings.” However, these measures may significantly differ from underlying business activity for a number of reasons including:
a relatively large number of transactions occur at the end of the quarter. Invoicing 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 will shift deferred revenue from one period into the next;
multi‑year upfront billings may distort trends;
subscriptions that have deferred start dates; and
services that are invoiced upon delivery.
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.
The forecasts of market growth included in this prospectus may prove to be inaccurate, and, even if the markets in which we compete achieve the forecasted growth, we cannot assure you our business will grow at similar rates, if at all.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The forecasts in this prospectus relating to the expected growth in the market for our platform were prepared by a third party based on their research, estimates and assumptions. While these factors may seem reasonable to them and us, the resulting forecasts may prove to be inaccurate. Even if this market experiences the forecasted growth described in this prospectus, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus should not be taken as indicative of our future growth.
If our new components and 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 components and enhancements of our platforms to incorporate additional features, improve functionality or other enhancements in order to meet our customers’ rapidly evolving demands. When we develop a new 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 components or enhancements to our

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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. For example, if our new file system based on the open source Kudu project does not garner widespread market adoption and implementation, our growth prospects, future financial results and competitive position could suffer.
Our new components or enhancements to our platform and changes to our platform could fail to attain sufficient market acceptance for many reasons, including:
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 their 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
reluctance of customers to purchase platforms incorporating open source software or to purchase hybrid platforms.
If 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, a large percentage of our sales force is new to our company. New hires require significant training and may take significant time before they achieve full productivity. 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.
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.
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, we acquired Gazzang, Inc. in June 2014 and Xplain.io, Inc. in February 2015. 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,

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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.
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 involve many risks, including the following:
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,
may result in acquired in‑process research and development expenses or in the future may require the amortization, write‑down or impairment of amounts related to deferred compensation, goodwill and other intangible assets, or
may not generate sufficient financial returns for us to offset our acquisition costs;
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 integration process is 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 mail 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.

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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. 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.
As we expand internationally, our business will become more susceptible to risks associated with international operations.
We have recently 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 over 65 countries as of January 31, 2017. 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:
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;
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;
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;
increased financial accounting and reporting burdens and complexities;
lack of familiarity with locals laws, customs and practices, and laws and business practices favoring local competitors or partners; and
political, social and economic instability abroad, terrorist attacks and security concerns in general.

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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, or 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.
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,

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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, together with our net proceeds from this offering, 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.
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 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.

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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.
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.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes‑Oxley Act of 2002, or the Sarbanes‑Oxley Act, the Dodd‑Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd‑Frank Act, 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 will increase our legal and financial compliance costs, make some activities more difficult, time‑consuming or costly and increase demand on our systems and resources, particularly after 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.

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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.
However, for as long as we remain an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes‑Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”
Further, the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act of 1933, as amended, or Securities Act, registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non‑emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult because of the potential differences in accounting standards used.
We will remain an “emerging growth company” for up to five years. However, among other factors, if the market value of our common stock that is held by non‑affiliates exceeds $700 million as of any July 31 after our first annual report, we would cease to be an “emerging growth company” as of the following January 31.
We also expect that being a public company and these new rules and regulations will 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 prospectus and in filings required of a public company, our business and financial condition will become 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 will be 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 Securities and Exchange Commission (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 and financial officers. 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 will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which could have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the applicable stock exchange. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes‑Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10‑K.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may 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.
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes‑Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take

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advantage of these exemptions for so long as we are an “emerging growth company,” which could be as long as five years following the completion of this offering but we expect to not be an “emerging growth company” sooner. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
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 May 2014, the FASB issued accounting standards update No. 2014‑09 (Topic 606), Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under GAAP. We will be required to implement this guidance in fiscal 2020. We have not selected a transition method and continue to evaluate what effect, if any, the amendments and transition alternatives could have on our financial position and results of operations. Regardless of the transition method selected, application of Topic 606 may significantly impact the amount and timing of revenue recognition, such as recognizing revenue from existing contracts in periods other than when historically reported under existing GAAP or the revenue recognized under existing GAAP could be eliminated as part of the effect of adoption. Further, adoption of Topic 606 could result in changes to the periods when revenue is recognized in the future compared with management’s current expectations under existing GAAP. In addition, Topic 606 may significantly change the timing of when expense recognition will occur related to costs to obtain and fulfill customer contracts. While the adoption of Topic 606 does not change the cash flows received from our contracts with customers, the adoption of Topic 606 could have a material adverse effect on our financial position or results of operations.
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.

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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 United States Internal Revenue Code of 1986, as amended, or 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 existing NOLs are subject to limitations arising from previous ownership changes, our ability to utilize NOLs could be limited by Section 382 of the Code. For example, we recently performed an analysis to determine whether an ownership change had occurred since our inception which identified two historical ownership changes. While these limitations did not result in a material restriction on the use of our NOLs, 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.
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, or Intel. Our former director, Kim Stevenson, who resigned in February 2017, was 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 may affect one or more of the sectors or countries in which we sell our applications. 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 earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by man‑made problems such as terrorism.
A significant 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, New York City and Austin in the United States and internationally in Budapest, London and Singapore. Further, if 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

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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 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 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 and this Offering
There has been no prior public market for our common stock, the stock price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
There has been no public market for our common stock prior to this offering. The initial public offering price for our common stock will be determined through negotiations among the underwriters and us and may vary from the market price of our common stock following this offering. The market prices of the securities of newly public companies such as us have historically been highly volatile. The market price of our common stock may 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:
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;
recruitment or departure of key personnel;
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;
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;

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lawsuits threatened or filed against us;
other events or factors, including those resulting from war, incidents of terrorism, or responses to these events;
the expiration of contractual lock‑up or market standoff agreements; and
sales of shares of our common stock by us or our stockholders.
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. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
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 will depend 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 few securities analysts commence coverage of us, or if industry analysts 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. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price could decline.
Our directors, executive officers and principal stockholders will continue to have substantial control over us after this offering, 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, will beneficially own, in the aggregate, approximately        % of our outstanding common stock after this offering, based on the number shares outstanding as of January 31, 2017. As a result, these stockholders, if acting together, will be able 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, would have the ability to control the 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.
In addition, Intel will hold approximately         % of our outstanding common stock after this offering, based on the number shares outstanding as of January 31, 2017. As such, Intel could have considerable influence over matters such as approving a potential acquisition of us. Intel’s investment in and position in our company 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 cannot assure you that a market will develop for our common stock or what the market price of our common stock will be.
We have applied to list our common stock on the New York Stock Exchange under the symbol “CLDR.” However, we cannot assure you that an active trading market for our common stock will develop on such exchange or elsewhere or, if developed, that any market will be sustained. We cannot predict the prices at which our common stock will trade. The initial public offering price of our common stock was determined by negotiations with the underwriters and may not bear any relationship to the market price at which our common stock will trade after this offering or to any other established criteria of the value of our business.

38


We have broad discretion in the use of the net proceeds that we receive in this offering.
The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our stock and thereby enable access to the public equity markets by our employees and stockholders, obtain additional capital, and increase our visibility in the marketplace. In addition, 1% of the net proceeds of this offering will be use to fund the Cloudera Foundation, a California non profit public benefit corporation formed by us to engage in charitable activities.We have not yet determined the specific allocation of the net proceeds that we receive in this offering. Rather, we intend to use the net proceeds we receive from this offering for general corporate purposes, including headcount expansion, working capital, sales and marketing activities, development, general and administrative matters and capital expenditures. We also may use a portion of the net proceeds to acquire complementary businesses, products, services or technologies. Accordingly, our management will have broad discretion over the specific use of the net proceeds that we receive in this offering and might not be able to obtain a significant return, if any, on investment of these net proceeds. Investors in this offering will need to rely upon the judgment of our management with respect to the use of proceeds. If we do not use the net proceeds that we receive in this offering effectively, our business, operating results and financial condition could be harmed.
Because the initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our outstanding common stock following this offering, new investors will experience immediate and substantial dilution.
The initial public offering price is substantially higher than the pro forma net tangible book value per share of our common stock immediately following this offering based on the total value of our tangible assets less our total liabilities. Therefore, if you purchase shares of our common stock in this offering, based on the midpoint of the price range set forth on the cover page of this prospectus, and the issuance of shares of common stock in this offering, you will experience immediate dilution of $          per share, the difference between the price per share you pay for our common stock and its pro forma net tangible book value per share as of January 31, 2017. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of common stock. In addition, we have issued RSUs and options to acquire common stock at prices significantly below the initial public offering price. To the extent these RSUs and outstanding options are ultimately settled or exercised, there will be further dilution to investors in this offering. In addition, if the underwriters exercise their option to purchase additional shares from us or if we issue additional equity securities, you will experience additional dilution. See the section titled “Dilution” for additional information.
Sales of substantial amounts of our common stock in the public markets, or the perception that they might occur, could cause the market price of our common stock to decline.
Sales of a substantial number of shares of our common stock into the public market, particularly sales by our directors, executive officers, and principal stockholders, or the perception that these sales might occur, could cause the market price of our common stock to decline and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate.
Substantially all of our securities outstanding prior to this offering are currently restricted from resale as a result of lock‑up and market standoff agreements. See the section titled “Shares Eligible for Future Sale” for additional information. These securities will become available to be sold 181 days after the date of this prospectus. Morgan Stanley & Co. LLC may, in its discretion, permit our security holders to sell shares prior to the expiration of the restrictive provisions contained in the lock‑up agreements. Shares held by directors, executive officers, and other affiliates will also be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements.
In addition, as of January 31, 2017, we had options outstanding that, if fully exercised, would result in the issuance of 23,239,679  shares of common stock. We also had 21,374,022 RSUs outstanding as of January 31, 2017 some of which, as modified subsequent to January 31, 2017, will vest upon this offering. All of the shares of common stock issuable upon the exercise of stock options or settlement of RSUs, and the shares reserved for future issuance under our equity incentive plans, will be registered for public resale under the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance subject to existing lock‑up or market standoff agreements and applicable vesting requirements.

39


Immediately following this offering, the holders of 81,260,841 shares of our common stock will have rights, subject to some conditions, to require us to file registration statements for the public resale of the common stock issuable upon conversion of such shares or to include such shares in registration statements that we may file for us or other stockholders.
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.
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 amended and restated certificate of incorporation and amended and restated bylaws that will be in effect upon completion of this offering 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:
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, 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 amended and 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 the 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 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 the Company’s 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

40


solicitation of proxies to elect the 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 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 the their own slate of directors or otherwise attempting to obtain control of us or influence over our business.
In addition, our restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be 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 restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation 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.
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 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.


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SPECIAL NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This prospectus contains forward‑looking statements. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future results of operations, financial position, market size and opportunity, our business strategy and plans, the factors affecting our performance and our objectives for future operations, are forward‑looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “expect,” “objective,” “plan,” “potential,” “seek,” “grow,” “target,” “if” and similar expressions are intended to identify forward‑looking statements. We have based these forward‑looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short‑term and long‑term business operations and objectives and financial needs. These forward‑looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward‑looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward‑looking statements. Forward‑looking statements contained in this prospectus include, but are not limited to, statements about:
our expectations regarding our results of operations, financial condition and cash flows;
our expectations regarding the development and expansion of our business;
our ability to successfully enter new markets and manage our international expansion;
our ability to expand our customer base, renew subscriptions and expand penetration of existing customers;
anticipated trends and challenges in our business and in the markets in which we operate;
our ability to develop new features and functionality that meet market needs and achieve market acceptance;
the anticipated benefits associated with the use of our platform;
our ability to retain and hire necessary employees and staff our operations appropriately;
the timing and amount of certain expenses;
our ability to maintain, protect and enhance our intellectual property; and
worldwide economic conditions and their impact on enterprise software spending.
We caution you that the foregoing list may not contain all of the forward‑looking statements made in this prospectus. In addition, in light of these risks and uncertainties, the matters referred to in the forward‑looking statements contained in this prospectus may not occur.
You should not rely upon forward‑looking statements as predictions of future events. The events and circumstances reflected in the forward‑looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward‑looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of these forward–looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

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MARKET, INDUSTRY AND OTHER DATA
Introduction
This prospectus contains estimates and information concerning our industry, our business, and the market for our solutions, including market position, market size and growth rates of the markets in which we participate, that are based on industry publications, surveys and reports. Although we have not independently verified the accuracy or completeness of the data contained in these industry publications, surveys, and reports, we believe the publications, surveys and reports are generally reliable, although such information is inherently subject to uncertainties and imprecise. The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors, including those described in the “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications and reports.
The source of certain statistical data, estimates, and forecasts contained in this prospectus are the following independent industry publications or reports:
Black Duck Software and North Bridge, 2015 Future of Open Source Survey, 2015
International Data Corporation, Worldwide Internet of Things Forecast Update, May 2016
International Data Corporation, Worldwide Semiannual Software Tracker, November 2016
International Data Corporation, Worldwide Software Tracker Taxonomy, August 2016
Global 8000
We refer to the largest 8,000 corporate enterprises globally as the Global 8000. For purposes of defining the Global 8000, the top 2,000 enterprises in the Global 8000 are based on the FORBES Global 2000 ranking. The FORBES Global 2000 is an annual ranking of the top 2,000 public companies in the world by Forbes magazine. The ranking is based on a mix of four metrics: sales, profit, assets and market value. The remainder of our Global 8000 is based on entities listed in Data.com as having the highest annual revenue, excluding those that are listed in the FORBES Global 2000. Data.com is a service offered by salesforce.com, inc. that we use to categorize companies by industry.
For purposes of customer count, a customer is defined as an entity with a unique FORBES Global 2000 or Data.com identifier and quarterly subscription revenue as of the measurement date.
The FORBES Global 2000 is updated annually in the second quarter of the calendar year. Current and prior period Global 8000 customer counts are based on the most recent FORBES Global 2000 list for comparability purposes. We similarly update the remainder of the Global 8000 based on Data.com information. Our customer count is subject to adjustments for acquisitions, spin‑offs and other market activity. Where these adjustments occur, previously disclosed numbers of customers are restated to allow for comparability. For example, we add a Global 8000 customer when a Global 8000 company that is not our customer acquires a company in our existing customer base that is not a Global 8000 company. When we enter into a contract with a Global 8000 parent company, or any of its related subsidiaries, or any combination of entities within a Global 8000 company, we count only one Global 8000 customer. We do not count further penetration into entities within a given Global 8000 customer as a new customer in the Global 8000 customer count. We make exceptions for holding companies and other organizations for which the FORBES Global 2000 or Data.com identifier in our judgment does not accurately represent the Cloudera customer.

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For purposes of determining the top ten enterprises in various sectors, we group the FORBES Global 2000 categories into industry verticals, including as follows:
Industry Vertical
 
FORBES Global 2000 Categories
Banks
 
Major Banks
Regional Banks
Healthcare and Life Sciences
 
Biotechs
Healthcare Services
Medical Equipment & Supplies
Pharmaceuticals
Technology
 
Communications Equipment
Computer Hardware
Computer Services
Semiconductors
Software & Programming
Telecommunications
 
Telecommunication Services
For purposes of determining the top ten enterprises in the FORBES Global 2000 bank category, we have excluded state‑controlled banks.
Public Sector Organization
We define “public sector organization” to include the various departments, agencies and other organizations of the U.S. federal, state and local governments, as well as similar organizations of foreign governments and subdivisions. We also include both public and private educational institutions and school districts as public sector organizations. Due to the variety of ambiguities, judgments and distinctions that could be made, and the lack of a widely accepted standard, in how such customers are counted, we currently do not include public sector organizations in our Global 8000 customer count.
Net Expansion Rate
We have provided an analysis of our net expansion rate. Our quarterly net subscription revenue expansion rate equals:
the subscription revenue in a given quarter from all customers that had subscription revenue in the same quarter of the prior year,
divided by
the subscription revenue attributable to that same group of customers in that prior quarter.
Our net expansion rate equals the simple arithmetic average of our quarterly net subscription revenue expansion rate for the four quarters ending with the most recently completed fiscal quarter.


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USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of common stock that we are offering will be approximately $          million, based on an assumed initial public offering price of $          per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, the net proceeds to us by approximately $          , assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ over‑allotment option is exercised in full, we estimate that our net proceeds will be approximately $          million.
The principal purposes of this offering are to obtain additional capital, create a public market for our common stock, facilitate our future access to the public equity markets, increase awareness of our company among potential customers and improve our competitive position. We intend to use the net proceeds from this offering for working capital and other general corporate purposes, which may include sales and marketing activities, research, product development, general and administrative matters and capital expenditures. In addition, 1% of the net proceeds will be used to fund the Cloudera Foundation, a California non profit public benefit corporation formed by us to engage in charitable activities. We may also use a portion of the net proceeds for the acquisition of, or investment in, complementary companies, products, services, technologies or assets. However, we have no current understandings, commitments or agreements to enter into any such acquisitions or make any such investments. We do not have more specific plans for the net proceeds from this offering.
We have not yet determined our anticipated expenditures and therefore cannot estimate the amounts to be used for each of the purposes discussed above. The amounts and timing of any expenditures will vary depending on the amount of cash generated by our operations, competitive and technological developments and the rate of growth, if any, of our business. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of these net proceeds.
Pending the uses described above, we intend to invest the net proceeds from this offering in short‑term, interest‑bearing obligations, investment‑grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. The goal with respect to the investment of these net proceeds will be capital preservation and liquidity so that these funds are readily available to fund our operations.
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 after the offering or for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend upon, among other factors, our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that our board of directors may deem relevant.

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CAPITALIZATION
The following table sets forth our cash, cash equivalents, and marketable securities and capitalization as of January 31, 2017 on:
an actual basis;
a pro forma basis to reflect: (i) the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 74,907,415 shares of common stock; (ii) stock-based compensation expense of approximately $148.2 million associated with restricted stock units (RSUs), subject to a service based vesting condition and a liquidity event related performance vesting condition for which the service based vesting condition was satisfied as of January 31, 2017 and which we will recognize on the effectiveness of this offering, as further described in Notes 2 and 16 to our consolidated financial statements included elsewhere in this prospectus; and (iii) the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the closing of this offering; however, the pro forma adjustments set forth above do not reflect the issuance of 3,408,712 shares of common stock subject to the RSUs that will vest upon the effective date of this offering and will be issued on a date following the 180th day after the effective date of this offering. The pro forma adjustment related to stock based compensation expense of approximately $148.2 million has been reflected as an increase to additional paid in capital and accumulated deficit; and
a pro forma as adjusted basis to give effect to (i) the pro forma adjustments set forth above and (ii) the sale and issuance of          shares of our common stock by us in this offering, based upon the receipt by us of the estimated net proceeds from this offering at the assumed initial public offering price of $          per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds from this offering as described in “Use of Proceeds.”
You should read this information together with our consolidated financial statements and related notes appearing elsewhere in this prospectus and the information set forth in “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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January 31, 2017
 
Actual
 
Pro Forma
 
Pro Forma
as Adjusted
(1)(2)
 
(in thousands, except share and per share data)
Cash, cash equivalents and marketable securities
$
255,666

 
$
255,666

 
$
Redeemable convertible preferred stock, $0.00005 par value per share, 74,907,415 shares authorized, issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted
$
657,687

 
$

 
$
Stockholders’ equity (deficit):
 
 
 
 
 
Preferred stock, $0.00005 par value per share; no shares authorized, issued and outstanding, actual; 20,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

 

 
 
Common stock, $0.00005 par value per share, 160,000,000 shares authorized, 38,156,688 shares issued and outstanding, actual; 1,200,000,000 shares authorized, 113,064,103 shares issued and outstanding, pro forma; and         shares issued and outstanding, pro forma as adjusted
2

 
6

 
 
Additional paid‑in capital
192,795

 
998,649

 
 
Accumulated other comprehensive loss
(556
)
 
(556
)
 
 
Accumulated deficit
(675,997
)
 
(824,168
)
 
 
Total stockholders’ equity (deficit)
(483,756
)
 
173,931

 
 
Total capitalization
$
173,931

 
$
173,931

 
$
___________
(1)
Each $1.00 increase (decrease) in the assumed initial public offering price of $     per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) our cash, cash equivalents and marketable securities, total stockholders’ equity and total capitalization by approximately $     million, assuming that the number of shares of our common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions payable by us. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) the amount of our cash, cash equivalents and marketable securities, total stockholders’ equity and total capitalization by approximately $     million, assuming an initial public offering price of $     per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions payable by us. The pro forma as adjusted information discussed above is illustrative only and will adjust based on the actual initial price to the public and other terms of this offering determined at pricing.
(2)
Does not give effect to the use of 1% of the net proceeds of this offering to fund the Cloudera Foundation.
The number of shares of our common stock issued and outstanding in the table above does not include the following shares:
23,239,679 shares of our common stock issuable upon the exercise of stock options outstanding as of January 31, 2017, with a weighted‑average exercise price of $4.67 per share;
21,374,022 shares of our common stock subject to restricted stock units (RSUs) outstanding as of January 31, 2017, of which 3,408,712 shares of common stock subject to these RSUs will vest upon the effective date of this offering and will be issued on a date following the 180th day after the effective date of this offering;
581,084 shares of our common stock reserved for future issuance under our 2008 Equity Incentive Plan as of January 31, 2017 and 2,000,000 additional shares of our common stock reserved for future issuance after January 31, 2017, of which:
9,000 shares of our common stock are issuable upon the exercise of stock options granted after January 31, 2017 through March 30, 2017, with an exercise price of $17.85 per share;

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2,130,010 shares of our common stock are subject to RSUs granted after January 31, 2017 through March 30, 2017;
711,509 shares of our common stock that were reserved for future issuance as of March 30, 2017 that will become available for future issuance under our 2017 Equity Incentive Plan in connection with this offering; and
30,000,000 additional shares of our common stock reserved for future issuance under our 2017 Equity Incentive Plan and 3,000,000 shares of common stock reserved for future issuance under our 2017 Employee Stock Purchase Plan, which plans will become effective in connection with this offering and contain provisions that will automatically increase their share reserves each year, as more fully described in “Executive Compensation—Employee Benefit Plans.”

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DILUTION
If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.
As of January 31, 2017 , our pro forma net tangible book value was approximately $132.6 million, or $1.17 per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of January 31, 2017 , after giving effect to the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 74,907,415 shares of common stock immediately prior to the closing of this offering. The total number of shares of our common stock outstanding as of January 31, 2017 does not give effect to the issuance of 3,408,712 shares of common stock subject to the RSUs that will vest upon the effective date of this offering and will be issued on a date following the 180th day after the effective date of this offering.
After giving further effect to the sale of      shares of our common stock in this offering, at the assumed initial public offering price of $     per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of January 31, 2017 would have been approximately $     million, or $     per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $     per share to our existing stockholders and an immediate dilution of $     per share to investors purchasing shares in this offering. The following table illustrates this dilution:
Assumed initial public offering price per share
 
 
$
Pro forma net tangible book value per share as of January 31, 2017
$
1.17

 
 
Increase in pro forma net tangible book value (deficit) per share attributable to new investors purchasing shares in this offering
 
 
 
Pro forma as adjusted net tangible book value per share after this offering
 
 
 
Dilution in pro forma net tangible book value per share to new investors in this offering
 
 
$
A $1.00 increase (decrease) in the assumed initial public offering price of $     per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by approximately $     per share and the dilution per share to investors in this offering by $     per share, assuming the number of shares of our common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions payable by us.
Similarly, a 1,000,000 increase (decrease) in the number of shares of our common stock offered by us would increase (decrease) our pro forma as adjusted net tangible book value by approximately $     per share and the dilution per share to investors in this offering by $     per share, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions payable by us. If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value per share of our common stock would be $     per share, and the dilution in pro forma net tangible book value per share to investors purchasing shares in this offering would be $     per share.

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The following table summarizes, on a pro forma as adjusted basis described above as of January 31, 2017 , the differences between existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us, and the average price per share paid, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:
 
Shares Purchased
 
Total Consideration
 
Average
Price
 
Per Share
 
Number
 
Percent
 
Amount
 
Percent
 
Existing stockholders
113,064,103

 
%

 
$
 
%

 
$
Investors purchasing shares in this offering
 
 
 
 
 
 
 
 
 
Total
113,064,103

 
100.0
%
 
$
 
100.0
%
 
 
Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares. If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own     % and our new investors would own      % of the total number of shares of our common stock outstanding upon the completion of this offering.
The number of shares of our common stock issued and outstanding in the table above does not include the following shares:
23,239,679 shares of our common stock issuable upon the exercise of stock options outstanding as of January 31, 2017, with a weighted‑average exercise price of $4.67 per share;
21,374,022 shares of our common stock subject to restricted stock units (RSUs) outstanding as of January 31, 2017, of which 3,408,712 shares of common stock subject to these RSUs will vest upon the effective date of this offering and will be issued on a date following the 180th day after the effective date of this offering;
581,084 shares of our common stock reserved for future issuance under our 2008 Equity Incentive Plan as of January 31, 2017 and 2,000,000 additional shares of our common stock reserved for future issuance after January 31, 2017, of which:
9,000 shares of our common stock are issuable upon the exercise of stock options granted after January 31, 2017 through March 30, 2017, with an exercise price of $17.85 per share;
2,130,010 shares of our common stock are subject to RSUs granted after January 31, 2017 through March 30, 2017;
711,509 shares of our common stock that were reserved for future issuance as of March 30, 2017 that will become available for future issuance under our 2017 Equity Incentive Plan in connection with this offering; and
30,000,000 additional shares of our common stock reserved for future issuance under our 2017 Equity Incentive Plan and 3,000,000 shares of common stock reserved for future issuance under our 2017 Employee Stock Purchase Plan, which plans will become effective in connection with this offering and contain provisions that will automatically increase their share reserves each year, as more fully described in “Executive Compensation—Employee Benefit Plans.”
To the extent that any outstanding options to purchase shares of our common stock are exercised or new awards are granted under our equity compensation plans, there will be further dilution to investors participating in this offering.

50


SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated statement of operations data for the years ended January 31, 2016 and 2017, and the selected consolidated balance sheet data as of January 31, 2016 and 2017, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data for the year ended January 31, 2015, and the selected consolidated balance sheet data as of January 31, 2015, have been derived from our audited consolidated financial statements that are not included in this prospectus. 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 prospectus. Our historical results are not necessarily indicative of the results that may be expected for any other period in the future.
 
Year Ended
January 31,
 
2015
 
2016
 
2017
 
(in thousands, except share and per share data)
Consolidated Statements of Operations Data:
 
 
 
 
 
Revenue:
 
 
 
 
 
Subscription
$
72,615

 
$
119,150

 
$
200,252

Services
36,503

 
46,898

 
60,774

Total revenue
109,118

 
166,048

 
261,026

Cost of revenue:(1) (2) (4)
 
 
 
 
 
Subscription
18,314

 
30,865

 
38,704

Services
32,148

 
44,498

 
48,284

Total cost of revenue
50,462

 
75,363

 
86,988

Gross profit
58,656

 
90,685

 
174,038

Operating expenses:(1) (2) (3) (4)
 
 
 
 
 
Research and development
66,431

 
99,314

 
102,309

Sales and marketing
103,736

 
161,106

 
203,161

General and administrative
25,041

 
34,902

 
55,907

Total operating expenses
195,208

 
295,322

 
361,377

Loss from operations
(136,552
)
 
(204,637
)
 
(187,339
)
Interest income, net
327

 
2,218

 
2,756

Other income (expense), net
(490
)
 
386

 
(547
)
Net loss before benefit from (provision for) income taxes
(136,715
)
 
(202,033
)
 
(185,130
)
Benefit from (provision for) income taxes
1,285

 
(1,110
)
 
(2,187
)
Net loss
(135,430
)
 
(203,143
)
 
(187,317
)
Deemed dividend to preferred stockholders
(43,207
)
 

 

Net loss attributable to common stockholders
$
(178,637
)
 
$
(203,143
)
 
$
(187,317
)
Net loss per share attributable to common stockholders, basic and diluted
$
(6.53
)
 
$
(6.21
)
 
$
(5.15
)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted(5)
27,347,970

 
32,723,629

 
36,405,534

Pro forma net loss per share attributable to common stockholders, basic and diluted(5)
 
 


 
$
(1.65
)
Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted(5)
 
 


 
113,259,828


51


___________
(1)
Amounts include stock‑based compensation expense as follows:
 
Year Ended
January 31,
 
2015
 
2016
 
2017
 
(in thousands)
Cost of revenue – subscription
$
996

 
$
3,363

 
$
1,426

Cost of revenue – services
1,376

 
4,301

 
1,803

Research and development
11,687

 
23,048

 
5,606

Sales and marketing
11,530

 
19,187

 
5,757

General and administrative
8,477

 
13,691

 
7,122

Total stock-based compensation expense
$
34,066

 
$
63,590

 
$
21,714

(2)
Amounts include amortization of acquired intangible assets as follows:
 
Year Ended
January 31,
 
2015
 
2016
 
2017
 
(in thousands)
Cost of revenue – subscription
$
906

 
$
1,732

 
$
1,997

Sales and marketing
1,149

 
1,723

 
1,723

Total amortization of acquired intangible assets
$
2,055

 
$
3,455

 
$
3,720

(3)
In January 2017, we donated 1,175,063 shares of 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, see Note 12 to our consolidated financial statements included elsewhere in this prospectus for further discussion.
(4)
As of January 31, 2017, we have 21,374,022 restricted stock units (RSUs) outstanding that are generally subject to service‑based vesting condition and a liquidity event‑related performance vesting conditions, of which 18,378,394 were modified subsequent to January 31, 2017. We have not recognized any compensation expense related to these RSUs as a qualifying liquidity event has not yet occurred. In the quarter in which this offering is completed, we will recognize stock-based compensation expense using the accelerated attribution method with a cumulative catch‑up of stock‑based compensation expense. If this offering and the modification had been completed on January 31, 2017, we would have recognized $148.2 million of stock‑based compensation expense on that date, and would have approximately $173.2 million of future period expense to be recognized over the remaining service periods through fiscal 2021. The actual stock‑based compensation expense that we record will also reflect additional expense for RSUs that vest from February 1, 2017 through the effective date of this offering. See Notes 10 and 16 to our consolidated financial statements included elsewhere in this prospectus for further discussion.
(5)
See Notes 2 , 14 and 15 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic, diluted and pro forma net loss per share attributable to common stockholders, and the weighted‑average number of shares used in the computation of the per share amounts. The weighted‑average number of shares used in computing pro forma net loss per share includes the impact of 3,408,712 shares of common stock subject to these RSUs will vest upon the effective date of this offering and will be issued on a date following the 180th day after the effective date of this offering.
 
As of
January 31,
 
2015
 
2016
 
2017
 
(in thousands)
Consolidated Balance Sheet Data:
 
 
 
 
 
Cash and cash equivalents
$
359,814

 
$
35,966

 
$
74,186

Marketable securities, current and noncurrent
138,448

 
362,279

 
181,480

Working capital
387,096

 
142,717

 
110,616

Total assets
575,239

 
512,887

 
442,544

Deferred revenue, current and noncurrent
116,089

 
158,175

 
217,424

Redeemable convertible preferred stock
657,687

 
657,687

 
657,687

Total stockholders’ deficit
(222,640
)
 
(343,509
)
 
(483,756
)

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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.
 
Year Ended
January 31,
 
2015
 
2016
 
2017
 
(in thousands)
Other Financial Statement Data:
 
 
 
 
 
Non‑GAAP operating loss
$
(100,431
)
 
$
(137,592
)
 
$
(140,331
)
We define non‑GAAP operating loss as loss from operations before stock‑based compensation expense, amortization of acquired intangible assets and donation of 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 non‑GAAP operating loss to loss from operations, 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:
 
Year Ended
January 31,
 
2015
 
2016
 
2017
 
(in thousands)
Loss from operations
$
(136,552
)
 
$
(204,637
)
 
$
(187,339
)
Stock‑based compensation expense
34,066

 
63,590

 
21,714

Amortization of acquired intangible assets
2,055

 
3,455

 
3,720

Donation of common stock to the Cloudera Foundation

 

 
21,574

Non‑GAAP operating loss
$
(100,431
)
 
$
(137,592
)
 
$
(140,331
)
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 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

53


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 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.


54


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 section titled “Selected Consolidated Financial Data” and the consolidated financial statements and related notes thereto included elsewhere in this prospectus. 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 prospectus. Our fiscal year end is January 31, and references throughout this prospectus to a given fiscal year are to the twelve months ended on that date.
Overview
Cloudera empowers organizations to become data‑driven enterprises in the newly hyperconnected world. We have developed the leading modern platform for data management, machine learning and advanced analytics.  We have achieved this position through extensive collaboration with the global open source community, continuous innovation in data management technologies and by leveraging the latest advances in infrastructure including the public cloud for “big data” applications. Our pioneering hybrid open source software (HOSS) model incorporates the best of open source with our robust proprietary software to form an enterprise‑grade platform. This platform delivers an integrated suite of capabilities for data management, machine learning and advanced analytics, affording customers an agile, scalable and cost‑effective solution for transforming their businesses. Offered on a subscription basis, our platform enables organizations to use vast amounts of data from a variety of sources, including the Internet of Things (IoT), to better serve and market to their customers, design connected products and services and reduce risk through greater insight from data. We believe that our solution is the most widely adopted big data platform, with a growing range of applications being built on it.
Since our founding, our collaboration with the open source community and our proprietary software innovation have enabled us to grow our technology, platform offerings and customer base rapidly. The graphic below provides an outline of selected milestones.
milestonesfinal.jpg

55


We focus our selling efforts on the largest 8,000 corporate enterprises globally (Global 8000) as well as large public sector organizations. We target these organizations because they capture and manage the majority of the world’s data and operate highly complex IT environments. These organizations are likely to realize the greatest value from utilizing our enterprise‑grade platform. See “Market, Industry and Other Data” for how we define Global 8000.
To maintain our strong partner ecosystem, we will continue to establish and maintain relationships with third parties. To date, over 2,500 resellers, systems integrators, independent software vendors and platform and cloud providers have registered under our Cloudera Connect partner program to gain access to marketing, sales, training and support resources. We have also developed a strategic partnership with Intel Corporation, or Intel, to optimize our software for use with Intel processors and architecture. As a result of our and Intel’s dedication to this partnership, our platform achieves differentiated performance on Intel architecture today, and is expected to achieve differentiated performance on future Intel platform technologies.
We have achieved significant growth over our operating history. For our fiscal years ended January 31, 2016 and January 31, 2017, our revenue was $166.0 million and $261.0 million, respectively, representing year‑over‑year growth in revenue of 57% for our most recent fiscal year. Over the same period, operating cash outflows increased from $90.5 million to $116.6 million while our net losses were $203.1 million and $187.3 million, respectively, which includes $63.6 million and $21.7 million, respectively, of stock‑based compensation expense, and a non‑cash charge of $21.6 million in connection with the donation of common stock to the Cloudera Foundation for the year ended January 31, 2017.
Our Hybrid Open Source Software (HOSS) Business Model
We have created our software platform and pioneered the hybrid open source software model. HOSS combines the best open source software with proprietary software to meet the exacting requirements of large enterprises. By integrating robust proprietary software with our open source platform, built on the leading data management and analytics technologies, we deliver substantially greater value to customers in managing, operating and securing their data and data architectures. This approach also creates meaningful differentiation that drives long‑lived customer relationships, as well as the revenue to support sustained innovation.
Subscription Model
We offer term‑based subscriptions of our platform generally on a per node basis, whether deployed on‑premises or in the cloud. We also offer consumption‑based pricing for cloud‑based deployments. As of January 31, 2017, 18% of our Global 8000 customers run our platform in the cloud. We also generate revenue from professional services and training.
We offer subscriptions for five editions of our platform, ranging from Cloudera Essentials to the industry leading Cloudera Enterprise. Other editions are designed to address the most common and critical data challenges enterprises face: Cloudera Data Science for programmatic preparation, predictive modeling and machine learning; Cloudera Real Time for online, streaming and real‑time applications; and Cloudera Analytics for business intelligence and SQL analytics.
Operating Model
We market and sell our platform to a broad range of organizations, although we focus our selling efforts on large enterprises, primarily the Global 8000, as well as large public sector organizations. We target these organizations because they capture and manage the vast majority of the world’s data and operate highly complex IT environments, and our enterprise‑grade platform has the greatest opportunity to benefit these organizations. Our total number of Global 8000 customers grew from 255 as of January 31, 2015 to 381 as of January 31, 2016, and grew to 495 as of January 31, 2017. For the fiscal year ended January 31, 2017, revenue from our Global 8000 and public sector, including large public sector, customers represented 73% and 10% of total revenue, respectively. See “Market, Industry and Other Data—Global 8000.”

56


We have a broad customer base that spans industries and geographies. For fiscal 2016 and fiscal 2017, no customer accounted for more than 10% of our total revenue. We have significant revenue in the banking and financial services, 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. We have a substantial and growing international presence with more than 25% of our revenue generated outside of the United States in fiscal year ended January 31, 2017.
We market our platform primarily through a direct sales force while benefiting from business driven by our ecosystem of technology partners, resellers, OEMs, MSPs, independent software vendors and systems integrators. The size and growth of our partner ecosystem affords us reach and greater distribution of our software, enhancing our field organizations’ efforts. Moreover, we work closely with select vendors to design solutions to specifically address the needs of certain industry verticals or use cases, which we refer to as Partner Solutions. See “Business—Partners and Strategic Alliances” and “Business—Intel Strategic Partnership.”
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.
To further illustrate the economics of our customer relationships, we have provided an analysis of our net expansion rate. Our quarterly net subscription revenue expansion rate equals:
the subscription revenue in a given quarter from all customers that had subscription revenue in the same quarter of the prior year,
divided by
the subscription revenue attributable to that same group of customers in that prior quarter.
Our net expansion rate equals the simple arithmetic average of our quarterly net subscription revenue expansion rate for the four quarters ending with the most recently completed fiscal quarter. Our experience has been that net expansion rates are generally consistent across customer cohorts, irrespective of the age of the cohort. In particular, our net expansion rate as of January 31, 2017 was 143%.
a140final.jpg

57


Since our founding, we have invested heavily to grow our business. We have increased our headcount from 1,140 employees as of January 31, 2016 to 1,470 employees as of January 31, 2017. We make significant investments in research and development. We expend engineering resources to drive innovation in the open source community, integrate the latest open source technologies, and create proprietary software to constantly improve the functionality and performance of our platform. We make these investments to meet the evolving needs of our customers and capitalize on the growing market for data management, machine learning and analytics software. We intend to continue this investment as we aim to expand our category leadership in open source data management.
We also remain committed to investing in our sales and marketing activities, including expanding our strategic partnerships and alliances, to acquire new customers and increase penetration among existing customers. Our business model focuses on maximizing the lifetime value of a customer relationship. We recognize subscription revenue ratably over the term of the subscription period, and recognize consumption‑based revenue as processor hours are consumed. In general, 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. Over the lifetime of the customer relationship, we also incur sales and marketing costs to renew or increase usage per customer. However, these costs, as a percentage of revenue, are significantly less than those initially incurred to acquire the customer. As a result, the profitability of a customer to our business in any particular period depends in part upon how long a customer has been a subscriber and the degree to which they have expanded their usage of our platform. We believe that, over time, as our customer base grows and a relatively higher percentage of our subscription revenue is attributable to renewals or greater usage among existing customers relative to new customers, associated sales and marketing expenses and other allocated upfront costs as a percentage of revenue will decrease, subject to investments we may make in our business.
In fiscal 2017, for customers who generated more than $1,000,000 of subscription revenue, sales and marketing expense attributable to those customers represented approximately 30% of subscription revenue from them. For customers who generated between $500,000 and $1,000,000 in subscription revenue, sales and marketing expense attributable to those customers represented approximately 54% of our subscription revenue from them. For these purposes, we calculate sales and marketing expenses allocated to a customer as estimated personnel costs associated with our field organization that supports such customer, such as salaries and commissions, and allocated marketing and overhead expenses. These calculations exclude stock-based compensation expense. Customers who generated more than $500,000 of subscription revenue represented more than 60% of our subscription revenue in fiscal 2017.
Factors Affecting Our Performance
Acquiring New Customers
We believe that the shift from legacy data management systems to a modern data platform is just beginning. We intend to target new Global 8000 customers by continuing to invest in our field organization, both domestically and internationally. We are also committed to extending and strengthening relationships within our partner ecosystem to expand our reach, increase our distribution and increase the number of Partner Solutions. We believe this strategy will allow us to maximize leverage for our sales force. Our business and results of operations will depend on our ability to continue to add new Global 8000 customers.
Expanding Penetration within Our Existing Customer Base
Our existing customer base is large and growing, and we remain committed to ensuring our customers fully utilize the capabilities of our platform. Our customers often start with small deployments and then expand their usage significantly as they derive value from their data using our platform. Our field organization, together with our partner ecosystem, assists our customers in identifying new use cases, modernizing their data architectures and achieving success with data‑driven initiatives. We believe this allows our customers to fully realize the strategic value of their data. Our business and results of operations will depend on our ability to drive higher usage of our platform within our growing base of Global 8000 customers.

58


Investments in Future Growth
We believe that we are only beginning to penetrate our market opportunity with Global 8000 companies and public sector entities, and we intend to continue to invest in our future growth. As discussed above, we expect to continue to make significant investments in research and development as well as sales and marketing activities. We also plan to continue to invest in operational and administrative functions to support our expected growth and our transition to a public company. We expect to use the proceeds from this offering to fund these growth strategies and do not expect to be profitable in the near future. As discussed in “—Our Hybrid Open Source Software Business Model—Operating Model,” these investments will be unprofitable in the short term until our customer base grows to include a higher percentage of subscription revenue that is attributable to renewals and greater usage of our platform.
Components of Results of Operations
Revenue
We generate revenue primarily from the sale of subscriptions for our platform that our customers deploy either on‑premises or in the cloud, as well as the sale of services. Subscription revenue relates to term (or time‑based) subscriptions to our platform, which includes both open source and proprietary software. Our subscription arrangements are typically one to three years in length and we recognize subscription revenue ratably over the term of the subscription period. Our subscription includes 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. Services revenue relates to professional services for the implementation and use of our subscriptions, customer training and education services, and related reimbursable travel costs.
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 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). We expect cost of revenue to increase in absolute dollars for the foreseeable future as we continue to obtain new customers and expand our relationship with existing customers. As discussed in detail below, see “—Significant Impacts of Stock‑based Compensation Expense,” we expect stock‑based compensation expense associated with cost of revenue to increase by approximately $27 million and approximately $34 million for subscription and services, respectively, in the near term related to the restricted stock units (RSUs) outstanding as of January 31, 2017 as a result of achieving vesting conditions in connection with this offering. The actual stock‑based compensation expense that we record will also reflect additional expense for RSUs that vest from February 1, 2017 through the effective date of this offering. See Note 16 to our consolidated financial statements included elsewhere in this prospectus.
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. We expect our research and development expenses to increase in absolute dollars for the foreseeable future as we continue to enhance and add new technologies, features and functionality to our subscriptions. As discussed in detail below, see “—Significant Impacts of Stock‑based Compensation Expense,” we expect stock‑based compensation expense associated with research and development expenses to increase by approximately $113 million in the near term related to the RSUs outstanding as of January 31, 2017 as a result of achieving vesting conditions in connection with this offering. The actual stock‑based compensation expense that we record will also reflect additional expense for RSUs that vest from February 1, 2017 through the effective date of this offering. See Note 16 to our consolidated financial statements

59


included elsewhere in this prospectus. We also expect allocated shared costs to increase in the periods following the commencement of the lease for our new headquarters in Palo Alto in July 2017.
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 includes 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 acquired intangible assets from business combinations. Sales‑based incentives are expensed as incurred. We expect our sales and marketing expenses to increase in absolute dollars as we continue to invest in selling and marketing activities to attract new customers and expand our relationship with existing customers. As discussed in detail below, see “—Significant Impacts of Stock‑based Compensation Expense,” we expect stock‑based compensation expense associated with sales and marketing expenses to increase by approximately $109 million in the near term related to the RSUs outstanding as of January 31, 2017 as a result of achieving vesting conditions in connection with this offering. The actual stock‑based compensation expense that we record will also reflect additional expense for RSUs that vest from February 1, 2017 through the effective date of this offering. See Note 16 to our consolidated financial statements included elsewhere in this prospectus.
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 and other corporate expenses, and allocated shared costs (including rent and information technology). We expect our general and administrative expenses to increase in absolute dollars due to the anticipated growth of our business and related infrastructure as well as legal, accounting, insurance, investor relations and other costs associated with becoming a public company. As discussed in detail below, see “—Significant Impacts of Stock‑based Compensation Expense,” we expect stock‑based compensation expense associated with general and administrative expenses to increase by approximately $38 million in the near term related to the RSUs outstanding as of January 31, 2017 as a result of achieving vesting conditions in connection with this offering. The actual stock‑based compensation expense that we record will also reflect additional expense for RSUs that vest from February 1, 2017 through the effective date of this offering. See Note 16 to our consolidated financial statements included elsewhere in this prospectus. We also expect allocated shared costs to increase in the periods following the commencement of the lease for our new headquarters in Palo Alto in July 2017.
Interest Income, net
Interest income primarily relates to amounts earned on our cash and cash equivalents and marketable securities.
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 state and foreign income taxes. Due to cumulative losses, we maintain a valuation allowance against our deferred tax assets. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets.
Significant Impacts of Stock‑based Compensation Expense
Restricted Stock Units
We have granted RSUs to our employees and members of our board of directors under our 2008 Equity Incentive Plan, or the 2008 Plan. The employee RSUs vest upon the satisfaction of both a service‑based condition and a liquidity event‑related performance condition. The service‑based vesting condition for these awards is generally satisfied pro‑rata over four years. The liquidity event‑related performance vesting condition is satisfied

60


upon the occurrence of a qualifying event, or six months following the effective date of this offering. Subsequent to January 31, 2017, a majority of the RSUs outstanding as of January 31, 2017 were modified such that the liquidity event‑related performance condition is satisfied upon the effective date of this offering, rather than six months following this offering; see “Critical Accounting Policies and Estimates—Stock‑Based Compensation” and Note  10 and Note 16 to our consolidated financial statements included elsewhere in this prospectus.
As of January 31, 2017, we have 21,374,022 RSUs outstanding that are generally subject to a liquidity event‑related performance vesting condition, of which 18,378,394 RSUs were modified subsequent to January 31, 2017. We have not recognized any stock‑based compensation expense related to these RSUs as a qualifying liquidity event has not yet occurred. In the quarter in which this offering is completed, we will recognize stock‑based compensation expense using the accelerated attribution method with a cumulative catch‑up of stock‑based compensation expense. If this offering and the modification had been completed on January 31, 2017, we would have recognized approximately $148.2 million of stock‑based compensation expense on the effective date, and would have approximately $173.2 million of additional future period expense to be recognized over the remaining service periods through fiscal 2021.
In March 2017, we granted to employees 2,130,010  RSUs as well as options to purchase 9,000  shares of our common stock with an exercise price of $17.85  per share. The majority of these RSUs were also modified subsequent to issuance, see Note 16 to our consolidated financial statements included elsewhere in this prospectus. The aggregate fair value of these options and RSUs as modified was approximately $29.9 million . We expect to grant additional RSUs and stock options in the future which will also increase stock‑based compensation expense in future periods.
Tender Offer
In May 2015, an unrelated third party initiated a cash tender offer which was completed in July 2015 for the purchase of our common stock from specified categories of current and former employees which had a significant impact on our stock‑based compensation expense for the year ended January 31, 2016, and specifically in our second quarter of fiscal 2016. Sellers participating in the tender offer sold a total of 4,079,131  shares of common stock to the unrelated third party. The purchase price per share in the tender offer was in excess of the fair value of our outstanding common stock at the time of the transaction and accordingly, upon the completion of the transaction, we recorded $16.6 million as stock‑based compensation expense related to the excess of the selling price per share of common stock paid to our employees over the fair value of the tendered shares.
Additionally, the completion of the tender offer was a qualifying liquidity event, such that the performance‑based vesting requirement was satisfied for those RSUs that had met the service‑based condition at this date. Upon the completion of the transaction, we recorded $19.7 million of stock‑based compensation expense for the RSUs for which both the service‑based condition and the qualifying liquidity event had been achieved.
The total stock‑based compensation expense related to the tender offer impacted our second quarter of fiscal 2016 as follows (in thousands):
Cost of revenue – subscription
$
1,954

Cost of revenue – services
2,514

Research and development
16,179

Sales and marketing
9,481

General and administrative
6,191

Total stock‑based compensation expense
$
36,319


61


Results of Operations
The following table sets forth our results of operations for the periods indicated:
 
Year Ended
January 31,
 
2016
 
2017
 
(in thousands)
Revenue:
 
 
 
Subscription
$
119,150

 
$
200,252

Services
46,898

 
60,774

Total revenue
166,048

 
261,026

Cost of revenue:(1) (2)
 
 
 
Subscription
30,865

 
38,704

Services
44,498

 
48,284

Total cost of revenue
75,363

 
86,988

Gross profit
90,685

 
174,038

Operating expenses:(1) (2) (3)
 
 
 
Research and development
99,314

 
102,309

Sales and marketing
161,106

 
203,161

General and administrative
34,902

 
55,907

Total operating expenses
295,322

 
361,377

Loss from operations
(204,637
)
 
(187,339
)
Interest income, net
2,218

 
2,756

Other income (expense), net
386

 
(547
)
Net loss before provision for income taxes
(202,033
)
 
(185,130
)
Provision for income taxes
(1,110
)
 
(2,187
)
Net loss
(203,143
)
 
$
(187,317
)
___________
(1)
Amounts include stock‑based compensation expense as follows:
 
Year Ended
January 31,
 
2016
 
2017
 
(in thousands)
Cost of revenue – subscription
$
3,363

 
$
1,426

Cost of revenue – services
4,301

 
1,803

Research and development
23,048

 
5,606

Sales and marketing
19,187

 
5,757

General and administrative
13,691

 
7,122

Total stockbased compensation expense
$
63,590

 
$
21,714

(2)
Amounts include amortization of acquired intangible assets as follows:
 
Year Ended
January 31,
 
2016
 
2017
 
(in thousands)
Cost of revenue – subscription
$
1,732

 
$
1,997

Sales and marketing
1,723

 
1,723

Total amortization of acquired intangible assets
$
3,455


$
3,720


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(3)
In January 2017, we donated 1,175,063 shares of 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, see Note 12 to our consolidated financial statements included elsewhere in this prospectus for further discussion.
The following table sets forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenue:
 
Year Ended
January 31,
 
2016
 
2017
Revenue:
 
 
 
Subscription
72
 %
 
77
 %
Services
28

 
23

Total revenue
100

 
100

Cost of revenue(1) (2): 
 
 
 
Subscription
18

 
15

Services
27

 
18

Total cost of revenue
45

 
33

Gross margin
55

 
67

Operating expenses(1) (2) (3):
 
 
 
Research and development
60

 
39

Sales and marketing
97

 
78

General and administrative
21

 
21

Total operating expenses
178

 
138

Loss from operations
(123
)
 
(72
)
Interest income, net
1

 
1

Other income (expense), net

 

Net loss before provision for income taxes
(122
)
 
(71
)
Provision for income taxes
(1
)
 
(1
)
Net loss
(123
)%
 
(72
)%
___________
(1)
Amounts include stock‑based compensation expense as a percentage of total revenue as follows:
 
Year Ended
January 31,
 
2016
 
2017
Cost of revenue – subscription
2
%
 
1
%
Cost of revenue – services
3

 
1

Research and development
14

 
2

Sales and marketing
11

 
1

General and administrative
8

 
3

Total stockbased compensation expense
38
%
 
8
%

63


(2)
Amounts include amortization of acquired intangible assets as a percentage of total revenue as follows:
 
Year Ended
January 31,
 
2016
 
2017
Cost of revenue – subscription
1
%
 
1
%
Sales and marketing
1

 

Total amortization of acquired intangible assets
2
%
 
1
%
(3)
As a percentage of revenue, the non‑cash expense recognized for the donation of common stock to the Cloudera Foundation for the year ended January 31, 2017 was 8%.
Year Ended January 31, 2016 and 2017
Revenue
 
Year Ended
January 31,
 
Change
 
2016
 
2017
 
Amount
 
%
 
(dollars in thousands)
Subscription
$
119,150

 
$
200,252

 
$
81,102

 
68
%
Services
46,898

 
60,774

 
13,876

 
30
%
Total revenue
$
166,048

 
$
261,026

 
$
94,978

 
57
%
As a percentage of total revenue:
 
 
 
 
 
 
 
Subscription
72
%
 
77
%
 
 
 
 
Services
28
%
 
23
%
 
 
 
 
Total revenue
100
%
 
100
%
 
 
 
 
The increase in subscription revenue was primarily attributable to volume driven increases in subscription sales to new and existing customers. Our net expansion rate for the period ended January 31, 2017 was 143%.
Our services revenue increased at a lower rate compared to the increase in our subscription revenue primarily due to our existing customers increasing experience with the technology and our efforts to develop relationships with partners and other system integrators, resulting in a shift of the provision of such services to these partners. Customers benefit from the increased choice in partners and system integrators, and we anticipate that our services revenue will continue to decrease as a percentage of total revenue in future periods.

64


Cost of Revenue, Gross Profit and Gross Margin
 
Year Ended
January 31,
 
Change
 
2016
 
2017
 
Amount
 
%
 
(dollars in thousands)
Cost of revenue:
 
 
 
 
 
 
 
Subscription
$
30,865

 
$
38,704

 
$
7,839

 
25
%
Services
44,498

 
48,284

 
3,786

 
9
%
Total cost of revenue
$
75,363

 
$
86,988

 
$
11,625

 
15
%
Gross profit
$
90,685

 
$
174,038

 
$
83,353

 
92
%
Gross margin:
 
 
 
 
 
 
 
Subscription
74
%
 
81
%
 
 
 
 
Services
5
%
 
21
%
 
 
 
 
Total gross margin
55
%
 
67
%
 
 
 
 
Cost of revenue, as a percentage of total revenue:
 
 
 
 
 
 
 
Subscription
18
%
 
15
%
 
 
 
 
Services
27
%
 
18
%
 
 
 
 
Total cost of revenue
45
%
 
33
%
 
 
 
 
The increase in cost of revenue for subscription was primarily due to an increase of $8.0 million in salaries and benefits related to growth in employee headcount to support our overall expansion in customers and an increase of $1.1 million in allocated shared costs, partially offset by a decrease of $1.9 million in stock based compensation expense mainly due to the tender offer in July 2015, which was not repeated in fiscal 2017.
Subscription gross margin improved from 74% to 81% in the year ended January 31, 2017 as compared to the same period a year ago. We expect subscription gross margin to decline in future periods due to the recording of stock based compensation expense related to RSUs vesting in connection with this offering and in the subsequent service period partially offset by improvement in economies of scale. Excluding the impact of stock based compensation expense, we would expect subscription gross margin to continue to improve.
The increase in cost of revenue for services was primarily due to an increase of $4.1 million in salaries and benefits related to growth in employee headcount and an increase of $1.3 million in fees to subcontractors as a result of higher demand of services by our customers, offset by a decrease of $2.5 million in stock based compensation expense mainly due to the tender offer in July 2015, which was not repeated in fiscal 2017.
Services gross margin improved from 5% to 21% in the year ended January 31, 2017 as compared to the same period a year ago. We expect services gross margin to decline due to the recording of stock based compensation expense related to the RSUs vesting in connection with this offering and in the subsequent service period partially offset by increased utilization of chargeable consultants.

65


Operating Expenses
 
Year Ended
January 31,
 
Change
 
2016
 
2017
 
Amount
 
%
 
(dollars in thousands)
Research and development
$
99,314

 
$
102,309