UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ___ to ___

Commission File Number 001-37825

Talend S.A.

(Exact name of registrant as specified in its charter)

France

(State or other jurisdiction of incorporation or organization)

5-7, rue Salomon de Rothschild

Suresnes, France

(Address of principal executive offices)

Not Applicable

(I.R.S. Employer Identification Number)

92150

(Zip Code)

+33 (0) 1 46 25 06 00

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American Depositary Shares, each representing one ordinary share, nominal value €0.08 per share	TLND	The NASDAQ Stock Market LLC
Ordinary shares, nominal value €0.08 per share*		The NASDAQ Stock Market LLC*

* Not for trading, but only in connection with the listing of the American Depositary Shares on the NASDAQ Stock Market LLC.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒  Yes  ☐  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒  Yes  ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

​If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  ☒

As of October 30, 2020, the registrant had 31,763,338 ordinary shares, nominal value of €0.08 per share, outstanding.

TALEND S.A.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Balance Sheets as of September 30, 2020 and December 31, 2019	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	8
	Notes to the Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibits	74
	Signatures	75

2

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).​

TALEND S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	September 30,		December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	160,527	$	177,075
Accounts receivable, net of allowance for doubtful accounts of $1,546 and $1,082, respectively	57,523		82,952
Contract acquisition costs	11,650		10,695
Other current assets	10,816		9,832
Total current assets	240,516		280,554
Non-current assets:
Contract acquisition costs	23,594		22,050
Operating lease right-of-use assets	36,603		27,821
Property and equipment, net	8,771		5,348
Goodwill	50,000		49,744
Intangible assets, net	10,171		14,018
Other non-current assets	5,377		4,382
Total non-current assets	134,516		123,363
Total assets	$	375,032	$	403,917
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	3,976	$	4,439
Accrued expenses and other current liabilities	36,522		41,182
Contract liabilities - deferred revenue, current	126,676		142,616
Operating lease liabilities, current	4,586		5,047
Short-term debt	—		227
Total current liabilities	171,760		193,511
Non-current liabilities:
Deferred income taxes	580		768
Other non-current liabilities	1,924		1,137
Contract liabilities - deferred revenue, non-current	11,764		17,807
Operating lease liabilities, non-current	33,726		24,252
Long-term debt	139,856		130,490
Total non-current liabilities	187,850		174,454
Total liabilities	359,610		367,965
Commitments and contingencies (Note 8)
STOCKHOLDERS' EQUITY
Ordinary shares, par value €0.08 per share; 31,760,727 and 31,017,268 shares authorized, issued and outstanding, respectively	3,272		3,205
Additional paid-in capital	350,777		309,988
Accumulated other comprehensive income	(362)		1,107
Other reserves	282		207
Accumulated losses	(338,547)		(278,555)
Total stockholders’ equity	15,422		35,952
Total liabilities and stockholders’ equity	$	375,032	$	403,917

The above condensed consolidated balance sheets should be read in conjunction with the accompanying notes.

3

TALEND S.A.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue
Subscriptions	$	65,985	$	54,952	$	187,779	$	157,432
Professional services	6,717		7,484		20,780		22,975
Total revenue	72,702		62,436		208,559		180,407
Cost of revenue
Subscriptions	10,553		7,976		27,524		23,782
Professional services	6,065		6,772		19,065		21,925
Total cost of revenue	16,618		14,748		46,589		45,707
Gross profit	56,084		47,688		161,970		134,700
Operating expenses
Sales and marketing	40,686		33,240		118,470		102,428
Research and development	16,836		15,552		50,409		46,987
General and administrative	16,796		12,163		47,448		34,191
Total operating expenses	74,318		60,955		216,327		183,606
Loss from operations	(18,234)		(13,267)		(54,357)		(48,906)
Interest income (expense), net	(2,063)		(631)		(5,790)		(637)
Other income (expense), net	(62)		396		203		(189)
Loss before benefit (provision) for income taxes	(20,359)		(13,502)		(59,944)		(49,732)
Benefit (provision) for income taxes	18		(9)		(48)		(48)
Net loss	$	(20,341)	$	(13,511)	$	(59,992)	$	(49,780)
Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.64)	$	(0.44)	$	(1.91)	$	(1.63)
Weighted-average shares outstanding used to compute net loss per share attributable to ordinary shareholders:	31,635		30,648		31,419		30,453

The above condensed consolidated statements of operations should be read in conjunction with the accompanying notes.

4

TALEND S.A.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net loss	$	(20,341)	$	(13,511)	$	(59,992)	$	(49,780)
Other comprehensive gain (loss)
Foreign currency translation adjustment	(995)		730		(1,469)		871
Total comprehensive loss	$	(21,336)	$	(12,781)	$	(61,461)	$	(48,909)

The above condensed consolidated statements of comprehensive loss should be read in conjunction with the accompanying notes.​

5

TALEND S.A.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

	Three Months Ended September 30, 2020
	Ordinary shares			Additional paid-in capital		Accumulated other comprehensive income		Other reserves		Accumulated loss		Total equity
	Shares	Amount
Balance as of June 30, 2020	31,536,529	$	3,250	$	335,571	$	633	$	272	$	(318,206)	$	21,520
Net loss for the period	—	—		—		—		—		(20,341)		(20,341)
Other comprehensive loss	—	—		—		(995)		—		—		(995)
Restricted stock units reserve	—	—		(10)		—		10		—		—
Shares issued from restricted stock unit vesting	102,406	10		(10)		—		—		—		—
Exercise of stock awards	45,722	4		838		—		—		—		842
Issuance of ordinary shares in connection with employee stock purchase plan	76,070	8		2,354		—		—		—		2,362
Share-based compensation	—	—		12,034		—		—		—		12,034
Balance as of September 30, 2020	31,760,727	$	3,272	$	350,777	$	(362)	$	282	$	(338,547)	$	15,422

	Three Months Ended September 30, 2019
	Ordinary shares			Additional paid-in capital		Accumulated other comprehensive income		Other reserves		Accumulated loss		Total equity
	Shares	Amount
Balance as of June 30, 2019	30,558,748	$	3,164	$	267,281	$	545	$	213	$	(253,355)	$	17,848
Net loss for the period	—	—		—		—		—		(13,511)		(13,511)
Other comprehensive loss	—	—		—		730		—		—		730
Equity component of 2024 Notes, net of issuance costs	—	—		20,793		—		—		—		20,793
Restricted stock units reserve	—	—		6		—		(6)		—		—
Shares issued from restricted stock unit vesting	43,017	4		(4)		—		—		—		—
Exercise of stock awards	107,997	10		1,377		—		—		—		1,387
Issuance of ordinary shares in connection with employee stock purchase plan	72,478	7		2,462		—		—		—		2,469
Share-based compensation	—	—		9,039		—		—		—		9,039
Balance as of September 30, 2019	30,782,240	$	3,185	$	300,954	$	1,275	$	207	$	(266,866)	$	38,755

6

TALEND S.A.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(in thousands, except share data)

(unaudited)

	Nine Months Ended September 30, 2020
	Ordinary shares			Additional paid-in capital		Accumulated other comprehensive income		Other reserves		Accumulated loss		Total equity
	Shares	Amount
Balance as of December 31, 2019	31,017,268	$	3,205	$	309,988	$	1,107	$	207	$	(278,555)	$	35,952
Net loss for the period	—	—		—		—		—		(59,992)		(59,992)
Other comprehensive loss	—	—		—		(1,469)		—		—		(1,469)
Restricted stock units reserve	—	—		(75)		—		75		—		—
Shares issued from restricted stock unit vesting	379,166	34		(34)		—		—		—		—
Exercise of stock awards	215,248	19		2,676		—		—		—		2,695
Issuance of ordinary shares in connection with employee stock purchase plan	149,045	14		4,635		—		—		—		4,649
Share-based compensation	—	—		33,587		—		—		—		33,587
Balance as of September 30, 2020	31,760,727	$	3,272	$	350,777	$	(362)	$	282	$	(338,547)	$	15,422

	Nine Months Ended September 30, 2019
	Ordinary shares			Additional paid-in capital		Accumulated other comprehensive income		Other reserves		Accumulated loss		Total equity
	Shares	Amount
Balance as of December 31, 2018	30,158,374	$	3,128	$	244,878	$	404	$	138	$	(217,001)	$	31,547
Adjustment on initial application of ASC 842	—	—		—		—		—		(85)		(85)
Adjusted balance as of January 1, 2019	30,158,374	3,128		244,878		404		138		(217,086)		31,462
Net loss for the period	—	—		—		—		—		(49,780)		(49,780)
Other comprehensive gain	—	—		—		871		—		—		871
Equity component of 2024 Notes, net of issuance costs	—	—		20,793		—		—		—		20,793
Restricted stock units reserve	—	—		(69)		—		69		—		—
Shares issued from restricted stock unit vesting	185,645	17		(17)		—		—		—		—
Exercise of stock awards	306,844	28		4,354		—		—		—		4,382
Issuance of ordinary shares in connection with employee stock purchase plan	131,377	12		4,730		—		—		—		4,742
Share-based compensation	—	—		26,285		—		—		—		26,285
Balance as of September 30, 2019	30,782,240	$	3,185	$	300,954	$	1,275	$	207	$	(266,866)	$	38,755

The above condensed consolidated statements of stockholders’ equity should be read in conjunction with the accompanying notes.​

7

TALEND S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)​

	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net loss for the period	$	(59,992)	$	(49,780)
Adjustments to reconcile net loss to net cash (used in) from operating activities:
Depreciation	2,453		2,082
Amortization of intangible assets	3,978		3,974
Amortization of debt discount and issuance costs	3,918		411
Amortization of contract acquisition costs	8,843		7,605
Non-cash operating lease cost	4,890		4,264
Unrealized (gain) loss foreign exchange	(290)		34
Accrued interest on convertible debt	2,067		225
Share-based compensation	33,587		26,285
Changes in operating assets and liabilities:
Accounts receivable	25,950		14,377
Contract acquisition costs	(11,048)		(10,072)
Other assets	(1,660)		(3,580)
Accounts payable	(581)		1,871
Accrued expenses and other current liabilities	(6,688)		(2,927)
Contract liabilities - deferred revenue	(23,566)		(6,951)
Operating lease liabilities	(4,845)		(4,224)
Net cash used in operating activities	(22,984)		(16,406)
Cash flows from investing activities:
Acquisition of property and equipment	(5,652)		(2,064)
Net cash used in investing activities	(5,652)		(2,064)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs	—		149,145
Proceeds from issuance of ordinary shares related to exercise of stock awards	2,695		4,382
Proceeds from issuance of ordinary shares related to employee stock purchase plan	4,649		4,742
Repayment of borrowings	(660)		(117)
Net cash from financing activities	6,684		158,152
Net decrease in cash and cash equivalents	(21,952)		139,682
Cash and cash equivalents at beginning of the period	177,075		34,104
Effect of exchange rate changes on cash and cash equivalents	5,404		(1,822)
Cash and cash equivalents at end of the period	$	160,527	$	171,964

The above condensed consolidated statements of cash flows should be read in conjunction with the accompanying notes.

8

1. Organization and Summary of Significant Accounting Policies​

Business​

Talend S.A. (“the Company”) is a leader in data integration and data integrity. Talend’s software platform, Talend Data Fabric, integrates data and applications in real-time across modern big data and cloud environments, as well as traditional systems, allowing organizations to develop a unified view of their business and customers. The Company, organized under the laws of France in 2005, has its registered office located at 5-7, rue Salomon de Rothschild, 92150 Suresnes, France.​

Basis of presentation​

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the consolidated balance sheets as of September 30, 2020 and December 31, 2019, the consolidated statements of operations, the consolidated statements of comprehensive loss and the consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2020 and September 30, 2019, and the consolidated statements of cash flows for the nine months ended September 30, 2020 and September 30, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.​

These unaudited condensed consolidated financial statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 17, 2020.​

Certain prior year financial information in the consolidated statement of cash flows has been reclassified to conform with current year presentation. In addition, an immaterial reclassification of unbilled revenue between other assets and accounts receivable has been made in our prior year consolidated balance sheet to conform to the current period presentation. These reclassifications had no impact on net loss, stockholders’ equity, operating cash flows or total cash flows as previously reported.​

Use of estimates​

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates include, but are not limited to, revenue recognition (including allocation of the transaction price to separate performance obligations and the determination of the stand-alone selling price), the amortization period for contract acquisition costs, contract period of leases, fair value of acquired intangible assets and goodwill, and share-based compensation expense. These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ significantly from these estimates.​

Summary of significant accounting policies​

Except for the accounting policies described below, there have been no changes to the Company’s significant accounting polices disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 17, 2020, that have had a material impact on the Company’s condensed consolidated financial statements and related notes.​

Recently adopted accounting standards​

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and in November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. ASU 2019-11 requires entities that did not adopt the amendments in ASU 2016-13 as of November 2019 to adopt ASU 2019-11, and contains the same effective dates and transition requirements as ASU 2016-13. ASU 2016-13 replaced the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of

9

the effective date to align existing credit loss methodology with the new standard. The Company adopted ASU 2016-13 effective January 1, 2020 and the adoption did not have a material impact on our consolidated financial statements.​

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which modifies the goodwill impairment test and requires an entity to write down the carrying value of goodwill for the amount by which the carrying amount of a reporting unit exceeds its fair value. The Company adopted ASU 2017-04 effective January 1, 2020 and the adoption did not have a material impact on our consolidated financial statements.​

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. The Company adopted ASU 2018-15 effective January 1, 2020 and the adoption did not have a material impact on our consolidated financial statements.​

Accounting standards issued not yet adopted​

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for convertible instruments by removing the separation models in Subtopic 470-20 that required embedded conversion features to be separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The new standard also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. ASU 2020-06 is effective for the Company beginning January 1, 2022, although early adoption is permitted for fiscal periods beginning January 1, 2021. The new standard can be adopted using either a modified or full retrospective transition method. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements.

2. Revenue from Contracts with Customers​

Contract Liabilities​

Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. These liabilities are classified as current and non-current contract liabilities – deferred revenue in the consolidated balance sheet. Deferred revenue, including current and non-current balances, was $138.4 million and $160.4 million as of September 30, 2020 and December 31, 2019, respectively. Revenue recognized from the deferred revenue balances at the beginning of each period was $52.1 million and $48.6 million for the three months ended September 30, 2020 and 2019, respectively. Revenue recognized from the deferred revenue balances at the beginning of each period was $123.3 million and $100.6 million for the nine months ended September 30, 2020 and 2019, respectively.​

Remaining Performance Obligations​

The Company’s contracts with customers include amounts allocated to performance obligations of $210.7 million that will be satisfied at a later date. As of September 30, 2020, $153.0 million of deferred revenue and backlog is expected to be recognized from remaining performance obligations over the next 12 months, and approximately $57.7 million thereafter.​

Contract assets​

The Company may record assets for amounts related to performance obligations that are satisfied but not yet billed and/or collected. These assets, or unbilled revenue, are classified as accounts receivable, net in the consolidated balance sheet. Unbilled revenue was $1.9 million and $2.1 million as of September 30, 2020 and December 31, 2019, respectively.

Contract acquisition costs

The Company recognizes sales commissions earned by the Company’s sales force that are considered incremental and recoverable costs of obtaining a contract with a customer as contract acquisition costs in the consolidated balance sheet. Contract

10

acquisition costs, including current and non-current balances, were $35.2 million and $32.7 million as of September 30, 2020 and December 31, 2019, respectively. Amortization expense of contract acquisition costs was $3.1 million and $2.6 million for the three months ended September 30, 2020 and 2019, respectively. Amortization expense of contract acquisition costs was $8.8 million and $7.6 million for the nine months ended September 30, 2020 and 2019, respectively. There were no impairments of assets related to Company’s contract acquisition costs during the period ended September 30, 2020.

Disaggregation of Revenues​

The following table sets forth the Company’s total revenue by region for the periods indicated (in thousands). The revenues by geographic region were determined based on the country where the sale took place.​

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Americas	$	33,654	$	29,837	$	96,194	$	83,816
EMEA	30,408		26,739		89,146		80,504
Asia Pacific	8,640		5,860		23,219		16,087
Total revenue	$	72,702	$	62,436	$	208,559	$	180,407

Revenues from the Company’s country of domicile, based on sales revenue recognized from customers in France, totaled $10.6 million and $8.6 million for the three months ended September 30, 2020 and 2019, respectively, and $31.8 million and $27.0 million for the nine months ended September 30, 2020 and 2019, respectively.​

3. Net Loss Per Share​

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares outstanding during the period. In periods of net income, diluted net income per share is computed by dividing net income for the period by the basic weighted-average number of shares plus any dilutive potential ordinary shares outstanding during the period. As the Company was in a loss position for both of the three and nine months ended September 30, 2020 and 2019, the diluted loss per share is equal to basic loss per share because the effects of potentially dilutive shares, which include shares from share-based awards and convertible senior notes, were anti-dilutive.

During 2019, the Company issued 1.75% Convertible Senior Notes due September 1, 2024 (the “2024 Notes”) (see Note 6, Debt, for more details). Since the Company expects to settle the principal amount of the outstanding 2024 Notes in a combination of cash and shares, the Company uses the if-converted method for calculating any potential dilutive effect of the conversion spread on the diluted net income per ordinary share when the average market price of the Company’s ordinary shares, each represented by an American Depositary Share ("ADS"), for a given period exceeds the initial conversion price of €51.75 per share. This situation has not occurred as of September 30, 2020.​

The net loss and weighted average number of shares used in the calculation of basic and diluted earnings per share are as follows (in thousands, except per share data):​

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator (basic and diluted):
Net loss	$	(20,341)	$	(13,511)	$	(59,992)	$	(49,780)
Denominator (basic and diluted):
Weighted-average ordinary shares outstanding	31,635		30,648		31,419		30,453
Basic and diluted net loss per share	$	(0.64)	$	(0.44)	$	(1.91)	$	(1.63)

4. Fair Value Measurements​

The Company reports assets and liabilities recorded at fair value on the Company’s consolidated balance sheets based upon the level of judgment associated with inputs used to measure their fair value. Hierarchical levels that are directly related to the amount of judgment associated with the inputs to the valuation of these assets or liabilities are as follows:

•Level 1: observable quoted prices (unadjusted) in active markets for identical financial assets or liabilities.

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•Level 2: inputs other than quoted prices (other than level 1) in active markets, that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices).

•Level 3: unobservable inputs that are supported by little or no market data, and may require significant management judgment or estimation.​​​

The fair value measurement level within the fair value hierarchy for a particular asset or liability is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.​

Financial instruments not measured at fair value on the Company's consolidated balance sheet, but which require disclosure of their fair values include: cash and cash equivalents, accounts receivable and certain other receivables, deposits, accounts payable and certain other payables and the 2024 Notes. The fair values of these financial instruments, other than the 2024 Notes, are deemed to approximate their carrying amount.​

The fair values of cash and cash equivalents, accounts receivable and certain other receivables, deposits, accounts payable and certain other payables are categorized as Level 1. The fair value of the 2024 Notes was categorized as Level 2 and was estimated based on a discounted cash flow method using a market interest rate for similar debt. As of September 30, 2020, the fair value of the 2024 Notes was $144.2 million.​

There were no transfers between levels of the fair value hierarchy during the nine month periods ended September 30, 2020 or 2019.

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5. Balance Sheet Components​

Accrued expenses and other liabilities consisted of the following (in thousands):​

	September 30, 2020		December 31, 2019
Accrued compensation and benefits	$	25,569	$	24,201
VAT payable	3,259		6,238
Other taxes	34		502
Contingent liabilities	1,152		578
Other current liabilities	6,508		9,663
Accrued expenses and other liabilities	$	36,522	$	41,182

Property and equipment, net consisted of the following (in thousands):​

	September 30, 2020		December 31, 2019
Computer equipment and software	$	12,031	$	8,587
Fixtures and fittings	3,268		2,312
Leasehold improvements	5,612		3,858
Property and equipment, gross	20,911		14,757
Less: accumulated depreciation	(12,140)		(9,409)
Property and equipment, net	$	8,771	$	5,348

Depreciation expense related to property and equipment was $0.8 million and $0.7 million for the three months periods ended September 30, 2020 and 2019, respectively, and $2.5 million and $2.1 million for the nine months ended September 30, 2020 and 2019, respectively.

Intangible assets as of September 30, 2020 and December 31, 2019 included the following (in thousands):​

​	September 30, 2020						December 31, 2019						​
​	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net		Weighted Average Remaining Useful Life
Customer relationships	$	5,049	$	(4,912)	$	137	$	4,975	$	(3,600)	$	1,375	1 year
Acquired developed technology	19,915		(9,881)		10,034		19,555		(6,912)		12,643		4 years
Total	$	24,964	$	(14,793)	$	10,171	$	24,530	$	(10,512)	$	14,018	​

Amortization expense for intangible assets was $1.3 million for both of the three months periods ended September 30, 2020 and 2019, respectively, and $4.0 million for both of the nine months ended September 30, 2020 and 2019, respectively.​

The following table presents the estimated future amortization expense related to intangible assets as of September 30, 2020 (in thousands):​

​	Amount
Remainder of 2020	$	1,065
2021	3,708
2022	3,498
2023	1,900
Thereafter	—
Total amortization expense	$	10,171

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6. Debt

Convertible Senior Notes due September 1, 2024

In September 2019, the Company issued an aggregate principal amount of €125.0 million of the 2024 Notes and an additional €14.8 million pursuant to the partial exercise of the option to purchase additional 2024 Notes granted to the initial purchasers, in a private placement, pursuant to an exemption from the registration requirements afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), to qualified institutional buyers (as defined in Rule 144A promulgated under the Securities Act). The net proceeds from the issuance, after deducting initial purchaser discounts and debt issuance costs of €6.0 million, were €133.8 million. The 2024 Notes mature on September 1, 2024, unless earlier repurchased, redeemed or converted, and bear interest at a fixed rate of 1.75% per year payable semi-annually on March 1 and September 1 of each year, beginning on March 1, 2020. Each €1,000 of principal amount of the 2024 Notes will initially be convertible, subject to adjustment upon the occurrence of specified events, into 19.3234 ADSs, corresponding to 19.3234 of the Company’s ordinary shares per €1,000 principal amount of the 2024 Notes as of the date hereof, which initial conversion rate is equivalent to an initial conversion price of approximately €51.75 per ADS calculated on the basis of the closing price of the Company’s ADSs of $38.72 and a euro to U.S. Dollar exchange rate of €1 to $1.1036 on the pricing date of the 2024 Notes. Refer to Note 15, Debt, of the Company’s consolidated financial statements for the year ended December 31, 2019 for details of the issuance of the 2024 Notes.

As of September 30, 2020, none of the conditions permitting the holders of the 2024 Notes to early convert had been met. Therefore, the 2024 Notes were classified as long-term debt for such period.

The net carrying amount of the 2024 Notes was as follows as of September 30, 2020 and December 31, 2019 (in thousands):​

	September 30, 2020		December 31, 2019
Principal	$	163,633	$	156,716
Unamortized debt discount	(18,944)		(21,227)
Unamortized debt issuance costs	(4,833)		(5,443)
Net carrying amount	$	139,856	$	130,046

The net carrying amount of the equity component of the 2024 Notes was as follows as of September 30, 2020 and December 31, 2019 (in thousands):

	September 30, 2020		December 31, 2019
Gross amount	$	21,866	$	21,866
Allocated debt issuance costs	(945)		(945)
Net carrying amount	$	20,921	$	20,921

Interest expense related to the 2024 Notes was as follows during the three and nine months ended September 30, 2020 and 2019 (in thousands):

​	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Contractual interest expense	$	715	$	225	$	2,067	$	225
Amortization of debt discount	1,093		323		3,097		323
Amortization of issuance costs	285		88		821		88
Total	$	2,093	$	636	$	5,985	$	636

7. Equity Incentive Plans​

In April 2017, the Company adopted the 2017 Stock Option Plan (the “2017 Plan”), primarily for the purpose of granting stock options to employees and employee warrants BSPCE (“bons de souscription de parts de créateur d'entreprise” or “employee warrants (BSPCE)”) to employees who are French tax residents. In August 2019, the Company adopted the 2019 Free Share Plan, primarily for the purpose of granting Restricted Stock Units (“RSUs”) to employees. In June 2019, the Company’s shareholders also delegated authority to the Company’s board of directors to grant warrants (“bons de souscription d'actions” or

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“warrants (BSA)”) to the Company’s directors and consultants. In June 2020, the Company's shareholders delegated authority to the Company's board of directors to grant stock options and RSUs to employees, and warrants (BSA) to the company's directors and consultants, superseding and replacing the previous delegations of authority to grant equity awards. Consequently, in August 2020, the Company adopted the 2020 Free Share Plan (the "Free Share Plan") and the 2020 Stock Option Plan (the "Stock Option Plan"). The Free Share Plan provides for the grant of RSUs to the Company's employees and employees of any company or group in which the Company holds, directly or indirectly, 10% of the share capital or voting rights as of the date of the grant. The Stock Option Plan provides for the grant of stock options to the Company's employees and directors. The Company no longer grants employee warrants (BSPCE) as the Company no longer meets the eligibility criteria for granting BSPCEs.​

As of September 30, 2020, there were 2,054,617 ordinary shares available for future grants of stock options, RSUs and warrants (BSA) under the Company’s share pool reserve.​

Stock options and warrants​

Most of our stock options and employee warrants (BSPCE) vest over four years, with 25% on the one year anniversary of the grant and 1/16th on a quarterly basis thereafter. Options have a contractual life of ten years and generally individuals must continue to provide services to the Company in order to vest. Employee warrants (BSPCE) are a specific type of option to acquire ordinary shares available to qualifying companies in France that meet certain criteria. Otherwise, employee warrants (BSPCE) function in the same manner as stock options.​

In general, warrants (BSA) vest quarterly over a one year period. In addition to any exercise price payable by a holder upon the exercise of any warrants (BSA), pursuant to the relevant shareholders' delegation to the board, such warrants need to be subscribed for a price at least equal to 5% of the volume weighted average price of the last five trading sessions on the Nasdaq Global Market preceding the date of allocation of the BSA by the board of directors. Otherwise, warrants (BSA) function in the same manner as stock options.​

The following table summarizes the activity and related weighted-average exercise prices (“WAEP”) and weighted-average remaining contractual term (“WACT”) of the Company’s stock options and warrants for the nine months ended September 30, 2020 (in thousands, except exercise price per option):​

	Stock options outstanding	BSPCE warrants outstanding	BSA warrants outstanding	WAEP per share		WACT (in years)	Aggregate intrinsic value
Balance as of December 31, 2019	1,215	155	210	$	14.61	5.1	$	40,809
Granted	746	—	41	33.41
Exercised	(192)	(23)	—	12.71
Forfeited	(47)	(3)	(11)	33.63
Balance as of September 30, 2020	1,722	129	240	$	21.82	6.1	$	37,203
Vested and expected to vest as of September 30, 2020	1,576	127	237	$	21.00	5.9	$	36,227
Exercisable as of September 30, 2020	1,056	125	199	$	15.86	4.4	$	33,240

The total intrinsic values of stock options and warrants exercised during the period ended September 30, 2020 was $5.4 million.​

Restricted Stock Units (RSUs)

RSUs vest upon either performance-based or service-based criteria. ​

Performance-based RSUs are typically granted such that they vest upon the achievement of certain software subscription sales targets, during a specified performance period, subject to the satisfaction of certain time-based service criteria. Compensation expense from these awards is equal to the fair market value of the Company’s ordinary shares on the date of grant and is recognized over the remaining service period based on the probable outcome of achievement of the financial metrics used in the specific grant’s performance criteria. Management’s estimate of the number of shares expected to vest is based on the anticipated achievement of the specified non-market performance criteria, which are assessed at each reporting period.​

In general, service-based RSUs vest over a four years period, with 25% vesting on the one year anniversary of the grant and equal quarterly installments thereafter.​

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A summary of RSU activity under all of the plans as of September 30, 2020 is presented in the following table (in thousands, except the weighted-average grant date fair value per RSU):​

	Number of service- based RSUs	Number of performance- based RSUs	Weighted-average grant date fair value
Balance as of December 31, 2019	1,924	384	$	44.96
Granted	1,144	411	37.88
Vested and released	(341)	(39)	46.75
Forfeited	(258)	(216)	43.21
Balance as of September 30, 2020	2,469	540	$	41.97
Expected to vest as of September 30, 2020	2,013	321	$	42.49

​Employee Stock Purchase Plan​

In the fourth quarter of 2017, the Company established the 2017 Employee Stock Purchase Plan (the “ESPP”), which was amended and restated in August 2020. In June 2020, the Company's shareholders authorized 550,000 shares for future issuance under the ESPP, which supersedes and replaces the shares previously available for issuance under ESPP. The ESPP allows the Company’s employees to purchase ADSs, with each ADS representing one ordinary share of the Company, at a discount through payroll deductions up to 15% of their eligible compensation, subject to any plan limitations. The ESPP has two consecutive offering periods of approximately six months in length during the year and the purchase price of the ADSs is 85% of the lower of the fair value of the Company’s ADSs on the first trading day or on the last trading day of the offering period. A total of 473,930 ADSs are available for sale under the ESPP as of September 30, 2020. As of September 30, 2020, $0.8 million has been withheld on behalf of employees for a future purchase under the ESPP and is recorded in accrued compensation benefits.

Compensation expense​

Cost of revenue and operating expenses include employee share-based compensation expense as follows (in thousands):​

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Cost of revenue - subscriptions	$	1,313	$	773	$	2,592	$	2,301
Cost of revenue - professional services	574		472		1,389		1,602
Sales and marketing	4,046		3,030		10,237		7,663
Research and development	1,413		2,680		7,085		8,098
General and administrative	4,688		2,084		12,284		6,621
Total share-based compensation expense	$	12,034	$	9,039	$	33,587	$	26,285

During fiscal year 2019, the Company decreased the estimated forfeiture rate as part of the Company’s annual assessment of the assumptions used in the calculation of share-based compensation expense. The adjustment resulted in higher expense recognized in periods subsequent to March 31, 2019.​

As of September 30, 2020, the Company had $56.0 million of total unrecognized share-based compensation expense relating to unvested stock options, employee warrants (BSPCE), warrants (BSA) and RSUs, which are expected to be recognized over a weighted-average period of approximately 1.8 years.

8. Commitments and Contingencies​

Legal Proceedings​

In the ordinary course of business, the Company may be involved in various legal proceedings and claims related to intellectual property rights, commercial disputes, employment and wage and hour laws, alleged securities laws violations or other investor claims and other matters. For example, the Company has been, and may in the future be, put on notice and sued by third parties for alleged infringement of their proprietary rights, including patent infringement. The Company evaluates these claims and lawsuits with respect to their potential merits, the Company’s potential defenses and counterclaims, and the expected effect on it of defending the claims and a potential adverse result. The Company is not presently a party to any legal proceedings that in

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the opinion of its management, if determined adversely to it, would have a material adverse effect on its business, financial condition or results of operations.​

The Company accrues estimates for resolution of legal proceedings when losses are probable and estimable. Although the results of legal proceedings and claims are unpredictable, the Company believes that there is less than a reasonable possibility that the Company will incur a material loss with respect to such legal proceedings and claims. As a result, the Company has not recorded an accrual for such contingencies as of September 30, 2020.​

9. ​Income Tax

The Company provides for income taxes in interim periods based on the estimated annual effective tax rate for the year, adjusting for discrete items in the quarter in which they arise. The annual effective tax rate after discrete items was 0.1% and (1.0)% for the three months ended September 30, 2020 and 2019, respectively, and (0.1)% and (0.1)% for the nine months ended September 30, 2020 and 2019, respectively.​

The 2020 and 2019 annual effective tax rates differed from the French statutory income tax rate of 28% for 2020 and 2019, primarily due to a valuation allowance on current year losses in most jurisdictions.​

The Company files income tax returns in France, the U.S. federal jurisdiction, many U.S. states, as well as many foreign jurisdictions. The tax years 2005 to 2019 remain open to examination by the various jurisdictions in which the Company is subject to tax. Fiscal years outside the normal statutes of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized.​

10. Related Party Transactions​

As part of the Restlet SAS acquisition, the Company assumed debt totaling $1.2 million related to advances for research and development projects from Bpifrance to Restlet SAS. The debt was completely paid during the second quarter of fiscal year 2020. There are no other material related party transactions that require disclosure.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “may”, “believe”, “can”, “intend”, “potential”, “designed to”, “expect”, “anticipate”, “estimate”, “predict”, “plan”, “targets”, “projects”, “likely”, “will”, “would”, “could”, “potential”, “continue”, “should”, “contemplate”, or similar expressions or phrases or the negative of these and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about:

•Our future financial performance, including our revenue, cost of revenue, gross profit or gross margin, operating expenses, expectations about our future cash flow, and ability to achieve and maintain profitability;

•The sufficiency of our cash and cash equivalents to meet our liquidity needs;

•Our expectation that as organizations adopt and scale out deployments of modern data technologies such as cloud data warehouses, machine learning, and big data processing, they will continue to use Talend to facilitate the integration of these technologies within their IT environments;

•Our plans to expand our non-U.S. presence to address the needs of our global customers and to acquire customers in new geographies;

•Our plans to invest in new product development, adding new features and services, increasing functionality, and enhancing our integration cloud infrastructure, which will increase research and development expenses in absolute dollars;

•Our plans to continue to invest additional resources in our cloud-based offerings and services and increased cost of third-party cloud infrastructure and hosting;

•The sufficiency of our security measures to protect our own proprietary and confidential information, as well as the personal information, personal data, and confidential information that we otherwise obtain, including confidential information we may obtain through customer usage;

•Our expectation that, over time, more of our existing customers will have subscription contracts with Annual Recurring Revenue, or ARR, of $0.1 million or more;

•Our expectation that our dollar-based net expansion rate may decline as we scale our business and as a result of IT spending constraints in the current economic environment;

•Our expectation that our gross margin may fluctuate from period to period as a result of changes in the mix of our subscription and professional services revenue, and may decline as cloud-based offerings represent a growing portion of our total revenues;

•Our expectation that our cloud-based offerings will grow as a percentage of revenue;

•Our expectation that professional services revenue will decline as we work with more systems integrators and as our cloud-based offerings increase;

•Our expectation that we will continue to invest in sales and marketing by expanding our global promotional activities, building brand awareness, attracting new customers, and sponsoring additional marketing events, which may affect our sales and marketing costs in a particular quarter;

•Our expectation that research and development expenses will increase in absolute dollars as we invest in building the necessary employee and system infrastructure required to enhance existing and support development of new technologies and the integration of acquired businesses and technologies;

•Our plan to invest in training and retention of our sales team;

•Our expectations about changes in our general and administrative expenses as we invest in our infrastructure and incur additional employee-related costs and professional fees related to the growth of our business;

•Our expectation regarding the impact of risks related to foreign currency exchange rates and whether we will enter into derivative or hedging transactions;

•Our expectations regarding the impact of the novel coronavirus, or COVID-19 pandemic on economic activity, IT spending, financial markets, and our customers, partners, and employees; and

•Our expectation that our operating expenses will increase for the foreseeable future as we continue to develop our technology, enhance our product and services offerings, broaden our installed customer base, expand our sales channels, expand our operations and hire additional employees.​

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We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report. You should read thoroughly this Quarterly Report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect.​

Actual results, levels of activity, performance or achievements may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including but not limited to: general economic conditions, including the impact on economic activity of the COVID-19 pandemic; the impact of COVID-19 on demand for our solutions, on our operations, and on our partners, vendors, customers, and employees; our ability to achieve profitability or positive cash flows; our ability to manage future growth and improve our systems and processes; our ability to increase sales of our solutions to new customers and sell additional products to existing customers; the growth and expansion of the market for our cloud-based offerings; our ability to successfully manage our transition to cloud-based products and a cloud oriented sales model; the impact of the transition to cloud on our professional services revenue; our ability to successfully manage our leadership transition; our ability to successfully expand into our existing markets and into new domestic and international markets; the length and predictability of our sales cycle; our ability to renew existing customers’ subscriptions; the growth of the market for cloud-based offerings; our ability to maintain or improve our competitive position; our ability to predict, prepare for, and respond to rapidly evolving technological and market developments; our ability to raise additional capital or generate the capital necessary to expand our operations and invest in new products; our ability to satisfy customer demands or to achieve increased market acceptance of our cloud solutions; our ability to deliver high-quality professional services and customer support; the ability of our product offerings to operate with third-party products and services and our customers’ existing infrastructure; our ability to hire, train and retain highly skilled and qualified employees, including senior level managers and engineers, and our ability to effectively expand and train our sales force; our ability to maintain relations with strategic partners and sales channel partners; our ability to sustain and expand our international business; the seasonality of our business; our ability to protect our proprietary technology and intellectual property rights; any disruption in or fraudulent or unauthorized access to our information technology systems and production environment, including a breach of cybersecurity; our ability to comply with existing and modified or new government laws and regulations, including privacy, security, data protection, export and import controls, anti-bribery, anti-corruption and anti-money laundering, and other laws and regulations; fluctuations in currency exchange rates; natural, man-made and other disasters, including pandemics; exposure to political, economic and social events in France, the United States, United Kingdom, China, and other jurisdictions in which we operate and have customers; our estimates and judgments relating to our critical accounting policies; and changes in accounting principles generally accepted in the United States.​

We qualify all of our forward-looking statements by these cautionary statements. Other sections of this Quarterly Report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, 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. Furthermore, if any one or more of the assumptions underlying the market data turns out to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.​

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this Quarterly Report relate only to events or information as of the date on which the statements are made in this Quarterly Report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

​In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements, related notes and other financial information included elsewhere in this Quarterly Report. The following discussion contains forward-looking statements, including, without limitation, our expectations and statements regarding our outlook and future revenue, expenses, results of operations, liquidity, plans, strategies and objectives of management and any assumptions underlying any of the foregoing. Our actual results could differ materially from those discussed in the forward-looking statements. Our forward-looking statements and factors that might cause future actual results to differ materially from our recent results or those projected in the forward-looking statements include, but are not limited to, those discussed in Part II, Item 1A. “Risk Factors”.

Overview

Our mission is to provide data intelligence for all users by delivering trusted data when and where is it needed. We are a key enabler of the data-driven enterprise where data is a strategic asset powering business. Talend Data Fabric allows customers in any industry to improve business performance by using their data to create new insights and to automate business processes. Our customers rely on our software to better understand their customers, offer new applications and services, and improve operations.

We had 1,376 employees as of September 30, 2020 and we plan to continue to grow our employee base to address the needs of our global customers as well as to acquire customers in new geographies. We also plan to continue to invest in new product development.

Our business model combines our open source approach with self-service trials of our commercial software and direct sales. We have been able to rapidly expand awareness and usage of our products through our free open source versions and self-service trials. This enables developers and users to download and try the free and paid versions of our products, creating sales leads for our more feature-rich commercial solutions. Users of our open source products often catalyze adoption of our commercial solutions by their organizations, primarily to benefit from enterprise-grade features that include the scaling out of our offering to a larger set of users, among others. Following an initial deployment of our paid subscription products, organizations often purchase more subscriptions or expand usage to additional products from our fully integrated suite after realizing the benefits of additional features or scale. We sell our product offerings as subscriptions based primarily on the number of users of our platform.

We generate the majority of our revenue from subscriptions of our commercial solution Talend Data Fabric. We primarily sell annual contracts billed in advance. Our subscription offering includes enterprise-grade features and capabilities to scale our solutions across production environments and customer infrastructures. These product features and capabilities include scheduling, management and monitoring of data integration flows, collaboration across a team of users and technical support. We also provide professional services to implement our solutions. Our subscription revenue represents a significant portion of our revenue, growing from 86% of our total revenue in the year ended December 31, 2018, to 88% in the year ended December 31, 2019, to 90% in the nine months ended September 30, 2020.

COVID-19 Update

COVID-19 was first reported in December 2019, and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level, and the WHO characterized COVID-19 as a pandemic on March 11, 2020. Across the United States and the world, national and local governments instituted measures in an effort to control the spread of COVID-19.

Our first priority remains ensuring the safety and health of our employees, customers and others with whom we partner in conducting our business. In response to the pandemic, and in line with guidance provided by government agencies and international organizations, we temporarily closed our offices and requested our employees work remotely, suspended all non-essential travel and activated our business continuity plan so we can continue to support customers while protecting our employees. We continue, in the vast majority of instances, to operate our business remotely. We have also moved all in-person customer-facing events to virtual ones. To date, the pandemic, which has affected nearly all regions around the world, and preventive measures taken to contain or mitigate the pandemic, are adversely impacting economic activity and have caused and may continue to cause significant disruptions in the financial markets. The COVID-19 pandemic and resulting economic uncertainty has negatively impacted our business and we anticipate that it will continue to have an adverse impact on our results

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of operations and financial performance. We cannot predict with any certainty the degree to, or the time period over, which we will be affected by this pandemic.

While we believe the pandemic has had certain impacts on our business, we do not believe there has been, nor are we anticipating, a material impact from the effects of the pandemic on our operations, financial condition, liquidity and capital and financial resources; however, the situation is rapidly changing and hard to predict and actual results may differ materially from our current expectations. The broader implications of the COVID-19 pandemic on our results of operations and overall financial performance remain uncertain, particularly because the full extent to which the COVID-19 pandemic may impact our results of operations and financial performance will depend on future developments, which are highly uncertain and cannot be predicted, including but not limited to, the duration and geographic spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. We have experienced and expect to continue to experience curtailed customer demand that could adversely impact our business, results of operations and overall financial performance in future periods. Specifically, we have experienced and expect to continue to experience impacts from reduced IT budgets of customers and potential customers resulting in deferred purchase decisions, delayed implementation of our products, reduced renewals of subscriptions by existing customers, and decreases in software license sales driven by channel partners. We also have experienced challenges in creating sales pipeline in the absence of in-person marketing events. We have seen and may see in the future a slowing in our collections of outstanding accounts receivable and requested changes in billing terms from some of our customers. Moreover, because of our subscription-based business model, the effect of the COVID-19 pandemic will not be fully reflected in our results of operations and overall financial performance until future periods. There has been no impact to our financial reporting systems, internal control over financial reporting, or any disclosure controls or procedures.

Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future. Specifically, difficult ma