Talend S A : Management Report on Consolidated Financial Statements

TALEND

A French public limited company (société anonyme) with capital of 2,567,521.60 €

Registered office: 5-7 Rue Salomon de Rothschild - 92150 Suresnes, France

484 175 252 Nanterre R.C.S.

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GROUP MANAGEMENT REPORT

TO THE JUNE 29, 2021 ANNUAL SHAREHOLDERS MEETING

FOR THE YEAR ENDED ON DECEMBER 31, 2020

Ladies and Gentlemen,

We hereby present you the management report on the activities of the Talend Group during the financial year started on January 1, 2020 and ended on December 31, 2020.

The statutory auditors' report, this management report and the consolidated financial statements have been made available for your consultation at the registered office, in accordance with French legal and regulatory requirements.

The financial statements presented to you have been prepared in compliance with the provisions of the IFRS rules as adopted by the European Union and presented in US Dollars, which is the currency used by the Group for its management and daily internal communication.

Besides, the Board recalls that since January 1, 2019, the Company has changed status with the Securities and Exchange Commission ("SEC") from Foreign Private Issuer ("FPI") to that of Domestic Issuer. Consequently, the Company is now subject to new legal, financial and reporting obligations and standards.

Under US securities regulations for domestic issuers, the costs of regulation and compliance are greatly higher than what we have previously incurred as an FPI. As of January 1, 2019, we are required, for instance, to file various periodic reports with the SEC such as "10-Q" and "8-K" forms, as well as registration statements. These statements are more detailed in certain respects than the forms applicable to FPI.

Under current SEC rules, we are also required to prepare our financial statements in accordance with Generally Accepted Accounting Principles ("GAAP"), rather than IFRS, and to bring certain of our policies into line with corporate governance practices applicable to US domestic issuers. The transition from IFRS to US GAAP has required and will continue to involve significant delays and costs. In addition, we are no longer able to avail ourselves of exemptions relating to certain governance requirements offered to FPIs by the NASDAQ Stock Market, and are now subject to the requirements relating to the solicitation of proxies and authorizations applicable to securities subject to the Exchange Act, including the rules relating to the

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establishment of a proxy statement under section 14 of the said act. Our officers and directors are also now subject to the provisions of section 16 of the Exchange Act and related rules for the declaration and short- term recovery of profits related to the purchase and sale of our securities.

Finally, as Talend is no longer qualified as an Emerging Growth Company within the meaning of the JOBS Act, but as Large Accelerate Filer with at least $700 million in equity securities held by non-affiliated companies, we are required to comply with the provisions of article 404 of the Sarbanes-Oxley regulation, which provides certain governance, reporting and internal control practices. The end of the status of Emerging Growth Company also implies, inter alia, the vote of our shareholders on the elements of compensation paid to our managers ("say-on-pay").

I. Situation and activity of the Group during the past financial year

a) Activity

Talend is a leader in data integration and data integrity. We operate on the principle that delivering clean, complete, uncompromised, and trusted data - in real time - empowered businesses to make critical decisions with confidence. Our mission is to provide data intelligence for all users by delivering trusted data when and where is it needed. Our customers rely on our software to better understand their customers, offer new applications and services, and improve operations.

We are a recognized leader in the hybrid and cloud data integration market. In 2020, Gartner identified Talend as a Leader in its Magic Quadrant for Data Integration Tools for the fifth consecutive year and in its report titled Magic Quadrant for Data Quality Tools for the third time in a row.

Our business model combines our open source approach and direct sales. We supplement our direct sales and demand generation activities with self-service trials of our software.

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.

Total revenue increased $39.6 million, or 16%, in the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase in revenue was attributable to an increase in subscription revenue, partially offset by a decrease in professional services revenue.

Subscription revenue increased $42.5 million, or 20%, for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase in subscription revenue was primarily attributable to greater demand for our cloud solutions.

Professional services revenue decreased by $2.9 million, or 9% for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to lower demand for professional services resulting from the increasing proportion of cloud solutions as a percentage of our sales. Customers of our cloud solutions typically have lower demand for our professional services.

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Our employee headcount and number of customers have increased significantly, and over time we expect to continue to grow our headcount. The evolution of our business and product offerings places a continuous significant strain on our management, operational and financial resources. Our employee base has grown from 1,219 employees as of December 31, 2019 to 1,397 employees as of December 31, 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.

In September 2019, we issued €139.8 million aggregate principal amount of 1.75% Convertible Senior Notes due September 1, 2024 ("Notes 2024"), i.e. principal amount of €125.0 million and an additional 12% or €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 Rule144A 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.

b) Share Capital

Pursuant to the various capital transactions that occurred during the year, the share capital amounted to € 2,560,842.08 as of December 31, 2020 and was divided into 32,010,526 ordinary shares with a par value of 0.08 euro each, fully subscribed.

1. Year Results

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, and 90% in the year ended December 31, 2020.

The details of the consolidated financial statements and the comparative tables included in this report should facilitate your information by comparing them.

Below is a review of the main items reported into the Company's consolidated balance sheets and financial statements.

Our financial results include:

• Total revenue increased from $205.8 million for 2018 to $247.9 million for 2019 to $287.5 million for 2020;
• Subscription revenue increased from $176.4 million for 2018 to $217.0 million for 2019 to $259.5 million for 2020;
• Subscription revenue grew 20% year-over-year for 2020; and
• Net loss was $79.6 million for 2020, $61.5 million for 2019 and $39.0 million for 2018.

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We recall that as part of its periodic reporting obligations related to (i) its status as a public company listed on the Nasdaq Stock Market and (ii) its status as a "domestic issuer" since January 1, 2019, and (iii) in accordance with the provisions of the Securities Exchange Act of 1933 and 1934, the Company is required to file with the Securities and Exchange Commission in the United States, in the form of a document entitled "Form 10-K", an annual report on the consolidated financial statements for the year ended, presented and prepared in accordance with the standard US GAAP. Form 10-K related to fiscal year 2019 was filed with the SEC on March 1st, 2021.

Nevertheless, and in accordance with the provisions of articles L.233-16 seq. of the French Commercial Code, the figures presented in this management report are based on the Company's consolidated financial statements prepared in accordance with IFRS standards. It should be noted that the information presented in the balance sheet and income statement established in IFRS standards are identical to that presented in US GAAP standards.

Consolidated statements of operations analysis

In thousands USD			2019
Year Ended December 31	2020	2019	(adjusted numbers)
Total revenue	287,471	247,861	247,861
Total cost of revenue	63,148	60,880	60,880
Gross profit	224,323	186,981	186,981
Total operating expenses	294,124	246,251	245,505
Loss from operations	(69,801)	(59,270)	(58,524)
Net profit	(9,350)	(3,994)	(2,796)
Loss before income tax expense	(79,151)	(63,264)	(61,320)
Income tax (expense) benefit	(573)	(149)	(149)
Net loss for the year	(79,724)	(63,413)	(61,469)
Foreign currency translation adjustment	(4,048)	703	703
Total comprehensive loss for the year	(83,772)	(62,710)	(60,766)

Revenue breaks down as follows:

The following table sets forth the Group's total revenue by region for the periods indicated. The revenues by geographic region were determined based on the country where the sale took place.

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	As of Dec. 31, 2020	As of Dec. 31, 2019
Americas……………….	$ 131,561	$ 115,736
EMEA………………….	$ 123,599	$ 108,664
Asia Pacific…………….	$ 32,311	$ 23,461
Total revenue…………..	$ 287,471	$ 247,861

Revenues from the Company's country of domicile, based on sales that took place in France, totaled $44.9 million, $36.3 million and $33.6 million for the years ended December 31, 2019, and 2018, respectively.

Total cost of revenue for the year ended December 31, 2020 increased $2.3 million, or 4%, compared to the year ended December 31, 2019 driven by higher cost of subscription revenue partially offset by lower cost of professional services revenue.

Cost of subscription revenue increased $5.9 million, or 18%, for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily attributable to an increase in hosting support costs for our cloud offerings of $2.7 million as a result of the increase of purchases of our cloud solutions, an increase in employee compensation expenses of $2.6 million, which resulted from an increase in headcount, and an increase in IT, office and operational expenses of $1.3 million. The increases in expense were partially offset by a decrease of $0.8 million in travel and entertainment expenses due to the impact of Covid-19.

Cost of professional services revenue decreased $3.6 million, or 13%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to a decrease of $2.1 million in travel and entertainment expenses due to the impact of Covid-19 and a decrease of $1.6 million in consultant fees because of lower demand for professional services resulting from the increasing proportion of cloud solutions as a percentage of our sales. The decreases were partially offset by a slight increase in employee compensation expenses.

Sales and marketing expenses increased $22.5 million, or 16%, in the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily due to a $20.6 million increase in employee compensation expenses, which resulted from increased headcount and share-based compensation, an increase in digital marketing costs of $4.0 million as we shifted to virtual events in response to Covid-19, and an increase in IT-related costs, office and other operational expenses of $3.0 million. These increases were partially offset by a decrease in travel and entertainment expenses of $5.1 million due to the impact of Covid-19.

Research and development expenses increased $6.5 million, or 10%, in the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily due to a $7.7 million increase in employee compensation expenses, which resulted from increased headcount and consultant fees. Higher IT related costs and depreciation expense also contributed $1.5 million to increased expenses. These increases were partially offset by a decrease in office and other operational expenses of $1.1 million and a decrease in travel and entertainment expenses of $1.1 million due to the impact of Covid-19.

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