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			2018_10K_Response_Letter_Folio

			FOIA CONFIDENTIAL TREATMENT REQUESTED

			PURSUANT TO 17 C.F.R. § 200.83

			BY TALEND S.A.: TLND-006

			THIS FILING HAS OMITTED CONFIDENTIAL INFORMATION INCLUDED IN AN UNREDACTED VERSION OF THIS LETTER DELIVERED TO THE COMMISSION. OMITTED INFORMATION HAS BEEN REPLACED WITH A PLACEHOLDER IDENTIFIED BY THE MARK “[***]”.

			VIA EDGAR AND HAND DELIVERY

			March 5, 2020

			Ms. Christine Dietz and Mr. Frank Knapp

			United States Securities and Exchange Commission

			Division of Corporation Finance

			Office of Technology

			100 F Street, NE

			Washington, DC 20549

			Re:         Talend S.A.

			Form 10-K for the fiscal year ended December 31, 2018

			Filed February 28, 2019

			File No. 001-37825

			Dear Ms. Dietz and Mr. Knapp:

			Talend S.A. (the “Company”) respectfully submits this letter to the Securities and Exchange Commission (the “Commission”) via EDGAR in response to the comment letter dated March 2, 2020 relating to the Company’s Annual Report on Form 10-K filed with the Commission on February 28, 2019 (the “Form 10-K”). For the convenience of the Staff, we have reproduced the comments in bold in numerical sequence and the corresponding responses of the Company are shown below each comment. References to page numbers are to the page numbers in the Form 10-K.

			Form 10-K for the fiscal year ended December 31, 2018

			Note 2. Summary of significant accounting policies

			(e) Revenue recognition

			Allocation of the transaction price to the performance of obligations in the contract, page 83

			Based on the information provided in your response letter dated January 24, 2020 and subsequent discussions with the staff, we continue to have concerns with certain details in the analysis provided to us.  Specifically, whether the company maximized the use of observable inputs and considered information that is reasonably available to the company in its determination of the estimated useful life used to determine the license revenue in your standalone selling price model.  Please provide us with a qualitative and quantitative materiality analysis had a lower useful life been used.  As part of your response, please tell us how you considered the effectiveness of your internal control over financial reporting.

			1

			Confidential Treatment Requested by Talend S.A.: TLND-006

			Response to Comment 1:

			The following summarizes the Company’s considerations in determining the IP useful life, the qualitative and quantitative analysis of the adjustments on the filed financial statements, and the Company’s consideration of the effectiveness of internal control over financial reporting.

			Background

			As discussed in the Company’s response letter dated January 24, 2020, in connection with the adoption of ASC 606 effective January 1, 2018, the Company used a cost-plus margin approach and developed a model to estimate stand-alone selling prices (SSP) for each performance obligation. One of the variables used to determine the license revenue in the model relates to the estimated useful life of the intellectual property (“IP”).

			For purposes of the Company’s SSP model, estimated useful life of the IP (the “Model Useful Life”) includes both the time required to research and to develop the IP, as well as the estimated time this IP is expected to generate future cash flows.  This is consistent with the fact that the cost base used by the Company in its model includes costs related to both the research and development phases for all R&D projects, without consideration of the likelihood that those projects will be successfully completed.

			At the time of the adoption, the Model Useful Life of the IP (as defined above) was estimated to be [***] years.  This was based on management’s expectation considering the R&D efforts incurred to-date, the stability of the core IP, future product development roadmaps and limited data points from other companies.

			Discussions with the Staff related to the Company’s responses to the SEC’s comments led the Company to reassess the estimated Model Useful Life of the IP by incorporating additional observable inputs.  In the absence of observable data for comparable Model Useful Life (including both the time required to research and to develop the IP, as well as the estimated time this IP is expected to generate future cash flows), the Company considered observable useful life assigned to acquired developed technology on recent acquisitions of similar sized software businesses (adjusted for the differing accounting purposes for which estimated lives are to be used as later described in this letter) as an input to its reassessment, recognizing that useful life assigned to acquired developed technology on acquisitions:

				 (i)

			is representative of the residual useful life at the date of acquisition and reflects neither the time incurred to research and to develop the IP, nor the period over which this IP generated cash flows before the acquisition;

				 (ii)

			only relates to R&D projects completed at the date of acquisition and not to R&D projects that were unsuccessful.

			The Company developed an external benchmark of the useful life assigned to acquired developed technology. This benchmark suggested the useful life assigned to the developed technology on the acquisition date ranged from 4 to 7 years, with an average of 5 years.

			In order to derive a revised estimated Model Useful Life incorporating the benchmark of the useful life assigned to acquired developed technology, the Company supplemented this benchmark with judgments and data points relevant to the accounting purpose for which the estimate is intended and the Company’s history and future development plans, as outlined below, and concluded that the appropriate useful life is [***] years:

			2

			Confidential Treatment Requested by Talend S.A.: TLND-006

			Observable inputs – useful life assigned to developed technology upon acquisition:

			The Company has previously provided the Staff a study of software company acquisitions indicating a benchmarked useful life of 4 to 7 years assigned to developed technology upon acquisition.

			It should be noted that these useful lives were calculated from a “purchase price accounting” point of view (i.e., the useful life of an intangible asset recorded at fair value acquired in a business combination) and represents the number of years the majority (not all) of discounted future cash flows are expected to be received following the acquisition date.

			As such and based on management’s understanding of practice, the fair value of acquired intangibles is typically determined using a discounted projected net cash flow approach and the useful life of the related asset often represents the number of years the majority (not all) of the present value of discounted future cash flows are expected to be received following the acquisition date.  As cash flows expected in the near-term are discounted less than those expected in later years the effect of this weighted cash flow approach is oftentimes that the amortizable life of the acquired intangible is less than the expected term for which cash flows are actually expected.  Therefore, the useful life of acquired assets on acquisition does not represent the entire period the intangible asset (the developed technology) is expected to generate cash flows and the useful life assigned to the intangible asset upon acquisition is generally shorter than the period during which the asset will continue to generate cash flows.

			The updated Model Useful Life of [***] years used by the Company in its SSP model was determined in a more straight-forward manner to focus simply on the period costs incurred to date would be expected to generate cash flows, not for purposes of establishing an amortization period for an acquired intangible asset recorded at fair value. Therefore, the benchmarked useful life of 5 years assigned to the developed technology represents a subset of the Model Useful Life.  In fact, if the Company takes into account the time to research as well as develop the acquired technology for the benchmarked companies, the Company would expect to arrive at similar life of [***] years (if not longer); observable information is however not available to make this calculation.  That is, the costs incurred to date represent not just the costs to develop existing technology but also costs for technology that may be released in the future, as well as costs that do not ultimately contribute to sales.  Rather than make subjective adjustments to the costs into which the useful life is being divided, the Company believes the use of an [***]-year life reasonably accounts for this difference.

			The Company believes its determination of an IP useful life of [***] years for purposes of determining the relative SSP allocation between licenses and PCS is not inconsistent with the purchase business combination study it provided the Staff.  This is because it is likely that each of those companies expected and projected cash flows for a longer period than the useful life assigned in purchase accounting but the effect of basing such assigned life on a weighting of the present value of discounted cash flows would oftentimes be less than the actual period for which cash flows were anticipated.  Moreover, that exercise is to assign a useful life to only existing technology whereas the Company’s calculation of costs incurred to date includes both existing technology and technology that is currently under development to be released in future periods.  The Company observes that ASC 606 does not provide specific, detailed guidance on how to perform a cost-plus margin SSP model assessment and the difficulties and judgments required are exacerbated by the Company’s unique facts.  The Company, again, believes it has taken a thoughtful, reasoned approach that is in keeping with the principles of ASC 606 and that its determination of useful life can be reconciled qualitatively to the observable benchmark from which the judgment started.

			Company specific considerations

			In order to qualitatively and further support the range of possibilities suggested by the observable inputs (benchmarking), the Company also considered the history of the Company’s product introductions and discontinuations, its future roadmaps, and the time it generally takes between software concept to general availability. Specifically:

			3

			Confidential Treatment Requested by Talend S.A.: TLND-006

				i.

			The Company does not have any plans to discontinue the on-premise offerings for the foreseeable future, which supports the assertion that the existing IP and the IP currently being developed are expected to provide future economic benefits for an extended period.

				ii.

			Based on the Company’s historical pattern, it generally takes approximately [***] from software concept to general availability of new product offerings. It is important to note that while the Company’s software offerings have evolved since its inception, the on-premise software solutions developed (core IP) in the early years of the Company continue to be at the heart of the Talend unified platform and architecture. In fact, for reference, in 2016 the Company released Data Preparation, an on-premise solution for cleaning and transforming raw data, preparing it for processing and analysis. Data Preparation was built on top of the core IP (the core IP was developed around 2007).  Development of the enterprise version of Data Preparation started in [***] with the enterprise version of Data Preparation available in 2016. This example supports the assumption that the core IP (i.e. no change to the core source code) is used to build additional enterprise features and functionality and supports a longer average useful life of the IP.

				iii.

			In assessing the appropriate Model Useful Life, the Company took into consideration the interrelation between three key inputs in the cost-plus margin approach:

			(a) scope and allocation of R&D costs included by the Company in its model relate to both the research and development phases for all R&D projects, including those for existing software and for yet to be released products, without consideration of the likelihood that projects will be successfully completed;

			(b) estimated useful life applied to amortize those R&D costs; and

			(c) desired margins.

			For purposes of the Company’s SSP model, estimated useful life of the IP includes the time required to research as well as to develop the IP, as well as the estimated time this IP is expected to generate future cash flows. A shorter useful life, such as the life assigned to developed technology for acquisitions, would relate to completed R&D projects resulting from R&D costs previously incurred over a number of years, and would be expected to generate a high margin.  A longer useful life would relate to R&D costs incurred both on completed projects, as well as in-process projects and projects that were unsuccessful and correspond to a lower expected margin to reflect that much preliminary phase R&D cost does not ultimately contribute to sales.  Using an IP useful life of only the time expected to generate future cash flows determined on a discounted basis from completed R&D projects would require a change to either the desired margins to ensure a realistic return on investment from the all R&D efforts is achieved, or exclude the research costs incurred on projects that have not yet been completed, which is not possible without unreasonable efforts to the Company.

				iv.

			The output, that is, the allocation of the transaction price used to determine license revenue in the SSP model, of the Company’s revised analysis using an [***]-year IP useful life results in an accounting outcome that is within the range of financial reporting outcomes reached by other hybrid open-source software companies.

			Based on the above, the Company adjusted the IP useful life used in its SSP model to [***] years.  Given the significant level of judgment required in determining the useful life of the IP and the lack of specific, detailed guidance in ASC 606 about how to perform a cost plus margin analysis in the Company’s unique circumstances, the Company believes [***] years reflects the best estimate at this time for these purposes and is in accordance with GAAP.

			4

			Confidential Treatment Requested by Talend S.A.: TLND-006

			This change in assumption resulted in changes of the transaction value allocation from 10-90% to 16-84% for IP and PCS, respectively. The Company regularly reviews and tests its SSP Analysis as part of its ongoing controls and will adjust these areas of significant judgment as the practice, business and competitive landscape evolves.

			Materiality Analysis

			The Company conducted an analysis under Staff Accounting Bulletin No. 99, Materiality (“SAB 99”), and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), relating to the identified adjustments resulting from the change of the useful life of the IP. This analysis resulted in the conclusion that the cumulative adjustments were immaterial for the years ended December 31, 2018, and 2019.

			The Company’s SAB 108 analysis includes a materiality assessment based on both the “rollover” and “iron curtain” approach. The “rollover” approach requires an assessment of the error based on the current year income statement. The “iron curtain” approach requires the Company to assess the impact of the error based on correcting the balance sheet at each period end, regardless of the year when the error originated. Under SAB 99, “one rule of thumb in particular suggests that misstatements or omission of an item that falls under a 5%