Categories Earnings Call Transcripts, Other Industries
Cloudera, Inc. (CLDR) Q4 2021 Earnings Call Transcript
CLDR Earnings Call - Final Transcript
Cloudera, Inc. (NYSE: CLDR) Q4 2021 earnings call dated Mar. 10, 2021
Corporate Participants:
Kevin Cook — Vice President Corporate Development & Investor Relations
Robert Bearden — President & Chief Executive Officer
Jim Frankola — Chief Financial Officer
Analysts:
Chad Bennett — Craig-Hallum — Analyst
Sanjit Singh — Morgan Stanley — Analyst
Rishi Jaluria — DA Davidson — Analyst
Jack Andrews — Needham & Company — Analyst
Zane Chrane — Sanford C. Bernstein & Co. — Analyst
Nehal Chokshi — Northland Securities — Analyst
Pat Walravens — JMP Securities — Analyst
Presentation:
Operator
Good afternoon. My name is Gabriel, and I will be your conference operator today. Welcome to Cloudera’s Fourth Quarter Fiscal 2021 Financial Results Conference Call. All participants have been placed on listen-only mode to prevent background noise. After the speakers’ remarks, there will be a question — opportunity to ask questions. [Operator Instructions]
Your host is Kevin Cook, VP Finance, Corporate Development and Investor Relations. Kevin, you may begin your conference.
Kevin Cook — Vice President Corporate Development & Investor Relations
Thank you, operator. Good afternoon, and welcome to Cloudera’s fourth quarter fiscal 2021 financial results conference call. We will be discussing the results announced in our press release issued after market close today. We have also posted today’s prepared remarks and supplemental materials on Cloudera’s investor relations website, which in combination with our press release, provide additional information as well as greater accessibility to today’s quarterly conference call. From Cloudera with me are Rob Bearden, President and Chief Executive Officer; Jim Frankola, Chief Financial Officer; Arun Murthy, Chief Product Officer; and Mick Hollison, Chief Marketing Officer.
During the course of this call, we will make forward-looking statements regarding future events and the future financial performance of the Company. Generally, these statements are identified by the use of words such as expect, believe, anticipate, intend and other words that denote future events. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release, and on this conference call. These risk factors are described in our press release, and are more fully detailed under the caption Risk Factors in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the SEC.
During this call, we will present both GAAP and non-GAAP financial measures. Non-GAAP financial measures exclude stock-based compensation expense, amortization of acquired intangible assets and extraordinary non-cash real estate impairment charges. These non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results, and we encourage you to consider all measures when analyzing Cloudera’s performance. All references to operating income are to non-GAAP operating income. For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures, and a quantitative reconciliation of those figures, please refer to today’s press release regarding our fourth quarter results for fiscal 2021. The press release has also been furnished to the SEC as part of a current report on Form 8-K.
In addition, please note that the date of this conference call is March 10, 2021, and any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date, including those related to the impacts of COVID-19 on our business and global economic conditions. The forward-looking guidance we will provide today is based on our assumptions as to the macroeconomic environment in which we will be operating. Those assumptions are based on the facts as we know them today. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including but not limited to the timeframes for and severity of social distancing and other mitigation requirements related to COVID-19, and the impact of COVID-19 on our customers and partners and its impact on the economy as a whole. Significant changes in the future, whether related to COVID-19 or other factors could cause us to modify our guidance. We undertake no obligation to update these statements as a result of new information or future events.
Now, Rob Bearden, CEO.
Robert Bearden — President & Chief Executive Officer
Thank you, Kevin. Good afternoon, everyone. Thank you for joining us to discuss our fourth quarter and full year fiscal 2021 results. Today, we’ll quickly reflect on FY ’21 accomplishments, discuss how we’re positioned for the current fiscal year, and review our financial results in Q4 in detail. In all, we executed extremely well in Q4, throughout fiscal year ’21, and the opportunity for Cloudera has never been larger.
Let’s begin with our performance in the fourth quarter. Total revenue was $227 million. Subscription revenue was $207 million, and non-GAAP operating income was $50 million. Annualized recurring revenue reached $778 million at the conclusion of the quarter, representing 10% year-over-year organic growth.
It is noteworthy that Cloudera Data Platform, or CDP, demonstrated significant momentum in the quarter. Customers migrating to CDP increased from about 10% of our customer base at the time we reported Q3 to more than 15% of our customer base today, which is well ahead of plan. Most impressively, ARR from CDP now exceeds $60 million of total ARR. Please note that there is no year-over-year growth comparison for CDP as we’ve only had hybrid cloud offerings in the market for a few months now. And these early migrations really validate customer demand for our hybrid data cloud platform, and the new use cases that we address with CDP.
The use cases enable the full data lifecycle, from data collection to reporting, predictive analytics, and AI. This adoption momentum and enthusiastic customer feedback demonstrates that we have the right strategy and it’s working. The adoption of CDP for hybrid data cloud and data lifecycle use cases is what will drive future growth, and we’re happy with our progress to date. And we’ll spend more time on each of these items later in the call.
So in fiscal ’21, we delivered on a number of key objectives that set us up for continued success this year. And I’ll mention just a few of these accomplishments. First, from a product perspective, we delivered the industry’s first cloud-native hybrid and multi-cloud data and analytics platform that meets the needs of large enterprise customers from mission-critical, data-driven applications. In addition, we developed an integrated suite of analytics capabilities that service use cases throughout the lifecycle of data from the Edge to AI. We also completely rebuilt our data platform with a modern, containerized architecture that separates compute and storage, marking the definitive end of the Hadoop era and empowering our customers to migrate to the hybrid data cloud architecture they want. And we executed on a number of critical digital and business transformation initiatives, making everything from CDP trials to customer support faster and easier for our customers, and more efficient for our business.
From a partnership standpoint, we expanded our hyperscale cloud provider relationships and solidified our partnership with IBM/Red Hat, particularly for our private cloud offerings. Importantly, we also produced steady organic growth above expectations, and gained efficiencies that drove operating income margins on non-GAAP basis from negative 5% for fiscal 2020 to a positive 17% for fiscal 2021.
In closing, FY ’21 was a year of important transformational work designed to position the Company for growth, and to capture the market opportunities that are right ahead of us. So, as we consider the opportunity for fiscal ’22, we remain firmly convicted that enterprises will require a hybrid and multi-cloud data architecture for many years to come. Enterprises want the agility, ease of use and elasticity of the public cloud and the performance, security and cost advantages of the private cloud. And only CDP can deliver both, enabling our customers with a modern platform to manage their hybrid architecture and analytics applications.
Now let’s briefly discuss CDP’s traction to date. For many of our customers, the general availability of CDP Private Cloud late last fall started the beginning of their migrations from legacy Cloudera and Hortonworks products to CDP. Over the course of just a few months, nearly 300 customers have begun to move some or all of their workloads to CDP. This represents more than 15% of the customer base, and is excellent traction since last quarter. For example, in Q4 we saw strong customer adoption of CDP hybrid, private and public cloud by customers like Telecom Italia, ExxonMobil and Daimler. We are extremely pleased with this progress in the short time that our hybrid data cloud offering with CDP has been available.
In terms of the economic impact of CDP, we are seeing that customers who deploy CDP are growing faster than the rest of our customer base. We only have two quarters of history, but these customers have a net expansion rate in excess of 120% for the Q3 and Q4 cohort of CDP adopters. This growth is consistent with our customers moving to a modern hybrid data architectures and beginning to deploy new use cases in the cloud. We believe that most of our customers will move the bulk of their existing workloads to CDP Private Cloud first. As you know, many of our customers have large data sets and manage mission-critical applications that may not be good candidates for public cloud deployments. Their objective is to create a modern, hybrid data architecture and to selectively leverage public cloud infrastructure to extend existing use cases and to build complementary new ones.
As a public cloud platform, CDP enables customers to easily and rapidly develop new use cases using cloud-native services. Since the introduction of CDP Public Cloud, we’ve made major advancements in product breadth, functionality and quality to meet the requirements of both existing and new enterprise customers. As a result, we are now in a position to benefit from the key industry trends of data and workload movement to the cloud and customer demand for hybrid solutions. So based on the current momentum, we are expecting that the majority of our existing customers will initiate migrations to CDP this year. We are fully engaged with these customers to assist them with migration planning, and to accelerate the rate at which their clusters and workloads are moved to CDP. As a result, we believe that we can grow CDP ARR to more than $250 million in fiscal 2022. We’ll talk in minute more about our priorities in fiscal ’22 to meet the goals that I just outlined.
Okay. Now that we’ve covered our accomplishments in fiscal ’21, discussed our strategic outlook for fiscal ’22, and shared our progress on customer migrations, let’s now turn our attention to the technology and functionality that distinguishes CDP in the marketplace. So as a level set for everyone, CDP is a hybrid multi-cloud data platform and an integrated suite of analytic applications. It has two form factors, public cloud and private cloud, which share a common security, governance and management framework, that’s powered by Cloudera SDX. This delivers a hybrid data cloud architecture, which allows our customers to optimize the performance, cost and security of data-driven applications across the entire enterprise. This is a completely new architecture that’s divorced from what people used to regard as Hadoop, but this allows for easy migration from those legacy platforms to this next-generation data cloud. It is the interoperability of CDP Public and Private that is highly differentiating, delivering true hybrid cloud functionality.
CDP offers our customers one holistic environment that spans multiple public and private clouds. CDP’s separation of compute and storage, and its use of Kubernetes container technology also means that the user experience is nearly identical in CDP Public and Private. Importantly, CDP is also secure by design, and supports the full lifecycle of data. That means CDP can solve real business problems in a wide variety of use cases for both structured and unstructured data, ranging from streaming analytics to AI. Although the strategy is definitely hybrid and multi-cloud, the advancements we’ve made recently with our public cloud services are important. Each of these services is built to deliver tremendous value in terms of TCO and ROI for our customers. This was clearly demonstrated in a recent cloud data warehouse study, conducted by an independent third-party analyst firm and it was published by GigaOm. And in this particular evaluation was an analytic performance test derived from the industry-standard TPC Benchmark. CDP Data Warehouse ran the field test 20% faster and more cost-effectively than our nearest competitor. And I encourage you to check out the results for yourself on the GigaOm website.
While we are understandably proud of our performance in the cloud data warehousing space, we are also making significant progress with our streaming and machine learning solutions. Streaming remains one of our fastest-growing businesses. Our strategy is to offer the most comprehensive set of functionality for enterprise use cases including ingestion, flow management, messaging, and real-time analytics. As part of CDP Public Cloud, streaming and flow management have quickly become two of the most popular use cases. Also, later this month we plan to deliver the streaming SQL capabilities we gained through the Eventador acquisition in CDP Private Cloud. This functionality will enable our customers to query real-time streams through an intuitive user-interface that includes visualization and dashboarding capabilities, driving increased adoption of our streaming offerings by data and business analysts.
Complementing our success in streaming, CDP Machine Learning empowers our customers to rapidly build machine learning models, and deliver production use cases with integrated security and governance. As you may recall, in Q3 our CDP Machine Learning service was recognized as a leader in Forrester’s recent wave for Notebook-Based Predictive Analytics and Machine Learning. In this quarter, we introduced a revolutionary new way to deliver enterprise ML use cases, Cloudera AMPs, or Applied ML Prototypes. These are pre-packaged applications that enable complete machine learning projects to be deployed with one click directly from CDP Machine Learning. Some examples of the pre-built apps that we’ve made available include churn modeling, deep learning, anomaly detection, demand forecasting, and model compliance. This effort significantly enhances our offerings in the fast growing ML/AI markets.
Okay. So as you’ve seen, we delivered several new and highly differentiated solutions in fiscal ’21. Our R&D efforts will now be focused primarily on simplifying migrations to our CDP hybrid platform and delivering cloud-native services on CDP Public Cloud. We will also make very targeted adjustments to our go-to-market model as the year unfolds to accelerate growth, and enable a cloud-first business model that focuses more on new customer acquisition. Specifically, we have several key priorities for fiscal 2022.
The first is to promote hybrid data cloud adoption. This effort is already well underway, as evidenced by the strong ARR performance for CDP in Q4. Early indications are that customer demand remains high and CDP adoption will continue to accelerate. Second, we have significantly more innovation planned for CDP in this fiscal year. We are dedicating more than 65% of our R&D dollars to public cloud services, and hybrid cloud product development. And as discussed, we see big opportunities in streaming, ML and applied AI. Together these are our fastest-growing businesses and we intend to enhance our differentiation in these areas throughout fiscal ’22.
Next, over the course of FY ’22, we are making a deliberate shift in our go-to-market focus from almost exclusively existing customers to also now attracting new ones. We will accelerate our business transformation to advance digital customer engagement, including increased marketing spend with a portion directed at customer segments below our traditional large enterprise customer base. This is designed to lower our customer acquisition costs, and expand our market opportunity to mid-sized enterprises and line-of-business users.
In addition to targeting new segments, we plan to formalize our efforts to attract non-paying users of our software. This is really pretty straightforward now that nearly all of our compiled software is accessible only with a subscription. And since adopting the Red Hat distribution model, we’ve already had meaningful success in converting non-paying users to subscribers, and we intend to expand on this success in FY ’22.
Finally, as mentioned, we have begun to pre-package a handful of our most common and highest impact machine learning/AI use cases in the form of Applied ML Prototypes. These one-click apps make it easy for customers to deploy machine learning/AI use cases using CDP Machine Learning. There seems to be a strong market demand for applied ML and AI apps that are packaged this way, and we believe these prototypes will accelerate CDP ML consumption. As a result, we plan to invest in the development of additional pre-built machine learning apps throughout the course of the year.
As you can see, we remain focused on making it easier for customers to gain valuable insights from their data. We firmly believe that our hybrid and multi-cloud strategy is the right one for our customers and our business. And, we are entering FY ’22 with a new level of momentum as customer migrations to CDP are accelerating with our CDP hybrid and multi-cloud solutions that are now in market. That said, there is still much to do. We must continue to simplify and harden our products to make them easier to use and ready to address our customers’ mission-critical use cases. We must also accelerate our business transformation to a cloud-first go-to-market model that includes new customer acquisition.
And so, before Jim takes us through the numbers, let me close with a quick update on a new strategic partnership. As many of you know, semiconductor technology has become increasingly important for machine learning and AI. It is critical that advances in analytic software match the advances in silicon, and are optimized for GPUs. And as a result, Cloudera and NVIDIA have partnered to deliver massively accelerated process for enterprise data engineering and data science workflows on CDP. And with NVIDIA GPUs natively integrated into CDP, customers will now be able to more rapidly perform data workflows across any on-premise, public cloud, or a hybrid cloud deployments at lower costs. We’re excited to partner with NVIDIA, and expect this alliance to help differentiate our solutions in many ways.
So, I’ll stop there. Jim, would you please now review the financials?
Jim Frankola — Chief Financial Officer
Thanks, Rob. Hello, everyone.
Fiscal Q4 was another very strong quarter in the face of a pretty tough operating environment. Total revenue was $227 million, an increase of 7% year-over-year. Subscription revenue was $207 million, an increase of 14% year-over-year. Annualized recurring revenue for fiscal Q4 was $778 million, up 10% over the same period last year. For fiscal year 2021, total revenue was $869 million, an increase of 9% over fiscal 2020, and subscription revenue was $783 million, up 17% year-over-year. Note, information regarding definitions and trends can be found in today’s press release or the supplemental materials on Cloudera’s investor relations website.
As we enter a new fiscal year, I’d like to begin with an update on reported financial, and non-financial metrics, that we use to manage the business. Some of the metrics that we’ve tracked and reported in the past have lost their utility or predictive character as our business model has evolved. We will cease using some metrics, and begin to introduce others for fiscal year ’22. For example, when we were a predominantly an on-premises business, we used to count customers only after they had reached $100,000 of ARR. To complete the fiscal ’21 disclosure, we concluded Q4 with 1,005 customers who started at or have grown to more than $100,000 of ARR. But this number is much less useful than in the past, because we expect many of our new customers to come to us as CDP Public Cloud customers acquired with reduced involvement from our sales force, and commencing an economic relationship based on consumption revenue of a few dollars per hour. This is exactly what we want to happen from a cloud-first standpoint. However, it is likely to take several quarters before such a customer eclipses $100,000 of ARR.
To be clear, the expected ramp in new customers will be modest in the first few quarters of fiscal year ’22 as we focus on supporting our existing base as it upgrades to CDP. In this regard, $1-million-plus ARR customers are still important, and we will continue to track these. In the fourth quarter, we increased this number again by a record amount from 179 in Q3 to 190 in Q4, an increase of 23% year-over-year. As fiscal 2022 progresses, we expect the contribution to ARR growth from new customers to increase. Accordingly, we will disclose the proportion of ARR growth from new customers versus existing customers. In Q4 of fiscal ’21, 3 percentage points of the 10 percentage points of ARR growth came from new customers.
With respect to CDP, we will evolve the metrics to match the state of the business. The primary measure of progress in the short-term is the continued adoption of CDP products by the customer base, and total ARR for CDP. Therefore, we will track and share the percentage of existing customers that have initiated an upgrade to CDP, as well as the ARR dollar value and growth rate for CDP. For additional context, while the fourth quarter was marked by record profitability, our operating margin came in roughly 4 percentage points higher than normalized Q4 levels due to lower travel and facilities costs because of the pandemic. Among pandemic-related items, we reviewed our real estate portfolio, and have taken a $36 million impairment charge to reflect that anticipated sublease income will be less than lease payments. This expense is reflected in our GAAP results, and is excluded from non-GAAP expenses and profitability metrics. Please see the supplemental materials on our investor relations website for further information.
As I review the remainder of the income statement note that, unless otherwise stated, all references to expenses and operating results are on a non-GAAP basis. Historical non-GAAP results are reconciled to GAAP results in the press release issued earlier today. Our non-GAAP measures exclude stock-based compensation, amortization of M&A-related intangible assets, and extraordinary non-cash real estate impairment charges.
Total gross margin for Q4 was 85%, compared to 79% in Q4 of last year, driven by subscription gross margin of 91%, up from 88% in the year-ago period. Overall, operating income was $50 million for the fourth quarter, representing an operating margin of 22%, a substantial improvement of 17 percentage points, compared to Q4 of last year. Operating cash flow for the fourth quarter was $37 million. Top line growth and ongoing operational efficiencies are driving our strong cash flow. Diluted earnings per share was $0.15 in the fourth quarter, compared to $0.04 in the fourth quarter of fiscal 2020.
For the full year of fiscal 2021, total gross margin was 83%, compared to 76% for fiscal 2020, while subscription gross margin for the full year was 90%, compared to 87% for last year. Operating expenses in fiscal ’21 were $572 million, or 66% of revenue, compared to $646 million, or 81% of revenue in fiscal 2020. Operating income was $147 million for fiscal 2021, representing an operating margin of 17%, a 22 percentage point improvement from fiscal year 2020. Operating cash flow for the year was $156 million, an improvement of $193 million from the year-ago period. Diluted earnings per share was $0.45 in fiscal 2021, compared to a loss per share of $0.13 in fiscal year 2020.
Now, turning to the balance sheet, we exited Q4 with $773 million in cash, cash equivalents, marketable securities, and restricted cash, up from $568 million at the conclusion of Q3. Note, in December we executed a term loan of $500 million on favorable terms, equating to 3.25% floating rate for seven years. At that time, the Board also approved a corresponding $500 million share repurchase authorization. In the fourth quarter, $314 million of the loan proceeds were used to repurchase 26 million shares of common stock. Total contract liabilities were $608 million at the end of the fourth quarter. RPO was $954 million, up 9% year-over-year. Current RPO grew 13% over last year. Capital expenditures were $3 million in the quarter, and $10 million for the full year.
I will conclude by providing initial guidance for fiscal Q1 and for fiscal year ’22, which is subject to the disclaimers provided at the beginning of the call regarding forward-looking information. We expect Q1 total revenue to be between $216 million and $218 million, representing approximately 3% growth, compared to Q1 of last year, with subscription revenue in the range of $195 million to $197 million, up approximately 5% year-over-year. Non-GAAP operating income is our primary bottom line metric. We expect operating income for the first quarter to be in the range of $28 million to $33 million, or roughly 14% of revenue. Diluted earnings per share for Q1 is projected to be $0.07 to $0.09.
For fiscal year 2022, we expect total revenue to be between $907 million and $927 million, representing approximately 6% growth, with subscription revenue in the range of $822 million to $832 million, up approximately 6% year-over-year. We expect to steadily supplant revenue from traditional products with revenue from CDP throughout fiscal ’22. By the second half, growing CDP Public Cloud consumption revenue and CDP expansion activity will begin to push ARR higher. Driven by CDP momentum, we expect ARR to grow by at least 10% year-over-year for the first two quarters of fiscal year ’22, and 1 percentage point or 2 percentage points faster for the second half of the year. Once again, ARR is the best measure of recurring economic activity and normalizes for the effects of accounting, M&A, and the shift toward 100% open source software.
In fiscal 2022, ARR is expected to grow faster than subscription revenue due to an intentional decline in non-recurring revenue, particularly non-recurring engineering. Non-recurring revenue is reflected in subscription revenue on the income statement. Non-recurring revenue is an artifact of our on-premises business and is not strategic. We are managing down these commitments to focus resources on hybrid cloud development. Specifically, we expect our non-recurring revenue to decline from $48 million in fiscal ’21 to approximately $20 million in fiscal year ’22. To be clear, the recurring component of subscription revenue is expected to grow in line with ARR at 10% or higher.
With respect to spending, using fiscal year ’21 as a baseline, we expect the following trends in fiscal year ’22. Gross margins will be relatively flat as increased operational efficiencies are offset by slightly higher initial costs associated with the support of customers on new offerings. Sales and marketing will increase as a percent of revenue as we make investments in the hybrid data cloud market opportunity and planned CDP adoption. Expense will grow due to increased resources associated with traditional go-to-market motions, as well as investments in digital transformation, in particular, creating new go-to-market motions to build awareness and drive consumption of CDP. In addition, we anticipate travel expenses to increase in the second half of the year.
R&D will be flat as a percentage of revenue as we shift the focus of our engineering teams away from the heavy work required to develop CDP, to building increased functionality and extending CDP’s reach. G&A expenses, excluding abandoned facilities expenses, will continue to decline slightly. These trends will result in fiscal year ’22 operating margins of approximately 16%, down slightly from fiscal year ’21 due to the accelerated investments in sales and marketing to support CDP growth. We expect operating income for fiscal 2022 to be in the range of $137 million to $147 million. For the year, we expect operating cash flow to be slightly above operating income, despite absorbing approximately $16 million of interest expense. Diluted earnings per share for fiscal ’22 is projected to be $0.35 to $0.39.
Now, I will turn the call back to Rob.
Robert Bearden — President & Chief Executive Officer
Thanks, Jim.
Q4 was a clean quarter and the outlook for Cloudera is better than it has been for some time. We’ve demonstrated consistently strong execution for several quarters. We’ve introduced new products and launched cloud-native services. We’ve stabilized our existing customer base and won their commitment to our new offerings. And I’m excited to be moving through this transformational phase with a view towards more rapid growth. We’ve got a $900-million-plus revenue stream. It takes time for CDP adoption to impact that number, particularly as CDP Public Cloud is an entirely consumption-based revenue model.
That said, it is our hybrid data cloud that is driving customer engagement. So the hybrid cloud trend, combined with the exceptional market opportunity for analytics and AI, positions Cloudera nicely. These markets are at the very earliest stages of development, and CDP enables us to innovate at a faster pace and to aggressively acquire new customers. It is a multi-year transition to establish ourselves as the hybrid data cloud category leader, but we are focused on the long-term. This year, we plan to methodically advance toward our market-rate growth objectives, while operating with a sense of urgency in achieving our FY ’22 objectives.
So, I will leave it there except to say thanks to all those who’ve helped bring us to this point. In addition to Jim and myself, Arun Murthy, Chief Product Officer; and Mick Hollison, our Chief Marketing Officer are also available with Jim and I for Q&A. So operator, please begin the Q&A portion of the call.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Your first question will come from the line of Chad Bennett with Craig-Hallum. Please go ahead.
Chad Bennett — Craig-Hallum — Analyst
Great. Thanks for taking my questions. So can — you gave off a lot of metrics there which are great, and it’s great to break out the CDP ARR in your expectations there. But just, trying to unpack Rob and Jim, probably the 120%-plus net expansion in the CDP customers, or your base that’s migrated to CDP for the Q3 and Q4 cohort. I guess just in plain English, what does that mean — just whether they were on Hortonworks distribution, or Cloudera distribution before you’re kind of annualizing the contract in you’re seeing 120%. Can you just give further color there?
Robert Bearden — President & Chief Executive Officer
Yeah, sure. Hey, Chad, thanks for joining. Appreciate the question. So yeah, [Indecipherable] just foundational. So we’ve only got two quarters of cohort, Q3, Q4 of CDP customers, excuse me, legacy customers moving to CDP. Recognizing also that the — really Q3 was not a full quarter of having full CDP hybrid in market holistically, right, to win the full quarter. So what we’re seeing from that is though, the customers whether they’d be legacy Cloudera or Hortonworks that are moving more close to CDP and acquire any CDP entitlements, we’re seeing the net expansion rate for those portions of workloads to grow at a faster net expansion rate than the traditional legacy environments, and they’re tracking at about 120% of that net expansion rate, which is a great signal. It plays very much into the value creation of CDP hybrid platform, and the ability to expand use cases in a high value way, and in the many degrees also a low friction way.
Jim Frankola — Chief Financial Officer
Hey, let me just jump in on the — how we measure it. So we looked at the customers that graduated to the CDP cohort, we then compared their Q4 ARR results in a net expansion rate calculations. So — then our average customer is quite frankly growing at a very nice rate.
Robert Bearden — President & Chief Executive Officer
And the drivers very principally that are CDP just represents more capabilities generally. It’s faster and easier to get workloads and gain insights into the data and leverage the use case experiences. And it’s quicker ROI and a better TCO than the legacy platforms that they were tradition — and have been traditionally operating on. Recognized the last piece of that Chad, is that our customer base, as you know, are running these very mission-critical use cases and are very large data sets. So the migration to CDP and the hybrid environment has to be a very well thought through migratory approach. And we’re heavily engaged in assisting the customer base and how to get there in a methodical way, in a mindful way. And so it is a — in sometimes multi-month and can be multi-quarter process as they [Indecipherable] CDP.
Chad Bennett — Craig-Hallum — Analyst
Okay. And then maybe one follow-up for me. So if I try to connect the dots between the guide, especially for subscription for the year and what appeared to be pretty decent CRPO numbers, and I know you don’t like talking about billings, but billings looked actually fairly good. Is it — is the simplest answer is the non-recurring engineering revenue headwind of I think roughly $28 million, or can you just kind of give me an update on how churn played out in the quarter, maybe how the IBM partnership played out the quarter? And is there anything that changed relative to your outlook in the last few months?
Jim Frankola — Chief Financial Officer
Yeah, so let me start with some of the numbers, then I will turn it over to Rob for some of the color in business. So you know the big news, so to speak in the guidance, and that is the deceleration of non-recurring engineering revenue. That’s a conscious and strategic decision that we’ve made to refocus our engineering team on the hybrid cloud versus of maybe partner certifications and other types of things you do in a legacy on-prem business. So that’s one element. The billings piece, we probably pulled ahead about $40 million more billings out of Q1, and hence fiscal year ’22 above expectations. And that’s a reflection of the conversations we’re having with customers on CDP right now. So we’re starting migration plans. We’re selling professional services, and that has caused our services bookings to be good in the quarter, and it caused a number of contracts that would normally been signed in Q1 to be signed in Q4. So that’s certainly good news, but it’s the left pocket, right pocket. It’s just some billings out next year. Beyond that, I’ll say, we’re a 10% ARR grower. We’ve said that for a while. And as CDP gains traction, we will accelerate to 11% and 12% as we believe it will occur in the second half of this year. Rob, is there anything you would add?
Robert Bearden — President & Chief Executive Officer
Yeah, just very simply, the NRR that we have moved away from was very, very conscious, and it is an absolute reflection of our shift into CDP, the migration and adoption that we’re — and traction that we’re seeing with that. We want to make sure that that we’re allocating our R&D resources on to the platform that’s going to give us the highest return in that CDP or hybrid environment, versus doing NRR, co-dev and the legacy platform that’s just a dollar in and dollar out in the old legacy world. And those resources are exponentially better applied on the CDP and driving the acceleration, and ultimately the adoption for CDP. And we’re seeing acceleration of that. That adoption happened before our very eyes this quarter, as you can see in the numbers.
Chad Bennett — Craig-Hallum — Analyst
Okay. Thanks for the color.
Robert Bearden — President & Chief Executive Officer
Absolutely. Thanks for joining.
Operator
Your next question comes from Sanjit Singh of Morgan Stanley. Please go ahead.
Sanjit Singh — Morgan Stanley — Analyst
Hi, thank you for taking the questions, and congrats on a good end the year. I had a similar question around the ARR trajectory. I think, first when we look at the $60 million going to $250 million into next year, if you look at some of the components of that, how should I think about net new versus expansions versus migrations? And when customers do you expand, or migrate rather, is that going to be sort of a dollar for dollar? Is it going to be more of a compressionary effect, or is that would be sort of net neutral to their pre-existing ARR commitments?
Robert Bearden — President & Chief Executive Officer
Yeah. Sanjit, hey, thanks for the question. Thanks for joining in also. So let me take the first part of that, and then Jim just probably going to add some color too. So look, I think what we are very focused on is, when we look at the traction and the acceleration is we looked at quarter-to-quarter, going from 10% of the customer base adopting CDP from last quarter to 15% in Q4, significant acceleration. That’s driven by the more completeness and stability of an increased functionality and, candidly, ease of use and easy migration to CDP, a lot of backlog to get to CDP. And that is driving the consistency and expansion of the net expansion rate that we’ve seen in the Q3, Q4 cohort. Right now, tracking at about 120%. And so, it’s actually now to your question, for the portion of workloads that need and are able to migrate within that customer base is migration plan, as they acquire CDP entitlements. The base is a dollar for dollar, but the net expansion is tracking well above the legacy expansion. In addition to that, what it does is it allows net new workloads to also come online, weather for the hybrid buyback, whether it be public or private. And so it’s just unlocking a lot of the backlog of workloads and data sets that wanted to be applied on the existing use cases that customers have been running. And so that momentum is building really nicely. We’re pleased with the progress. And we’re continuing to make sure that we’re really leaning in both from an assistant standpoint in migration, as well as making sure from a tech completion and tooling, to move those migrations along in an accelerated way.
Jim Frankola — Chief Financial Officer
Yeah. I’ll just add some quantitative pieces. So regarding the new versus migration versus expansion, 3 points of our ARR growth as of Q4 came from new. We expect that to be roughly the same for the next quarter or two. And then as CDP matures as our go-to-market efforts, against that new opportunity increase, we expect the portion of growth from new to increase in the back half of the year. So that’s a piece of it, but a modest piece. Migration is going to be a big piece. And underneath migration, there is an element that will be a short-term drag on ARR growth. And that is, as customers move from a term license to a prepaid consumption on the public cloud, we recognized revenue on the consumption side of our business when it’s consumed. So you go from potentially seeing a slight revenue drag at first when customers start moving to the cloud until their usage kicks in months or quarters later. So that is factored into our guidance as well. So the biggest piece of the $60 million to $250 million [Phonetic] is the migration, coupled with expansion. $60 million to $250 million [Phonetic]. Yeah.
Sanjit Singh — Morgan Stanley — Analyst
That’s super helpful. Thank you both for that. And then just one quick follow-up again on a similar topic, but this one on form factor, as you put it, Rob, public cloud versus private. Where do we stand in terms of public cloud of that $60 million? And it sounds like, the driver for that new business coming in the door in the second half of next year is going to be driven by public cloud. So personally that’s been very explicit about public cloud driving near term ARR in the next couple quarters, in quite some time. I just wanted to get your latest thoughts on the mix of — on the form factors go into next year.
Robert Bearden — President & Chief Executive Officer
Certainly. So we think about CDP in terms of hybrid. And obviously, it has public and private form factor. And like — what our customers want is to be able to have that high — to enable the hybrid multi-cloud data platform. And those workloads will move fluidly between private and public, and across public cloud. And so we’re not breaking out deliberately the amount of revenue allocation or consumption by tier, if you will, meaning public or private. We — as you see, we’ve had acceleration to CDP in terms of current quarter at $60 million. We are seeing with the — with [Indecipherable] behind CDP and its adoption in our projections that CDP will generate a $250 million ARR in FY ’22. And that will be distributed as we talked about between private and public.
Sanjit Singh — Morgan Stanley — Analyst
I appreciate that. Thanks, Rob.
Robert Bearden — President & Chief Executive Officer
Yeah, absolutely. Thanks. Thanks for joining, Sanjit.
Operator
Your next question will come from Rishi Jaluria of DA Davidson. Please go ahead.
Rishi Jaluria — DA Davidson — Analyst
Hey, guys. Thanks so much for taking my questions. I wanted to start by drilling a little bit into the guidance, and specifically for next quarter. So if I look at the subscription guidance, even adjusting for the mix shift away from non-recurring, it is still calling for a sequential decline, if my estimates are correct. Maybe help us understand what’s going on in that guidance, and what assumptions are being made into there? And then maybe alongside that Jim, I know you don’t like billings, but as we think about the billings guidance for Q1, maybe could you walk us through a couple of the puts and takes of billings you’re talking about it being down double-digits year-over-year, how much of that is from pulled forward into Q4, as you mentioned versus CDP shifts going from prepaid to consumption based? And then the headwinds from obviously the non-recurring shaft? And I’ve got a follow-up to that multi-part question.
Jim Frankola — Chief Financial Officer
Yeah. So the sequential change in revenue, subscription revenue in particular in Q4 to Q1 is driven by three things. First and foremost, the number of days in the quarter. That’s a little bit more than 3% [Technical Issues] the revenue. The second piece is that, although, we are mostly vast majority of open source software, we still have some proprietary software. On the proprietary software piece, there’s upfront revenue that is associated with FIP, functional IP. Given the fact that closed to 40% of our bookings occur in Q4, we have a seasonally high FIP that shows up in revenue one thing and this is why ARR is the best measure, but you’ll see a big decline in that FIP number from Q4 to Q1.
And the last piece of it is, if you go into the supplemental materials you can see the NRR piece. So NRR, non-recurring revenue is also stepping down Q4 to Q1. So those three things are what’s driving the sequential decline. If you strip out the non-recurring revenue piece and you look at year-over-year growth rate for our recurring revenue it’s up roughly 10% year-over-year. On the billings piece, once again if you move $40 million of Q4 billings back to Q1 and to do the year-over-year math of Q1 and for the full year. I think you’ll see show straight [Technical Issues] revenue burn.
Rishi Jaluria — DA Davidson — Analyst
Got it. Thanks guys that’s helpful. And then just on CDP the percent of the business. I appreciate the disclosure and great to see that 8% around there of total ARR. How should we be thinking about that number trending overtime. I mean should just be slow ramp up should gradually or massively accelerate. Maybe you can just help us understand how we should be thinking the mix shift on CDP as a percent of total ARR. Thanks.
Jim Frankola — Chief Financial Officer
I’ll start, so big picture. We think that more than half our customers who have started a journey to CDP by the end of this year. If you look at our guidance – soft guidance for ARR growth that means that we should have a well over $400 million worth of ARR associated with customers who have started that journey. Now exactly how far each of them would progress and which of their skews will be entitled around CDP, we’re just at the very start of this journey. So that’s where the 250 comes from. We’re very confident of the 250 number. How quickly it progresses to that 250, how much upside there is above that 250, we’ll be able to tell you a lot more in 90 days.
Robert Bearden — President & Chief Executive Officer
But we’re very, very encouraged by the acceleration that’s happening over the adoption models that we have been anticipating. I think it’s a great testament to the take ability to CDP the value it brings and the TCO that its driving.
Rishi Jaluria — DA Davidson — Analyst
Wonderful. Thank you so much guys.
Operator
Your next question comes from Jack Andrews of Needham. Please go ahead.
Jack Andrews — Needham & Company — Analyst
Rob, you mentioned that obviously one of the key metrics here is just overall adoption of CDP products. So I was just wondering if there’s a way to parse out in more detail maybe which parts of CDP are really gaining traction. You mentioned some of them around AI, machine learning, streaming. But is there a way to maybe provide some context or metrics around the penetration of individual components and if there’s a way to go deeper into how these individual parts maybe driving broader adoption of the CDP platform.
Robert Bearden — President & Chief Executive Officer
Yeah, I think that’s really the real power behind the model and that you think about CDP as we talked about in two form factors public and private and the highly differentiation is the interoperatability for between public and private to enable a true hybrid data architecture and then be able to enable the entire lifecycle of data and those analytics applications across that hybrid data with a common security and governance platform in framework. So with that, what we see then is neutral motion is the legacy customer base between Cloudera and Hortonworks moving to CDP as a hybrid platform distributing their workloads between private and public.
The biggest portion initially go to private then we see expansion to either depending on the workload tie public or private that embodies the Phase 1 and generally comes with as the numbers as we talked about the initial cohorts or driving about 120% net expansion. Phase 2 then becomes around that adding net new workloads to either public or private. But irrespective on the CDP and then within that sort of in parallel and beyond is then enabling the analytical applications for the hybrid platform and so those and the two fastest growing use cases that we have right now, that we’ve indicated I think in previous calls remains consistent now and into our model through the year is streaming [Indecipherable]. Those are growing well above our corporate growth rates as markets are accelerating. We’re getting great acknowledgment of our leadership in these spaces and we’re not breaking out the numbers. But essentially, we’re seeing it at roughly 25% of our ARR is driven from those two use cases in particular. And what we’re now seeing is incremental momentum if you will, as we talked about in some of our prepared remarks, the things that we’re doing with AMPs. And those are prebuilt apps for machine learning and as you’re aware for everybody on the call most and many of our customers and the big regulated industry that are heavily data driven and digital transformations are underway in those industries and across our customers and those are in healthcare, manufacturing, telco, financial services.
What they have done is built those mission critical applications and use cases for things like anomaly detection, fraud, demand forecasting, turn money laundering, network load management, etc. We’ve been able to leverage our relationships from their standpoint and be able to take those industry templates put them across the machine learning platform and be able to get high value, single click through to deploy these workloads onto CDP in a very accelerated timeframe. So that’s driving incremental expansion across our customer base and also allowing us to move acquiring new customers in new market sectors and expanding our presence in existing industries we’ve got strong holds in. So it’s beginning to have a compounding effect and it’s great testament to CDP now coming online and the improvement, the ease of use of the platform and now we’re able to take the lifecycle experiences lay on to CDP hybrid, create more value, more traction and as we talked about again this is another great example of why we don’t want to spend resources on doing legacy NRR work that don’t have returning impact in the future. We prefer to move those resources onto things like building more amps and more of the lifecycle service functionality because it’s going to accelerate adoption of CDP and drive net expansion faster.
Jack Andrews — Needham & Company — Analyst
I really appreciate that answer, that’s super helpful. This is a quick follow-up. Rob, you mentioned that one of your new priorities which you touched on here and your answer is just bringing on board new customers to Cloudera and I was wondering, you referenced sort of targeting line of business users as well as some potential mid-market enterprises. I was wondering if you could just shed some light on how you plan to target those because to my relocation, I feel like those are different personas than Cloudera has historically targeted.
Robert Bearden — President & Chief Executive Officer
It has been, good question. I appreciate you putting that out there. It is absolute a very fundamental and clear priority for us as a company and certainly for me. But as a core operating priority. And so just quickly reflecting to refresh everybody. As we’ve been making the CDP transformation from the existing legacy platform to CDP that has been a very big effort because we have to make sure that CDP’s hybrid platform is mission critical application ready to run those enterprise viable workloads at scale for our customers and so to do that, we’ve been largely focused on finishing the platform, delivering the tech and making sure that we’re servicing our customer base extraordinarily well in a high value, high touch way and we were extraordinarily focused on our legacy customer base helping them be successful in their current operating environments as importantly in parallel in helping them plan the blue print to their migration to CDP to enable their hybrid data strategies. And as you see from the numbers, we’ve delivered certainly only in the last few months having CDP hybrid available in market. But the work we’ve done with our legacy customer base and the planning process we’ve gone through to get them moving is clearly showing up very quickly moving from 10% to 15% of the customer base to CDP driving $60 million in ARR and another incremental 35% of the customer base by the end of the year moving is to around $250 million plus CDP ARR.
But what that really now does is give us the ability with the completion and of CDP to now leverage the work that Mick and his team has been driving around digital transformation and the go-to-market motion that Scott and his team had built to now we can take through our product packaging, through our digital motion and get to a new customer base in the mid-market that we’ve not been able to cost effectively either touch or cover as well as now be able to take either digitally and/ or the lifecycle experiences on a very targeted basis through the line of business users all of which will drive net new adoption in terms of those CDP platform as well as the lifecycle applications. So we’re super excited as you can tell. But the work that the teams have been doing certainly over the last 12 to 15 months has put us in this position that now we can roll in and execute on, with the completion of the product and the enablement of the go-to-market motion and the digital transformation progress that we’ve made over the last 12 months.
Jack Andrews — Needham & Company — Analyst
Got it. That’s really helpful. Thank you for taking my questions.
Operator
And your next question comes from Zane Chrane of Bernstein. Please go ahead.
Zane Chrane — Sanford C. Bernstein & Co. — Analyst
I was wondering if you could give me a little bit of elaboration on how the pipeline in Q4 both for new customers as well as existing customers expansion maybe compared to that in during Q2 and Q3. And then regarding the CRPO growing 16% over 50% faster than ARR this quarter. To me that seems incredibly bullish and I think I understand the dynamics there. But I would love to hear some of in your words, the third-grade level explanation of how to reconcile the much faster CRPO growth with ARR? Thanks.
Jim Frankola — Chief Financial Officer
Okay, I’ll start with the RPO. The pipeline real briefly rough in that color. So my notes on RPO show that total RPO growth on a year-over-year basis is 9%. Current RPO on a year-over-year basis is 13%. So the 13% is just a couple points higher than our 10% ARR growth. RPO does not include contracts with terminations for convenience and there are some other factors that will cause it’s move slightly differently than ARR. I’ll say, if you look at our current RPO over the past several quarters you’ll see the growth rate averaging to be roughly ARR. Now I’ll always [Indecipherable] back to ARR is the best measure for both the economic activity that exist as of the end of the quarter and are predictor of where revenue is going to be in the future.
Regarding the pipeline growth in Q4, is good. Conversion rates are also very good in the quarter. So we’re pleased with how the market is developing. On the new versus existing right now our focus is still primarily on our existing customers. The efforts that Rob talked about on new are forming now. They’re starting to gain traction. But we aren’t really counting on a big difference in the amount of new bookings until the back half of the year.
Robert Bearden — President & Chief Executive Officer
Just to quickly touch on that. There’s been a lot of work that’s been done and a very disciplined operating cadence within our overall motion to go from building pipeline through the various segments from field, digital and direct. As well as make a really learning and being very effective and becoming much more efficient in converting that pipeline ultimately into monetization. And being able to do that in a way where we’ve been able to move into – begin the move toward the mid-market and line of business and make those conversions in a way that will be contributory in this year going forward and will have the ability to build and expand on the net new in those new sectors.
The other thing that we’re seeing really pretty strong benefit from it, is obviously the things that we’re able to do in that digital motion that’s been effective, is I think also contributing to the net expansion rate as the customers are moving to CDP with other line of businesses adopting those lifecycle analytics applications? So again we’re seeing a compounding effect that’s and to a great work that’s happened in the digital transformation and the go-to-market motion disciplines that Scott making their teams have been able and hard work they put in over the last year.
Zane Chrane — Sanford C. Bernstein & Co. — Analyst
Got it, super helpful. I must have misheard, I thought I heard 16% CRPO growth. But 13% makes a little bit more sense vis-a-vis the ARR growth. Just very quick follow-up question. The net dollar expansion rate or net retention rate, whatever you prefer to call it. How does that prepare for those that migrated to CDP public versus those that have migrated to CDP private? And I ask that as an apparitional question recognizing you may not enough data yet on the CDP public front?
Jim Frankola — Chief Financial Officer
I’ll echo what Rob said earlier, that’s now how we look at the business. These customers are moving to the CDP hybrid cloud public and private. We don’t have it now.
Zane Chrane — Sanford C. Bernstein & Co. — Analyst
Got it. Okay, great. Well thanks very much. Congrats guys.
Operator
Your next question comes from Nehal Chokshi of Northland. Please go ahead.
Nehal Chokshi — Northland Securities — Analyst
The ARR for the quarter was 10% year-over-year growth versus 12% into prior quarter and arguably was in easier year-over-year growth compare. So what’s in there on why there was a declaration here?
Jim Frankola — Chief Financial Officer
Okay, I’ll start and Rob, will add color. For this year what we’ve been characterizing [Indecipherable] roughly a 10% grower as we’re going through this transition to CDP and in any given quarter. You’ll see ARR move around so we’re 10%, 11%, 12%, 10%. So part of this is just the normal ins and outs of bookings that we’ve had in the quarter. Our Q4 last year was actually a pretty good quarter. So if you look at the sequential growth in Q4 last year you know the comp was pretty good. And piece of this I touched upon earlier and that is, we’re starting to see customers migrate to CDP and CDP public cloud. Sometimes that migration takes a form of a prepaid credit where they’re swapping out within $1 million of term license or $1 million of prepaid credit and as they’re starting on CDP public cloud. Their usage and therefore our revenue maybe less in the public cloud than it was on-prem.
Robert Bearden — President & Chief Executive Officer
Think of this very simply as really a timing issue and so it the new from workloads that were being paid from subscription basis to workloads that are on a consumption basis, it takes a bit of time for those consumptions dollars to catch up with the subscription dollars. But I’ll point out that it’s much better than healthier for us as a company and a financial model as we’re making this transition for that target environment.
Nehal Chokshi — Northland Securities — Analyst
Okay, great and then that 120% net expansion rate that’s a phenomenal number, that’s great, fantastic. Congratulations. I think this has been asked a couple of times in different ways. Let me try and explicitly. That 120% net expansion rate, can you break that down increased notes and increased functionalities/basically getting increased price for the CDP?
Robert Bearden — President & Chief Executive Officer
Okay, so we’re not breaking it out at that level of granularity at this point. And what we’re seeing is that expansion is use case driven, it’s not price driven. And so what that does is it increases the amount of consumption and or spend because obviously they’re using more of the platform in the levers that we have there, right. And so it’s – if you want to think about it as dollar-for-dollar from legacy estate to as is on CDP. But what happens is, it unlocks incremental use cases, incremental data sets that they want to add to that insight and it just accelerates and we’re seeing as you see continued acceleration and we think that will continue to exist on a go forward basis.
And just for clarity because the question has been asked couple times. CDP is about hybrid and so there’s workflows and use cases are going to be fluid between public, private cloud. And so right now we’re not breaking out the percentage of spend allocation between the various form factors. Right. Because it’s more predictive and healthy and true – is the ARR expansion of leveraging CDP as a hybrid platform and that’s where we’re seeing really nice traction again is driven by use case, expansion, incremental data set expansion and those are what’s obviously giving us better and increased net expansion rate.
Nehal Chokshi — Northland Securities — Analyst
Excellent, thank you very much.
Operator
And your next question comes from Pat Walravens of JMP. Please go ahead.
Pat Walravens — JMP Securities — Analyst
Congratulations on all the progress and moving to CDP, it’s a remarkable shift. Rob, if I can just ask you because obviously the stock is down whatever 10% the aftermarket and there’s clearly some confusion here. So did the performance of the sales organization meet your objective in Q4?
Robert Bearden — President & Chief Executive Officer
Pat, thanks for joining. Appreciate the question. Absolutely.
Pat Walravens — JMP Securities — Analyst
Okay, all right, great.
Robert Bearden — President & Chief Executive Officer
Could not be happier holistically. You guys have known, we always want more. But I’m very, very pleased with the execution not just in Q4 but through the year, not just in terms of either the delivery but the quality of delivery especially given – we’re in complete from home remote environment and it’s impressive results under any scenario. But it’s not just the delivery but it’s also the set up through the go forward that I’m most pleased with that and how we built, we’re going to have the ability to build off those momentum certainly in terms of execution but even below that water line.
The overall digital motion from creating awareness going through a digital education process, generating a great pipeline and getting very, very efficient in the conversion of that pipeline to the position monetization that’s what I’m incredibly happy about because that gives us the set up in the platform for obviously continued scale and to being very comfortable in executing the model, we’ve outlined for you guys. But as importantly, give us the ability to start touching those new market sectors i.e. we talked about mid-market. We go into lot of business and it’s giving us the platform and reach to be able now go implement and execute on that and that’s a very long yes. But it’s much more than about just yes, happy about the execution.
Pat Walravens — JMP Securities — Analyst
That’s great and my follow-up Jim is going to be for you which I’m sure you realized as you’re preparing for this call. The stock was going to do in aftermarket was doing and so what do you think is by comparison one or two really important thing, that you think we need to take away from this and then maybe we don’t understand as well as we should, what are they?
Jim Frankola — Chief Financial Officer
It’s the NRR, ARR dynamics. Once we put a slide in our supplemental deck to try to give greater transparency and the messaging is once again ARR growth of 10% for the first part of next year accelerating in the second half. The recurring element of subscription revenue will be growing at that same of ARR. So you can see that the entire story in terms of soft revenue growth guidance for next year is all due to NRR and as we discuss that’s a conscious very strategic decision, we made over the course of last year to reprioritize our engineering resources toward the hybrid cloud.
Pat Walravens — JMP Securities — Analyst
Okay, great. Thank you both.
Operator
And we have no further questions at this time. I will now turn the call back over to the presenters for closing remarks.
Robert Bearden — President & Chief Executive Officer
Great, we appreciate everybody’s participation. We couldn’t be more excited about the execution of the team and the opportunity that’s in front of us. We still got a lot of work to do as you know we’re very focused on executions. Incredibly pleased with CDP, it’s progress, the adoption rate we’re seeing in it. We’re obviously focused on continuing to make it, easier to use, faster to migrate. But we’re clearly delivering the hybrid data platform that’s leading it, the industry and we know for a fact that the enterprise requires a hybrid data architecture for many years to come and we’re incredibly well positioned with it and looking forward to a great FY 2022 with the team and with all of you. So stay tuned and look forward to seeing you guys about in another 90 days and have great rest of the week. Stay healthy and safe. See you all.
Operator
[Operator Closing Remarks]
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So, as we consider the opportunity for fiscal ’22, we remain firmly convicted that enterprises will require a hybrid and multi-cloud data architecture for many years to come.true… but it’ll depend on how effectively those opportunities are tapped