CFLT - Earnings call transcript Q2 2021

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Shane Xie

Hi, everyone. Welcome to the Confluent Q2 2021 earnings conference call. I'm Shane Xie from investor relations, and I'm joined by Jay Kreps co-founder and CEO, and Steffan Tomlinson, CFO.

During today's call, management will make forward-looking statements, including statements regarding our financial outlook for the third quarter and full-year 2021, the expected performance of our product offering increased adoption of a platform, growth in our customer base, our market opportunity, our ability to capitalize on the shift to cloud, growth in complement cloud revenue, our long-term growth and our overall future prospects. These forward-looking statements are subject to risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements.

and factors in cause our XXXX, our dated XX, risk differ results IPO that on the June included for with is SEC XXXX, today. will information be that June the actual could to perspectives quarter filed Additional ended XX-Q SEC XX, Form filings including as law. We assume any update by to statements after required no obligation today's call, except

accordance financial are or measures certain financial as our internal financial at These to trends and found use the measures expressed call Jay. on with with and these considered investor is limitations reconciliation have measures supplemental reminder, today's over be that, We website business to a financial I'll a earnings non-GAAP should GAAP between a financials, substitute A non-GAAP of As these for planning analysis not press in in on non-GAAP on in internally facility relations and prepared purposes. GAAP. our our be basis. included non-GAAP from can release used call And isolation which measures financial and and investors.confluent.io. financial broadcasting for hand information and

Jay Kreps

earning the support, our company report look public our call company. today, Welcome our second-quarter Shane. our our and our to million. overall our a thanking of Cloud to life second-quarter year. get I partners we're This the I whom to and all Cloud growth strong want a results revenue accounts Confluent investors, I'm well appreciate totaling to us with over acceleration as and began the our I'm delivered, trailing what's is of helped forward in employees, we to this year I quarters that the year I'm customers, growth and pleased with as our ahead. over XX% here. Revenue earnings of year significant a to extremely be will second of first the excited growth pleased Confluent continued Thanks, to for here call for growth public and XXX%. revenue. be ahead. of outpace start quarter with XX% XXX% team XX-month now business from accelerated results. rate total positioned XX.X by

digital-first I details I to as story, as engage on be driving the our rise provide of how Before world. world factors We're of software fundamentally in companies perspective the the into it where with a customers. to living business data they some get would how the quarter, and overview motion. has those think changed the in an new helpful for of The well operate

paradigm change using applications data. sufficient islands, core the every of across this disparate outside data companies business. operated was of when stored operations in data is the change industry. a IT the role operated a as software of rest, stack. operations This in was core The in companies role the driving disconnected around back-end business. all And Software this end-to-end is reimagining drive of has the the how front-end geographies a in This company customer of all very their the across and produce do interactions to happening sizes moved from to is applications deliver and really of of from edge an companies the companies how virtually products companies on of largely the Historically, data at that services. the where corresponding in databases mostly

the driven time cohesive integrate data experiences. applications at built of operations systems where with to This disparate and starting major in all happening. new now in the time during its helping is whatever category world represents co-founders disparate our platform for more. new including to react every as on my I that motion operations systems to in the work is pioneered a motion. in sizes, ubiquitous in Data has drive and development of modern in data cloud-native connect Zero the data like to infrastructure, real-time with real need cases motion, This gone has Confluent generated. organizations software and data modern to Apache mainstream. the we companies into one power and data With for enables need to have Kafka and harnessing LinkedIn motion. need and to Grab, together companies However, of in Square, move and in a all and Confluent virtually access use time company industry respond many to category real This continuing

motion stream data in the data The testing in using healthcare facilities and updates. CDC inventory is U.S. uses Walmart data addition, from to build real-time to In motion across

the For accurate rise data equity into center and Citigroup motion. provide to sophisticated pandemic, sits state at COVID-XX Confluent to of real-time the the traders. of in historical the combines insights data of analytics

these competitive some three in of that areas. some Kafka best pillars each scale this and create A We a and in the has why advantages new in believe to is build cloud address well everywhere. around our as being product in the key has investment think open-source differentiation: applications being give significant data differentiation these is for to easily native, combination emerged motion to over I'd unique the helped each our I'll around and other moving updates as product launched complete, in first earlier, address the use of is has nervous a any complete overview offering. and the central customers leader stack. organizations of having Confluent strategy in call part reason as we've to the our with in working being of like primary space, more getting vision data recent I'd like real-time space a streams. us or as the of QX. building of turn these for goal most The central Our of of leadership. this the ourselves emerging We solution. continuing for data features discuss a by of infrastructure and strategic advantages, to that an also nervous next-gen system system connecting

built are versus as to built This native. a open-source important something customers designed the multi-tenant built, and cloud of taken and difference platforms elastically use. as native selecting on-premise how the redesigned a are they and cloud Kafka systems We've in scalable There for put completely to that are heart products operate in right to fundamental the that First, an cloud solutions cloud between environment is cuts software service. it's incredibly services. these that's distinction

can cloud kind cloud we networking, strengthen technologies the It data that manage a and natively with the security up help to array about needed less. added major and other our and of to providers automatically the change. memory their customers several second vast cloud native It In in quarter, features individual that cloud cloud offers servers, What of as Our the easily and protocol platform architected additional Private layer that -- of balancing Link. We support of networking low-level fundamentally usage connectivity, Microsoft deepens This means the is server without is Azure. usage customers' as it and down system. means their that think integration private Azure's customers control managing the allows elastic our with Confluent of also on CPU with capabilities. don't Kafka This be for additional its in security that is as product added Azure this characteristics. It's or securely. load other patterns needs integrates or scale elastic. and need

capabilities and even Confluent and predominantly crucial online. the create a each experiences our role-based AO historical cases of features from access Confluent Cloud give by which usage it a security world AO market core is regime. are a Cloud the helping platform is at to We enhance was continues use retailer leverage value to more products quarter. within in example and business. strengthening to ongoing security able online into also customers features improved not at a became as combining purchase logs leadership its with story. These added implementing speed Ao.com privacy audit shopping pandemic rapidly digital new to the control good cloud-native real-time time spend of which compliance capabilities The needed the AO controls unique so the the expanded to overall putting pace impactful moved journey more their its experience. to moment, rapid do to in to security its A data with and versus in and customer changes. visit during so cement our customer Confluent signals is hyper-personalized a in-store customer our allows to to to digital with building security because information customer that even motion adapt Cloud that enabling as Pace by deliver customers U.K., second they position practice treat ao.com, the

is in data differentiation foundational second in a Kafka The the product pillar but motion makes harnessing make in paradigm motion completeness. developing that data to complete is our in need the easy, emerging customers new this offering easy. for of stack layer

the a We key and motion I'll that and to are have few by significant essential represent modern data features XXXs which of highlight stack, ones, investment Confluent.

or cloud services. have integration their real-time existing make spending APIs cost. in data XXX easy layers, set we data and to from customers years capture streams These motion mean over databases, it deliver connectors without infrastructure First, that SaaS, can connectors writing

extending to as of fully integration our SQL, with the for engineering ksqlDB. paradigm. with In MongoDB a excited This advanced of skills traditional progress in language announced connectors offer the this lets as other offer in world and in spent years to Datadog, well of new databases we second data completeness brings teams the availability developing quarter, made Atlas, is platform. a new Second, stream this the use we're managed of into processing that we This great motion. We the package to platforms. they've data layer the work best-of-breed capabilities the familiar

from reducing while is VA that application veterans. processing that offline benefits claims security compliance. IP accurate million a capabilities of solution VA veteran processing rework CDC for to connector, computed also it XXX-X processing in enables claims speed to critical for for reuse of quality second more richest of example, benefit customer, delivery developed results to to with the servicing is delivery. of Confluent Oracle And their new real-time modernizing to Department includes process on platform We This in applications, reliance increased and data providers The in results. modernized purchased of Confluent effort legacy the and and Affairs. a extend launched a ability the features veterans the motion in the the the the reduces completeness timelines that its was and batch the in processing Veterans driver FIPS our faster ksqlDB job VA. our the VA the claims the multi-tenant query quarter and of improves traction an which that X.X nightly The distributes significant

The everywhere. is of our differentiation third pillar product being

Just having the means as one major a motion. core open all the central all that all is multi-cloud differentiating the and on-premise requirement to through can hybrid spans modern and legacy fabric strategies, environments in operating data the nervous our in needs a up it's tap and applications operates data one customers as By as Confluent. This three for parts cloud locked system and of capability them these, private for customers, securely span seamlessly a into and on-premise cloud, This all all seamlessly connect company modern to well systems uniquely cloud that to connecting into across platform and these up clouds, the for needs legacy Confluent. span in in Confluent body, environments.

extending of and We cover us BMW. that in of is Confluent BMW of or In this run to use strengthened which lets story of environment Confluent its quarter, Confluent plants. a self-managing benefits launch for Confluent Confluent of cars space its motion Hundreds provider platform, with Kubernetes the through By in across Cloud to we these A adding based these of Confluent. CFK will span customers are cloud BMW helping Group platform. help cloud-native the everything and leverage example CFK. it's perfect on-premise. to the It Confluent API support everywhere from Kubernetes a private optimize Group data environments. and get the all to XX can time experience processes IoT complete Cloud second of driven manufacturing environments the our only for the its ordered will we're production when provides of the many deploying logistics delivered. processes, all applications

We cloud making in GCP also Confluent available Cloud XX regions Azure. expanded total regions a to six across of new and AWS,

and in beginning the involving a health of with by Confluent in time a allowing working of motion slow diagnosing on-premise have the lots with to and, continuous growing capabilities ensure often that however, to to motion into launched operate thousands and Confluent developed customers to on-premise back support powers are vendor and major We while monitor also visibility the is painful capabilities operations monitoring infrastructure issues. of now which operations efficient platform clusters HealthPlus, to environments. support environments. of Traditional in hybrid to providers. diagnosing team, With monitoring their in architectures Confluent provides further that issues, infrastructure cloud reactively data using to multi-cloud process highlighted reliable, we clusters and data availability relationships customers real their Confluent Cloud, continuously the ensure downtime of make these the of these to our same help send order the proactive. we forth and Cloud our to optimize, In HealthPlus, importance stream The protracted cloud for and of has on-premise Kafka data thousands from them advanced their the Confluent on-premise environments cloud-based in them on-premise plugging was into of extend algorithms

for month, row. of leadership success pillars smart and Partner a what of the being a built These solutions being are our customer Year third to on analytics, and for you have and we're everywhere and on the the us, to years setting innings being I'll three complete this commitment Google leading motion. ahead industry walk over we've our year innovative Cloud partner cloud-native, continue in highlighting a impactful now think financials. recognized delivery standard Cloud. to many for through around space. technology we have Steffan Cloud has the turn Google led the were in a as Just us last named We in of to to opportunity the this product very would call to early our for strategy in With executing emerging become large excited we're of really data that, Google

Steffan Tomlinson

model. is over substantial deployed offering and and consumption. pay-as-you-go of customer's on sign be a recognized first up total subscription Thanks, to QX, or overview of is portion accounts our available our fully sell operating to such Confluent platform Cloud to on great customers A card enterprise-ready under our Revenue Confluent our our license make team. and a afternoon, can to contract I'll typically our part data for upfront Confluent pleased results. that is Since Confluent credit comes I'm an differentiated reside. majority remaining model. XX% software Jay. Services as of XX% everyone. this is revenue. term. Cloud harness earnings platform Good revenue recognized cloud motion everywhere as with business offering with ratably provide to recognized the environments. based XX% Confluent in and together SaaS XX% here their a designed platform as subscription self-managed attached software call, is applications our two cloud revenue, from delivered up is empower AWS, native a and In subscriptions. and successfully completed of private is which revenue delivered. recognized strong in be data model and cloud platform. IPO our can business We offering, GCP. We an services Azure we a committed on-prem, either Confluent our managed offerings; which The as to contract is Customers purchase public our credits Cloud

of rather of performance business. and into the current future Given to as in organic measure RPO remaining business billing provides or revenue it RPO metrics committed in cloud momentum obligations variability are RPO represents of and health our be to our recognized billings, than contractually the in insight terms the the important the regardless patterns. billing and components terms various revenue model, consumption

in topline momentum self-service start rate, land growth Now, strong in I'll the QX of expand and let's customer platform the customer our with retention quarter. strategy. demonstrating was the accelerated our we the and momentum results. turn to a Leveraging with robust saw quarter power and motion the net count arrangements commercial our approximately of segments. enterprise customers X,XXX, significantly Confluent offering, XXX and and able reach customers, pay-as-you-go and our bringing net QX, In XXX% new we've been to our number both up total added and year. we broaden Cloud to in the year over customer

up and see the at the at of $XXX,XXX cases, the cases customers over We effect and of business large This for year. the As second often reflected ARR, X up strong XX% of is with offering value ARR, use with quarter least lines XXX customers use least year ended year growth our expand base. our into expansion XXX% across their organization. more in in with customer initial million other over in XX year customers they

to consistently year, our in term, retention XXX%. initial expansions Another NRR QX, the and usage-based compared improvement in was continue, the NRR success term of on to transition billing XXX% our drive in key of We've XXX% goal due in driving and deal part customer it across we by and both our The expect and renewals robust metric in churn. net driven expanding was focused We're in cloud In large strong prior fluctuations business the rate, the above is longer offerings. subscription quarter. to past, the timing near NRR quarterly operationally above consistently of first is dollar-based the to XXX% above or the to fluctuation sizes seen NRR.

plan a report as relative target XXX%. near-term of our we basis, quarterly threshold on NRR forward, to Going to

Total XX% XX.X Confluent year QX. components. Subscription XX.X year to and million, of over year year over revenue ago. Turning of year percentage subscription for a year to significant growth to total continued revenue was accounted million, Cloud and and was and all growth revenue XXX% from growing revenue. XX% XX.X acceleration XX% to XX% revenue. up revenue was up over sequentially accounted components percentage year, XX% growth. of revenue. over a for up Confluent exhibit across total growth points from million, The for two accelerating year was revenue revenue our We accelerating of year acceleration XX million, accounted our platform saw XX.X of total X points XX% revenue, strong

significant believe cloud platform we see mix motion XX% their from to trend As grew year outside highest still continue ago. in local invest offerings demand in up representing geographic the U.S. points year Revenue U.S. grew see of adoption. international the percentage early Kafka from propensity we opportunity in in the From a a of of where migration. million, representing XX.X we're the XX% million, the cloud, and front see of expansion, standpoint, to the countries more revenue. we in Revenue organizations secular XX.X extend world. increasing on capitalize to positioned operations a data XX% continue We'll our us. total to for X over we over strong to We're year year year of total revenue, to innings XX% our the around from

targeted these higher expect international revenue to over our time. drive investments We mix

year RPO, year obligations. over we up XX% up million of be Turning quarter We XXX.X million, ended which in second Current the year. with XX% XX% RPO to XXX.X to remaining performance estimate over approximately was year. RPO,

our is an the estimate due fluctuate consumption patterns current to cloud our As of could a of customers. RPO and reminder, variability

multiyear also in by a driver. triple-digit product Confluent RPO acceleration the offerings large largest was driven RPO broad-based across being Cloud's the momentum expansion growth Our from deal. growth benefited with our

While the it modest and RPO current QX impact rate had differential between RPO. on deal a revenue, increased the growth

the I'll profitability, total include which up results to noted. realizing scale supports Confluent multi-tenant ago. Cloud. up I'd unless of a non-GAAP to achieving XX.X% for increasing Cloud year Confluent gross and XX%, gross turning as Confluent XX.X% margin QX Before otherwise from infrastructure efficiencies attributed and in margins has of to that platform discussing a optimizations gross the mix XX.X%, note margins that than for is we're like stages increase the lower costs, ago. year early was and Subscription our be hosting the Cloud gross product infrastructure offering. and The Confluent platform Confluent leverage cloud and majority were from of margins,

and total Cloud Confluent account to larger a gross for in of revenue, to As we continues margin share the scale fluctuate anticipate future.

negative XX.X% a per Free Operating loss XX.X% XXX.X to to well driven The negative by negative was million and catch XX.X was cash ago, was ago. our profitability. XX.X% XX.X% loss net year diluted $X.XX primarily outstanding. invest negative of as profitability shares basic decline representing and a as Turning margin in FY was with growth. million average plan operating to compared to compared year-over-year up to continuing for weighted in share negative flow year margin 'XX, hiring negative using

resume hit As FY pause on until earnest pandemic a front at and hiring reminder, end in of the 'XX, we the in hiring the didn't button we QX. late

functions Given our we in critical of opportunity. economics strong in organizational across model, capture inherent to addressable the and market all invest our size the believe our to market scale unit it's

sheet. Moving balance cash X.XX second the the the includes marketable net on with IPO. billion proceeds and ended cash, in securities, from which million XXX.X equivalents to our in quarter We

on or or income and revenue, to net we're loss loss quarterly now non-GAAP non-GAAP total quarter, guidance. operating earnings Starting and this share. annual Turning providing guidance per

we For XX includes and IPO. negative to XX% using XXXX, to negative range XX% range of outstanding, which loss of XX in share full $XX million approximately weighted $X.XX impact shares post of in quarter year million net XXX average XX $X.XX, in to growth the per weighted the loss operating negative revenue non-GAAP the to of negative over the be the expect range quarter of million, representing of third to Non-GAAP year. shares

outstanding. negative average range the XXX to to negative share XXXX, to I'd be also some to negative provide XXX to XXX of points. million $X.XX of year. loss growth Non-GAAP year per range range weighted and revenue approximately in fiscal shares XXX of in the to loss in expect modeling For million XX% $X.XX, of like the representing negative using we operating non-GAAP over year XX% XXX million, net

expenditures be ability 'XX of And amounts to FY taxes revenue. strong total execute X in FY a large to 'XX to range to our of closing, expect capital our approximately X% In and market internal for costs the We use software against X% non-GAAP results to opportunity. capitalized second-quarter X million. be underscore

a category-creating growth your and just getting drive take As that, term. I questions. durable company, long profitability Jay we're well we're started, positioned over the and to and will With

Shane Xie

Thank you, Steffan.

Operator

that, with he question we'll And Sanjit be Sanjit, Instructions] our will Sanjit? from still take mute. first I think [Operator Singh followed you're of and on Morgan Stanley, Murphy. Mark by

Sanjit Singh

Okay.

three the is on Sorry to bit a platform of point's mix escape little only on Confluent mix about as cloud both that, few about Confluent sort the up impressive year up Cloud that I last last particularly really cloud results basis this The a in really The If quarters, public Shane. it team part Congrats velocity business quarter. Confluent and on we XXX year, recent points to XX most and about of the and the year. on I at want today? a see was Cloud strong up the side. debut talk points your look why were the company.

take is of like I it Why So, could if wondering off? Confluent just of sort the adds, now seeing it strong on just customer start business that we are why was Is to Jay, feature parity, really on expand sort Cloud? you

Jay Kreps

question, a that. to different contribute really it's couple things that Yes, great it's of a and

about be like I really to pillars customers, is getting each meaningful The talked everywhere. native, that differentiation. product of cloud being to being being complete, the first those

lot. a matters that think I

cloud incredibly a learning maturing a with the company. etc., advantage a of is to And our that I to the go the infrastructure, the think really then, may to especially really how of We've really unlocks cloud security helps. product. skeptical market, of cloud model transition through customers managed finally, capabilities be The to story, think usage-oriented a that secondly, work I that you of take smaller getting a gone think foundations us, solid. of lot be I how product with of

advantage early days of we're think I in still taking the of that.

So, really just the we're that's sell to like us I for SaaS big been adjustment getting a started, year over but think company. plus a last

And things so, all of I significantly. think contributed those

Sanjit Singh

That's in the next then, super of of question terms my sort truly, velocity was helpful. And around adoption.

think data And exciting each other you the were about but guys infrastructure the one I with that's part on talking hand, is reimagining on how roadshow, the interact new. applications and other.

sometimes it's things friction. sort speak, of to into terms to a maybe here? Confluent key you that But And get to is And to are other your new of Or lever wheel, can so buy to related Cloud of the Cloud. customers there means adoption, pull to in kind greasing Confluent drive architectural? that guys do

Jay Kreps

question. great a That's Yes.

at But that So, One, -- is that with we hard it. something friction. said, there's do to really it. point was that as want company started that powerful it an two And dimensions, right? the was you idea was absolutely very and who companies

is at make features really really distributed we the problem platform away. you. net scale cloud Confluent two massive the value. operations. do easy, is just And solution dimensions it We, so, obviously, easy to to takes have can the just with for that project to make do quality the set run cloud, get a there? think the there's And new That there's it is I just One but for easy and a the it it Is production help that. of out on-premise product

on for is to low-level development easier of build later, focused applications of and the is primitive easy reimagining kinds seconds side, applications. is the hard of the capability. against these really it XX new But or core side how this other you're we've at world-class kind But this almost what this, making So, easier. it Kafka is

XXX that write. allow that over connectors no streams code with just you to having different to have capture you So,

much it ksql going. it a and You traditional and making makes just know understand to motion. this, software is part high of engineers all very the to apply people really for it language data just huge efficiency to easy easier flows. get plug in the that take in And then, and data of thing kind of the databases, That

more I the and we're to open-source making easy it we're the the develop a results different in that do new can use done lot think don't we seeing But efficient more acceleration business I direction. out think for in and able underlying to value we're, cases, it and think in in that this more we're way. get making be this there's showing. option in the I to

Sanjit Singh

Well, a results and that to on congrats great start. great. Well, see first-quarter great

Jay Kreps

much. Thanks, so

Shane Xie

Sanjit. Thanks,

Operator

of J.P. our second question Morgan. Mark Rangan. by We'll Kash Mark? from Murphy Mark take followed And be will

Mark Murphy

so Shane. my I to that ask see you hearty to single I Thank materially your quarter. congratulations net describe the underlying such quarter. much, operating is a not then last wanted yes. quarter? on just you it, customer in move way the a math behavior performance increment just it's changed XX-month it's it you, what's maybe there large Could And stellar average the want Okay, a definition is a in rare that Steffan, retention single in little whether a in so that add to has or it? in a

Steffan Tomlinson

average real higher net environment, bright is and Confluent a company. quarter who Confluent gross things starters, retention rate we strength saw were ARR. great of the the in a was meaningfully the Cloud for net it's than really running expansion. underlying one retention that are the And the was platform. saw a Confluent Well, the customers for improvement drivers retention Confluent really, in rate healthy metric in trailing both Cloud for for and the platform both XX-month But the same spot We for of

to dynamic And the so, some underlying to hold. really we're the get take And that network important because of I drivers. effect starting understand it's see

operationally the about As in and our term in are talked above to on we the IPO, driving be focused consistently XXX%, near on XXX%. -- and above term we NRR long remember, you

this the So, above that we're organization, in way. through and a sales We're But was proof and product off. quarter the point and great seeing really through operational to we've pay fluctuations along going the see focus put we've got rigor go-to-market XXX%. that the organization

we're very that. with So, pleased

Mark Murphy

in vanilla follow-up order in steps so value you for to versus what the at interested can look be of I'm the Kafka you when be as of think subscription Okay. differentiated plain features most all Confluent just important can relationship? highlighting offering Apache a Jay, the are you, that you the the version the that take maximizing people And in

Jay Kreps

of as making I kind pillars and for that really that customers Yes, of sure differentiation great clear are experiencing question. project that those it's a that's us. mean, critical three a

the So, a next the pillars those is making The really is And that of people sure on. we've is underlying of which foundation think great really that broadly I I sure strong, making think job known. done each that as that that making organization the making trying really marketing significant which hires and product, well. think of or made cloud part signing in I big We've over easy six is are a as critical. up so, the months last

take think, help have all more discussion going I so, we to and broadly, proceed us of with have that, customers. that is kind And out potential of story any it

Mark Murphy

Thank you, very much.

Shane Xie

Great. Thanks, Mark.

Operator

Sills. be Goldman by next question followed Rangan Kash Kash Our will comes Brad from And Sachs. of

Kash Rangan

your on again Congratulations company. much. so first you, public quarter as Thank a

Jay. for one First

that So, here. wonder business for where are really the on of couple points you impressive of cloud incentivization front years. higher landing cloud I were the Jay, numbers than the a dissect was could there if customers how go-to-market much into versus of maybe strength cloud

what very accelerates core economics much as a perspective? just from Congratulations. business? Steffan, product of the that Confluent existing product extent accelerated great. longer to to Maybe mix basis, is LTV of one the do with look we dissect That more another business the that bit what again. for sustainable starts to be there little you. the of the a driving Maybe the be cloud. customer and the maybe thinking And the consideration. model like? the in Is first cloud, to is have Confluent CAC cloud as decision go the the materially do that To you So, you have business with cloud about of Confluent the do platform different business on should meaning go-to-market term? a decided Can extent or same the itself. Cloud factor the strength you about as Confluent the cloud transition And there's I will Thank to the what of implications far the business

Jay Kreps

question. Yes, it's a great

just thing one this of one things down where boil multifactor that is So, can't to you these changed.

Yes, got what So, better? significantly the product better. got

is something crossed really how full across off. a until that the And build infrastructure for usage to given and to that region, kind surprising right. talked every starting to really And a have with us properly on really the work time technologies, it scale customers. cloud the really across is that. large see years. to lift be sophistication that having and a starts big threshold just I the there organizations to advantage is may of you're I it bit just every a And that the we've world-class best worked I think do product, model to at a people about doing cloud that pay starting cloud of native actually networking our have invested of that deal underestimate of think cloud, that's go-to-market we've think I do do evolution of this not something suite security, amount lot. of offering. underlying This kind little it's in But ready that's to adapting you the unlock. take And and that we've

think I paying off that's as well.

people it I to more -- to world beyond broad-based be the against going critical systems going And realization that. think data place absolutely be of there's of to the open cloud more think I cloud as that awareness larger is also growing kind much are are well. that independent their a just part There to architecture, the bets to that in to movement they're of us. a cloud helps shift they're starting much and around set and us provider, is the

they for of And put these best them can customers, that. them want so, that the these need and give actually their they in a place, to of companies want lot areas. kind for do of great to best in be engineers the themselves. help to open-source things They they're out can running looking get They world-class product that

that. it's up be it So, those I wish simple things. up adding just all it but thing, to one was all of ends

Steffan Tomlinson

the multiple point this of view. Kash, year on of a is second And question, kind

time, we it quarter, over a of but by component see just thematically, of lots quarter read with being basis. don't it for our positive trending bigger has longer-term for higher So, It impacts sure. business, and cloud on a

a profile From standpoint, believe positive are customers traditional be a that set of longer running consumption-based our just that standpoint term. see a NRR of and revenue we call a the CP. as through visibility who cloud the it, the than, we lot read higher customers So, should having business

but we've improvement nascent Our in definitely cloud fluctuate is a gross multiyear margins the We're that LTV when of fluctuation. bit the of economics, provide And unit Confluent should on profile platform. will the great far, given gross and Confluent over a we will think growing business stage of be more goes in then, margin Cloud seen little our the to CAC time. it so to journey profile

very customers, the R&D really to serve of becoming the in into organization can't tailored plugging that be will we house, of the on more much positive the And investments the terms three making are for organization the order anymore, being cloud. major our the nervous providers and engineering in so, cloud-first lastly, to central cloud to service on But I And the aspects have complexity we're system then, to all plus tailwind say, on-prem underscore and integrations, but doing the in etc., business. whole side of company. of a because product in able be a this dynamic I'll

so, And is our central just priority. the there's system. being first cloud related investment to like The definitely more engineering nervous

Kash Rangan

to and Thanks the Good for that. again. very Wonderful. hear answers, detailed congratulations

Jay Kreps

Thanks, Kash.

Shane Xie

Thanks, Kash.

Operator

Brad Sills Michael from by next our question followed will with be Turrin. Brad And take We'll Bank of America.

Brad Sills

first driving on which doubling to customer count the that And quarter My you in a see that as more? from customer. point a Real company. more certain on Thanks size is year. common They And really customer guys. become so great. nice really out when Confluent a catalyst accelerate use that what that expansion the strong a than they which customer to look how crosses question such start guys, to to at they a that in as is, million public what quarter hits result is more My organization, Great a the Is is question ARR. congratulations Oh, of point? metrics get in as Confluent way a and you that? that of hear me, that one over is more quarter, this partner that threshold stands or there greater to than a certain meaningful strategic a of are a across and year much. theme start when you

Jay Kreps

a that's fantastic Yes, question.

we early It's of the So, interest. in, yes, application. at There's are There's development. there's as early developer having three of getting experimental. look where kind production People to disparate it's adoption phases. kind phase of maybe kind attaching more a

is to as a the nervous of that central kind that used third to kind starts in way company that plus where as use something, the for really that then, it's million of system something. used be of in the really, it this company exchanged part of data data I applications So, this that is beginning phase it flows. thought and it's And starts part a And for across. important. $X connect between of This customers. default later-stage wouldn't for customer way proxy default is

Now, them part want our applications. want point, data their as start product obviously, friction at down We journey. to with have of a get really possible. it We the with you over many use experiment could world one early on. want very cloud our successfully more and if typically, possible of the that case, in and to you as foundational goal people big production to become We customers into time. little that is And as really most But away pay grow best significant architecture to have usage. in the taking you be at that

development a kind of technology scale, takes accounts. there's we and the goal kind see the to having in all take this sure heading as off it's the way and accelerate direction about next of across parts our in a so, really our that's very that. the different At to of to I value the in And for see things try organization, -- making need relationship any think of they the million of And That's the that that. level. healthy right relationship one they're

Brad Sills

looking that an the When that even more I that really talk to capabilities. they're modernize really integration scale we at one need for real-time also hear Confluent legacy great think these we of when of you capability require of Confluent, the to may. But some is real-time company those help the customers, infrastructure next-generation to follow-up data. think applications applications of of we applications, to hear. And if that adoption That's that riding

question my the What do to so in lot much guess is, Confluent, I for cycle you move there's modern next-gen imagine. Obviously, very legacy, could coming of increasingly. that see results you're applications. replacement So, see how driven well would about do that a of I far, has the you that positioned that

Jay Kreps

major isn't the ways. and the product to and and things us, rebuild There're running powerful but I products, often yet, this is And it's has to the really kind part in think of on pressure subtle ROI and there the one new It's many business. right. hey, new adapt will there systems do work that it is problem and exactly business how the come everything technology that's really And in great. things rebuild Yes, say, of of works. about which be

that the allowing to both ERP may into actually have about built action It's isn't, parts challenge in in lot have of really the enterprise don't And how relational integrate up in And able platforms the be it's Typically, that? how old they business new to we're challenge the kinds the flow and real-time business power into a this if requirement activity databases central mainframes, alone. to continuously of When in versa, that new customers. systems, and challenge you is what bridging. to these pull be system, for commonly and why right? core that's this that New them They enable not stand trigger really a to system they're them can And do so mainframe. and built core be see islands. on so, we of. And out applications, vice connecting part nervous you they systems the data of plug can do the apart and of a is doing. new new that They a have the stuff old a talk out and the larger cloud be that's to applications. you things the the to old to you on be that's back stuff. allow That's the want

I kind brownfield, This And tech key think These operational the as companies is to need application. Greenfield back of to the it so, right? systems. the change versus really are what same experience of bit new next-generation It key some you of The part both that that and a in isn't front want bridge end same get older to, Silicon the it's it is well. starting Valley the possible. this both is makes ultimately architecture time. way a time at for and actually a companies it And is often even things at be by has to customer fed data

want not transitionary they them. it's a thing. really is how just there for So, get It works to but

Brad Sills

That's great, so Jay. much Thanks, thank you Steffan.

Shane Xie

that. for Thanks

Operator

with question Wells comes And Fargo. Keirstead next. Turrin from Michael Karl next Our is on

Michael Turrin

a you Jay, the on Confluent Year or a and major with a is cooperative year congrats there competitive afternoon Good milestone first third on on GCP Partner named shed thanks. with cloud for in here agnostic dynamic was can positioning of customers positioning Can investors? Great, for light Hey. important Confluent row. there the report. maybe you is and another Tech providers? expand the for How earnings

Jay Kreps

cloud of Yes. three cloud not have Confluent up these enable makes next to all That's That cloud just really I eating cloud they workload systems. is provider about really cases. and that providers. of this. is to with It that The with in critical complicated have. excited cloud other applications that it's And strong. get new question you previous and really, what cooperation said, doing. in excited environment that with that And in compete Google. is it certainly is the about and actually really feeding part the we're products would what just a said operational has we This the different in see architectures it's them of many what that's is they're for why new the the handful Each And dynamic. reference a would why that's their BigQuery bridging providers

limitations of story. think all kind have in everywhere that The I A basket. lot really of the them complete three most of is don't handled a in clouds. now so of of that to one provider. these it's cloud-native story bridge these of offerings major are the a in That's lot And doing. well they want into why the doesn't what cloud doesn't possible they're larger It work isn't clouds. It that bridge necessarily I with us. just into think on-premise other complete

Michael Turrin

on year. of comment Great. mix cloud model, affects And Steffan, on you're just to providing of an outlook for the in both the as and that QX the approach well? have you visibility here guidance at maybe overall the the comment full you Can all whether degree or

Steffan Tomlinson

also consideration forecast, at sheet. look We into coming at of guidance. items we look the we several revenue balance pipeline, when at have take our we sales our We visibility for look the off constructing

a gives we high we forecasting upfront the through. to really a piece us standpoint, the you on I confidence about should and that's the level, based consumption and ratable attributes say, from model I good because very walked consumption, guidance just our mix And but feel so, is in modeling, just and visibility, ratable fine-tune revenue our continue of a revenue in good

Michael Turrin

That's a great start team. here. Nice job the to

Steffan Tomlinson

you. Thank

Shane Xie

Michael. Thanks,

Operator

Karl by Derrick take be next Wood. Karl UBS. Keirstead will from question We'll And followed our with

Karl Keirstead

Congrats and good Jay you, Thank first and way on start. A quarter. to Steffan, Shane. this

the modest Steffan. call extension Was maybe out? some a in IPO to with slipped anything second multiyear mentioned about that? large a there start into I out, revenues. quarter maybe boost XQ in could you that results I'll provided to you the XQ. where that least slipping, quick of comment So, quarter that's had Maybe calling that characterize And unusual had the Steffan. you was deals remember an process Anything during anything occur deals also, the worth that like funky at occasion then in there terms in

Steffan Tomlinson

question. good Yes,

impact RPO, we a large it RPO you if can you revenue, RPO the of growth but the also opportunity particular. on did view one between on in for that that because didn't multiyear that it just script, base. rate I impact current a deals wanted as very quarter it really out on a to anything was then, great material did have us. tell going two, it was the And the at far as the impact We as there. we big called So, deal, an it it was of and call was have and deal solid the look a quarter very else kind And large quarter it across that had in in a out vote confidence. other in expansion but we unique,

tell Ganesh customers, as us field healthy, the throughout X plus NRR was net ARR you customers, in million that to ARR feature well. sales a Schultz XXX,XXX of performance. And operationalizing point quarter focus around bright for drive us engineering the functionality product about standpoint was of that's terms a for I like metrics And improve things indicator continuing And organization. us. has last the great the just NRR about clearly around think gross from and think a done for done retention what in the at that's can we retention look You velocity you has stickiness. the Erica over year, spot very been to an

Karl Keirstead

then, great. a maybe follow-up. Okay, And

is to tail of spoken the but haven't customer skewed your too metrics quarter long sometimes of get customer impressive. on is yet, by the focus not much One which count can doubling we count because that I the about SMBs tend overall in

you if at Jay larger a did have of to a indicator? wanted for XX% of revenues, cloud sort look other was I then, was new growth. leading of customers? new version a words, secondly, so, that extent, cloud effect ask on catalyst product, good customer And in And bringing what it to much disproportionate In the Steffan, as and the

Jay Kreps

great a it's question. Yes,

of customers yes, getting is cloud the the out we're definitely foundation how So, scale. offering that to

much is we're Confluent And so, So, self-service right? is going when vast low customers customers on in that the majority total looking Cloud that at of growth very to predominate. yes, it what's are kind numerically, of And friction.

worth a with can may techniques an us to so yes, come be you $X.XX marketing beginning it as said, of may friction indication that's journey in it of and And And the of Confluent. Now, great, as you that quarter is quarter right? long-term we where putting buy going be the something from not to of spend, onboarding process. remove stack change a we're some fluctuate our or

it's You're going obviously at continual as to they look becoming we So, of full etc.? doing? we Are product, do what think usage see We changes approach journey, the are Do techniques our have active? on. that that. customers be quarter-to-quarter, and answer so system and incentives to that we offering your strategically, there fluctuations important, in as for and question, will I credits change and very

Karl Keirstead

you. Awesome. Thank

Shane Xie

Karl. Thanks,

Operator

by Cowen. next followed will comes from Derrick with be question Our Derrick Rob Wood And Owens.

Derrick Wood

go-to-market, question. been to gate. year. Thanks teams the of job building Great. wanted I my guys have out new out on for ask the over taking Really go-to-market you the great last

those you year? see get progressing by Just sales to capacity do do the the how playbooks, efforts sales a Where sense wanted maturity with that stand standardizing we of driving through up EMEA, to APAC. region, what U.S., and look

Jay Kreps

a question. Yes, right. I it's we young a would first say, remain great all, company, of

ton that a in overall in still think I that's arc there's happening there. So,

seen performance in team. Steffan done alluded, team the we've the job, good of brought an board they Erica across I think great from and in rest talent region, has amazing and As the the every

steps. think I huge we've made So,

you I would add think there's will it that Steffan? to a even that, I lot there's know still don't better. if make that anything doing we're

Steffan Tomlinson

expanded and a in couple One we've is most have recently in we started U.S. and I APAC. in the of EMEA things.

still just prudently of And hiring. a had hiring that track answer year need. up more growth question, headcount the reps on a we 'XX to three XXXX, and than we're tell people so, we're in ramped XX-month We're have catching we theaters. major on in sales hiring fact the we're last than early proportionally in we have going reps to paused can that more all and talent ramping I onboarding the and standpoint, we have process ramp in that of and because your hiring COVID stages on in from And caught to Derrick, you up we've 'XX In process. 'XX. ramped given relative

on also you commentary So, little of geography the progress. that a gives just and color then hiring bit

Derrick Wood

through of and to And changes sell Perfect. couple cloud at different it And engagements, committed is questions then that From year? and any an shifting then, tactical cloud incentives? as when two versus Steffan, really. how contracts comp incentives a the all the are pay-as-you-go is much have to to quick perspective, we platform made you comes versus progress there internal

Steffan Tomlinson

folks On sell side of the the to year, this put call compensation Confluent more Cloud. in, at of for did house start the we it, incentives slightly

committed majority And of committed contracts, between off, good. base. contracts. pay-as-you-go mix revenue And far as place and is off and which small in vast is a the the that's so, is as of paying that's growing Pay-as-you-go the

look like of majority vast So, at but high the committed are you proportions if revenue rates are this point. just the growth at contracts very percentage a

Derrick Wood

Got it, thanks. And congrats, again.

Steffan Tomlinson

you. Thank

Shane Xie

Thank you.

Operator

we'll Raimo And by And Piper take Lenschow. Owens Rob be next question our with from Sandler. followed Rob will

Rob Owens

you that could the taking Steffan, whatsoever potentially I or pushouts? there was that for the top any in we out terms as breach guess customers Thank of CodeCov And line. that play Great. QX, did thought my question. contemplated impact starters, for

Steffan Tomlinson

thought, the how very the we're clear We're what were CodeCov very front that way out We customer responding. we're in of the by base. was The breach, company it. well-received doing, I with handled

the as you very had And through. revenue than I those played growth growth, of literally out, just think, we results had RPO, it expected. if so, no the all growth to And as overall the look XXX%, little came impact revenue also at and in cloud the far the better

color And you so, hopefully, that gives some commentary.

Rob Owens

history up think and but gave How thinking have are you Sure. quarter And of a pushing guidance relative about as to you on have then, a being earlier, commentary that. number? even of and strength you end we you the history guess of and you leading of contemplated to this conservative, than I would know those I sequential some influence a third I flattish that to it's happen given be might and takes quarter. different indicators, puts seen all the couple type a you've a what could but actually in that of this million stronger some

Steffan Tomlinson

component Well, at consensus, guidance we're fact to little our to growth to we looking total XX% year-over-year can bit a seasonality in there relative raise we're business. And the very is basically with revenue. pleased that XX% a

have plans comp for year. Our this salespeople semiannual

and just of than QX stronger seasonally be comp to how by tend QX nature plans and QX so, And work. the QX the

but guide we very good consideration XX% being the guidance. But guide also for into not the felt that so, we about only quarter, for year to the XX%. while And constructing took

And so, and gives clarity. you some hopefully, again, confidence some that

Rob Owens

you, much. Thank Alright. very

Steffan Tomlinson

Thank you.

Shane Xie

Thanks, Rob.

Operator

We'll next Barclays. take our with question from Raimo Lenschow

Raimo Lenschow

kind that that? Jay, And But Hey, little out went the into question the other to look more started as clouds know of of bit is me congrats if like at thanks squeezing a future. the Mongo I toward the going cloud, they that me for with vendors well. look three you out kind But then in. from label, And came opportunity your of of big Chinese going clouds the up. that, east of I for Asia what's terms in one kind thinking forward they start market the in a Steffan. What's have working toward around and And white follow-up then then, thinking more terms you're on. there here?

Jay Kreps

Yes.

process. I think we're in early that

watched have have of what We done. some other the companies

I options. major Raimo? lose are Did priority follow-up? just our think Was these a first building Obviously, those we you there is three clouds. first a in there great product world-class

Shane Xie

you. we Raimo, Hey can't hear

Raimo Lenschow

Okay.

factors quarter for something question question is going in changes back Sorry, pretty like were be actually those my internet never Mark's I've to about that me forward from that is before. here. you going Steffan, how and connection NRR like earlier, like do to going unstable. do Could the one in it it's remarkable. well and think seen going forward, that could think be like stable Thank you. more you

Steffan Tomlinson

Yes.

for called So, QX some equation. NRR, year. if QX, on a it's and historical metric, etc. we of QX last some trailing out because one now out I'll make is the you look of that had churn we because our is We of The based QX XX-month on the churn candidly, at additional actually patterns NRR had point churn COVID,

definitely So, And retention be out. bigger components were point. going tailwind gross saw We've the think do better driving the is play are been We And we it's to to that's lands expansion very why also it, committed in very that is to that and hard XXX%. just not a opportunities the a where there's that quarter, that but NRR, consistent on on saying NRR were we but to forecast, quarter, we XXX%. guiding are we we're consistently in above what always NRR which actually were this particular we above pleased fluctuation.

So of wanted is to a I base. year those ago churn happened out that's how an make. comment now was that benefit of because there additional some slight are, the On NRR, that a the

gives you a that color hopefully little So, commentary. bit extra of

Raimo Lenschow

strong quarter, Congratulations. though. Very Perfect, yes.

Steffan Tomlinson

Thank you.

Shane Xie

Thanks, Raimo.

Operator

your our participation. you Q&A would This and now concludes much questions section. for Jay to very closing it I remarks. Thank back for turn

Jay Kreps

larger for journey. represents We quarter one time our step everyone, forward thanks feel more today. on the Well, your

so, our huge customers our a for and Take investors, making care. this And team, possible. to thanks our

Confluent (CFLT) 7 Aug 212021 Q2 Earnings call transcript