CFLT - Earnings call transcript Q1 2024

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Shane Xie

Hello, everyone. Welcome to the Confluent Q1 2024 Earnings Conference Call. I'm Shane Xie from Investor Relations, and I'm joined by Jay Kreps, Co-Founder and CEO; and Rohan Sivaram, CFO.

During today's call, management will make forward-looking statements regarding our business, operations, sales strategy, market and product positioning financial performance and future prospects, including statements regarding our financial guidance for the fiscal second quarter of 2024 and fiscal year 2024. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. factors in cause XX-K our the risk differ results filed on SEC. included is most information that actual could to with Further recent Form except these no after to assume by update We today's obligation call, as required law. statements used financial on basis, [indiscernible] Unless all call on made non-GAAP today's measures otherwise, are on stated a and are certain expressed a year-over-year basis.

be and measures purposes. financial measures consider from of GAAP. investor.confluent.io. earnings contains limitations is website can The in these included trends non-GAAP between concluded call. IT analysis our These earnings should prepared our internally release our forecasting GAAP report the remarks we accordance in and financial facility will have non-GAAP financial our measures for a financials to these found our in And which on planning use earnings in or have once earnings financial single We and as and with slides at our today's non-GAAP call, we internal our information from Confluent and [indiscernible] website. and technology, financial infographic, isolation as The for our X-pagers post which prepared press IR finally, to on report supplemental PDF,

publishing forward, that, quarterly earnings to the I'll over the call. turn plan Going we end on Jay. With at report of our the call

Edward Kreps

welcome first and margin [indiscernible] than XX quarter majority for million, $XXX offering. percentage of a million. earnings points, Total improvement. Non-GAAP quarter end and Confluent more of our grew operating metrics. XX% call. which improved to to Cloud to the afternoon, fastest-growing to grew the start of to points strong had revenue subscription revenue everyone, the our report guided accounts the $XXX happy Thanks, we Shane. year, Good remains all XX% XX high consecutive I'm exceeding our now revenue

oriental's systems, and compensation team's new friction We macro we consumption incremental our for and [indiscernible] We and our out and environment. adjustments, amid cloud [indiscernible] logo results launched metrics These new consumption measures strong customers. QX, reduced In new transformation. towards reflect execution acquisition. but landing stabilized in rolled

but in stabilization customer It tremendous category. trends. signals streaming ever [indiscernible], happening consumption growth, are Bangalore recently illustration and promising remains increased and We With consumption and logo start-ups, new [indiscernible] in hosted great acquisition the customers registered person of APAC. particularly on an the spanning we the like added Kafka growth and Summit early strong of Stripe, around London was of between our Bangalore. first we new only are two within the [indiscernible], many innovation Uber events events, Kafka others. more organizations than well. us Kafka their to Summit customer in a of potential increased in virtually, These days, Between and not customer customer XXX our X,XXX in our adds Bloomberg, able or QX Apple, but including everything joining we better total We people count, had enterprises ING, CERN, data of quality we're growth sequential the the our largest volume as 'XX. target additions, to since high focus increasing

and Our pricing call general optimizations we Cable performance feature list major powerful of was with display new across both on events, of product including XX customer-facing features announced availability innovation full Flink Flow. a and availability the of early

tables that table streams object Flow Cable using structured an makes Iceberg. cloud Cloud called flow format available and as data storage all Confluent through the open Apache

walled data data so a powerful. me and means analytics that Historically, why garden. warehousing on existing who's Let closed it's inside little this provide systems world, and their the in data background in of what tracked

but lots has another world of and data technology for systems. [indiscernible], the links, has analytics created This led of granted vendors complexity the AI reporting to data products end value user. mismatch As grown, the yet silo this a for of

Spark trend arisen top SX across various as object project and storage Iceberg data universal However, of formats as on of data last tables fragmenting emerged standardizing around analytical lake can systems. as data source years, the the path for is the cheap open open systems, metadata object and across products data Snowflake. and and world, Apache near tables AWS Google's Iceberg cloud BigQuery means open of facto cloud these another source across Athena, instead de RedShift, data object a standard store. of of like open has well like like support has storage. an systems be The possible, cloud over that top X shared analytic on Apache house the including warehousing rise of has the Flink that is

its is cloud Confluent connector. This early Cloud. on with defined native as now can data and up Table Confluent the just heavily Kafka Cable means more tables the already streams for these directly and same is storing in or translations we access are users. click needed. with one single Flow cloud time, implementation the make no KORA, streams is are the a data most a Cable of relied we first taking mappings feeds Flow time Flow a Already means object Cable common of analytics open But deeper. Flow, single that complex of integration stored on than iceberg Kafka that in and a button. far our into storage data system. of can

overcome processing as vendors performance the open Iceberg level and data to having was a layers up is data based cost, playing ecosystem silo a For perceived on to any formats features new analytics threat entrant field significant rather than that like locked of gravity. in a as compete some on vendors, it letting opens of rise and data an

positioned this indeed, our However, we built to sharing the uniquely business as of around Confluent believe is goal our and model trend from is benefit data.

our of that platform. a in value creates streams rise the Iceberg the for the important data very increase So destination can of

our adopt significant on-premise exciting Kafka Flink customers many We time. to This centers. position in the production processing XXX on-premise consuming as win data seeing our Last Table business We'll our Summit, and customers is over This London, forward look up Summit be And capabilities another a a announced this development towards the the customer Flowing starting We've adding of software the general for and data why Kafka customers uniquely Table modern feedback our Nearly since offering platform most from applications of company. we for our announced feedback Confluent this this the building Bangalore. stream world Flow of hybrid We discussed been an vision Flink market. positioned quarter, workloads announcement Flink. only positive at offering. opening heard very in critical These over helps At are steps exciting interesting has ramp and represents been these see overwhelmingly running Confluence have to Apache tried makes with time. cements the significant towards incredibly we've it connecting in Kafka important significant will strong. and customers be of Flink Flink platform. prospects making for preview. of central part organization. platform. and drive will to our that to progress data and link and Early offering excitement its Flink we availability their all assumption Confluent what

stream specific coming realize or powerful sets of top real-time play LLM alone. into power stand platforms enriching a in common tap augmented data business in for for control. continuous mind the many to RAG-enabled that retrieval to and allows companies, AI right pattern continues It trustworthy domain [ a most streaming and companies emerged granular AI but to data. pivotal to transform with that access Gen to data models basis generation as to vector avoids it contextual used don't for hallucination LLM Gen to by the workloads be Data be way ] the has enables that into of AI applications. are a and the RAG extend

of helps than simplify capability Summit easier and Flink Another computation models to applications their with is Bangalore to real-time development apps. ever architecture in that it data support software remote for This integrate processing, AI directly easier make to into Sequel. of Kafka the AI deployment to inference this in designed kind developers rag making from bring and inference announcement embedding AI

used central traction AI in to We're Gen a with for we're to powerful customer is segment cases, native and an use in reimagine handling strong a AI-powered to managers form real-time the digital agents companies seeing engagements, or need situations. insights including and immediate variety when for and assistance identifying surfacing call particularly and of AI center every customer communications leveraging intervention Motive, with problematic industry. is a customer platform experiences manage nearly customer like centers notion is OpenAI, contact intelligence such One

AI real sometimes Their This was and existing data. to that demands exceeding a handle continuously architecture for fresh to latency the was of an requires updated with application minute. access unable sluggishness time unacceptable

of But this tools and integrating Confluent for putting digital available, able their who With turned to insights significantly down contact reduce customer act. minute as AI are for the it's the meet analytics and times just its into customer scalable to fresher data with a more with not fat its faster, from low over data and for and customer By engagements. provide was needs milliseconds. customers centers real-time latencies stream. valuable Confluent So them Cloud to architecture, to the managing as other natives response customers Gen XX

solutions. a example chain in supply global procurement GEP great Another and is leader Worldwide,

Its support This too [indiscernible], and chatbots shop, to innovate some consultancy to stifling was world's an billion operating Kafka biggest open-source multinationals. and AI but are ultimately offerings open and ability $X iterate Gen maintain, became their and quickly. services managed source maintaining software by of infused and decisions to to [indiscernible] burdensome previously provides the software

including our With more connect they custom and is to estates organizations analytical the the and using and partner trusted innovate build its for its applications Confluent company of easier as platform. operational scale able contextual, nervous the of and so turn AI across provide hundreds to to continues to customers, insight streams. across apps software, products quickly AI-enabled data and So [indiscernible] relevant Confluent. system into data both applications, Confluent central serving quickly can real-time

closing, In team. proud incredibly our I'm of

confident I've things the in is or are consumption to data streaming teams field over into rapid phenomenal, that, the patient been market. pace of turn more of and go-to-market to and our innovation With results. lion's leaning Confluent's Our capture Rohan. with ability share I'll excited impressive never our

Rohan Sivaram

robust results, afternoon, adoption. and line consumption Thanks, We quarter transformation, our include line first all Jay. momentum on delivered expand strong in The growth These sequential platform execution results reflect since XXXX [indiscernible]. and customer largest leadership create in QX our our team's metrics multiproduct product guided everyone. uncertain highlights macro our growth top improvements. Good still solid Key environment. beating bottom and a

Turning the QX to results.

to Total harness total XX% rely bridge revenue platform on XX% grew Subscription ] Customers platform Confluent million. to to edge grew to cloud. $XXX.X million, data Within representing subscription, Confluent [ $XXX.X $XXX.X revenue and the to grew of revenue million. the on XX% on-prem, streaming XX% revenue.

their platform total in see Cloud cloud. to ago. million, as continue year organizations to move [indiscernible] ended our We grew quarter XX% early $XXX to of to are XX% and $XXX.X the most million exceeding XX% guidance revenue for compared Confluent a revenue the of at Confluent

customers in cloud Our quarters, native including base, case in consumption select segment. stabilization expansion the use customer and driven of added digital seeing new existing we was started ramp in performance our recent by our from

outside to geographical $XX.X mix from XX% to of $XX.X the Turning grew XX% Revenue million. U.S. to Revenue million. the from U.S. the revenue. grew

I'll basis the referring basis Total to was of Subscription points. XXX on gross stated was to non-GAAP gross statement. results otherwise. XXX the points margin unless up be XX.X%, XX.X%, up income Moving rest margin

operating our mix We a margin with long-term total revenue shift above level to are for XX% pleased continued cloud. gross of target with

continual operations offering replication architectural Our TCO. have the networking multi-tenancy, lower significant of innovations layer to significant a advantage cost our balancing, in customers in driven data with elasticity, optimizations at while at and delivering cloud a data stack, every we has advantages combined industry-leading

points of quarter cash representing improved margin XX points flow. than improvement. X.X%, and XX point, profitability than and in our more negative XX seventh fourth Our percentage of quarter more consecutive Operating margin [indiscernible]

Operating under the at rates margin and performance margin driven our continued performance in in pronounced focused focus and for driving Fully sales with sales $X.XX improving Net XXX.X our progress diluted stock per share The method on was unit average million. using QX, made count operating improvements driving growth marketing. $XXX.X approximately shares million economy by and weighted was leverage most and economics. outstanding. share gross treasury income diluted efficient the was

billion in we And improved first cash with quarter XX.X%. negative equivalents cash XX points marketable cash, Free to flow securities. ended margin percentage $X.XX the and

in customers [indiscernible]. metrics. sequential increase consumption the of XXXX. was customers growth now X,XXX This $XXX,XXX our plus standardization in to business account our ARR early grew XXX, Turning X,XXX an on and with than success ARR platform. million XX% QX with Customers to count XX% for power $X ,[indiscernible] and to our our in XXX reflecting other total of network the signs revenue. of continued XX% to Total our of continue streaming is customer from customers' greater reflecting largest Customers approximately And since data effect transformation. grew

NRR was this of remained range year. rate in target strong retention to line was for and and above healthy with our Gross XXX% XXX% XX%.

be up Current to 'XX million, midterm of as quarter, to exit exceed last target $XXX.X RPO fiscal $XXX.X XX%. year transfer. million, we we expect NRR consumption was XX%. our RPO starting discussed As estimated the threshold up XXX% was

quarters, are relevant our in now less business. on RPO our driving discussed for given prior [indiscernible] consumption focus cloud As greater

quarter, our financials in website. can our investors our on this document Starting metrics RPO access IR supplemental

like I with opportunity would discuss DSP. or our Now our to streaming long-term data platform,

We cloud revenue. have accounting driven product for Kafka with with streaming our of the majority cloud-native substantial our success

to we few have and process multiproduct last years, platform. the our Connect, complete Over added governed

mentioned, strong. early of reception customer our processing been product has stream Jay As Flink

As their our customers contribute in to will meaningfully streaming start we applications, Flink XXXX. building and revenue ramping expect

streaming and processing. about just isn't Confluent But stream

portfolio. and trajectory and Our is companies is massive has Connect our growth base this to is increasing the have growth with rise its regulation, complexity potential and of robust. streaming driving underestimated. first with our significant revenue are products. Gen our been DSP coupled connectors, Legacy around after AI opportunity the for and product integration for installed Connect [indiscernible], a a largest demand Govern often security the Connect

to been In fastest launched fact, of have revenue stream any governance growth products for we the has date.

our and durable multiproduct adds extends vectors unified to growth. of aspect to runway platform our efficient The our drive and growth

Let me put it into more context.

has large their on products, S-curve early our than platform the think DSP First, lender. the maturity potential larger The a be potential its each to and Process become over we X Kafka Connect, are include pillar of own. growth independent of But business which itself. will adoption and time, Governor

with opportunity DSP Second, in our days. remain our products early very

the XXXX, cloud accounted with DSP for XX% revenue, but growth QX our overall substantially business. In a than cloud products approximately faster of X rate

multiproduct larger and cloud of customers XXX,XXX-plus third, NRR products the profile. our higher And or In X for to revenue increased QX have XXXX, cohort account fastest-growing over year-over-year. We NRR customer the using X more expect DSP our These [ ] products multiproduct remain than customers time. substantially part had our a average. business an XX% much a customers higher push in company

others. our strong of the success drives the one product networks underscores success of This platform, unified in the additional where

multiproduct $XX our address in adoption As our streaming be matures to we data and we continues opportunity increase, platform to ahead. stronger billion believe position will market a

consistent targets. is And environment our a Before forecast we reminder, the with objective philosophy and secret subscription guidance the guidance fully achievable to of prior financial We to only. total outlook, quarter macro better our don't of like guidance. I'd turning with in will revenue a with our transition that overall providing note beginning to as XXXX, third quarters

turn let's guidance. Now to

XX% X million, be representing Second to in non-GAAP million of margin $XXX quarter XX% to to to approximately $XXX of representing negative cloud at revenue the $XXX in XX%; of improvement be expect $XXX million XX%; representing approximately of to percentage the million, to to growth approximately representing points. growth $XXX million, approximately operating total XX%; revenue X%, of subscription we range revenue be growth range of XXXX, of

XX approximately approximately million, diluted non-GAAP percentage to in revenue free of approximately year now subscription points approximately million, representing to ]. we breakeven, percentage XX Non-GAAP XX%; approximately Full breakeven, $XXX points; to approximately and per be to operating range $X.XX non-GAAP share be flow improvement the of be of X to share of diluted margin $X.XX. cash to in income range growth to of growth the to improvement in $X.XX net total $XXX XXXX, representing margin expect net $X.[ be per revenue representing XX%;

we net line target. X%, year Finally, dilution for midterm be 'XX will expect with our in fiscal approximately

which target total is a will X%, over percentage to down long-term under down mid-teens Our drive dilution revenue to we as to the net of bring time. SBC expect

our [indiscernible] we closing, strong are in first and pleased with the In line bottom performance quarter.

Our signs consumption of multiproduct proposition early with customers. platform shown transformation success, value resonating has the of our

fine-tune our capture and continuing delivering effort, we innovation stronger will focused while which We to ahead. to position customers go-to-market our believe in market put on stay to will us opportunity our a value

take your I questions. will Now Jay and

Operator

Instructions] [Operator

Stanley, come RBC. will Sanjit Today, question our first Morgan from by with Singh followed

Sanjit Singh

What A the last just in terms go you Jay, quite initiatives? terms year, maybe efforts want big And year. projects are of a can of had you tie down have sales [indiscernible]. on transformation that development remember of pace bit. macro the of you that some the to to of in sort you to back the software into now solid that seeing to software start development definitely go new environment

Edward Kreps

Yes.

necessary probably where seen developments, bit. little the in focus a picked I up think amount focus for The up of really that's think only a I segment, heavy of most would do our last were on year. optimization stabilization. we've -- the but here some the the say overall they most that's was really with I cost probably new pronounced digital hardest lot things. native customers hit

back in initiatives of they terms on focus AI-related probably And biggest developments. the have bounce other and

really execute a period of I then positive. in feel say consumption had the short -- we've pretty think of do I on would large that's well. really a like gone to And changes transformation, time. I So we that's seen number

bunch significantly well think I of changes Of things the really team. nice we're customers. with in a actually think we've set to just customer that's by were rolling They've one by our actually up adopted of changes. out in addition new targeting think And I And getting propensity the [indiscernible] They higher the shown system derisked proved themselves I field customers, out and customers. of acquisition. more getting And

So more higher and volume quality book.

So like result. a that yes, good was felt overall really we

Sanjit Singh

to Flow just does DSP, And contribution of In of sort the new of a of get in monetization across strategy the monetized XXXX? pillars hear. the good Table product us? It's for just could that you potentially That's outline terms breakout how overtime?

Edward Kreps

Yes. Yes.

and So each these how charge a a the connector connectors. of of of flowing with it volume amount the opportunity distinct hour of of similar kind each roughly data of -- those to like levers, models There's for correlates kind compute other is of the the couple represents you'd monetization We for vectors. see Flink, of pricing Snowflake. services many for processing but instances it's very

an well as that to For uplift you governments, usage our up kind something of as it's of the product. is as that governance advanced fee flat new. comes move package Table and with your scales a as Flow

So also will it. opportunities to an we pricing, it's that with along any early go announced have just but access haven't now, monetization

Operator

quickly our with question by Matt Barclays. from We'll next followed take Hedberg

Matthew Hedberg

Congrats question. on the results. as Really Sanjit's nice to follow-up to see. a Maybe

it seeing just for how also to more of You hyperscaler have that to sense of company-specific of how and rates think just specific? sort trying the to versus a improving that we're could complement about is curious, success? of trends relevant in seeming get help much your note. certainly Just you are that a drivers is your lot important apparent I'm [indiscernible] in growth of sort be us

Edward Kreps

us, If all question. success of there's directly of different Yes. thus in but the inflation were don't the of consumption specific amount transformation in out I That's that would cloud. I the our breaking a we things, important some say factor. I Yes, the know other obviously drives spend an far. performance companies it's mean

Flink probably kind contributors think GA. that of the DSP Rohan and I the connect along, components is furthest outlined, by went [indiscernible] governance followed just

coming ramp into starting congee contribution. just that's next revenue year. So to We'll more to

Matthew Hedberg

'XX hear XXX follow nice as If you we're I'm think a it you show thing. in it to hear. great in partner guidance, is about any Rohan, starting actually second wondering like well. conversations up contribution It's I mean 'XX? you prospects of just just It Flink like, mentioned up sounds a to half tried are when tie. can It Flink. I have featuring in sounds Jay, the

Rohan Sivaram

XXXX Well, said question. opportunity adoption Matt, is before, thanks for XXXX us. all about a monetization. is all your is and this really Flink we've for And big

assuming an what's from guidance, overall in [indiscernible]. contribution the basically that the material we're contribution Flink from So --

Operator

Barclays, We'll followed take our Blair. by next question from Raimo with William Lenschow

Raimo Lenschow

Jay, the conversations coming the have market saw conversations, the adoption me in it of from Kafka congrats curve what And does -- you early one? there? to about seeing you customer are obviously think out as the on now terms what [indiscernible] Flink proper you What's that customer And early of side, that addressable have seen drive before. well.

Edward Kreps

the of Yes, cloud really very I the enterprises. against kind customer would in adoption of in build the enthusiasm workloads to pre-GA incredible early It's been it's from these our the across There's positive. product. base customers native production set offerings. say Nobody broad digital wants of

starts kind of of this kind and starting little GA where about workloads. to build workload as really continuous And milestone of a then customers, up those adds the it within of really meaningfully. line contribute revenue each production of that's bit So And production. build it's the going

both as could as market possibly expect has the reception say, overall, as kind development well offering. the the would I product, of so And gone of the of development we that initiated Flink we about

a really make is customers and business on very it, go with step. as to a Now next us successful important execute which it it's obviously

Raimo Lenschow

came together Rohan, that in of needs seen on Yes. be to -- results? the the overall the where kind CRPO. And RPO, it's follow-up, is Maybe get and number context I moment committee reminder how number a worth how of at why that then financial that's the from one

Rohan Sivaram

for customer. but and is out incentivizing last And the we the customer. the When and focusing important transformation, what And the huge the that of from when a CRPO. RPO we of than changes consumption about RPO commitment not that's of quarter. that, we're driving probably you are means would is and we about a because organic indicators true consumption the business, of result our A One we've of consumption. eager next and the lives, commitment revenue focus subscription Confluent be nothing us on forward-looking revenue Absolutely. growth Cloud Raimo, and not think from unit that consumption indicators that our think it are said share more driving that called is

Operator

We'll next William Jason Margo. followed by take our question Ader from Blair, Walls

Jason Ader

Can Gen I ask AI. about

examples You where are specific as using just your talk And the folks DSP? gave the you about some impact elements the Can the technology timing it the of some customer what part then is a are actual of other it Gen of Or to [indiscernible]? projects. AI Is more bit you revenue? products of selling? little

Edward Kreps

Yes. Yes.

So not now, an cases kind us. of say the are adopting this a use seeing This like number would one of ramping are one their customers. described, It's for important customers that's it's little a is usually for cases. and of further but think I as one, [indiscernible] the we we're strategic they in that ahead thing, use I

these hit yes, I that as production. think So initiatives

I yes, these involves cases. KORA, connectors, involves the think we'll will announced the customers driven that all of that are ramp see -- -- the our and by increasingly Like this involved of Flink use year. what that with LLM Summit chain the into be think is really [indiscernible] is [indiscernible] supply [indiscernible] full to increasing our into using an I from we integration data role in their so heading Kafka The of just platform. next

Jason Ader

Rohan, hiring, stabilizing, You And I the and year, of for quick the why you [indiscernible] margins guys seem maybe are doing to hiring. announces on -- can are one talk of reasons one with follow-up but thought this you right flat just assume about a to be that now? ramping going op hiring up Rohan. good your things some that's be but job some

Rohan Sivaram

essentially runway key that, when we And is and look [indiscernible] headcount growth, mean, investment say not period long obviously allocation driving is growth. durable out to like of I when philosophy, growth think investment Yes. it's part as over about efficient a in I -- our Jason, and resource and it durable we was a that.

one quarters So in of strongest for our we've hiring QX, the great. go-to-market organization, which example, had is for

And and we pretty profitability. think so growth we to approach good thinking how on feel respect we a are balanced with about yes, I where are and

say, question we know, on over get track And breakeven as are improvement, heading odd which our to there. year, on percentage for months, your XX X to the efficiency the to XX On into deliver full and going margins, the year, by percentage us we've to point last, improved you the over points. this is on we're track get

Operator

We'll take Wells our followed Michael next question from by Fargo, Mizuho. Turrin with

Michael Turrin

advantage customers us early how more consumption sense newer the help then Jay, getting addition are to wondering Is Flink. best there towards you products And around as can offering. can a the the conversations GA provide way any back to for take see to expected. go-to-market [indiscernible] suited of you I'm is if as shifting bookings. the of platform

Edward Kreps

Yes. that. do Yes, to happy I'm

our interest customer seen So we've across certainly base.

the tend use new see cloud be cloud opportunity the cases, will One to and offering, the early Confluent with of suiting as use development, beginning a new of whereas the things versions as there's as offering to suited cloud that cases. dynamic we offering, shift well Flink the in offering the more platform a just best lift of between

took feature reaches was Kafka, completeness shift more that's behavior of existing with saw bases more offering proofs there Flink cloud the a lift early itself of large time. that incremental installed as use the out adoption workloads will we and case the where time, the be and customers, Over shift and of of with kind

full customers. think see a seen I out similar we've eagerness. behavior of that's of what we'll a ton So There's and of across set customers. here Nonetheless, the

feature. So lining that on, they're up. they're awaiting people delivery there's feature are waiting some kind eagerly of if Even the of

think So both we'll that on dimensions. yes, I growth see

an the offering software of pretty by was have them that ultimately Flink of in a big are have for [indiscernible] they to were to is customers popular extensive do some -- and terms eager our well. intention demand. everywhere. And offering that operations, of us, Confluent the In platform, for set users on-premise very Originally, just cloud, to them as was goal very

that, we take plans on development to of the And and add added built as we kind so capacity of it for up. that

Michael Turrin

useful. how you additional I initial perspective go-to-market see around if that encouraging but your just progressing to if alongside can QX. [indiscernible] from impacts and you Rohan, any the how move It's are fiscal guide up, is your year confidence the just changes may, on numbers the that framed comment

Rohan Sivaram

the Well, for very Jay through indicators to it. consumption of a points, early processes, lot example, very positive. some respect at X systems, early positive. made and Absolutely. been the touched look we have we've transformation on you if changes but in We've the highest from Obviously, I in early gone the quarters. of mean, with that had QX, had ads the data

at well. total XX% quarter our second month saw And then momentum the our performance particularly our January, we X QX actually the of performance, look with when as you pleased year-over-year. the growth cloud and that with continued performance in and very has And

what a a is with guidance full to strong when into our And kind So for increased we've has year, XX%. Michael, the from this we've QX. -- delivered XX% put strong context, happened QX guide and of you also for full year

a the somehow happy year point half, very quarter. rates half that last you first important, half look obviously discussion at was which uncandidly the And growth second manner of the of when time So has that a second versus derisked same in more were about.

looking [indiscernible] our because the performance. of dealer half of first flattish at Now we're

positive, overall, about year feel I happy guide So say QX obviously indication about performance. good our and our would early full

Operator

Mizuho, question folled Needam. next from our take We'll by with Moskowitz Gregg

Gregg Moskowitz

of Jay, industry around the obviously, buzz Iceberg. a Apache there's in lot

are what Flow that land Table becomes will installed curve the help you new your well? logos So among your expectations adoption GA, base you on also once as

Edward Kreps

Yes. Yes, actually I were a of We think it fair amount around expecting will. enthusiasm this.

analytics it's direct many you in by been in we interest a a that, great serve. a interest We was. said, But sure And were that. As team of I've is huge would we to the discussion of think bit sometimes kind customers. of well, if the buzz and conversation fact, actually drop that little Despite the I had that there's topic like, ways, how have felt of around side the in with naturally in every we the deal weren't environment they widespread iceberg. surprised a

on early [indiscernible] market. -- rate or of as no, I first all feel does up And to opening project. it for is said, potential kind with I adoption as so ton contribution comes that. revenue across like GA way. it very or sharing to the made to really This just the market would product. data it too it we is the in, onto deliver much deliver to the has of align that about a analytics So out it's of journey data that, there. but fantastic us a across systems business organization. our mechanism this In the we a think, and different of fantastic volume an the us ways, a fragmentation And Confluent's whatever, many that do

and low KORA boon the date. of as into data very that And well one and I integrate ability area where friction, a really up a to I helps challenges, And way, reliable directly a to And differentiation. our getting that with always think, data great think that's competitive to offer to is in it that access huge overhead low is natural that. high-quality, this

go excited and product think the of Still So have about early, delivery yes, we the I finish to make success. it. the we're customers' all very and

Gregg Moskowitz

Very helpful. then or for you for And Rohan. either

new potential with The so, accelerate if with that So a be to why. program and maker we've lot can difference will more a SIs spoken before that about forward. Confluent the business do going or

Edward Kreps

Rohan, that? want take to you

Rohan Sivaram

happy called in it of a that's which the we've partner an up and little opportunities leveling bit, broader I us. ecosystem well opportunity, about we think ahead as We'll when mean is of early Greg, of kind before most to. be innings, the

program that's So us opportunity specifically for around called But absolutely, revenue. early that we to again, it's and in an SI days. out, the drive

for that or us, opportunity. working we're that So is of that huge hard opportunity we're going next advantage to something month. to taking it's not next you're and see sure make a quarter It

ahead. short, I general, in as think we SIs GSIs look for a the to ecosystem will story So and focus and be long us continue partner

Operator

followed TD We'll Mike Cowen. Cikos next take with from our by question Needham,

Michael Cikos

that start fair I put. still you -- are through, adoption early guys across come is to go-to-market adoption Is go wanted but guys faster to to was driving actually just come And prioritize something this have this is result multiproduct thinking consumption over Or I it to of shift the to transformation commitments what you a Confluent's your think numbers. This back I that's to too has platform? stress it today. in as to the citing in that seeing this wanted been a test this. slow like

Edward Kreps

it's -- good actually It's very a Yes. observation. Yes.

sold So point field really but -- commitments team the subtle this dollars. just is a previously,

much consume for incentive time Of immediate year right? immediate. And but drive payoff consumption components commit to of them [indiscernible] year, DSP course, adoption course, world, It's more, so renew higher the be consumption might the out. was could much a to more next less, compensation that these payoff more delayed. that they a to In right? ramps arrives, And somewhat the of is customer

was consumption adoption for [indiscernible] And in quite these actually Kafka. so transformation important the driving of

sell In build around delivery have seen to we just all not actually X that getting team quarter, because it offerings up a [indiscernible] we were that sure an we us these we've make wanted good more right for that multiproduct actually in and Kafka, us. It's this for yes, effect, up set we set terms that like I that doing think felt to motivation seen to be to field over materializes on had model in will of was it. very now quickly. components substantial increase we

Michael Cikos

But the from to the thought have the customers I -- guess presumption customers. on if seeing of some And that the are despite with be you're quality of get one pressing fact not would calling even commitments, pressing would go-to-market, you're quality follow-up X-parter right? higher on a on attach lower that that is guys a interesting, you Like, a think things here. just Jay to then I out And it's bit Awesome. start not I you're

of out I of would the if And know like guys -- months your What that So change. go-to-market tease to do given here for lot angst can could a it, was are with, guess, the you I change kind be think year, half along you there I clicking on Rohan, second first for articulate into just beneficial. this you folks, the piece X more that that kind is of the and front of call there now behind you? then

Edward Kreps

customers. to with they more we actually on customers and plan. the to to target land made incentivize land of field worth the the Yes. on bit great particularly because a of was that I part will be comp directly those not those were so potential set to to as compensate start question. Yes, more as it's only a a But Yes, side the large the consumption. highly high important even for Confluent we felt ramp lot that

been exciting what but of to so spenders then yes, only said, propensity of actually customers they high up, go the And was had was not were set into volume targeted you previously. that as us those better than

the I'll just that the the because think picking I had direct up. additions And to that these differentiation result take want as customer of sure that's incentives. we're And let second -- half. that you make said, high-quality And are we I we

Rohan Sivaram

when obviously we of showed good up actually Yes. X on of quarter -- quarter. indications been the transformation Mike, look how The are And in we saw to the -- the -- QX. momentum we that we're out have half, our on early first importantly, earlier. positive. which for some carried performance feel has the second called actually and this the is QX, cloud our entering month more we at very

on. me we But our I in feeling QX am to of what's ahead like obviously, our we in QX performance good. of quarters couple need and guide, that execution ask focus But are still expectations. are feel how that's our and a So we strong which have general, evident of which if you

we couple is the overall, the feel also quarters. from perspective, half And first half transformation, but derisking more is need that a with does really we of what our guidance the still where an good strength to overall in, we so execute in second are,

Operator

We'll Wood TD Derrick Cowen take by our from next Bernstein. question with followed

James Wood

Like what can you're through pricing having the in changes. changes expecting gone as Jay, you gets you us market? kind remind to some of mentioned absorbed dividends this and made you what see

Edward Kreps

Yes. Yes. a changes. set There's of

our for effectively that use offerings, of and actually product offerings, of are these us. Some efficient multi-tenant better allow which are incentivize the TCO which more

came offering We private freight -- so throughput-oriented cluster pricing announced with the We of networking. number changes we Bangalore. out. adjustments is clusters, to was a which incumbent enterprise So announced made tenants that high-performing there of type, a some

land to it changes big of and expand these the the of reduce transformation. changes this team, thought in were A We've field about on All in systems, friction part process. in compensation. meant our consumption is

X-month way process. a that pricing tell There's felt it But get of up be I negotiation the So there of important go customers that gets can't think to in to going, price. the a front right? and trying case that sell a team reasonable a in very to it door at or to with going along the be the we very product will was that, not ton if we're process. land

up lined that with that's changes those a that? feel offering. to soak ton have want It's a Kafka cloud up with there's and do of that. open [indiscernible]. We so we source Why because And very go ultimately our

for new sets of unlock of of right? So of would up kind kind of like and been those the that us customers changes access, growing time. that TCO And harder a the and to breadth feel that that over do offering, customer workloads base out comes we the offerings have these

type have that how able have they TCO do, that we use across better offer or not just certain talked in about it's a we workload across of everything is it's a they make cut really to no-brainer past case. the workloads important all sure a certain for different And customers. so offerings a KORA the that We've a bit

that So was our goal.

James Wood

is talked concerns, Rohan, And ask and for services know, digital about for Jay about native you I vertical, wanted important guys you. obviously or to financial which don't rebound

platform composition Just there curious cloud? seeing and conditions deal you're what whether demand in sizes and change seeing around you're versus much

Edward Kreps

we years, ramp-up last adoption. for few And have a be Confluent segment the continued a pretty seen That's over Cloud in us. strong Yes. significant to

that And part start cloud to bit be financial the would out I then they have a time, fit security, the to first with goes institutions. of of scrutiny And allow for than faster very meet if tend of happened that, really stack to offering. and great say this substantial that reliability, largest to they smaller their themselves. the little new And any slower but banks. spread the were they build in adoption trying them to they that actually we're some There's the -- case actually use into requirements a increasingly, that over their

see and adoption of so services. cloud financial great we And

think open their low that's as institutions friction thing large has promising broad up cases. a something that very to very of very very these set I across consume use

So in excited these front we're door banks. in large kind getting a the about very of of really lot

Operator

from Wheat come Bernstein will Guggenheim. Peter question next by Our followed with

Unknown Analyst

it, we step missed of you -- Obviously, the like continued But great cannibalization on transition should a think the of little weakness planned. think not there I or of some revenue I see we that feel to kind in working a to side, very we and some cloud about whether haven't people and consumption where and wonder momentum I down talked more I that's the sequential how as to platform out moving the much bit saw may cloud. of side have on more but

whether important that underlying think it's some just shifting stream. like not it's of an slower we about should going on business revenue given growth so share side or part And the the forward or of that

Edward Kreps

to Yes, to Rohan? do you want that, speak

Rohan Sivaram

Well, bit value when when be in you think the the I'll at Peter. little revenue. total a XX% we're platform about reminder, look business, happy what We contract can for year-over-year. generally as -- your question, lumpiness as pleased of so happens can very Confluent Yes, do platform revenue performance, upfront of grew Thanks take our And to about it. we recognized add XX% more a of that license what is is that actually.

which this launched innovation, business the I part Flink well. as the business, deals, Jay the those large the last respect impact. of And But back of with renewals take the or been of to based to an Clearly, XX I step a pleased say, for in product very and we months large on timing also momentum. have look out this is timing at, obviously overall when a with called help brand, deals going for we've

So the we wherever yes, keeping in our important to do we business going to listen, Confluent it's that just be needs it's part mind, I mean, that that need and on-prem. we've applications are If data cloud be cloud, need to be If on-prem, said an be this side. of the as in we ahead. we is feel to look

Operator

followed with our next Howard take question by Ma from Guggenheim JPMorgan. We

Howard Ma

broader Jay, -- And can for the and do yet. options standard plans implementations perhaps indicates standard some and And of and believe more well. on of a architecture transport RAG you it's reference for there's that a the you alternative have that really talk too. transformation as architectures? you're transport Confluent for don't at about live aware making layer the you have do RAG point, to aimed I establish

Edward Kreps

cases, to reality opportunities plenty products. is kind as use just and a have the questions us time. though that. relative strong push seeing and of of kind kind real sure And for kind -- we has [indiscernible] we lot the something formation There's say really was of of case, yes. a for just are for focus movement, it doing in to of business, and outside that that's movement driving of it's out batch coming is use don't it real-time so as very is support not is for this real would that, with that's just about have the right, a I The there of a in customer lot where the There Confluent. stack other GTL what just yes, on to of good reality it's facto think are some related evangelizing or of and us been that's build information in are these -- make something solidifies, of data across interesting Yes, now. data permanent that for architecture we you aspects It a position The try alternatives real-time as say, I that words, towards batch. because, enough status there likely a -- answering is customer to enterprise. business de great a customers

Howard Ma

And in could maybe more. slip great. one That's I

extent Just talk on increasing and with called. [indiscernible] FortuneXXX what I it the conversions. tool, seeing wallet the -- that among Confluent Can any share that And your using it's topic accelerator of progress open is about are Kafka to tool. you're migration you source believe

Edward Kreps

up. that ramping just We're Yes.

somewhat surprisingly, by one-off these effort It's more customer. haven't had really focused migrations. been So on we customer a somewhat

a in And our terms tooling focused move creating both with customers to effort over. so of and partners,

but in the that imagine, you easy these any for to of to situations to as possible make that's reduce some really customers A effort there's B. better can alternative, of effort kind want TCO get you As to required as and make where point much a switch, it from point

it's coming ] few So we will I contribute down, the years. think that being over [ just believe into next

Operator

We'll with question Pinjalim Bora next our from JPMorgan. take

Pinjalim Bora

recently way the Congrats in trial materially quarter? for the how and understand quarter. added AI that by so ramp? the a was And select if -- custom clarify. to in consumption a driven of broad-based some I One heard new was contributed clarification. of on to it you Help set the me vendors understand

Edward Kreps

Yes, Rohan, take... you to want

Rohan Sivaram

Pinjalim, to. thanks happy question. Yes, your for

the performance, I'd it cloud if categories, at for the had call two when QX. put I look maybe So out to you performance, in

look base our and customers, the in see need [indiscernible] use you new if it And The net one did cases. there. consumption first broad stabilization inclusive of we in at when is is

broad was our I'd that customers, of We've of a And and probably with guidance as of these out a pretty the kind schedule ramp-up we has of newer X in QX we've is well. QX, Gen pleased informed It's ramp happy most looks for lot that. few QX, the something are that's call we continued And of about And on. the our AI these month in say, which that have base that as very line customers. newer where customers. spoke customer. who've you And we're So customer the QX. trends that's enter second them seen [indiscernible] of and of into for

So the that's the patterns. overall consumption context down

Pinjalim Bora

Jay. for question you, One

kind up Java We else opens a that up [indiscernible] of notion skilled on developer developer been the picking SQL, have most understood aperture being versus most is or set of which something by this more see in then a more bringing and developers starting creates drives kind more of and little of to a bit that to some Kafka this? Flink of additionally you Are Flink flywheel. do

Edward Kreps

this my like sounds question. already. I I ahead. mean question this ahead. like Go answer Go

Pinjalim Bora

no. Please No, answer. no,

Edward Kreps

Yes, are. we to Yes, open Are set that? our is I to mean APIs. the of see up starting goal full we

thing Sequel. launched first we the was So

is which Java. they Sequel. intention bring like Java There's dynamic core well probably We set to of use more differences. Our always will cases APIs out applications that be think well. [indiscernible] suited a of languages as serve application-oriented a and There's to more are set of kind transformations,

easier all broad things of set tools, in that opening much the a this And that, One yes, of think top it we leader made engine, to the on very to up Flink easier of things powerful kind is do goal about that's and of one core that's processing. the our make I use. of stream is as

real actually been difficult reacted Nobody The just [indiscernible] time. to the They real-time think things -- They for work at rather in the the a long time, It's in that that. connect would I slow. to been wants data would customers time, do be it's to they rather prefer data. case with [indiscernible]. would

benefit kind So more a of and way can making this is there's costly for an really customers. core more make not you obvious of easy not complicated enabling this. if our Like it

really this that there's move use move in batch opportunity kind and that development thing it and core things, drives that both is ease of So when appealing will you the we processing focusing becomes whole kind set to TCO. and on movement, because -- as data a see as us this ease think really for TCO of of we orientated this needs that of do of huge of batch

Operator

website. earnings earnings from from We Securities. infographic, ] call. report on report our question the our As go will prepared The our on final our come And is earnings encourage them. our [ to today, the remarks reminder, technology, contains today's Miller Jump and with slides look Truist IR to a Confluent you now X-pagers

Unknown Analyst

the start. on Congrats strong

a AI like I'm in So the remind maybe look -- maybe estate conversations the that is opportunity on strength just unit driving just dollar ready What more there? for just economics your you you And governance? like need talked to what like curious, data governance. if if level, about get looks does streaming? for on the could then And us that

Edward Kreps

Yes, question. Yes. a it's great

is a the Yes, of would So set that there's drivers. governance. data interest that in AI driven deal have forces I say of whole

One is kind of to start, compliance regime of GDPR those around list organizations is to but do. that just the things of rising have there's a long data.

of second is just The safety around data. the

Those is are things to maybe have do. first around actually you up. third The opening it two

to in there right it you think, the a the right they well, around been to of But I is it it documentation it to enterprise data, date? of order an -- many set has right by at rich might more supercharged across customers that for in are And have much that the of the in the again. organization data applications that, traditional Is build something what take data going that draw advantage than work to of on data to order where data case sources have getting time, kind integrity but is find critical to up AI, and app can -- of that And is said more means has [indiscernible] right all that discovery way? work. really really a to be team you the actually can set, as

that at pipelines Is top and towards in trusty set has supposed it be old gotten on of harder trending there harder it is of all? of And some [indiscernible]. all and bespoke to managing

things platform. And of these the is thing kind bring I rise the capabilities driven nice with to right one think of the ability the streaming. there data that's of the governance

you effort where, extra strong use [indiscernible] what and across adopt as kind of this to naturally is data that goes by data The So of there's these tracked products Asia ]. no of [ are have the case. go shared use lineage flows, it case

as they day that is better think really about take customers And really for as have large of now, is use efficient. be they and advantage they as technology this step how over they additional some a kind line right of in the will the usage more you yes, a this broadly. this it product And use powerful up with how it thing change that economics, the to serve unit on time more and customers

how and and we're that functionality think adding around of use aspects will more analyze think of fields of around you I I monetization encryption other more over the and data, time. the increase data

but call a of ratio kind final too it's to any think think that, state probably for that we the for do will early offerings, pending sizable of I these be us. business

Unknown Analyst

for Rohan. to And scale? these start helpful. of changes is That if I Any streaming outside gross in as one could squeeze uses quick margin one

Rohan Sivaram

we [ XX essentially -- we margin. [indiscernible] perspective, Yes. From margin had what percent a gross Miller gross is are ]-plus

operating above We consistently above well are that and that.

look ahead impact a any we the [indiscernible] -- as lot there expect margins. to one not with other out So way to to call year, on whole or the respect we so margins be the for in gross

Operator

everyone. today. Bye, This our call concludes Thanks for earnings us. again joining

Edward Kreps

Thanks, everyone.

Rohan Sivaram

you. Thank

Confluent (CFLT) 7 May 242024 Q1 Earnings call transcript