Confluent — Q1 2024 Earnings Presentation
38 slides from Confluent's earnings presentation, May 7, 2024
Slide 1: Investor Presentation
Investor Presentation May 7, 2024
Slide 2: Disclaimer
Disclaimer This presentation includes express and implied forward-looking statements. All statements contained in this presentation other than statements of historical facts, including expectations of Confluent, Inc. (“we,” “us,” “our,” or “Confluent”) regarding our revenue, revenue mix, revenue growt
Slide 3: Confluent Momentum-at-a-Glance
Confluent Momentum-at-a-Glance Founded in 2014 by the ~$60B Total Addressable Market¹ Original Creators of Apache Kafka Q1’24 Subscription Revenue $207M / +29% YoY Confluent Cloud Revenue $107M / +45% YoY Non-GAAP Operating Margin (OM) (1.5%) / +22pts YoY Dollar-Based Net Retention Rate 120%-125% Cust
Slide 4: Confluent is on a mission to set data in motion
Confluent is on a mission to set data in motion 4
Slide 5: The Problems with Data at Rest and Legacy Movement Tools
The Problems with Data at Rest and Legacy Movement Tools Data at Rest Legacy Data Movement Tools Databases ETL/Data Messaging Integration Slow, daily batch processing Batch Difficult to Scale Simple, static real-time Expensive No Persistence queries Time Consuming Data Loss No Replay 5
Slide 6: Databases Bring Point-in-Time Queries to Stored Data; This Leads to a Giant Mess in Data Architecture
Databases Bring Point-in-Time Queries to Stored Data; This Leads to a Giant Mess in Data Architecture LINE OF BUSINESS 01 LINE OF BUSINESS 02 PUBLIC CLOUD 6
Slide 7: A New Paradigm for Data in Motion: Data Streaming
A New Paradigm for Data in Motion: Data Streaming To Instant Value From Data Mess To Data Products Everywhere AI/MODELING PROCESS FRAUD RECOMMENDATIONS CUSTOM APPS & PERSONALIZATIONS MICROSERVICES PAYMENTS STREAM ACCOUNTS INVENTORY CONNECT DATA SYSTEMS GOVERN
Slide 8: From Giant Mess to Central Nervous System
From Giant Mess to Central Nervous System DATA STREAMING PLATFORM 8
Slide 9: Proven Success Across Industries
Proven Success Across Industries Financial Services Technology Communications & Media Manufacturing Consumer & Retail Automotive & Transportation Healthcare Insurance 9
Slide 10: Customer Expansion Journey Case Studies
Customer Expansion Journey Case Studies ARR $ in millions Global Telco Payment Global Online Fortune 50 Leader Card Provider Job Site Bank $14.3 $13.5 $6.5 16x $5.9 276x 43x 12x $7.9 $5.3 $2.4 $4.8 $1.5 $1.0 $0.6 $1.2 $0.4 $0.2 $0.6 $0.05 Q4’19 Q1’21 Q1’22 Q4’23 Q2’17 Q4’19 Q1’21 Q4’23 Q3’20 Q1’21 Q
Slide 11: Use Cases Across All Industries
Use Cases Across All Industries Product Streaming Systems of Inventory Personalized Sentiment Retail Management Promotions Development Analysis Enterprise Scale for High & Introduction Messaging Traffic Periods Data Dynamic Staff Connected Integrated Proactive Real-Time Healthcare Health Records Confi
Slide 12: Why Confluent Wins
Why Confluent Wins Product Customer Growth Differentiation Go-To-Market Model Cloud-native: Re-imagined Kafka for the Cloud Product Led: Getting customers’ hands on product early to qualify and deliver faster time-to value Complete: Enable developers to reliably & securely build next-gen apps faster
Slide 13: The Confluent Data Streaming Platform: Stream + Connect + Process + Govern
Product Differentiation The Confluent Data Streaming Platform Stream + Connect + Process + Govern Data Pipelines Real-time Analytics Data Analytics Cyber-Security IoT & Telematics ML & AI Geofencing Streaming ETL Dynamic Pricing Shipment Tracking / Alerting Customer 360 and more… DATA STREAMING APPLI
Slide 14: Confluent's Cloud Advantage: Kora Architecture
Product Differentiation Confluent’s Cloud Advantage: Kora Architecture Other Confluent CUSTOMERS Cloud Services NETWORK Multi-Cloud Networking & Routing Tier METRICS & OBSERVABILITY AZ AZ AZ Metadata Cells GOVERNANCE S Real-time Durability Audits E COMPUTE Cells feedback C data Data Balancing U Cells
Slide 15: Stronger Capabilities, With Up to 60% Lower TCO
Product Differentiation Stronger Capabilities, With Up to 60% Lower TCO HEADCOUNT INFRASTRUCTURE DEVELOPMENT & OPERATIONS SAVINGS WITH CONFLUENT SAVINGS WITH CONFLUENT SAVINGS WITH CONFLUENT Development & Higher Utilization Multi-tenancy Operations Personnel of Infrastructure Elastic Software-driven
Slide 16: Product Led Complements Enterprise Sales GTM Motion
Customer Growth GTM Product Led Complements Enterprise Sales GTM Motion Awareness Mission Critical of Solution PRODUCT LED ENTERPRISE SALES Self-Serve Signup, Master Contract, Success Pay-As-You-Go Plan / Value Realization Evaluation and TCO, Governance Production Development Central Nervous System
Slide 17: Our Powerful and Differentiated Cloud Consumption Model
Customer Growth GTM Our Powerful and Differentiated Cloud Consumption Model Serve mission-critical Power revenue (frontend) Expand seamlessly in Moving up the stack with workloads in and operational (backend) the cloud with strong Flink and capitalizing data infrastructure use cases network effects
Slide 18: Data in Motion Journey
Customer Growth GTM Data in Motion Journey Central Nervous System 5 VALUE Mission Critical Cross-Company Platform 4 Mission Critical, But Disconnected Use Cases Early Production 3 ● Senior executive buy-in Usage (CTO, CIO, CISO) Experimentation ● Center of Excellence / Early Interest 2 ● Company-wid
Slide 19: Network Effects Drive Further Expansion
Network Effects Drive Further Expansion any source NoSQL Web Oracle Custom Apps Mainframes Salesforce Microservices Marketo Monitoring Twitter Analytics AWS, Azure, GCP Data Warehouse …and more any destination 19
Slide 20: Competitive Landscape
Competitive Landscape Legacy Data Infrastructure Cloud Providers Relational DBs Partners & Competitors ESB & Messaging ETL On-Premises Streaming 20
Slide 21: Multiple Levers of Growth in a Large and Growing TAM
Multiple Levers of Growth in a Large and Growing TAM Expand in Easy and Frictionless Land Enterprise-Wide Expansion Underpenetrated Segments with Cloud Pay-As-You-Go via Solutions Selling (e.g. Commercial, Tech) Grow and Harness Continued Productize Use Cases our Partner Ecosystem International Expa
Slide 22: One Team, One Mission: Set Data in Motion
One Team, One Mission: Set Data in Motion Board of Directors Jay Kreps Jun Rao Erica Schultz Stephanie Buscemi Co-Founder & CEO Co-Founder President, Field Operations Chief Marketing Officer Jay Kreps Co-Founder & CEO of Confluent Neha Narkhede Co-Founder of Confluent Matt Miller Sequoia Capital Rohan
Slide 23: A New Data Category, A Large Market Opportunity
A New Data Category, A Large Market Opportunity 2022 Total Addressable Market (TAM) 2022-2025 TAM Growth (3) ~$60B (2) 19% CAGR Addressed by ksqlDB pull queries and Kafka Storage $100B Addressed by Kafka and Cluster Linking $9B Database Addressed by ksqlDB push $10B queries, Connect Analytics SMTs,
Slide 24: Bottoms-up View of Our 2022 Addressable Market
Bottoms-up View of Our 2022 Addressable Market Fortune 500 Enterprise Commercial - Mid Market (LTM Revenue >$1B) (LTM Revenue: <$1B) Number of Companies(1) 500 ~29,000 ~300,000 Estimated Average ARR per Company(2) $10M+ $1M+ $100K+ $60B+ (1) Source: Capital IQ. 24 (2) Estimates based on evaluation o
Slide 25: The Power of Our Hybrid Model
The Power of Our Hybrid Model Confluent Cloud 49% Fully managed, cloud-native Rev Rec: Consumption Confluent Platform 46% Self-managed software Rev Rec: Upfront & ratable VM Services 5% Attached to product sales Rev Rec: As delivered 25 Note: 49% Confluent Cloud revenue mix, 46% Confluent Platform reven
Slide 26: Subscription Revenue
Subscription Revenue Annual Subscription Revenue Quarterly Subscription Revenue $ in millions $ in millions $729.1 $206.9 $202.8 $189.3 $176.5 66%+ CAGR $160.6 $155.3 FY18-FY23 $535.0 $138.7 $127.0 $347.1 $208.6 $130.2 $56.4 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 FY’18 FY’19 FY’20 FY’21 FY’
Slide 27: Confluent Cloud Revenue
Confluent Cloud Revenue Annual Cloud Revenue Quarterly Cloud Revenue Cloud $ in millions $ in millions now $348.8 largest offering $106.8 $100.0 $91.6 $83.6 167%+ $73.6 CAGR $211.2 $68.4 FY18-FY23 $56.9 $47.0 $94.2 Q/Q $ $9.9 $11.5 $9.9 $31.4 $8.1 $5.3 $8.0 $8.4 $6.8 Add $14.4 $2.6 Q2’22 Q3’22 Q4’22
Slide 28: Revenue Mix by Geography and Offering
Revenue Mix by Geography and Offering Revenue Mix by Geography Revenue Mix by Offering $ in millions $ in millions $585.9 $777.0 $174.3 $217.2 $585.9 $777.0 $174.3 $217.2 9% 6% 8% 5% 38% 40% 40% 41% 36% 45% 42% 49% 62% 60% 60% 59% 55% 49% 50% 46% FY’22 FY’23 Q1’23 Q1’24 FY’22 FY’23 Q1’23 Q1’24 US In
Slide 29: Customers
Customers Total Customers with Customers with Customers 9% y/y ≥ $100K in ARR ≥ $1M in ARR 17% y/y 24% y/y growth growth growth 1,229 1,260 5,120 4,910 4,960 1,185 4,830 1,144 4,690 1,075 168 155 158 147 135 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Co
Slide 30: Non-GAAP Gross Margins
Non-GAAP Gross Margins Margin Drivers: Total Gross Margin +4.7 pts Healthy margins for Growing Improving Cloud hosting y/y Confluent Platform Confluent Cloud costs due to scale and Revenue revenue mix optimization 75.4% 76.9% 71.2% 72.2% Subscription Gross Margin +3.2 pts y/y 77.1% 79.6% 77.5% 80.7% F
Slide 31: Driving Efficient Growth
Driving Efficient Growth Non-GAAP Operating Expenses Non-GAAP as % of Revenue Operating Margin % +21.6 pts y/y FY’22 FY’23 Q1’23 Q1’24 14% -2% 13% -7% 27% 11% 11% 26% 24% 24% -23% 61% 56% -30% 48% 44% FY’22 FY’23 Q1’23 Q1’24 S&M R&D G&A Note: Refer to the slides in the section titled “Definitions & GA
Slide 32: Focus on Managing Net Dilution
Focus on Managing Net Dilution Net dilution Calc SBC % of Revenue Net Dilution • (Shares granted - shares 45% forfeited) / WASO Drivers • SBC is a lagging indicator ~25% • Final tranches of pre-IPO options recognized in SBC through 1H FY25 Mid-Teens 3.5% ~3% • FY’24 net dilution target <2% of ~3% •
Slide 33: Key Takeaways
Key Takeaways Category Creating ~$60 Billion Strong Growth Company Founded by Total Addressable and Long-Term the Creators of Kafka Market1 Margin Profile Expansion Positioned to Capitalize Seasoned Management Driven by on the Large and Team with Track Record Network Effects Growing Shift to Cloud of
Slide 34: Definitions & GAAP to Non-GAAP Reconciliations
Definitions & GAAP to Non-GAAP Reconciliations 34
Slide 35: Definitions
Definitions Annual Recurring Revenue (ARR): We define ARR as (1) with respect to Confluent Platform customers, the amount of revenue to which our customers are contractually committed over the following 12 months assuming no increases or reductions in their subscriptions, and (2) with respect to Conflue
Slide 36: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (in thousands, except percentages) FY’22 FY’23 Q1’23 Q1’24 Total revenue $585,944 $776,952 $174,302 $217,237 Total gross profit on a GAAP basis $383,529 $547,282 $116,158 $156,016 Total gross margin on a GAAP basis 65.5% 70.4% 66.6% 71.8% Add: Stock-based compensation
Slide 37: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (in thousands, except percentages) FY’22 FY’23 Q1’23 Q1’24 Total revenue $585,944 $776,952 $174,302 $217,237 Sales and marketing (S&M) expense on a GAAP basis $456,452 $504,929 $128,624 $131,352 S&M expense as a % of total revenue on a GAAP basis 77.9% 65.0% 73.8% 60
Slide 38: Confluent
@) CONFLUENT