Confluent — Q3 2023 Earnings Presentation
51 slides from Confluent's earnings presentation, Nov 1, 2023
Slide 1: Introducing Confluent
Introducing Confluent November 1, 2023
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, expenses and
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 Q3’23 Total Revenue $200M / +32% YoY Confluent Cloud Revenue $92M / +61% YoY Q4’23 OM Non-GAAP Operating Margin (OM) (5.5%) / +22pts YoY Guidance: 0-1% Dollar-Based Net Retention Rat
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: Today, Software Is the Business
Today, Software Is the Business OLD WAY NEW WAY Slow Fast Real-time stream Batch processing processing Siloed Connected 5
Slide 6: Real-time Use Cases Found Everywhere in Our Lives
Real-time Use Cases Found Everywhere in Our Lives 6
Slide 7: New use cases need new capabilities
New use cases need new capabilities This requires total connectivity and instant reaction, all the time, in real-time 7
Slide 8: 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 8
Slide 9: Databases Bring Point-in-Time Queries to Stored Data; This Leads to a Giant Mess
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 9
Slide 10: A New Paradigm for Data in Motion: Data Streaming
A New Paradigm for Data in Motion: Data Streaming All your data continuously streamed, processed, governed and shared as a product, making it instantly valuable, usable, and trustworthy everywhere. PROCESS AI/ML Modeling Custom App & Inventory Payments Microservices Personalization CONNECT SHARE Fra
Slide 11: From Giant Mess to Central Nervous System
From Giant Mess to Central Nervous System DATA STREAMING PLATFORM 11
Slide 12: Confluent is Becoming the Central Nervous System of the Modern Technology Stack
Confluent is Becoming the Central Nervous System of the Modern Technology Stack 12
Slide 13: Proven Success Across Industries
Proven Success Across Industries Financial Services Technology Communications & Media Manufacturing Consumer & Retail Automotive & Transportation Healthcare Insurance 13
Slide 14: Customer Expansion Journey Case Studies
Customer Expansion Journey Case Studies ARR $ in millions Online Travel Health Benefits Payment Fortune 50 Provider Provider Card Provider Bank 29x 10x 34x 9x Rapid global adoption Accelerated claims Secured the ability to continue Improved banking relationship driving elevated customer approval and
Slide 15: 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 16: Why Confluent Wins
Why Confluent Wins Product Customer Growth Differentiation Go-To-Market Model Cloud-native: Re-imagined Kafka experience for Product Led: Getting customers’ hands on product the Cloud early to qualify and deliver faster time-to value Complete: Enable developers to reliably & Consumption Oriented: Cus
Slide 17: The Confluent Data Streaming Platform
Product Differentiation The Confluent Data Streaming Platform 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 APPLICATIONS CONNECT GOVERN PROCESS SHARE
Slide 18: 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 19: 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 20: 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 21: 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 the cloud with strong Flink and capitalizing data infrastructure (backend) use cases network effects
Slide 22: 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 23: 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 23
Slide 24: Competitive Landscape
Competitive Landscape Legacy Data Infrastructure Cloud Providers Relational DBs Partners & Competitors ESB & Messaging ETL On-Premises Streaming 24
Slide 25: Cloud Competitive Landscape
Cloud Competitive Landscape Cloud-Native Complete Everywhere Confluent Microsoft Event Hubs Dataflow Google Pub/Sub Kinesis Amazon MSK 25
Slide 26: 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 27: One Team, One Mission: Set Data in Motion
One Team, One Mission: Set Data in Motion Board of Directors Jay Kreps Co-Founder & CEO of Confluent Neha Narkhede Jay Kreps Jun Rao Erica Schultz Stephanie Buscemi Co-Founder of Confluent Co-Founder & CEO Co-Founder President, Field Operations Chief Marketing Officer Matt Miller Sequoia Capital Mike V
Slide 28: Financial Highlights
Financial Highlights 28
Slide 29: 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 30: 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. 30 (2) Estimates based on evaluation o
Slide 31: The Power of Our Hybrid Model
The Power of Our Hybrid Model Confluent Cloud 46% Fully managed, cloud-native Rev Rec: Consumption Confluent Platform 49% Self-managed software Rev Rec: Upfront & ratable VM Services 5% Attached to product sales Rev Rec: As delivered 31 Note: 46% Confluent Cloud revenue mix, 49% Confluent Platform reven
Slide 32: Significant Revenue Growth at Scale
Significant Revenue Growth at Scale Annual Revenue Quarterly Revenue $ in millions $ in millions $585.9 $200.2 $189.3 $174.3 72%+ $168.7 CAGR $151.7 FY18-FY22 $387.9 $139.4 $126.1 $119.9 Subscription Revenue Subscription Revenue $236.6 $149.8 $65.2 Total 64% 58% 48% 41% 38% 36% 32% Rev Y/Y 32
Slide 33: Fast-Growing Confluent Cloud Revenue
Fast-Growing Confluent Cloud Revenue Annual Confluent Cloud Revenue Quarterly Revenue $ in millions $ in millions $91.6 $83.6 $73.6 $68.4 $56.9 $47.0 200%+ CAGR $38.9 FY18-FY22 $33.8 Q/Q $ Add Y/Y 180% 139% 112% 102% 89% 78% 61% Growth 33
Slide 34: Early International Expansion and Accelerating Adoption of Confluent Cloud
Early International Expansion and Accelerating Adoption of Confluent Cloud Revenue Mix by Geography Revenue Mix by Product $ in millions $ in millions $387.9 $585.9 $151.7 $200.2 $387.9 $585.9 $151.7 $200.2 US International Confluent Platform Confluent Cloud Service Note: Q3’22 revenue mix by product d
Slide 35: RPO and current RPO (cRPO)
RPO and current RPO (cRPO) Total RPO $ in millions ● RPO represents contractually $824.1 $791.4 committed revenue to be recognized in $740.7 $742.6 the future, regardless of: $663.5 ○ Billings terms ○ Variability in cloud consumption patterns ● RPO and cRPO was impacted by cRPO ○ A decline in both a
Slide 36: Rapid Customer Growth & Large Customer Momentum
Rapid Customer Growth & Large Customer Momentum Total Customers with Customers with Customers 16% y/y ≥ $100K in ARR ≥ $1M in ARR 25% y/y 38% y/y growth growth growth 4,910 4,690 4,830 4,530 4,240 Confluent Cloud Confluent Platform $5M+ ARR Customer Cohort Continuing to Grow 36
Slide 37: Gross Margin Healthy as Revenue Mix Shifts
Gross Margin Healthy as Revenue Mix Shifts Total Gross Margin Margin Drivers: (Non-GAAP) +540 bps Healthy margins for Growing Improving Cloud hosting y/y Confluent Platform Confluent Cloud costs due to scale and Revenue revenue mix optimization Subscription Gross Margin (Non-GAAP) +320 bps y/y 76.5% 7
Slide 38: Driving Efficient Growth
Driving Efficient Growth Non-GAAP Operating Expenses Non-GAAP as % of Revenue Operating Margin % FY’21 FY’22 Q3’22 Q3’23 Q4’23 OM Guidance: 0-1% S&M R&D G&A Note: Refer to the slides in the section titled “GAAP to Non-GAAP Reconciliations” at the end of this presentation for a reconciliation of our n
Slide 39: Focus on Managing Net Dilution
Focus on Managing Net Dilution Net dilution Calc SBC % of Revenue Net Dilution • (shares granted - shares 47% forfeited) / WASO Drivers • SBC is a lagging indicator ~25% • Final tranches of pre-IPO options recognized in 5% SBC through 1H FY25 Mid-Teens ~3% • FY23 net dilution target <2% of 3-4% • Fo
Slide 40: 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 41: Appendix
Appendix 41
Slide 42: Customer Success with Confluent
Customer Success with Confluent Leveraging data in motion to Optimizing production logistics Streaming IoT data to reimagine the customer experience through data in motion launch new products LEARN MORE LEARN MORE LEARN MORE Transforming customer Delivering real-time data Democratizing data to launch
Slide 43: Telco Use Cases
Teleco Use Cases Teleco Product Development Sentiment Drive analytics 5G Network Data Security & Introduction Analysis ... and streamline operations Fraud Detection Predictive/Preventative Customer Data Migration to the Cloud & Analysis Maintenance Aggregation Dynamic Sales Regulatory Reporting Prod
Slide 44: Financial Services Use Cases
Financial Services Use Cases Financial Services Corporate and Finance, Risk, Retail Banking, Wealth Technology Reshape customer Investment Banking, Compliance, IT ... & Asset Management Modernization experience and Capital Markets & Cyber streamline operations Mainframe Real-time Payments Operationa
Slide 45: Retail Use Cases
Retail Use Cases Retail Inventory Personalized Product Development Sentiment Drive consumer Management Promotions & Introduction Technology Modernization Analysis ... analytics & streamline operations Omni-Channel Correlation Detection Predictive/Preventative Customer Data Experiences & Analysis Mai
Slide 46: Originally created by the founders of Confluent while at LinkedIn
Originally created by the founders of Confluent while at LinkedIn >150,000 >75% of the F500 >65,000 Kafka >200 global organizations estimated to be using meetup members meetup groups using Kafka Apache Kafka 46
Slide 47: 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 48: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations 48
Slide 49: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (in thousands, except percentages) FY’21 FY’22 Q3’22 Q3’23 Total revenue $387,864 $585,944 $151,732 $200,181 Total gross profit on a GAAP basis $250,572 $383,529 $98,552 $143,632 Add: Stock-based compensation expense 17,989 32,389 8,997 8,790 Add: Employer taxes on em
Slide 50: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (in thousands, except percentages) FY’21 FY’22 Q3’22 Q3’23 Total revenue $387,864 $585,944 $151,732 $200,181 Sales and marketing (S&M) expense on a GAAP basis $319,331 $456,452 $114,312 $128,624 Less: Stock-based compensation expense 55,506 99,366 26,712 32,297 Less:
Slide 51: Confluent
@) CONFLUENT