Part I [Business](index=6&type=section&id=Item%201.%20Business) Confluent provides a data infrastructure platform, built on Apache Kafka, enabling real-time data motion for enterprises through self-managed and cloud-native SaaS offerings, driving growth via a land-and-expand model and international expansion - Confluent aims to establish data in motion as a new data infrastructure category, serving as a real-time central nervous system for enterprises [21](index=21&type=chunk) - The company offers **Confluent Platform** (self-managed software) and **Confluent Cloud** (fully-managed SaaS) on major cloud providers [36](index=36&type=chunk)[47](index=47&type=chunk) - The business model leverages a 'Data in Motion Journey' for customer expansion, resulting in a dollar-based net retention rate of **just under 130%** as of December 31, 2022 [32](index=32&type=chunk)[45](index=45&type=chunk) - International revenue constituted **38% of total revenue** for the year ended December 31, 2022, serving customers in over 100 countries [46](index=46&type=chunk) - As of December 31, 2022, Confluent employed **2,761 people** across 22 countries, with **62%** in the United States [77](index=77&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including persistent operating losses, macroeconomic uncertainty, intense competition, cybersecurity threats, and concentrated voting power from its dual-class stock structure - The company reported a net loss of **$452.6 million** in 2022 and an accumulated deficit of **$1.2 billion** as of December 31, 2022, with no assurance of future profitability [99](index=99&type=chunk) - Macroeconomic uncertainties, such as inflation and potential recession, have extended sales cycles and increased IT spending scrutiny, potentially impacting future results [102](index=102&type=chunk) - The business heavily relies on its data-in-motion offering, with Confluent Platform contributing **61% of subscription revenue** in 2022, a decrease from 73% in 2021 [106](index=106&type=chunk)[107](index=107&type=chunk) - Key competition arises from internal IT teams utilizing open-source software and major public cloud providers like AWS, Microsoft Azure, and Google Cloud [112](index=112&type=chunk)[113](index=113&type=chunk) - A 2021 security breach at third-party vendor Codecov led to unauthorized access and copying of Confluent's private source code, exposing cybersecurity and supply-chain vulnerabilities [160](index=160&type=chunk) - The dual-class stock structure concentrates approximately **87.1% of voting power** with Class B common stockholders as of December 31, 2022 [258](index=258&type=chunk) [Unresolved Staff Comments](index=69&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the Securities and Exchange Commission - None [290](index=290&type=chunk) [Properties](index=69&type=section&id=Item%202.%20Properties) Confluent leases its corporate headquarters in Mountain View, California, and other global offices, holding no owned real property - The company's headquarters in Mountain View, California, consist of approximately **75,475 square feet** of leased space, with the lease expiring in 2029 [291](index=291&type=chunk) [Legal Proceedings](index=69&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings that would materially adversely affect its business or financial condition - Confluent is not currently a party to any material legal proceedings [292](index=292&type=chunk) [Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - None [293](index=293&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=70&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Confluent's Class A common stock trades on Nasdaq under 'CFLT' since its 2021 IPO, with the company retaining earnings for growth and no plans for future cash dividends - Class A Common Stock has been listed on the Nasdaq Global Select Market under the symbol **'CFLT'** since June 24, 2021 [296](index=296&type=chunk) - The company has never declared or paid cash dividends, intending to retain all funds for future business growth [298](index=298&type=chunk) - The Initial Public Offering (IPO) on June 28, 2021, generated aggregate gross proceeds of **$828.0 million** [300](index=300&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=72&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 51% revenue growth in 2022, driven by customer acquisition and Confluent Cloud adoption, alongside continued net losses from growth investments and macroeconomic impacts [Key Business Metrics](index=76&type=section&id=Key%20Business%20Metrics) Key business metrics demonstrate strong growth, with Remaining Performance Obligations reaching $740.7 million and a dollar-based net retention rate just under 130% Key Business Metrics as of December 31 | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Remaining Performance Obligations (RPO) (in millions) | $740.7 | $500.6 | $261.7 | | Customers with ≥ $100k in ARR | 991 | 734 | 513 | | Dollar-Based Net Retention Rate (NRR) | Just under 130% | N/A | N/A | [Results of Operations](index=79&type=section&id=Results%20of%20Operations) In fiscal year 2022, total revenue increased 51% to $585.9 million, driven by subscription growth, though net loss widened to $452.6 million due to increased operating expenses Consolidated Statements of Operations Highlights (in thousands) | Line Item | FY 2022 | FY 2021 | YoY Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$585,944** | **$387,864** | **$198,080** | **51%** | | Subscription Revenue | $535,009 | $347,099 | $187,910 | 54% | | Services Revenue | $50,935 | $40,765 | $10,170 | 25% | | **Gross Profit** | **$383,529** | **$250,572** | **$132,957** | **53%** | | Gross Margin | 65% | 65% | - | - | | **Operating Loss** | **($462,674)** | **($339,620)** | **($123,054)** | **36%** | | **Net Loss** | **($452,551)** | **($342,801)** | **($109,750)** | **32%** | Operating Expenses (in thousands) | Expense Category | FY 2022 | FY 2021 | YoY Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $264,041 | $161,925 | $102,116 | 63% | | Sales and marketing | $456,452 | $319,331 | $137,121 | 43% | | General and administrative | $125,710 | $108,936 | $16,774 | 15% | | **Total operating expenses** | **$846,203** | **$590,192** | **$255,011** | **43%** | [Liquidity and Capital Resources](index=84&type=section&id=Liquidity%20and%20Capital%20Resources) Confluent maintains strong liquidity with $1.93 billion in cash and marketable securities, primarily funded by equity and debt, despite increased net cash used in operating activities - Principal liquidity sources as of December 31, 2022, totaled **$1.927 billion** in cash, cash equivalents, and marketable securities [364](index=364&type=chunk) - In December 2021, the company issued **$1.1 billion** in 0% convertible senior notes due 2027, yielding net proceeds of **$1.08 billion** [363](index=363&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Category | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($157,333) | ($105,060) | ($82,057) | | Net cash used in investing activities | ($865,805) | ($400,583) | ($176,859) | | Net cash provided by financing activities | $82,241 | $1,844,514 | $276,758 | [Quantitative and Qualitative Disclosures About Market Risk](index=87&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Confluent faces market risks from interest rate fluctuations on its $1.93 billion portfolio and convertible notes, and foreign currency exposure on operating expenses, mitigated by a hedging program - The company faces interest rate risk on its **$1.93 billion** portfolio of cash, cash equivalents, and marketable securities, and its **$1.1 billion** convertible senior notes [384](index=384&type=chunk)[385](index=385&type=chunk) - Foreign currency risk primarily stems from non-U.S. operating expenses, with a hedging program initiated in December 2022 to mitigate this exposure [386](index=386&type=chunk)[387](index=387&type=chunk) [Financial Statements and Supplementary Data](index=88&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2020-2022, along with the independent auditor's report and detailed notes on accounting policies and financial instruments [Report of Independent Registered Public Accounting Firm](index=89&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued unqualified opinions on Confluent's financial statements and internal controls, highlighting Standalone Selling Price determination as a critical audit matter - PricewaterhouseCoopers LLP issued an **unqualified opinion** on both the financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022 [394](index=394&type=chunk) - A Critical Audit Matter was identified regarding management's judgment in determining the Standalone Selling Price (SSP) for performance obligations [402](index=402&type=chunk)[403](index=403&type=chunk) [Consolidated Financial Statements](index=92&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements show total assets of $2.34 billion, increased liabilities, and a net loss of $452.6 million in 2022, contributing to an accumulated deficit of $1.2 billion Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $435,781 | $1,375,932 | | Marketable securities | $1,491,044 | $640,085 | | **Total Assets** | **$2,344,849** | **$2,342,729** | | Deferred revenue (current & non-current) | $322,829 | $246,477 | | Convertible senior notes, net | $1,084,500 | $1,080,701 | | **Total Liabilities** | **$1,575,372** | **$1,492,448** | | **Total Stockholders' Equity** | **$769,477** | **$850,281** | Consolidated Statement of Operations (in thousands) | Account | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Total revenue | $585,944 | $387,864 | $236,577 | | Gross profit | $383,529 | $250,572 | $161,101 | | Operating loss | ($462,674) | ($339,620) | ($233,175) | | Net loss | ($452,551) | ($342,801) | ($229,828) | | Net loss per share | ($1.62) | ($1.82) | ($2.21) | [Notes to Consolidated Financial Statements](index=99&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail revenue disaggregation, convertible senior notes, stock-based compensation, and subsequent events including the Immerok GmbH acquisition and a January 2023 workforce reduction Disaggregation of Revenue by Type (in thousands) | Revenue Type | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Confluent Platform - License | $76,019 | $69,183 | $49,043 | | Confluent Platform - PCS | $247,803 | $183,737 | $128,178 | | Confluent Cloud | $211,187 | $94,179 | $31,412 | | **Total Subscription Revenue** | **$535,009** | **$347,099** | **$208,633** | | Services Revenue | $50,935 | $40,765 | $27,944 | | **Total Revenue** | **$585,944** | **$387,864** | **$236,577** | Disaggregation of Revenue by Geography | Geography | FY 2022 % | FY 2021 % | FY 2020 % | | :--- | :--- | :--- | :--- | | United States | 62% | 64% | 66% | | International | 38% | 36% | 34% | - In January 2023, the company acquired Immerok GmbH for approximately **$54.9 million** in cash [574](index=574&type=chunk) - In January 2023, the company approved a restructuring plan, including an **8% reduction** of its global workforce, with estimated non-recurring charges of **$27 million to $31 million** [576](index=576&type=chunk) [Controls and Procedures](index=129&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and the independent auditor concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022 [578](index=578&type=chunk) - Management's report on internal control over financial reporting concluded effectiveness as of December 31, 2022, a conclusion audited and concurred with by the independent auditor [579](index=579&type=chunk) Part III [Directors, Executive Officers, Compensation, and Governance](index=131&type=section&id=Items%2010-14) Information for Items 10-14, covering directors, executive officers, compensation, and governance, is incorporated by reference from the forthcoming 2023 Proxy Statement - Information on Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships, and Principal Accountant Fees and Services is incorporated by reference from the forthcoming 2023 Proxy Statement [587](index=587&type=chunk)[589](index=589&type=chunk)[590](index=590&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=132&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Annual Report on Form 10-K, including consolidated financial statements and an index of incorporated documents - This section contains the consolidated financial statements and a list of all exhibits filed with the 10-K report [593](index=593&type=chunk) [Form 10-K Summary](index=134&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that no Form 10-K summary is provided - None [598](index=598&type=chunk)

Financial Data and Key Metrics Changes - Total revenue grew 41% to $169 million, with Confluent Cloud revenue increasing 102% to $68 million [85][99] - Non-GAAP operating margin improved by 20 percentage points, indicating a significant enhancement in profitability [85][96] - Net loss per share was negative $0.09, with free cash flow margin improving four percentage points to negative 18.3% [102][104] Business Line Data and Key Metrics Changes - Subscription revenue grew 44% to $155.3 million, accounting for 92% of total revenue [99] - Confluent Cloud represented over 70% of new ACV bookings in Q4, marking the fifth consecutive quarter where Cloud exceeded 50% of new ACV bookings [99][100] - The number of customers with $100,000 or more in ARR increased by 35%, totaling 991 customers [98] Market Data and Key Metrics Changes - Revenue from the U.S. grew 35% to $100.5 million, while revenue from outside the U.S. grew 50% to $68.2 million [101] - RPO for the fourth quarter grew 48% to $740.7 million, with current RPO estimated at approximately $456.2 million, up 43% [119] - The dollar-based net retention rate remained healthy, just under 130%, with hybrid NRR continuing to be the highest [120] Company Strategy and Development Direction - The company aims to dominate the $60 billion market, with a focus on maintaining R&D investment while streamlining costs [87][118] - A restructuring of the workforce was undertaken, optimizing for strategic priorities and high ROI business areas, including an 8% reduction in workforce [110][111] - The acquisition of Immerok aims to enhance stream processing capabilities, with plans to launch a Flink offering in Confluent Cloud later this year [114][115] Management's Comments on Operating Environment and Future Outlook - The macroeconomic environment has led to elongated deal cycles and increased budget scrutiny, impacting large deals and new business [76][109] - The company is confident in its ability to achieve approximately 30% revenue growth while accelerating its path to profitability by one year [104][125] - Management emphasized the importance of stream processing and its role in driving customer value and operational efficiency [80][81] Other Important Information - The company plans to hold Investor Day 2023 in New York City on June 13 [84] - The restructuring is aimed at preserving the ability to drive top-line growth while optimizing operational efficiencies [66][110] Q&A Session Summary Question: How is the sales execution affected by recent changes in leadership and workforce? - Management indicated that the primary issue is the macro environment rather than internal execution problems, with opportunities for improvement identified [136] Question: What patterns were observed in deal cycles across different segments? - The enterprise segment experienced the most pronounced impact from budget scrutiny, while the commercial segment remained stable [142] Question: What gives confidence in the revenue guidance despite macro challenges? - The current RPO provides about 60% visibility into total revenue for FY '23, which is higher than the previous year, along with a greater proportion of fully ramped sales reps [145]

Financial Data and Key Metrics Changes - Total revenue grew 48% year-over-year to $152 million [7] - Non-GAAP operating margin improved by 14 percentage points year-over-year [7][35] - RPO grew 72% to $663.5 million, with current RPO estimated at approximately $408.2 million, up 59% [41] - Subscription revenue grew 50% to $138.7 million, accounting for 91% of total revenue [41] Business Line Data and Key Metrics Changes - Confluent Cloud revenue increased 112% year-over-year to $57 million, representing 38% of total revenue compared to 26% a year ago [7][42] - Confluent platform revenue was $81.8 million, up 25% and accounted for 54% of total revenue [41] Market Data and Key Metrics Changes - Revenue from the US grew 44% to $95.1 million, while revenue from outside the US grew 56% to $56.6 million [45] - The company added 120 net new customers, ending the quarter with approximately 4,240 total customers, up 40% [46] Company Strategy and Development Direction - The company aims to drive durable and efficient growth, with a market opportunity of approximately $60 billion [28] - The focus is on converting open-source users and landing new customers through self-service on Confluent Cloud [28] - The introduction of Stream Designer and Stream Governance Advanced aims to enhance customer engagement and expand the addressable market [27][38] Management's Comments on Operating Environment and Future Outlook - Management noted that the demand for data streaming remains strong despite macroeconomic pressures [58] - The company raised its revenue and bottom line guidance for Q4 and FY 2022, reflecting confidence in its business model [53][55] - For FY 2023, the company expects revenue in the range of $760 million to $770 million, incorporating a negative impact from increased scrutiny on deal approvals [56] Other Important Information - The company ended Q3 with $1.94 billion in cash, cash equivalents, and marketable securities [52] - The company announced the appointment of Rey Perez as Chief Customer Officer [36] Q&A Session Summary Question: How is the shift from open-source DIY to Confluent Cloud being perceived by large Apache Kafka users? - Management noted that the total cost of ownership (TCO) of the cloud offering has become a significant part of the sales process, with many large tech customers recognizing the benefits of moving to Confluent Cloud [61][62] Question: Can you discuss the seasonality of Confluent Cloud revenue? - Management indicated that Q4 typically sees less aggressive deployment of new workloads as companies prepare for year-end, but they expect a sequential increase in revenue [65] Question: How has the consumption impact related to macroeconomic conditions affected the company? - Management stated that the mission-critical nature of their use cases has helped maintain strong net retention rates, despite economic pressures [69] Question: What percentage of the business is supporting operational use cases versus analytical use cases? - Management indicated that the vast majority of use cases are operational in nature, which contributes to the resilience of demand [73][76] Question: How does the shift to cloud impact the competitive landscape? - Management noted that the shift is making on-premise solutions less relevant, while emphasizing the importance of cloud partnerships [92][96]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40526 CONFLUENT, INC. (Exact Name of Registrant as Specified in its Charter) | --- | --- | |--------------------------------- ...

Confluent, Inc. (NASDAQ:CFLT) Q2 2022 Earnings Conference Call August 3, 2022 4:30 PM ET Company Participants Shane Xie - IR Edward Kreps - Co-Founder, Chairman & CEO Steffan Tomlinson - CFO Conference Call Participants Jason Ader - William Blair & Company Karl Keirstead - UBS Sanjit Singh - Morgan Stanley Bradley Sills - Bank of America Merrill Lynch Rudy Kessinger - D.A. Davidson & Co. Michael Turrin - Wells Fargo Securities Raimo Lenschow - Barclays Bank Pinjalim Bora - JPMorgan Chase & Co. James Wood - ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40526 CONFLUENT, INC. (Exact Name of Registrant as Specified in its Charter) | --- | --- | |-------------------------------------- ...

Confluent, Inc. (NASDAQ:CFLT) Q1 2022 Results Earnings Conference Call May 5, 2022 4:30 PM ET Company Participants Shane Xie - Director, Investor Relations Jay Kreps - Co-founder and Chief Executive Officer Steffan Tomlinson - Chief Financial Officer Conference Call Participants Sanjit Singh - Morgan Stanley Jason Ader - William Blair Derrick Wood - Cowen and Company Michael Turrin - Wells Fargo Phil Winslow - Credit Suisse Rob Owens - Piper Sandler Adam Bergere - Bank of America Eric Heath - KeyBanc Capita ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40526 CONFLUENT, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 47-1824387 (State or other jurisdiction of ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Securities registered pursuant to Section 12(b) of the Act: For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number: 001-40526 CONFLUENT, INC. (Exact name of Registrant as specified in its Charte ...

Introducing Confluent February 10, 2022 Disclaimer 2 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 other results of operations; future financial performance, business strategy and plans; potential market and growth opportunities; competitive position; technological o ...