Confluent(US:CFLT)2023-10-31 16:00Revenue Growth - Subscription revenue increased by $50.5 million during Q3 2023 compared to Q3 2022, with a dollar-based net retention rate of just under 130% as of September 30, 2023[104]. - Confluent Cloud revenue represented 46% of total revenue for Q3 2023, up from 38% in Q3 2022, indicating a growing contribution to subscription revenue[85]. - Total revenue for Q3 2023 was composed of 95% subscription revenue and 5% services revenue, compared to 91% and 9% respectively in Q3 2022[102]. - Subscription revenue increased by $146.7 million (39%) during the nine months ended September 30, 2023, compared to the same period in 2022, reaching $526.3 million[114][142]. - Total revenue for the nine months ended September 30, 2023, was $563.8 million, a 35% increase from $417.3 million in the same period in 2022[142]. Profitability and Margins - Gross profit margin improved to 72% in Q3 2023 from 65% in Q3 2022, reflecting better cost management[102]. - Gross profit for the nine months ended September 30, 2023, was $391.2 million, reflecting a 46% increase compared to $268.8 million in 2022[144]. - Operating loss narrowed to $54 million in Q3 2023 from $78 million in Q3 2022, indicating improved operational efficiency[102]. Expenses - Research and development expenses increased by $21.1 million in Q3 2023, primarily due to higher personnel-related costs and stock-based compensation[108]. - Sales and marketing expenses were $128.6 million in Q3 2023, representing 64% of total revenue, down from 75% in Q3 2022[109]. - Research and development expenses rose by $69.6 million (95%) during the nine months ended September 30, 2023, driven by increased personnel-related costs and stock-based compensation[147]. - Sales and marketing expenses increased by $51.3 million (66%) during the nine months ended September 30, 2023, mainly due to higher personnel-related costs and stock-based compensation[148]. - General and administrative expenses increased by $13.1 million for the nine months ended September 30, 2023, primarily due to a $10.4 million rise in personnel-related costs and allocated overhead costs[149]. Other Income and Charges - Other income increased by $12.8 million in Q3 2023, primarily due to higher yields on marketable securities[112]. - Other income increased significantly by $45.2 million (889%) during the nine months ended September 30, 2023, reaching $50.3 million[122]. - Restructuring and other related charges amounted to $34.9 million, representing 6% of revenue for the nine months ended September 30, 2023[122]. Cash Flow and Liquidity - Cash, cash equivalents, and marketable securities totaled $1,872.8 million as of September 30, 2023, indicating strong liquidity for operational needs[151]. - The net loss for the nine months ended September 30, 2023, was $348.7 million, with cash used in operating activities amounting to $115.9 million[154]. - Cash provided by financing activities was $91.4 million for the nine months ended September 30, 2023, mainly from stock option exercises and employee stock purchase plan[157]. - Cash used in investing activities was $816.3 million for the nine months ended September 30, 2022, primarily due to marketable securities purchases[156]. - The company believes existing cash and marketable securities will be sufficient to fund both short-term and long-term operating and capital needs[151]. Market and Business Model - The company expects greater negative impacts on consumption growth rates in the coming quarters due to macroeconomic factors and customer preferences shifting towards consumption-based models[83]. - Confluent's business model relies on customer renewals and increasing existing customer consumption, with significant opportunities for revenue growth as customers migrate more data to the public cloud[87]. Tax and Other Financial Metrics - The effective tax rate for the three months ended September 30, 2023, was (1.7)%, slightly higher than (1.6)% in the same period of 2022[113]. - Non-cash charges included $261.0 million of stock-based compensation expense for the nine months ended September 30, 2023[154]. Risk Management - The company established a hedging program in December 2022 to mitigate foreign currency fluctuations[190]. - The fair value of the $1.1 billion convertible senior notes issued in December 2021 is subject to market risk due to the conversion feature[189].