Confluent(CFLT) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Highlights Confluent reported strong Q1 2024 financial performance, with total revenue up 25% to $217.2 million, driven by subscription and cloud growth, and improved profitability Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | Y/Y Change | | :--- | :--- | :--- | :--- | | Total Revenue | $217.2M | $174.3M | 25% | | Subscription Revenue | $206.9M | $160.6M | 29% | | Confluent Cloud Revenue | $107.0M | - | 45% | | GAAP Operating Margin | (51.3%) | (95.3%) | +44.0 pts | | Non-GAAP Operating Margin | (1.5%) | (23.1%) | +21.6 pts | | GAAP Net Loss Per Share | $(0.30) | $(0.52) | +$0.22 | | Non-GAAP Net Income Per Share | $0.05 | $(0.09) | +$0.14 | | Free Cash Flow | $(31.7)M | $(82.9)M | +$51.2M | - The number of customers with $100,000 or greater in Annual Recurring Revenue (ARR) grew to 1,260, an increase of 17% year-over-year[1] - Management highlighted that the company's consumption transformation is showing early signs of success, with strong subscription revenue growth and the largest sequential increase in total customers since Q1 2023[1] - CEO Jay Kreps noted that Confluent Cloud now accounts for the majority of subscription revenue and remains the fastest-growing offering[6] Financial Outlook Confluent provided Q2 and FY2024 guidance, projecting continued revenue growth and improved profitability, while announcing a shift to subscription revenue-focused reporting - Confluent will transition its revenue outlook to focus solely on subscription revenue starting with its guidance for Q3 2024. The second quarter of 2024 will be the last period for which total revenue outlook is provided[2] Q2 2024 Outlook Confluent projects Q2 2024 total revenue between $229 million and $230 million, with subscription revenue of $217 million to $218 million, and improved non-GAAP profitability Q2 2024 Financial Outlook | Metric | Guidance Range | | :--- | :--- | | Total Revenue | $229M - $230M | | Subscription Revenue | $217M - $218M | | Non-GAAP Operating Margin | Approx. -1% | | Non-GAAP Net Income per Diluted Share | $0.04 - $0.05 | Fiscal Year 2024 Outlook Confluent targets FY2024 total revenue of approximately $957 million and subscription revenue of $910 million, aiming for a 0% non-GAAP operating margin Fiscal Year 2024 Financial Outlook | Metric | Guidance | | :--- | :--- | | Total Revenue | Approx. $957M | | Subscription Revenue | Approx. $910M | | Non-GAAP Operating Margin | Approx. 0% | | Non-GAAP Net Income per Diluted Share | $0.19 - $0.20 | Consolidated Financial Statements This section presents Confluent's unaudited consolidated financial statements for Q1 2024, detailing its financial position, performance, and cash flows Statements of Operations Confluent's Q1 2024 Statement of Operations shows total revenue of $217.2 million and improved GAAP operating and net losses compared to Q1 2023 Condensed Consolidated Statements of Operations (in thousands) | Line Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total Revenue | $217,237 | $174,302 | | Gross Profit | $156,016 | $116,158 | | Total Operating Expenses | $267,367 | $282,251 | | Operating Loss | $(111,351) | $(166,093) | | Net Loss | $(92,967) | $(152,555) | | Net Loss Per Share | $(0.30) | $(0.52) | Balance Sheets As of March 31, 2024, Confluent's balance sheet shows strong liquidity with $1.91 billion in cash and equivalents, and $2.44 billion in total assets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash, cash equivalents & marketable securities | $1,906,959 | $1,900,770 | | Total Assets | $2,439,629 | $2,460,809 | | Total Liabilities | $1,594,412 | $1,650,394 | | Total Stockholders' Equity | $845,217 | $810,415 | Statements of Cash Flows Confluent's Q1 2024 cash flow statements show improved cash management, with net cash used in operating activities decreasing to $26.0 million and improved free cash flow Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(25,954) | $(77,772) | | Net cash used in investing activities | $(16,765) | $(52,483) | | Net cash provided by financing activities | $30,004 | $37,729 | | Net decrease in cash and cash equivalents | $(13,388) | $(92,321) | | Cash and cash equivalents at end of period | $336,373 | $343,460 | Reconciliation of GAAP to Non-GAAP Measures This section reconciles GAAP to non-GAAP financial measures, adjusting for items like stock-based compensation to provide a clearer view of core operational performance Reconciliation of GAAP to Non-GAAP Operating Loss (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | GAAP Operating Loss | $(111,351) | $(166,093) | | Stock-based compensation | $102,985 | $82,952 | | Acquisition-related expenses | $4,587 | $9,317 | | Restructuring charges | - | $33,382 | | Non-GAAP Operating Loss | $(3,277) | $(40,329) | Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Loss) (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | GAAP Net Loss | $(92,967) | $(152,555) | | Total Adjustments | $108,767 | $127,065 | | Non-GAAP Net Income (Loss) | $15,800 | $(25,490) | Reconciliation to Free Cash Flow (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(25,954) | $(77,772) | | Less: Capitalized internal-use software costs | $(5,539) | $(4,556) | | Less: Capital expenditures | $(186) | $(546) | | Free Cash Flow | $(31,679) | $(82,874) | Legal and Definitional Disclosures This section outlines forward-looking statement risks, explains non-GAAP financial measures, and defines key operational metrics like Annual Recurring Revenue (ARR) Forward-Looking Statements This section details forward-looking statements, emphasizing inherent risks and uncertainties that could cause actual results to differ materially from projections - The report includes forward-looking statements concerning financial outlook, market leadership, investment plans, and the effectiveness of its go-to-market strategy[10][13] - Key risks that could cause actual results to differ include limited operating history, ability to manage rapid growth, uncertain macroeconomic conditions, competition, and reliance on third-party cloud infrastructure[14] Non-GAAP Financial Measures Explanation Confluent uses non-GAAP financial measures to supplement GAAP results, providing a consistent view of core operations by excluding specific non-recurring or non-cash items - The company uses non-GAAP financial measures internally to analyze business trends and for planning purposes, believing they provide consistency and comparability for investors[15] - Non-GAAP measures are defined as the respective GAAP measures adjusted for items including stock-based compensation, amortization of acquired intangibles, acquisition-related expenses, and restructuring charges[11] Key Metrics Definition (ARR) This section defines Annual Recurring Revenue (ARR), a key metric, detailing its calculation methodology for both Confluent Platform and Confluent Cloud offerings - Annual Recurring Revenue (ARR) is defined as the sum of (1) contractually committed revenue over the following 12 months for Confluent Platform customers and (2) annualized actual consumption over the last three months for Confluent Cloud customers[26]