Confluent(US:CFLT)2023-11-02 00:21Financial Data and Key Metrics Changes - Total revenue grew 32% to $200 million, exceeding guidance [5][30] - Non-GAAP operating margin improved by 22 percentage points, reaching negative 5.5% [29][33] - Non-GAAP EPS turned positive for the first time at $0.02 [5][33] - Subscription revenue grew 36% to $189.3 million, with Confluent Cloud revenue up 61% to $91.6 million [30][31] - Free cash flow margin improved 24 percentage points to negative 6.5% [33] Business Line Data and Key Metrics Changes - Confluent Platform revenue growth reaccelerated to 19%, ending at $97.7 million [30] - Confluent Cloud revenue accounted for 46% of total revenue, up from 38% a year ago [31] - NRR was healthy at just under 130%, with cloud NRR above 130% [34] Market Data and Key Metrics Changes - U.S. revenue grew 25% to $119.4 million, while international revenue grew 43% to $80.8 million [32] - RPO was $824.1 million, up 24%, with current RPO at $535.1 million, up 31% [43] Company Strategy and Development Direction - The company is transitioning to a fully consumption-based model to align with customer buying behavior [9][14] - Focus on capturing the $60 billion market opportunity in streaming, with plans to enhance product offerings [8][27] - The shift in go-to-market strategy aims to drive new customer acquisition and workload expansion [12][16] Management's Comments on Operating Environment and Future Outlook - Management noted challenges from macroeconomic pressures and specific customer events impacting revenue [7][44] - The company expects revenue growth of 21% to 22% in Q4 2023, with cloud revenue projected to grow 43% sequentially [6][45] - For FY 2024, revenue is expected to grow approximately 22% year-over-year, with a break-even non-GAAP operating margin [46][48] Other Important Information - The company held an industry event, Current 2023, showcasing innovations in data streaming [18] - New product offerings include Enterprise clusters and Flink public preview, enhancing the data streaming platform [19][21] - The company is focused on improving customer experience and reducing friction in the consumption model [12][16] Q&A Session Questions and Answers Question: Changes in the spending environment and impact on sales execution - Management acknowledged pressure on new software projects and emphasized the need to align with customer consumption patterns [52][53] Question: Guidance for 2024 and risks associated with the sales force transition - Management outlined three factors impacting guidance: specific customer events, macroeconomic conditions, and the consumption transformation [55][56] Question: Context on the customer moving workloads back to their data center - Management clarified that this decision was part of a broader strategy and not specific to Confluent [59][73] Question: Impact of new enterprise clusters on consumption - Management believes the new clusters will be a tailwind, improving customer efficiency and reducing costs [60][61] Question: Structural advantages from the go-to-market model change - Management stated that aligning with consumption will enhance the ability to address the market and drive growth [64][66]