Confluent Q4 2023 Earnings Review

$CFLT Q4'23 Results:

Financial Results:

⬆️$213.2M rev (+26.4% YoY, +32.0% LQ) beat est by 3.9%

⬆️GM* (77.5%, +4.6%pp YoY)🟢

⬆️Operating Margin* (5.3%, +26.8%pp YoY)🟢

⬆️FCF Margin (3.2%, +21.5%pp YoY)🟢

⬆️EPS* $0.09 beat est by 80.0%🟢

*non-GAAP

↘️DBNR 120% (130% LQ)

➡️1,229 $100k+ customers (+24.0% YoY, +44)

➡️RPO $0.92B (+24.0% YoY)🟡

➡️Billings $242M (+20.0% YoY)🟡

Operating expenses

↘️S&M*/Revenue 41.0% (47.2% LQ)

↘️R&D*/Revenue 21.6% (24.4% LQ)

↘️G&A*/Revenue 9.6% (10.2% LQ)

⬆️Net New ARR $52M ($44 LQ)

↘️CAC* Payback Period 28.1 Months (33.0 LQ)

Dilution

↘️SBC/rev 42%, -3.0%pp QoQ)

⬆️Dilution at 7.8% YoY, +0.1%pp QoQ)🔴

Guidance

⬆️ $212.0M guide (+21.6% YoY) beat est by 0.7%

➡️$950M FY guide (+22.3% YoY)

Key points from Confluent $CFLR Q4 2023 Earnings Call:

1.   Growth and Vision:

Confluent significantly improving operating margins. The company sees itself at the forefront of the data streaming platform category.

2.   Shift to Consumption Model:

The company is transitioning to a fully consumption-based model, focusing on customer usage and expanding its reach within the data streaming market. This internal shift aligns with their cloud-centric approach, aiming for broader adoption and customer engagement.

3.   Recognition of Data Streaming:

Data streaming is increasingly acknowledged as a vital component of modern data infrastructure.

4.   Investment in Flink:

Confluent's investment in Flink positions the company to lead in stream processing technology. Flink complements Kafka by allowing for real-time data processing, which is crucial for building dynamic, responsive applications.

5.   Generative AI Applications:

Confluent sees significant opportunities in generative AI, partnering with leading AI and database companies. The company is integral in enabling real-time data integration for AI-driven applications.

Management comments on the earnings call.

Product Innovations:

Jay Kreps: "The potential for data streaming is to collapse the fragmentation of Data in Motion technologies and create a new data platform... Since Confluent's creation, that has been our central thesis that the data streaming platform would be a data platform of similar importance and scale to databases."

Jay Kreps: "This data streaming platform is more than just Kafka. Kafka is the data stream, a foundational layer, but it's just the start. To extract the full value of data in motion, organizations need to connect to the systems they have, process data in real-time, and govern these flows of data across the enterprise."

Competitors:

Jay Kreps: "In December, research published by Forrester validated our thesis that data streaming platforms are a distinct category that has become a mission-critical component of the modern data stack... The Forrester Wave Streaming Data Platforms Q4 2023 recognizes streaming data as the pulse of an enterprise and names Confluent a leader."

Customers:

Jay Kreps: "We continue to see demand from customers who are building the next wave of generative AI applications, including AI-powered procurement software, chatbots, coding platforms, and even unexpected use cases like predicting and detecting cavities."

Jay Kreps: "ACERTUS operates the largest automotive logistics company in the United States... With Confluent serving as its data streaming platform, ACERTUS has been able to open new business lines to generate tens of millions in new revenue."