Confluent (CFLT) 4 Aug 222022 Q2 Earnings call transcript

Hi, everyone. Welcome to the Confluent Q2 2022 Earnings Conference Call. I'm Shane Xie from Investor Relations. And I'm joined by Jay Kreps, Co-Founder and CEO; and Steffan Tomlinson, CFO.

During today's call, management will make forward-looking statements regarding our business, operations, financial performance and future prospects, including statements regarding our financial outlook for the fiscal third quarter of 2022 and fiscal year 2022. subject to and anticipated differ statements. are cause which by statements results actual materially forward to uncertainties, risks could these These from those information XX-Q filed actual the SEC. could included Further our with factors differ in Form to is cause recent most risk on results that We obligation these to statements except today's call, assume required by no as law. update after

from financial non-GAAP financial and our As Investor GAAP. isolation I'll over included and purposes. analysis non-GAAP can basis. a are measures expressed or a reminder, in is on for hand facility on and for certain between trends These supplemental considered limitations prepared be to our call financial found use non-GAAP business measures information should manage these accordance A internal used press of earnings forecasting in With internally financials, financial not as in be with our investors.confluent.io. that, on the which Jay. measures release today's call and a these substitute Relations financial and reconciliation GAAP measures We planning have at website non-GAAP to and

that our for are experiences. mix serve despite economic customer by uncertain Cloud customer in operating Total directly to stack, Thanks, the We're our of Confluent reflected quarter, product this our another on grew applications of end overall critical by XX% exceeding high quarter everyone, to of demand our performance proud our powering in. $XXX durability: touching macro given First, topic, on year-over-year revenue million. we're revenue strong There X seeing operations the and business real-time as metrics. adoption call. in to represented consumption as the grew why Confluent across operational strong and Confluent revenue sits the all environment see trends. currently continues XX% briefly especially increase reasons to business Shane. XXX% earnings of quarter. an total year-over-year headwinds. base Welcome, and continues delivered Confluent strong I'll start Cloud rapid our guidance this is second

it complete operations be criticality, of this can't off Given to disruption without the the switched business. a

state XXXX of data and XX% and to streams processes underscores surveyed, are IT nearly leaders engineering said that this, the building than X,XXX responsive finding more real-time of experiences. in report rich Our data motion critical customer business

more these Institute soon were ran has value internal into overhead of a that costs. one self-supporting services teams propositions made driving difficult open cloud of they to operational their customer to adjust managed cost is build significant than such more of source SaaS advantages but campaigns like trying that compared to marketing is service source source. out Cloud changing targeted, Levi's key build intelligence, data Cloud around personal transform SAS powerhouse perfectly and is more data Discover, the Honda, built to making initially into attempt a and businesses as marketing relevant. real-world the from to engineers it significant open a Second, XX,XXX on savings. its demand. Kafka, Using Confluent TCO to Plus, Confluent open analytics real-time illustrates complexity more dynamics. helping scalability issues, -- and Nestle SaaS internal platform

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study to million XXX% shared than savings months. for recent X of we businesses translating use of quarter, than identified last As that less Confluent, in more ROI $X.X TCO Forrester a an

IoT To in ETC Kafka, cars sensor and with toll corridors, next-generation for Another from ETC onboarding nature transportation Cloud. new demonstrates fully smart cost to as and pricing saved Kafka X economic TCO industry. real-time congestion conducting talent on leading engineering XX% Kafka city total ETC accelerate an use toll expanding support about and open managed and move After company. data in strategic first maintaining millions per Cloud skyrocketed use of to produced source example their transactions management A Kafka. and was the as significantly totaling the year. and mission-critical dynamic Kafka to as of of collection time the billion Confluent collecting services, that costs, toll mobility value development By our case input their ETC. customers, on reallocate increased well so was of both internal congestion of XX% a the of real is By electronic to traffic algorithm devices their continuously truly analysis, more moved an the making But did predictive Confluent dedicated processing of this projects, across their ETC and able infrastructure innovation. to average that reduced and Confluent that collects downtime Cloud, risk projects managing operating

partner go-to-market. Our and the software and relationships. a data remain are front our that our key announcements across few of deepened everywhere notable partnership part relationship landscape of on the differentiation key our made core a We to pillar

directly Organizations First, accelerate reseller business we start already a Confluent from motion consulting adoption are know program, with by program. support. their of consulting launch cloud who work strategic collaboration their expanded they we partner this to joining thrilled marketplace the can can the our of AWS and offer channel To private offers. Confluent localized the agreement program, with by in data partners announce Cloud purchasing

easier can we zone their business. with make unlock it work Now data the mega XX partners, streaming to including leading our of full streaming value for slower, customers SBA data to and throughout

data with usage Microsoft as motion minutes few the developers. thankful on of customers Cloud and making partners journey adoption This for The is that partners. a go-to-market motion of customer to early default for down XXXX. the top for starting this for incredibly stage often at simply like their also we experimenting proud consumption-oriented technology developers with product-led our to technology. of concepts service their for acquisition quarter, discussed our providers accelerate spend model previously low friction. and also be stage, we're adoption We're by builds this learning it's I'd path. were journey growth to At with the journey. recognized and pilots particularly and partnerships in doing starts or for the strong critical and one and This stages onboarding critical data process point proof of new of We've early stage Confluent early the customer work a cloud for MongoDB both

aligns scale. remain impacts customer paying in and paywall as share finally, will quarter, first the of We has our I'm than in QX. funnel, land for initial card but are best, we into the unquestionably with Thanks and as strategy all confident at Steffan which for go-to-market up like has customers minimal now So platform wish coming incredibly in risk more Officer. larger thank sign-ups, gain of Reset a our the acting customers, customer sign-ups, disruption. look the developer total our Chief can role our ultimately financials. business for have the as which has at And of Confluent, less stage. up through will developers and a means drive incurred our some had a over a for preproduction test headed of dollars sticky who Ganesh This to paywall a Product of seeing And and sequentially. us you free been that small you count of pay-as-you-go on developers, run for production hosting right entering joining end very This previously count impactful grow removal us also of hundred aside, easier the half And This creating new growth to for in October. Users strategic more the than again as be quarter, of that I'd large leader. Confluent customers leads paying applications product. our to the industry test not today. credit to to that requirement and now many chunk as short-term positioning to are developer average back we search many the production our X-year Officer stepping evidenced reduce in months. grow than interim as you in of I it's very top amounts in after for is up our the few year-over-year growth trial expand their risk-free. even as of contributions. we to XXX% be QX move model, Chief our Product customers that successful returns friction XX% access turn the the his product, we're and in Ganesh, would a streaming an we drives customers year. noise well To customer I'll seeing your change our to in our the growth the reduction count. easier allowing Current, just customer can already usage us that the from opportunity by market progress new us, towards a reset phase With removal power per including of eliminated strong event of And spend data trials second the at we full created with make at show forward and of trial walk friction as a that, customer the paying call sign-ups, Srinivasan removed to our the road cohort counted count accelerating will more it the pleased this metric. process instantly been information for increasing

Cloud be Cloud in Thanks, million. Confluent quarter environments guidance margin best-in-class quarter, which $X.X also significant to $XXX.X a strong improvements, RPO the grew high visibility positioned delivered and and platform streams. Confluent million multi-cloud XX% XX% sequentially, Confluent Total adds the Confluent second XXX% of new year-over-year our to was broader net revenue quarter. grew revenue for compared approximately fourth highlights total XX% With was growth, total XX% and to Within grew address representing performance. subscription, opportunity of testament of And Jay. Cloud using and XX% date. Current consecutive accounted a revenue. revenue growth time. XX% net the for million customers revenue adding to to XX% bookings. estimated XX% year-over-year to Cloud RPO grew revenue for strong of a XX% team's $XXX our expectations, between basis, for for are more exceeded $XXX total on-prem million, and cloud revenue. On revenue bridge our year-over-year than up we're Confluent RPO platform, of accounted subscription and to million revenue up in $XXX.X year-over-year around We XX% to Confluent quarter the retention the Key Cloud our ACV model revenue accounted over the largest $XX revenue a ago. third the million, platform exceeding year-over-year year-over-year. accounted Subscription XX% $XX consecutive of to of for Confluent quarter, second end more platform include hybrid where year Confluent to million. up

consumption technology particular by financial with services. across strong healthy industries and performance Our was in cloud strength driven

the year-over-year to year-over-year grew to the million. from mix grew to the Revenue Turning revenue. Revenue U.S. XX% of U.S. $XX.X $XX.X outside geographic from XX% million.

and The our customers to customers. customer ARR, XX% $XXX,XXX ARR, at XX% base $X year-over-year. least to least growth continue year-over-year at up with XXX in be up in large with We in million XXX the with Turning quarter customers ended robust.

revenue XXX,XXX in more customer cohort total than Our contributed historical with quarter, line of in XX% trends. the

retail, across and more. media services, base Total telecom, count: customers. year-over-year X diversified pay-as-you-go total are X,XXX, spans committed technology, customer and and customer up approximately contract There ended sector, components XX% at various care, financial health including sequentially. and of customers industries, flat Our entertainment many public

As earlier, acceleration testament a health removal and our our cloud key is indicator Jay in for for the which demand product. a the driven funnel, strong of discussed has growth strong sign-ups, overall paywall customer it's to

hybrid see XX QX While a added we're short-term our majority We committed customer XXX compared in year committed revenue a net had The to new to attributed paywall momentum in total customers and XXX the rate degree committed XX%-plus the ago. continue high expansion the base. very of the in pleased provides revenue strong XXX% our continued our on by Dollar-based any of of was the NRR customers in net count, our which for NRR vast to and a substantially quarter across visibility offerings. for fifth remained be higher retention the product to overall removal impact customer company, above gross quarter. our number our in quarter given cloud NRR for highest. in both is for than customers, the customers previous quarter into consecutive of retention and the pay-as-you-go driven

profitability. gross on margin XX.X% stated subscription margins was to like unless Total to otherwise. non-GAAP referring margin note Moving results gross be and was to and I'd that gross I'll XX.X%.

and platform strong. steady Our margin remained gross

the and a offset optimize cloud pricing cloud of higher cloud margin hosting substantially efforts total improved driven near midterm efficiencies gross approximately headwind Our have mix future. to paying business providers, drive in economics efforts concerted gross continue the total margin. term, our improving and of gross anticipate on to to been costs In by revenue will with target and continue margin improved off continued unit our XX%. the The which of to focus service near fluctuate to the cloud our we of some the

spend sales second negative such focused efficiency Turning Operating improving flow. loss X outperformance, was and of driven with securities. Net weighted profitability million equivalents share cash and rate percentage as pace the We manage average margin XX.X% margin to points XX basic quarter controlling points approximately ended to in by billion revenue across percentage proactively shares flow cash the improvement efforts The cash hiring. the by negative using and Free year-over-year cash, year-over-year XX.X%. XXX.X $X.XX strong and was per organization, and to to collections. driven marketable $X.XX, improved outstanding. diluted our improved negative

to Now outlook. I'll our turn

current tempered We macro guidance by and are been year, QX raising revenue the raise of and magnitude for has profit the our dynamics. the the but

transformation balance June estimated this rest customers' the capability. our the million negative change on increased this incremental impact conditions with continue and will if need approximately an on their through on million We to July, motion guidance Towards a is continues is meet with scrutiny second monitor We'll half ensure of dynamic and year in our data we we and and and of cautious targets QX margin investments by approximately million to correct $X macro action the deal of the revenue be segments negative digital highest approvals. We've believe environment the business. must-have fiscal assuming spending to levels have $X and back view to current $X We're to impact the warranted. with $X saw we driven being through the materially in on the course make million in XXXX. continue our the adjusted operating year ROI half initiatives

remains Our midterm turning exiting profitable annual high QX the non-GAAP and delivering improvements growth goal in XXXX. with margin

now Turning guidance. to

XXX range we representing be the QX and we negative $X.XX expect and margin operating outperformance, to to $X year-over-year. growth the third our we be to be million negative non-GAAP $X.XX, XX% to of in approximately $XXX revenue between XX%, negative adds XXXX, to loss share Due range million, to non-GAAP of per expect shares of revenue to in net XX% quarter million outstanding. sequential sequential to be $X.X expect net weighted million using million, QX average the $XXX approximately For cloud of

XX% to $X.XX, range in of million the XX% $X.XX in in million, $XXX loss non-GAAP and year-over-year, average full XX% range operating negative to expect year margin of range the growth per of negative to negative the to weighted negative non-GAAP the be revenue For approximately shares outstanding. XXX XX% $XXX be representing we using share XXXX, to to of net million

Due year FY be flow. in the the margin the bonus free annual approximately million timing to in originally flow cash the free and fiscal X than to $XX margin payment and anticipated, We payments, be while than of anticipated. lump in one XXXX QX will QX QX 'XX from these cash Turning payment XXXX structure changed cash XX. payout of to better 'XX previously sum remaining flow will QX of for X payments, lower the free

registration for webcast Texas. Q&A, p.m. the I'd We'll our Central beginning October and session will website please person, information. quarter on our update In The Before investor XXXX to an our IR To join be to contact our in turning invite customers. to Tuesday, on you at growth provide in leverage. underscore program Current join X:XX at on with second strategy, our operating increased results closing, Austin, live drive product like IR high to ability Time. X,

our While the tailwind uncertain, track to firmly of delivering intact. is near-term commitments, a on macro is platform data secular streaming and profitability improve for and we're in growth motion the well market-leading a With ahead. environment data drive durable positioned record

questions. Now I Jay and will take your

you, today, [Operator Blair followed question Ader by Instructions]. Jason Thank from our William with Steffan. And comes UBS. first

ask requires Kafka impact as the And starting down just some maybe I do some customers through bit little planning is a to impact, -- then as how play of Is those expect go out wanted implementing we QX? yes, out that of some pace you that slow what So projects? you macro change. the about the to and process where sort requires of on

in strong what continued mean deals. was some sporadic actually Yes. we I say I and delays demand, saw would

maybe say across and of of of finance I review that geos bit more a inspection, longer, segments. We another inspection saw little So would TCO. kind round

but really And it that all wasn't think localized is wasn't into it thing, So hugely I a factored guidance. the widespread.

probably what forward?" took do a the of we think same. kind expect of look that we at more "Well, I and we going So said,

kind story seen strong. we kind we've deals any work that, went through they think is think a sure that that be I to and of delayed. making review done of further the of And lost, that's on been overall I but haven't TCO those have testament

then And use quick on a follow-up just cases.

cool you the there the those were of that's you seen before," be obvious guys on a that like, would use case about that call. "Wow, quarter that where it examples Confluent. never there a use can the You maybe be some Are we've of or in wouldn't any vertical. talked for really case a in Maybe think past,

Just kind that. curious of about

I'm of customers that that of really trend on I Yes. on. number cases seen across most it's a started is kind the doing say of that these excited the kind some would company. organizations that, move graduate the some taking use as central cloud, the the to where about including premise broad We've they to of of

was the seeing exciting noticed on-premise folks the just probably of now most results some the was I and some that that. big trend these in of of early So cloud going

question Stanley. take from our followed UBS, next with Morgan We'll Karl Keirstead by

follow-up there So you XQ, anything Steffan, maybe was the quick unusual, you business. improvement on assuming Any pull roughly cloud X I've XQ. outperformance a cloud the in the questions. and XQ? why similar there a side Steffan, that in you'd in, were in on got that's then platform mentioned sequential performance et out cetera? on And Was call

see. pleased the for anything cloud. performance we're really very good just entire We a adoption in with across We in or is base, QX see to which broader pull our consumption forward. a very saw unusual sequential patterns customer didn't Well, record

calibrate also sequential for gave still we're help of and to for growth level orders we guidance QX And of the year. that So folks' this and each QX calling between additional QX expectations. for set

So very healthy growth, and we're that. to well deliver positioned

on you conservative business on outlook it. felt like a the your for where Got that I platform for side, moderate implied you little And perhaps bit then were us number, guidance Steffan. Congrats set growth for strong what side. platform on quarter prepping cloud similar pretty It did which that a initially to more by when 'XX, million, ago it was healthy year $X platform Yet, clip. sequentially the the pretty platform business actually grew goodness at pretty your grew in yet the despite side on growth. cloud the is

call in that trade-off you maybe to half, keep second would So out where of just number helping we any we maybe in sort that platform the or really migration as need mind Anything the segment we see platform as model XQ, that in there. didn't Steffan?

of an here. our wherever I us data think a customers' we base really customer have means implications our be building important system The resides. nervous central that it's to for point

means cloud, positioned very that in are we to well that. feel So on-prem, hybrid do we like in the And environments. cloud

Our in going platform, CP ACV to look last But business particular, and of is over new how is versus grow. continue new has that percentages row. the much coming XX% ACV at to cloud you the X are in quarters a as been cloud for in

on cloud. So to numbers see NRR NRR are and And are out And for important and the the average. of total Cloud company gives we cloud But and going look our for by also Confluent biggest total environments. than to those you CP-only hybrid and Confluent somewhat an at and then hybrid more platform. top numbers business growth is because coming our us greater the Confluent of definition, opportunity platform takeaway cross-sell the upsell it moderated is

Got it.

know Steffan. a done. and tough Okay. demand Well, Jay, nice job, well I it's so backdrop,

you. Thank

Thank you.

We'll take next Wells Sanjit Stanley, Morgan with Fargo. by followed question Singh from our

Can me? you hear

Yes.

Okay.

in of that. video, video. a were I I I'm demand softening there saw XXx some source of And paid that go, how would what sort map versus the move either to in do cloud customers during sort downturn framework that guide, script dynamics might said super you're -- There earnings start changed us want take that's Kafka, or about appreciate given what pandemic? from XXXX. has I choose open you your some potentially the the to Jay, helpful customers industries, gives see choosing we to on sort and sure this Steffan. have of route really Confluent downgraded Kafka? to not Sorry go opinion And the way sporadic Cloud than That around in environment, being height some in in compare think -- is you risk that was thinking How my but I we can platform environment. what the to the Kafka. how the this on wanted some your okay. downturn customers on get to Confluent to to the better to your of XXXX about is

think reasons. think the few changed And product of is a I I actually Yes is a one that company. for was which ago. would would what first is and years really significantly, touched Like just much on, better. But say dynamic I the has you Confluent X is young our

So maybe everywhere. Those and we've lot a TCO and that in customers. and has customers cloud-native to and development as few gotten around effectively complete believably and percentage done very of life, last communicate of our meaningful differentiation the kind our analysis of those ability of much of pillars years, like being a real, it's are to that to And better.

try of to get by positive out So that's any a cloud a of first pencil I team a platform engineers. not think get sense go make hire doesn't and and that's the reason is actually off means. it And

think So that helps significantly. us I

at start just success. of the to to second I And the that helping our really management is use the maturity think production us from them getting think shows through The to account to better customer that as results much be sticky. thing cases the just that's organization, helped I thing and to We're has support that are field well. finish up the in customers going

was sort of announcements my around that follow-up -- the on it. paywall. those ton a rid sign-ups. It driving in And sense of makes of then the Got getting

that of in customers a top your you your to to optimism $XXX,XXX funnel will think view see sort probably of to that help is healthy of or does going sort making funnel what increasing And I Historically, the of growth. so terms it like? that look that top of make that conversion some of can And of lot $XXX,XXX what it sort cohort? source threshold, customers

very the build -- that of the source that important the it's you we kind in like source. the And have in, I frictionless high. area self-service open mean in cloud it's Yes, thing against. as very ways, open the can of we're is many kind

our kind the of open customers either So of I as source that come adoption. we that or from significant a usage come which with cloud, see future open portion of would say self-service from source

plant So seeds. to quite it's actually important those

and case Sometimes bit winding. later, little versus different some It enterprise, continued at And kind a the a that of hops it's That signs some stuff that's lot trying totally in path does a who several of we be just may out. use person be actually playing that really just with going still why up dollars. funnel it of top there's important. may have after where the but first investment is it developer and

have out have for them spread. many get source broad want is there. that go to You there's so the push to We And users Kafka all. open us

And are we think up do investments so the over that that these us set can time. to

next our Michael Cowen. take with by question from followed Fargo, Wells Turrin We'll

if of of even don't It July. levels been sounds has impacts I commentary technology how the some cloud suggests prove know I'm cloud, you this characterizing -- broader the I'm flexibility and more just are turned added there's attractive. adopting observing there's mix if or call imagining any the customers Confluent you're with But new off. expecting hold if like revenue you're quarter. towards that you'd is the just any June in a of the function video if record can in sort out. this wondering you're shift of change could

attention anyways, So to anything recent I'm to the just the... is head the market was likely to there's this much if just direction call wondering or more of how

Yes, combination the I I like it's say, it's quarter-to-quarter, dynamics market or dramatically. the product not the changed both. a of mean would of

unique customers real find resources there's competitive much called services able step But And just back faster. kind a doing is flows there seasonality multi-quarter to QX build advantage over are you like and think these against away long trying for our how look I And look and engineers at in develop apply are around a versus high-quality teams infrastructure. that I would that company some So actually move lower-level the infrastructure cloud term. we who of And us yes, from thing think previously. that that hiring and to they're QX, you internal kind customers versus mindset getting you of lot the able build trajectory, builds lot if the be to over of to value a to significant the shift out to very back and that the they're to if of a really the this that expensive quicker.

think a of that I to tailwind. is really this absolutely high have for have et to trend on cross gotten up. there's a bar So think cetera, pick security, we've as before reliability, pretty there a lot I the to can And you kind infrastructure that and boxes of scale start you checked

becomes done think As to that as benefit Confluent. less risky started a I work well we've where far like from it that, company with we've to

data And I overall in the and data just think tailwind. of operational kind business then trends motion adoption of the the use And of around and driving are the right? that's integration use of continues, that's run how cases. another those these longer software more

That's great.

questioning. Just a quick similar line follow-up, of

the ability rate across retention use and that hybrid multiple this had there to you than the environments? something case useful of Is and the finding you're Is expansion openness XXX% around seeing work comments You you're overall. can... something some repeatable, even Confluent holding stronger the that

we kind delete and out platform Confluent customers Yes, definitely of absolutely. install back to Confluent who there, the will transition, it set a platform there's Yes, see our would Confluent Cloud to as Cloud. Confluent the people say of because I keep coming where a

their it's a Like bit different that. So to actually different from this environments. little has span

into the systems that. organizations. one there And suite cloud legacy of all data for amounts customers. solve strategic. the practical of we you premise. It's how tie applications meaningful lot are expansion in problems full a we to is and these period that's workloads have applications can turn So bridge those quite them native that actually into And And of on of into environments time. want to if of important role in you cloud ability just is projects key of each between in their strategic have happening any these really it's software investments to kind cloud over back for Like of key to get typically an short not these into the out a as think that

time some is that one works interim them. back all so that in going these right? significant the period And as generations customers mainframes, are have on fairly cloud, it's it company of elongated. to but Some to make it incredibly to together the period how all investments important is And

able this big they So new a bridge is want architecture the ability deal. to move across, the connect be to to old and to both and the anyway event-driven real-time more streaming

followed with We'll take Wood Cowen our JPMorgan. by next from question Derrick

where get more then optimization kind of the now. a what in we're And as and business. puts lot to around and have guys optimization because cloud you then little you're cycle a dynamic transactional a a that that lot comparison again. start this behavior? consumption you a my into more just grow workloads tend of is takes question, consumption of analytic of of go from through do Jay, cycles? Great. customers go flattens of lot kind where around I curious, you and more right of your to first of and lot heard workloads, workloads we've centered pump a do optimization an growth the a similar through kind we see consumption of cycle and will see questions system bit drive not maybe And Or guess But Snowflake these

than less a of it. work any Yes. production kind that it certainly, optimized use kind you're lot come well looks days, of as production serve -- where using have have usually loads loads. development that, are as customer, Like I their spend to building were. is I And don't scale, it think, things We inefficiently? hey, They workloads this gets mean spent? at, we of

hoc more reporting, together. kind of Some ad data things of warehouse that the thrown are is usage

And then you more kind it of so I back. accumulate prune think and do

workloads that we terms in production if of permanent is in it's of in But certainly to this been economic going seen us, drop investors, that the that comparable conversations serving applications actually at accurate. usage respect, And there's say been idea that maybe to hasn't like oh, in like, So there looked important. quarter. might enough not something more And patterns. of our -- haven't some this I Snowflake is which dynamics soon and what consumption comparison is be like idea MongoDB, pressure, we've more to has is that is as we as with saw quite what this --

Okay. And Steffan, one for you.

Just the looking at services. platform platform million $X another knowing revenue to is And line million or the cloud would you're item, in suggest professional it's QX $X.X and piece. downtick in that bigger quarter-over-quarter obviously that build, whether expecting guide

platform So of platform be of would down kind light more which government quarter, revenues what stronger cause to -- tends that especially purchase sequentially, in licenses? be a being to

to It how the is coming really down of in. business mix comes

sure, Typically, platform Cloud won't would will bounce year that contributor see because they a in very a solution, think We a continue just ACV X platform QX. coming working, has sell we're We that for row quarter. a a helpfully. Confluent strong that's be Confluent sales are platform in end XX% have in it force, fact that's when last Confluent models -- will The very for a for quarters we there's but as out had But the is a be pronounced the going that's the sequential and that play. QX dynamic little coming of to and still of cycles be a of anticipating Confluent the selling grow at the healthy business that bit QX. buying of right? one back new been in typically we've they're cloud way to

We'll followed Goldman Pinjalim JPMorgan, Bora next from take by Sachs. our with question

guys you hear me? Can

Loud and clear.

Okay.

the For down has video. problem. when the Oh, OpEx here second wanted margin to at coming like I reason, guys can't at It it. is. about I some half I more ask least start growth, seems look it you same guidance. It everybody the seems the year-over-year like the is in

I little to Help that levers us think hiring. the half second in bit you're a the talked pulling OpEx. understand you about on optimize

Yes.

done So overly opportunity anything huge ahead. we I aggressive. we a growth haven't mean see

and high for And economic operating in us, metrics. so margin about sustained growth it's and other increasing unit improvements

moving did kind year normal on just spend kind higher we the hires. do play in the on we readjustment some already that efforts. to great. some which expect. make the would did out, of add of the adjustments of second we've is programs timing savings ROI did that We we So Overall, the to seen and And of of half would

than we us we with kind had plotted So of a gets improvement towards goal, a do. faster And this the our little out we're even happy that bit our trajectory. little

in So you completely, hiring not of be COVID So this just to when that. right? anything is paused close clear, to kind XXXX, hit, had

Yes. that. No, nothing like

Jay. still for Kafka, ZooKeeper. guess, X.X ZooKeeper gone Amazon that. dependency, I thought from talk I like something They question, at technical One Understood. or look about was MSK. The I

in in margins? So -- to I'm now does does running few gone, dependency understand, a they trying steps terms are you of that Kafka gross And that behind ZooKeeper your cloud version? help

yes. Yes,

that So a don't source that it's was -- dependency like. open the in people

up for take This And you that very of the is so you and scale done to manage about lot meta internal help do large these work workloads. cases. how how a data we've use

just as our started. as So of it users well that's getting helps the simplicity kind of how

The no kind it to make a on is of that great going stage set product, Amazon's a self-hosting few tend a be through do and they dependency it's current built we've behind. to path. a with ZooKeeper. ready, As production That's increasingly iterations on versions of Kafka

who So adopting case our cloud. won't we're in that. become seeing over cost playing particular use dependency expect kind we will And help are that time. definitely that because us? have of and serve already running mainstream kind that lower with more we a Will folks it of Yes, approach the the early will to

by America. question of Goldman our followed next Bank We'll from Kash Rangan take with Sachs,

of assuming hurdles, I'm versus proposition, It that But the you in to the change strategy, over generally thing. architectures. dissecting are and long fence? thinking let's are times with just inflation, you to leap if what confidence the great going all, of tough a rates, during How of order a these you a have will in get people that go-to-market that about higher bit redefine changing commercial. less technology and Clearly, curious, is higher economic Jay downturn last Confluent I'm Companies for job great if data adopting, we're -- Steffan, value higher through these a curious of downturn. job economic at your change approach contention interest go-to-market an time, your it's sort outlook. quarter done takes Kafka an things. say

I'm at. what getting see You

a really important question. Yes. It's

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change that, in is make us. not. Maybe, IT didn't and data investments big think each to maybe that I very suffer we some we like, want projects you journey, It's that deliver if flow? on by project. value step we what would critical have described, That's which do important hey, from some for

understand. so And to thing the I first think that's

base in use open very on Kafka, some more that I of earnings how slowdown we new where conversion last to still do of of need in difficult biggest adjustment, more would this. net seeing of But new shared for installed the We're source seen stats a call. if I a we the Kafka. probably yes, is, would thing lots happening. cases, see there's second adjust use significant we say shift haven't environment. we The in cases the a the

to over of to that of usage And migration so pool Confluent of. a Cloud out is significant the fish

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America We'll followed of Brad with question Bank take Bank. Deutsche by Sills our next from

to ask wanted question sorry here. about echo -- I a around Great. the

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Okay. All right.

airport net So platform? is it the my retention, deals revenue expand cloud total. question revenue than greater that net What overall retention is to on in outpacing was cloud velocity about such

Yes. Yes.

sides, So It's for question anybody who I the missed was cloud really NRR So right? higher. last both is the the bit, think retention why is better.

able that against parts If to gets business switch as you running attached gets data pursue. applications agree That larger have it it And move and that all to as service, from competition building doesn't to of kind a very larger harder be from And have where in many cloud source. in path you're there's a like the difficult open Confluent to something of scale, the and to becomes of different especially harder to together. off much that would suffer this. it, it respect, for to

that's side. So the retention on

about the just mostly it's ease think realizing of value. I side, expansion the the On

One large spinning the production a enterprise hard often that's of new for things data. is net up a

challenging. can you and out Some for in even that the that doing it is master build hiring specialized actually would big in product people, of kind all reach. count as servers, team we getting that, our it of ecosystem motion, reliably able all the system, really full data to on getting offer if bit, And being that they of the very distributed what of the core to usually then can kind utility, teams scale that's enough against a

So connectors won't they typically stream, to be that need stuff the the all and that. all teams successful, have

faster? get value expand cloud go It's to does easier your why and and up. then just build So application the much it's because

it. factors And the are so drive that think I X those

loads on you're if That's or that great. color I work replacement-type greenfield seeing one may. Any applications. versus And then more,

replacement about cycle you're connectivity think Like come Does that to that drive increased of -- I more talked growth. that mean you the applications infrastructure. starting in... see historically to legacy

is an and middleware the replacement. not ETL a budget replacement old some And freeing some processing, there's we're say say we've big what batch is with stuff. always products. shift oftentimes, legacy freeing of seen X We've to up element messaging customers, data typically analysis to would that from. some When that layers, up I X. the it's I I It But typically replacement is legacy been. of steps. It's broadly, new where of always database some stuff doing had that movement exactly replacing similar a is that's new replacement spend in of and or mix think and more would Yes. of mix. old stuff don't of

followed take Davidson. by We'll next from Deutsche question Bank, Zelnick D.A. our Brad with

on Congrats margin how the share nice progression. easing guys, your an that comp? what given strong labor dynamic growth, just changes timing in on any you bonus can change seems be and is inspired there Steffan, just maybe evolving versus payments, are out philosophy that? the And there? what cash And equity in to around

payment go employee no did. base. we timing basis really we that because it this that really thing was with year, And other overall Good with question. bonus is conscious call stock our seen employees a from standpoint dynamics things for And payout annual from are the an we've that employee-friendly year to instead for wanted impact payments. this flow This it's -- a payout at decided and we've to cash base was through, originally well move to and Thanks of semiannual just price given year. that And has move received for semiannual that, to structure. going employee decided a it, of kind by that to structure and a flow annual had over, compensation of we we payment our cash a through free an Brad. looking for have And year, to a be of Well, effectively a bonus our couple

we top good making also sure versus taken care about are of. our terms very compensated And far feel as And been we that are that employees market. sure to equity making So our we've that. according as of is in then talent cash, selective

attrition. been has -- something that about have our like doing continue we base. fully going make and have we do employee health And engaged will and forward well-being feel good we expected. better a we'll than around we I And follow-on we maybe employees. that's to trending of been a Attrition So think that to that question sure the

Congrats. Excellent.

Great. you. Thank

Thanks, Brad.

next question Kessinger followed D.A. from by with We'll take Rudy our Davidson, Barclays.

some -- guys, total there's flat pay-as-you-go The count, customer that causes there. messiness the the know total quarter-over-quarter. I But was count

macro, So are people have you maybe given more guess to seen projects? slowdown new trials? a if start those it's just pay-as-you-go even I free in new hesitant the

Yes.

rate. an seen impact. it even be more funnel, very will disambiguate. There's that saw strong We think at better the area is of any strong. XX% kind getting very Those actually over like adds macro in lead At the hard enough so top increasing growth, would into changing usage sign-ups. we people to We customer haven't that that of time, to very

So of about move where so funnel, strategic details we that through feel the new go. important pretty we think, good it's for But I will really us. all a work that. have to actually, It's a

last just last see committed is do The vast customer business that was comes base. standpoint, But question just And I why year. just growth, healthy did and it. that a versus a majority of from follow-on out our important? our know And customer committed really that, to mentioned then -- you more quickly. quarter we ads from on your Rudy, Got more point I to pay-as-you-go. want

a as reinforce just well. -- so we dynamic And that that's we wanted to

it. Got

at more guess the adds? to I customer the year, I when it the deals. plans million year, have, million new existing the is with the noticed impact the on their down for customers from your Or that you entirely I look of Have amount any mentioned guide of Confluent? You I'm with your customers. curious guess, new scrutiny from the to $X is expansion existing $X any notable impact slowed to customer... you that slower guess

It's what come logo new company can we scrutiny probably on the acquisition the in expansion, yet all what they don't yes, would across And up in little either same bit those. something say, more wraps our projects projects -- probably new a do to, when kind both the there. does new to. pronounced because most it's guidance Steffan or company of of gave I add on generally, out, sell on that's Yes. a summary of, around that netted up the it analysis. But well, probably

comes today question final Our from Lenschow. Raimo

know resources? Jay, follow-up. we're a you And sales thinking I cetera. I'm strategic But then kind cloud moving earlier Quick about having an cloud of in last question, it from more as about of more What et the change in like you're to company? structure that your one becoming et of importance about is like you and talked motion, here. organizational because the to you're if selling, have cetera, more there mean start need how mix, I you the proper doing both. a more one terms does question queue think range, like how the you're

already significant has a a happening amount happened. Yes. that and Yes. amount around that There's significant

So often, the these adjustments you actually results. before have happen to get

I now and do But not we're continued happened been advancement adjusting. it's nothing there. think there's doing like we've suddenly So this and

think to team our other quite and and efficiency in things makes into customers the of an sales customers and actually to of the easier do for -- on to value segments the take think only year that's the So important. really consumption done spread both add delivering driving team us and that cases more use think that matter cases, our and the and across then to And opportunity That aspect to monitor days of in out to and Leaning some it's how that XXX customer incredibly already, measure in kind motivated, up, of getting revenue. their can transactions to the important. I in expand absolutely workloads, without we growth needed particular, usage that's that in to it that's The teams. in by a fact drive what us business. leaning add the like as We've a into use key usage really commit to production journey everything. I it but consumption how accelerate is focusing much

switch you kind help at the last drive mentioned Kafka earlier, base. they kind over? that on deployment terms of kind question in of models? can then was -- lean of Are times, the of Where you self-posted And moment might the you into tougher And are how Are want to Yes. for in me they kind on-premise? of to in cloud? they more

Yes. Yes.

cases use of overall. We are away that mindset a and the are in of are, just harder of Many just which happening net cutover all way natural are kind point on Confluent types there easily there's think proven we and and of from the productivity. that's they can right? ones are of ones companies, The the are are the in migration would Cloud. So And cloud. can in doing of just cloud. is the to I stuff -- get of a drag move to go do-it-yourself cloud the ones them Many on convert where on them we enterprise on-premise. some tech infrastructure, Those different unreliable say a over a mindset of I companies, it. think is expensive this some companies, scale to a kind into shift

do Like so it we told who the some growing keep I any ourselves, that this and of hey, it. increasingly needs this year internally. that can't us are need with solution large sense. a make Like ago doing for would have we're we think like, now happy doesn't up And kind just okay, like, companies we're team have we're seeing where

as me sense. Congrats Makes Perfect. Okay. well. from

much. so Thanks Yes.

earnings today's concludes call. everyone, care. All Take right. us. Thanks again, for That joining