Q1 2022 Confluent Inc Earnings Call

Okay.

Speaker 1: The world was moving very fast. Customers' expectations were going up and up and up. Companies like Instacart have to meet them there. We have an opportunity to do something remarkable on the side of how do software companies operate in this new fast world. Breaking news tonight on several... Day of home, that is the order tonight from... When the pandemic hit, overnight, we became critical infrastructure for the country. We experienced about 10 years worth of growth in six weeks.

The World is moving very fast.

Customers' expectations are going up and up and up.

He's like instant card have to meet them there.

We have an opportunity to do something remarkable on the side of how these software companies operate in this new fast World breaking news Tonight on Saturday at home that is the order Tonight.

When the pandemic hit overnight, we became critical infrastructure for the country, we experienced about 10 years' worth of growth in six weeks.

Speaker 2: Now it's time to really build more tools and capabilities that other engineering teams can use. Our search experiences can be more personalized. Fraud detection algorithms will get better. All of our data is flowing through one place. Confluence becomes the central nervous system of Instacart.

Now, it's time to really build more tools and capabilities that other engineering teams can use our search experiences can be more personalized fraud detection algorithms will get better all of our data is flowing through one place confluent becomes the central nervous system of instant card.

Speaker 1: The likelihood of you getting not just the tomato you asked for, but a good tomato goes up tremendously with this state of emotion. Confluence has been and will be critical to us succeeding as this much larger enterprise.

The likelihood of you getting not just the tomato you asked for but a good Tomatoes goes up tremendously with this data in motion.

Fluent has been and will be critical to us exceeding has this much larger enterprise.

Hi, everyone welcome to the Comscore in Q4, and 2021 earnings Conference call I'm, Shane Z from Investor Relations and I'm joined by <unk> co founder and CEO and Steffan Tomlinson CFO during today's call management will make forward looking statements, including statements regarding our financial outlook for the fist.

Speaker 3: Hi, everyone. Welcome to the Confluent Q4 and 2021 earnings conference call. I'm Xing Z from Investor Relations, and I'm joined by Jay Kreps, co-founder and CEO , and Stefan Tomlinson, CFO .

Speaker 3: During today's call, management will make follow-up statements.

Speaker 3: including statements regarding our financial outlook for the fiscal first quarter of 2022 and fiscal year 2022. Increased adoption of our platform, our ability and position to capitalize on the shift to cloud, our ability to sustain relationships and integration with cloud providers, growth in revenue, customers, remaining performance obligations and dollar-based net retention rate. Our market opportunity, our go-to-market strategy, our ability to near-term and mid-term financial targets, and our overall future prospects.

<unk> first quarter of 2022 and fiscal year 2020 to increase adoption of our platform, our ability and position to capitalize on the shift to cloud our ability to sustain relationships and integration with cloud providers. Both in revenue customers remaining performance obligations and dollar based net retention rate our market opportunity our go to market.

<unk>, our ability to meet near term and midterm financial targets and overall future prospects. These potent statements are subject to risks and uncertainties some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements further information on risk factors that could cause actual results to differ is included in our.

Speaker 3: These bulletin statements are subject to risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements.

Speaker 3: Further information on risk factors that could cause actual results to differ is included in our SEC filing.

SEC filings, including our Form 10-Q for the quarter ended September 32021.

Speaker 3: including our form 10Q for the quarter end of September 30th, 2021, and our form 10K for the fiscal year end of December 31st, 2021 that will be filed with the SEC. We assume no obligations to update these statements after today's call except as required by law. As a reminder, certain financial measures used on today's call are expressed on a non-GAAP basis.

10-K for the fiscal year ended December 31, 2021 that will be filed with the SEC. We assume no obligation to update these statements after today's call except as required by law as a reminder, certain financial measures used on today's call are expressed on a non-GAAP basis. We use these non-GAAP financial measures internally the facility analysis.

Speaker 3: We use these non-GAAP financial measures internally to facilitate analysis of a financial and business trends and for internal planning and forecasting purposes. These non-GAAP financial measures have limitations and should not be considered an isolation from or as a substitute for financial information prepared in accordance with GAAP. A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release and supplemental financials, which can be found on our investor relations website at investors.confluent.io. And with that, I'll hand the call.

Our financial and business trends and for internal planning and forecasting purposes. These non-GAAP financial measures have limitations and should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release, and supplemental financials, which can be found on our investor Relations website.

At Investor stock Confluent, donohoe, and with that I'll hand, the call over to Jay. Thanks, Shane welcome everyone to our fourth quarter earnings call. We ended our first year as a public company on a very strong note once again exceeding our guidance on all metrics confluence success continues to be driven by the rise of data in motion and the shift to the cloud revenue in the fourth quarter.

Speaker 4: Thanks, Shane. Welcome everyone to our fourth quarter earnings call. We ended our first year as a public company on a very strong note, once again exceeding our guidance on all metrics.

Speaker 4: Confluent's success continues to be driven by the rise of data in motion and the shift to the cloud. Revenue in the fourth quarter totaled $119.9 million, representing growth of 71% year-over-year, a further acceleration from our 67% growth last quarter. This is our fourth consecutive quarter of revenue growth acceleration. Revenue from Confluent Cloud in the fourth quarter grew 211% year-over-year, continuing to significantly outpace the growth of our overall business.

Total $119 9 million representing growth of 71% year over year, a further acceleration from our 67% growth last quarter. This is our fourth consecutive quarter of revenue growth acceleration revenue from confluent cloud in the fourth quarter grew 211% year over year, continuing to significantly outpace the growth of our overall business.

Speaker 4: Confluent Cloud represented 28% of total revenue up from 26% last quarter and 15% one year ago. Another milestone of note is that for the first time in the company's history, Confluent Cloud surpassed 50% of new HTTP books.

Confluent cloud represented 28% of total revenue up from 26% last quarter and 15% one year ago. Another milestone of note is that for the first time in the Companys history confluent cloud surpassed 50% of new ACB bookings. This is an important milestone it's often a struggle for a second product to get to critical mass if the first products still show.

Speaker 4: This is an important milestone. It's often a struggle for a second product to get to critical mass, if the first product still shows significant growth. But with this milestone, we've crossed a clear threshold point and Confluent Cloud is now the most significant focus of our go-to-marketing.

Significant growth, but with this milestone we've crossed a clear threshold point and consequent cloud is now the most significant focus of our go to market engine a fundamental driver of this growth is the rise of data in motion as a foundational underpinning for company's success in digital transformation Tech Disruptors are building around real time data streams to deliver rich digital cut.

Speaker 4: A fundamental driver of this growth is the rise of data in motion as a foundational underpinning for companies' success in digital transformation. Tech disruptors are building around real-time data streams to deliver rich digital customer experiences and are setting the standard for customer expectations. Mainstream enterprises are quickly realizing that their ability to harness data in motion is key to their survival, as this is at the heart of the customer experiences and operational capabilities they need to compete in the modern digital world.

Our experiences and are setting the standard for customer expectations mainstream enterprises are quickly realizing their ability to harness data in motion as key to their survival. As this is at the heart of the customer experiences and operational capabilities. They need to compete in the modern digital World card Lytic as a great example of one of these tech disruptors that power.

Speaker 4: Cardlytics is a great example of one of these tech disruptors. They power reward and loyalty programs for the world's leading banks, and their approach to increased customer engagement is underpinned by data in motion. With Confluent, they analyze the real-time purchase data of more than 170 million customers and use this consumer spend intelligence to present highly relevant and timely offers within a bank's digital channels. These offers help the bank acquire new customers and increase loyalty. You couldn't do what Cardlytics does.

Ward and loyalty programs for the world's leading banks and their approach to increased customer engagement is underpinned by data and motion with confluence they analyze the real time purchase data of more than 170 million customers and use this consumer spend intelligence to present highly relevant and timely offers within the bank's digital channels. These offers helped the bank acquired.

New customers and increase loyalty you Couldnt do what <unk> does without data and motion central to our leadership in our space is the strength of our product we shape our value proposition around three pillars product differentiation being cloud native being a complete offering and being everywhere. These three pillars help express the advantages our product has both against.

Speaker 4: Central to our leadership in our space is the strength of our product. We shape our value proposition around three pillars of product differentiation. Being cloud native, being a complete offering and being everywhere. These three pillars help express the advantages our product has both against other competitive products, as well as for internal IT teams that might otherwise attempt to do it themselves with open source.

Other competitive products as well as for internal it teams that might otherwise attempt to do it themselves with open source components I'll briefly recap these areas of differentiation and summarize some of the new capabilities. We've launched in each of them first being cloud native isn't enough to just offer software in the cloud developers today demand services that are fully <unk>.

Speaker 4: I'll briefly recap these areas of differentiation and summarize some of the new capabilities we've launched in each of them. First, being cloud native, it isn't enough to just offer software in the cloud. Developers today demand services that are fully reimagined in a cloud native way. This means being massively scalable, elastic, secure, API driven and multi-

Imagine in a cloud native way this means being massively scalable elastic secure API driven multi tenant.

Speaker 4: This lets the customer ignore the low-level details of operations, move quickly, and focus on using these services to create value in their organization. In Q4, we took steps forward in this area by improving the elasticity of our Kafka offering, offering more granular scaling for ksql, and the integration for HashiCorp's Terraform platform. These are steps that attracted Dapper Labs. They're one of the most innovative NFT companies, delivering fun and games on the block.

Customer ignore the low level details of operations move quickly and focus on using these services to create value in their organization. In Q4, we took steps forward in this area by improving the elasticity of our kafka offering offering more granular scaling for case equal and the integration for Hartford Corp's Terraform platform. These are steps that attracted dapper labs.

One of the most innovative NFC companies delivering fun and games on the blockchain. They have a number of decentralized apps, but one that has risen dramatically in popularity is called NBA topshop to date, there have been over $10 million digital collectible transactions in Concord, which is at the center of their data streaming architecture can facilitate these purchases dapper chose us to run there.

Speaker 4: They have a number of decentralized apps, but one that's risen dramatically in popularity is called NBA Topshop. To date, there have been over 10 million digital collectible transactions and Confluence is at the center of their data streaming architecture to facilitate these purchases.

Speaker 4: Dapper chose us to run their mission-critical workloads because of the scalability and security of our cloud solution.

Mission critical workloads because of the scalability and security of our cloud solutions, our second pillar. The completeness of our product is another area, where we've continued to raise the bar for data and motion, giving customers advanced capabilities, including enterprise grade security and governance case equal DB for stream processing as well as our rich collection of connectors our newest.

Speaker 4: Our second pillar, the completeness of our product, is another area where we've continued to raise the bar for data in motion.

Speaker 4: giving customers advanced capabilities, including enterprise-grade security and governance.

Speaker 4: ksqlDB for stream processing, as well as our rich collection of connectors. Our newest fully managed connectors include Azure Synapse Analytics, Amazon DynamoDB, Databricks Delta Lake, Google Bigtable, and Redis, bringing the number of fully managed connectors to over 50. Without these connectors, integrations between systems and applications take months and require significant resources to manage.

Fully managed connectors include Azure synapse analytics, Amazon Dynamo DB data Brooks Delta Lake, Google Big table, and reddish bringing the number of fully managed connectors to over 50 without these connectors integrations between systems and applications take months and require significant resources to manage key public customer of ours that runs the largest online.

Speaker 4: T-Public, a customer of ours that runs the largest online marketplace for independent creators, recently shared their use case which is confluent with our S3, Elasticsearch, Salesforce and Snowflake Connectors.

Marketplace for independent creators recently shared their use case, which is confluence with our S. Three elastic search salesforce and snowflake connectors using these they can act on a real time stream of user interaction data to power product recommendations and create a more personalized shopping experience. Our third pillar is being able to run everywhere across all.

Speaker 4: Using these, they can act on the real-time stream of user interaction data to power product recommendations and create a more personalized shopping experience.

Speaker 4: Our third pillar is being able to run everywhere across all our customers' environments, whether on-premise, hybrid cloud, or multi-cloud. Using Confluent, customers can link together data from these disparate environments and geographic applications to create a unified fabric for data in motion that seamlessly spans all the parts of the company.

All our customers' environments, whether on premise hybrid cloud or multi cloud using confluence customers can link together data from these different environments and geographic locations to create a unified fabric for data in motion. It seamlessly spans all the parts of the company.

Speaker 4: Our ability to serve our customers wherever they are is unique to us and is a massive competitive advantage. We made significant progress on this dimension as well. We recently added eight more regions for Confluent Cloud, bringing the total to 66 and helping to fill out our presence in APH.

Our ability to serve our customers wherever they are is unique to us and is a massive competitive advantage. We made significant progress on this dimension as well. We recently added eight more regions for console cloud, bringing the total to 66 and helping to fill out our presence in APAC. We released seven Oh version of console platform and improvements to our kubernetes space.

Speaker 4: We released the 7.0 version of Confluent Platform and improvements to our Kubernetes-based private cloud integration.

Private cloud integration customers like BMW brilliance really benefit from running our service cross cloud and on premise. They are responsible for producing distributing and selling bmw's in mainland China and they use confluence to integrate their order to delivery services. This process spans multiple countries, many manufacturing plants and requires clusters across AWS.

Speaker 4: Customers like BMW brilliance really benefit from running our service across clouds and on premise. They're responsible for producing, distributing and selling BMWs in mainland China, and they use Confluent to integrate their order to delivery service.

Speaker 4: This process spans multiple countries, many manufacturing plants, and requires clusters across AWS, Azure, Ollie cloud, as well as on-premise. Confluent acts as the central nervous system, bringing it all together.

Sure Ali cloud as well as on premise compound acts as the central nervous system, bringing it all together to truly ensure that confluence is everywhere, we must be well integrated into each cloud in which we operate this is a key priority for US is it makes us a natural part of the cloud environments. Our customers who've chosen it's also very compelling for the cloud providers as it helps their custom.

Speaker 4: To truly ensure that Confluence is everywhere, we must be well integrated into each cloud in which we operate. This is a key priority for us as it makes us a natural part of the cloud environments our customers have chosen.

Speaker 4: It's also very compelling to the cloud providers as it helps their customers unlock data from their on-premise environments and take full advantage of the many data systems and services in the cloud.

Unlock data from their on premise environments and take full advantage of the many data systems and services in the cloud one very significant step towards this integration is our recently announced strategic collaboration agreement with AWS under this five year agreement confluence in AWS have committed to increasing product integrations and development as well as joint go to market initiatives to help organizations.

Speaker 4: One very significant step towards this integration is our recently announced strategic collaboration agreement with AWS.

Speaker 4: Under this five-year agreement, Confluent and AWS have committed to increasing product integrations and development, as well as joint go-to-market initiatives to help organizations accelerate their cloud adoption journey with real-time data. We are really excited about this agreement, which will help our joint customers unlock the power of data in motion more quickly and seamlessly and take advantage of Confluent and AWS environments.

<unk> accelerate their cloud adoption journey with real time data. We are really excited about this agreement, which will help our joint customers unlock the power of data and motion more quickly and seamlessly and take advantage of confluence in AWS environments. We also see this relationship is a strong symbolic indication the mutual respect between concludes in AWS, given the willingness and desire to.

Speaker 4: We also see this relationship as a strong symbolic indication of the mutual respect between Confluent and AWS, given the willingness and desire to collaborate on such a large and meaningful agreement for both parties.

Collaborate on such a large and meaningful agreement for both parties a significant customer for both AWS and us as dish network with their new <unk> Smart network congestion transforming how people in enterprises leverage data they deployed consequent cloud over AWS to connect their network systems and customers with real time data. This means that confluence is key part of their network status.

Speaker 4: A significant customer for both AWS and us is DISH Network. With their new 5G smart network, DISH is transforming how people and enterprises leverage data. They deploy Confluent Cloud over AWS to connect their network systems and customers with real-time data. This means that Confluence is a key part of their network's data backbone, starting with fault management and network resiliency functions to ensure network availability. And our enhanced collaboration with AWS is making it easier for customers like DISH to unlock data in motion everywhere.

Backbone, starting with fault management and network resiliency functions to insured network availability and our enhanced collaboration with AWS is making it easier for customers like dish to unlock data in motion everywhere. Another exciting new environments, where confluence is now helping customers is through Alibaba cloud as we announced in December confluence and Alibaba cloud of partner to.

Speaker 4: Another exciting new environment where Confluent is now helping customers is through Alibaba Cloud. As we announced in December , Confluent and Alibaba Cloud have partnered to offer the Alibaba Cloud Confluent Data Streaming service via the Alibaba market.

<unk> offer the Alibaba cloud confluent data streaming service via the Alibaba marketplace servicing our multinational customers with operations in China and opening the power of data and motion to domestic customers in mainland China. We've added significant differentiation in our products, but our product is not the only big differentiator for console I wanted to spend some time.

Speaker 4: servicing our multinational customers with operations in China and opening the power of data in motion to domestic customers in mainland China. We've added significant differentiation in our products, but our product is not the only big differentiator for conflict. I wanted to spend some time on the call today, talking through another critical area of focus, what we call our customer growth go to market. This is explicitly aimed at helping to land customers and help them grow their usage of our product from early experiments to large scale central nervous.

On the call today talking to another critical area of focus what we call our customer growth go to market. This is explicitly aimed at helping to land customers and help them grow their usage of our products from early experiments to large scale central nervous systems stepping back a bit I think the ability to build around our customers' adoption journey and help ensure wrap.

Speaker 4: Stepping back a bit, I think the ability to build around a customer's adoption journey and help ensure rapid low risk value realization is one of the biggest innovations that cloud infrastructure enables. This may be slightly counterintuitive, so let me explain what I mean.

With low risk value realization is one of the biggest innovations that cloud infrastructure enables this may be slightly counterintuitive. So let me explain what I mean people tend to think of cloud is being about automating operations. This is true, but it misses the bigger advantage cloud as a model, which when done right can let customers adopt and realized value faster and with lower risk. This mirrors.

Speaker 4: people tend to think of cloud as being about automating operations. This is true, but it misses the bigger advantage.

Speaker 4: Cloud is a model which, when done right, can let customers adopt and realize value faster and with lower risk. This mirrors the transformation in the world of application-level SaaS, where the transition to an as-a-service model turned out to be as much about go-to-market innovation as reducing hosting costs.

The transformation in the world of application level, SaaS, where the transition to an as a service model turned out to be as much about go to market innovation is reducing hosting costs are well designed SaaS go to market enables the company to move with their customers down a natural low friction low risk path to realize the value of the product provides the.

Speaker 4: A well-designed SaaS go-to-market enables a company to move with their customers.

Speaker 4: down a natural low friction, low risk path to realize the value the product provides. The transition of the world of data infrastructure to a consumption oriented SaaS model allows us to accomplish a similar.

<unk> of the world with data infrastructure to a consumption oriented SaaS model allows us to accomplish a similar thing. This has been a key focus for <unk> over the last few years, it's particularly important for us because data and motion has a very unique customer journey, that's different in critical ways from other products, even other infrastructure products adoption of data and motion often starts with developers in the.

Speaker 4: This has been a key focus for Confluent over the last few years. It's particularly important for us because Data in Motion has a very unique customer journey that's different in critical ways from other products, even other infrastructure products.

Speaker 4: Adoption of data in motion often starts with developers in the early phases of product experimentation. At this stage, being low friction and building developer love are the keys to success.

Early phases of product experimentation at this stage being low friction and building developer love of the keys to success, our product needs to be available for instant usage with all the needed features and the least amount of hassle stopping to try to plan out the structure of a large deal or negotiate pricing at this early stage would serve little purpose and slow down the development cycle.

Speaker 4: Our product needs to be available for instant usage with all the needed features and the least amount of hassle.

Speaker 4: stopping to try to plan out the structure of a large deal or negotiate pricing at this early stage would serve a little purpose and slow down the development cycle. As a technical project starts towards production, new needs arise.

As a technical projects starts towards production new needs arise or the security availability connectivity and compliance needs met is there a predictable pricing that is economically attractive in this space. It's important to provide the customer with the qualifications and assurance and need to depend on the service as a mission critical part of their infrastructure stack.

Speaker 4: Are the security, availability, connectivity, and compliance needs met? Is there predictable pricing that is economically attractive? In this phase, it's important to provide the customer with the qualifications and assurance they need to depend on the service as a mission critical part of their infrastructure stack.

Speaker 4: Succeeding in this space involves satisfying multiple economic and technical stakeholders.

Succeeding in this space, both satisfying multiple economic and technical stakeholders overtime as multiple such projects emerge the customer's use of conflict goes through a transition it goes from being an ingredient in one project to a layer connecting many such projects. There is a natural network effect for data in motion that helps drive this expansion and the <unk>.

Speaker 4: Over time, as multiple such projects emerge, the customer's use of Confluent goes through a transition. It goes from being an ingredient in one project to a layer connecting many such projects.

Speaker 4: There is a natural network effect for data in motion that helps drive this expansion and the progression between these stages.

<unk> between these stages. These streams go between applications, our customers add streams to the platform unlocking value for that use case, but also attracting other applications that need to tap into these streams, hence the virtuous cycle of adoption as the applications bring incremental data streams with them, which in turn attracts new applications that need that day.

Speaker 4: These streams go between applications. Our customers add streams to the platform, unlocking value for that use case, but also attracting other applications that need to tap into these streams. Hence the virtuous cycle of adoption is the applications bring incremental data streams with them, which in turn attract new applications that need that data, which in turn bring new streams of data and so on. This journey is truly unique to Data in Motion because of the natural virtuous cycle and network effect that comes from the sharing of data in context.

<unk>, which in turn bring new streams of data and so on this journey has truly unique data in motion because of the natural virtuous cycle and network effects that comes from the sharing of data in conflict. We've designed our product and go to market engine around this unique journey at each point, we want to solve for the products and support from confluent that will best help customers succeed.

Speaker 4: We've designed our product and go-to-market engine around this unique journey. At each point, we want to solve for the products and support from Confluent that will best help customers succeed and progress to the next stage. We've structured our go-to-market efforts around three key principles.

<unk> and progressed to the next stage, we've structured our go to market efforts around three key principles first being product led that is making sure. The product is present in the journey of the customer takes from day, one and the in product features and tutorials to help this progression and learning at each stage second being consumption oriented we've designed our model so the customer.

Speaker 4: First, being product led. That is, making sure the product is present in the journey the customer takes from day one. And the in-product features and tutorials help this progression in learning at each stage.

Speaker 4: Second, being consumption oriented. We've designed our models so that customers can start quickly with our self-service pay-as-you-go capabilities and can expand rapidly by adding additional use cases and consuming more without the need to stop and negotiate a new transaction. This is good for customers because it removes much of the risk and upfront analysis they would otherwise need to go through when deploying new products.

Can start quickly with our self service pay as you go capabilities and can expand rapidly by adding additional use cases and consuming more without the need to stop and negotiated a new transaction. This is good for customers because it removes much of the risk and upfront analysis, they would otherwise need to go through and deploying new products and is good for confluence because the reduction in friction.

Speaker 4: and is good for Confluent because the reduction in friction and risk enables faster expansion. Finally, our efforts are built around the stages of the Data in Motion journey. Because this is our sole focus, we can bring to bear our millions of hours of experience, our learnings from thousands of customers, and our differentiated products to support customers in each phase of adoption. Using these principles, we bring together a variety of go-to-market tactics suited to each of the...

<unk> and risks enables faster expansion finally, our efforts are built around the stages of the data in motion journey. Because this is our sole focus we can bring to bear our millions of hours of experience our learnings from thousands of customers and our differentiated product to support customers in each phase of adoption using these principles, we bring together a variety of go to.

Market tactics suited to each of the different stages self service sign up and adoption as well as open source downloads helped developers get started in a low friction way without requiring any contact with sales. This is often done with free credits were in a pay as you go model that lets them start quickly and with low risk in 2021, the traction of our self service cloud adoption.

Speaker 4: Self-service signup and adoption, as well as open source downloads, help developers get started in a low friction way without requiring any contact with sales. This is often done with free credits or in a pay-as-you-go model that lets them start quickly and with low risk. In 2021, the traction of our self-service cloud adoption helped us grow our customer base 65% year over year to approximately 3,470 customers.

<unk> helped us grow our customer base, 65% year over year to approximately 3470 customers. Our sales team engages early in the customer lifecycle to help customers that are progressing towards production to ensure their needs are met our customer success focus starts on day, one as a customer's project becomes part of production operations they would likely move.

Speaker 4: Our sales team engages early in the customer lifecycle to help customers that are progressing towards production to ensure their needs are met. Our customer success focus starts on day one. As a customer's project becomes part of production operations, they would likely move to a committed contract, which they would lock in in exchange for discounts. The best proxy for customers in this stage is the count of customers 100K or greater, which grew 43% year over year to 734 customers.

To a committed contract, which they would lock in an exchange for discounts the best proxy for customers. In this stage is the count of customers 100, K or greater which grew 43% year over year to 734 customers are team that engages to help the spread to additional use cases and teams to ensure that data in the platform as widely available and.

Speaker 4: Our team then engages to help the spread to additional use cases and teams to ensure that data in the platform is widely available and that there's top level buy-in to the larger architectural role that Confluent can play in the organization. Growing a strategic cross-organization platform requires a full enterprise engagement, including sales, technical resources, partners, and services. These later stage customers are common among our 1 million plus customer base, which grew 57% year over year to 88%.

Theres top level by into the larger architectural role that confluence can play in the organization growing our strategic cross organization platform requires a full enterprise engagements, including sales technical resources partners and services. These later stage customers are common among our 1 million plus customer base, which grew 57% year on.

For year to <unk> 88, a key aspect of our approach is that these disparate go to market capabilities are not deployed as disjointed silos, but rather are linked together into a continuous journey that is built to help the customer succeed with data and motion confluence ability to help customers navigate this journey successfully and quickly is a key differentiator.

Speaker 4: A key aspect of our approach is that these disparate go-to-market capabilities are not deployed as disjointed silos, but rather are linked together into a continuous journey that is built to help the customer succeed with data in motion.

Speaker 4: Confluence's ability to help customers navigate this journey successfully and quickly is a key differentiator because it builds on our deep knowledge of this emerging space and the needs of customers at each stage. By being solely focused on data in motion, we are able to organize all our teams around this journey and do it far better than our competitors.

It builds on our deep knowledge of this emerging space and the needs of customers at each stage by being solely focused on data and motion. We are able to organize all of our teams around this journey and do it far better than our competitors companies that work with confluent will realize more value more quickly and with lower risk because of this we believe this customer growth go to <unk>.

Speaker 4: Companies that work with Confluent will realize more value more quickly and with lower risk because of

Speaker 4: We believe this customer growth go-to-market model is a significant competitive advantage.

<unk> model is a significant competitive advantage smaller startups struggled to operationalize. This journey because they lack the field team and customer success motions to serve large customers at scale as the platform becomes critical across many lines of business and use cases legacy infrastructure companies struggle because they lack the self service cloud product and product led.

Speaker 4: Smaller startups struggle to operationalize this journey because they lack the field team and customer success motions to serve large customers at scale as the platform becomes critical across many lines of business and use case.

Speaker 4: Legacy infrastructure companies struggle because they lack the self-service cloud product and product-led growth capabilities to serve developers at the early stages in the journey. The cloud providers have many of these capabilities, but they've organized them around a very different customer journey. General cloud adoption is a very important part of the

Both capabilities to serve developers at the early stages in the journey to cloud providers have many of these capabilities, but they are organized them around a very different customer journey general cloud adoption and theyre not setup to get customers to success in the new paradigm of data in motion, especially when that involves bridging into data not yet in the cloud I wanted to go over this customer growth go.

Speaker 4: And they're not set up to get customers to success in the new paradigm of data in motion, especially when that involves bridging into data.

Speaker 4: I wanted to go over this customer growth go-to-market model in some depth because it continues to be an area of ongoing effort and investment for Confluent. And we think it will be a critical mode. We continue to work to develop easier, low-friction adoption at the beginning of the journey, easier, more transactional project-level sales for the middle, and best-in-class enterprise sales and customer success capabilities at the end, each supported by the right product capabilities for that phase.

Our market model in some depth because it continues to be an area of ongoing effort and investment for console and we think it will be a critical mode. We continue to work to develop easier low friction adoption at the beginning of the journey easier more transactional project level sales for the middle and best in class enterprise sales and customer success capabilities at yet each supported by the right product.

Capabilities for that base integrating all these capabilities to best support. This journey is a significant undertaking but it's critical for helping customers to drive the value that we can provide and it's central to our mission to set data and motion. This combination of our product differentiation and our unique operationalization of the data in motion journey started to come together and earn.

Speaker 4: Integrating all these capabilities to best support this journey is a significant undertaking, but it's critical for helping customers to drive the value that we can provide, and it's central to our mission to set data in motion.

Speaker 4: This combination of our product differentiation and our unique operationalization of the data in motion journey started to come together in earnest in 2021 and I think these two key differentiators helped us achieve the results we did over the course of the year, but we're really just getting started and look forward even more to the year ahead. With that, I'll turn the call over to Stefan to walk through the financial...

In 2021, and I think these two key differentiators helped us achieve the results we did over the course of the year, but we're really just getting started and look forward even more to the year ahead with that I'll turn the call over to Stephen to walk through the financials. Thanks, Jay Good afternoon, everyone. The results for the quarter and the year were very strong and the main theme.

Speaker 3: Thanks, Jay. Good afternoon, everyone. The results for the quarter and the year were very strong, and the main theme that described the year is growth acceleration.

That described the year is growth acceleration starting with the highlights for the full year 2021, we delivered four quarters of accelerating growth in our <unk> and revenue and drove sequential improvement in our in each quarter since our IPO console and cloud revenue accelerated to 200% year over year growth and accounted for 24% of total.

Speaker 3: Starting with the highlights for the full year 2021, we delivered four quarters of accelerating growth in RPO and revenue and drove sequential improvement in NRR in each quarter since our IPO. Compliment cloud revenue accelerated to 200% year over year growth and accounted for 24% of total revenue. And this top line growth translated to better leverage than we expected as non-GAAP operating margin and non-GAAP EPS beat our original estimates for the year.

Revenue in this top line growth translated to better leverage than we expected as non-GAAP operating margin and non-GAAP EPS beat our original estimates for the year turning to the fourth quarter, we delivered an excellent quarter with results exceeding the high end of our guidance on all metrics Q4 was highlighted by record new customer additions are strong now.

Speaker 3: Turning to the fourth quarter, we delivered an excellent quarter, with results exceeding the high end of our guidance on all metrics.

Speaker 3: Q4 was highlighted by record new customer additions, a strong net retention rate, and continued top-line growth acceleration. As Jay mentioned earlier, our differentiated platform and go-to-market motion enable us to meet customers wherever they are on their data and motion journey. This dynamic helped add approximately 450 net new customers in the fourth quarter, a record high for the company.

Retention rate and continued topline growth acceleration as Jay mentioned earlier, our differentiated platform and go to market motion enable us to meet customers wherever they are on their data in motion journey. This dynamic help at approximately 450 net new customers in the fourth quarter a record high for the company growth in our large customer base was driven.

Speaker 3: Growth in our large customer base was driven by the network effects inherent in our model with customers connecting more data and applications through our central nervous system, strong partnerships with cloud service providers and our ability to execute our customer growth go to market strategy. Another key measure of customer success

By the network effects inherent in our model with customers connecting more data and applications through our central nervous system strong partnerships with cloud service providers and our ability to execute our customer growth go to market strategy. Another key measure of customer success is dollar based net retention rate driven by strong gross retention and expansion.

Speaker 3: is dollar based net retention rate. Driven by strong gross retention and expansion across both of our product offerings, NRR was comfortably above 130%. This marks the third consecutive quarter of exceeding both our near-term target of greater than 120% and our long-term target of greater than 130%.

Across both of our product offerings.

<unk> was comfortably above 130%. This marks the third consecutive quarter of exceeding both our near term target of greater than 120% and our long term target of greater than 130%. Our thesis that compound cloud with its consumption based model will have a higher <unk> profile of the <unk> platform is playing out in the fourth quarter.

Speaker 3: Our thesis that Confluent Cloud with its consumption-based model will have a higher NRR profile than Confluent Platform is playing out. In the fourth quarter, NRR for Confluent Cloud was meaningfully higher than the company average. And the cohort of customers running both Confluent Platform and Confluent Cloud has the highest NRR. We are very pleased with the progress we've made in increasing this key metric since our IPO. And going forward, our goal is to drive NRR consistently above 130%.

<unk> NR for console and cloud was meaningfully higher than the company average in the cohort of customers running both commvault platform and comp loan cloud has the highest NRI. We're very pleased with the progress we've made in increasing this key metrics since our IPO and going forward. Our goal is to drive NR consistently above 130% turn.

Speaker 3: Turning to revenue, Q4 total revenue was $119.9 million, growing 71% year over year, an acceleration from 67% in Q3, and our fourth consecutive quarter of revenue acceleration.

The revenue Q4 total revenue was $119 9 million growing 71% year over year, an acceleration from 67% in Q3, and our fourth consecutive quarter of revenue acceleration subscription revenue was $108 2 million accelerating to 71% growth year over year and accounted for $90.

Sent a total revenue within subscription Compline platform revenue was $74 4 million accelerating the growth of 42% year over year and accounted for 62% of total revenue console and cloud revenue was $33 8 million representing growth of 211% year over year and accounted for 28% of total revenue.

Up from 26% of total revenue last quarter and up from 15% a year ago as growth in console platform accelerated complement cloud continue to grow above 200% and increase as a percentage of total revenue. This dynamic is driven by the strong demand for confluence complete platform to harness data and motion everywhere.

Speaker 3: This dynamic is driven by the strong demand for Confluence complete platform to harness data in motion everywhere, the secular shift to cloud, and the enhancements and features we continue to add to both products.

The secular shift to cloud and the enhancements and features we've continued to add to both products turning to the geographic mix of revenue demand for our industry, leading platform remains robust in the U S and across the globe with customers in over 100 countries.

Speaker 3: Turning to the geographic mix of revenue, demand for our industry leading platform remains robust in the US and across the globe with customers in over 100 countries.

Speaker 3: Revenue from the US grew 68% year over year to $74.3 million, representing 62% of total revenue. Revenue from outside the US grew 74% year over year to $45.6 million, representing 38% of total revenue, up from 37% of total revenue a year ago.

Revenue from the U S grew 68% year over year to $74 3 million, representing 62% of total revenue revenue from outside the U S grew 74% year over year to $45 6 million, representing 38% of total revenue up from 37% of total revenue a year ago.

Speaker 3: Q4 was another impressive quarter of sales execution highlighted by the strength in remaining performance obligations.

Q4 was another impressive quarter of sales execution highlighted by the strength in remaining performance obligations. We ended the fourth quarter with $500 6 million in RP O and acceleration of growth to 91% year over year current <unk> is estimated to be approximately $319 8 million up 72% year over year a fair.

Speaker 3: We ended the fourth quarter with 500.6 million in RPO, an acceleration of growth to 91% year over year. Current RPO is estimated to be approximately 319.8 million, up 72% year over year, a further acceleration from 65% year over year growth last quarter.

Acceleration from 65% year over year growth last quarter, our customers growing desire to build towards the central nervous system with comp line is driving an increase in multiyear deals as I look towards making a long term commitment to us moving on our gross margins and profitability I would like to note that I'll be referring to non-GAAP results unless otherwise.

Speaker 3: Our customers growing desire to build towards a central nervous system with Compli-Lint is driving an increase in multi-year deals as they look toward making a long-term commitment to us.

Speaker 3: Moving on to gross margins and profitability, I'd like to note that I'll be referring to non-GAAP results unless otherwise noted.

Speaker 3: In Q4, Compile and Cloud revenue increased as a percentage of total revenue and subscription revenue, which led to total gross margin of 68.2% and subscription gross margin of 74.7%. Both were down sequentially and year over year.

In Q4 comparable in cloud revenue increased as a percentage of total revenue and subscription revenue, which led to total gross margin of 68, 2% and subscription gross margin of 74, 7% both were down sequentially and year over year. The decline was anticipated as comparable cloud has a lower gross margin.

Speaker 3: the decline was anticipated as Confluent Cloud has a lower gross margin profile than Confluent Platform. With that said, we've seen substantial annual improvement in our cloud gross margin, and we remain in our early days of achieving leverage and scale for our infrastructure that supports our cloud offering. As Confluent Cloud continues to scale and account for a larger share of total revenue, we anticipate total gross margin to fluctuate near our midterm target of approximately 70%.

File the Commvault platform with that said, we've seen substantial annual improvement in our cloud gross margin and we remain in our early days of achieving leverage and scale for our infrastructure that supports our cloud offering as comparable in cloud continues to scale and account for a larger share of total revenue, we anticipate total gross margin to fluctuate.

Near our midterm target of approximately 70% turning to profitability operating margin was negative 41, 4% compared to negative 31, 7% a year ago. The performance is attributed to our plan to catch up on hiring given the pause we took in 2020 and our continued investment for growth free cash flow margin was.

Speaker 3: Turning to profitability, operating margin was negative 41.4% compared to negative 31.7% a year ago. The performance is attributed to our plan to catch up on hiring given the pause we took in 2020 and our continued investment for growth.

Speaker 3: free cashflow margin was negative 22.3% compared to negative 30.4% a year ago.

22, 3% compared to negative 34% a year ago. The improvement was primarily driven by strong collections and the impact to timing of cash flows related to the contributions from our employee stock purchase program net loss per share was negative 19 using.

Speaker 3: The improvement was primarily driven by strong collections and the impact to timing of cash flows related to the contributions from our employee stock purchase program. Net loss per share was negative 19 cents using 265.5 million basic and diluted weighted average shares outstanding. Moving on to the balance sheet, we ended the fourth quarter with 2.02 billion in cash, cash equivalents and marketable securities.

Using $265 5 million basic and diluted weighted average shares outstanding moving onto the balance sheet. We ended the fourth quarter was $2 $2 billion in cash cash equivalents in marketable securities. This includes approximately $990 million in proceeds from our convertible debt issuance in December net of issuance costs and the <unk>.

Speaker 3: This includes approximately $990 million in proceeds from our convertible debt issuance in December , net of issuance costs, and the purchase of cap calls.

<unk> a capped calls before turning to guidance I am going to discuss our investment priorities and philosophy for 2022 and beyond coming off the strong results in 2021, where we demonstrated our disciplined investment strategy has been successful in driving growth and favorable unit economics, we're well positioned in 2022 to continue to drive high growth.

Speaker 3: Before turning to guidance, I'm going to discuss our investment priorities and philosophy for 2022 and beyond. Coming off the strong results in 2021, where we demonstrated our disciplined investment strategy has been successful in driving growth and favorable unit economics.

Speaker 3: We're well positioned in 2022 to continue to drive high growth while improving operating margin.

<unk>, while improving operating margin our priorities are to continue to invest in the innovation engine to extend our technology lead with a cloud first approach further develop our partnerships with the CSP in the partner ecosystem and invest in our go to market organization as we look to increase our footprint in geographies of theaters across the world looking beyond 2020.

Speaker 3: Our priorities are to continue to invest in the innovation engine to extend our technology lead with a cloud-first approach, further develop our partnerships with the CSPs and the partner ecosystem, and invest in our go-to-market organization as we look to increase our footprint in geographies and theaters across the world.

Speaker 3: Looking beyond 2022, we're capitalizing on the rise of data in motion and the secular shift to cloud in a 50 billion plus market, and we're laying the groundwork to meaningfully scale our business in the years ahead.

Two we're capitalizing on the rise of data in motion and the secular shift to cloud and a $50 billion plus market and we're laying the groundwork to meaningfully scale our business in the years ahead, we're committed to delivering high growth and annual improvement in non-GAAP operating margin as we drive towards our midterm target of approximately 5% and free cash flow Mark.

Speaker 3: We're committed to delivering high growth and annual improvement in non-GAF operating margin as we drive towards our midterm target of approximately 5% and free cash flow margin target of approximately 10%. Turning now to guidance, I'd like to...

<unk> target of approximately 10%.

Turning now to guidance I'd like to note two items first going forward, we'll be providing guidance on operating margin instead of one dollar based operating loss or income metric. This better aligns with our philosophy of prioritizing investments for growth, while driving operating leverage in our model and secondly, we expect certain COVID-19 related savings we've seen over the past two years.

Speaker 3: First, going forward, we'll be providing guidance on operating margin instead of a dollar-based operating loss or income metric. This better aligns with our philosophy of prioritizing investments for growth while driving operating leverage in our model. And secondly, we expect certain COVID-related savings we've seen over the past two years to fade in 2022. The guidance for the quarter and the year take into consideration an increase in expenses related to travel, in-person events, real estate and facilities.

Our is to feed in 2022, the guidance for the quarter and the year taking into consideration an increase in expenses related to travel in person events real estate and facilities for the first quarter of 2022, we expect revenue to be in the range of $117 million to $119 million representing growth of 52% to 54% year over year.

Speaker 3: For the first quarter of 2022, we expect revenue to be in the range of 117 to 119 million, representing growth of 52 to 54% year over year, non gap operating margin to be approximately negative 50%.

non-GAAP operating margin to be approximately negative 50%.

Speaker 3: and non-GAAP net loss per share in the range of negative 23 cents to negative 21 cents using approximately 272 million weighted average shares outstanding.

And non-GAAP net loss per share in the range of negative 23 to negative <unk> 21.

Using approximately 272 million weighted average shares outstanding for the full year 2022, we're raising our revenue guidance relative to the initial outlook. We provided on our Q3 earnings call and we now expect revenue to be in the range of $538 million to $546 million representing growth of 39% to 41% year over year.

Speaker 3: For the full year 2022, we're raising our revenue guidance relative to the initial outlook we provided on our Q3 earnings call. And we now expect revenue to be in the range of $538 to $546 million, representing growth of 39 to 41% year over year. non-GAAP operating margin to be negative 39 to negative 40% and non-GAAP net loss per share in the range of negative 82 cents to negative 74 cents.

non-GAAP operating margin to be negative 39 to negative, 40% and non-GAAP net loss per share in the range of negative <unk> to negative <unk> 74.

Speaker 3: using approximately 281 million weighted average shares outstanding.

Approximately 281 million weighted average shares outstanding I would also like to provide some modeling points for the year, we expect non-GAAP taxes to be in the range of $4 million to $5 million capital expenditures and amounts capitalized internal use software costs to be approximately 2% to 3% of total revenue and we expect more pronounced seasonality for free cash flow margin.

Speaker 3: I'd also like to provide some modeling points for the year. We expect non-GAAP taxes to be in the range of $4 to $5 million, capital expenditures in amounts capitalized for internal use software costs to be approximately 2% to 3% of total revenue, and we expect more pronounced seasonality for free cash flow margin in Q1 and Q3 due to the introduction of our new corporate bonus program and employee stock purchase plan.

In Q1, and Q3 due to the introduction of our new corporate bonus program and employee stock purchase plan. As a result, we expect Q1 to have the lowest free cash flow margin, followed by Q3 and closing the fourth quarter capped a momentous year for <unk> and we're very pleased with what we accomplished in our first six months as a public company, we're still in the very <unk>.

Speaker 4: As a result, we expect Q1 to have the lowest free cash flow margin followed by Q3.

Speaker 3: In closing, the fourth quarter capped a momentous year for Compli1ent, and we're very pleased with what we accomplished in our first six months as a public company. We're still in the very early stages of a significant opportunity for data in motion, and we look forward to building on our momentum in the years ahead. With that, Jay and I will take your questions.

Early stages of a significant opportunity for data in motion and we look forward to building on our momentum in the years ahead with that chain I will take your questions.

Speaker 3: Thank you, Stephen. If you'd like to ask a question, please raise your hand on Zoom. We will pause a few moments for our team to assemble the Q&A volume.

Thank you Stephanie if you'd like to ask a question. Please raise your hand on zone. We will also few moments for our team's assembled the Q&A roster.

Speaker 3: And our first question comes from Phil Winslow of Credit Swiss followed by UBS. Phil?

And our first question comes from Phil Winslow of Credit Suisse, followed by UBS.

Phil.

Bill are you there.

Yeah.

Speaker 3: Okay, let's move to Jason Ader at William Blair.

Okay.

Let's move to Jason Ader at William Blair.

Can you guys hear me.

Speaker 5: Yep. Sorry. Thanks a lot.

Yes.

I'm sorry.

Thanks, a lot.

Speaker 5: Zoom is great until it doesn't work. But thank you guys. My question is, where are you seeing the most friction in the monetization engine? Maybe ask it a different way. Where do you see the biggest opportunity to really accelerate things on that data and motion journey slide that you showed?

Zoom calls zoom is great until it doesn't work, but thank you guys. My question is what are you seeing the most friction in the monetization engine, maybe ask it a different way where do you see the biggest opportunity to really accelerate things.

On that data in motion journey slide that you showed.

Speaker 4: Yeah, I actually think we have opportunities at each of those stages. You know, one of the downsides of having multiple things is they're each in the earlier stages of development. I think we've shown success now at each stage. I think probably one of the bigger opportunities is to kind of open up that top of the funnel. There's still an enormous number of open source Kafka users, so we're kind of just scratching the surface on that.

I actually think we have opportunities at each of those stages one of the downsides of having multiple things as they are each in the earlier stages of development I think we've shown success now at each stage I think probably one of the bigger opportunities and just kind of open up that top of the all there's still an enormous number of open.

<unk> Kafka users. So we're kind of just scratching the surface on that and I think we bring more people into that funnel even in the early phases of learning I think that can have really big upside for us overtime.

Speaker 4: And I think if we bring more people into that funnel, even in the early phases of learning, I think that can have really big upside for us.

Speaker 4: And do you have any quick metrics on Kafka, kind of how broad-based Kafka adoption is? Yeah, you know, it's hard to provide kind of exact stats. And so what we have is kind of the same stuff you would find, you know, out there by looking at different leaderboards or download stats or whatever. There's not an official kind of download count number. We kind of would roughly estimate it to be in the hundreds of the past itself.

And do you have any quick metrics on Kafka kind of how broad based kafka adoption is yes.

Yes. It is.

Hard to provide kind of exact stats and so what we have is kind of the same stuff you would find.

Out there by looking at different.

Leaderboards or download stats or whenever theres, not an official kind of download count number we kind of would roughly estimate it to be in the hundreds of assets up.

Okay. Thank you guys.

Speaker 3: We'll take our next question from Carl Kierstad of UBS.

Okay. Thanks, Jason we'll take our next question from Karl Keirstead of UBS.

Carl.

Okay.

Other and rigor.

Speaker 6: Carl, thanks for the trouble. I was kicked out there for a moment. Thanks for bringing me back in.

Karl Marx.

Travel I was kicked out there for a moment, thanks for bringing me back in.

Speaker 6: Jay and Stefan, maybe I'd like to ask you about the, if it wasn't asked already, apologies, the cloud platform mix in 22. Jay, you mentioned that cloud is now over half of the new ACV bookings and that your reps are really leading with it.

J S <unk> I'd like to ask you about the if it wasn't asked already apologies the cloud platform mix in 'twenty. Two Jay you mentioned that cloud is now over half of the new ACD bookings and that your reps are really leading with it when I look at your platform numbers have been.

Speaker 6: When I look at your platform numbers, you've been growing pretty steadily in the 40-45% range for four or five quarters. If your reps are collectively going to lean into cloud, should we expect the on-prem platform growth to maybe slow as the emphasis is put on the cloud? I guess I'm asking for a little bit of mixed color, Stefan, on your 2022 REVS guidance.

<unk> pretty steadily in the 40, 45% range for four or five quarters. If your reps are collectively going to lean into cloud should we expect the on Prem platform growth to maybe slow as the emphasis is put on the cloud and I guess I'm asking for a little bit of mix color Stefan on your 2022 reps.

Speaker 4: Yeah, you know, I'll let Stefan, you know, speak to anything on the mix. I think broadly, you know, one thing that's critical to understand is we don't really view this as kind of a transition where we're just, you know, shifting from platform to cloud and just kind of swapping out customers from one product to the other. You know, effectively we have to have kind of an outpost in each environment a customer is in.

<unk> yeah.

Seven speak to anything on the mix I think broadly one thing thats critical to understand is we don't really view this as kind of a transition where we're just shifting from platform to the cloud and just kind of swapping out customers from one product to the other effectively we have to have kind of an outpost in each environment our customers.

Speaker 4: So we continue, you know, we expect to continue to see growth in Confluent Platform, you know, throughout this. And we think that's not a bad thing. That's a good thing. Now, obviously, as you say, you know, the field team will kind of have focus in different areas where the net new project's going into there. There may be some shift there, but I want to just clarify that at the opening that it's not a pure conversion.

<unk>. So we continue we expect to continue to see growth in console platform.

Throughout this and we think thats not a bad thing that's a that's a good thing now obviously as you say the field team will kind of have focus in different areas, where the net new projects going into there and there may be some shifts there, but I wanted to just clarify that at the opening that it's not a pure conversion story.

Okay and.

Speaker 3: And Carl, on the mixed side of the house, you've seen Confluent Cloud.

And Carl on the mix side of the house.

<unk> seen calpine cloud take more of the revenue mix over the last several quarters and over the last year et cetera, we anticipate that that type of trend to continue.

Speaker 4: take more of the revenue mix over the last several quarters and over the last year, et cetera, we anticipate that type of trend to continue.

Speaker 3: basically for the next year for sure. So Confluent Cloud will have a higher mix of revenue at the end of 22 than it has in 21. We don't guide specifically on individual line items on the P&L, but thematically that's what you can anticipate. Okay, got it. Thanks for that.

Basically for the next year for sure. So copper clad will have a higher mix of revenue.

At the end of 'twenty two than it has in in 'twenty one.

We don't guide specifically on individual line items on our on the P&L, but thematically that that's what you can anticipate.

Got it thanks for the call Kevin.

Speaker 3: Carl, we'll take our next question from Kath Rangan of Goldman Sachs.

Okay.

We'll take our next question from Kash Rangan of Goldman Sachs.

Speaker 7: Hey, guys, thank you very much. Stefan, I like the you're dressed like the Wall Street guy and I'm dressed like the tech guy. So nice, nice outfit there. Jay, you too. Congrats on the quarter. Terrific acceleration going. And Jay, I really love the first few slides where we walked. You gave us a primer of your business model. As far as the cloud is concerned, I'm curious to get your thoughts. Since the cloud is so evolved today, is the first line of engagement for an entry level customer

Hey, guys. Thank you very much Stefan I'd like the.

Can you address like the Wall Street, Guy and I'm, just like the Tech Guy.

Nice nice outfit there say you too congrats on the quarter terrific acceleration going on Jay I'll really loved the first few slides very walk you gave us a primer of your business model.

As far as the cloud is concerned I'm curious to get your thoughts since the cloud has sort of evolved today is the first line of engagement for an entry level customer.

Speaker 7: different than the first line of engagement for the next level customer had been.

Different than the first sign of engagement for the entry level customer had been on the on Prem side, some meaning are they engaging at a higher commit.

Speaker 7: on the on-prem sites, meaning are they engaging at a higher commitment or are they much farther along in their awareness of Confluent? And if so, it looks like we're hitting the tipping point from a technology standpoint with Confluent Cloud.

Commitment or are they much farther along in their awareness of confluent and if so.

It looks like we're hitting that tipping point from a technology standpoint with confluence cloud.

Speaker 7: So when technology tips over, then the business model tips over as well. So how are you planning as a CEO running the company and, and creating targets for the long term when there's

<unk> technology tips over then the business model type stores, let's say or how are you planning as a CEO , allowing the company and creating targets for the long term.

Speaker 7: There's some unknowns. And it could be a good unknown. But this whole cloud thing looks like you were hitting the tipping point. And this could be a big transition. And Stefan, follow up for you. As a CFO , how are you going to manage this transition? Because this could open the doors for an entirely new business model. Not new business model, but different implications for customer acquisition, cost, profitability, revenue outcome long-term. Thank you so much. Congrats.

When there is there is some unknowns and it could be a good unknown, but this whole cloud thing. It looks like you were hitting a tipping point and this could be a big transition and Stephane followed for years as a CFO how are you going to manage this transition because.

This could open the doors for an entirely new business model.

Not new business model, but different implications for customer acquisition cost profitability.

Our revenue outcome longer term. Thank you so much congrats.

Speaker 4: Awesome. I'll start with the first part of that. So yeah, actually our push is almost the opposite, which is not necessarily trying to push a bigger deal, you know, for that first stage. One of the reasons I wanted to show that journey is really with the cloud, what we can start to do is move the commercialization upstream, you know, so that people are engaging with our cloud product, even before the first use case is identified, even as part of their learning of the skillset around data in motion. And so that kind of land faster and, you know, smaller as needed and then expand from there. That's actually the push that we have internally. And we think that that does lead to, you know, a much faster growth down that path.

Awesome I'll start with the first part of that so yeah actually our push is almost the opposite which is not necessarily trying to push a bigger deal for that first stage. One of the reasons I wanted to show that journey is really with the cloud where we can start to do is move the commercialization upstream.

So that people are engaging with our cloud product even before their first use cases identified even as part of their learning of the skill set around data in motion and so that kind of land faster and smaller as needed and then expand from there that's actually the push that we have internally and we think that that does.

Lead too much faster growth down that app for a whole variety of reasons, but in large part because of the obvious one that you are not sitting around waiting for servers to be ordered and provisioned and learn how to operate and we set up new infrastructure all of that gets spent up quite significantly.

Speaker 4: for a whole variety of reasons, but you know, in large part because of the obvious one that you're not sitting around waiting for servers to be ordered and provisioned and learn how to operate it and set up new infrastructure, all of that gets sped up quite significantly.

Speaker 4: So that's kind of a little bit about how we're thinking about the journey. You know, there, there is one of the reasons I wanted to mention the 50% of new ASPV is really because yeah, there has been a big push internally to make sure that this

So that's kind of a little bit about how we're thinking about the journey there.

There is one of the reasons I wanted to mention that.

50%, New HBV is really because there hasnt been a big push internally to make sure that this caught on.

Speaker 4: caught on, you know, a cloud product. It's, you know, it's not just another product. It's effectively an entirely different delivery model and go to market. We knew that there was a lot of synergies in having both of these, but it's obviously a huge effort for a small company to get that going and get it to critical mass.

<unk> product is not just another product is effectively an entirely different delivery model and go to market. We knew that there was a lot of synergies and having both of these but it's obviously a huge effort for a small company to get that going and get it to a critical mass. So you asked a little bit about how are we operating internally, yes, that's been a huge.

Speaker 4: So, you know, you asked a little bit about how are we operating internally? Yeah, that's, that's been a huge push really across the entire company to make that really catch on.

Really across the entire company to make that really catch on and to your point. There is a lot of uncertainty and when you look out into the larger term of just even how how quickly is the move to cloud is going to happen. You know if you said hey in 2020 for 2025, whats customer spend going to be in.

Speaker 4: And to your point, there is a lot of uncertainty when you look out into the larger term of just even how quickly is the move to cloud going to happen. If you say, hey, in 2024, 2025, what's customer spend going to be in the cloud? I don't think we have a crystal ball any more than anybody else does. We're setting targets around that. Stefan, you may want to comment on how we're doing it, but yeah, there is uncertainty around that. I mean, we're very happy with the progress.

Cloud I don't think we have a crystal ball any more than anybody else does where we're setting targets around that Stefan you may want to comment on how we're doing it but yes. There is uncertainty around that I mean, we're very happy with the progress.

Speaker 4: You know, the business model for both of these and we're well set up, whatever the kind of split is, I think to capitalize on that and indeed, you know, for a lot of these customers, that transition is one of the drivers of adoption of data in motion because it's acting as that bridge between environment.

The business model for both of these and we are well set up whatever the split is I think to capitalize on that and indeed, if for a lot of these customers that transition is one of the drivers of adoption of data and motion because it is acting as that bridge between environments.

Speaker 3: And on the second part of the question, Cash, there are a number of elements that we take a look at, but we start with a first principles approach of looking at what our customers are telling us. And what our customers are telling us is

Okay and on the second part of the question Kash.

There are a number of elements that we take a look at but we start with.

First principles approach us looking at what our customers are telling us.

And what our customers are telling us is buying.

Speaker 8: by and large, they're running hybrid environments.

By and large things, they're running hybrid environments.

Speaker 8: And we need to continue to be a cloud-first company, but also have products that enable customers to manage their data wherever their data resides.

And we need to continue to.

Be a cloud first company, but also have products that enable customers to manage their data wherever their data resides and from a business model standpoint.

Speaker 8: And from a business model standpoint, the great thing about our cloud offering, which we've been very, I think, hopefully clear about is,

The great thing about our cloud offering, which we've been very I think hopefully clear about is.

Speaker 8: This frictionless, seamless way to onboard customers through a pay-as-you-go model is super important. That helps with the overall economics of the company, longer term, better margin profile, et cetera, but it's still early days. And then there's the next step along that journey around those cloud customers that start in the pay-as-you-go format when they transition over to being a committed customer.

Frictionless seamless way to onboard customers through our pay as you go model is super important that helps with the overall economics of the company longer term better margin profile et cetera. So it's still early days and then there is the next step along that journey around those cloud customers that start in the pay as you go format when <unk>.

Transitioning over to being a committed customer.

Speaker 8: we like to see that progression as well. And that's why we have.

We'd like to see that progression as well and Thats why we have.

Speaker 8: That's why we spent some calories during the call today talking about our sales and go-to-market model because in that customer journey...

That's why we spent some calories during the call today talking about our sales and go to market model because in that customer journey, we need to be there for our customers that each step along the way. So over time, we believe that lifetime value and overall lifetime spend of our customers will be greatly enhanced.

Speaker 8: We need to be there for our customers at each step along the way. So, over time, we believe that lifetime value and overall lifetime spend of our customers will be greatly enhanced. And therefore, that all plays into this growth and profitability framework that we outlined at the time of our IPO. You know, we're in high growth mode today. We're forecasting to be, continue to be in high growth mode. And we're improving operating margins. And, and the business.

And therefore that all plays into this growth and profitability framework that we outlined at the time of our IPO.

Or in high growth mode today.

We're forecasting EMEA continue to be a high growth mode, and we're improving operating margins and <unk> and the business model.

Speaker 8: basically pairs itself very well with that growth and profitability framework.

Basically paradise held very well with that growth and profitability framework.

Speaker 3: Got it. Thanks, Stefan. Thanks, Jay. And thank you, Shane. Thanks, guys. We'll take our next question from Derek Wood with Calum, followed by Barkley.

Thanks, Stephane, Thanks, Jay and thank you Shane.

Okay.

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

Speaker 4: Great. Great to see you guys. Congratulations. First question, I wanted to touch on the agreement with AWS. And first, can you give a little more detail around what the go-to-market looks like and how you expect that to ramp over the next 12 months? And then second, what does this say about the competitive dynamics with Kinesis and MSK? I mean, I guess more specifically, what are you seeing from both a win rate and a displacement rate against these offerings?

Great Great to see you guys. Congratulations first question I wanted to touch on the agreement with AWS and <unk>.

First can you give a little more detail around what the go to market looks like and how you expect that to ramp over the next 12 months and then second what does this say about the competitive dynamics with kinesis and S. K I mean, I guess more specifically what are you seeing from both though our win rate and a displacement rate against these offerings.

Speaker 4: Yeah, well, so the first thing I would say, you know, this isn't entirely new. We've been partnering with AWS as we do with each of the cloud providers. And, you know, those have been our most important partnerships for a long time.

Yeah, well so the first thing I would say this isn't entirely new we've been partnering with AWS as we do with each of the cloud providers and visit been our most important partnerships for a long time.

Speaker 4: But I do think this is a big deal, and it has a couple aspects. There's an economic aspect in terms of our discounts with them. There's a good market aspect in terms of how we're taking this out to customers, and there's kind of a product and engineering collaboration side of it in terms of how we just make the things work well together. And each of those are actually really significant. I think the key thing that has driven this...

But I do think this is a big deal and it has a couple of aspects right. There is a economic aspect in terms of our discounts with them. There's a go to market aspects in terms of how we're taking this out to customers and there's kind of a product and engineering collaboration side of it in terms of how we just make the things work well together and each of those are actually really.

Significant I.

I think the.

The key thing that has driven this is less about kinesis or confluence is actually about the importance of data in motion and these ecosystems like for them, although yes, theres a handful of things in AWS. We compete with there is a handful of products in each of the clouds, we compete with.

Speaker 4: is less about, you know, kinesis or confluent. It's actually about the importance of data in motion in these ecosystems. Like for them, although, yeah, there's, there's a handful of things in AWS we compete with, there's a handful of products in each of the clouds we compete with.

Speaker 4: You know, as an organization, it's very cooperative. You know, their project is about getting data into the cloud, about connecting up all the different systems and driving utilization and all their hundreds of data systems and offerings.

As an organization is very cooperative Theyre project is about getting data into the cloud about connecting up all the different systems and driving utilization in all of our one hundreds of data systems and offerings driving application workloads and so it's a huge win for them as an organization is as customers are using.

Speaker 4: driving application workloads. And so it's a huge win for them, you know, as an organization, as customers are using more Confluent, that has a really significant spillover into their utilization and commitment rates overall.

More comparable that has no really significant spillover into their utilization and commitment rates overall and so that's what I would highlight we do compete with individual kind of teams or projects.

Speaker 4: And so that's what I would highlight. We do compete with individual kind of teams or projects.

Speaker 4: in each of the clouds. Some of these are kind of small and nascent, not you know massive. Some are you know more successful. We do really well in that competition. Like we're very happy with the win rate that we see you know in each of the clouds against any of the you know competitive offerings.

In each of the clouds. Some of these are kind of small and nascent not massive some are more successful we do really well.

In that competition, but we're very happy with the win rate that we see.

In each of the clouds against any of the competitive offerings, you would care to them.

Speaker 9: Perfect. Stefan, maybe one for you. Great job on the free cash flow in the quarter. I know you don't guide on free cash flow, but anything we should keep in mind as we build our models for 2022. Should we be thinking about free cash flow margins, kind of trending in a similar fashion to operating a changer, and then you can help out on that front?

Perfect Stephane, maybe one for you great job on the free cash flow in the quarter. I know you don't guide on free cash flow, but anything we should keep in mind as we build our models for 2022.

Should we be thinking about free cash flow margins kind of trending in a similar fashion to operator. Thank you and then you can help out on that front.

Speaker 8: Thank you. There are a couple things. The first is there's going to be some seasonality to free cash flow, which I called out in my prepared remarks. We have the impact of our bonus program. That's happening in Q1. And then we have also new program for employee stock purchase plan. But directionally, free cash flow margin should trend like operating margin. There's going to be some perturbations along the way, but directionally, I think that's a good way to think about it.

Thank you there are a couple of things. The first is there's going to be some seasonality to free cash flow, which I called out in my prepared remarks.

The impact of our bonus program.

That's happening in Q1, and then we have also new program for them play stock purchase plan, but.

Directionally free cash flow margin should trend like operating margin.

There's going to be some perturbation along the way, but directionally I think that's a good way to think about it.

Speaker 3: Eric, our next question comes from Ray Molensho with Barclays followed by Morgan Stanley .

Eric Unexercised.

Thanks deck. Our next question comes from Raimo <unk> with Barclays followed by Morgan Stanley .

Speaker 3: Thank you. One for Stefan maybe, like as we get to see you as a public company and kind of understand the different quarters and how seasonality works, can you maybe speak a little bit towards the cloud progression this quarter? Because like one of the questions I got from investors was like, oh, look at the sequential revenue up with about the same, I think you're free. Can you maybe talk a lot about aspects of seasonality or something that played a role here? And then I have one follow up for Jay afterwards.

Thank you.

One for Stefan maybe like SDF too.

See you as a public company and kind of understand the different quarters on how seasonality works can you maybe speak a little bit towards.

The cloud progression this quarter, because like lumpy questions I got from investors worth like or look at the sequential.

Revenue at <unk>.

It was about the statements in Q3 can you maybe talk about aspects of seasonality or something that's later role here and then I have one follow up per day afterward.

Speaker 8: Yeah, for sure. So first, we're very pleased with the 211% share of your growth. From a seasonality standpoint, remember, cloud is a consumption-based model. And in different quarters, you're going to see higher levels of consumption.

Yeah for sure. So first we're very pleased led to 211% year over year growth.

From a seasonality standpoint, remember cloud isn't is a consumption based model.

And in different quarters, youre going to see higher and higher levels of consumption.

Speaker 8: In Q4, as an example, there are some holidays that are there. People oftentimes lock down environments before year end. And so those dynamics are at play a little bit as well. I can tell you that from an ECV standpoint, and Jay highlighted this.

In Q4 as an example, there are there are some holidays that are there people oftentimes locked down environments.

Before year end.

And so those dynamics are at play a little bit as well I can tell you that from an ECB standpoint, and Jay highlighted this.

Speaker 8: greater than 50% of new ACB bookings came from cloud, that is a great leading indicator.

And 50% of new ACD bookings came from cloud that is a great leading indicator.

Speaker 8: of the business. So the consumption patterns within a fiscal year, they are going to kind of ebb and flow a little bit. But, you know, we were really pleased with the year over year growth rate, and being able to post, you know, another quarter above 200% was great. And then, like I said, the ACV numbers and the RPO numbers were very, very important.

<unk> of the business so the consumption patterns within it.

Within our fiscal year, they are going to kind of ebb and flow a little bit but.

We're really pleased with that.

The year over year growth rate.

And being able to posted another quarter of above 200%.

Was great and then like I said, the ACB numbers and <unk> numbers.

We're very very healthy.

Speaker 3: Perfect. Yeah, that's really helpful, actually, because that helps us to kind of square on the seasonality there. And then Jay, one for you. The one thing we saw with other vendors that kind of went with an open source system and then just with an open source solution and then went into the cloud was that in the cloud, there was a lot of like self serve.

Perfect that's really helpful likely because that helps us.

To kind of square on the seasonality there.

And then one for you.

One thing we saw with other vendors.

A wedding with an open source system and in this way with the open source solution and then into the cloud World.

In the cloud if there was a lot of like self service.

Speaker 3: business going on and then when the cloud offering came from the proper vendor then you slowly started converting that. What do you see in terms of self-service instances for Kafka in AWS etc and the opportunity for convincing those teams that it's much easier to work with you and that could be a main driver for you going forward. Thank you and congrats. Yeah, that's actually a phenomenal opportunity for us and these customers are actually at each stage. There's people just getting started. They downloaded the open source. They find out there's a cloud product and they go try it. There's people who are actually at significant scale.

Business going on and then when the cloud offering came from the from the appropriate vendor then you slowly start converting that.

What do you see in terms of self serves incidences for cost in AWS et cetera, and the opportunity for convincing those teams that it's much easier to work with you and that could be a medium appropriate going forward. Thank you and congrats yes, yes, that's actually a phenomenal opportunity for us and these customers are actually at each stage.

There is people just getting started with a dominated the open source. They find out there is the cloud product and they go Tri Ed. There is people who are actually had significant scale. So a lot of the.

Speaker 4: you know, big Silicon Valley tech companies.

Big Silicon Valley Tech companies.

Speaker 4: They've been building around this for a long time and we're starting to see success with these very large users of Kafka. And the reason is very clear. Engineers are quite expensive and having kind of your smartest team of people running some internal infrastructure layer which is really hard to do well at scale and to do in a cost effective way that actually uses cloud infrastructure responsibly is not really what they want. And so that there is...

They've been building around this for a long time and we're starting to see success with these very large users of Kafka.

And the reason is very clear and engineers are quite expensive and having kind of youre smartest team of people running some internal infrastructure layer, which is really hard to do well at scale and to do in a cost effective way that actually uses cloud infrastructure responsibly.

Isn't that really what they want and so that there is an offering that they think can meet their needs at scale. There is actually now a lot of enthusiasm even through the most technical companies about embracing that as they have with other layers in the cloud and so yes, I think that represents a very significant opportunity for us okay. Thank you.

Speaker 4: an offering that they think can meet their needs at scale. There's actually now a lot of enthusiasm even from the most.

Speaker 4: technical companies about embracing that, as they have with other layers in the cloud. And so, yeah, I think that represents a very significant opportunity for us.

Speaker 3: Thank you. Well done. Thanks. Our next question comes from Sanjis Sin with Morgan Stanley , followed by Siddy.

Sure.

Our next question comes from Sanjay <unk> with Morgan Stanley followed by city.

Hey, Sanjay I can see you there.

Hi.

Speaker 1: Can you hear me now? Yep. Perfect. Thank you so much. And congrats to you, Shane, Jay, and Stefan. Team on a very successful 2021. Really great to see all the numbers. What I want to ask you, Jay, was really sort of the pace of change. I think we all understand that there's an emerging data and application architecture that's getting reconstituted. You guys are at the heart of that. The theme of your last two earnings calls has been what you guys have been doing on the product side in terms of improving the capability.

Can you hear me now.

Perfect. Thank you so much and congrats to you same day earnings nothing even on a very successful 2020 would really wait and see them. All the numbers I want I want to ask you Jay was really sort of the pace of change I think we all understand that there is an emerging data and application architecture. That's getting reconstituted you guys are at the heart of that.

The theme of your last two earnings calls has been what you guys have been doing on the product side in terms of improving the capabilities.

Speaker 1: When you sort of have those conversations with your enterprise customers in terms of building the real-time piece of this future architecture, how much of a priority is that going into 2022 versus 2021 or last year? Do you get any sense of how big a part of these conversations you're having with CIOs?

When you sort of have those conversations with your enterprise customers in terms of building the real time piece of this of the future architecture, how much of a priority is that going into 2022 versus 2021 and last year, you can get any sense of.

How big a part of these conversations you are having with Cio's, yes.

Speaker 4: Yeah, I think it's a significant priority. I mean, I think this was already true, but the pandemic seems to have kind of accelerated some of the digital transformation efforts and the move to the cloud overall. And with that, it's not just a matter of picking up a workload and moving it. With that does come this whole kind of re-architecture that brings in the things that you would use if you were building it now, right? And that's really what my saltwater ride should be What was it called? My water fi forgoed that engineering team was really, really involved in the development of my al

Yes, I think it's in a significant priority I mean, I think this was already true but.

The pandemic seems to have kind of accelerated some of the digital transformation efforts and the move to the cloud overall and with that it's not just a matter of picking up a workload in moving it with that does come this whole kind of re architecture that brings in the things that you would use if you were building it now right and that confluence of big part of that and.

Speaker 4: Confluence is a big part of that. And particularly because we kind of bridge between these environments, that often becomes really important. How are you going to peel off that next workload and get it there? Well, it has to connect back into things and other environments.

Because we kind of bridge between these environments are often becomes really important how are you going to peel off that next workload and get it there will have to connect back into things in other environments and so yes, I would say, we're a very significant part of that we're often a critical element of that kind of a hybrid or multi cloud architecture that they are pursuing and I think increasingly.

Speaker 4: And so, yeah, I would say we're a very significant part of that. We're often a critical element of that kind of hybrid or multi-cloud architecture that they're pursuing. And I think increasingly prevalent on the minds of senior technology leaders.

Prevalent on the minds of senior technology leaders.

Speaker 1: That's my question for Stephen, with the dovetail on Jay's comment.

That's my question for stepped in with the dovetail on Jay's comments, if you think about how to turn to macro incontinence. The last three months and we're thinking about rates of inflation I think the idea about focusing on profitability focusing on unit economics, I guess poppy that women want to bring to your stuff in as we think about the.

Speaker 1: If you think about how all of us have turned to macroeconomics the last three months and we're thinking about rates and inflation, I think the idea about focusing on profitability, focusing on unit economics, I guess is a topic I want to bring to you, Stefan.

Speaker 1: As we think about the core components of your unit economics.

Core components of your unit economics, whether it's the gross margins, which I think you've talked about at length, so far but the improvement in gross retention net retention can you sort of break that down for us in terms of how much of that is coming from the sort of recovery post pandemic customers that may have downgraded to opus with cost of getting them back came back on.

Speaker 1: The gross margins, which I think you've talked about at length so far, but the improvement in gross retention and net retention, can you sort of break that down for us in terms of how much of that is coming from the sort of recovery post pandemic.

Speaker 1: customers that may have downgraded to open source Kafka, getting back on board with Confluent. And then as you guys get more successful with a strategy, building out that application ecosystem, what does that, will that do for your gross retention and net retention rates? Essentially like how much upside is there as we think about getting to your profitability targets over a midterm framework with a longer term frame?

Bored with confluent and then as you guys get more successful with our strategy and building out that application ecosystem.

What does that get ruled that do for your gross retention and net retention rate lately, particularly like how much upside is there as we think about getting to your profitability targets over.

Our mid term framework with the longer term framework.

Speaker 8: Well, the unit economics in general are very healthy for our company. Whichever metrics we're looking at could be gross margin. It could be the componentry of net retention rates like gross expansion and retention, et cetera, as well as LTV to CAC and magic number, right? If you look at all of those, they're very healthy. When you look at specifically net retention rates, what gives us a multiple estimate what what gives us EXIT Comestart, for example, when you think of highnet retention, what gives us the Our retard Luis, there's really been a problem with yourcing that with a tar-to- twitter group like mine,

Well the unit economics in general are very healthy for our company.

Whichever metrics, we're looking at can be gross margin it could be the componentry of net retention rates like gross expansion.

And retention et cetera.

As well as LTV to CAC and Magic number right. If you look at all of those are very healthy.

And when you look at specifically net retention rates.

What gives us.

Speaker 8: a lot of confidence around our ability to move off of what our near term target was, which was 120% and now saying hey, it's 130 and our goal is 130 going forward.

A lot of confidence around our ability to.

Move off of what our near term target was which was 120% and now, saying hey, with $1 30, and our goal is at 130 going forward.

Speaker 8: greater than 130 going forward, is the fact that Confluent Cloud net retention rate is higher than Confluent Platform. And then customers who are running both cloud and platform have the highest NRR. And when you peel back the layers of the onion and if you look at gross retention, gross expansion, they're very healthy and improving. And the point that you made, which is good because you're back in.

Greater than 130 going forward is the fact that copper on cloud net retention rate is higher than comparable platform and then customers who are running both cloud and platform had the highest NR and when you Peel back the layers of the onion enabled if you look at gross retention.

<unk> gross expansion, there are very healthy and improving and the point that you made which is good because we get back in June of.

Speaker 8: June of last year, I was answering a lot of questions around, oh, you know, like, why isn't that retention at 117, etc. And we spent a lot of time kind of explaining, yeah, there were some impacts of the pandemic where there were a couple of companies that cycle off the platform. And that's actually a rare case these days.

Last year I was answering a lot of questions around Oh.

Why isn't that retention at 117 et cetera, and we spent a lot of time kind of explaining yes. There were some impacts of the pandemic, where there were a couple of companies that cycle off the platform. That's actually a rare case these days.

Speaker 8: And by the way, those numbers are out of the dollar based net retention rate. We've sunset those. So you can imagine the

And by the way those numbers are out of the dollar based net retention rate with sunset dose. So you can imagine the head of steam we have relative to new customer acquisition, the gross retention rates and the and the expansion rates are very healthy so we.

Speaker 8: head of steam we have relative to new customer acquisition, the gross retention rates, and the expansion rates are very healthy.

Speaker 8: We feel good about greater than 130. Where that takes us over time is to be determined. And there's gonna be fluctuations along the way for sure. But we felt good enough that we have three quarters in a row of greater than 130 and three quarters of a row of sequential improvement.

We feel good about greater than 130, where that takes us over time is to be determined and theres going to be fluctuations along the way for sure, but we felt good enough that we had three quarters in a row of greater than 138, and three quarters in a row of sequential improvement and NR.

Speaker 8: in NRR. And that is, those are good facts for us. And we have to, you know, we're not going to lose sight of it. We're not planting the victory flag. We're going to continue to take it as high as we can. But those are some of the dynamics at play.

And that is those are good facts for us and we are not.

I'm not going to lose sight of it we're not planting the victory flag, we're going to continue to Ted to take it as high as we can but that those are some of the dynamics at play.

Speaker 1: Great to be here. Thanks. Thanks. Our next question comes from Tyler Rocky with Citi followed by Bank of America.

The encouraging point here thanks, Greg Thanks.

Our next question comes from Tyler Radke with Citi, followed by Bank of America.

Speaker 9: Hey, thanks a lot for taking my questions. Two questions for me.

Hey, Thanks, a lot for taking my question.

Two questions for me.

Speaker 10: about some of the analytics use cases and I think last earnings call you talked about some of the data warehouse

About some of the analytics use cases, and I think last earnings call you talked about some of the data warehouse modernization use cases could you maybe talk about what are some of the use cases and go to market motions that are surprising you to the upside.

Speaker 10: Modernization use cases. Could you maybe talk about what, what are some of the use cases and go to market motions that are surprising you to the upside? You know, what are the most successful?

The most successful and then the second question just wanted to ask you about the hiring environment.

Speaker 10: And then the second question, I just wanted to ask you about the hiring environment. Obviously, operating expenses are still growing pretty nicely, but just what you're seeing in terms of the ability to recruit, retain talent in this environment and anything we should think about on the cost side heading into next year. Thank you.

Obviously operating expenses are still growing pretty nicely, but just what youre seeing in terms of the ability to recruit retain talent in this environment and anything we should think about on the cost side heading into next year. Thank you.

Speaker 4: Yeah, I, you know, look, the, um, I don't know if there's been any kind of breakout surprise on the go to market, but a lot of it was what I talked about in that journey, CEO , so we, the kind of investments we planted were really building out the self service, uh, kind of funnel and starting to connect that up into that overall flow we have started to partner around different use cases and solutions. So that data warehouse modernization that you mentioned, that's feeding into a lot of these next gen analytics systems. That's something where there's a lot of companies that are offering those products and have a really critical need in terms of how they adjust things. That's been successful. I don't think there's one kind of out outside use case that

Yes.

Look the I don't know if theres been any kind of breakout surprise on the go to market side a lot of it was what I talked about in that journey. She also with the kind of investments we planted we're really building out the self service kind of funnel and starting to connect that up into that overall flow. We have started to partner around different use case.

<unk> solutions, so that data warehouse modernization that you mentioned that's feeding into a lot of these next gen analytic systems, that's something where there's a lot of companies that are offering those products and have a really critical need in terms of how they adjust things has been successful I don't think there is one kind of outsized use case, that's driving a disproportionate.

Speaker 4: driving a disproportionate share, but across that broad spectrum of use cases, we've seen great growth.

<unk> sure.

Across that broad spectrum of use cases, we've seen great growth.

On the hiring front.

Speaker 4: Yeah, we're obviously paying very close attention to both hiring and retention, given kind of what you would see in a lot of other companies. On the whole, that's been solid for us. So we're kind of broadly on track with our hiring targets. We've been happy with the retention numbers we've seen. So it's probably good news on that front. I don't know if you want to add anything.

Yes.

We're obviously paying very close attention to both hiring and retention given kind of what you would see in a lot of other companies.

On the whole that's been solid for us.

We're kind of broadly on track with our hiring targets.

We've been happy with the retention numbers, we're seeing so it's probably good news on that front I.

Don't know if you want to add anything to that.

Speaker 8: The only thing I'd add is given the performance that we've been able to deliver, employees want to

The only thing I'd add is given the performance that we've been able to deliver.

Cotton.

<unk> want to.

<unk>.

Speaker 8: They want to be part of our journey, and prospective employees want to be part of our journey. And when we post growth, like in RPO, like we just did, or record new customer additions, and a lot of the underpinnings of the financial model that translate into, hey, we are actually helping our customers achieve their goals, that's the type of journey that folks want to sign up for. And that's part of the story as well.

They want to they want to be part of our journey and prospective employees want to be part of our journey and when we post growth like at RPM like we just did or record new customer additions in a lot of the.

Underpinnings of the financial model that translate into hey, we're actually helping our customers achieve their goals. That's the type of journey that folks want to sign up for and and that's part of the story as well.

Thank you.

Speaker 6: Okay, our next question comes from Brett Sills with Bank of America followed by D.A. Davis.

Okay.

Next question comes from Brett <unk> with Bank of America, followed by D. A Davidson.

Speaker 10: Great, thanks Shane. Hi guys. Congratulations on a real nice quarter here. I wanted to ask about that customer cohort greater than a million. It really stood out as some real solid growth this quarter, acceleration it looks like to 57%. Can you remind us, what do those customers typically start with and how do they get there? How quickly does a customer get to that type of ARR?

Great. Thanks, Shane Hi, guys.

Congratulations on a really nice quarter here.

I wanted to ask about that customer cohort greater than $1 million. It really stood out as some real solid growth this quarter acceleration it looks like the 57% can you remind us what are those those customers typically start with and how do they get there how quickly does the customer get to that type of.

That type of IRR.

Speaker 4: Yeah, the answer unfortunately is that it varies. And part of the reason for that is the existence of the open source.

The answer Unfortunately is it varies.

And part of the reason for that is the existence of the open source right. So I showed this journey. Obviously, we're assuming you started with us in stage one but some people have started with the open source that kind of progress. They have some production use cases, we're converting them midstream and so depending at the point that we're picking you up you could actually start quite large.

Speaker 4: Right. So I showed this journey, obviously we're assuming you started with us in stage one, but some people have started with the open source. They've kind of progressed. They have some production use cases and we're kind of converting them midstream.

Speaker 4: And so depending at the point that we're picking you up, you could actually start quite large. Now that doesn't mean that that's really when you started. You actually may have started some years ago.

Now that doesn't mean that Thats really when you started you actually may have started some years ago.

And one of the nice things about actually engaging early on in our commercial offering is we can actually help your progress in entry you succeed so.

Speaker 4: So it will vary based on kind of when we're picking you up and how long that's been happening. It will vary also based on cloud and on-premise. It's a lot easier to expand with cloud. And we see that in some of the numbers because you're not actually having to order servers or hire a team of Kafka experts to help with operations and that can allow you to move much faster as well. So unfortunately, I don't know that there's a simple rule of thumb that covers all types of companies and all use cases. It really does vary between them and it depends on when we pick them up. Thanks so much, Jay. And maybe one for you, Stefan. When you look at the sales and marketing line, where are the top priorities?

Will vary based on kind of when we're picking you up and how long that's been happening. It will vary also based on cloud and on premise, it's lot easier to expand with cloud and we see that in some of the numbers because youre not actually having to you now.

Order servers or hire a team of kafka experts to help with operations and that can allow you to move much faster as well so.

Fortunately there is I don't know that Theres, a simple rule of thumb that covers all types of companies and I'll use cases, it really does vary between them and it depends on when we pick them up.

Speaker 10: Thanks so much, Jay. And maybe one for you, Stefan. When you look at the sales and marketing line, you know, where are the top priorities? Where are you investing this coming year for sales and marketing, please?

Thanks, So much Jay maybe one for you Stephane.

When you look at the sales and marketing line.

Or are the top priorities, where you're investing this coming year for sales and marketing. Please.

Speaker 8: We're definitely focused on building out our sales footprint in terms of both international and domestic headcount expansion. That's one thing. And when you look at our customer success organization, which isn't technically part of the S&M line.

We are definitely focused on.

Building out our sales footprint in terms of both international and domestic headcount expansion.

That's one thing and when you look at our customer success organization, which isn't technically part of like the <unk> line.

Speaker 8: That's a key part of an investment strategy for us that plays into the overall field operations work that we're doing because we're trying, especially for our consumption based business, we're trying to decrease the amount of time it takes for customers to start to consume. And that is a key area. On the marketing side of the house.

That's a key part of an investment strategy for us that plays into the overall field operations work that we're doing because we're trying especially for our consumption based business. We're trying to decrease the amount of time. It takes for customers to start to consume and that is a key area on the marketing side of the house.

Speaker 8: We're very much focused on on demand gen, pipe gen, also building out our brand.

We're very much focused on on demand Gen pipe Gen also building out our brand.

Speaker 8: in a very meaningful way. And with the leadership on the sales and marketing side.

And in a very meaningful way.

And with the leadership on the sales and marketing side with.

Speaker 8: with Erica and Stephanie, respectively, we feel like we're in a really good spot to have a lot of great performance over the foreseeable future.

With Erika and Stephanie respectively.

We feel like we're in a really good spot to have.

A lot of great performance over the over the foreseeable future.

Great to hear thanks, Kevin Thanks.

Speaker 11: Next question comes from Rudy Kessinger with BA Davidson followed by Bojibang.

Next question comes from <unk> <unk> with da Davidson, followed by Deutsche Bank.

Speaker 6: Hey, great. Thanks for taking the question, guys, and asking the quarter. Another kind of question on the customer cohorts, I guess, is the average, you know, 100,000 plus error customers kind of in stage two or three, your average million plus is in stage four. Is it fair to say that, you know, the bulk of or maybe, you know, the average customer that's 100,000 plus in that stage two or three can be a million plus customer once they get to stage four?

Hey, great. Thanks for taking the questions as best in the quarter.

Another kind of question on the customer cohorts I guess is the average.

100000, plus are customers kind of in stage, two or three <unk> million pluses and stage four is it fair to say that where the bulk of where maybe the average customer that is a 100000 plus in that stage two or three can be a million plus customer once they get to stage four.

Speaker 4: Yeah, I think that's absolutely the case. Even in the million plus customers, we're seeing great expansion.

Yeah, I think thats, absolutely the case.

In the 1 million plus customers were seeing great expansion. So yeah, I think that that is true in almost any but the very smallest companies. This can be a very significant part of the architecture. So even in smaller tech companies. This can turn into a significant line item in the large company is just the number of.

Speaker 4: So yeah, I think that is true in almost any, but the very smallest companies. This can be a very significant part of the architecture. So even in smaller techy companies, this can turn into a significant line item. In large companies, just the number of systems and applications, even if we've been working with them for some years, we're still in the early days of what's possible over time as these application layers turn over and start to utilize this new paradigm more.

Systems and applications, even if we've been working with them for some years, we are still in the early days of what's possible over time as these application layers turnover and start to utilize this new paradigm more.

Speaker 6: Got it. And then just a quick follow up. I know data at the S partnerships with NASA a number of times. I guess on the Alibaba.

Got it and then just.

A quick follow up I know AWS purposes, NASA and number of times I guess on the Alibaba deal announced back in December just how significant of an incremental opportunity is that within your existing customers that have operations over there, but also from a new customer acquisition standpoint from the oil companies maybe headquarters of this how big of a gap.

Speaker 6: Uh, deal announced back in December , just how significant of an income opportunities that within both.

Speaker 6: your existing customers that have operations over there, but also from a new customer acquisition standpoint.

Speaker 4: companies maybe headquartered over this. How big of a problem is that? Yeah, it's definitely a significant opportunity for us, both to access that region in a better way, but also in particular because we were finding a really significant portion of our customer base has manufacturing or other operations there. And they effectively must have...

Yes, it's definitely a significant opportunity for us.

Both to access that region in a better way, but also in particular, because we were finding a really significant portion of our customer base has manufacturing or other operations, there and they effectively must have coverage in that environment Ipi tax a little bit about this everywhere value proposition and it is true right and.

Speaker 4: coverage in that environment. I talked a little bit about this everywhere.

Speaker 4: value proposition and it is true, right? And it's actually not great for us if we cover almost everywhere, we wanna be all the way everywhere. And so that was one that was kind of the holdout that a lot of customers really needed something for. You know, we could always tell them, oh, go run Confluent Platform yourself, but it's not that compelling if you're able to get, you know, manage shock ring for everything else. And so this, you know, kind of helps close that gap.

It is actually not great for us if we cover almost everywhere, we want to be all the way everywhere. So that was one that was kind of the hold out that a lot of customers really needed something for we can always tell them Oh go run comparable platform yourself, but is not that compelling if youre able to get managed operating for every analysis services.

Kind of helps close that gap.

Great. Thanks, Jeff.

Speaker 11: Our last question comes from Patrick Coble with Deutsche.

Our last question comes from Patrick <unk> with Deutsche Bank.

Speaker 12: Thank you so much for taking the time and taking my question and congrats on a phenomenal enter in your overall year. Can I just ask about

Okay. Thank you so much for taking the time.

And taking my question and congrats on a.

Normal lenses.

Yeah.

Can I just ask about.

Speaker 12: Platform versus cloud. I mean, the incoming that I've been getting from investors is that platform this quarter was very strong, but cloud was maybe a little bit light versus expectations. And so my question is, you know, can you just help me understand the consumption dynamic of that cloud piece? You know, is there any, I mean, are there any metrics you can share? Is it the bulk of it consumption? Just help me understand that component.

<unk> platform is cloud incoming that I've been getting from investors is it platform. This quarter was very strong with cloud is maybe a little bit light versus expectations and so my question is.

Can you just help me understand the consumption dynamic of that power piece.

Is that already.

Metrics you can say is that the bulk of it consumption.

Just help me understand that that component possible yeah, yeah, Stefan touched on this a little bit in the previous answer but there is a bit of a dynamic here. So when you think about new revenue coming in that's in cloud. Our revenue is usage based and so there has to be some new software project typically that launches that's now.

Speaker 4: Yeah, yeah. Stefan touched on this a little bit in the previous answer, but there is a bit of a dynamic here. So when you think about new revenue coming in, that's in cloud. Our revenue is usage-based. And so there has to be some new software project, typically, that launches that's now consuming more data, or using our offering, or processing more streams to drive that additional consumption. So you do see a bit of a slowdown through the holidays for a variety of reasons, not least of which a lot of the software engineers are on vacation.

<unk> more data or using our operating our processing more streams to drive that additional consumption. So you do see a bit of a slowdown through the holidays for variety of reasons, not least of which a lot of the software engineers are on vacation right.

Speaker 4: And then you do see a little bit of the opposite on Confluent Platform, where because there is a software offering, there's an upfront component to that, and the rest is kind of over the course of the subscription. And so you would see that because of the Q4 dynamic, where there tend to be more deals that close there, you would see that kind of being a little bit seasonally up in Q4.

And then you do see a little bit of the opposite on constantly platform, where because there isn't it's a software offering there's an upfront component of that and the rest is kind of over the course of the subscription.

And so you would see that because of the Q4 dynamic where there tend to be more deals that closed there you would see that kind of being a little bit seasonally up in Q4.

Speaker 4: Hopefully that makes sense and sheds at least a little light on the jacket.

Hopefully that makes sense and sure. She is at least a little light on the generic.

Speaker 8: Yeah, and I just, just to add a couple of other things. One is you look at the comments we made around cloud being greater than 50% of new ACV in the quarter, which is a milestone for the company, and you look at the growth rate of our total RPO and current RPO, both of those accelerated very well in the quarter. And there's, a lot of that is, is Confluent Cloud related. So we feel.

And I'd just say.

A couple of other things one is you look at the comments, we made around cloud being greater than 50% of new ACD in the quarter, which is a milestone for the company and you look at the growth rate of our total RPM and current RTL both of those accelerated very well in the quarter and.

And there is a lot of that is comparable in cloud related.

So we feel feel really good about the quarter, we felt really good about 211% year over year growth rate off of an incredibly tough comp a year ago a year ago.

Speaker 8: feel really good about the quarter. We feel really good about the 211% year-over-year growth rate off of an incredibly tough comp a year ago. A year ago, we triple digit growth. So to grow 211%, we feel really good about.

Triple digit growth.

To grow 211%, we feel really good about.

Great. Thank you so much.

Speaker 11: All right, this concludes the Q&A portion of our call. Jay, back to you for closing remarks.

This.

Concludes the Q&A portion of our call Dave back to you for closing remarks.

Speaker 4: Well, that concludes the call. Our success and momentum since our IPO would not be possible without all the hard work and the dedication of our team, our investors, and especially our customers. So thank you all for being part of the journey.

Well that concludes the call our success and momentum since our IPO was not possible without all the hard work and the dedication of our team our investors and especially our customers. So thank you all for being part of the journey.

Yeah.

Speaker 13: I.

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