8-K
0001699838false00016998382022-08-032022-08-03

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 3, 2022

 

 

CONFLUENT, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-40526

47-1824387

(State or Other Jurisdiction
of Incorporation)

(Commission File Number)

(IRS Employer
Identification No.)

 

 

 

 

 

899 W. Evelyn Avenue

 

Mountain View, California

 

94041

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (800) 439-3207

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class

 

Trading
Symbol(s)

 


Name of each exchange on which registered

Class A Common Stock, par value $0.00001 per share

 

CFLT

 

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 


Item 2.02 Results of Operations and Financial Condition.

On August 3, 2022, Confluent, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2022. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The information contained in this Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the accompanying Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filings, unless expressly incorporated by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.

Description

99.1

Press Release dated August 3, 2022.

104

Cover Page Interactive Data File (formatted as Inline XBRL).

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Confluent, Inc.

 

 

 

 

Dated:

August 3, 2022

By:

/s/ Steffan Tomlinson

 

 

 

Steffan Tomlinson
Chief Financial Officer

 

 


EX-99.1

Exhibit 99.1

 

Confluent Announces Second Quarter 2022 Financial Results

Total revenue of $139 million, up 58% year over year
Confluent Cloud revenue of $47 million, up 139% year over year
Remaining performance obligations of $591 million, up 81% year over year
857 customers with $100,000 or greater in ARR, up 39% year over year

 

MOUNTAIN VIEW, Calif. -- August 03, 2022 -- Confluent, Inc. (NASDAQ: CFLT), the data streaming platform to set data in motion, today announced financial results for its second quarter of 2022, ended June 30, 2022.

 

“Data streaming is a requirement to create the real-time digital experiences and efficient operations that are needed to compete and win,” said Jay Kreps, co-founder and CEO, Confluent. “Our strong Q2, highlighted by 139% year-over-year Confluent Cloud revenue growth and exceeding our guidance on all metrics, underscores our leadership of this market and the critical business value we deliver to our customers.”

 

“Our ability to drive high growth with increased operating leverage is reflected in our 58% year-over-year revenue growth and significant margin improvements in the second quarter,” said Steffan Tomlinson, CFO, Confluent. “Customers view Confluent as a strategic platform for delivering data in motion, as evidenced by our dollar-based net retention rate of greater than 130% for the fifth consecutive quarter and the growth in our six- and seven-figure customers.”

 

Second Quarter 2022 Financial Highlights

(In millions, except per share data and percentages)

 

Q2 2022

Q2 2021

Y/Y Change

Total Revenue

$139.4

$88.3

58%

Remaining Performance Obligations

$591.3

$327.2

81%

GAAP Operating Loss

$(117.3)

$(86.0)

$(31.3)

Non-GAAP Operating Loss

$(46.8)

$(36.8)

$(10.0)

GAAP Operating Margin

(84.1%)

(97.4%)

13.3 pts

Non-GAAP Operating Margin

(33.5%)

(41.7%)

8.2 pts

GAAP Net Loss Per Share

$(0.42)

$(0.74)

$0.32

Non-GAAP Net Loss Per Share

$(0.16)

$(0.31)

$0.15

Net Cash Used in Operating Activities

$(33.5)

$(43.2)

$9.7

Free Cash Flow

$(36.9)

$(45.4)

$8.5

 

A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is provided in the financial statement tables included in this press release. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section titled “Non-GAAP Financial Measures.”

 

 

 


 

Financial Outlook

For the third quarter and fiscal year 2022, Confluent expects:

 

Q3 2022 Outlook

FY 2022 Outlook

Total Revenue

$143-$145 million

$567-$571 million

Non-GAAP Operating Margin

~ (33%)

(35%)-(34%)

Non-GAAP Net Loss Per Share

$(0.19)-$(0.17)

$(0.73)-$(0.69)

 

A reconciliation of forward-looking non-GAAP operating margin and non-GAAP net loss per share to the most directly comparable GAAP measures is not available without unreasonable effort, as certain items cannot be reasonably predicted because of their high variability, complexity and low visibility. In particular, the measures and effects of our stock-based compensation expense specific to our equity compensation awards and employer payroll tax-related items on employee stock transactions are directly impacted by the timing of employee stock transactions and unpredictable fluctuations in our stock price, which we expect to have a significant impact on our future GAAP financial results.

 

Conference Call Information

Confluent will host a video webcast to discuss the company’s second quarter 2022 results as well as its financial outlook today at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time. Open to the public, investors may access the webcast, earnings press release, supplemental financial information, and investor presentation on Confluent’s investor relations website at investors.confluent.io before the commencement of the webcast. A replay of the webcast will also be accessible from Confluent’s investor relations website a few hours after the conclusion of the live event.

 

Confluent uses its investor relations website and may use its Twitter, LinkedIn, and Facebook accounts as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

 

 

 


 

Forward-Looking Statements

This press release and the earnings call referencing this press release contain forward-looking statements including, among other things, statements regarding our financial outlook, including margin improvements, target gross margin levels, achievement of positive non-GAAP operating margin exiting the fourth quarter of fiscal 2024 and impact of macro dynamics; the potential growth runway for Confluent Cloud; continued rates of Confluent Cloud consumption despite macroeconomic uncertainty; ability for Confluent Cloud to provide cost savings for users and customers; increased adoption of our platform and data streaming in general; dependence of businesses on data in motion; retention of data platforms like Confluent by organizations in times of macroeconomic uncertainty; our ability and position to capitalize on the shift to cloud; the degree of market acceptance of our products; our ability to sustain relationships and integration with cloud providers; growth in and growth rate of revenue, including Confluent Cloud revenue, customers, remaining performance obligations and dollar-based net retention rate; our market opportunity; our go-to-market strategy; our product differentiation and market acceptance of our products, including over open source alternatives; our ability to improve margins, on an annual basis or at all; our ability to meet near-term and mid-term financial targets; our potential for value creation; our investment priority and philosophy; and our overall future prospects. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “seek,” “plan,” “project,” “target,” “looking ahead,” “look to,” “move into,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements represent our current beliefs, estimates and assumptions only as of the date of this press release and information contained in this press release should not be relied upon as representing our estimates as of any subsequent date. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Risks include, but are not limited to: (i) the impact of the ongoing COVID-19 pandemic on our business, as well as our customers, prospects, partners, and service providers, (ii) our ability to sustain and manage our rapid growth, (iii) our limited operating history, (iv) our ability to attract new customers and retain and sell additional features and services to our existing customers, (v) our ability to increase consumption of our offering, including by existing customers and through the acquisition of new customers, and successfully add new features and functionality to our offering, (vi) our ability to achieve or sustain profitability and improve margins annually or at all, (vii) the estimated addressable market opportunity for our offering, (viii) our ability to compete effectively in an increasingly competitive market, including achieving market acceptance over competitors and open source alternatives, (ix) our ability to successfully execute our go-to-market strategy and initiatives, (x) our ability to attract and retain highly qualified personnel, (xi) breaches in our security measures or unauthorized access to our platform, our data, or our customers’ or other users’ personal data, (xii) our reliance on third-party cloud-based infrastructure to host Confluent Cloud, (xiii) inflationary conditions, economic uncertainty, recessionary risks, and exchange rate fluctuations, which may result in customer pullback in information technology spending, lengthening of sales cycles, reduced contract sizes, reduced consumption of Confluent Cloud or customer preference for open source alternatives and (ix) general market, political, economic, and business conditions. These risks are not exhaustive. Further information on these and other risks that could affect Confluent’s results is included in our filings with the Securities and Exchange Commission (“SEC”), including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and our future reports that we may file from time to time with the SEC. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 that will be filed with the SEC, which should be read in conjunction with this press release and the financial results included herein. Confluent assumes no obligation to, and does not currently intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

 

 


 

Non-GAAP Financial Measures

This press release includes the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development, sales and marketing, general and administrative), non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net loss per share, free cash flow, and free cash flow margin. We use these non-GAAP financial measures and other key metrics internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. We believe these non-GAAP financial measures, when taken collectively, may be helpful to investors because they provide consistency and comparability with past financial performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. However, non-GAAP financial measures have limitations as an analytical tool and are presented for supplemental informational purposes only. They should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In particular, other companies, including companies in our industry, may report non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development, sales and marketing, general and administrative), non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net loss per share, free cash flow, free cash flow margin, or similarly titled measures but calculate them differently, which reduces their usefulness as comparative measures. Further, free cash flow is not a substitute for cash used in operating activities. The utility of free cash flow is limited as such measure does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for any given period. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, as presented below. We define non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development, sales and marketing, general and administrative), non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, and non-GAAP net loss per share as the respective GAAP balances, adjusted for, as applicable, stock-based compensation expense; employer taxes on employee stock transactions; common stock charitable donation expense; amortization of debt issuance costs; and income tax effects associated with these adjustments. We define free cash flow as net cash used in operating activities less capitalized internal-use software costs and capital expenditures and free cash flow margin as free cash flow as a percentage of revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the performance of core operations and future ability to generate cash that can be used for strategic opportunities or investing in our business.

 

Other Business Metrics

Remaining performance obligations (“RPO”) represent the amount of contracted future revenue that has not yet been recognized as of the end of each period, including both deferred revenue that has been invoiced and non-cancelable committed amounts that will be invoiced and recognized as revenue in future periods. RPO excludes pay-as-you-go arrangements. RPO may also fluctuate due to a number of factors, including the timing of renewals, average contract terms, seasonality, and dollar amount of customer contracts. RPO as a metric is not necessarily indicative of future revenue growth because it does not account for the actual timing of customers’ consumption or future expansion.

 

Customers with $100,000 or greater in annual recurring revenue (“ARR”) represent the number of customers that contributed $100,000 or more in ARR as of period end. We define ARR as the revenue customers contractually committed to over the following 12 months assuming no increases or reductions in their subscriptions. ARR excludes services and pay-as-you-go arrangements. Similar to RPO, ARR as a metric is not necessarily indicative of future revenue growth because it does not account for the actual timing of customers’ consumption or future expansion. For purposes of determining our customer count, we treat all affiliated entities with the same parent organization as a single customer and include pay-as-you-go customers. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.

 


 

 

Dollar-based net retention rate (“NRR”) as of a period end is calculated by starting with the ARR from the cohort of all customers as of 12 months prior to such period end (“Prior Period Value”). We calculate the ARR from these same customers as of the current period end (“Current Period Value”), which includes any growth in the value of subscriptions and is net of contraction or attrition over the prior 12 months. Services and pay-as-you-go arrangements are excluded from the calculation of ARR. We then divide the Current Period Value by the Prior Period Value to arrive at our dollar-based NRR. The dollar-based NRR includes the effect, on a dollar-weighted value basis, of our subscriptions that expand, renew, contract, or attrit, but excludes ARR from new customers in the current period. Our dollar-based NRR is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.

 

About Confluent

Confluent is the data streaming platform that is pioneering a fundamentally new category of data infrastructure that sets data in motion. Confluent’s cloud-native offering is the foundational platform for data in motion – designed to be the intelligent connective tissue enabling real-time data, from multiple sources, to constantly stream across the organization. With Confluent, organizations can meet the new business imperative of delivering rich, digital front-end customer experiences and transitioning to sophisticated, real-time, software-driven backend operations.

 

Investor Contact

Shane Xie

investors@confluent.io

 

Media Contact

Taylor Jones

pr@confluent.io

 

 

 


 

Confluent, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

June 30,

 

 

December 31,

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

529,667

 

 

$

1,375,932

 

Marketable securities

 

1,427,859

 

 

 

640,085

 

Accounts receivable, net

 

149,394

 

 

 

137,491

 

Deferred contract acquisition costs

 

29,491

 

 

 

27,646

 

Prepaid expenses and other current assets

 

55,612

 

 

 

44,919

 

Total current assets

 

2,192,023

 

 

 

2,226,073

 

Property and equipment, net

 

21,813

 

 

 

14,428

 

Operating lease right-of-use assets

 

32,613

 

 

 

37,281

 

Deferred contract acquisition costs, non-current

 

54,661

 

 

 

51,178

 

Other assets, non-current

 

23,807

 

 

 

13,769

 

Total assets

$

2,324,917

 

 

$

2,342,729

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

15,527

 

 

$

7,591

 

Accrued expenses and other liabilities

 

93,917

 

 

 

98,974

 

Operating lease liabilities

 

7,846

 

 

 

9,236

 

Deferred revenue

 

255,064

 

 

 

220,920

 

Liability for early exercise of unvested stock options

 

3,826

 

 

 

11,467

 

Total current liabilities

 

376,180

 

 

 

348,188

 

Operating lease liabilities, non-current

 

27,975

 

 

 

31,645

 

Deferred revenue, non-current

 

30,667

 

 

 

25,557

 

Convertible senior notes, net

 

1,082,583

 

 

 

1,080,701

 

Other liabilities, non-current

 

10,888

 

 

 

6,357

 

Total liabilities

 

1,528,293

 

 

 

1,492,448

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock

 

-

 

 

 

-

 

Class A common stock

 

1

 

 

 

1

 

Class B common stock

 

2

 

 

 

2

 

Additional paid-in capital

 

1,785,640

 

 

 

1,599,962

 

Accumulated other comprehensive loss

 

(9,547

)

 

 

(830

)

Accumulated deficit

 

(979,472

)

 

 

(748,854

)

Total stockholders’ equity

 

796,624

 

 

 

850,281

 

Total liabilities and stockholders’ equity

$

2,324,917

 

 

$

2,342,729

 

 

 


 

Confluent, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Subscription

$

127,018

 

 

$

78,516

 

 

$

240,938

 

 

$

146,508

 

Services

 

12,389

 

 

 

9,822

 

 

 

24,608

 

 

 

18,858

 

Total revenue

 

139,407

 

 

 

88,338

 

 

 

265,546

 

 

 

165,366

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

Subscription(1)(2)

 

35,608

 

 

 

20,292

 

 

 

69,211

 

 

 

36,049

 

Services(1)(2)

 

13,901

 

 

 

9,717

 

 

 

26,075

 

 

 

17,798

 

Total cost of revenue

 

49,509

 

 

 

30,009

 

 

 

95,286

 

 

 

53,847

 

Gross profit

 

89,898

 

 

 

58,329

 

 

 

170,260

 

 

 

111,519

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development(1)(2)

 

64,472

 

 

 

33,225

 

 

 

122,133

 

 

 

57,538

 

Sales and marketing(1)(2)

 

112,754

 

 

 

73,206

 

 

 

219,456

 

 

 

131,715

 

General and administrative(1)(2)

 

29,979

 

 

 

37,943

 

 

 

57,460

 

 

 

53,455

 

Total operating expenses

 

207,205

 

 

 

144,374

 

 

 

399,049

 

 

 

242,708

 

Operating loss

 

(117,307

)

 

 

(86,045

)

 

 

(228,789

)

 

 

(131,189

)

Interest income

 

2,618

 

 

 

688

 

 

 

3,184

 

 

 

1,532

 

Other expense, net

 

(1,432

)

 

 

(643

)

 

 

(2,814

)

 

 

(979

)

Loss before income taxes

 

(116,121

)

 

 

(86,000

)

 

 

(228,419

)

 

 

(130,636

)

Provision for income taxes

 

1,510

 

 

 

2,170

 

 

 

2,199

 

 

 

2,060

 

Net loss

$

(117,631

)

 

$

(88,170

)

 

$

(230,618

)

 

$

(132,696

)

Net loss per share, basic and diluted

$

(0.42

)

 

$

(0.74

)

 

$

(0.84

)

 

$

(1.17

)

Weighted-average shares used to compute net loss per share, basic and diluted

 

278,268,980

 

 

 

118,648,655

 

 

 

275,593,362

 

 

 

113,717,546

 

 

(1) Includes stock-based compensation expense as follows:

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cost of revenue - subscription

$

6,018

 

 

$

2,172

 

 

$

11,331

 

 

$

3,147

 

Cost of revenue - services

 

2,328

 

 

 

1,055

 

 

 

4,190

 

 

 

1,599

 

Research and development

 

25,337

 

 

 

8,932

 

 

 

45,422

 

 

 

12,443

 

Sales and marketing

 

24,746

 

 

 

11,155

 

 

 

45,808

 

 

 

16,131

 

General and administrative

 

10,437

 

 

 

11,202

 

 

 

19,484

 

 

 

14,549

 

Total stock-based compensation expense

$

68,866

 

 

$

34,516

 

 

$

126,235

 

 

$

47,869

 

 

(2) Includes employer taxes on employee stock transactions as follows:

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cost of revenue - subscription

$

70

 

 

$

38

 

 

$

403

 

 

$

38

 

Cost of revenue - services

 

80

 

 

 

288

 

 

 

157

 

 

 

288

 

Research and development

 

342

 

 

 

277

 

 

 

1,381

 

 

 

398

 

Sales and marketing

 

1,048

 

 

 

610

 

 

 

1,728

 

 

 

713

 

General and administrative

 

130

 

 

 

222

 

 

 

440

 

 

 

261

 

Total employer taxes on employee stock transactions

$

1,670

 

 

$

1,435

 

 

$

4,109

 

 

$

1,698

 

 

 

 


 

Confluent, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(117,631

)

 

$

(88,170

)

 

$

(230,618

)

 

$

(132,696

)

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

1,810

 

 

 

756

 

 

 

3,060

 

 

 

1,543

 

Net (accretion) amortization of (discounts) premiums on marketable securities

 

(469

)

 

 

459

 

 

 

236

 

 

 

964

 

Amortization of debt issuance costs

 

947

 

 

 

-

 

 

 

1,883

 

 

 

-

 

Amortization of deferred contract acquisition costs

 

8,925

 

 

 

6,048

 

 

 

17,395

 

 

 

11,583

 

Non-cash operating lease costs

 

2,200

 

 

 

2,748

 

 

 

4,475

 

 

 

5,604

 

Common stock charitable donation expense

 

-

 

 

 

13,290

 

 

 

-

 

 

 

13,290

 

Stock-based compensation, net of amounts capitalized

 

68,866

 

 

 

34,516

 

 

 

126,235

 

 

 

47,869

 

Deferred income taxes

 

30

 

 

 

2,297

 

 

 

26

 

 

 

1,730

 

Other

 

355

 

 

 

209

 

 

 

559

 

 

 

648

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(25,244

)

 

 

(17,587

)

 

 

(12,462

)

 

 

(11,853

)

Deferred contract acquisition costs

 

(10,643

)

 

 

(15,482

)

 

 

(22,723

)

 

 

(26,348

)

Prepaid expenses and other assets

 

(12,136

)

 

 

(12,368

)

 

 

(20,121

)

 

 

(14,723

)

Accounts payable

 

7,275

 

 

 

(468

)

 

 

7,452

 

 

 

371

 

Accrued expenses and other liabilities

 

24,609

 

 

 

11,460

 

 

 

1,756

 

 

 

12,893

 

Operating lease liabilities

 

(2,413

)

 

 

(2,661

)

 

 

(4,910

)

 

 

(5,382

)

Deferred revenue

 

20,047

 

 

 

21,787

 

 

 

39,254

 

 

 

31,352

 

Net cash used in operating activities

 

(33,472

)

 

 

(43,166

)

 

 

(88,503

)

 

 

(63,155

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Capitalization of internal-use software costs

 

(2,256

)

 

 

(1,215

)

 

 

(4,765

)

 

 

(1,811

)

Purchases of marketable securities

 

(763,479

)

 

 

(14,283

)

 

 

(1,167,362

)

 

 

(55,971

)

Maturities of marketable securities

 

275,114

 

 

 

66,211

 

 

 

370,659

 

 

 

122,974

 

Purchases of property and equipment

 

(1,184

)

 

 

(1,030

)

 

 

(2,071

)

 

 

(1,673

)

Other

 

-

 

 

 

-

 

 

 

-

 

 

 

9

 

Net cash (used in) provided by investing activities

 

(491,805

)

 

 

49,683

 

 

 

(803,539

)

 

 

63,528

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Proceeds from initial public offering, net of underwriting discounts and commissions

 

-

 

 

 

786,600

 

 

 

-

 

 

 

786,600

 

Proceeds from issuance of common stock upon exercise of vested options

 

7,947

 

 

 

12,490

 

 

 

24,383

 

 

 

18,705

 

Proceeds from issuance of common stock upon early exercise of unvested options

 

71

 

 

 

11,309

 

 

 

416

 

 

 

18,756

 

Repurchases of unvested options

 

(683

)

 

 

(164

)

 

 

(695

)

 

 

(213

)

Payments of deferred offering costs

 

-

 

 

 

(767

)

 

 

-

 

 

 

(920

)

Payments of debt issuance costs for convertible senior notes

 

-

 

 

 

-

 

 

 

(786

)

 

 

-

 

Proceeds from issuance of common stock under employee stock purchase plan

 

-

 

 

 

-

 

 

 

22,485

 

 

 

-

 

Net cash provided by financing activities

 

7,335

 

 

 

809,468

 

 

 

45,803

 

 

 

822,928

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

20

 

 

 

(2

)

 

 

(26

)

 

 

(10

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(517,922

)

 

 

815,983

 

 

 

(846,265

)

 

 

823,291

 

Cash, cash equivalents, and restricted cash at beginning of period

 

1,048,339

 

 

 

45,114

 

 

 

1,376,682

 

 

 

37,806

 

Cash, cash equivalents, and restricted cash at end of period

$

530,417

 

 

$

861,097

 

 

$

530,417

 

 

$

861,097

 

Reconciliation of cash, cash equivalents, and restricted cash within the consolidated balance sheets to the amounts shown above:

 

Cash and cash equivalents

$

529,667

 

 

$

860,347

 

 

$

529,667

 

 

$

860,347

 

Restricted cash included in other assets, current and non-current

 

750

 

 

 

750

 

 

 

750

 

 

 

750

 

Total cash, cash equivalents, and restricted cash

$

530,417

 

 

$

861,097

 

 

$

530,417

 

 

$

861,097

 

 

 

 


 

 

Confluent, Inc.

Reconciliation of GAAP Measures to Non-GAAP Measures

(in thousands, except percentages, share and per share data)

(unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Reconciliation of GAAP total gross profit to non-GAAP total gross profit:

 

Total gross profit on a GAAP basis

$

89,898

 

 

$

58,329

 

 

$

170,260

 

 

$

111,519

 

Total gross margin on a GAAP basis

64.5%

 

 

66.0%

 

 

64.1%

 

 

67.4%

 

Add: Stock-based compensation expense

 

8,346

 

 

 

3,227

 

 

 

15,521

 

 

 

4,746

 

Add: Employer taxes on employee stock transactions

 

150

 

 

 

326

 

 

 

560

 

 

 

326

 

Non-GAAP total gross profit

$

98,394

 

 

$

61,882

 

 

$

186,341

 

 

$

116,591

 

Non-GAAP total gross margin

70.6%

 

 

70.1%

 

 

70.2%

 

 

70.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP operating expenses to non-GAAP operating expenses:

 

Research and development operating expense on a GAAP basis

$

64,472

 

 

$

33,225

 

 

$

122,133

 

 

$

57,538

 

Less: Stock-based compensation expense

 

25,337

 

 

 

8,932

 

 

 

45,422

 

 

 

12,443

 

Less: Employer taxes on employee stock transactions

 

342

 

 

 

277

 

 

 

1,381

 

 

 

398

 

Non-GAAP research and development operating expense

$

38,793

 

 

$

24,016

 

 

$

75,330

 

 

$

44,697

 

Non-GAAP research and development operating expense as a percentage of total revenue

27.8%

 

 

27.2%

 

 

28.4%

 

 

27.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing operating expense on a GAAP basis

$

112,754

 

 

$

73,206

 

 

$

219,456

 

 

$

131,715

 

Less: Stock-based compensation expense

 

24,746

 

 

 

11,155

 

 

 

45,808

 

 

 

16,131

 

Less: Employer taxes on employee stock transactions

 

1,048

 

 

 

610

 

 

 

1,728

 

 

 

713

 

Non-GAAP sales and marketing operating expense

$

86,960

 

 

$

61,441

 

 

$

171,920

 

 

$

114,871

 

Non-GAAP sales and marketing operating expense as a percentage of total revenue

62.4%

 

 

69.6%

 

 

64.7%

 

 

69.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative operating expense on a GAAP basis

$

29,979

 

 

$

37,943

 

 

$

57,460

 

 

$

53,455

 

Less: Stock-based compensation expense

 

10,437

 

 

 

11,202

 

 

 

19,484

 

 

 

14,549

 

Less: Employer taxes on employee stock transactions

 

130

 

 

 

222

 

 

 

440

 

 

 

261

 

Less: Common stock charitable donation expense

 

-

 

 

 

13,290

 

 

 

-

 

 

 

13,290

 

Non-GAAP general and administrative operating expense

$

19,412

 

 

$

13,229

 

 

$

37,536

 

 

$

25,355

 

Non-GAAP general and administrative operating expense as a percentage of total revenue

13.9%

 

 

15.0%

 

 

14.1%

 

 

15.3%

 

 

 

 


 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Reconciliation of GAAP operating loss to non-GAAP operating loss:

 

Operating loss on a GAAP basis

$

(117,307

)

 

$

(86,045

)

 

$

(228,789

)

 

$

(131,189

)

Add: Stock-based compensation expense

 

68,866

 

 

 

34,516

 

 

 

126,235

 

 

 

47,869

 

Add: Employer taxes on employee stock transactions

 

1,670

 

 

 

1,435

 

 

 

4,109

 

 

 

1,698

 

Add: Common stock charitable donation expense

 

-

 

 

 

13,290

 

 

 

-

 

 

 

13,290

 

Non-GAAP operating loss

$

(46,771

)

 

$

(36,804

)

 

$

(98,445

)

 

$

(68,332

)

Non-GAAP operating margin

(33.5%)

 

 

(41.7%)

 

 

(37.1%)

 

 

(41.3%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP net loss to non-GAAP net loss:

 

Net loss on a GAAP basis

$

(117,631

)

 

$

(88,170

)

 

$

(230,618

)

 

$

(132,696

)

Add: Stock-based compensation expense

 

68,866

 

 

 

34,516

 

 

 

126,235

 

 

 

47,869

 

Add: Employer taxes on employee stock transactions

 

1,670

 

 

 

1,435

 

 

 

4,109

 

 

 

1,698

 

Add: Common stock charitable donation expense

 

-

 

 

 

13,290

 

 

 

-

 

 

 

13,290

 

Add: Amortization of debt issuance costs

 

946

 

 

 

-

 

 

 

1,882

 

 

 

-

 

Add: Income tax effects and adjustments

 

669

 

 

 

1,716

 

 

 

682

 

 

 

1,045

 

Non-GAAP net loss

$

(45,480

)

 

$

(37,213

)

 

$

(97,710

)

 

$

(68,794

)

Non-GAAP net loss per share, basic and diluted

$

(0.16

)

 

$

(0.31

)

 

$

(0.35

)

 

$

(0.60

)

Weighted-average shares used to compute net loss per share, basic and diluted

 

278,268,980

 

 

 

118,648,655

 

 

 

275,593,362

 

 

 

113,717,546

 

 

The following table presents a reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP measure, for each of the periods indicated (unaudited, in thousands):

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net cash used in operating activities

$

(33,472

)

 

$

(43,166

)

 

$

(88,503

)

 

$

(63,155

)

Capitalized internal-use software costs

 

(2,256

)

 

 

(1,215

)

 

 

(4,765

)

 

 

(1,811

)

Capital expenditures

 

(1,184

)

 

 

(1,030

)

 

 

(2,071

)

 

 

(1,673

)

Free cash flow

$

(36,912

)

 

$

(45,411

)

 

$

(95,339

)

 

$

(66,639

)

Free cash flow margin

(26.5%)

 

 

(51.4%)

 

 

(35.9%)

 

 

(40.3%)

 

Net cash (used in) provided by investing activities

$

(491,805

)

 

$

49,683

 

 

$

(803,539

)

 

$

63,528

 

Net cash provided by financing activities

$

7,335

 

 

$

809,468

 

 

$

45,803

 

 

$

822,928