8-K
false000169983800016998382022-11-022022-11-02

 

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): November 2, 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 November 2, 2022, Confluent, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 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 November 2, 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:

November 2, 2022

By:

/s/ Steffan Tomlinson

 

 

 

Steffan Tomlinson
Chief Financial Officer

 

 


EX-99.1

Exhibit 99.1

Confluent Announces Third Quarter 2022 Financial Results

Total revenue of $152 million, up 48% year over year
Confluent Cloud revenue of $57 million, up 112% year over year
Remaining performance obligations of $664 million, up 72% year over year
921 customers with $100,000 or greater in ARR, up 39% year over year

 

MOUNTAIN VIEW, Calif. -- November 02, 2022 -- Confluent, Inc. (NASDAQ: CFLT), the data streaming pioneer, today announced financial results for its third quarter of 2022, ended September 30, 2022.

 

“The data streaming era is here. The need for real-time data is pushing data streaming from the edges to the core of modern organizations,” said Jay Kreps, co-founder and CEO, Confluent. “This trend is reflected by the 39% year-over-year growth in customers with $100k+ ARR, while the 112% year-over-year growth in Confluent Cloud revenue underscores the strong differentiation and TCO advantage of our cloud-native platform.”

 

“Our ability to drive durable and efficient growth is proven once again by our strong third quarter results, with 48% revenue growth and 14-point GAAP and non-GAAP operating margin improvements year over year,” said Steffan Tomlinson, CFO, Confluent. “Customers continue to drive their digital transformation forward with Confluent, resulting in 72% year-over-year growth in RPO and greater than 130% NRR for the sixth consecutive quarter.”

 

Third Quarter 2022 Financial Highlights

(In millions, except per share data and percentages)

 

Q3 2022

Q3 2021

Y/Y Change

Total Revenue

$151.7

$102.6

48%

Remaining Performance Obligations

$663.5

$385.0

72%

GAAP Operating Loss

$(118.9)

$(94.8)

$(24.1)

Non-GAAP Operating Loss

$(42.1)

$(42.6)

$0.5

GAAP Operating Margin

(78.4%)

(92.4%)

14.0 pts

Non-GAAP Operating Margin

(27.8%)

(41.6%)

13.8 pts

GAAP Net Loss Per Share

$(0.41)

$(0.37)

$(0.04)

Non-GAAP Net Loss Per Share

$(0.13)

$(0.17)

$0.04

Net Cash Used in Operating Activities

$(41.8)

$(18.0)

$(23.8)

Free Cash Flow

$(45.6)

$(20.6)

$(25.0)

 

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 fourth quarter and fiscal year 2022, Confluent expects:

 

Q4 2022 Outlook

FY 2022 Outlook

Total Revenue

$161-$163 million

$578-$580 million

Non-GAAP Operating Margin

~ (28%)

~ (32%)

Non-GAAP Net Loss Per Share

$(0.16)-$(0.14)

$(0.65)-$(0.63)

 

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 third 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 operating margins and margin improvements, target gross and operating margin levels, achievement of positive non-GAAP operating margin exiting the fourth quarter of fiscal 2024 and impact of macro dynamics such as increased scrutiny on deal approvals; ability to invest with discipline and drive durable and efficient growth; the potential growth runway for Confluent Cloud; continued rates of Confluent Cloud consumption despite macroeconomic uncertainty; customer growth, retention and engagement; ability for Confluent Cloud to provide cost savings for users and customers; increased adoption of our platform and fully managed solutions for data streaming in general; dependence of businesses on data in motion; demand for and retention of data streaming 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 ability to increase engagement of customers for Confluent and expand customer cohorts; 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) our limited operating history, including in uncertain macroeconomic environments, (ii) our ability to sustain and manage our rapid growth, (iii) our ability to attract new customers and retain and sell additional features and services to our existing customers, (iv) 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, (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) the impact of the ongoing COVID-19 pandemic on our business, as well as our customers, prospects, partners, and service providers and (xiv) 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 June 30, 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 September 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)

 

 

September 30,

 

 

December 31,

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

503,406

 

 

$

1,375,932

 

Marketable securities

 

1,436,313

 

 

 

640,085

 

Accounts receivable, net

 

143,026

 

 

 

137,491

 

Deferred contract acquisition costs

 

32,666

 

 

 

27,646

 

Prepaid expenses and other current assets

 

59,144

 

 

 

44,919

 

Total current assets

 

2,174,555

 

 

 

2,226,073

 

Property and equipment, net

 

25,650

 

 

 

14,428

 

Operating lease right-of-use assets

 

31,470

 

 

 

37,281

 

Deferred contract acquisition costs, non-current

 

61,182

 

 

 

51,178

 

Other assets, non-current

 

20,772

 

 

 

13,769

 

Total assets

$

2,313,629

 

 

$

2,342,729

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

14,243

 

 

$

7,591

 

Accrued expenses and other liabilities

 

94,374

 

 

 

98,974

 

Operating lease liabilities

 

7,758

 

 

 

9,236

 

Deferred revenue

 

258,853

 

 

 

220,920

 

Liability for early exercise of unvested stock options

 

3,418

 

 

 

11,467

 

Total current liabilities

 

378,646

 

 

 

348,188

 

Operating lease liabilities, non-current

 

27,023

 

 

 

31,645

 

Deferred revenue, non-current

 

31,065

 

 

 

25,557

 

Convertible senior notes, net

 

1,083,541

 

 

 

1,080,701

 

Other liabilities, non-current

 

9,456

 

 

 

6,357

 

Total liabilities

 

1,529,731

 

 

 

1,492,448

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock

 

-

 

 

 

-

 

Class A common stock

 

2

 

 

 

1

 

Class B common stock

 

1

 

 

 

2

 

Additional paid-in capital

 

1,892,474

 

 

 

1,599,962

 

Accumulated other comprehensive loss

 

(13,058

)

 

 

(830

)

Accumulated deficit

 

(1,095,521

)

 

 

(748,854

)

Total stockholders’ equity

 

783,898

 

 

 

850,281

 

Total liabilities and stockholders’ equity

$

2,313,629

 

 

$

2,342,729

 

 

 


 

Confluent, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Subscription

$

138,730

 

 

$

92,400

 

 

$

379,668

 

 

$

238,908

 

Services

 

13,002

 

 

 

10,170

 

 

 

37,610

 

 

 

29,028

 

Total revenue

 

151,732

 

 

 

102,570

 

 

 

417,278

 

 

 

267,936

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

Subscription(1)(2)

 

38,417

 

 

 

25,489

 

 

 

107,628

 

 

 

61,538

 

Services(1)(2)

 

14,763

 

 

 

11,810

 

 

 

40,838

 

 

 

29,608

 

Total cost of revenue

 

53,180

 

 

 

37,299

 

 

 

148,466

 

 

 

91,146

 

Gross profit

 

98,552

 

 

 

65,271

 

 

 

268,812

 

 

 

176,790

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development(1)(2)

 

70,099

 

 

 

47,701

 

 

 

192,232

 

 

 

105,239

 

Sales and marketing(1)(2)

 

114,312

 

 

 

86,991

 

 

 

333,768

 

 

 

218,706

 

General and administrative(1)(2)

 

33,041

 

 

 

25,330

 

 

 

90,501

 

 

 

78,785

 

Total operating expenses

 

217,452

 

 

 

160,022

 

 

 

616,501

 

 

 

402,730

 

Operating loss

 

(118,900

)

 

 

(94,751

)

 

 

(347,689

)

 

 

(225,940

)

Interest income

 

3,147

 

 

 

299

 

 

 

6,331

 

 

 

1,831

 

Other income (expense), net

 

1,572

 

 

 

(530

)

 

 

(1,242

)

 

 

(1,509

)

Loss before income taxes

 

(114,181

)

 

 

(94,982

)

 

 

(342,600

)

 

 

(225,618

)

Provision for income taxes

 

1,868

 

 

 

684

 

 

 

4,067

 

 

 

2,744

 

Net loss

$

(116,049

)

 

$

(95,666

)

 

$

(346,667

)

 

$

(228,362

)

Net loss per share, basic and diluted

$

(0.41

)

 

$

(0.37

)

 

$

(1.25

)

 

$

(1.40

)

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

 

282,267,230

 

 

 

259,152,303

 

 

 

277,840,258

 

 

 

162,728,527

 

 

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

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cost of revenue - subscription

$

6,313

 

 

$

3,945

 

 

$

17,644

 

 

$

7,092

 

Cost of revenue - services

 

2,684

 

 

 

1,790

 

 

 

6,874

 

 

 

3,389

 

Research and development

 

27,692

 

 

 

16,310

 

 

 

73,114

 

 

 

28,753

 

Sales and marketing

 

26,712

 

 

 

18,516

 

 

 

72,520

 

 

 

34,647

 

General and administrative

 

11,992

 

 

 

9,122

 

 

 

31,476

 

 

 

23,671

 

Total stock-based compensation expense

$

75,393

 

 

$

49,683

 

 

$

201,628

 

 

$

97,552

 

 

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

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cost of revenue - subscription

$

82

 

 

$

117

 

 

$

485

 

 

$

155

 

Cost of revenue - services

 

62

 

 

 

49

 

 

 

219

 

 

 

337

 

Research and development

 

496

 

 

 

601

 

 

 

1,877

 

 

 

999

 

Sales and marketing

 

580

 

 

 

1,236

 

 

 

2,308

 

 

 

1,949

 

General and administrative

 

149

 

 

 

436

 

 

 

589

 

 

 

697

 

Total employer taxes on employee stock transactions

$

1,369

 

 

$

2,439

 

 

$

5,478

 

 

$

4,137

 

 

 

 


 

Confluent, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(116,049

)

 

$

(95,666

)

 

$

(346,667

)

 

$

(228,362

)

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

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

2,075

 

 

 

897

 

 

 

5,135

 

 

 

2,440

 

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

 

(3,105

)

 

 

536

 

 

 

(2,869

)

 

 

1,500

 

Amortization of debt issuance costs

 

958

 

 

 

-

 

 

 

2,841

 

 

 

-

 

Amortization of deferred contract acquisition costs

 

9,658

 

 

 

6,739

 

 

 

27,053

 

 

 

18,322

 

Non-cash operating lease costs

 

2,142

 

 

 

2,962

 

 

 

6,617

 

 

 

8,566

 

Common stock charitable donation expense

 

-

 

 

 

-

 

 

 

-

 

 

 

13,290

 

Stock-based compensation, net of amounts capitalized

 

75,393

 

 

 

49,683

 

 

 

201,628

 

 

 

97,552

 

Deferred income taxes

 

20

 

 

 

(1

)

 

 

46

 

 

 

1,729

 

Other

 

321

 

 

 

1,023

 

 

 

880

 

 

 

1,671

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

6,047

 

 

 

979

 

 

 

(6,415

)

 

 

(10,874

)

Deferred contract acquisition costs

 

(19,354

)

 

 

(11,244

)

 

 

(42,077

)

 

 

(37,592

)

Prepaid expenses and other assets

 

(977

)

 

 

(2,616

)

 

 

(21,098

)

 

 

(17,339

)

Accounts payable

 

(1,004

)

 

 

1,366

 

 

 

6,448

 

 

 

1,737

 

Accrued expenses and other liabilities

 

(35

)

 

 

18,597

 

 

 

1,721

 

 

 

31,490

 

Operating lease liabilities

 

(2,029

)

 

 

(2,834

)

 

 

(6,939

)

 

 

(8,216

)

Deferred revenue

 

4,187

 

 

 

11,550

 

 

 

43,441

 

 

 

42,902

 

Net cash used in operating activities

 

(41,752

)

 

 

(18,029

)

 

 

(130,255

)

 

 

(81,184

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Capitalization of internal-use software costs

 

(2,788

)

 

 

(2,052

)

 

 

(7,553

)

 

 

(3,863

)

Purchases of marketable securities

 

(355,886

)

 

 

(322,941

)

 

 

(1,523,248

)

 

 

(378,912

)

Maturities of marketable securities

 

347,000

 

 

 

57,693

 

 

 

717,659

 

 

 

180,667

 

Purchases of property and equipment

 

(1,044

)

 

 

(563

)

 

 

(3,115

)

 

 

(2,236

)

Other

 

-

 

 

 

3

 

 

 

-

 

 

 

12

 

Net cash used in investing activities

 

(12,718

)

 

 

(267,860

)

 

 

(816,257

)

 

 

(204,332

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

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

 

-

 

 

 

-

 

 

 

-

 

 

 

786,600

 

Proceeds from issuance of common stock upon exercise of vested options

 

9,749

 

 

 

10,421

 

 

 

34,132

 

 

 

29,126

 

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

 

-

 

 

 

186

 

 

 

416

 

 

 

18,942

 

Repurchases of unvested options

 

(14

)

 

 

(162

)

 

 

(709

)

 

 

(375

)

Payments of deferred offering costs

 

-

 

 

 

(2,205

)

 

 

-

 

 

 

(3,125

)

Payments of debt issuance costs for convertible senior notes

 

-

 

 

 

-

 

 

 

(786

)

 

 

-

 

Proceeds from issuance of common stock under employee stock purchase plan

 

18,454

 

 

 

-

 

 

 

40,939

 

 

 

-

 

Net cash provided by financing activities

 

28,189

 

 

 

8,240

 

 

 

73,992

 

 

 

831,168

 

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

 

20

 

 

 

(1

)

 

 

(6

)

 

 

(11

)

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

 

(26,261

)

 

 

(277,650

)

 

 

(872,526

)

 

 

545,641

 

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

 

530,417

 

 

 

861,097

 

 

 

1,376,682

 

 

 

37,806

 

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

$

504,156

 

 

$

583,447

 

 

$

504,156

 

 

$

583,447

 

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

 

Cash and cash equivalents

$

503,406

 

 

$

582,697

 

 

$

503,406

 

 

$

582,697

 

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

 

750

 

 

 

750

 

 

 

750

 

 

 

750

 

Total cash, cash equivalents, and restricted cash

$

504,156

 

 

$

583,447

 

 

$

504,156

 

 

$

583,447

 

 

 

 


 

 

Confluent, Inc.

Reconciliation of GAAP Measures to Non-GAAP Measures

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

(unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

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

 

Total gross profit on a GAAP basis

$

98,552

 

 

$

65,271

 

 

$

268,812

 

 

$

176,790

 

Total gross margin on a GAAP basis

65.0%

 

 

63.6%

 

 

64.4%

 

 

66.0%

 

Add: Stock-based compensation expense

 

8,997

 

 

 

5,735

 

 

 

24,518

 

 

 

10,481

 

Add: Employer taxes on employee stock transactions

 

144

 

 

 

166

 

 

 

704

 

 

 

492

 

Non-GAAP total gross profit

$

107,693

 

 

$

71,172

 

 

$

294,034

 

 

$

187,763

 

Non-GAAP total gross margin

71.0%

 

 

69.4%

 

 

70.5%

 

 

70.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Research and development operating expense on a GAAP basis

$

70,099

 

 

$

47,701

 

 

$

192,232

 

 

$

105,239

 

Less: Stock-based compensation expense

 

27,692

 

 

 

16,310

 

 

 

73,114

 

 

 

28,753

 

Less: Employer taxes on employee stock transactions

 

496

 

 

 

601

 

 

 

1,877

 

 

 

999

 

Non-GAAP research and development operating expense

$

41,911

 

 

$

30,790

 

 

$

117,241

 

 

$

75,487

 

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

27.6%

 

 

30.0%

 

 

28.1%

 

 

28.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing operating expense on a GAAP basis

$

114,312

 

 

$

86,991

 

 

$

333,768

 

 

$

218,706

 

Less: Stock-based compensation expense

 

26,712

 

 

 

18,516

 

 

 

72,520

 

 

 

34,647

 

Less: Employer taxes on employee stock transactions

 

580

 

 

 

1,236

 

 

 

2,308

 

 

 

1,949

 

Non-GAAP sales and marketing operating expense

$

87,020

 

 

$

67,239

 

 

$

258,940

 

 

$

182,110

 

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

57.4%

 

 

65.6%

 

 

62.1%

 

 

68.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative operating expense on a GAAP basis

$

33,041

 

 

$

25,330

 

 

$

90,501

 

 

$

78,785

 

Less: Stock-based compensation expense

 

11,992

 

 

 

9,122

 

 

 

31,476

 

 

 

23,671

 

Less: Employer taxes on employee stock transactions

 

149

 

 

 

436

 

 

 

589

 

 

 

697

 

Less: Common stock charitable donation expense

 

-

 

 

 

-

 

 

 

-

 

 

 

13,290

 

Non-GAAP general and administrative operating expense

$

20,900

 

 

$

15,772

 

 

$

58,436

 

 

$

41,127

 

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

13.8%

 

 

15.4%

 

 

14.0%

 

 

15.3%

 

 

 

 


 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

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

 

Operating loss on a GAAP basis

$

(118,900

)

 

$

(94,751

)

 

$

(347,689

)

 

$

(225,940

)

Add: Stock-based compensation expense

 

75,393

 

 

 

49,683

 

 

 

201,628

 

 

 

97,552

 

Add: Employer taxes on employee stock transactions

 

1,369

 

 

 

2,439

 

 

 

5,478

 

 

 

4,137

 

Add: Common stock charitable donation expense

 

-

 

 

 

-

 

 

 

-

 

 

 

13,290

 

Non-GAAP operating loss

$

(42,138

)

 

$

(42,629

)

 

$

(140,583

)

 

$

(110,961

)

Non-GAAP operating margin

(27.8%)

 

 

(41.6%)

 

 

(33.7%)

 

 

(41.4%)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Net loss on a GAAP basis

$

(116,049

)

 

$

(95,666

)

 

$

(346,667

)

 

$

(228,362

)

Add: Stock-based compensation expense

 

75,393

 

 

 

49,683

 

 

 

201,628

 

 

 

97,552

 

Add: Employer taxes on employee stock transactions

 

1,369

 

 

 

2,439

 

 

 

5,478

 

 

 

4,137

 

Add: Common stock charitable donation expense

 

-

 

 

 

-

 

 

 

-

 

 

 

13,290

 

Add: Amortization of debt issuance costs

 

958

 

 

 

-

 

 

 

2,841

 

 

 

-

 

Add: Income tax effects and adjustments

 

293

 

 

 

(20

)

 

 

975

 

 

 

1,025

 

Non-GAAP net loss

$

(38,036

)

 

$

(43,564

)

 

$

(135,745

)

 

$

(112,358

)

Non-GAAP net loss per share, basic and diluted

$

(0.13

)

 

$

(0.17

)

 

$

(0.49

)

 

$

(0.69

)

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

 

282,267,230

 

 

 

259,152,303

 

 

 

277,840,258

 

 

 

162,728,527

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net cash used in operating activities

$

(41,752

)

 

$

(18,029

)

 

$

(130,255

)

 

$

(81,184

)

Capitalized internal-use software costs

 

(2,788

)

 

 

(2,052

)

 

 

(7,553

)

 

 

(3,863

)

Capital expenditures

 

(1,044

)

 

 

(563

)

 

 

(3,115

)

 

 

(2,236

)

Free cash flow

$

(45,584

)

 

$

(20,644

)

 

$

(140,923

)

 

$

(87,283

)

Free cash flow margin

(30.0%)

 

 

(20.1%)

 

 

(33.8%)

 

 

(32.6%)

 

Net cash used in investing activities

$

(12,718

)

 

$

(267,860

)

 

$

(816,257

)

 

$

(204,332

)

Net cash provided by financing activities

$

28,189

 

 

$

8,240

 

 

$

73,992

 

 

$

831,168