Confluent, Inc. Q4 FY2024 earnings call

Key Points

• Jay Kreps noted exceeding guided metrics, with subscription revenue up 24%, Confluent Cloud revenue up 38%, and non-GAAP operating margin at 5% for the third consecutive positive quarter.
• Major expansion of strategic partnership with Databricks to integrate Confluent's data streaming platform with Databricks' Data Intelligence platform for real-time AI-driven decision making.
• Tableflow's success in bridging operational and analytical systems, with examples like a U.S. digital native customer improving data insights and decision-making.
• Customer examples such as Zazzle, a European grocery delivery service, a top telecom customer, and Citizens Bank showcasing benefits of Confluent's platform.
• Rohan Sivaram highlighted strong fiscal year 2024 results: subscription revenue grew 26% to $922.1 million, non-GAAP operating margin improved to 2.9%, free cash flow margin to 1%, and first non-GAAP profitable year.
• Q4 results: subscription revenue $250.6 million, Confluent Cloud revenue $137.9 million. Win rate increase, customer count growth to ~5,800, 100K+ ARR customers at 1,381 (90% of revenue), 1 million+ ARR customers at 194. NRR 117%, GRR above 90%.

Subscription revenue grew 24% to $251 million. Confluent Cloud revenue grew 38% to $138 million, accounting for 55% of subscription revenue (up from 49% a year ago). Confluent Platform revenue grew 10% to $112.7 million, accounting for 45% of subscription revenue. DSP Cloud consumption (connect, process and govern) accounted for approximately 13% of the cloud business and grew substantially faster than overall cloud. Geographically, revenue from the U.S. grew 20% to $153.7 million, and revenue growth from outside the U.S. accelerated to 26% to $107.5 million.

Fiscal Q1 2025

• Subscription revenue expected to be in the range of $253 million to $254 million, representing growth of approximately 22% to 23%.
• Non-GAAP operating margin expected to be approximately 3%.
• Non-GAAP net income per diluted share expected to be in the range of $0.06 to $0.07.

Fiscal Year 2025

• Subscription revenue expected to be in the range of $1.117 billion to $1.121 billion, representing growth of approximately 21% to 22%.
• Non-GAAP operating margin within midterm target.
• Free cash flow margin expected to be approximately 6% excluding one-time negative impact from timing of cash compensation payments.

Q: Matthew Hedberg from RBC asked about how customers think about using Confluent for streaming and processing outside of analytic engines and where processing makes sense within data lake/data warehousing layer.

A: Jay Kreps responded that the rise of AI applications and open data formats like Iceberg or Delta are driving the need for real-time data in analytics. Tableflow's offering projects streaming data as Iceberg or Delta tables, and the partnership with Databricks integrates into their format and catalog, with go-to-market activities to take it to customers.

Q: Michael Turrin from Wells Fargo asked about Gen AI related use cases for streaming/DSP technology.

A: Jay Kreps said the first wave was real-time ETL for AI, and the second wave is applying language models directly on data streams, such as in insurance for claim processing.

Q: Brad Zelnick from Deutsche Bank asked about changes in go-to-market and packaging changes expanding the serviceable addressable market.

A: Jay Kreps mentioned tuning up the comp plan to track specific workloads, and Rohan Sivaram explained that packaging changes like enterprise SKU, freight clusters, and WarpStream expand the market by providing TCO and ROI for various workloads.

Q: Raimo Lenschow from Barclays asked about Flink momentum and Databricks relationship.

A: Jay Kreps said Flink has seen maturity and broad-based adoption, and the Databricks relationship is productive as Confluent acts as a broker of streaming data in the analytics ecosystem.

Q: Robbie Owens from Piper Sandler asked about $1 million customers and deferred revenue.

A: Jay Kreps said building the journey from first use case to large platform with DSP functionality accelerates customer growth, and Rohan Sivaram noted deferred revenue changes are driven by timing of large deals, not organic momentum.

Q: Kash Rangan from Goldman Sachs asked about salespeople compensation through consumption and AI impact on financials.

A: Jay Kreps said the new model matches customer buying and accelerates DSP adoption, and AI use cases show up in customer references and growth numbers but not as a broken-out category.

Q: Howard Ma from Guggenheim asked about replacing traditional data integration vendors and go-to-market for larger commercial batch workloads.

A: Jay Kreps said Confluent is replacing legacy integration technologies, with more awareness of the data streaming space and complete product capabilities enabling direct replacement of commercial data integration vendors.

Q: Gregg Moskowitz from Mizuho asked about customer deliberation due to multiple deployment mechanisms.

A: Jay Kreps said it's not a huge concern as the company has excellent TCO and deployment stories for various workloads, and the product portfolio covers different compute needs.

Q: Rudy Kessinger from D.A. Davidson asked about sales productivity levels in 2025.

A: Rohan Sivaram said the company became more efficient in 2024 and has capacity to deliver on 2025 plans with continued focus on efficiency.

Q: Kingsley Crane from Canaccord asked about stream processing market size and inning.

A: Jay Kreps said stream processing is in an early inning with significant growth potential as more workloads move to continuous processing, and AI companies are a strong customer segment for stream processing.