Confluent, Inc. (NASDAQ:CFLT) Q3 2023 Results Conference Call November 1, 2023 4:30 PM ET

Company Participants

Shane Xie - IR

Jay Kreps - Co-Founder and CEO

Rohan Sivaram - CFO

Conference Call Participants

Sanjit Singh - Morgan Stanley

Brad Zelnick - Deutsche

Kash Rangan - Goldman Sachs

Michael Turrin - Wells Fargo

Pinjalim Bora - JPMorgan

Brad Sills - Bank of America

Jason Ader - William Blair

Derrick Wood - TD Cowen

Raimo Lenschow - Barclays

Shane Xie

Hi, everyone. Welcome to the Confluent Q3 2023 Earnings Conference Call. I'm Shane Xie from Investor Relations, and I'm joined by Jay Kreps, Co-Founder and CEO; and Rohan Sivaram, CFO.

During today's call, management will make forward-looking statements regarding our business, operations, sales strategy, financial performance and future prospects, including statements regarding our financial guidance for the fiscal fourth quarter of 2023, fiscal year 2023 and fiscal year 2024. These forward-looking statements are subject to risks and uncertainties, 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 most recent Form 10-Q filed with the SEC. We assume no obligation to update these statements after today's call, except as required by law. Unless stated otherwise, certain financial measures used on today's call are expressed on a non-GAAP basis, and all comparisons are made on a year-over-year basis. We use these non-GAAP financial measures internally to facilitate analysis of 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 IR website at investors.confluent.io.

And with that, I'll hand the call over to Jay.

Jay Kreps

Thanks, Shane. Good afternoon, everyone, and welcome to our third quarter earnings call.

We delivered a solid Q3, exceeding the high end of total revenue, operating margin and EPS guided range in a still challenging macroeconomic environment. Total revenue grew 32% to $200 million. Non-GAAP operating margin improved 22 percentage points, and non-GAAP EPS turned positive for the first time, a key milestone.

We've now driven 36 percentage points of operating margin improvement over the last two years. I want to thank our entire employee base for the tremendous progress here. The Confluent Cloud remains the fastest-growing part of our business, with revenue up 61% to $92 million. It fell slightly below our guidance. Our Q4 revenue outlook is impacted as well. We expect revenue growth of 21% to 22% with cloud revenue sequential add of $6 million, representing growth of 43%.