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Technology Stocks : Investing in Exponential Growth

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From: Paul H. Christiansen11/17/2023 10:55:32 AM
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2023-11-17 – Confluent has been added ($20.17) to our Model Portfolio

Select HERE for an updated copy of CFLT’s Revenue Chart

2023-11-01 – CFLT CEO’s Comments – 2023Q3 Earnings Call Transcript

"I want to spend some time now focusing on a critical change we're making to drive growth. Beyond just the friction in the current market environment, the critical project for Confluent is to capture the massive market opportunity in streaming. This is a $60 billion market where we are still just scratching the surface of even the existing open source Kafka usage. And we have additional expansion opportunities from Flink, our connectors and data governance, as I outlined in the earnings call last time.

Critical to our execution against this opportunity is leveraging our go-to-market engine to rapidly land new customers, expand new workloads and ensure the adoption of our full set of product capabilities. To this end, we'll be completing the transition to orient our cloud business around consumption. This will make cloud revenue rather than bookings or committed spend the primary goal of the go-to-market organization for Confluent Cloud. This was a planned transition. Indeed, we began changes in this direction this year, but it’s a transition we’ll be significantly accelerating heading into 2024.

To explain what this means, let me start with a little background. In the traditional world of on-premise software, customers would make big upfront commitments. Salespeople worked with the customer to scope these commitments and were paid as a percentage of the resulting bookings. The marketing organization measured pipeline based on these commitments, and every internal system and process was oriented around measuring and managing the bookings that resulted. There was some misalignment between customer and vendor because customer might end up over purchasing, but this was masked by the fact that the rest of the stack, such as servers that ran the software, were also fundamentally upfront in inelastic purchases.

With the advent of the cloud and the elasticity and flexibility it offered to customers, this model had to evolve. Cloud has a utility-like model where services are metered as they are used. However, in the early days, the go-to-market engine for cloud infrastructure software largely remained as it was previously, selling customer commitments or credits that overlaid this dynamic usage. Alignment between customer and vendor improved somewhat, but the vendor still had an incentive to maximally scope customer commitments. Over the last couple of years, businesses like MongoDB, Snowflake, Datadog and hyperscalers have all transitioned their go-to-market to a fully consumption-based model. In this model, the customer and the go-to-market organization are both oriented around the actual service usage, not the upfront commitment. This fully aligns the customer value realization with the vendor's revenue. Less obvious from the outside is how this completely upends the sales and marketing model.

Pipeline is no longer oriented around maximum customer commitment, but rather new logos and new workloads. Salespeople aren't compensated for getting an upfront booking, but rather for what a customer actually uses, finding new workloads and driving new product adoption. This is an absolute win for customers and also a huge win for vendors, who are actually able to grow faster by removing much of the uncertainty and risk from customer purchasing.

With Confluent Cloud now at nearly 50% of our revenue, having NRR over 140% and continuing rapid growth, it's time for Confluent to complete our transition to this fully consumption-based model. We've already made the transition to usage-based pricing that bills for what is used. But today, our go-to-market is still primarily oriented around booking customer commitments."



2023-11-15 – Confluent (CFLT) - Collected Snippets from Briefing.com

Data Streaming Is Central to the Modern Data Stack

Data streaming enables businesses to continuously process their data in real time for improved workflows, more automation, and superior, digital customer experiences. Confluent helps you operationalize and scale all your data streaming projects so you never lose focus on your core business.

2023-09-01 - Canaccord Genuity began coverage on Confluent (CFLT) at Buy, $40 tgt; CG thinks investors should consider three key elements in the CFLT story: Confluent stands out in a rapidly growing, highly fragmented data streaming landscape. Opportunity in stream processing (Flink) could be as large as core market. Confluent Cloud's differentiated value proposition extends far beyond hosting.

2023-05-30 - Confluent: Data Streaming Hits the Mainstream; Category Leader Positioned to Execute - Needham; tgt $35 (28.71)

Needham's Mike Cikos notes, "Confluent Cloud has been constructed from the ground up to deliver a Cloud-Native SaaS offering that differs from hyperscalers' Cloud-Hosted solutions and provides cross-cloud flexibility. We also see Confluent's development of a fully-managed Flink offering as potentially mirroring Kafka adoption while deepening and broadening the platform. We initiate coverage of Confluent with a Buy rating and a $35 Price Target."

2023-05-16 - Confluent (CFLT) announced new Confluent Cloud capabilities that give customers confidence that their data is trustworthy and can be easily processed and securely shared. With Data Quality Rules, an expansion of the Stream Governance suite, organizations can easily resolve data quality issues so data can be relied on for making business-critical decisions. In addition, Confluent's new Custom Connectors, Stream Sharing, the Kora Engine, and early access program for managed Apache Flink make it easier for companies to gain insights from their data on one platform, reducing operational burdens and ensuring industry-leading performance. Briefing.com

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