Confluent, Inc. (NASDAQ:CFLT) Q2 2023 Earnings Call Transcript

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Michael Cikos: Got it, got it. And then one, if I could ask over to Steffan here. But on the guidance, for the negative 10% operating margin guidance that we have for Q3, the slight erosion versus what we just saw in Q2. And I’m just trying to sanity check that. Were there any delays in expenses that may be pushed from Q2 to Q3 or can you help us think through why we are looking at a wider operating loss when thinking about that margin in Q3 versus what we just saw out of the June quarter?

Steffan Tomlinson: Yes. I mean there’s — what we’re talking about is effectively roughly flat quarter-on-quarter and way better than what we had originally thought for in Q3. So what we have going on is there’s some — we look at the top line growth, we look at margin and we look at the key drivers as we construct the overall guidance. And there was nothing that was pulled forward or pushed out in Q2. We are just forecasting where our head counts is going to land, timing of head count, and so it’s effectively flat quarter-on-quarter. And way better than what we thought at the beginning of the year relative to where we thought operating margin would be in Q3. And we also raised numbers for Q4 profit as well. So overall — or for the full year, I should say, so we’ll always feel good about that.

Michael Cikos: Great. Thank you very much guys.

Shane Xie: Thanks, Mike. We’ll take our next question from Bradley Sills with Bank of America, followed by [indiscernible].

Bradley Sills: Wonderful. Thanks Shane. Congratulations Rohan, and Steffan, you’ll be missed, I enjoyed working with you. I wanted to ask a question about the partner channel. It was a key theme at your Analyst Day so any progress there? Anything incremental here, seems like it’s kind of a newer — not a new focus, but an incremental focus, if you will, on some of the ISVs and SIs. So any update there, please?

Jay Kreps: Yes. That has been an area of investment and kind of increased focus for us maybe in the last six-nine months. And it’s actually manifested in some pretty positive early signs a couple of ways. So, a couple of the SIs where we’ve seen really strong traction and we think if that continues, that can be a substantial tailwind over time. We’ve seen this actually reflected in the uptick in pipeline that Steffan called out, that was an area that was a little behind our expectations, maybe a year ago. It is now performing above plan now, which has been really a kind of strong turnaround in the area and so we were really happy to see. So yes, I think both of those are positive signs and of course, kind of key discussions in the technology landscape.

We announced a program around the technology partners, and this is an area that I think it’s particularly strategic, making sure that we have the integrations into all these different systems, either upstream or downstream that want to plug in, deliver streams of data out to everything else in an organization or pull it in and do some kind of analytics or AI or machine learning on top of it, that’s a program that we’ve launched that has really seen strong demand, and I think is very exciting.

Bradley Sills: Wonderful. Thanks Jay. One more, if I may, please, when we think of the success you’ve had over the years, a lot of this is driven by need for real-time streaming in next-generation applications. But I know there’s also a good mix of deals here that involve modernization of existing data platforms and providing that real-time capability to a lot of legacy applications. So, just curious, any observation there on that mix of deal activity coming from net new activity versus replacement and refresh modernization of existing infrastructure? Thank you.

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