Confluent, Inc. (NASDAQ:CFLT) Q4 2022 Earnings Call Transcript

Pinjalim Bora: Got it. And great to see the acceleration to get to breakeven. I wanted to ask — I think I was doing the math was about $55 million in terms of cost coming down, I believe. I was trying to understand how much of that is driven by the , how much of that is kind of optimization of discretionary spend that you talked about, how much of that is kind of real estate. I would think that real estate optimization probably will take time. So trying to understand those mix. And then, I guess, how should we think of that profitability going forward?

Jay Kreps: Yes. Yes. So it’s definitely a mixture of all those things. We haven’t broken out exactly how much is due to each thing. But — yes, absolutely, we’re kind of optimizing real estate footprint. Just kind of post COVID, we have a better of what we actually need. We had already a plan for the year prior to this action that would have shown very meaningful operating margin improvement. And so then this is kind of added on top of that, which is kind of what lets us make big improvements. And if you look at this last year, we had about 20 points of improvement over the last 12 months from Q4 to Q4 in non-GAAP operating margin. And so this is kind of roughly that again between the ref and the existing improvements and the additional growth in revenue.

Pinjalim Bora: Got it. Thank you.

Shane Xie: And our next question goes to Kash Rangan with Goldman Sachs. Kash?

Jay Kreps: Hi, Kash.

Kasthuri Rangan: Thank you so much. Somewhat static here. Nice to see you guys, Jay, Steffan and Shane. Question for you. When you look at Flink, Jay, for you, how much work needs to be done to Flink to make it as solid as — in terms of research and development, product development came pretty — as a core platform is taking so many years to come to shape. What is the path ahead for Flink? And when you said Flink could be as large as Kafka, I’m curious to see if there’s any pent-up demand that customers have been asking for. I know you highlighted a few customers, including us. What are they saying that you could do better with Flink that could cause them to allocate bigger budgets? And I have one for Steffan.

Jay Kreps: Yes. Yes, there’s a couple of things there. I mean, I — Flink, the technology, I think, is in good shape. It’s a successful piece of technology that it’s in own right. To turn it into a managed cloud service is a ton of work. It’s just a huge amount of work. That’s something we’ll work on for many years, right? And so we’ll release a product, but there’ll be more and more to do. That kind of cloud-native bucket that we talk about for the rest of our offering, it’s a big bucket. It really matters to customers. And so — yes, there’ll be ongoing work in that dimension in the years to come. That’s one of the reasons why it’s really important to have these core people who are driving that technology forward. It’s not just a matter of kind of getting the open source and putting it on some servers, which we wouldn’t need an acquisition to do.