Item 2.02 Results of Operations and Financial Condition.
On
Based on preliminary unaudited financial and other information, the Company expects results to exceed the high end of its guidance for total revenue, non-GAAP operating margin, and non-GAAP net loss per share for its fourth quarter and fiscal year 2022:
Fourth Quarter 2022 Financial Highlights
(in millions, except per share data and percentages) Q4 2022 Q4 2021 Y/Y Change Total Revenue$168.7 $119.9 41% Confluent Cloud Revenue$68.4 $33.8 102% GAAP Operating Loss$(115.0) $(113.7) $(1.3) Non-GAAP Operating Loss$(36.3) $(49.7) $13.4 GAAP Operating Margin (68.2%) (94.8%) 26.6 pts Non-GAAP Operating Margin (21.5%) (41.4%) 19.9 pts GAAP Net Loss Per Share$(0.37) $(0.43) $0.06 Non-GAAP Net Loss Per Share$(0.09) $(0.19) $0.10 Net Cash Used in Operating Activities$(27.1) $(23.9) $(3.2) Free Cash Flow$(30.9) $(26.7) $(4.2)
Fiscal Year 2022 Financial Highlights
(in millions, except per share data and percentages) FY 2022 FY 2021 Y/Y Change Total Revenue$585.9 $387.9 51% Confluent Cloud Revenue$211.2 $94.2 124% GAAP Operating Loss$(462.7) $(339.6) $(123.1) Non-GAAP Operating Loss$(176.9) $(160.6) $(16.3) GAAP Operating Margin (79.0%) (87.6%) 8.6 pts Non-GAAP Operating Margin (30.2%) (41.4%) 11.2 pts GAAP Net Loss Per Share$(1.62) $(1.82) $0.20 Non-GAAP Net Loss Per Share$(0.58) $(0.86) $0.28 Net Cash Used in Operating Activities$(157.3) $(105.1) $(52.2) Free Cash Flow$(171.8) $(114.0) $(57.8)
A description of these non-GAAP financial measures, including the reasons management uses each measure, as well as a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure are provided below under "Non-GAAP Financial Measures" in this Item 2.02.
The Company also expects to report the following preliminary results for its key
metrics as of
• Remaining performance obligations grew 48% year over year to$740.7 million , of which 62% is expected to be recognized as revenue over the next 12 months • Customers with$100,000 or greater in annual recurring revenue ("ARR") grew 35% year over year to 991, 133 of which had$1,000,000 or greater in ARR, up 51% year over year • Dollar-based net retention rate of just under 130%
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As previously announced, the Company is scheduled to release financial results
for its fourth quarter and fiscal year 2022, which ended
For a description of the Company's key metrics, see the section titled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Key Business Metrics" in the Company's Quarterly Report on Form 10-Q
for the quarter ended
These preliminary unaudited financial and other results are subject to revision
in connection with the Company's financial closing procedures, including the
review of such financial results by the Company's audit committee, and
finalization and audit of the Company's consolidated financial statements for
the year ended
Non-GAAP Financial Measures
This Current Report on Form 8-K includes the following non-GAAP financial
measures: non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss
per share, free cash flow, and free cash flow margin. Non-GAAP financial
measures are financial measures that are derived from the consolidated financial
statements, but that are not presented in accordance with generally accepted
accounting principles in
Reconciliation of GAAP Measures to Non-GAAP Measures
The following table presents a reconciliation of non-GAAP operating loss to GAAP operating loss and non-GAAP net loss to GAAP net loss, each the most directly comparable GAAP measure, for each of the periods presented.
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. . .
Item 2.05 Costs Associated with Exit or Disposal Activities.
On
The Restructuring Plan includes a reduction of approximately 8% of the Company's
global workforce of 2,761 employees as of
The Company estimates it will incur approximately
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Potential position eliminations in each country are subject to local law and
consultation requirements, which may extend this process beyond
Item 7.01 Regulation FD Disclosure.
The Company is issuing its preliminary outlook for its first quarter of 2023,
and updating the preliminary outlook for fiscal year 2023, which it initially
provided on
Q1 2023 Outlook FY 2023 Outlook Total Revenue$166-$168 million $760-$765 million
Non-GAAP Operating Margin ~ (27%) (15%) - (14%)
Non-GAAP Net Loss Per Share
The Company expects to exit the fourth quarter of 2023 with breakeven non-GAAP operating margin.
A reconciliation of forward-looking non-GAAP operating margin and non-GAAP net loss per share to the most directly comparable GAAP measures is not available without unreasonable effort, as certain items cannot be reasonably predicted because of their high variability, complexity and low visibility. In particular, the measures and effects of the Company's stock-based compensation expense specific to its equity compensation awards and employer payroll tax-related items on employee stock transactions, both of which the Company expects will have a significant impact on its future GAAP financial results, are directly impacted by the timing of employee stock transactions and unpredictable fluctuations in the Company's stock price.
In addition, on
The information contained in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 incorporated by reference herein, shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filings, unless expressly incorporated by specific reference in such filing.
Forward Looking Statements
This Current Report on Form 8-K and the exhibit attached hereto contains forward-looking statements including, among other things, statements about the Company's expectations regarding the costs, cash outlays, benefits, timing and financial impacts of the Restructuring Plan, the Company's preliminary unaudited financial and other results as of and for the fourth quarter of 2022 and fiscal year 2022, the Company's anticipated timeline to achieve breakeven for non-GAAP operating margin, the Company's financial outlook for the first quarter of 2023 and fiscal year 2023, including expected annual revenue growth rate, and related matters. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "seek," "plan," "project," "target," "looking ahead," "look to," "move into," and similar expressions are intended to identify forward-looking statements. Forward-looking statements represent the Company's current beliefs, estimates and assumptions only as of the date of this Current Report on Form 8-K and information contained herein should not be relied upon as representing the Company's estimates as of any subsequent date. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Risks include, but are not limited to: (i) the Company's ability to timely complete its financial closing procedures and finalize its consolidated financial statements for fiscal year 2022, (ii) the Company's
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limited operating history, including in uncertain macroeconomic environments,
(iii) the Company's ability to sustain and manage its rapid growth, including
following the Restructuring Plan, (iv) the Company's ability to attract new
customers and retain and sell additional features and services to its existing
customers, (v) inflationary conditions, economic uncertainty, recessionary
risks, and exchange rate fluctuations, which may result in customer pullback in
information technology spending, lengthening of sales cycles, reduced contract
sizes, reduced consumption of Confluent Cloud or customer preference for open
source alternatives, as well as the potential need for cost efficiency measures,
such as the Restructuring Plan, (vi) the Company's ability to increase
consumption of its offering, including by existing customers and through the
acquisition of new customers, and successfully add new features and
functionality to its offering, (vii) the Company's ability to achieve or sustain
profitability and improve margins annually, by the Company's expected timelines
or at all, (viii) the Company's ability to operate its business and execute on
its strategic initiatives following the Restructuring Plan, (ix) the estimated
addressable market opportunity for the Company's offering, (x) the Company's
ability to compete effectively in an increasingly competitive market, including
achieving market acceptance over competitors and open source alternatives,
(xi) the Company's ability to successfully execute its go-to-market strategy and
initiatives, including following the Restructuring Plan, (xii) the Company's
ability to attract and retain highly qualified personnel, which could be
negatively impacted by the Restructuring Plan, (xiii) breaches in the Company's
security measures or unauthorized access to its platform, its data, or its
customers' or other users' personal data, (xiv) the Company's reliance on
third-party cloud-based infrastructure to host Confluent Cloud, and
(xiv) general market, political, economic, and business conditions, including
continuing impacts from the COVID-19 pandemic. These risks are not exhaustive.
Further information on these and other risks that could affect the Company's
results is included in its filings with the
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits Exhibit No. Description 99.1 Message to Confluent employees fromJay Kreps , datedJanuary 26, 2023 . 104 Cover Page Interactive Data File (formatted as Inline XBRL).
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