First of all, I am eternally grateful to everyone on this board, as others have stated many times before, I share this sentiment.
The company I wanted to bring up for discussion is Confluent.
Investor Presentation: https://investors.confluent.io/events-presentations
Public MF article discussing pre-IPO (where I pulled some info): https://www.fool.com/investing/2021/06/28/should-you-put-con…
Confluent operates as a software company with a SaaS model. The company is seven years old and they IPO’d a little more than two months ago at $45 (trading there now). Their market cap is ~$11.5 Billion. There is a lot to like from a Saul standard, which I will get into later.
The company was founded by three former Linkedin employees (all three still with the company, two on the board) who were tasked with rebuilding Linkedin’s data infrastructure from the ground up to be cloud native and scalable. They didn’t see an off the shelf solution, so decided to start building it themselves. This platform is called Apache Kafka.
Confluent offers a service that allows businesses to “stream” data in real time. They operate a data platform and their tag line is “Data In Motion.” Confluent’s platform, from what I understand, is a paid version of Apache Kafka, the open-source project adopted by more than 80% of Fortune 500 companies they created. The difference being Confluent provides enterprise level support. Among other things? Not sure
From the 10Q: Confluent’s platform, "allows customers to connect their applications, systems, and data layers and can be deployed either as a self-managed software offering, Confluent Platform, or as a full-managed cloud-native software-as-as-service (“Saas”) offering, Confluent Cloud.
Someone else can probably help explain that a little better for non techies like myself. Hard for me to get my head around that. As Saul says, we may not understand the tech like someone “in the field” might, but we CAN look at the impressive numbers
Confluent reported yesterday, Aug 5th.
-Total Revenue of $88mm, up 64% YoY
-Confluent Cloud revenue of $20mm, up 200% YoY
-RPO of $327mm, up 72% YoY
-617 customers w/ $100,000 or greater in ARR, up 51% YoY
-Q3 Revenue Guidance of $89-$91mm, and Fiscal 2021 revenue guide of $347-$351mm
By the Numbers (pulled from Bloomberg):
Year Mar Jun Sep Dec Total Growth (QoQ)
FY2019 29.2 34.0 38.5 48.1 149.8
FY2020 50.9 53.9 61.5 70.3 236.6 74.5% 58.2% 59.7% 46.2%
FY2021 77.0 88.3 51.3% 64.0%
Confluent is starting to re-accelerate after the Q4’20 slowdown. I don’t know why they slowed a bit in 2020, but I assume it was COVID related.
Gross margin has hovered around 69% over the last year. Subscription based revenue, which represents ~90% of revenue, was 77%.
In land and expand mode: already have captured 136 of the Fortune 500 companies.
Customers that you would be familiar with include: Citi, Expedia, Lowe’s, Bosch, BMW, Expedia, Humana, Key Bank, Walmart, Dominos, Netflix, Ticketmaster, Morgan Stanley, Goldman Sachs, Lufthansa and more. Do you see the point there? They are proving to be successful across virtually ANY industry! The network effect is driving further expansion.
Named Google’s 2020 Cloud Partner of the Year for Smart Analytics for the third straight year! (https://www.confluent.io/press-release/confluent-google-clou…)
Total Customers: As of Q2’21 Confluent had 2,830 customers, up from 1,390 in Q2’20, an increase of 104%!
Customers w/ >$100k in ARR: 617 in latest quarter, up 51% YoY
Customers w/ >$1MM in ARR: 70 in latest quarter, up 112% YoY! Talk about land and expand!!
There is a lot to like here. This is a founder-led hyper-growth SaaS company with a huge TAM. While I don’t completely understand the technology, I do like the impressive revenue growth, gross margin %, and customer growth, particularly in the $1MM+ category. It appears that Confluent’s moat is the fact that they are the main support for the Apache Kafka software at the enterprise level. The technology is open source and ubiquitous, and they are bringing over paid subscribers in droves. I am going to buy a ~2% starter position next week to keep it on the radar.