Summary
Confluent reported second quarter fiscal 2021 revenue of $88.3 million, up 64% year over year. Revenue for the six months ended June 30, 2021 was $165.4 million, up 57.9%. Confluent Cloud revenue was $19.7 million in the quarter, up 200% year over year, and represented 22% of total revenue. Remaining performance obligations were $327.2 million. The company counted 2,830 customers at June 30, 2021, up 104% year over year, including 617 customers with $100,000 or greater in annual recurring revenue, up 51%. Dollar-based net retention rate was over 130% as of June 30, 2021. Confluent Platform and Confluent Cloud contributed 75% and 25% of subscription revenue in the quarter, compared with 86% and 14% a year earlier.
Gross profit was $58.3 million, up 61.3%. Gross margin was 66.0%, down 1.1 percentage points. The decline came from a change in revenue mix and higher personnel-related costs, partly offset by economies of scale from infrastructure efficiency and optimization. Gross profit for the six months ended June 30, 2021 was $111.5 million, up 61.0%, and gross margin for that period was 67.4%, up 1.3 percentage points. Operating loss widened to $86.0 million. Net loss widened to $88.2 million. Diluted earnings per share was -$0.74. Operating margin was -97.4%, down 46.3 percentage points. Operating loss for the six months was $131.2 million, net loss for the six months was $132.7 million, and diluted earnings per share for the six months was -$1.17. Non-GAAP operating loss was $36.8 million and non-GAAP net loss per share was $0.31 in the quarter.
Net cash used in operating activities was $43.2 million for the quarter and $63.2 million for the six months ended June 30, 2021, with the six-month figure down 20.3%. Free cash flow was negative $45.4 million for the quarter and negative $66.6 million for the six months. Capital expenditures were $1.0 million for the quarter and $1.7 million for the six months. Deferred revenue was $190.5 million at June 30, 2021. Confluent completed its initial public offering in June 2021 and holds a substantial cash and securities balance. Management still expects operating losses and negative cash flows from operations and may need to raise additional capital.
The outlook covers the third quarter and the full fiscal year 2021. Management guided third quarter and full year revenue to ranges, with a non-GAAP operating loss of $62-$60 million for the third quarter and $199-$195 million for the full fiscal year. Non-GAAP net loss per share guidance is $0.24-$0.23 for the third quarter and $1.07-$1.05 for the full fiscal year. The company said it cannot reconcile the non-GAAP operating loss and non-GAAP net loss per share outlook to GAAP measures without unreasonable effort because of the variability in stock-based compensation and payroll tax items tied to employee stock transactions.
Risks named in the filing include the ongoing COVID-19 pandemic, which delayed some professional services delivery and lengthened some sales cycles; a slower pace of sales and marketing hiring in 2020 that may weigh on near-term growth; competition from other vendors and open source alternatives; reliance on third-party cloud infrastructure; security breaches; and a limited operating history. Confluent also cites its ability to attract new customers, retain and sell more to existing customers, and grow consumption of its offering. A partial early lock-up release begins August 9, 2021, letting certain holders sell up to 25% of vested shares.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $88.3M | — | — | — | — |
| Gross profit | $58.3M | — | — | — | — |
| Gross margin | 66.0% | — | — | — | — |
| Research & development | $33.2M | — | — | — | — |
| Sales & marketing | $73.2M | — | — | — | — |
| General & administrative | $37.9M | — | — | — | — |
| Total operating expenses | $144.4M | — | — | — | — |
| Operating income (loss) | -$86.0M | — | — | — | — |
| Operating margin | -97.4% | — | — | — | — |
| Net income (loss) | -$88.2M | — | — | — | — |
| Net margin | -99.8% | — | — | — | — |
| Customers | 2,830 | — | — | — | — |
| Net retention rate | 130.0% | — | — | — | — |
Risks
In April 2021 the company was notified it was impacted by the Codecov Breach, where attackers gained access to credentials in its development environment and copied private GitHub repositories containing source code and internal documents with references to certain customers. The full impact may not be known for some time, and the incident could lead to legal claims, reputational harm, and reduced market acceptance of its offering.
Confluent Cloud runs on AWS, Azure, and GCP, which are also primary actual and potential competitors that could embed innovations in competing products, bundle competing offerings, provide unfavorable pricing, or exclude Confluent from opportunities. The company also states its costs and gross margins are significantly influenced by prices negotiated with these public cloud providers.
Confluent Platform and Confluent Cloud contributed 75% and 25% of subscription revenue in the quarter ended June 30, 2021, respectively, compared to 86% and 14% in the prior-year quarter. Because Confluent Cloud has historically had a lower average price than Confluent Platform, this shift could cause near-term fluctuations in financial results and pressure gross margins.
Operating loss widened to $86.0 million in the quarter ended June 30, 2021 from $27.5 million in the prior-year quarter, and net loss widened to $88.2 million from $26.3 million. The company had an accumulated deficit of $538.7 million as of June 30, 2021 and states it intends to continue investing heavily to grow rather than optimize for profitability or cash flow in the near future.
Sales and marketing expenses increased 101% to $73.2 million in the quarter ended June 30, 2021, and the company must expand its sales and marketing capabilities, accelerate sales force ramp time, and improve productivity. Failure to do so could harm its ability to expand its customer base and sales pipeline.
The pandemic has caused delays in delivery of professional services and education services and lengthened the sales cycle for some prospective customers. The company also temporarily reduced hiring across all functions in the second and third quarters of 2020, and the sales and marketing hiring pause may negatively impact its near- to medium-term growth and revenue.
The company typically sells a higher percentage of new customer subscriptions and renewals in the fourth quarter, and expects this seasonality to affect bookings, RPO, and results of operations. RPO was $327.2 million as of June 30, 2021, and may fluctuate due to timing of renewals, average contract terms, and seasonality.
Lock-up agreements restrict transfers of shares until the second trading day after the company announces results for the quarter ending September 30, 2021, with a second release period beginning August 9, 2021. Sales of substantial amounts of Class A common stock, or the perception that such sales may occur, could depress the trading price.
The company sells to heavily regulated verticals such as banking and financial services and to government entities. Without FedRAMP certification for Confluent Cloud, it cannot sell to certain federal government and public sector customers, and government contracting compliance and audits could harm results.
Class B common stock has 10 votes per share and Class A has one vote per share. As of June 30, 2021, Class B holders, including executive officers and directors, held approximately 98.8% of voting power, which limits the ability of Class A stockholders to influence corporate matters.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Total Customers
Customers with $100,000 or Greater in ARR
Dollar-Based Net Retention Rate (NRR)
Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from Confluent, Inc.'s SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.