Real-time data analysis platform Confluent (NASDAQ:CFLT) went public this past summer, and shares have skyrocketed nearly 60% since that time. In this segment of Backstage Pass, recorded on Nov. 15, Fool contributors Jason Hall and Danny Vena discuss the newly public stock and some of the catalysts for its future growth.
Jason Hall: I just want to hit this again. This is their two major products. You have on the right Confluent Platform. This is for companies that do a lot of soft management. They already have a lot of data that’s already on-site at the enterprise, and they have some technical expertise to managing that data on premises.
There are also companies that might be using the cloud, some. All ready they have data in the cloud, but they’re self-managing. Then you have Confluent Cloud. It takes Apache Kafka, and it’s reengineered for the cloud, really powerful, particularly for companies that are looking for an expert partner to do the heavy lifting for them.
Danny Vena: Very interesting indeed.
Jason Hall: It is. It’s one that I encouraged people to dig into.
Danny Vena: Why don’t we take a minute or two and take a look at the questions that we have in Slido.
Jason Hall: There we go, maybe we need to get Harold on the show here. Harold says
“I’m using multiple products that use Kafka right now.”
Danny Vena: And maybe we can get Harold on here to explain the benefit of using multiple products on Kafka right now. JK asks, “What industries does Confluent go after?” Then further asks, “Is this like Anaplan or a competitor? Is there any light you can shed on that?”
Jason Hall: No, not like Anaplan. Anaplan is like plan, what’s the word I’m looking for here, implementation management. Is Anaplan’s, don’t they focus on healthcare? I am drawing a blank. It’s a Monday. You’ll have to forgive me.
Danny Vena: Honestly, I’ve heard of Anaplan, but it’s not a company that I follow.
Jason Hall: I think there are a plan management. I don’t think it’s healthcare specific. But, the answer is no. This is all about data, and analytics, and managing data. Here are just a few use cases across industries. I’m just going to leave that there for a second so people that want to know more can come back and pause livestream, and you can take a look at this.
They also have some examples of some large customers in different industries that are using it: Expedia in travel, think about healthcare, Humana, KeyBank, financial services, manufacturing, you got companies like BMW and Bosch so those are important. Here’s a list of some of their customers.
You see companies that have been around for forever, like Goldman Sachs, and then you’ve got companies on the cutting edge of technology like Square. I’m really impressed.
One of the things that I like that’s not on this is the deep insider ownership. You have Jay Kreps, who’s the CEO, co-founder. He owns close to 20% of the company. You have to forgive me for pronunciation. Jun Rao who is one of key engineers that developed the product.
He’s also one of the co-founders. He owns over 10% of the company. I can’t remember her name right now, but she was formerly the Chief Financial Officer, and she’s on the board now, owns about two percent of the company, is one of the co-founders.
You have the three co-founders of the company that are still very involved, that also have a substantial stake in the business. I think there’s a tremendous amount of value there. You have founder-led, insider ownership, great trend, large addressable market that’s growing like wildfire. There’s a lot of trends in our favor, a lot of data points that inform this could be a really good company to own. Danny.
Danny Vena: One of the things that I saw repeatedly on the presentation that you referenced had to do with the customer experience. It makes me think about a lot of times you will have customers who will make a comment or complaint on social media.
It might be on Facebook. It might be on Twitter. Maybe you have somebody checks that regularly and maybe you don’t. Whereas, if you have a tool that can go out and pull this information in and flag the things that require action, like a customer badmouthing you on social media, then it’s something that you can address much more quickly.
Jason Hall: Yeah, and that’s one of the use cases for this. But when you think about data broadly, [LAUGHTER] every business has a hundred different ways that you can utilize data more quickly. Here’s another way to think about this company that can be helpful. You’ve heard of, Toby Lütke, right?
Danny Vena: Yeah, I have no idea who the CEO of Shopify is.
Jason Hall: [LAUGHTER] So you have this guy who worked for another business.
Rachel Warren: Yes.
Jason Hall: Welcome back, Rachel, Welcome back. You have this guy who is trying to build a business or do a thing and was trying to solve a problem for that business. In his case, he was selling snowboards. He just wanted to have a great e-commerce experience, and he ended up building Shopify.
Danny Vena: There was nothing available that took care of that.
Jason Hall: He couldn’t find anything on the market to do it, so he built it, and he said, this is a much better [LAUGHTER] business than selling snowboards. Why don’t I do this?
Danny Vena: Exactly.
Jason Hall: You have three co-founders here who were at LinkedIn, who built this tool and said, why don’t we go run this incredible business instead of working for LinkedIn? You think about the founder of Zoom.
I don’t believe I can’t remember his name right now, but it’s the same thing. You find those stories of products that exist because somebody had a problem that nobody else has to solving well. They built the thing to solve the problem and then created a business around it. That’s what’s happening here.
Danny Vena: Eric Yuan was the guy you’re talking about.
Jason Hall: Eric Yuan. Thank you. I apologize, Eric, for that.
Rachel Warren: Yes, supposedly he used to go on 10-hour train rides to see his girlfriend and that was what caused him to think of the ideas to invent or to found Zoom. Kind of solved that issue.
Jason Hall: There we go.
Danny Vena: There has to be a better way then. Getting on the train or making a phone call were his only two options.
Jason Hall: Yeah.
Rachel Warren: Right.
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