- Second quarter revenue totaled $401.0 million, representing an
increase of 30% year-over-year
- GAAP loss from operations of $34.7 million, or 9% of revenue,
and non-GAAP income from operations of $57.0 million, or 14% of
revenue
- Operating cash flow of $74.8 million, or 19% of revenue, and
free cash flow of $38.3 million, or 10% of revenue
Cloudflare, Inc. (NYSE: NET), the leading connectivity cloud
company, today announced financial results for its second quarter
ended June 30, 2024.
“We had a strong second quarter, crossing $1.6 billion in
annualized revenue and growing 30% year-over-year. The world is
still complicated, but our team remained focused on execution and
delivered terrific results, including a double-digit year-over-year
improvement in sales productivity,” said Matthew Prince, co-founder
& CEO of Cloudflare. “I'm proud of how Cloudflare rises to the
occasion to help our customers solve some of the hardest problems
they face when modernizing, transforming, and securing their
businesses—checking off even more value with the promise of our
connectivity cloud and reinforcing Cloudflare's position on
'must-have' lists.”
Second Quarter Fiscal 2024 Financial Highlights
- Revenue: Total revenue of $401.0 million, representing
an increase of 30% year-over-year.
- Gross Profit: GAAP gross profit was $312.0 million, or
77.8% gross margin, compared to $233.3 million, or 75.6%, in the
second quarter of 2023. Non-GAAP gross profit was $316.6 million,
or 79.0% gross margin, compared to $239.7 million, or 77.7%, in the
second quarter of 2023.
- Operating Income (Loss): GAAP loss from operations was
$34.7 million, or 8.7% of revenue, compared to $56.2 million, or
18.2% of revenue, in the second quarter of 2023. Non-GAAP income
from operations was $57.0 million, or 14.2% of revenue, compared to
$20.3 million, or 6.6% of revenue, in the second quarter of
2023.
- Net Income (Loss): GAAP net loss was $15.1 million,
compared to $94.5 million in the second quarter of 2023. GAAP net
loss per basic and diluted share was $0.04, compared to $0.28 in
the second quarter of 2023. Non-GAAP net income was $69.5 million,
compared to $33.7 million in the second quarter of 2023. Non-GAAP
net income per diluted share was $0.20, compared to $0.10 in the
second quarter of 2023.
- Cash Flow: Net cash flow from operating activities was
$74.8 million, compared to $64.5 million for the second quarter of
2023. Free cash flow was $38.3 million, or 10% of revenue, compared
to $20.0 million, or 6% of revenue, in the second quarter of
2023.
- Cash, cash equivalents, and available-for-sale
securities were $1,757.4 million as of June 30, 2024.
The section titled "Non-GAAP Financial Information" below
describes our usage of non-GAAP financial measures. Reconciliations
between historical GAAP and non-GAAP information are contained at
the end of this press release following the accompanying financial
data.
Financial Outlook
For the third quarter of fiscal 2024, we expect:
- Total revenue of $423.0 to $424.0 million
- Non-GAAP income from operations of $50.0 to $51.0 million
- Non-GAAP net income per share of $0.18, utilizing weighted
average common shares outstanding of approximately 359 million
For the full year fiscal 2024, we expect:
- Total revenue of $1,657.0 to $1,659.0 million
- Non-GAAP income from operations of $196.0 to $198.0
million
- Non-GAAP net income per share of $0.70 to $0.71, utilizing
weighted average common shares outstanding of approximately 358
million
These statements are forward-looking and actual results may
differ materially. Refer to the Forward-Looking Statements safe
harbor below for information on the factors that could cause our
actual results to differ materially from these forward-looking
statements.
Conference Call Information
Cloudflare will host an investor conference call to discuss its
second quarter ended June 30, 2024 earnings results today at 2:00
p.m. Pacific time (5:00 p.m. Eastern time). Interested parties can
access the call by dialing (877) 400-4517 from the United States or
(332) 251-2620 internationally with conference ID 3723782. A live
webcast of the conference call will be accessible from the investor
relations website at https://cloudflare.NET. A replay will be
available approximately two hours after the conclusion of the live
event and will remain available for approximately one year.
Supplemental Financial and Other Information
Supplemental financial and other information can be accessed
through the Company’s investor relations website at
https://cloudflare.NET.
Non-GAAP Financial Information
Cloudflare believes that the presentation of non-GAAP financial
information provides important supplemental information to
management and investors regarding financial and business trends
relating to the Company’s financial condition and results of
operations. Reconciliations of non-GAAP financial measures to the
most directly comparable financial results as determined in
accordance with GAAP are included at the end of this press release
following the accompanying financial data. A reconciliation of
non-GAAP guidance measures to corresponding GAAP measures is not
available on a forward-looking basis without unreasonable effort
due to the uncertainty of expenses that may be incurred in the
future. For further information regarding why Cloudflare believes
that these non-GAAP measures provide useful information to
investors, the specific manner in which management uses these
measures, and some of the limitations associated with the use of
these measures, please refer to the “Explanation of Non-GAAP
Financial Measures” section at the end of this press release.
Available Information
Cloudflare intends to use its press releases, website, investor
relations website, news site, blog, X account, Facebook account,
and Instagram account, in addition to filings made with the
Securities and Exchange Commission (SEC) and public conference
calls, as a means of disclosing material non-public information and
for complying with its disclosure obligations under Regulation
FD.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which statements involve substantial risks and
uncertainties. In some cases, you can identify forward-looking
statements because they contain words such as “may,” “will,”
“should,” “expect,” “explore,” “plan,” “anticipate,” “could,”
“intend,” “target,” “project,” “contemplate,” “believe,”
“estimate,” “predict,” “potential,” or “continue,” or the negative
of these words, or other similar terms or expressions that concern
our expectations, strategy, plans, or intentions. However, not all
forward-looking statements contain these identifying words.
Forward-looking statements expressed or implied in this press
release include, but are not limited to, statements regarding our
future financial and operating performance, our reputation and
performance in the market, general market trends, our estimated and
projected revenue, non-GAAP income from operations and non-GAAP net
income per share, shares outstanding, the benefits to customers
from using our products, the expected functionality and performance
of our products, the demand by customers for our products, our
plans and objectives for future operations, growth, initiatives, or
strategies, our market opportunity, and comments made by our CEO
and others. There are a significant number of factors that could
cause actual results to differ materially from statements made in
this press release, including: the impact of adverse macroeconomic
conditions, such as inflation, high interest rates, actual or
potential bank failures and recessionary concerns, on our and our
customers’, vendors’, and partners’ operations and future financial
performance; the impact of the Hamas-Israel and Russia-Ukraine
conflicts and other areas of geopolitical tension around the world,
or any potential worsening or expansion of those conflicts or
geopolitical tensions and other geopolitical events such as
elections and other governmental changes; our history of net
losses; risks associated with managing our rapid growth; our
ability to attract and retain new customers (including new large
customers); our ability to retain and upgrade paying customers and
convert free customers to paying customers; our ability to expand
the number of products we sell to paying customers; our ability to
effectively increase sales to large customers; our ability to
increase brand awareness; our ability to continue to innovate and
develop new products and product features; our ability to generate
demand for our products; our ability to effectively attract, train,
and retain our sales force to be able to sell our existing and new
products and product features; our sales team’s productivity; our
ability to effectively attract, integrate and retain key personnel;
problems with our internal systems, network, or data, including
actual or perceived breaches or failures; rapidly evolving
technological developments, including advancements in AI, in the
market; length of our sales cycles and the timing of payments by
our customers; activities of our paying and free customers or the
content of their websites and other Internet properties that use
our network and products; foreign currency fluctuations; changes in
the legal, tax, and regulatory environment applicable to our
business; and other general market, political, economic, and
business conditions. Our actual results could differ materially
from those stated or implied in forward-looking statements due to a
number of factors, including but not limited to, risks detailed in
our filings with the SEC, including our Quarterly Report on Form
10-Q filed on May 2, 2024, as well as other filings that we may
make from time to time with the SEC.
The forward-looking statements made in this press release relate
only to events as of the date on which the statements are made. We
undertake no obligation to update any forward-looking statements
made in this press release to reflect events or circumstances after
the date of this press release or to reflect new information or the
occurrence of unanticipated events, except as required by law. We
may not actually achieve the plans, intentions, or expectations
disclosed in our forward-looking statements, and you should not
place undue reliance on our forward-looking statements.
About Cloudflare
Cloudflare, Inc. (NYSE: NET) is the leading connectivity cloud
company on a mission to help build a better Internet. It empowers
organizations to make their employees, applications and networks
faster and more secure everywhere, while reducing complexity and
cost. Cloudflare’s connectivity cloud delivers the most
full-featured, unified platform of cloud-native products and
developer tools, so any organization can gain the control they need
to work, develop, and accelerate their business.
Powered by one of the world’s largest and most interconnected
networks, Cloudflare blocks billions of threats online for its
customers every day. It is trusted by millions of organizations –
from the largest brands to entrepreneurs and small businesses to
nonprofits, humanitarian groups, and governments across the
globe.
Learn more about Cloudflare’s connectivity cloud at
cloudflare.com/connectivity-cloud. Learn more about the latest
Internet trends and insights at radar.cloudflare.com.
CLOUDFLARE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per share
data)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Revenue
$
400,996
$
308,494
$
779,598
$
598,669
Cost of revenue(1)(2)
89,011
75,221
174,049
145,653
Gross profit
311,985
233,273
605,549
453,016
Operating expenses:
Sales and marketing(1)(2)(4)
174,501
146,688
368,603
283,689
Research and development(1)
102,547
89,610
190,250
171,149
General and administrative(1)(3)
69,635
53,147
135,944
101,622
Total operating expenses
346,683
289,445
694,797
556,460
Loss from operations
(34,698
)
(56,172
)
(89,248
)
(103,444
)
Non-operating income (expense):
Interest income
21,715
16,536
42,967
30,023
Interest expense(5)
(1,218
)
(1,539
)
(2,318
)
(3,665
)
Loss on extinguishment of debt
—
(50,300
)
—
(50,300
)
Other income (expense), net
269
(1,527
)
1,393
(2,384
)
Total non-operating income (expense),
net
20,766
(36,830
)
42,042
(26,326
)
Loss before income taxes
(13,932
)
(93,002
)
(47,206
)
(129,770
)
Provision for income taxes
1,146
1,465
3,415
2,779
Net loss
$
(15,078
)
$
(94,467
)
$
(50,621
)
$
(132,549
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.04
)
$
(0.28
)
$
(0.15
)
$
(0.40
)
Weighted-average shares used in computing
net loss per share attributable to common stockholders, basic and
diluted
340,648
332,297
339,617
331,448
____________
(1) Includes stock-based compensation and
related employer payroll taxes as follows:
Cost of revenue
$
3,011
$
2,126
$
5,833
$
3,929
Sales and marketing
24,629
20,734
46,404
36,602
Research and development
37,106
36,573
66,086
66,789
General and administrative
24,761
12,156
47,911
26,019
Total stock-based compensation and related
employer payroll taxes
$
89,507
$
71,589
$
166,234
$
133,339
(2) Includes amortization of acquired
intangible assets as follows:
Cost of revenue
$
1,619
$
4,314
$
6,310
$
8,625
Sales and marketing
363
574
938
1,150
Total amortization of acquired intangible
assets
$
1,982
$
4,888
$
7,248
$
9,775
(3) Includes acquisition-related and other
expenses as follows:
General and administrative
$
162
$
—
$
162
$
—
Total acquisition-related and other
expenses
$
162
$
—
$
162
$
—
(4) Includes one-time compensation charge
as follows:
Sales and marketing
$
—
$
—
$
15,000
$
—
Total one-time compensation charge
$
—
$
—
$
15,000
$
—
(5) Includes amortization of debt issuance
costs as follows:
Interest expense
$
990
$
1,307
$
1,980
$
2,470
Total amortization of debt issuance
costs
$
990
$
1,307
$
1,980
$
2,470
CLOUDFLARE, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except par
value)
(unaudited)
June 30, 2024
December 31,
2023
Assets
Current assets:
Cash and cash equivalents
$
156,967
$
86,864
Available-for-sale securities
1,600,430
1,586,880
Accounts receivable, net
250,213
248,268
Contract assets
12,917
11,041
Restricted cash short-term
1,000
2,522
Prepaid expenses and other current
assets
71,491
47,502
Total current assets
2,093,018
1,983,077
Property and equipment, net
339,124
322,813
Goodwill
156,162
148,047
Acquired intangible assets, net
21,663
19,564
Operating lease right-of-use assets
141,870
138,556
Deferred contract acquisition costs,
noncurrent
144,330
133,236
Restricted cash
2,023
1,838
Other noncurrent assets
18,483
12,636
Total assets
$
2,916,673
$
2,759,767
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
59,528
$
53,727
Accrued expenses and other current
liabilities
66,916
63,597
Accrued compensation
57,813
63,801
Operating lease liabilities
40,740
38,351
Deferred revenue
370,968
347,608
Total current liabilities
595,965
567,084
Convertible senior notes, net
1,285,342
1,283,362
Operating lease liabilities,
noncurrent
112,508
113,490
Deferred revenue, noncurrent
23,579
17,244
Other noncurrent liabilities
17,734
15,540
Total liabilities
2,035,128
1,996,720
Stockholders’ Equity
Class A common stock; $0.001 par value;
2,250,000 shares authorized as of June 30, 2024 and December 31,
2023; 303,321 and 298,089 shares issued and outstanding as of June
30, 2024 and December 31, 2023, respectively
302
297
Class B common stock; $0.001 par value;
315,000 shares authorized as of June 30, 2024 and December 31,
2023; 38,216 and 39,443 shares issued and outstanding as of June
30, 2024 and December 31, 2023, respectively
39
40
Additional paid-in capital
1,956,984
1,784,566
Accumulated deficit
(1,074,461
)
(1,023,840
)
Accumulated other comprehensive income
(loss)
(1,319
)
1,984
Total stockholders’ equity
881,545
763,047
Total liabilities and stockholders’
equity
$
2,916,673
$
2,759,767
CLOUDFLARE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June
30,
2024
2023
Cash Flows from Operating
Activities
Net loss
$
(50,621
)
$
(132,549
)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization expense
59,767
65,182
Non-cash operating lease costs
23,124
21,925
Amortization of deferred contract
acquisition costs
36,991
29,011
Stock-based compensation expense
155,714
125,793
Amortization of debt issuance costs
1,980
2,470
Net accretion of discounts and
amortization of premiums on available-for-sale securities
(24,028
)
(19,050
)
Deferred income taxes
(1,310
)
(613
)
Provision for bad debt
4,770
6,037
Loss on extinguishment of debt
—
50,300
Other
291
494
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable, net
(6,715
)
(35,413
)
Contract assets
(1,876
)
(381
)
Deferred contract acquisition costs
(48,085
)
(43,348
)
Prepaid expenses and other current
assets
(24,726
)
(13,996
)
Other noncurrent assets
1,941
(1,991
)
Accounts payable
15,996
6,602
Accrued expenses and other current
liabilities
254
1,454
Operating lease liabilities
(25,031
)
(18,149
)
Deferred revenue
29,695
56,460
Other noncurrent liabilities
263
627
Net cash provided by operating
activities
148,394
100,865
Cash Flows from Investing
Activities
Purchases of property and equipment
(61,681
)
(56,289
)
Capitalized internal-use software
(12,831
)
(10,703
)
Asset acquisitions and business
combinations, net of cash acquired
(13,977
)
—
Purchases of available-for-sale
securities
(790,675
)
(795,096
)
Sales of available-for-sale securities
—
20,248
Maturities of available-for-sale
securities
792,354
857,456
Other investing activities
18
59
Net cash provided by (used in)
investing activities
(86,792
)
15,675
Cash Flows from Financing
Activities
Repayments of convertible senior notes
—
(172,249
)
Cash paid for issuance costs on revolving
credit facility
(2,148
)
—
Proceeds from the exercise of stock
options
7,614
7,059
Proceeds from the early exercise of stock
options
6
—
Repurchases of unvested common stock
—
(34
)
Proceeds from the issuance of common stock
for employee stock purchase plan
10,455
10,450
Payment of tax withholding obligation on
RSU settlement
(8,763
)
(3,383
)
Payment of indemnity holdback
—
(9,208
)
Net cash provided by (used in)
financing activities
7,164
(167,365
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
68,766
(50,825
)
Cash, cash equivalents, and restricted
cash, beginning of period
91,224
215,204
Cash, cash equivalents, and restricted
cash, end of period
$
159,990
$
164,379
CLOUDFLARE, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Reconciliation of cost of
revenue:
GAAP cost of revenue
$
89,011
$
75,221
$
174,049
$
145,653
Less: Stock-based compensation and related
employer payroll taxes
(3,011
)
(2,126
)
(5,833
)
(3,929
)
Less: Amortization of acquired intangible
assets
(1,619
)
(4,314
)
(6,310
)
(8,625
)
Non-GAAP cost of revenue
$
84,381
$
68,781
$
161,906
$
133,099
Reconciliation of gross profit:
GAAP gross profit
$
311,985
$
233,273
$
605,549
$
453,016
Add: Stock-based compensation and related
employer payroll taxes
3,011
2,126
5,833
3,929
Add: Amortization of acquired intangible
assets
1,619
4,314
6,310
8,625
Non-GAAP gross profit
$
316,615
$
239,713
$
617,692
$
465,570
GAAP gross margin
77.8
%
75.6
%
77.7
%
75.7
%
Non-GAAP gross margin
79.0
%
77.7
%
79.2
%
77.8
%
Reconciliation of operating
expenses:
GAAP sales and marketing
$
174,501
$
146,688
$
368,603
$
283,689
Less: Stock-based compensation and related
employer payroll taxes
(24,629
)
(20,734
)
(46,404
)
(36,602
)
Less: Amortization of acquired intangible
assets
(363
)
(574
)
(938
)
(1,150
)
Less: One-time compensation charge
—
—
(15,000
)
—
Non-GAAP sales and marketing
$
149,509
$
125,380
$
306,261
$
245,937
GAAP research and development
$
102,547
$
89,610
$
190,250
$
171,149
Less: Stock-based compensation and related
employer payroll taxes
(37,106
)
(36,573
)
(66,086
)
(66,789
)
Non-GAAP research and development
$
65,441
$
53,037
$
124,164
$
104,360
GAAP general and administrative
$
69,635
$
53,147
$
135,944
$
101,622
Less: Stock-based compensation and related
employer payroll taxes
(24,761
)
(12,156
)
(47,911
)
(26,019
)
Less: Acquisition-related and other
expenses
(162
)
—
(162
)
—
Non-GAAP general and administrative
$
44,712
$
40,991
$
87,871
$
75,603
Reconciliation of income (loss) from
operations:
GAAP loss from operations
$
(34,698
)
$
(56,172
)
$
(89,248
)
$
(103,444
)
Add: Stock-based compensation and related
employer payroll taxes
89,507
71,589
166,234
133,339
Add: Amortization of acquired intangible
assets
1,982
4,888
7,248
9,775
Add: Acquisition-related and other
expenses
162
—
162
—
Add: One-time compensation charge
—
—
15,000
—
Non-GAAP income from operations
$
56,953
$
20,305
$
99,396
$
39,670
GAAP operating margin
(8.7
)%
(18.2
)%
(11.4
)%
(17.3
)%
Non-GAAP operating margin
14.2
%
6.6
%
12.7
%
6.6
%
CLOUDFLARE, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Reconciliation of interest
expense:
GAAP interest expense
$
(1,218
)
$
(1,539
)
$
(2,318
)
$
(3,665
)
Add: Amortization of debt issuance
costs
990
1,307
1,980
2,470
Non-GAAP interest expense
$
(228
)
$
(232
)
$
(338
)
$
(1,195
)
Reconciliation of loss on
extinguishment of debt:
GAAP loss on extinguishment of debt
$
—
$
(50,300
)
$
—
$
(50,300
)
Add: Loss on extinguishment of debt
—
50,300
—
50,300
Non-GAAP loss on extinguishment of
debt
$
—
$
—
$
—
$
—
Reconciliation of provision for income
taxes:
GAAP provision for income taxes
$
1,146
$
1,465
$
3,415
$
2,779
Income tax effect of non-GAAP
adjustments
8,082
(88
)
12,372
2,449
Non-GAAP provision for income taxes
$
9,228
$
1,377
$
15,787
$
5,228
Reconciliation of net income (loss) and
net income (loss) per share:
GAAP net loss attributable to common
stockholders
$
(15,078
)
$
(94,467
)
$
(50,621
)
$
(132,549
)
Add: Stock-based compensation and related
employer payroll taxes
89,507
71,589
166,234
133,339
Add: Amortization of acquired intangible
assets
1,982
4,888
7,248
9,775
Add: Acquisition-related and other
expenses
162
—
162
—
Add: One-time compensation charge
—
—
15,000
—
Add: Amortization of debt issuance
costs
990
1,307
1,980
2,470
Add: Loss on extinguishment of debt
—
50,300
—
50,300
Income tax effect of non-GAAP
adjustments
(8,082
)
88
(12,372
)
(2,449
)
Non-GAAP net income
$
69,481
$
33,705
$
127,631
$
60,886
GAAP net loss per share, basic
$
(0.04
)
$
(0.28
)
$
(0.15
)
$
(0.40
)
GAAP net loss per share, diluted
$
(0.04
)
$
(0.28
)
$
(0.15
)
$
(0.40
)
Add: Stock-based compensation and related
employer payroll taxes
0.26
0.22
0.49
0.40
Add: Amortization of acquired intangible
assets
0.01
0.01
0.02
0.03
Add: Acquisition-related and other
expenses
—
—
—
—
Add: One-time compensation charge
—
—
0.04
—
Add: Amortization of debt issuance
costs
—
—
0.01
0.01
Add: Loss on extinguishment of debt
—
0.15
—
0.15
Income tax effect of non-GAAP
adjustment
(0.02
)
—
(0.04
)
(0.01
)
Effect of dilutive shares
(0.01
)
—
(0.01
)
—
Non-GAAP net income per share,
diluted(1)(2)
$
0.20
$
0.10
$
0.36
$
0.18
Weighted-average shares used in computing
net loss per share attributable to common stockholders, basic
340,648
332,297
339,617
331,448
Weighted-average shares used in computing
non-GAAP net income per share attributable to common stockholders,
diluted(2)
356,096
343,187
356,359
342,667
____________
(1)
Totals may not sum due to rounding.
Figures are calculated based upon the respective underlying
non-rounded data.
(2)
For the period in which we had non-GAAP
net income, diluted non-GAAP net income per share is calculated
using weighted-average shares, adjusted for dilutive potential
shares that were assumed outstanding during period.
CLOUDFLARE, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Free cash flow
Net cash provided by operating
activities
$
74,815
$
64,451
$
148,394
$
100,865
Less: Purchases of property and
equipment
(29,625
)
(38,748
)
(61,681
)
(56,289
)
Less: Capitalized internal-use
software
(6,915
)
(5,733
)
(12,831
)
(10,703
)
Free cash flow
$
38,275
$
19,970
$
73,882
$
33,873
Net cash provided by (used in) investing
activities
$
(183,742
)
$
108
$
(86,792
)
$
15,675
Net cash provided by (used in) financing
activities
$
7,143
$
(168,612
)
$
7,164
$
(167,365
)
Net cash provided by operating
activities
(percentage of revenue)
19
%
21
%
19
%
17
%
Less: Purchases of property and
equipment
(percentage of revenue)
(7
)%
(13
)%
(8
)%
(9
)%
Less: Capitalized internal-use
software
(percentage of revenue)
(2
)%
(2
)%
(2
)%
(2
)%
Free cash flow margin(1)
10
%
6
%
9
%
6
%
____________
(1)
Totals may not sum due to rounding.
Figures are calculated based upon the respective underlying
non-rounded data.
Explanation of Non-GAAP Financial Measures
In addition to our results determined in accordance with
generally accepted accounting principles in the United States (U.S.
GAAP), we believe the following non-GAAP measures are useful in
evaluating our operating performance. We use the following non-GAAP
financial information to evaluate our ongoing operations and for
internal planning and forecasting purposes. We believe that
non-GAAP financial information, when taken collectively, may be
helpful to investors because it provides consistency and
comparability with past financial performance. However, non-GAAP
financial information is presented for supplemental informational
purposes only, has limitations as an analytical tool and should not
be considered in isolation or as a substitute for financial
information presented in accordance with U.S. GAAP. In particular,
free cash flow is not a substitute for cash provided by operating
activities. Additionally, the utility of free cash flow as a
measure of our liquidity is further limited as it does not
represent the total increase or decrease in our cash balance for a
given period. In addition, other companies, including companies in
our industry, may calculate similarly-titled non-GAAP measures
differently or may use other measures to evaluate their
performance, all of which could reduce the usefulness of our
non-GAAP financial measures as tools for comparison. A
reconciliation is provided above for each non-GAAP financial
measure to the most directly comparable financial measure stated in
accordance with U.S. GAAP. Investors are encouraged to review the
related U.S. GAAP financial measures and the reconciliation of
these non-GAAP financial measures to their most directly comparable
U.S. GAAP financial measures, and not to rely on any single
financial measure to evaluate our business.
Items Excluded from Non-GAAP Measures. We exclude
stock-based compensation expense, which is a non-cash expense, from
certain of our non-GAAP financial measures because we believe that
excluding this item provides meaningful supplemental information
regarding operational performance. We exclude employer payroll tax
expenses related to stock-based compensation, which is a cash
expense, from certain of our non-GAAP financial measures because
such expenses are dependent on the price of our Class A common
stock and other factors that are beyond our control and do not
correlate to the operation of our business. We exclude amortization
of acquired intangible assets, which is a non-cash expense, related
to business combinations from certain of our non-GAAP financial
measures because such expenses are related to business combinations
and have no direct correlation to the operation of our business. We
exclude acquisition-related and other expenses from certain of our
non-GAAP financial measures because such expenses are related to
business combinations and have no direct correlation to the
operation of our business. Acquisition-related and other expenses
can be cash or non-cash expenses and include third-party
transaction costs and compensation expense for key acquired
personnel. We also excluded the one-time cash compensation charge
incurred during the three months ended March 31, 2024 from certain
of our non-GAAP financial measures because it was not attributable
to services provided and did not correlate to the ongoing operation
of our business. We exclude amortization of debt issuance costs and
loss on extinguishment of debt, which are non-cash expenses, from
certain of our non-GAAP financial measures because such expenses
have no direct correlation to the operation of our business.
Non-GAAP Gross Profit and Non-GAAP Gross Margin. We
define non-GAAP gross profit and non-GAAP gross margin as U.S. GAAP
gross profit and U.S. GAAP gross margin, respectively, excluding
stock-based compensation and related employer payroll taxes and
amortization of acquired intangible assets.
Non-GAAP Income (Loss) from Operations and Non-GAAP Operating
Margin. We define non-GAAP income (loss) from operations and
non-GAAP operating margin as U.S. GAAP loss from operations and
U.S. GAAP operating margin, respectively, excluding stock-based
compensation expense and its related employer payroll taxes,
amortization of acquired intangible assets, acquisition-related and
other expenses.
Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) per
Share, Diluted. We define non-GAAP net income (loss) as GAAP
net income (loss) adjusted for stock-based compensation expense and
its related employer payroll taxes, amortization of acquired
intangible assets, acquisition-related and other expenses,
amortization of issuance costs, loss on extinguishment of debt, and
a non-GAAP provision for (benefit from) income taxes. Generally,
the difference between our GAAP and non-GAAP income tax expense
(benefit) is primarily due to adjustments in stock-based
compensation and related employer payroll taxes, amortization of
acquired intangibles associated with business combinations,
acquisition-related and other expenses, and amortization of
issuance costs. We define non-GAAP net loss per share, diluted, as
non-GAAP net loss divided by the weighted-average common shares
outstanding. Calculation of non-GAAP net loss per share, diluted
excludes all potentially dilutive securities as their effect is
antidilutive. We define non-GAAP net income per share, diluted, as
non-GAAP net income divided by the weighted-average common shares
outstanding, adjusted for dilutive potential shares that were
assumed outstanding during period. Currently, potential dilutive
effect mainly consists of employee equity incentive plans and
convertible senior notes. We believe that excluding these items
from non-GAAP net income (loss) per share, diluted, provides
management and investors with greater visibility into the
underlying performance of our core business operating results.
Free Cash Flow and Free Cash Flow Margin. Free cash flow
is a non-GAAP financial measure that we calculate as net cash
provided by operating activities less cash used for purchases of
property and equipment and capitalized internal-use software. Free
cash flow margin is calculated as free cash flow divided by
revenue. We believe that free cash flow and free cash flow margin
are useful indicators of liquidity that provide information to
management and investors about the amount of cash generated from
our operations that, after the investments in property and
equipment and capitalized internal-use software, can be used for
strategic initiatives, including investing in our business, and
strengthening our financial position. We believe that historical
and future trends in free cash flow and free cash flow margin, even
if negative, provide useful information about the amount of cash
generated by our operating activities that is available (or not
available) to be used for strategic initiatives. For example, if
free cash flow is negative, we may need to access cash reserves or
other sources of capital to invest in strategic initiatives. One
limitation of free cash flow and free cash flow margin is that they
do not reflect our future contractual commitments. Additionally,
free cash flow does not represent the total increase or decrease in
our cash balance for a given period.
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version on businesswire.com: https://www.businesswire.com/news/home/20240801447304/en/
Investor Relations Information Phil Winslow
ir@cloudflare.com
Press Contact Information Daniella Vallurupalli
press@cloudflare.com
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