10-KPeriod: FY2019

Cloudflare, Inc. Annual Report, Year Ended Dec 31, 2019

Filed March 4, 2020For Securities:NET

Summary

Cloudflare, Inc. filed its 2020 10-K for the fiscal year ending December 30, 2019, shortly after its September 2019 IPO. The filing highlights the company's growth trajectory, with revenue increasing by 49% year-over-year to $287 million, driven by both new and existing customer acquisition. Despite this strong revenue growth, Cloudflare continues to operate at a significant net loss, which widened from $87.2 million in 2018 to $105.8 million in 2019, primarily due to substantial investments in sales and marketing and research and development. The company emphasizes its 'emerging growth company' status and its intention to leverage associated regulatory benefits. Cloudflare's business model relies on a large base of free users to drive awareness and attract paying customers, with a focus on expanding relationships with existing enterprise clients. The company's robust cash position, bolstered by the IPO proceeds, provides it with sufficient liquidity for at least the next 12 months, although it anticipates continued investment and potential future capital needs.

Financial Highlights

53 data points
Beta

Revenue

$287.02M

77.9% Gross Margin

Net Income

-$105.83M

-36.9% Net Margin

EPS (Diluted)

$-0.72

Total Assets

$830.82M

Cash & Equivalents

$138.98M

Free Cash Flow

-$82.21M

Financial Statements
Beta
Revenue$287.02M
Cost of Revenue$63.42M
Gross Profit$223.60M
R&D Expenses$90.67M
Operating Expenses$331.55M
Operating Income-$107.95M
Interest Expense$1.11M
Net Income-$105.83M
EPS (Basic)$-0.72
EPS (Diluted)$-0.72
Shares Outstanding (Basic)146.31M
Shares Outstanding (Diluted)146.31M

Key Highlights

  • 1Revenue grew by 49% year-over-year to $287.0 million for the fiscal year ended December 30, 2019.
  • 2The company experienced a net loss of $105.8 million for the fiscal year ended December 30, 2019, an increase from $87.2 million in the prior year.
  • 3Cloudflare completed its Initial Public Offering (IPO) in September 2019, raising $565 million in net proceeds.
  • 4Paying customers increased to 82,882 as of December 31, 2019, up from 67,899 in the prior year, with a significant rise in customers spending over $100,000 annually.
  • 5The company's dollar-based net retention rate remained strong, consistently above 110% for the past three years.
  • 6Significant investments are being made in sales and marketing (up 69% YoY) and R&D (up 66% YoY), contributing to the increased net loss.
  • 7Cloudflare continues to operate as an 'emerging growth company,' utilizing exemptions from certain reporting requirements.

Frequently Asked Questions

For the fiscal year ended December 30, 2019, Cloudflare reported a 49% increase in revenue to $287.0 million. However, the company incurred a net loss of $105.8 million, widening from a net loss of $87.2 million in the previous year. This indicates significant ongoing investment in growth initiatives, and the company is not yet profitable.

Cloudflare completed its IPO in September 2019, raising approximately $565 million in net proceeds. This significantly boosted the company's cash position, providing sufficient liquidity for at least the next 12 months. The IPO also led to the conversion of preferred stock to common stock and a substantial increase in the company's additional paid-in capital.

Cloudflare's revenue growth is driven by both acquiring new paying customers and expanding relationships with existing ones. The number of paying customers grew to over 82,000 by the end of 2019, with a notable increase in high-value customers (>$100,000 annual billings). The company also maintains a strong dollar-based net retention rate, consistently above 110%, indicating successful upsell and cross-sell to existing customers.

Cloudflare is heavily investing in sales and marketing and research and development to fuel its growth. The company utilizes a free customer base as a marketing tool and focuses on expanding its enterprise offerings. Despite the increasing net losses, management believes these investments are crucial for long-term growth and competitive positioning in the evolving internet infrastructure market.