10-QPeriod: Q2 FY2021

Cloudflare, Inc. Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 6, 2021For Securities:NET

Summary

Cloudflare, Inc. (NET) reported strong revenue growth of 53% year-over-year for the second quarter of 2021, reaching $152.4 million. This growth was driven by an increase in paying customers and expansion within existing customer relationships, as indicated by a dollar-based net retention rate of 124%. Despite the impressive top-line performance, the company continued to incur net losses, with a net loss of $35.5 million for the quarter, reflecting ongoing significant investments in sales and marketing, research and development, and general administrative functions. The company's balance sheet shows a healthy cash position with $247.6 million in cash and cash equivalents and $786.0 million in available-for-sale securities as of June 30, 2021. While operating activities used cash in the first half of 2020, they generated positive cash flow in the first half of 2021 ($30.9 million). Cloudflare's strategic investments in network infrastructure and product development are crucial for its long-term growth strategy, but these investments contribute to the ongoing net losses. Investors should monitor the company's ability to leverage its strong revenue growth to eventually achieve profitability.

Financial Highlights

52 data points
Beta

Revenue

$152.43M

77.0% Gross Margin

Net Income

-$35.51M

-23.3% Net Margin

EPS (Diluted)

$-0.12

Total Assets

$1.45B

Cash & Equivalents

$247.55M

Free Cash Flow

-$6.12M

Financial Statements
Beta
Revenue$152.43M
Cost of Revenue$35.03M
Gross Profit$117.40M
R&D Expenses$41.35M
Operating Expenses$146.27M
Operating Income-$28.87M
Interest Expense$10.44M
Net Income-$35.51M
EPS (Basic)$-0.12
EPS (Diluted)$-0.12
Shares Outstanding (Basic)308.26M
Shares Outstanding (Diluted)308.26M

Key Highlights

  • 1Revenue grew 53% year-over-year to $152.4 million in Q2 2021.
  • 2Number of paying customers increased by 32% year-over-year.
  • 3Dollar-based net retention rate was strong at 124%.
  • 4Gross margin remained stable at 77%.
  • 5Net loss for the quarter was $35.5 million, indicating continued investment in growth.
  • 6Cash and cash equivalents increased significantly to $247.6 million as of June 30, 2021.
  • 7Operating cash flow turned positive year-to-date ($30.9 million) compared to the prior year period ($10.3 million used).

Frequently Asked Questions

Cloudflare demonstrated strong revenue growth, with a 53% increase year-over-year in the second quarter of 2021, reaching $152.4 million. This growth was attributed to acquiring new paying customers and expanding relationships with existing ones, as evidenced by a robust dollar-based net retention rate of 124%.

Cloudflare is not yet profitable. The company reported a net loss of $35.5 million for the second quarter of 2021. This loss is a result of continued significant investments in sales and marketing, research and development, and general administrative functions to support its growth strategy.

Cloudflare maintains a healthy liquidity position. As of June 30, 2021, the company had $247.6 million in cash and cash equivalents and $786.0 million in available-for-sale securities. The company also saw a positive shift to positive cash flow from operations for the first six months of 2021 ($30.9 million), an improvement from the previous year's period which used cash.

Cloudflare's revenue growth is primarily driven by two factors: the addition of new paying customers and the expansion of services and revenue from existing customers. The company highlighted a 32% increase in paying customers and a strong dollar-based net retention rate of 124%, indicating that existing customers are spending more over time.