10-QPeriod: Q2 FY2023

Cloudflare, Inc. Quarterly Report for Q2 Ended Jun 30, 2023

Filed August 3, 2023For Securities:NET

Summary

Cloudflare, Inc. (NET) reported solid revenue growth of 32% year-over-year for the second quarter of 2023, reaching $308.5 million. This growth was driven by an increase in paying customers and strong expansion from existing ones, as indicated by a dollar-based net retention rate of 115%. While the company continues to invest heavily in its global network and product development, leading to an increase in operating expenses and a net loss of $94.5 million for the quarter, the company also demonstrated an improvement in free cash flow to $20.0 million, a significant increase from the prior year. The company's financial position remains strong with $159.3 million in cash and cash equivalents and $1.4 billion in available-for-sale securities as of June 30, 2023. A notable event during the quarter was the loss on extinguishment of debt of $50.3 million related to the repurchase of its 2025 Convertible Senior Notes. Management remains focused on long-term growth, innovation, and expanding its customer base, while navigating ongoing macroeconomic uncertainties.

Financial Highlights

51 data points
Beta

Revenue

$308.49M

75.6% Gross Margin

Net Income

-$94.47M

-30.6% Net Margin

EPS (Diluted)

$-0.28

Total Assets

$2.53B

Cash & Equivalents

$159.32M

Free Cash Flow

$25.70M

Financial Statements
Beta
Revenue$308.49M
Cost of Revenue$75.22M
Gross Profit$233.27M
R&D Expenses$89.61M
Operating Expenses$289.44M
Operating Income-$56.17M
Interest Expense$1.54M
Net Income-$94.47M
EPS (Basic)$-0.28
EPS (Diluted)$-0.28
Shares Outstanding (Basic)332.30M
Shares Outstanding (Diluted)332.30M

Key Highlights

  • 1Revenue increased by 32% to $308.5 million in Q2 2023 compared to Q2 2022.
  • 2Dollar-based net retention rate was 115% for the three months ended June 30, 2023.
  • 3Free cash flow turned positive, reaching $19.97 million in Q2 2023, up from a negative $4.41 million in Q2 2022.
  • 4Net loss for Q2 2023 was $94.5 million, compared to $63.5 million in Q2 2022, reflecting increased operating expenses.
  • 5Cash and cash equivalents plus available-for-sale securities totaled approximately $1.58 billion as of June 30, 2023.
  • 6The company recognized a $50.3 million loss on extinguishment of debt related to the repurchase of its 2025 Convertible Senior Notes.

Frequently Asked Questions

Cloudflare reported revenue of $308.5 million for the three months ended June 30, 2023, representing a 32% increase compared to $234.5 million for the same period in 2022. This growth was driven by new customer acquisition and expansion from existing customers.

Cloudflare continues to operate at a net loss. For the three months ended June 30, 2023, the net loss was $94.5 million, an increase from $63.5 million in the prior year's quarter. The company attributes this to significant investments in research and development, sales, and marketing to support its growth strategy.

The company generated positive free cash flow of $19.97 million in the second quarter of 2023, a significant improvement from a negative free cash flow of $4.41 million in the same quarter of the previous year. This indicates progress in managing operational cash burn despite ongoing investments.

The company repurchased approximately $123.0 million of its 2025 Convertible Senior Notes in May 2023, resulting in a loss on extinguishment of debt of $50.3 million for the quarter. This was a significant non-operational expense impacting the net loss.