10-QPeriod: Q1 FY2024

Cloudflare, Inc. Quarterly Report for Q1 Ended Mar 31, 2024

Filed May 2, 2024For Securities:NET

Summary

Cloudflare, Inc. (NET) reported strong revenue growth of 30% year-over-year for the first quarter of 2024, reaching $378.6 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 115%. Despite the revenue growth, the company continues to operate at a net loss, with a net loss of $35.5 million for the quarter. The company's operating expenses, particularly in sales and marketing, increased significantly due to investments in headcount and a one-time compensation charge, leading to a wider operating loss. Financially, Cloudflare demonstrated improved cash flow from operations, nearly doubling to $73.6 million compared to the prior year, and generated positive free cash flow of $35.6 million. The company ended the quarter with a healthy cash position of $254.4 million and available-for-sale securities totaling $1.5 billion, indicating sufficient liquidity for at least the next 12 months. Key business metrics show continued expansion, with paying customers growing by 17% and large customers (>$100k ARR) increasing by 33%. The company also made a change in accounting estimate regarding the useful lives of its servers, which reduced depreciation expense by $6.2 million for the quarter.

Financial Highlights

49 data points
Beta

Revenue

$378.60M

77.5% Gross Margin

Net Income

-$35.54M

-9.4% Net Margin

EPS (Diluted)

$-0.10

Total Assets

$2.80B

Cash & Equivalents

$254.40M

Free Cash Flow

$41.52M

Financial Statements
Beta
Revenue$378.60M
Cost of Revenue$85.04M
Gross Profit$293.56M
R&D Expenses$87.70M
Operating Expenses$348.11M
Operating Income-$54.55M
Interest Expense$1.10M
Net Income-$35.54M
EPS (Basic)$-0.10
EPS (Diluted)$-0.10
Shares Outstanding (Basic)338.58M
Shares Outstanding (Diluted)338.58M

Key Highlights

  • 1Revenue increased by 30% year-over-year to $378.6 million.
  • 2Net loss for the quarter was $35.5 million, an improvement from $38.1 million in the prior year's quarter.
  • 3Cash flow from operations significantly improved, reaching $73.6 million, up from $36.4 million in Q1 2023.
  • 4Free cash flow was positive at $35.6 million, more than double the $13.9 million generated in Q1 2023.
  • 5The number of paying customers grew by 17% year-over-year to 197,138.
  • 6Customers with annualized revenue greater than $100,000 increased by 33% year-over-year to 2,878.
  • 7Dollar-based net retention rate was 115% for the quarter.
  • 8Sales and marketing expenses increased by 42% year-over-year, impacting profitability.

Frequently Asked Questions

Cloudflare reported a 30% year-over-year increase in revenue for the first quarter of 2024, reaching $378.6 million. This growth was primarily attributed to an increase in the number of paying customers and expansion within existing customer accounts.

Cloudflare continues to operate at a net loss. For the first quarter of 2024, the net loss was $35.5 million. While this represents a slight improvement from the $38.1 million net loss in the same quarter last year, the company is still investing heavily in growth, which contributes to ongoing losses.

The company showed significant improvement in cash flow from operations, generating $73.6 million in the first quarter of 2024, more than double the $36.4 million from the prior year. Cloudflare also generated positive free cash flow of $35.6 million, indicating strong operational cash generation after capital expenditures.

Customer growth remains robust. The number of paying customers increased by 17% year-over-year to 197,138. Notably, the number of larger enterprise customers (annualized revenue over $100,000) grew by 33% year-over-year to 2,878. The dollar-based net retention rate of 115% suggests existing customers are increasing their spending.