- First quarter total revenue totaled $212.2 million,
representing an increase of 54% year-over-year
- Record dollar-based net retention of 127%, representing an
increase of 400 basis points year-over-year
- Strong paying customer growth, with a record addition of
roughly 14,000 paying customers in the quarter, bringing the total
number of paying customers to 154,109
Cloudflare, Inc. (NYSE: NET), the security, performance, and
reliability company helping to build a better Internet, today
announced financial results for its first quarter ended March 31,
2022.
“Cloudflare had a terrific first quarter of 2022, beating
expectations with revenue growth up 54% year-over-year and adding
more than 14,000 new paying customers—a quarterly record,” said
Matthew Prince, co-founder & CEO of Cloudflare. “Our largest
customers continue to get larger, with those spending over $1M a
year growing 72 percent year-over-year. The key to our success and
customer expansion is innovating at an unrelenting pace, and
continued interest in consolidating behind a single vendor that can
power multiple network services at scale.”
First Quarter Fiscal 2022 Financial Highlights
- Revenue: Total revenue of $212.2 million, representing
an increase of 54% year-over-year.
- Gross Profit: GAAP gross profit was $165.1 million, or
77.8% gross margin, compared to $106.0 million, or 76.8%, in the
first quarter of 2021. Non-GAAP gross profit was $166.9 million, or
78.7% gross margin, compared to $107.2 million, or 77.6%, in the
first quarter of 2021.
- Operating Income (Loss): GAAP loss from operations was
$40.0 million, or 18.9% of total revenue, compared to $31.3
million, or 22.6% of total revenue, in the first quarter of 2021.
Non-GAAP income from operations was $4.9 million, or 2.3% of total
revenue, compared to a loss from operations of $7.5 million, or
5.4% of total revenue, in the first quarter of 2021.
- Net Income (Loss): GAAP net loss was $41.4 million,
compared to $40.0 million in the first quarter of 2021. GAAP net
loss per basic and diluted share was $0.13, compared to $0.13 in
the first quarter of 2021. Non-GAAP net income was $3.5 million,
compared to non-GAAP net loss of $9.3 million in the first quarter
of 2021. Non-GAAP net income per diluted share was $0.01, compared
to non-GAAP net loss per share of $0.03 in the first quarter of
2021.
- Cash Flow: Net cash flow from operating activities was
negative $35.5 million, compared to $23.5 million for the first
quarter of 2021. Free cash flow was negative $64.4 million, or 30%
of total revenue, compared to negative $2.2 million, or 2% of total
revenue, in the first quarter of 2021.
- Cash, cash equivalents, and available-for-sale
securities were $1,725.2 million as of March 31, 2022.
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
The following forward-looking statements regarding our financial
outlook are subject to substantial uncertainty as a result of the
ongoing COVID-19 pandemic, reflect our estimates as of May 5, 2022
regarding the impact of the pandemic on our operations, and are
highly dependent on numerous factors that we may not be able to
predict or control, including, among others: the duration, spread,
and severity of the pandemic; actions taken by governments and
businesses in response to the pandemic and the resulting impact on
our customers, vendors, and partners; the timing of administering
COVID-19 vaccines around the world and the long-term efficacy of
these vaccines; the impact of the pandemic on global and regional
economies and economic activity generally; our ability to continue
operating in impacted areas; and customer demand and spending
patterns.
For the second quarter of fiscal 2022, we expect:
- Total revenue of $226.5 to $227.5 million
- Non-GAAP loss from operations of $2.0 to $1.0 million
- Non-GAAP net income (loss) per share of $(0.01) to $0.00,
utilizing weighted average common shares outstanding of
approximately 325 million for a net loss per share, and
approximately 344 million for a net income per share
For the full year fiscal 2022, we expect:
- Total revenue of $955.0 to $959.0 million
- Non-GAAP income from operations of $10.0 to $14.0 million
- Non-GAAP net income per share of $0.03 to $0.04, utilizing
weighted average common shares outstanding of approximately 345
million
Conference Call Information
Cloudflare will host an investor conference call to discuss its
first quarter ended March 31, 2022 earnings results today at 2:00
p.m. Pacific time (5:00 p.m. Eastern time). Interested parties can
access the call by dialing (888) 330-2022 from the United States or
(646) 960-0690 internationally with conference ID 1278984. 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, Twitter 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 net income (loss) from operations and
non-GAAP net income (loss) per share, shares outstanding, the
benefits to customers from using our products, the expected
functionality and performance of our products, our plans and
objectives for future operations, growth, initiatives, or
strategies, 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 extent and duration of the impact of the COVID-19
pandemic and resulting adverse conditions in the general domestic
and global economic markets; the impact of the COVID-19 pandemic on
our and our customers’, vendors’, and partners’ operations and
future financial performance; our history of net losses; our
limited operating history; 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 effectively increase sales to large customers; problems
with our internal systems, network, or data, including actual or
perceived breaches or failures; rapidly evolving technological
developments in the market; length of sales cycles; activities of
our paying and free customers or the content of their websites and
other Internet properties that use our network and products;
changes in the legal, tax, and regulatory environment applicable to
our business; and 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 Annual Report on Form 10-K
filed on March 1, 2022, 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. (www.cloudflare.com / @cloudflare) is on a
mission to help build a better Internet. Cloudflare’s suite of
products protect and accelerate any Internet application online
without adding hardware, installing software, or changing a line of
code. Internet properties powered by Cloudflare have all web
traffic routed through its intelligent global network, which gets
smarter with every request. As a result, they see significant
improvement in performance and a decrease in spam and other
attacks. Cloudflare was named to Entrepreneur Magazine’s Top
Company Cultures 2018 list and ranked among the World’s Most
Innovative Companies by Fast Company in 2019. Headquartered in San
Francisco, CA, Cloudflare has offices in Austin, TX, Champaign, IL,
New York, NY, San Jose, CA, Seattle, WA, Washington, D.C., Toronto,
Lisbon, London, Munich, Paris, Beijing, Singapore, Sydney, and
Tokyo.
CLOUDFLARE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per share
data)
(unaudited)
Three Months Ended
March 31,
2022
2021
Revenue
$
212,167
$
138,055
Cost of revenue(1)(2)
47,051
32,084
Gross profit
165,116
105,971
Operating expenses:
Sales and marketing(1)
100,057
69,974
Research and development(1)(3)
67,054
39,527
General and administrative(1)
38,029
27,724
Total operating expenses
205,140
137,225
Loss from operations
(40,024
)
(31,254
)
Non-operating income (expense):
Interest income
1,061
544
Interest expense(4)
(1,557
)
(10,234
)
Other income (expense), net
(487
)
148
Total non-operating income (expense),
net
(983
)
(9,542
)
Loss before income taxes
(41,007
)
(40,796
)
Provision for (benefit from) income
taxes
374
(833
)
Net loss
$
(41,381
)
$
(39,963
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.13
)
$
(0.13
)
Weighted-average shares used in computing
net loss per share attributable to common stockholders, basic and
diluted
323,334
305,947
____________
(1) Includes stock-based compensation and
related employer payroll taxes as follows:
Cost of revenue
$
1,323
$
523
Sales and marketing
10,379
6,835
Research and development
24,079
11,058
General and administrative
6,018
4,648
Total stock-based compensation and related
employer payroll taxes
$
41,799
$
23,064
(2) Includes amortization of acquired
intangible assets as follows:
Cost of revenue
$
507
$
700
Total amortization of acquired intangible
assets
$
507
$
700
(3) Includes acquisition-related and other
expenses as follows:
Research and development
$
2,639
$
—
Total acquisition-related and other
expenses
$
2,639
$
—
(4) Includes amortization of debt
discounts and issuance costs as follows*:
Amortization of debt discounts and
issuance costs*
$
1,170
$
8,971
Total amortization of debt discounts and
issuance costs
$
1,170
$
8,971
* The Company recorded amortization of
debt discount as interest expense prior to the adoption of ASU
2020-06 on January 1, 2022.
CLOUDFLARE, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except par
value)
(unaudited)
March 31, 2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents
$
151,976
$
313,777
Available-for-sale securities
1,573,264
1,508,066
Accounts receivable, net
125,350
95,543
Contract assets
6,329
6,079
Restricted cash short-term
2,487
2,958
Prepaid expenses and other current
assets
35,404
29,433
Total current assets
1,894,810
1,955,856
Property and equipment, net
202,432
183,736
Goodwill
28,481
23,530
Acquired intangible assets, net
3,846
1,254
Operating lease right-of-use assets
138,871
130,314
Deferred contract acquisition costs,
noncurrent
76,266
70,320
Restricted cash
5,969
4,223
Other noncurrent assets
3,274
2,838
Total assets
$
2,353,949
$
2,372,071
Liabilities, Temporary Equity and
Stockholders’ Equity
Current liabilities:
Accounts payable
$
32,925
$
26,086
Accrued expenses and other current
liabilities
40,888
38,085
Accrued compensation
39,978
65,905
Operating lease liabilities
27,305
25,175
Liability for early exercise of unvested
stock options
3,870
4,651
Deferred revenue
131,650
116,546
Current portion of convertible senior
notes, net
—
12,117
Total current liabilities
276,616
288,565
Convertible senior notes, net
1,432,705
1,146,877
Operating lease liabilities,
noncurrent
114,619
109,037
Deferred revenue, noncurrent
5,577
4,680
Other noncurrent liabilities
8,955
7,114
Total liabilities
1,838,472
1,556,273
Temporary equity, convertible senior
notes
—
4,439
Stockholders’ Equity:
Class A common stock; $0.001 par value;
2,250,000 shares authorized as of March 31, 2022 and December 31,
2021; 280,412 and 277,708 shares issued and outstanding as of March
31, 2022 and December 31, 2021, respectively
280
277
Class B common stock; $0.001 par value;
315,000 shares authorized as of March 31, 2022 and December 31,
2021; 45,128 and 45,904 shares issued and outstanding as of March
31, 2022 and December 31, 2021, respectively
43
44
Additional paid-in capital
1,215,790
1,494,512
Accumulated deficit
(687,891
)
(680,829
)
Accumulated other comprehensive loss
(12,745
)
(2,645
)
Total stockholders’ equity
515,477
811,359
Total liabilities, temporary equity and
stockholders’ equity
$
2,353,949
$
2,372,071
CLOUDFLARE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March
31,
2022
2021
Cash Flows From Operating
Activities
Net loss
$
(41,381
)
$
(39,963
)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization expense
20,014
15,218
Non-cash operating lease costs
8,610
5,346
Amortization of deferred contract
acquisition costs
9,662
6,060
Stock-based compensation expense
33,965
18,042
Amortization of debt discount and issuance
costs
1,170
8,971
Net accretion of discounts and
amortization of premiums on available-for-sale securities
2,195
1,879
Deferred income taxes
6
(1,513
)
Provision for bad debt
968
1,470
Other
113
79
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable, net
(30,775
)
(9,211
)
Contract assets
(250
)
(122
)
Deferred contract acquisition costs
(15,608
)
(10,866
)
Prepaid expenses and other current
assets
(6,775
)
614
Other noncurrent assets
(85
)
1,361
Accounts payable
1,862
6,181
Accrued expenses and other current
liabilities
(25,427
)
10,119
Operating lease liabilities
(9,455
)
(5,352
)
Deferred revenue
16,001
14,646
Other noncurrent liabilities
(277
)
535
Net cash provided by (used in)
operating activities
(35,467
)
23,494
Cash Flows From Investing
Activities
Purchases of property and equipment
(24,481
)
(22,268
)
Capitalized internal-use software
(4,453
)
(3,445
)
Cash paid for acquisitions, net of cash
acquired
(4,380
)
—
Purchases of available-for-sale
securities
(264,541
)
(188,377
)
Maturities of available-for-sale
securities
187,048
261,822
Other investing activities
2
44
Net cash provided by (used in)
investing activities
(110,805
)
47,776
Cash Flows From Financing
Activities
Repayments of convertible senior notes
(16,571
)
—
Proceeds from the exercise of stock
options
3,006
7,964
Proceeds from the early exercise of stock
options
62
95
Repurchases of unvested common stock
(3
)
(150
)
Payment of tax withholding obligation on
RSU settlement
(748
)
(530
)
Net cash provided by (used in)
financing activities
(14,254
)
7,379
Net increase (decrease) in cash, cash
equivalents, and restricted cash
(160,526
)
78,649
Cash, cash equivalents, and restricted
cash, beginning of period
320,958
118,146
Cash, cash equivalents, and restricted
cash, end of period
$
160,432
$
196,795
CLOUDFLARE, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended
March 31,
2022
2021
Reconciliation of cost of
revenue:
GAAP cost of revenue
$
47,051
$
32,084
Less: Stock-based compensation and related
employer payroll taxes
(1,323
)
(523
)
Less: Amortization of acquired intangible
assets
(507
)
(700
)
Non-GAAP cost of revenue
$
45,221
$
30,861
Reconciliation of gross profit:
GAAP gross profit
$
165,116
$
105,971
Add: Stock-based compensation and related
employer payroll taxes
1,323
523
Add: Amortization of acquired intangible
assets
507
700
Non-GAAP gross profit
$
166,946
$
107,194
GAAP gross margin
77.8
%
76.8
%
Non-GAAP gross margin
78.7
%
77.6
%
Reconciliation of operating
expenses:
GAAP sales and marketing
$
100,057
$
69,974
Less: Stock-based compensation and related
employer payroll taxes
(10,379
)
(6,835
)
Non-GAAP sales and marketing
$
89,678
$
63,139
GAAP research and development
$
67,054
$
39,527
Less: Stock-based compensation and related
employer payroll taxes
(24,079
)
(11,058
)
Less: Acquisition-related and other
expenses
(2,639
)
—
Non-GAAP research and development
$
40,336
$
28,469
GAAP general and administrative
$
38,029
$
27,724
Less: Stock-based compensation and related
employer payroll taxes
(6,018
)
(4,648
)
Non-GAAP general and administrative
$
32,011
$
23,076
Reconciliation of income (loss) from
operations:
GAAP loss from operations
$
(40,024
)
$
(31,254
)
Add: Stock-based compensation and related
employer payroll taxes
41,799
23,064
Add: Amortization of acquired intangible
assets
507
700
Add: Acquisition-related and other
expenses
2,639
—
Non-GAAP income (loss) from operations
$
4,921
$
(7,490
)
GAAP operating margin
(18.9
)%
(22.6
)%
Non-GAAP operating margin
2.3
%
(5.4
)%
CLOUDFLARE, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended
March 31,
2022
2021
Reconciliation of interest
expense:
GAAP interest expense
$
(1,557
)
$
(10,234
)
Add: Amortization of debt discount and
issuance costs(1)
1,170
8,971
Non-GAAP interest expense
$
(387
)
$
(1,263
)
Reconciliation of provision for
(benefit from) income taxes:
GAAP provision for (benefit from) income
taxes
$
374
$
(833
)
Income tax effect of non-GAAP
adjustments
1,284
2,103
Non-GAAP provision for income taxes
$
1,658
$
1,270
Reconciliation of net income (loss) and
net income (loss) per share:
GAAP net loss attributable to common
stockholders
(41,381
)
(39,963
)
Add: Stock-based compensation and related
employer payroll taxes
41,799
23,064
Add: Amortization of acquired intangible
assets
507
700
Add: Acquisition-related and other
expenses
2,639
—
Add: Amortization of debt discount and
issuance costs(1)
1,170
8,971
Income tax effect of non-GAAP
adjustments
(1,284
)
(2,103
)
Non-GAAP net income (loss)
$
3,450
$
(9,331
)
GAAP net loss per share, basic
$
(0.13
)
$
(0.13
)
GAAP net loss per share, diluted
$
(0.13
)
$
(0.13
)
Add: Stock-based compensation and related
employer payroll taxes
0.13
0.08
Add: Amortization of acquired intangible
assets
—
—
Add: Acquisition-related and other
expenses
0.01
—
Add: Amortization of debt discount and
issuance costs(1)
—
0.03
Income tax effect of non-GAAP
adjustment
—
(0.01
)
Effect of dilutive shares
—
—
Non-GAAP net income (loss) per share,
diluted(2)(3)
$
0.01
$
(0.03
)
Weighted-average shares used in computing
net income (loss) per share attributable to common stockholders,
basic
323,334
305,947
Weighted-average shares used in computing
non-GAAP net income (loss) per share attributable to common
stockholders, diluted(3)
341,589
305,947
____________
(1) The Company recorded amortization of
debt discount as interest expense prior to the adoption of ASU
2020-06 on January 1, 2022.
(2) Totals may not sum due to rounding.
Figures are calculated based upon the respective underlying
non-rounded data.
(3) 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
March 31,
2022
2021
Free cash flow
Net cash provided by (used in) operating
activities
$
(35,467
)
$
23,494
Less: Purchases of property and
equipment
(24,481
)
(22,268
)
Less: Capitalized internal-use
software
(4,453
)
(3,445
)
Free cash flow
$
(64,401
)
$
(2,219
)
Net cash provided (used in) investing
activities
$
(110,805
)
$
47,776
Net cash provided by (used in) financing
activities
$
(14,254
)
$
7,379
Net cash provided by (used in) operating
activities
(percentage of revenue)
(17
)%
17
%
Less: Purchases of property and
equipment
(percentage of revenue)
(11
)%
(17
)%
Less: Capitalized internal-use
software
(percentage of revenue)
(2
)%
(2
)%
Free cash flow margin(1)
(30
)%
(2
)%
____________
(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 (used in)
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.
Expenses 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 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 exclude
amortization of issuance costs, which is a non-cash expense, from
certain of our non-GAAP financial measures because such expenses
have no direct correlation to the operation of our business. Prior
to adoption of ASU 2020-06 on January 1, 2022, we recorded
amortization of debt discount as interest expense.
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 and related employer payroll taxes, amortization of
acquired intangible assets, and 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 and 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) 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 (used in) 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 (or consumed) 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/20220505005463/en/
Investor Relations Information Jayson Noland
ir@cloudflare.com
Press Contact Information Daniella Vallurupalli
press@cloudflare.com
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