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Cloudflare (NET)

Cloudflare, Inc. is on a mission to help build a better Internet. Cloudflare's platform protects and accelerates 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, Seattle, WA, New York, NY, San Jose, CA, Washington, D.C., Lisbon, London, Munich, Paris, Beijing, Singapore, Sydney, and Tokyo.

NET stock data

Calendar

4 Aug 22
28 Sep 22
31 Dec 22
Quarter (USD) Jun 22 Mar 22 Dec 21 Sep 21
Revenue
Cost of revenue
Operating income
Operating margin
Net income
Net profit margin
Cash on hand
Change in cash
Diluted EPS
Annual (USD) Dec 21 Dec 20 Dec 19
Revenue
Cost of revenue
Operating income
Operating margin
Net income
Net profit margin
Cash on hand
Change in cash
Diluted EPS
Cash burn rate (est.) Burn method: Change in cash Burn method: Operating income Burn method: FCF (opex + capex)
Last Q Avg 4Q Last Q Avg 4Q Last Q Avg 4Q
Cash on hand (at last report) 153.78M 153.78M 153.78M 153.78M 153.78M 153.78M
Cash burn (monthly) 2.22M 8.59M 21.51M 22.74M (no burn) (no burn)
Cash used (since last report) 6.55M 25.36M 63.52M 67.14M n/a n/a
Cash remaining 147.23M 128.41M 90.26M 86.63M n/a n/a
Runway (months of cash) 66.4 14.9 4.2 3.8 n/a n/a

Beta Read what these cash burn values mean

Date Owner Security Transaction Code Indirect 10b5-1 $Price #Shares $Value #Remaining
13 Sep 22 Prince Matthew Class A Common Stock Sell Dispose S Yes Yes 62.2438 400 24.9K 0
13 Sep 22 Prince Matthew Class A Common Stock Sell Dispose S Yes Yes 61.4055 12,613 774.51K 400
13 Sep 22 Prince Matthew Class A Common Stock Sell Dispose S Yes Yes 60.5285 25,416 1.54M 13,013
13 Sep 22 Prince Matthew Class A Common Stock Sell Dispose S Yes Yes 59.8263 13,955 834.88K 38,429
13 Sep 22 Prince Matthew Class A Common Stock Conversion Acquire C Yes No 0 52,384 0 52,384
13 Sep 22 Prince Matthew Class B Common Stock Class A Common Stock Conversion Dispose C Yes No 0 52,384 0 16,706,667
12 Sep 22 Prince Matthew Class A Common Stock Sell Dispose S Yes Yes 66.6216 21,826 1.45M 0
12 Sep 22 Prince Matthew Class A Common Stock Sell Dispose S Yes Yes 65.709 20,845 1.37M 21,826
12 Sep 22 Prince Matthew Class A Common Stock Sell Dispose S Yes Yes 64.852 9,713 629.91K 42,671
12 Sep 22 Prince Matthew Class A Common Stock Conversion Acquire C Yes No 0 52,384 0 52,384
93.1% owned by funds/institutions
13F holders Current Prev Q Change
Total holders 536 626 -14.4%
Opened positions 68 79 -13.9%
Closed positions 158 120 +31.7%
Increased positions 202 258 -21.7%
Reduced positions 161 199 -19.1%
13F shares Current Prev Q Change
Total value 17.17B 39.75B -56.8%
Total shares 261.78M 259.83M +0.8%
Total puts 7.34M 6.75M +8.7%
Total calls 6.06M 6.6M -8.2%
Total put/call ratio 1.2 1.0 +18.5%
Largest owners Shares Value Change
MS Morgan Stanley 34.42M $1.51B +15.7%
Baillie Gifford & Co 24.11M $1.06B -11.1%
Vanguard 23.9M $1.05B +2.3%
FMR 16.47M $720.57M -26.6%
Sands Capital Management 15.64M $684.42M +15.4%
Venrock Associates V 14.8M $1.12B 0.0%
BLK Blackrock 14.28M $624.59M -5.4%
New Enterprise Associates 13 13.16M $1B 0.0%
Capital World Investors 10.5M $459.37M -38.4%
First Trust Advisors 9.58M $419.26M +48.6%
Largest transactions Shares Bought/sold Change
Capital World Investors 10.5M -6.55M -38.4%
FMR 16.47M -5.98M -26.6%
MS Morgan Stanley 34.42M +4.67M +15.7%
First Trust Advisors 9.58M +3.13M +48.6%
Baillie Gifford & Co 24.11M -3.02M -11.1%
Sands Capital Management 15.64M +2.09M +15.4%
Voloridge Investment Management 1.92M +1.82M +1769.7%
Two Sigma Investments 2.75M +1.68M +156.8%
Two Sigma Advisers 2.37M +852K +56.1%
BLK Blackrock 14.28M -815.63K -5.4%

Financial report summary

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Risks
  • We have a history of net losses and may not be able to achieve or sustain profitability in the future.
  • We have experienced rapid revenue growth, which may not be indicative of our future performance.
  • If we are unable to attract new paying and free customers, our future results of operations could be harmed.
  • Our business depends on our ability to retain and upgrade paying customers and, to a lesser extent, convert free customers to paying customers, and any decline in renewals, upgrades, or conversions could adversely affect our future results of operations.
  • If we are unable to effectively attract, expand, and retain sales to large customers, or we fail to mitigate the additional risks associated with serving such customers, our business, results of operation, and financial condition may suffer.
  • The ongoing COVID-19 pandemic, the Russia-Ukraine conflict, and the related challenging macroeconomic conditions globally and in various countries in which we and our customers operate may materially adversely affect our customers, vendors, and partners, and the duration and extent to which these factors may impact our future business and operations, results of operations, financial condition, and cash flows remain uncertain.
  • Activities of our paying and free customers or the content of their websites or other Internet properties, as well as our response to those activities, could cause us to experience significant adverse political, business, and reputational consequences with customers, employees, suppliers, government entities, and others.
  • Although offering a free plan for certain of our products is an important part of our business strategy, we may not be able to realize all of the expected benefits of this strategy and the costs and other detriments associated with our free plan could outweigh the benefits we receive from our free customers.
  • We face intense and increasing competition, which could adversely affect our business, financial condition, and results of operations.
  • If we do not effectively expand, train, and retain our sales force, we may be unable to add new contracted customers, or increase sales to our existing customers and our business would be adversely affected.
  • If we fail to effectively manage our growth, we may be unable to execute our business plan, maintain high-quality levels of customer support, ensure the reliability and security of our network, adequately address competitive challenges, or maintain our corporate culture, and our business, financial condition, and results of operations would be harmed.
  • Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
  • We rely on our co-founders and other key technical, sales, and management personnel to grow our business, and the loss of one or more key employees or the inability to attract and retain qualified personnel could harm our business.
  • We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our profitability.
  • If we are not able to maintain and promote our brand, our business and results of operations may be adversely affected.
  • Adverse economic conditions, including reduced spending on products and solutions for network security, performance, and reliability, and the impacts of geopolitical developments and uncertainty, may adversely impact our revenue and profitability.
  • Our relatively limited operating history makes it difficult to evaluate our current business and prospects, and may increase the risk that we will not be successful.
  • We have limited experience with our pricing models, particularly for our newer products and solutions, and we may not accurately predict the long-term rate of paying customer adoption or renewal, or the impact these will have on our revenue or results of operations.
  • Our growth depends, in part, on the success of our strategic relationships with third parties, and if we fail to continue to expand, grow, and retain these relationships then our business, results of operations, and financial condition may be adversely impacted.
  • Our ability to maintain customer satisfaction depends in part on the quality of our customer support. Failure to maintain high-quality customer support could have an adverse effect on our business, results of operation, and financial condition.
  • Our business depends, in part, on sales to the United States and foreign government organizations, which are subject to a number of challenges and risks.
  • We rely on third-party software for certain essential financial and operational services, and a failure or disruption in these services could materially and adversely affect our ability to manage our business effectively.
  • Our business is exposed to risks associated with credit card and other online payment processing methods.
  • Because we recognize revenue from subscriptions for our products over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our results of operations and may be difficult to discern.
  • If our estimates, assumptions, or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected.
  • Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value, and adversely affect our results of operations, financial condition, and prospects.
  • Certain of our key business metrics could prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business.
  • We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all.
  • Problems with our internal systems, networks, or data, including actual or perceived breaches or failures, could cause our network or products to be perceived as insecure, underperforming, or unreliable, our customers to lose trust in our network and products, our reputation to be damaged, and our financial results to be negatively impacted.
  • Detrimental changes in, or the termination of, any of our co-location relationships, ISP partnerships, or our other interconnection relationships with ISPs could adversely impact our business, results of operations, and financial condition.
  • If our network and products do not interoperate with our customers’ internal networks and infrastructure or with third-party products, websites, or services, our network may become less competitive and our results of operations may be harmed.
  • We rely on a limited number of suppliers for certain components of the equipment we use to operate our network and any disruption in the availability of these components could delay our ability to expand or increase the capacity of our global network or replace defective equipment.
  • The actual or perceived failure of our products to block malware or prevent a security breach or incident could harm our reputation and adversely impact our business, results of operations, and financial condition.
  • Abuse, misuse, or other unauthorized use of our internal network, including network services tools, could cause significant harm to our business and reputation.
  • We may choose to make public disclosures in press releases, on our website and blog, through social media, and in other ways about our network, systems, products, and technology, which may include negative events, when we are not otherwise required by applicable law and those disclosures could materially and adversely impact our business, reputation, and results of operations.
  • We provide service level commitments under our Enterprise subscription plan customer contracts and our Business subscription plan terms of service. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service or allow customers to terminate their subscriptions and our business could suffer.
  • If our products do not obtain and maintain market acceptance, our ability to grow our business and our results of operations may be adversely affected.
  • We may not be able to respond to rapid technological changes or develop new products and features that are attractive to our current and prospective future customers.
  • In connection with our Web3 suite of products and our potential future participation in various Web 3 protocol governance activities, we expect to hold certain types of cryptocurrency and similar types of digital assets that may be subject to unique regulatory and accounting risks, volatile market prices, and risks of loss, which could harm our business and reputation.
  • Activities of our paying and free customers or the content of their websites and other Internet properties may violate applicable laws and/or our terms of service and could subject us to lawsuits, regulatory enforcement actions, and/or liability in various jurisdictions.
  • Our policies regarding user privacy could cause us to experience adverse business and reputational consequences with customers, employees, suppliers, government entities, and other third parties.
  • Our business could be adversely impacted by changes in Internet access for our customers as a result of competitive behavior or laws specifically governing the Internet.
  • Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business.
  • Our actual or perceived failure to comply with privacy, data protection, and information security laws, regulations, and obligations could harm our business.
  • We are subject to anti-corruption, anti-bribery, and similar laws, and noncompliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.
  • We may face fines, penalties, or other costs, either directly or vicariously, if any of our partners, resellers, contractors, vendors or other third parties fail to adhere to their compliance obligations under our policies and applicable law.
  • We may have exposure to greater than anticipated income tax liabilities and may be affected by changes in tax laws, which could adversely impact our results of operations.
  • Our results of operations may be harmed if we are required to collect sales and use, gross receipts, value-added, or similar taxes for our products in jurisdictions where we have not historically done so.
  • Our international operations require us to exercise judgment in determining the applicability of tax laws, which may subject us to potentially adverse tax consequences.
  • Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
  • Our international operations expose us to significant risks, and failure to manage those risks could materially and adversely impact our business and results of operations.
  • Our business could be adversely impacted by the decision of foreign governments, Internet service providers, or others, to block transmission from Cloudflare IP addresses or domains in order to enforce certain Internet content blocking efforts.
  • Our network presence within China is dependent upon our commercial relationship with JD Cloud & AI and any detrimental changes in, or the termination of, that relationship could jeopardize our ability to offer an integrated global network that includes China.
  • We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations.
  • We are currently, and may be in the future, party to intellectual property rights claims and other litigation matters that, if resolved adversely, could have a material impact on our business, results of operations, or financial condition.
  • Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
  • Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets.
  • We depend and rely upon software and technologies licensed from third parties to operate our business, and interruptions or the unavailability of these technologies may adversely affect our products, network, business, and results of operations.
  • Some of our technology incorporates “open source” software, we license some of our software through open source projects and we voluntarily make available some of our software on an open source basis, which could negatively affect our ability to sell our products, subject us to possible litigation, and be used by other companies to compete against us.
  • The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
  • The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering, and it may depress the trading price of our Class A common stock.
  • Substantial future sales could depress the market price of our Class A common stock.
  • We have broad discretion over the use of the net proceeds from our financing activities, and we may not use them effectively.
  • Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.
  • Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.
  • Our Class A common stock market price and trading volume could decline if equity or industry analysts do not publish research or publish inaccurate or unfavorable research about our business.
  • An active trading market for our Class A common stock may not be sustained.
  • We do not intend to pay dividends for the foreseeable future.
  • The conditional conversion feature of the Notes, when triggered, may adversely affect our financial condition and operating results.
  • Transactions relating to the Notes may affect the value of our Class A common stock.
  • We are subject to counterparty risk with respect to the capped call transactions.
  • If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
  • Our business is subject to the risks of catastrophic events.
  • The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.
Management Discussion
  • Revenue increased by $82.1 million, or 54%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The increase in revenue was primarily due to the addition of new paying customers, as our number of paying customers increased by 20% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 126% for the three months ended June 30, 2022.
  • Revenue increased by $156.2 million, or 54%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. The increase in revenue was primarily due to the addition of new paying customers, as our number of paying customers increased by 20% as of June 30, 2022 compared to the prior period ended June 30, 2021, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 126% for the three months ended June 30, 2022.
  • Cost of revenue increased by $20.8 million, or 59%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The increase in the cost of revenue was primarily due to an increase of $5.9 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base as well as increased capacity to support our growth, an increase of $4.8 million in employee-related costs due to a 56% increase in headcount in our customer support and technical operations organizations, an increase of $3.8 million of amortization expense of acquired developed technology and capitalized internal-use software, and an increase of $2.9 million in depreciation expense related to purchases of equipment located in co-location facilities. The remainder of the increase was primarily due to $2.8 million of increased third-party technology services costs, registry fees, and payment processing fees.

Content analysis

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Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability
H.S. senior Good
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