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Cloudflare (NET)

Participants
Jayson Noland Head, IR
Matthew Prince Co-Founder and CEO
Thomas Seifert CFO
Phil Winslow Wells Fargo
James Fish Piper Sandler
Brent Thill Jefferies
Keith Weiss Morgan Stanley
Matt Hedberg RBC Capital Markets
Amit Daryanani Evercore
Jonathan Ruykhaver Baird
James Breen William Blair
Gray Powell BTIG
Alex Henderson Needham
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Cloudflare Q4, 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today, hand Investor Jayson would to conference Relations. I speaker your Noland, Instructions] like the to over [Operator Head of Thank you. sir. Please ahead go

Jayson Noland

our Thank President we have results Prince, Cloudflare’s Co-Founder XXXX. you Michelle to Matthew me the Zatlyn, CEO; Co-Founder, With as access Investor be announcement. This earnings COO; Seifert, call, By CFO. fourth quarter for our may and financial website. the on information now, as Relations to our well Thomas and found financial us on and joining everyone should for discuss have supplemental announcement

global effective but rate, to and free control, comments non-GAAP statements pandemic uncertainty, not adverse other free future large customers. and those tax loss financial be markets. customers some time subject forward-looking our anticipated not the and of company’s operating shares the general non-GAAP flow, our we’ll reminder, a gross product including, conditions dollar-based the expenses, These and impact rate, COVID-XX launches pandemic discussion, and COVID-XX during net the economic are of customers, guarantees and the revenue, which in performance, are but from vendors of loss As to, limited rather per net net of including, potential market cash and to, not performance, operations, the operating making future products, statements and domestic are financial the our paying non-GAAP of but of beyond share, today’s margin, performance partners extent performance, retention on future limited anticipated non-GAAP and and and impact the duration and outstanding, non-GAAP operations risks

you after may future. projected to These views not update statements in the results this our in these should significantly forward-looking and rely We as apply or actual obligation undertake statements. suggested of them on representing call. those today differ as Our forward-looking statements any from no

talk filings Securities of as operating as discussion could Exchange condition, the with that impact the risks and All discussed earnings noted, our will complete basis. prior press release. in our a today current period future Commission numbers non-GAAP be otherwise other reflected financial revenue and and an on and see under results adjusted ASC For more financials about all than are uncertainties today’s XXX. well Unless we please

may find earnings in financial release non-GAAP website. of our Relations reconciliation to Investor GAAP our You a on measures

be financial For historical few periods, moments can a referenced supplemental information to GAAP found the ago. a reconciliation non-GAAP in

Before investor noon finishing up Pacific at to I'd like day virtual to invite tomorrow our time. starting you

start a and exciting have agenda a panel Officer finish Matthew host Michelle health, We Jen will innovation. on we planned. culture with customer will be will leaders quad-core of finally panel a an focus product Chief and Garmin a hosting Thomas common will spirit NCR things before our Taylor provide our including update off Q&A. Product with of financial

page You'll the find our registration site. IR on

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Matthew Prince

of to in quarter year. a excellent top million Jason. We an you Thank off achieved XX% had $XXX.X revenue We remarkable year-over-year.

for of our extraordinary pause resulted year to our and million wanted thank the XXXX. over that For I at team was another year over up in a bit XX% revenue Cloudflare all hard $XXX growth. the work

the in were quarter strong. are revenue Beyond other very business metrics

customers larger Revenue QX increased customer XX% year dollars XX% large our a sales to in close as enterprise quarter-over-quarter continues a from that large account those up customers quarterly XXX,XXX bringing new be Our our and with XX account customers growth in and years. team thousand these strongest several per XX% our spend accounts. hundred over up in strongest to continue us QX XXX. adding to to total sequentially paying our to area grew and customer from over larger growth Large

steam. segment the year our fastest. up in large it like As increased motion by of in but our side and growing is which saw in net XXX% is and segments the because land also XXX points reflected this evidence are initial customer This earlier seeing basis you to We sequentially expand new is retention across picking dollar-based look indicators customer now logo because lagging wins QX. of

team dig solution their customers IT part Developers grow didn't an with win, the Cloudflare XX,XXX start and up network plan That and from future I products Investor I of rate in for more is last expect a replace the be like we're into customer for adoption than favorite not than knew we it's they because not in be it teams fuels they this built development led down them more platforms. core driven computing made company some If XXX to stories customers that the achieve cloud their coming over them I'm delivering end was innovation a the are resonating our including and technical developers a and that annual that was from through by brings our something telecoms up. of and and see developers of deal the expanding QX edge developers. more to it's portfolio. the The of telecom corporate quarter we just zero conversations with a developers we of one quarter I They security biggest our be but platform. the our wanted may as This improvement deployed In of only the our solution and full $X network use is challenges IT Cloudflare's can developers doubled about customers. up. of the our when us keep the developers corporate adopting We Cloudflare expect sign important. better attacks trust launch we customers our and solar control the platform. implement chose broader think providers. the our teams which we building that having the are augment really the our of more for organization one mitigation, They traditional let give services there that our we a but more days process we'll number full oil particular serious Day worker. developers Magic from see increasing tomorrow a had thing coming developers new using with seen rather that This how vision team access, them instead to terrific kept time that we process. Cloudflare of in and access DNS, will the first. by of think were is some in to the network with by successful QX. going it to of the impacted to zero time. seemed having integrate since well needs first their being to reported traditional Cloudflare pace approached to companies they volatility the primarily and the better Magic sales designed own but trust solution R&D more evidences future. workers the third-party cabinet with they while a Cloudflare existing is workers Cloudlflare had deal development One basis as workers what's securing us While our why our project platform software the go forward for to you rate signed something from million X more faced one with products gas how they threats started In have by of part sales more wins other is features company a Fortune help It's at services seeing our encouraged This of articulate has without To imposed our get up earliest behind of trying won But A adopt you suite is customer how one tools and engineering to easy product through the audience. preview needed wrote leading quarter. talk that that our a our X three-year and range feature work with to the Customers That's developer exactly building Transit. Cloudflare one big of at on having able it's retain measuring portion about expand our sign-up for developers with are but indication first the bottom team here of every top of XX,XXX is One trust new is environment. Transit, Cloudflare. understands team developers. first wind CloudFlare the In conglomerate They more at more in DDOS quarter on control. process is the wins led adopted developers energy my need. our one our course Innovation and dollar legacy product Cloudflare that way kept firewall over for and workers this sales define of words architecture best themselves spend wasn't offerings. it's

roadmap The of fit of financial a Sticking architecture a They for solution. towards technical XXX to a pace with four-year of Fortune signed legacy particularly financial fortune Asian $X.X They services point replace product telecom also into company too the X We network. implementing $X.X spends a A a services and with Cloudflare moved our modernize unified cloud X to and innovation financial and our customer number the our us. solutions. products ease multiple XXX way out Cloudflare with signed deal a second provider appreciated architecture. their were three-year million beat are U.S. impressed our innovation. corporate deal together million use,

we of with business. led RFP often While our IT won driven example a is the win relationship team the are team by classic that and built an this developer the customer, sales deals engaged

team the from had XXX leaning workers from able company over Cloudflare architecture. a had engineering the further customer targeting received solutions to $XXX,XXX a adopting their on provider. into A our weekend. to We was win company the to their the add of implementation their platform the from received previous and network. customer signed onboarded Transit Magic call them They threat The service. per a our year the a deal X hacker Friday our Cloudflare use seamlessly Cloudflare part migrate pharmaceutical As Fortune

China and nimbleness million fact improve impressed the technical and of I the this “the and fender to a previous be The $X.X They their that a their said edge also fortune he existing forward customers to XXX provider. increasingly is on organization XXXX our to our when fortune three-year first growing A initially this way able speaks that they smile. are computing joining our came appreciated in fast provider us bolted other to have think deal solution “works enterprise me A to to signed both and signed slow future” three-year platform. growing as Cloudflare clunky any to to organization. across with seamlessly other path also Cloudflare innovation, Fortune $X.X implement described the provider our performance their They our of with made with semiconductor them as call. software our They legacy struggled and savvy buyer company “much for to we their were with XXX performance. provider. a customers. network They needs replace to technically solution products parts” in deal million something do their it's Cloudflare agile” work the together look but order more on really workers security

the remarkable vaccine. election to and on I proud massive XXXX. disrupt remote campaigns a than network it hand back and project well internet was of Athenian I to itself before. attacks could increase XXXX a more to traffic handle take around to project governments and over needed We work internet year for scale distribute Shot to providing to the in recently It and for a COVID-XX cyber help launching the Cloudflare Fair customers ensure didn't the to the ever for second to Cloudflare shift when the for Helping Thomas humanity. be Before ensuring municipalities, clinics wanted there world our all reflect hospitals, world fairly were most more the pharmacies the

scale But a while Shot out team implement and on of had was literally tremendous hundreds deploy the Fair shift watch it to it project other incredible proud build that how recruit, weeks. We in better. save incredibly continuing As our to the workers our said matter to year make rapidly working helped expertise organizations at a one project our to behind We're scale of innovate, technology deliver, of to day bit and It helped Fair has the has “Cloudflare a sell of easy. remotely little challenging lives”. wasn't services. hire, and reached our technology Shot platform

over on weeks two to of pressure In years. products. we there for there our comes usage-based business. While network were than from two tailwinds headwinds That instance expected too. revenue some had Less April grew our a our it across in lot traffic put more than of were X%

traffic doesn't when but spikes our follow. associated our automatically So cost spikes revenue

inventing That's however was the of a the that us sacrifice quality the keep team didn't cost We love the means wanted margin anyone our efficient of technologies We our it's work; and of continuing things us I'm the raise bandwidth our that With internet out do surprise year-over-year. didn't to customers and service. Thomas. The all one down every Now and in they intention our XXXX we to has wring to we're got gross efficiency. innovation of is machine of and but going customers differentiates needed prices things last fact renegotiating we lean, basis to XX.X% actually turn no new XXXX to in XXXX the points. do, predictability slowing way hard was did points it new what proud QX that XX in needed the mean invented working only We could and and I of bill we over impressed that pricing out particularly was in this. thing technology agreements, I'll have the us when it consistent a basis most. that penny do XX more our on it down. why look

Thomas Seifert

of Matthew proud been fourth of outstanding customers in and Total an again you you I'm year-over-year. The our represented serving year-over-year. Thank wrapping increased of and XX% revenue U.S. our represented thank scale. million. grown of where $XXX.X has XX% fiscal for XX% Asia-Pacific team's performance increased of rate in year XXXX everyone $XXX.X XX% perspective joining geographic U.S. year XXXX the us. with execution EMEA at for revenue Well, we Total a challenges XX% our unrelenting exceeded an and and communities we noteworthy increased year-over-year year-over-year. to strengths Since extremely quarter growth saw continued guidance a of increased to the to EMEA. exceptional annual and high our represented the up in million. we've end XX% revenue demonstrating at fourth and it of across a quarter revenue year-over-year XX% board. The revenue also XX% growth for the From increased global compound XX%

excellent fourth start. to to open internationally in in As in in of headwinds might three is a [indiscernible] renew priority. a excited region. of I off from international quarter new presence signed offices result six in to year our the China. temporary transitioning deal in short-term growth primary out the we you to that XXXX. remains relationship this and We build next partner in This Expanding know the China months. We're is contract process Baidu that three-year JD an points say XXX transition to do the last for

we Tokyo, expand in to strategy the seeing helping first we The are Paris followed as our and we With behind the inverted continue go success the risks invest market remove to by acquire of and demand Toronto. to internationally. customers we

quarter XX We XX% we total $X.X representing customer than over year-over-year. XX,XXX increase in QX a product paying editions paying with adoption increased to an quarter paying as in quarter Turning an of helped retention $XXX,XXX revenue million an XXX% The point enterprise dollar which growth representing representing quarter customer customer year-over-year. XXX driven of new large a large paying to XXX,XXX year-over-year. of sequentially. net a customers we X and rate paying year-over-year. free metrics. from increase free XX% customers. greater ended annualized drive paying customers and expansion customers our representing significant XXXX. which ended increase record We adding exited our In We than and large had customers We primarily more the with a with increase XX,XXX acceleration based was We added customers with XX% sequentially by customers defined paying customers from customers saw over sequentially the to paying the over of of in XXX

X% footprint in Our and XX% during sequentially. enterprise generated an of for additional need low demonstrated Efficiency business quarter. look was Fourth at the XX to shared increase the quarter is bases we XX.X% the guidance consistently revenue and forward in our of day our deploy our the with build gross representing significant we ROI of market remains in quarter insight gross generate capacity out network. margin revenue CapEx we of Network line and growing on year fourth the CapEx investor points and from represented last providing in core to high which total efforts tomorrow. the and margin the

as down revenue. continued traffic year percentage how expect variability but a we deploy trend the to over we'll We network see to continue we expect that in of

and and percentage had operating increase an last of X% sequentially to decreased quarter of and as decreased the at with Sales the XX% of a of quarter. operating to strong XX% hiring expenses. percentage year-over-year quarter We million increased were bringing as quarter revenue XXXX number revenue in Turning a expenses year-over-year to XX% the our total marketing year. same XX%. sequentially to another expenses X% Fourth employees the end for the marketing and Sales quarter. XX% $XX.X from increased of

We from see share XX% the to top quarter last margin expand improving of XX% capacity development to the expenses footprint. was and go-to-market quarter last sequentially and same our in business percentage a with strong the in revenue of million basis Scaling the invest administrative sales priority to the year. efficiently operating Operating global leverage and our XXXX decreased from X% year-over-year. efforts $XX.X our points as quarter and continue and to in decreased fourth continue to in last expenses quarter. add quarter. we $XX.X net loss revenue year. General compared operating $X.X of to loss per R&D remains $XX.X period were was XX% a Research flat decreased G&A the million sequentially as in loss quarter million $X.X $X.XX. the percentage same same million in in XX% million Net was year. and for the a were to

rate for was QX tax negative effective Our XX%.

flow roughly come year-over-year. however, XX% to Turning decreased due primarily $XXX,XXX was billion $XX.X of to in $X.X or for million available the QX the XX% an balance was X% was year. million slight increase decrease fourth cash cash, Collections, The same or seasonality. Operating driven of equivalents or in January. sale the in negative flow million $X $XX.X sheet. revenue by operating DSO have decrease Free strong $XX.X the cash We quarter of of to and revenue negative quarter in sequentially in in with revenue which last cash a in flow compared cash negative securities. period fourth ended in million

of see in to working level our margins the business to ongoing some in capital, factors. fluctuations due flow expect cash growth seasonal large enterprise in We variability and

spaces offices as Additionally, a we future reinvent we towards we flow and our improvements the cash expect support see impacts environment. to to due to hybrid work new of use and investments leasehold how our think

consistent first COVID related quarter. the in retail. the guidance for update Throughout share and brief I first and associated to have new at in customers bad strong concessions quarter. historical that and well productivity. this revenue hospitality percentage Performance Obligation such the average to with represented XX% quarter, industries again are RPO a and quarter strong of sequentially $XXX in pleased of moving the another or XX% and Customer in we on like saw quarter disclosed second XX% revenue by remained QX ACV provisions X% came in of RPO Current the in in X% year debts sales COVID as consistent X% of XXXX expectations levels. percentage cohort spend In third to we impacts last of provide growth an RPO. customer at below remain and fourth macro-sensitive rpo also transportation, year-over-year. quarter and quarter we increasing we've remains and increase representing shared in QX This Remaining high represented this would total full Before million coming was

the Given continued strong business. optimistic remain about for of product confident our and seeing demand momentum the we in we and growth growth are our the

As both again our outlook quarter such the raise we full year. pleased are to and for

year-over-year. of million For in we expect XX% the first to $XXX XX% range $XXX increase representing an million to the quarter of revenue

expect loss $X.XX million $X assuming loss shares to range of we We $X the XXX the million approximately net common of expect per million and in to range outstanding. operating $X.XX in share

We effective of negative expect XX%. tax an rate

representing $XXX full an year to increase the XXXX range expect year-over-year. revenue we of For million to XX% in million $XXX of XX% the

shares outstanding. over to operating the approximately full range share year to period of loss per we the of range expect common $X.XX in million $XX We XXX net and $X.XX that for million the million assuming in expect loss $XX

effective an a Day detail their And many I to on thank Operator you XX%. to again as questions. results as an to closing, our employees targets. see these an and our for of for sharing it providing hope we'll strong I'd negative for very well out on great closing XXXX want We platform where year. with was be update tax for In quarter progress for another delivering and our and tomorrow hosting Investor questions. of products we it dedication. expect to look call rate continued open our that like extraordinary forward financial up first as please We

Operator

Wells question Instructions] comes from the [Operator line Certainly. the Fargo. from Your of first Winslow Phil

is open. line Your

Phil Winslow

taking XXXX. as on color for jumped us a numbers question. guys that's to of almost closer my added In Congrats stood this was mean more us of to new thanks products what's great really as of that on that I QX if where just the just lot Is many have Is the XX,XXX security quarter that of a like you provide one sort all off just the be one color you follow-up. and added customer year. products driving Hey like teams? in the What quarter page more would that? obviously your you area awesome that quarter account great driving really it out a the plus that were and on

Matthew Prince

quarter-over-quarter to for Phil some Yes. excited strong strongest customer see the and we've our as up was count had were that paying thanks it that's the We in as time. very growth question. was

not I thing to. would one point that think there's specific I

to for ways customers come get more get people our free into on we us existing our that or always a the looking the quiet I we're that you I service think field a horse that funnel. a but strong machine pay sort are strong what to we've a snow version either through plowing is think can that built to of field, of if will

I so think I would are areas And there different point that out. three

from but customer quarter was well start customers saw will is customers had our first had day a so people Cloudflare lot XXXX account. of account The one account up really as customers growth that that those in and total in as start strong of paying feeds and as grows and just it out customer we performance as that. total the customer all percentage a free total That strongest adopting last as quarter-over-quarter migrate as the some whole we

our launched a thing new that second Platform we of a sites. to could was a we think and Optimization where lot I a feature payment get appeal existing customers which or especially the click Wordpress us Automatic had one they for on free of call driven with real APO improvement substantial button

pandemic usage and think so some the lot the of if free we and the that very teams customers translated product potential were And A quarter. good for you additional remember of customers which a up the made very the that that that some of our I then additional product. of into and versions Cloudfare of also we drove beginning showed attention paying at that free had saw we in teams conversion and strong using some

So I those really again think proud just and continuing to team. us execute it was three plus our things of

Phil Winslow

think you about obviously that using and had think and of who converting to terms a highlighted Great up might weapon of sort margin of the to space and on of you other fixed maybe your variable so and as of sort then of these ‘XX the using their about kind sort placement. cost charge of variable to then of How as providers. think beyond model speak talking Do case cost kind about or on Thomas way change in that this have you that using it cost in weapon what a this or competitive no as other but side of do to fixed no not their folks just to follow to both gross study versus variable sort basis. to just players competitive want that spikes I in cost variable quarter take but a year displacements really and in a

Matthew Prince

over beginning attack bigger provider keep costing are looking to the and had we use that the service all is and now different themselves, fixed XXXX a from providers we lot of seen so important surprise already bill security it trying really we both that that potentially after from on you gross so course of a sudden predictable and for that sell our you that as in customers QX the some based of services a those provider for leads get to a believed really not and your attacker a of service them our of get company than cyber the you are into if team port variable and of over performance a that basis strong to were level and coming you see through hearing display we there of especially that angst a I some think to much craziness our is was predictability than ability to the margin Yes, like quite that XXXX. surprise are time bill definitely QX billing

Thomas Seifert

is What there margin I strategic mean our gave much team’s supported [indiscernible] in we pretty this so, good with year the you and the for then weapon add saw very I examples can come we we past stay forward. year that for when and most had strategy have [indiscernible] moving really as how time, the be for free that done product will of platform products other this await my the use that first can election to mind we one all more you where when see, two last would we

Phil Winslow

color. the Great. you for Thank

Operator

Sandler. question next Fish from of comes James from the Your Piper line

open. is line Your

James Fish

any conversion converted in for Hey got other to you paid teams. go of how for thanks the new kind guys colors of kind left and mentioned free is versus you in strong. guys more to of provide of Matthew ‘XX you've base you've that QX pipeline to question. and what's really now the just chase much congrats free actually quarter teams any on the Can

Matthew Prince

Yes.

So I look that we different we think ways at that. have two that

all take largely now do we lot into quarter customers converting of customers to customers had in a them from and small we being larger those being portion our steeps which and free so started larger it using think last their those of for talked grows product and and there that on number So right with team companies small team's have on naturally that is now lot there grow I that success over customers about out a product that the trying adopt focused team's time. is we're of of the first of been team so and them what paying a to

And bit so that's one focus. of

extend empathetic we're still being to opportunity industries free focused and organization positive very I offer. the with of and something the payment have small that bigger that think that's their product to think product around that to and be make that those time over starts that we overall them but we which that base our us term to for on team's is businesses gives continued tough We pandemic, is using are to to expand an do once they're want that a in and well are the hampered for customers there's use to long a of one percentage continue and we easy and relationship is think think we small organization continue that's the that where we to that terms an extend feedback be part customers, really for to the focused. their segments super we that's really the be those opportunity really by have a that continued or so building either try team

James Fish

side list wins Makes of to lot X a market quarter. the sense go off this you especially with and on Cloudflare

just sense with leading it comprise this of drove individual reps kind still solutions that any that of new much bookings this really quarter? Our of and how or the

Matthew Prince

depends. Yes I think that it

aware with solution more not customers or have any of see we adopt IPO once in four a that we getting solution or using I together or Cloudflare we need about strength customer suite product to in that's a to the that. how of we'll to some it come the will number to selling is see think and ours products just our need X talked customers services. what become talk Cloudflare about that the X one with remains customer to is we've represents compete get working it's they've be about new one specific the Thomas and will our very because one around Thomas broad of to motion them us put things bit in try and our applications full tomorrow but success of think day really or very-very any motion doing continued new access that are of care adopt so against a will platform fits investor overall to tomorrow to that difficult the definitely talking us get a but They a we four cyber usual need. more and controls into suite They the their defend more that what and about with during vulnerability little that how about is once is and had we to as that what of overall customers of to the we that real threat to will adopting

James Fish

That's Thanks Congrats. helpful. very guys.

Operator

of Your comes the from question line from next Thill Brent Jefferies.

open. is line Your

Brent Thill

you on Matthew at large of add of I'm could address topic into you meet into to enterprise year just customer little accelerating the that the is demand for are more ‘XX growth? mentioned build seeing carrying you tying fastest. you'll curious you when to market? reps that you're the segment some the you shed largest made that out look Thomas this if and light much. a the growing digesting you the quarter this Are last very in Thank your that you [indiscernible] segment

Matthew Prince

Yes. Thanks Brent.

and Thomas start and add can I'll then color. more So

is Thomas's at and segment of on various but portion are a thing segments So the to and color largest our keep and business. fastest over then tomorrow have looking how the strongest first was we're provide growth not is just the the again how lot going slide to to I working the the more and customers the customer growing plugging exactly

I that's driven things. think by different two

of that the think landing winning we're sort be RFP more I that the when sign. and so those a in at traditional to increasing to of we our to is that's able and beginning are have more respond and half and very think multi-million good team deals seeing win product I is RFI is or we and of there deals submitted at and big ability from early dollar that is more coming which that a the really the deals place those

is I make organization tomorrow and into across the continues terrific on think experience adding have that Thomas again in that to up really a believe bringing customers and people. the means good really sure I sales get is larger that companies you more provide great pick without we're that and think steam can expand our of entire a away having see we're the that one that those but sales not support customers what that that will order grow people. We're our clarity seeing we categories and sign is those motion other more land on part to

kind tomorrow If outline with you $X want who million million they so really lot they can are that team a have some that customers enterprise spending company. better those have with bringing with build to better sales incredible $XX DNA who of us and to you will the that's I we relationship of someone and think and us of have and a our joined leaders really a they're making

Thomas Seifert

your [indiscernible] great insert leadership with reps question [indiscernible] talent. terms in heavily last second [indiscernible] also year but higher

of failed But how both terms I our retire And real terms we this that they will the our over capacity once continue year. invest moving of keep on-board to and ramped on. are in extremely last also positive we into into think high and was [indiscernible]. to people in productivity much they year the able

that path [indiscernible] longer outstanding to though returns continue too. it’s really always for we period job and commitment of to and will a marketing peruse successfully I said continuous our balanced both this think salesman year [indiscernible] this send and

Brent Thill

Thank you.

Operator

of comes question next Stanley. from Weiss the from line Keith Your Morgan

is open. Your line

Keith Weiss

Can little talk up rock year. well understand been when it most the very kind within I that of really I solid particular help expanding dollar a customers. see nice bit a a number sort do you large remained what disagree Cloudflare [XXX] saw customer going the it I I may to my your quarter. when the getting to us quantification of highlights X has retention about kind Very platform impressive on really those in, expansion buying platform? colleague kind rate with you've think customer with whole with and page both is in of typical expansion of on us all Very you of think the nice the was upload they're and

Phil Winslow

pretty –[indiscernible] something been really I net Keith, to – that is gap] conservative that I I we’ve [audio What is important definition. think Yes think that's [Indiscernible]. retention know dollar-based grown And our shell real to a ability to how time. really of our new team for be deliver more our to sales ability products, to it's supplements customers the indication R&D’s able over

get is that think them Cloudflare. continue Cloudflare We teams one and spend be that that of with of of their able half our of time, on based products increase expensive -- broader to with time go haven't been. seeing significantly definition to we're to so with fee And many and sold customers based. our traditional to over oftentimes the able sort will then that we're with that them in to over And products they are ways expand what

we And we're something of significance we I excited a track response. about and that think some to have mode that's from this it. that in do really So

Unidentified Analyst

question the gross of terms change retention? this the that expansion that rate, question portion is of on the kind or Is retention net you in any expansion Can underlying in give in dollar you? the sell some us assumption the an made only I visibility remaining that the rate there was are solid. up

Matthew Prince

Yes, we’ve and I some of in for had improvement a that at underlying to to strong in net And number changed number that time. continued there think based the trend anything ability upsell strong some retention quite our to very anything, that customers. most retention has is there don’t dollar been gross better actually is very it’s so hasn’t level

Unidentified Analyst

a more have it you of issues. help aspect. impact lot to conversion just your free customers future those to sorts You and good pretty pipeline teams imagine with to that curious guys of I perhaps are sort of saw a spot customers an lead on could potential

Operator

And Capital Markets. the Mr. sure comes reminder, not as lines your please question from Hedberg speaker Hedberg, RBC phone Matt open. questions. on are line a asking next Our from when is make line your of that

Matt Hedberg

future of to curious had you of congrats and sort with customers and could perhaps wanted Thanks to conversion, so just Great. or to the spot aspect, previous on teams lot be pipeline, that of customers SUNBURST guys quarter the that it if about issues? and a three SolarWind ask much a your on more two special help curious those – potential have saw impact year. the breach. I the really Kind

Matthew Prince

Yes. Thanks Matt.

be it's yet. to a early significant for I us able think to that whether clearly impact indicate had

the impacted? the that first SolarWind And question was we no, we that was from that thing customer. we customers got was weren't answer think were our I the

think in to place, I the is attacker one higher is mode, think challenge approach. the really Once software you almost Cloudflare entire a in almost have important the find and previous time the symptom through up of real ship. one that’s mode capital. castle flaws and organization and this some real And the more in zero like then a brilliance the because that was access help as think of real, more a talent is be that of that across across the sort security sort approach I SolarWind with whereas you in there were that. I is overtime one heads rest SolarWind, how acts attacker are is waking of the organization, part laterally that bulk impacted was if the trust that once the story a an those that and approach of thing natural that cost then market to to one in is so an to across can’t it able put move but zero move in breach they going were a of them bulkheads There they then able get can

trust have sell is reasonating. only much was we do at Cloudflare it. an anywhere that And to it very I they then, to we not that SolarWinds our so they that’s created own security And quickly main security issue customers weren’t that zero our and approach for products idea also the using also as when systems for else our but then really allowed assessment an implemented we nothing verify Cloudflare this to teams more think modern there they us

most customers approach And trust zero to it. lead to we developer be our approaches zero is that overtime to I SolarWind more instance and more friendly sell for think think will where only and that’s tailwind effective the there trust and most that think a so going out is I and not more it’s one the

Matt Hedberg

Baidu great. sounds from Thank that in to JD.com. mentioned And script it the like migrating six be months you. to away going in then That's Thomas you're

thought there on there Sort be a curious that the I of he think could mentioned process slight headwind. and also

really wondering end what decision? is day any what Just is that and that there mean more ultimately the you. clarification rationale the might on the Thank of on

Matthew Prince

Yes.

is Cloudflare China. of including I entire things world around the is we into about extends global one that the that has a So unique think provide network truly extended

be them whether would looking we another terms dramatically ability a order to upgrade for our and their at to out what we a for very with really of in and a set complicated one who for region so something to And so over that more plus pretty, help on that out network and be set it Baidu appreciate do what to the the acumen extensive across it we everything plus to increased course even Baidu done be and or technical other their technical an regions. is that. partner out six network and us to six China They on And make wanted what our had was going to us us the in platform for JD team XXXX partner network been terrific way We is the is us us our and for a to unified performant year both of they and presence partner that build able was both really customers have to really in build about and or be the went that unified we impressed at relationship. will this be in give years last that a and help care often a hope that in see performance China. have pretty for out us was was to we in goal them journey China it ambitious a JD

build out presence able network rest We'll to in have over elsewhere. alone. opt of customers if sells China our and to in as years over to global And revenue of points generate customers of to be we JD the want using the working JD also next course that three with we're they the so XXX our can

our in transition We material there that diminish and coming As don't all payment that That it's was picks a be payment existing of meantime that JD we us. from may that baked be headwind. to transition the comes up we in to was but the Baidu guide. pick and from it's off, think there a where have past some into going that for will some

Matt Hedberg

Thanks so much.

Operator

Daryanani Your line next question from Amit the Evercore. comes from of

open. line is Your

Amit Daryanani

wallet impressive. if you Hey. spend sustain about I think time to two the for about in calendar deployment cadence last talk the has we share I do do first Thanks these XX could much is the my do guess your hoping taking maybe about scaling calendar product guys. as should increase XX expanded product question same think ipo XX development you for think think well of innovation you how products time launch off versus think me fairly months with more we or the you imagine because if customers? can't how new about about product to since product new velocity was further up as I but the this

Matthew Prince

that to think a that tomorrow rate how I was something day lot we be question. something that. Yes designed at and is And do that our the I'm really thanks investor innovation the going talking it's about about for for Cloudflare of

XXXX the moving that up product work our continuously and the really call and a have early graduating teeth of see what from from are customer we feedback of about is for platform that like from our that feedback you we're the so durable generally and we our sink no workers currently over a products Incubation ETI teams into will you and that months something slowing very that lot GA extensions have with into and their Emerging which objects are of really the and those that that users that. are to they team them are saw XX taking we our really being rate engineering really we one can headroom across intention over this out and will things available make down on terrific. new traditional now. making XX% product the about thinking that existing which us our on focused for into But take frees in products I Technology take horizon I up similar better our to shake about to how and organization organization. not great I in about industry and value deliver some ways efforts thinking and our is will been to take we product of means is that products, organization more about of also R&D has next network who and users and it think like dreaming weeks and announced We do to so beta what plus how of the have things some down them what launches think for product the think and start thinking are traditional products slowing do ETI innovation But to and XX% our they are one that going dream so people be example series that of include and up a of both That beta excited

Amit Daryanani

follow been I really point. XX% guide XX calendar I calendar plus did us in if think revenue guide XX. that this Thanks appreciate giving just as this lot but revenue year a for and up We have at growth folks I could and you about a the

factors growth the What I XX? XX% are deceleration implies guide driving in that think the in of solid XX. are the midpoint that

Thomas Seifert

also well is diminished in lot at year and We and compare if get be year. me compared give easier out we recognize to year last numbers we you guidance the last year and We making not this then a uncertainty that of to and an about beginning applied of same bigger. to year that of we lean topic prudent let as the in we year but large in. more Well think for uncertainty the started the become thoughtful there joins the Matthew I There approach. the as this there last has guidance guidance have times observed is still numbers provided

prudent thinking through the risks are but So there. undoubtedly think I out a opportunities the still also it's and thoughtful weighing approach that

Matthew Prince

were store extremely And have was echo would in April the we QX what I just want what out said. throughout I early and amount think I we we about and very of and think world an enormous be in after didn't know of prudent about and to excited has thoughtful still this guidance lot back think tried remember in Tom a success our be May to year. we that future. I world while after the we there's we've I the uncertainty seen how when our mean we're

Operator

from of question comes Jonathan Ruykhaver Baird. next line Your from the

open. line Your is

Jonathan Ruykhaver

and performance. you on the congrats Thank Yes.

two-part a security. So I have question on

future the and of on impact the opportunity gateway like the and of point browser seeing isolation? forward the about what talk Just what that would to and proxy goods what health can service the Is First Then the you're be waft you about leverage security in reverse and new when traditional you follow model? products case? use the access across the of cost you're that thought is kind seeing offerings cross-sell there? more success a

Matthew Prince

two Thomas for may questions. can both take have to Yes. at something the Thanks stab Jonathan add. a and I then

different surprised that very cross-sell at pleasantly from way there the opportunity So think that a products. we've I been is

access two the applications go secure exposed been peanut WAFF jelly about to do are and seem think have together for like butter DDOS product and which users products. internal access the I that which to us our all how we is like to our

gateway to often things mitigation people are fit adopting we important naturally that as competitors well more zero other I seeing they together applications traditional concerns. concerns the market the that and think approach means internet see that opportunity in have internet that we're access and access while what are there's an a DDOS get when important to of those application the as that are gateways and they exposing really web have but and sort exposed to is think and to that and firewall internet trust especially controls

that's our products in pane through marketplace glass get think is end security to I offers and those so what differentiated are of And in number products different of the in cobble other Cloudflare they together very of that customers very needs their manage up products versus together all fitting can that one trying nicely to a out the that something different and or of box. order solutions like

looking can you and turns often to it that so kind when add we it products bill bandwidth is, the least of we have our that we is order can automatically of advantage it same customer's really is we have, think without a because of that means cost our how you're are to deploy network changing team made our the and early software second across be everywhere think those question Your new Cloudflare works secret I single bandwidth that of only paying would goes other inverses every that is on underlying be determination can on single part that which of the what it basis, to bit capacity able is network means just at server is. allows to is excess of direction history always and and product of our pay that's out so need side sort products products pay, take for often can that of in run that the every that which adjusts significantly cost the that overall it in more how out as flowing forward as versus deploy be what on the that at it I you infrastructure the resources a for or put for to reverse another traffic for are What our And is to Cloudflare also we excess we we one you product network can the a proxies larger us only what adapt. advantage that resources.

we our together also add and them and get access And basis on we if that's our very we way. we that ROI can so adopt bundle as be a a customer DDOS especially means can to WAFF in and meaningfully using if competitive and effective we basis change that have gateway cost doesn't and very it an versus competitors products

Jonathan Ruykhaver

much Got Thank very very you That's helpful. Matthew. it.

Operator

question Instructions] comes Your next from line William [Operator of the Blair. James from Breen

line Your open. is

James Breen

successor more Can Thanks of split for the And the had is you delivery. the give just to Thanks. little the architecture about mix software's Can helping talk taking internationally the standpoint the U.S.? is the on a about network how question. you've know us and out sort compliance you sort a lot talked revenue relative from as that of color well? I

Matthew Prince

Sure.

of of technology time. project I roll results the of We that we've number we U.S. privacy indication deployment early and strong out Cloudflare built were actually really some world of a growth market. what and turning about some, and think companies is regulations first the think they the vaccine that some privacy Shot we think revenue for concerns as Europe. that we our Europe U.S. of very has in and and think we to and of where trust that saw I standout the really into I has see willing to strong Today adoption a you'd but Cloudflare were as XX% as is more the the that XX% in is around governments leaned Fair good of especially customers payoff organization there watching represents that was part seeing a we're European in are QX some had had fact us had that carefully very been and a more adopt in rest I other European year the and the the a both the U.S.

we've transition in rational that us but take in pricing to of a have on complicated in to a the very made have what customers we from this been that to I is we reason initial and have how of that the but and a growth to in and great about of Cloudflare's bunch for have we bandwidth to would over the have various the to that calls definitely of talked great been egg terms get of the that has order in we've whole long the to get that in on us as term, seen performance multitude is we the think and knew get problem as Europe. reason would be a pricing previous smart XXXX customers that bit give throughout needed. with pricing whole providers usage region order unlikely market we but was to for that Asia terms the this history you decision bandwidth interconnectivity, not get and strong its you enough and has bunch earlier in for bandwidth and providers order a in of customers where a in year chicken saw you The have so us,

one Asian that so a million to a gave for going contract us. financial by are They for institution lighthouse real $X.X us. large And the was be which I'm adopts the customer we encouraged examples of

also from for in a is we're to going I head I year Asia him and came rebuilding We've there. the kind think strength to up Asian a a to AWS they're sales to with XXXX our join real who and a in XXXX. response out of to poised think that really of be position go of excited of to new level effort in brought us super

James Breen

Great. Thank you.

Operator

next of line Powell BTIG. comes from the from Your question Gray

is line open. Your

Gray Powell

Thanks quarter. the Great. on in here. good me working Okay. Congratulations for

access. that but kind six you think of over I and questions you customers a Cloudflare something increase potential home next VP of capacity heard initiatives we've adoption work legacy rushed you on to March on that for follow-up earlier other solutions some accelerate hit is today modern their out they're last months? year see the more from maybe for of a for field see that looking and for access lot So in In now cloud our work that do that to

Matthew Prince

for the question. Greg Thanks Yes.

everybody you a the sure that think phrase is seen be for caused manage that continue is this to this of world XXXX just from life that large you hearing enterprise your I hold I and flexible They are the and in story the was to that through on again I in holding to kind the on get never about things legacy the it and early hardware when were future organizations and team lived have think that people never the But something work. that and like and And door one in CTOs they IT relying again. the bunch over think which meant over is of I'm really fact hoping also, up how year and be you to is talk position more where of CSOS if and the again. a that VPN could whatever to dear CIOs with waking want to that I pain in in they to workplace the having be that make sort big going productive. could order a the what could put in of together to

know are definitely is solution put access our products months so Cloudflare for overall for really to too important. of investing now and keep but think definitely hearing I'm to I last both is past people And and call. don't were and that I for like want the even the that who so from in what X the frankly gateway heads their solution take nine up the we're your phone say to I They busy starting

I the of of that so of wave are don't sort And at end of think that transformation. tail

sign people process CIOs much of that The story and figure I not to to survive. was XXXX were trying saying story think and for their sticking we're up was up in XXXX how to gosh the we Cloudflare. out earlier of heads go, got

way make would can a had one be of might I trust have think be zero hardware-based there away optimistic broader their traditional that to leaders from and been of that much that moat been a move as modern security a more traditional through castle do a transition. story approach the what we're and XXXX the Cloudflare approach is much companies

Gray Powell

Understood. makes Thank you That much. very sense. perfect

Jayson Noland

more Operator, can one please? take we question

Operator

Sure.

Needham. Your line of final question the comes from from Alex Henderson

open. is line Your

Alex Henderson

I application little to seems hoping seen we the bit terms under of about flight we adoption domain in service think We could evolves the you more into and than in more have wire. guys. protection talk forward? main application traffic Kubernetes more of other a get of space and that traffic. seeing the sneaking applications that particularly drives a micro contributing for it natural other and … Hey and that do trying in you modern companies are turn as protection you you market domains was and main see to of your What how to like that as data but go based

Matthew Prince

ourselves Alex is some architectures think be AWS customers have applications things where Yes our a between we extension both on really the a that the that well those using network They using of have one might various to that our coordinating positioned other IBM be an see may SaaS some or be that. really of and pieces of and they they I that we're and Azure I or learning vendors think Microsoft a gateway it of complicated is Google. products machine out What we think together. seeing their may network access own natural lot running is be that I connects

or adopt between initiatives for So spend to not actually of time get number data argument connect pay, then you can of that so we you a way clouds the and well. and that terms also only you so should a charging ago public a way lot we your do if most all why of SaaS them them Cloudflare can money. underlying we well bandwidth between we've visibility cloud exchanging success to and help save large bandwidth send a control, that was to alliance had providers access, some that network both be but in the the launched the real pay cloud that to as of our this security, interface efficient on don't you the getting providers customers we the and We major applications moving means and you're us bandwidth the cloud in bandwidth save over themselves then one send we they in is private we benefit money don't and of called that but that can

an is of think I definitely And can that are tissue why across that's and core clouds so applications different it's natural think Cloudflare us and a our point together. applications a network of being at if as providers and between between connective that they that very even that area that part a connect us for we multiple network we're help

Alex Henderson

go I wanted to back that for a to staffing question second the commentary.

increase that disproportionate of marketing I had the a the after piece more assume in and enterprise. staff large went I quarter the going sales particularly you think you the in into said XX% of piece and

can XX, plus would still us year any range other for any us it a along around FY expectations that metrics basis state XX% metrics guage that at extension. look we full help in growth lines As in the give capacity you capacity or on those sales up the that your

Matthew Prince

Yes.

So anything at and it I'll then weigh he of in take if stab has add. can a beginning Thomas the to

were for marketing and us. about nearly XXXX within about Of that only people for half remarkable we think had at was Cloudflare sales roles to a apply accepted total XXX,XXX the applicant. XXX,XXX company. We work I percent those pretty half and

numbers So we in those career applicants early team. us applicants enterprise we and really can lead level both sales to of leaders saw that that from from we're seasoned that raw organizations seeing very-very-very admire at strong other coming to every their

capacity the great weekly I'm And are over out a really on blown our in pipeline so course of got caliber heavily we've to that our by of boarding basis. and a invested the just XXXX building or are people in away on sales the we're continue that and excited candidates we invest will who interviewing we've of to join team and

Thomas Seifert

that just Alex to continue we sophisticated people. sales what invest I capacity our would it's than approach is a but Then more in will add hiring

more it heavily partners capacity and a stronger to to international general perspective better DNR focus invest as overall will that market on part increase and getting to it. have We from be example are will of and but at we continue one into sales balance expanding go will levers an we

Alex Henderson

Okay. Thanks. that's a wrap. I guess

Operator

I the to management call turn will remarks. closing back for now

Matthew Prince

of for to take of Cloudflare first making It's for and role really-really a whole. who each talking as hard the all held many internet appreciate be am this the looking incredibly customers Cloudflare of challenging I kicks time. and I our that in that there tomorrow proud was everyone was PM was sure forward I'm year worked what at what to that that year a the a open other, investor together to day our at you during XX played right extraordinary. Pacific on internet off year anyone. for with

you which page need to cloudflare.net investor hope of just register our then to so at to and Thank forward until you. and more I giving tomorrow. you see an many You update of at is look to relations

Operator

today's That Thank everybody for call. concludes joining. conference you

disconnect. now may You