Cloudflare (NET)

Jayson Noland Head, IR
Matthew Prince Co-Founder, Chairman & CEO
Thomas Seifert CFO
Joel Fishbein Truist Securities
Brent Thill Jefferies
James Fish Piper Sandler & Co.
Philip Winslow Crédit Suisse
Adam Borg Stifel, Nicolaus & Company
Amit Daryanani Evercore ISI
James Breen William Blair & Company
Alexander Henderson Needham & Company
Call transcript
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Ladies and gentlemen, thank you for standing by, and welcome to Cloudflare's First Quarter 2021 Earnings Call. [Operator Instructions]. Thank you. Jayson Noland, Head of Investor Relations, you may begin your conference.

Jayson Noland

Thank you for joining us to discuss Cloudflare's financial results for the first quarter of 2022. call, Co-Founder, Matthew Thomas President the CEO; Co-Founder Seifert, on Zatlyn, Michelle and me we Prince, have and CFO. With COO; and announcement. everyone now, should access our By have earnings to financial This information, Investor announcement, website. as as our Relations may found on well be our supplemental

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

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

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

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

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

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Matthew Prince

QX, pay year, of Thank a We those of XXX than quarter. you, million, of a revenue over customer that customers, paying count add customers, bringing paying had terrific up up large total of our XX% XXX,XXX. comes XX% quarter-over-quarter, to to over In more large year-over-year new new Jayson. those $XXX,XXX per quarterly Today, added We record $XXX a we XX% up our XX,XXX customers. from achieved total XX% year-over-year. We us revenue X,XXX.

growing year, we larger more million $X Our representing spending Those growing over year million year, with spending partners those than $X largest us. customers per now and XX We revenue. And with a to highly customer over X% a year-over-year. $XXX,XXX year-over-year, XX% customers larger. get have continue and no diversified, yet, and over spending XX% remain of

retention XXX% new points of year-over-year. expand with dollar-based net record in motion XXX a to and hitting the basis quarter, up land continues Our improve,

target XXX these hallmark trusted network even single in gross of New consolidating XX.X%, And in achieved quarter behind of always an for we has in our of customers, products together, margin basis customer above them time. us offering continued the business. margin that the gross products to up them all Efficiency vendor bundles the reducing key the services been target work That has selectively of points modern our interest with solutions, providing same times, a of and at continues saving competitors' and money year-over-year. while a to number XX% the a range opportunity expansion. increased inflationary our be affords and they been need them seamlessly to XX%, to vendors

We are able everyone say largest even they'll closed this a raising buying ever to in the acquisition in hardware We million. value quarter, seems deliver when Area is or X proposition it their finding certain for be can't especially when compelling for legacy else prices boxes. Security $XXX our

biased internal solution, hurdle writing for out technology something wrong, I being seen X rate Security a we to and Area to but as phishing special. We reports acquisitions team after their are started Chief customer. if our towards was ask remember have high tech Officer We development report few implemented hadn't any messages would I digits out incredible very security still shortly team strongly a in a where our weeks, you're us. your was IT now box, Area if way, By answer. to It seeing tell solution. have a their great the team double usually the e-mail own per X and phishing call in day. turned We your

partnership, to last geeks. out X talked shares for to with, join sense became fun it's is spirit, our their made real quickly We and and more tech the them team the got and few years, a know so about customer good clear Cloudflare to same were their trust tech Area with and fully of definitely them bunch suite. far they Over but we BS. briefly BS. team. it integrate snipping work We're zero At isn't X, we're when of the Cloudflare, Area a when to The at

sense chose a even all I'm Area team, to in XX% hope that's Area hasn't of that hot last you giving of extended one member give the who offers X going. X not and market, me to how And We Cloudflare. Let labor join this on team up yet. them

was companies of threats #X no the that X it I are guilty trust zero the security is truly industry leading something about e-mail integrated together, technologies E-mail of. major vendor the culture. says fit the the think network source that a has and blind good is spot how

is the the space As now taking best trust the got know or matter them. share the fill zero pointed you they offerings, business. the market it's that their luck We others and to hole see resonating to what team the no And in build, the we and Cloudflare's solution partner say. may to buy that good best out scramble tech in best in in signal

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a U.S. New in to airline, the quarter bank included bracket customers trucking major a Asian XXXX Area X and investment bulge Fortune a onboarded who company.

decision the more stories tech Let a a security made phishing of Area Watch seats, space. deal. was going it. me now this existing tests, as pilot Cloudflare There's this the were example They of that part like into were vendors. customer. as one. $XXX,XXX that e-mails dig X range X,XXX best next a midst in lot the They a company no-brainer. trucking X-year signed In to testing many company competitor, the twice Cloudflare of e-mail those caught The trucking wide of an a be

hardware, in threat see They network We of had to sales. was also that their more talking deal. trust a love tightly part continue systems cloud-based state they zero decided policies integrator, which state trust U.S. XX,XXX integrated was presence with a zero The a major we A Cloudflare's partnership the will when X-year, an a and state began and example with It them to million borders. of glass, success legacy approach intelligence. had replacing seats deal, more and our that with the expect other gave of products. This and large Midwestern move be inside single pane performance our in a sale to was competitive to but us. bought integrated preferred $X.X solution

large confident than They trust Alto Networks our $XXX,XXX deal the competition. solutions They for network. a margin how zero Zscaler implementation and support over of integrated are much more partner were robust Cloudflare has these appreciated media chose plenty ecosystem. seats. X,XXX for their signed of Palo Indian We our to A products a platform tightly

zero We opportunity our like contract trust are with of zero vehicles. more trust than these believe million there this They significant worth more manage Alto use is and head-to-head Cloudflare's cases, with $XXX,XXX going to year. win fleet XX approach rates Networks A expand European signed IoT of we seeing Palo more do. customer. to and more, help We're and a per Zscaler global automotive their more adopted company and we Fortune XXX when and

We're company division. helping their network. vendor $XX software us, of our their the service. trusted Speaking they in annual XXX secure, such know, future expansion, year. relationship contract let new million per expanded expanded The relationship a Fortune repeatedly They internal space build scalable, with to the run another to only them a rate IT mission-critical modern their we were us for bringing

X-year they power directly a effortless contracts. and can real-time with teams social signed build Australian is have the Internet keep code seeing Workers' contract. large software do a one global of of security effectively with software million, company adopted using what Workers smart Sticking the as scalability. when volume messaging to products. and a using They serverless synchronization that network network into to expansion deploy Workers, tremendous large authentication trust, They're write Workers, there's What authenticate they theme collaboration its Workers a on They can the functionality $X their fabric. tool. it built Workers the our application They a can durable object to the compute On to natural their are global platform, that product. scale into with is signed a testament $XXX,XXX a of we're realize our up help

a security performance of a expect health their proven million, success that interesting X-year one. for and use use ours. $X.X customer will now What projects care replacing customer signed moved company pretty I services XXX to A with It's standard from Workers hardware. this the thought was We for financial case a large us, this legacy of more deal. team that IT had they've continue network Fortune with

change brought jobs, employer. their they they Cloudflare to new As

we're They It that A leaning Officer. They million, Fortune think went X-year by X.X They months. of see signed They X see From best-of-breed with said with start have up of as moving sales they around Security all a with and opportunities. instead best-of-breed the on a driven company to on going moving network their succeeded last their out behind in every was tightly and find have of services are the in map. finish, a deal. us trying and I XXX on product, job consolidated They Cloudflare. new to number their features all financial of vendors practitioners integrated could tired was together. the us the number realized ripped up us they in a network this services lot was future. cycle legacy to us. a as with work to Frankenstein were careers that efficient more by Chief ending,

Internet. were next XXXX what team them, they RX but seeing grow in told the that keep using into I as out protection. critical years will Ukraine signs theme the early now the what were in know A use the did. security of X-year Cloudflare, so month One Crimea million, fully last Fortune we've mentioned we similar of region and In and AWS, pressure. our characteristics After our AWS's Cloudflare." network A Cloudflare place they we lots wanted is At I and the seen online, other Georgia that Russia we've company progressing they at time. as They save well them and Basin, continue of prevent Many the were I $X.X and that cyber AWS call. out number briefed And end expect fees signed found to reached warning and that to government probing "You gaming egress say application couldn't providers Ukraine. them love took story. you sensor to this their expect attacks of their in before other to to services there a government beta of us on well. contract. we'll offer struggling talking leading offered last up earnings We Western proved happening what's [indiscernible] a warning brought contracts for close their seeing. Russes the at serves earlier. about by week, of just Concerned, physical to it to story. Unfortunately, eventually up be and to the able global they to open customers across began. and should invasion an let saw lots our organizations we're infrastructure institutions architecture.

of attacks. the exactly stories the has cyberattacks. lack been That's of the One of been not have accurate. There relative war

number revenue. signing the new are thankfully we tied parties including region, and been Ukraine, than customers checks few. regions played proud additional end. the However, sanction for In that for of of The put the of that place I'm services. Russia, represents Belarus to and X% our have has successful Cloudflare users Ukraine, Russian-occupied to role terminated all less up that in

to we reserving worst COVID. One the happened in in was media. our Russian inside what financial on, stores. in #X not anticipate was and to surprising that order as X.X.X.X key quarter We a for it of the but we are thing So trust app what It an increasingly just of we case, impact there environment away largest did out installed like conservatively test component build consumers bed wanting app business, at the to the zero the was for the our solution. to that thoughtful for in rose turned Western beginning see do that meaningful app going give really app world's our to access network Russia. Citizens free

this. any make money on won't we Now

to customers. Russia over Because It's state-sponsored the attacks thing financial infrastructure off-targeted inside network to and means of So term. business critical may to right giants. why am we pace. it paying the Cloudflare wonder always out government today's been applications zero environment customers and are we hire. operating our online ticked turns of earnings at around down, Internet you in for up doing conversations long briefing good We're We stays job I about while received insight we Successfully grow has you believe the we continue the been Internet And from struggling hostile the been. get global lot some the us hardest core a be in business. trust that And on the there Ensuring seat job. Even the in I call. to on to has industry in about for us have we needs future to during nation a have actually a makes power telling check QX It's always since many why proves enterprise why what's it XXX,XXX quarters. is while to my mobile trust to the attrition being the services out secret trust unique our QX, we network. some built of for and lot alongside continue I turned a and when in regulation record the to happen our and table love better our XXXX, and customers, quarter why others always is have biggest today government, what for the app of stand in other of will prove largest can saw the Ukrainian trust the

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Thomas Seifert

Thank everyone to and us. you you, for Matthew, thank joining

strength revenue in momentum quarter guidance QX, We delivered of exceeding our with high of fourth a the continued the the from business. and areas end strong multiple the

Turning traction was continued perspective, enterprise adoption and first The to strong our quarter a strength to growth the in our increased increased of $XXX.X portfolio with driven revenue year-over-year increased XX% base. revenue. From U.S. million. and for and revenue customer internationally. revenue by geographic product XX% XX% in represented revenue saw of The APAC we XX% increased both XX% XX% continued year-over-year. XX% of in and the revenue and year-over-year. EMEA QX, represented of year-over-year. represented Total U.S.

our We are in repeat geography EMEA to as accelerate and this highest see quarter. see pleased growth continue to APAC growth

We exited the We sequentially. XXX%, contributed X,XXX our an XXX quarter XX% with large XXX,XXX or large XXX of see large increase representing customer Significant addition to the rate year-over-year. customers paying increase increase large customers, metrics. retention customers, basis an to XX% Turning ended of a customers expansion year-over-year with to points customer representing record representing the an again pleased year We in increase of an net were revenue quarter. of contribution dollar-based from sequentially. of

continue additional our go-to-market forward Day efforts, week. which our insights see We enterprise next to broad-based providing during look we strength to across Investor

Moving to gross margin.

First quarter X% with revenue CapEx the in consistent quarter. quarter. last was first represented gross Network margin XX.X%, of

forward, CapEx level to to and XX% Going purchase we of be decisions expect see to variability quarter-to-quarter revenue strategic continue expect XX% given XXXX. fiscal for network to of some

operating to expenses. Turning

of $XX the employees We our total X% expenses had a of percentage First and quarter X,XXX $XX.X were year-over-year the decreased of end expenses year. as percentage decreased expenses We and same strong sequentially basis points to improving was an $X.X quarter. the saw a a of for G&A or same stayed million X% decreased profitability percentage we sequentially sequentially to approximately R&D at were in quarter another here number of breakeven employees to last and to the staying margin first achieving where continued number decreased our in QX And million last revenue quarter into as XX% period quarter. to quarter $XX.X the of front bringing to XX% year-over-year, quarter. flat and to Operating operating operating the of consecutive million decreased from XX% and of strength revenue operating XXX and hiring million sequentially Research with increased our operating the as as a intend in XX% year-over-year. marketing compared XX% from for a at year. G&A operating and line the XX%. $X.X third in Sales quarter with revenue expenses were loss X% of same increased saw the reinvest X% the quarter from opportunity business to quarter. leverage in million year. as enormous our last same profit. XX% revenue in of the revenue we and in operating marketing was last development reminder, quarter expenses the back grow percentage in address Sales year. XX% total the us. decreased income excess

Turning income sheet. to and net the balance

compared period to a quarter payment of the income $XX.X or the ended We XX% was $XX.X available-for-sale primarily in Our million. first XX% withholding last compared million last expense The cash, in revenue, tax cash net $X.X $X.X decrease or million approximately or or share flow flow of same revenue was million first million. same revenue $X.XX. X% net flow year. in quarter the $XX.X million to the in the revenue first $X.X cash of per year. cash securities. million in of billion $XX was and cash in of unique negative Operating related was period XX% negative was quarter equivalents Tax the negative for or with Free income to of $X.X quarter

of increase in RPO, first return XX% cash year-over-year. we As in and this some variability or mentioned XX% at the in see quarter, XXXX, to sequentially year. flow to obligations, was total of expect half we cash half continue Remaining of free XX% to positive RPO Current second million, $XXX flow of RPO. to last representing but expected an the performance came

Turning to guidance.

contribute impact As the is than guidance on in which second acquisition X% profitability we to is less full and and closed year. in Area revenue April X the the expected reflected both dilutive Matthew to quarter mentioned, on X,

the parties less in users with all we to Additionally, than to Russia, sanction first represented in quarter, tied relationships revenue. impact a X% which also ended

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

of operating range Area an loss, the million $X expect to including in X, million. We $X

share expect of We to per loss a breakeven. $X.XX net

quarter, XXX For we modeling purposes, shares net million be we positive count if loss. report basic share we XXX expect for a report net if income please share our fully that second note diluted million in to the the

$X.X We of expect a expense million. tax

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

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

deeper results We expense I, very look to tax dedication. was closing, employees great delivering quarter. Day for forward another second and of expect million. continued our these to our We Investor hosting strong a In again, their thank $X.X for for it poll that, where want questions. for on And we'll updates do our and open recent opportunity. to questions. Operator, our Thursday, acquisitions dive like and well I'd it up please on as market as progress with portfolio product financial next a


Instructions]. [Operator

Markets. of RBC Hedberg question with first Matt Your Capital

Unidentified Analyst

is level could, what Matt large the little And It's nice retention the net was more, next Hedberg. to Dan success the the of dollar-based Maybe obviously continues those if really you a really to buy customer to and set that track for expansion. usage? Berger gets gets see, XXX% customers with of enterprise well, Say, customers broader what it into platform? to having

Matthew Prince


what have that recommendations intelligent products. seen and traffic over typically additional we systems we can is their once see what on the network, across is customer I our think that make

on that specific have incredible So management I'll we a malicious customer's bot site. at good -- automated We're traffic product you a example. give an is stopping

we for traffic someone management they generate a product, things can bots is and see their says, One do at how we report patterns, is of using look then them the have bot have even a that "You many bond problem. before the

we I us like products additional Here's recommendations our you that sorts on getting very been Would customers think good intelligent adopt you see. it?" And have with platform. what at so to of to those help

what I see more more going broader bundle forward, we've into in do think us about you'll and our is licenses. calls, as earnings together talked previous services much

And that so and you can some on add that are additional prepared the up up see remarks commit of total on products, certain they examples even that where that I buy infrastructure continuously our to a annual brought with into we earlier, the companies just us, to then spend and true able basis. with an

I using that of of problems think solve going you're many service, can set forward. where can be piece start that our so growth recommendations, making different we we of for that are think customers really big products, continue intelligent once we broad will and And that, sort site-wide make sense. unique have a to those licenses that our in we I

Thomas Seifert

more incredible I innovation to that to moving forward. Not are our should back to That working, and there only into mind, expansion keep features add wanted you the the but that D&R every engine available strategy too. sell plays tie products quarter. to in

Unidentified Analyst

a And out worth the of for you really Very a you. pointing Anything that or number? then helpful as there quarter, customer new new robust from accounting record, strong generation, customer both as in driver mentioned.

Matthew Prince

suggested went out have XX,XXX that Yes. work, I your critique note we don't now that mean early to customers. your but

the XX,XXX and new the across are in now we at customers paying customers actually quarter, over customers platform. quarter, paying in the fact, In XXX,XXX added

use just services and time, size and I our larger think again showing effectively of been get them us that, to that them that onto get customers. of platform, across able customer, and them grow larger nurture the regardless is products to over we've them into additional very

very our what And thing so again, was I level, I'm point add some great never and think us look and from service But very, in growth and it's -- proud of work the when base. to team see large. that, the you that really to that that's particular to was going continuing customers new hard of at there's deliver record quarter. entire to very broad we one Because, they've of say, XX,XXX a it's a And set can order the -- on." such grow customer like at in to small have customers in you "That done


Your comes Joel next Truist. Fishbein with question of line from the

Joel Fishbein

companies has how months. Matthew, are that the has take flowing. traffic that trending what's several and Internet down been positioned cloud-centric Internet been on Fantastic reported I'd have execution other happening Cloudflare to again. past and love just of traffic a over your how your couple get is

Matthew Prince


We haven't that. seen

growth. I think continued been has it

We up, don't primarily with more bill of first just of based on and across year-over-year XX.X%, It's much all, to, of XX.X%, in we question, So answer seen we've your that bill straight growth way. we growth predictable the usage. a said that's line for that quarter-over-quarter the network traffic of growth our quarter-over-quarter in sort period. last remembering worth

network that, what our the indication that margins still above the so the times, do taking the gross maintaining post-COVID And good rest our And of traffic are. But industry. is grow. are we in that while even continues to that a from we think I target share across

Workers' driven in intelligent processing well to really of using which is those order they're by using the moving of is do ask as around, that compare, as how XX.X% Cloudflare just but some usage. people bits, that's product, computing that important, intelligence, to for And think edge that's that not why bandwidth I you where showing actually think it's think usage it's thing and the because much didn't that that's Cloudflare for bits across CPU like continue and that in delta but question? XX% -- grown and that's the products, What than Does about, CPU growth actually revenue other why growing able I we which interesting XX.X%. for year-over-year, think actually did are usage where security And interesting I that, our quarter. to over faster has grown shows to grow think our bandwidth XX.X% your is I I XX.X% network. has we're the bandwidth. grown at has answer And quarter, our

Joel Fishbein

wanted, Appreciate it. I you. thank than More was great. That but


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

Brent Thill

Matthew, think, one your the you've Can you of synergies just the when Area the think go-to-market the several talk next the And Also, among unique I lane maybe think and you outside for that you that core quarters? over acquisition, X gone. through then unveils you is a kind suite, about and talk can just other how to that? you

Matthew Prince


have products -- I for a and internal of development we unusual first acquisition bit ourselves. any building so because such all, think us a is bias towards strong

I Area think do in to X a of security, makes sense though, something just particular, us and around. e-mail for ton

I little And fault, from SMTP to think look that you or sent us SSH honestly, scar And it's out to john's across had your is I of it. not because and is, traffic, come tissue there, traffic both prior Internet, we protocol, other protocol SIP whether protecting or to we it's to our protect. and that a your any security Cloudflare. think system e-mail HDB it's we phone protect prove anything have my the we And protocols. that's traffic dived If across CTO bit fault the the e-mail worked of just in every into had

to should security come build all an so to have would that that. often And engineering "We could say, team Our it." ton veto security We the help a say, e-mail I And team product. I and customers have would sales us time, inform e-mail think and love John really data "Hey, would us of would an our product."

source by come both that, the of initial sites. headline I the a every taken account. was was incident in organization. an #X far Almost that e-mail was you've frankly, e-mail hacking that, threats data, think the Because into about spot years, our read X look if that, you on security of that last vulnerability at into is blind that the way

So or DNS Office Outlook Cloudflare, a a is, I customer provider makes that's if of that a incredibly make but can its where Much of to solution, for can whoever think it to Microsoft we're proxy, on-premise. clicks get proxy X also they it's have X the sense it It's for Area button e-mail it's because benefits hosting a and powerful or provider is they Area ton the instantly, a G-suite something they're existing deployment, continue like their use we one-click single whether of just traffic. e-mail solution. and that it's a us and the ours

very So integrate. natural for us to I it's a think point

it's integrates think, to with a go our very suite for think second of extremely sales motion I easy the the it to customers I part of through. zero question, trust your our well. And rest

any an on can you get e-mail when for isolate in click sender, that actually the using so your don't our isolation at from that that they're instance, laptop, our network. product an link So of you browser e-mail that render actually link on edge automatically unknown we but rendered

those we stop. in that's can content links, malicious any So

our to of gateway think that a trust so and introduce And products start gets way going approach zero effective product suite your for think existing our more trust that browser to to people deploy answer to zero it's with to going very I this customers a seat-based the gateway be very And I is Does be It well. a to to question? to market. X as our access of isolation adopt the and our rest our selling product, click. to easy

Brent Thill

was comprehensive. That very


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

James Fish

Plan products there. seems Transit, dollar wave Match quarter as little more are I bit hear and growth a like it especially doing, wanted Teams driving are Nice largest these about to the like the still. Magic X

many rate Offices a talking any I'm Additionally, of quarter? progress these how about of that solutions And how some X way customers here? wave is of penetration has Cloudflare for there think this are to using

Matthew Prince


about wave would characterize say Magic that think Transit, Firewall, products do Magic we that have little I would differently. I complement a solutions, our of Isolation, all content, that bit X really about products. traditional I more like infrastructure. and it like and Gateway So products And the are some Browser we protecting users. They're protecting all and protecting which your have Access then

but exact they are those of terms within are they you growing sort think both cases, somewhat that's they who are an different and the actually the slightly for in products. that true with go different products. to so But very way And I they And think in I X. that from those organization buyer those and timing pumped perspective, well. some And into -- is of a wave market we

think replacing network the the I we've adoption for a protection seen services. And of product. so traditional lot DDoS That really strong Magic is Transit

of product think than a any the as traffic in which just I of fact the think to possible it's can possible I which we strength that particular -- use sort is -- solution. stand box-based carriers -- of more that opportunity. And starting that much are as in well, through really exciting because front we're getting

to existing really user-based first think coming both traditional product, sell our us access are between but products, customers a and our also products and of to the then those, who natural able there's And on customers. products seeing I extension the those dovetail for good firewall very those those for together. really for we're adoption to well products be

in for what well, continues like. very really look Cloudflare that to Offices terms think it's progress early of will although I

hardware is are. Cloudflare of based interconnect. announced to ahead at I some landlords networks. we we more think that we invite our measuring of us That are us today And on I that product much the success the that, and generates, out us We what that trending to that are of to is where within think based allow network region deployed and the we've of than would product every that directly that I say and have, on the that of their in expectations the the we quarter, measuring starting willingness it are that build for Offices. in or success revenue facilities deploying, rather the into providers


Credit Winslow comes line Phil next of from the Your with Suisse. question

Philip Winslow

RX. on to in quarter. wanted Congrats another great Workers focus on and I

some pretty about there, significant Matthew. You talked wins

in talked sort is the it of et about, you you've a adoption, are of or One How takes sort RX? right pace about in long things of the to about anything think developer platform adoption also of cetera. of rate now? sort and velocity And when thinking time is broader how Workers it of of terms a and there the of too, escape get surprising sort where sort you stand of platform we just sort you call of

Matthew Prince


going on And develop exciting over which next closed think week, can course well. platform on, for next all RX very week from And different to be rolling really first as So beta of week. a the I a open a but we really Workers' developers ways beta as progress surprises have mentioned, to is to that all, of out focus is Cloudflare part we're we'll have Platform of as of very focused Week, around much the I the various what the products. some an

I platforms, them and that years. XX between developer for think if you reach really takes to X study escape velocity,

in so late that Workers on to continuing we're was launched it. so curve. And develop We're XXXX,

surprised where box. realizing if I to thing a public something seeing the where and of power within do I we is them. both a Workers, change organization that The once is team of The sophisticated really they're incredibly is teams is Australian that companies we continents, of with cloud, with and it's have. that in that that think have very we by very mentioned works that network, of major software think go that's that they you're chose collaboration sees the product. work. them, with found they we're will that with team, Workers, lot has like and they a sophisticated and they as to a that expect trying With the to team traditional technology objects prepared something of development fact, big the that And continue very remarks, they And developer like problems durable with getting about real-time was the at jobs again, a also it think that what for that, ton do just thing same do well-received can examples with me that's examples other And Workers. almost a Workers the out that take how the places across more using I social the sophisticated in done. solution software doing very X excited engineering one I true company, and to what excites the build that multiple was,

we it again, we'll more are think, very it's to about be how workers would contributing be -- I So pleasantly week. flocking surprised and is developers some time ecosystem, to that the dramatically next talking at a many it's going something before to But am I revenue. that lot


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

Unidentified Analyst

to detail weapon Matt, Weiss. pressures, pressures. again mentioned Keith what against cost pricing for opportunity a and use allowed gross who more against who to the on on these both you competitors and as Cloudflare -- has resist the cost you front? customers or pricing vulnerable Can Wilson Matt are It's margins to

Matthew Prince

is I think our core. efficiency just at

to our possible. so be has network as always get designed be And a to to as been such able in way efficient

And we so do. services allowed deliver that to the that has us

I just that how ourselves, chased. not think seen the we of vendors, we and and more sometimes get it's we that's never some have traditional compared with business CDN-type have

it returns the delivery, really selling And compelling very that, if that so a you're drive incredibly intelligence, into security, you're diminishing. little turns just where, are selling use -- is bit you're selling if if which think if the that built faster case. ability that you're I to out bit the Whereas being has a selling network,

lose said the beginning. think of first be forced from from think Cloudflare, always us beginning, also I we price. that of the I tenants And that Cloudflare the efficient on never one was to

we everyone this as and either share so can to they other and out again, And been. time cloud or in I that, out well can forward be continue to efficient who hold a think, we've are can time raise as not vendors save they ways especially other customers, IT taking I delivering many money products, high-margin trying taking from vendors hard where how share looking how for budgets pushing are as and I figure are where even prices, on is as figure both think hardware existing that vendors to think their having their

it's is to key the are we continue I think So story. to days. our who And been since story at efficiency Cloudflare. key our be that's that a of It hallmark I will to earliest think

Unidentified Analyst

can maybe kind on one gross And this the for off those expect to this for Thomas. show of you details. strategy Awesome. in Thank margin we When numbers.

Thomas Seifert

by you in numbers. what sure not showing I'm the mean up

service, to one I up that network. at traffic the have And testament in digest the been flat that decrease of to to mote, our of network the competitive where every ability freedom of demand that, scale think able growth growth significant to the margin, we that to every we gross able because add of network. the our of elasticity significant city been a And to, Matthew freedom of been to reiterate because I that able the elasticity manage that city. supply are have products and think every just server decrease manage server cost -- want running to in I is that we we revenue your is a already regardless add, complete I that every flexibility that are alluded and all of this and the think world the on digest just at and to the

to you digest So would slightly stable and every been that have that We've that to see gross today. already measure revenue-wise, that at I up growth in traffic-wise, look think you tremendous metric that margins. seen product-wise, able

already I to think a testament that. it's


Your comes of line from the Breen Blair. next William with James question

James Breen

Just sort that of point a little on bit.

income managing maximize line, So the expansion an to here couple you from then standpoint. are a or of revenue? kind basically plus breakeven operating non-GAAP million just And to sort a just of minus of

presence, build out access to of maybe that some have network, deeper of go does right you multinationals because to more that more now point you the As don't enable that? of you into

Matthew Prince

Jim. Sure,

can. consistent we we on there's be wrong breakeven to putting share, did a towards, per than if the as if the to into mean we very going margin else said to continue quickly money grow that we something something should possible. as business guiding showed operating that as to hold because grow So that been previous as back at rates I we're the call at nowhere earnings close we would other business think that that that I can our that saying positive we we've on massively are

I delivering consistent very there's that think has I that, that been think changed don't And a so we're breakeven we we've operating And towards think doing anything that on that in strategy. margin. about are managing again, message. I

In the -- mean, that over XXX terms countries POPs, already of the we're well I in world. around think I

us, has public, that I that -- POP in it's think not went certainly when to adopting them multinationals ever the presence look And of at think standing way we our I look think rely been the that since that some on in companies massive, highlighting of are companies and we're if that that these our the you the network, multinational almost all case. examples, us. it's

to build of about I and and number is a Thomas of I the our certain just powerful up. which network it it order efficiency certain requests. out alluded of rather to, because in actually It our more thing takes over a of of than servers both our time the driving drives amount as that design of POPs we think cost is counterintuitively, because network down that the process

that other and that bandwidth, variable around means server, is like can work by that with we and out networking network the are any our because anywhere drive as to usage of is ISPs the of various cost than more part is the any of service things world so side powerful handle the business. amount on So expand and the able actually make we to CapEx that have eyeball interconnect What anything that our and networks for continue driven our request, hard software it your to we're directly else. done your co-location down costs

what whatever get is a and pop we our And we ability to if effectively our darn to deliver to and possible. think are be to because the snorkels ocean the little decomposing our as in there, that, bit we future the necessary efficiently continue order continue bottom of network cost in the can by more And efficiency for reason need dive putting going expand. able a so services somewhere in as do I to to the that's to


comes the question next of Stifel. with Borg line from Your Adam

Adam Borg

you've win XXXX thinking you seen Accenture, with and federal about just vertical. Matthew there provide some on opportunity opportunities fed the for see. in broadly. the just the federal you but how could just ramp Obviously, Maybe I hoping just with joint the that traction on more you're an curious update

Matthew Prince

Yes. our with to opportunity we'll Federal we that and word is a that. We waiting up agency kind line get that federal from today have us. to thumbs big unlock the agency just actually we continue approved. in overall [indiscernible] sponsoring are for think of got

we being done that's at a going that everything do, think DMV. bit the and all we So like little We've can it's well.

anyone confident a DMV for hopefully wait that You've to listening number to later. that And got just want get of called. of get But sooner we're kind is will than us. your use it called if in, federal lot agencies to there's

working with can we well not hopefully, Accenture see and So other to meet requirement. is as continued partners, as significant interest. That back holding from we've that us

something the of that the us Identity, our quarter the infrastructure team, Infrastructure or up was recommended U.S. with received to I I companies securing utilities, back We that, built have the the is would to that stepping and I with adopt quickly us. as by number trusted are saying think of infrastructure, in was think have come well what's of energy the understand they partnership from ask launched, actually that honored of for protecting is sort incredibly the possible. well United that, really calls speaks hospitals, federal in to White as including I the people as thing of we that in amount help, who Act. the The that going the that Protection House trust C-level any in Ping Ukraine, CrowdStrike, equivalent myself, Critical and really in States, the government. on as

enormous within think we of have government. So amount an goodwill I that the

we behind I And that. we'll enormous and able to our now, deliver day continue are any formally is call to opportunity goodwill. and us. FedRAMP the to an think announce That that there number, think is on will hopefully, moving be that forward DMV process


question next Alex Needham. Henderson from Your comes the of with line

Alexander Henderson

the stuff. that the and into off, obviously, continuing ask growth you've was which needed as to reporters data job I a well Russia. It's important couple infrastructure, First But I the XX%. question wanted us around asked well points XX%, is ahead in flow to really you there in maybe total. done your as really give Ukrainian deliver could protecting around I on Internet you a Western great to both really traffic up is change to access traffic, guys of the of the the wanted news compliment coding The what question on the marketplace, And earlier. think

that us API XXX% update same traffic last and traffic in terms user to suggests in accelerating ultimately growth, growth and domain something of which in to excess which domain, traffic, there's is part protecting of of that XXX%, what that over a and rates guys do, very from domain my terms key the on high the optimizing you traffic. obviously you doubled you more can along So has of of where over of months are than lines, in rate XX carrying? the what percentage you're And it's Internet the its of second, understanding

can implication the number very us that being a the on not that being the So little share? acceleration but talk what bit, are about in would you're you rather statistics is? to API too. paid that rate bit rapid realize per are And you of of of in traffic, terms growth where imply I domains

Matthew Prince

our them Yes, team that and online as Alex, been at stays X.X.X.X to for continue the working the of much has nights been that, may Ukrainian services have I able I I'm the team of sure beginning. allow quarter out. like Internet and make thank be for world lot really you first appreciate tireless And to kudos proud our calling something that's have it to of free where done, to they happening. to a a of the It's what's infrastructure you not where all, parts that that in of people that think the access to see

traffic, of think know what of In we the Internet know is. but numerator -- -- our And I terms source don't really good that. don't there's I of a we denominator is, think percentage we what it's don't Cloudflare's

places. some of the are is that think look percentage for number One us. behind that at XX% top million that is we And what around today. in proxies other I websites

doesn't what the a just that like of other like doesn't products around if third-party that other zero take what web our on, pure underrepresents into account uses It trust sources, Magic is lot a Cloudflare of measure it take think our using you Transit XX%. right I products. But into products, percentage products. and account things from it's

our I during think that's of of easier bigger API a it's API, seeing have For strong API, delivering, I'd companies very think I passes are that one traffic. And protection the a And quite -- that Cloudflare, is seen been updated to think that all than same that. all customer doing forward. to I API week, build the customers of strong way going really of good Workers of at a today schema the of And seen make to to validate going this that. going where is that. that, developers an is that suite. is are developers exactly bunch help the sort and we're but from there no more is we next a through it's API Workers interest has Platform and that I some more and In and really growth the time, things that and that things its great that adoption an traffic and sure be big for to announced sent we're that think We've our is last Those we've piece able protocols, network customer bigger that correct. being say understand thing is and Week, on Workers. story examples being that API the the from that for quarter, trend Again, that API,

Alexander Henderson

just it will If why averages? give reaccelerating faster India X update us at start Can company in and the that a additional throw question could eclipse I China. isn't And rate? traffic on to when an you

Matthew Prince

the from are. I So think growth China, precisely I broken don't rates the we've traffic and and don't what out know India

Alexander Henderson

Yes, question, that revenue a was Matt.

Matthew Prince

From a revenue perspective.

So that from regions those interesting different are both another. one again, us. I to very that are think They're

selling a ISP have great in our to to market model very seen is finding as selling both done there. success I And a continue Indian what interconnect job expand with we to India. the well able of a at think we've In partners. services and lot as into to always been worked we've customers, ways complicated that with China,

been partner so And with Baidu. a have long-time we

in Cloud. -- complicated think JD going again, extremely I that both that in Western that partnership operating to case, is recent partner China. are a We be with for well. And more in is any And it company

unique a think deliver. part, fact from so not the we've revenue the power doing to since single inside the what always that value if so least at us that China. to that we And of not of for country be -- think it's of of functionality equal to that including have And of China. around now the that greater, rest that deliver with we generate there I to can features have largely Also, that, network X inside and earth, form on extends the The multinational been that world. shows is companies network, we been that we're to us do every shows the China and trying into purpose I in having is you can have same services XXXX, that able able

think I in continue those both success. of but and at we to own So markets complications, see are operate have their

Jayson Noland

question, more Operator, take please? can X we



last of Evercore. with Your line the Amit question Daryanani from comes

Amit Daryanani

have Perfect. them well. at I X the guess I'll ask I time. as same

recession talk Europe this in was you in First and of hoping a could concern America. off, just I about growing

clarify, can also recession is from operating And for So to rates patterns any your deal may? quarter? or the closing into buying you perspective, What profit you of customers' revenue Just the team seeing in just any context, operating? that anything? your are sales embedded how risk in is if deals, you shift how or impact if from from guide M&A your then and an June impact is that

Matthew Prince

the then Sure. and close can second. the first with I'll Thomas out question, take

way seeing a this aside and QX out most lived through, definitely though, the a tech them. service the is all books positioned risk I I sure can't in a I existing the a in we We're imagine are what than deployed since must-have. saves there are. that to We're will as offering think is of solutions that complicated real a even like, that for As the What way need forward. think service we when customers XXXX. customers there but money a of I -- quarter is inflationary company nice going we service that environment we're that have think We've better And And said, recession the we which be their which is a companies such can history situation that are. I certainly offering turn to that. network a from make that, that have, concerns around is written, that I like over not a

world. what saw going having was so quarter come in in And many we actually the in was us. them what But concern that fires to was over cases, on the definitely

XX that want vendors, instead turning fact in a are beginning and time across put the spend we we that it are so are continues from us, COVID, concern make provide think like bundled what want to extremely that critical able find that well them time, like what work. economic I like to lot money are of customers all and their save to again, consolidate our different lot is, place. are we to integrated positioned we But we're Internet time to are over to legacy to of me, challenging there. there's to we behind they there out solutions services time approach, a spending fact think of what that's saying And the feels it you. sure as where I the the times, And and They have that over

come. might many was may next So I quarter I over think be that for think challenging to a already be well I for what and -- for that, companies. very what companies think it us challenging a what positions the -- period period was

Thomas Seifert

thoughtful Ukraine we your to of Russia, approach it standard prudent exposure when trying and addressing the to guidance came Belarus. followed I And our be and question, to think

mentioned less So Area prepared of year. I X% reflected well for it's for profitability. revenue, for X for and than full true was quarter headwind in acquisition in contribution dilutive But impact revenue And -- guidance but quarter, issued we guidance, on also is year. we we that also both second the also that the that the the X% both the quarter year. as as as for reflected the the remarks, for rest than of already for the true in we and the And less a is current first said this the in the

in guidance reflected the are we all So gave.


time like remarks. the turn for questions. the all to That's we call CEO, for I'd to Matthew Prince, have back closing

Matthew Prince

our This providing what a watched challenging made online, at having in Customer as to our team for proud Day, of looking appreciate have many the of that lot forward announcements. seeing really world week with incredibly really a Innovation of stayed and the be in for Platform of up events and our Ukrainian has taken any to Cloudflare New is place. of Cloudflare I it's the quarter and sure York, stand which Investor It's what I'm the expecting because work really you see for I'm number world much. tuned been we've employees. is a ahead. to people really was Day that all could the busy network great you of customers. that announce Weeks, I one and all all features. can happening going which challenge week a infrastructure next our a that's stay Week, also to our of us, we're Thank of so appreciate


today's joining. you concludes conference call. Thank This for

disconnect. now may You