Cloudflare Announces Third Quarter 2020 Financial Results

  • Third quarter revenue totaled $114.2 million, representing an increase of 54% year-over-year
  • Q3 GAAP net loss per share of $0.09, representing an improvement of $0.26 year-over-year; non-GAAP net loss per share of $0.02, representing an improvement of $0.14 year-over-year
  • Strong large customer growth, adding a record of roughly 100 net large enterprise customers in the quarter, in addition to our first $10 million ARR customer

San Francisco, CA, November 5, 2020 — Cloudflare, Inc. (NYSE: NET), the security, performance, and reliability company helping to build a better Internet, today announced financial results for its third quarter ended September 30, 2020.

“Our third quarter represented many significant milestones including surpassing $100M in revenue, crossing 100,000 paying customers, and releasing more than a dozen new products and features,” said Matthew Prince, co-founder & CEO of Cloudflare. “I’m incredibly proud that we exceeded financial, customer, and innovation milestones, all while providing our services, at no cost, to state and local governments to ensure that cyberattacks don’t disrupt the United States 2020 elections. The world has never needed the Internet more than it has over the last nine months, and we're laser focused on helping to keep it fast, reliable, and secure.”

Third Quarter Fiscal 2020 Financial Highlights

  • Revenue: Total revenue of $114.2 million, representing an increase of 54% year-over-year.
  • Gross Profit: GAAP gross profit was $87.2 million, or 76.3% gross margin, compared to $57.9 million, or 78.3%, in the third quarter of 2019. Non-GAAP gross profit was $88.2 million, or 77.3% gross margin, compared to $58.3 million, or 78.9%, in the third quarter of 2019.
  • Operating Loss: GAAP loss from operations was $21.3 million, or 18.6% of total revenue, compared to $41.1 million, or 55.6% of total revenue, in the third quarter of 2019. Non-GAAP loss from operations was $4.5 million, or 4.0% of total revenue, compared to $18.1 million, or 24.5% of total revenue, in the third quarter of 2019.
  • Net Loss: GAAP net loss was $26.5 million, compared to $40.9 million in the third quarter of 2019. Non-GAAP net loss was $5.7 million, compared to $18.5 million in the third quarter of 2019. GAAP net loss per share was $0.09, compared to $0.35 in the third quarter of 2019. Non-GAAP net loss per share was $0.02, compared to $0.16 in the third quarter of 2019.
  • Cash Flow: Net cash flow from operations was $2.0 million, compared to negative $17.8 million for the third quarter of 2019. Free cash flow was negative $17.9 million, or 16% of total revenue, compared to negative $33.6 million, or 45% of total revenue, in the third quarter of 2019.
  • Cash, cash equivalents, and available-for-sale securities were $1,051.3 million as of September 30, 2020.

The section titled "Non-GAAP Financial Information" below describes our usage of non-GAAP financial measures. Reconciliations between historical GAAP and non-GAAP information are contained at the end of this press release following the accompanying financial data.

Financial Outlook

The following forward-looking statements regarding our financial outlook are subject to substantial uncertainty as a result of the COVID-19 pandemic, reflect our estimates as of November 5, 2020 regarding the impact of the pandemic on our operations, and are highly dependent on numerous factors that we may not be able to predict or control, including, among others: the duration, spread, and severity of the pandemic; actions taken by governments and businesses in response to the pandemic and the resulting impact on our customers, vendors, and partners; the impact of the pandemic on global and regional economies and economic activity generally; our ability to continue operating in impacted areas; and customer demand and spending patterns.

For the fourth quarter of fiscal 2020, we expect:

  • Total revenue of $117.5 to $118.5 million
  • Non-GAAP loss from operations of $10 to $9 million
  • Non-GAAP net loss per share of $0.04 to $0.03, utilizing weighted average common shares outstanding of approximately 304 million

For the full year fiscal 2020, we expect:

  • Total revenue of $422.5 to $423.5 million
  • Non-GAAP loss from operations of $38 to $37 million
  • Non-GAAP net loss per share of $0.13 to $0.12, utilizing weighted average common shares outstanding of approximately 300 million

Conference Call Information

Cloudflare will host an investor conference call to discuss its third quarter ended September 30, 2020 earnings results today at 2:00 p.m. Pacific time (5:00 p.m. Eastern time). Interested parties can access the call by dialing (866) 211-4146 from the United States or (647) 689-6734 internationally with conference ID 6459727. A live webcast of the conference call will be accessible from the investor relations website at https://cloudflare.NET. A replay will be available approximately two hours after the conclusion of the live event and will remain available for approximately 30 days.

Supplemental Financial and Other Information

Supplemental financial and other information can be accessed through the Company’s investor relations website at https://cloudflare.NET. Beginning with the quarter ended March 31, 2020, we have transitioned the method for calculating our key business metrics from a billings-based methodology to a revenue-based methodology. We believe the change in methodology to GAAP-based metrics provides improved disclosures for our investors by better aligning our key business metrics with GAAP and our financial statements and will provide a better representation of these important components of our operating model and business performance as we continue to scale. We have recast these metrics for the eight trailing quarters to reflect this new methodology in our supplemental materials.

Non-GAAP Financial Information

Cloudflare believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Reconciliations of non-GAAP financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future. For further information regarding why Cloudflare believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the “Explanation of Non-GAAP Financial Measures” section at the end of this press release.

Available Information

Cloudflare intends to use its press releases, website, investor relations website, news site, blog, and Twitter account, in addition to filings made with the Securities and Exchange Commission (SEC) and public conference calls, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “explore,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these words, or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. However, not all forward-looking statements contain these identifying words. Forward-looking statements expressed or implied in this press release include, but are not limited to, statements regarding our future financial and operating performance, our reputation and performance in the market, general market trends, our estimated and projected revenue, non-GAAP net loss from operations and non-GAAP net loss per share, and shares outstanding, the benefits to customers from using our products, the expected functionality and performance of our products, our plans and objectives for future operations, growth, initiatives, or strategies, and comments made by our CEO and others. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the extent and duration of the impact of the COVID-19 pandemic and adverse conditions in the general domestic and global economic markets; the impact of the COVID-19 pandemic on our and our customers’, vendors’, and partners’ operations and future financial performance; our history of net losses; our limited operating history; risks associated with managing our rapid growth; our ability to attract and retain new customers; our ability to retain and upgrade paying customers and convert free customers to paying customers; problems with our internal systems, network, or data, including actual or perceived breaches or failures; rapidly evolving technological developments in the market; length of sales cycles; and general market, political, economic, and business conditions. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our filings with the SEC, including our Quarterly Report on Form 10-Q filed on August 10, 2020, as well as other filings that we may make from time to time with the SEC.

The forward-looking statements made in this press release relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

About Cloudflare

Cloudflare, Inc. (www.cloudflare.com / @cloudflare) is on a mission to help build a better Internet. Cloudflare’s platform protects and accelerates any Internet application online without adding hardware, installing software, or changing a line of code. Internet properties powered by Cloudflare have all web traffic routed through its intelligent global network, which gets smarter with every request. As a result, they see significant improvement in performance and a decrease in spam and other attacks. Cloudflare was named to Entrepreneur Magazine’s Top Company Cultures 2018 list and ranked among the World’s Most Innovative Companies by Fast Company in 2019. Headquartered in San Francisco, CA, Cloudflare has offices in Austin, TX, Champaign, IL, Seattle, WA, New York, NY, San Jose, CA, Washington, D.C., Lisbon, London, Munich, Beijing, Singapore, Sydney, and Tokyo.

Investor Relations Information Jayson Noland ir@cloudflare.com

Press Contact Information Daniella Vallurupalli press@cloudflare.com

Source: Cloudflare, Inc.

Income Statement

Cloudflare Inc Condensed Consolidated Balance Sheets

Cloudflare Inc. Condensed Consolidated Statements of Cash Flows

Cloudflare Inc. Reconciliation of GAAP to Non-GAAP Financial Measures

Cloudflare, Inc. Reconciliation of GAAP to Non-GAAP Financial Measures

Press Contact Information
Daniella Vallurupalli
+1 650-741-3104