• First quarter revenue totaled $378.6 million, representing an increase of 30% year-over-year
• GAAP loss from operations of $54.6 million, or 14% of revenue, and non-GAAP income from operations of $42.4 million, or 11% of revenue
• Operating cash flow of $73.6 million, or 19% of revenue, and free cash flow of $35.6 million, or 9% of revenue

SAN FRANCISCO: Cloudflare, Inc. (NYSE: NET), the leading connectivity cloud company, today announced financial results for its first quarter ended March 31, 2024.

“The first quarter marked a strong start to the year, as we grew revenue 30% year-over-year to $378.6 million—fueled by a record number of net-new customers year-over-year spending more than $100,000, $500,000, and $1 million with Cloudflare on an annualized basis. I'm incredibly proud of the fact that our team has been able to continue to build our network, service larger and larger customers, and launch entirely new categories of products—including in the AI space—while also remaining disciplined with our gross and operating margins and our free cash flow,” said Matthew Prince, co-founder & CEO of Cloudflare. “We’ve also delivered a double-digit year-over-year improvement in sales productivity again this quarter. Cloudflare has always been powered by our relentless innovation engine, and I’m encouraged by our progress in building a go-to-market engine that will also be the envy of the industry.”

First Quarter Fiscal 2024 Financial Highlights

• Revenue: Total revenue of $378.6 million, representing an increase of 30% year-over-year.
• Gross Profit: GAAP gross profit was $293.6 million, or 77.5% gross margin, compared to $219.7 million, or 75.7%, in the first quarter of 2023. Non-GAAP gross profit was $301.1 million, or 79.5% gross margin, compared to $225.9 million, or 77.8%, in the first quarter of 2023.
• Operating Income (Loss): GAAP loss from operations was $54.6 million, or 14.4% of revenue, compared to $47.3 million, or 16.3% of revenue, in the first quarter of 2023. Non-GAAP income from operations was $42.4 million, or 11.2% of revenue, compared to $19.4 million, or 6.7% of revenue, in the first quarter of 2023.
• Net Income (Loss): GAAP net loss was $35.5 million, compared to $38.1 million in the first quarter of 2023. GAAP net loss per basic and diluted share was $0.10, compared to $0.12 in the first quarter of 2023. Non-GAAP net income was $58.2 million, compared to $27.2 million in the first quarter of 2023. Non-GAAP net income per diluted share was $0.16, compared to $0.08 in the first quarter of 2023.
• Cash Flow: Net cash flow from operating activities was $73.6 million, compared to $36.4 million for the first quarter of 2023. Free cash flow was $35.6 million, or 9% of revenue, compared to $13.9 million, or 5% of revenue, in the first quarter of 2023.
• Cash, cash equivalents, and available-for-sale securities were $1,716.2 million as of March 31, 2024.

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

For the second quarter of fiscal 2024, we expect:

• Total revenue of $393.5 to $394.5 million
• Non-GAAP income from operations of $35.0 to $36.0 million
• Non-GAAP net income per share of $0.14, utilizing weighted average common shares outstanding of approximately 360 million

For the full year fiscal 2024, we expect:

• Total revenue of $1,648.0 to $1,652.0 million
• Non-GAAP income from operations of $160.0 to $164.0 million
• Non-GAAP net income per share of $0.60 to $0.61, utilizing weighted average common shares outstanding of approximately 361 million

These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Conference Call Information

Cloudflare will host an investor conference call to discuss its first quarter ended March 31, 2024 earnings results today at 2:00 p.m. Pacific time (5:00 p.m. Eastern time). Interested parties can access the call by dialing (877) 400-4517 from the United States or (332) 251-2620 internationally with conference ID 3723782. A live webcast of the conference call will be accessible from the investor relations website at https://cloudflare.NET. A replay will be available approximately two hours after the conclusion of the live event and will remain available for approximately one year.

Supplemental Financial and Other Information

Supplemental financial and other information can be accessed through the Company’s investor relations website at https://cloudflare.NET.

Non-GAAP Financial Information

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

Available Information

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

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “explore,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these words, or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. However, not all forward-looking statements contain these identifying words. Forward-looking statements expressed or implied in this press release include, but are not limited to, statements regarding our future financial and operating performance, our reputation and performance in the market, general market trends, our estimated and projected revenue, non-GAAP income from operations and non-GAAP net income per share, shares outstanding, the benefits to customers from using our products, the expected functionality and performance of our products, the demand by customers for our products, our plans and objectives for future operations, growth, initiatives, or strategies, our market opportunity, 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 impact of adverse macroeconomic conditions, such as inflation, high interest rates, actual or potential bank failures and recessionary concerns, on our and our customers’, vendors’, and partners’ operations and future financial performance; the impact of the Hamas-Israel and Russia-Ukraine conflicts and other areas of geopolitical tension around the world, or any potential worsening or expansion of those conflicts or geopolitical tensions; our history of net losses; risks associated with managing our rapid growth; our ability to attract and retain new customers (including new large customers); our ability to retain and upgrade paying customers and convert free customers to paying customers; our ability to expand the number of products we sell to paying customers; our ability to effectively increase sales to large customers; our ability to increase brand awareness; our ability to continue to innovate and develop new products and product features; our ability to generate demand for our products; our ability to effectively attract, train, and retain our sales force to be able to sell our existing and new products and product features; our sales team’s productivity; our ability to effectively attract, integrate and retain key personnel; problems with our internal systems, network, or data, including actual or perceived breaches or failures; rapidly evolving technological developments, including advancements in AI, in the market; length of our sales cycles and the timing of payments by our customers; activities of our paying and free customers or the content of their websites and other Internet properties that use our network and products; foreign currency fluctuations; changes in the legal, tax, and regulatory environment applicable to our business; and other general market, political, economic, and business conditions. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our filings with the SEC, including our Annual Report on Form 10-K filed on February 21, 2024, 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. (NYSE: NET) is the leading connectivity cloud company on a mission to help build a better Internet. It empowers organizations to make their employees, applications and networks faster and more secure everywhere, while reducing complexity and cost. Cloudflare’s connectivity cloud delivers the most full-featured, unified platform of cloud-native products and developer tools, so any organization can gain the control they need to work, develop, and accelerate their business.

Powered by one of the world’s largest and most interconnected networks, Cloudflare blocks billions of threats online for its customers every day. It is trusted by millions of organizations – from the largest brands to entrepreneurs and small businesses to nonprofits, humanitarian groups, and governments across the globe.

Learn more about Cloudflare’s connectivity cloud at cloudflare.com/connectivity-cloud. Learn more about the latest Internet trends and insights at radar.cloudflare.com.

CLOUDFLARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(unaudited)
	March 31, 2024				December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	254,401			$	86,864
Available-for-sale securities		1,461,801				1,586,880
Accounts receivable, net		213,183				248,268
Contract assets		11,589				11,041
Restricted cash short-term		5,535				2,522
Prepaid expenses and other current assets		69,663				47,502
Total current assets		2,016,172				1,983,077
Property and equipment, net		329,422				322,813
Goodwill		148,047				148,047
Acquired intangible assets, net		14,298				19,564
Operating lease right-of-use assets		141,820				138,556
Deferred contract acquisition costs, noncurrent		137,527				133,236
Restricted cash		1,838				1,838
Other noncurrent assets		12,506				12,636
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