Cloudflare Announces Fourth Quarter and Fiscal Year 2021 Financial Results|||

  • Fourth quarter revenue totaled $193.6 million, representing an increase of 54% year-over-year; financial year 2021 revenue totaled $656.four million, representing an increase of 52% year-over-twelvemonth
  • Record dollar-based net retention of 125%, representing an increase of 600 footing points year-over-year, driven by connected strength from big enterprise customers
  • Achieved record operating cash flow and positive costless cash catamenia for the 4th quarter; operating cash flow was $40.6 million, or 21% of total acquirement, and costless cash flow was $viii.6 million, or 4% of total revenue

SAN FRANCISCO–(Business WIRE)–Cloudflare, Inc. (NYSE: Internet), the security, performance, and reliability visitor helping to build a better Internet, today announced fiscal results for its fourth quarter and financial year ended December 31, 2021.


We had a nigh excellent 2021, capping off the year with fourth quarter acquirement growth up 54% twelvemonth-over-year. The full year represented a 52% yr-over-year increment in revenue growth and a 71% year-over-year increase in large customer growth. It was also the fifth straight yr we achieved 50 percentage, or greater, compounded growth,” said Matthew Prince, co-founder & CEO of Cloudflare. “
Our continued success is fueled by a culture of relentless innovation on top of a highly scalable platform. That’south why we’re uniquely positioned to extend our network, introduce new Zero Trust capabilities, and abound our total addressable market place. We’ve never been more motivated to take on this huge opportunity as corporate networks transition to the cloud, and developers line-up to build on our border.”

Fourth Quarter Fiscal 2021 Financial Highlights

  • Revenue: Full acquirement of $193.6 million representing an increment of 54% year-over-twelvemonth.
  • Gross Turn a profit: GAAP gross turn a profit was $151.i meg or 78.0% gross margin, compared to $96.ix one thousand thousand or 76.ix%, in the fourth quarter of 2020. Not-GAAP gross profit was $153.3 meg or 79.2% gross margin, compared to $98.3 million, or 78.1%, in the 4th quarter of 2020.
  • Operating Income (Loss): GAAP loss from operations was $41.1 million, or 21.2% of total revenue, compared to $24.7 meg, or nineteen.half-dozen% of total acquirement, in the 4th quarter of 2020. Non-GAAP income from operations was $2.2 million, or 1.2% of total acquirement, compared to a loss from operations of $5.five million, or 4.iii% of full revenue, in the fourth quarter of 2020.
  • Internet Income (Loss): GAAP net loss was $77.5 million, compared to $34.0 million in the 4th quarter of 2020. GAAP net loss per basic and diluted share was $0.24 compared to $0.11 in the fourth quarter of 2020. Non-GAAP net income was $0.i million, compared to non-GAAP net loss of $vii.4 million in the fourth quarter of 2020. Non-GAAP net income per diluted share was $0.00, compared to non-GAAP cyberspace loss per share of $0.02 in the fourth quarter of 2020.
  • Cash Menstruation: Net cash period from operating activities was $twoscore.6 million, compared to negative $8.viii million for the 4th quarter of 2020. Complimentary cash menstruum was $8.6 one thousand thousand, or 4% of total revenue, compared to negative $23.5 million, or xix% of total revenue, in the fourth quarter of 2020.
  • Cash, cash equivalents, and available-for-auction securities
    were $1,821.8 1000000 equally of December 31, 2021.

Full Year 2021 Financial Highlights

  • Acquirement: Total revenue of $656.4 million representing an increase of 52% year-over-twelvemonth.
  • Gross Profit: GAAP gross profit was $509.3 million or 77.half-dozen% gross margin, compared to $330.0 million, or 76.six%, in fiscal 2020. Non-GAAP gross profit was $515.9 meg, or 78.6% gross margin, compared to $334.6 1000000, or 77.six%, in financial 2020.
  • Operating Loss: GAAP loss from operations was $127.7 million, or 19.5% of total revenue, compared to $106.8 meg or 24.8% of total revenue, in fiscal 2020. Not-GAAP loss from operations was $seven.0 million, or 1.i% of total revenue, compared to $33.9 million, or 7.9% of total revenue, in fiscal 2020.
  • Cyberspace Loss: GAAP net loss was $260.iii million compared to $119.4 million for fiscal 2020. GAAP net loss per share was $0.83, compared to $0.xl for fiscal 2020. Non-GAAP net loss was $fifteen.1 million compared to $35.1 million for fiscal 2020. Not-GAAP internet loss per share was $0.05, compared to $0.12 for financial 2020.
  • Cash Flow: Internet greenbacks menstruum from operating activities was $64.half-dozen million, compared to negative $17.1 million for fiscal 2020. Gratuitous cash period was negative $43.ane million, or 7% of total revenue, compared to negative $92.1 million, or 21% of total revenue, for financial 2020.

The section titled “Non-GAAP Financial Information” below describes our usage of not-GAAP fiscal measures. Reconciliations between historical GAAP and non-GAAP information are independent at the end of this press release following the accompanying financial data.

Fiscal Outlook

The following forrard-looking statements regarding our financial outlook are subject to substantial uncertainty every bit a upshot of the ongoing COVID-xix pandemic, reflect our estimates equally of Feb x, 2022 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 elapsing, 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 timing of administering COVID-19 vaccines around the world and the long-term efficacy of these vaccines; the impact of the pandemic on global and regional economies and economic activeness generally; our power to go along operating in impacted areas; and client demand and spending patterns.

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For the starting time quarter of financial 2022, we wait:

  • Total acquirement of $205.0 to $206.0 million
  • Not-GAAP income from operations of $0.5 to $1.v 1000000
  • Non-GAAP net income per share of $0.00 to $0.01, utilizing weighted boilerplate common shares outstanding of approximately 348 1000000

For the full year fiscal 2022, we expect:

  • Total revenue of $927.0 to $931.0 million
  • Non-GAAP income from operations of $10.0 to $xiv.0 one thousand thousand
  • Non-GAAP net income per share of $0.03 to $0.04, utilizing weighted average common shares outstanding of approximately 352 1000000

Conference Call Information

Cloudflare will host an investor conference call to discuss its 4th quarter and financial yr ended December 31, 2021 earnings results today at 2:00 p.m. Pacific time (5:00 p.m. Eastern time). Interested parties can admission the call by dialing (888) 330-2022 from the United States or (646) 960-0690 internationally with conference ID 9501812. A live webcast of the conference call will be attainable from the investor relations website at https://cloudflare.NET. A replay volition exist available approximately two hours after the conclusion of the live event and will remain bachelor for approximately ane year.

Supplemental Fiscal and Other Information

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

Non-GAAP Financial Information

Cloudflare believes that the presentation of not-GAAP financial data provides important supplemental data to direction and investors regarding financial and business trends relating to the Company’s financial status and results of operations. Reconciliations of non-GAAP financial measures to the most directly comparable fiscal results equally 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 respective GAAP measures is not available on a forward-looking basis without unreasonable endeavour due to the uncertainty of expenses that may be incurred in the future. For farther information regarding why Cloudflare believes that these not-GAAP measures provide useful information to investors, the specific mode in which direction uses these measures, and some of the limitations associated with the use of these measures, please refer to the “Explanation of Non-GAAP Fiscal Measures” section at the stop of this printing release.

Available Information

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

Forward-Looking Statements

This press release contains frontward-looking statements within the meaning of Section 27A of the Securities Act of 1933, equally amended, and Section 21E of the Securities Commutation Act of 1934, every bit amended, which statements involve substantial risks and uncertainties. In some cases, y’all can identify forward-looking statements because they incorporate words such every bit “may,” “will,” “should,” “await,” “explore,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “gauge,” “predict,” “potential,” or “continue,” or the negative of these words, or other similar terms or expressions that business concern our expectations, strategy, plans, or intentions. However, not all forward-looking statements incorporate these identifying words. Forrard-looking statements expressed or unsaid in this printing release include, only are non express to, statements regarding our time to come fiscal and operating performance, our reputation and performance in the market, general market place trends, our estimated and projected acquirement, non-GAAP income from operations and not-GAAP net income per share, shares outstanding, the benefits to customers from using our products, the expected functionality and functioning of our products, our plans and objectives for future operations, growth, initiatives, or strategies, and comments made past our CEO and others. There are a meaning number of factors that could cause bodily 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 resulting adverse weather in the general domestic and global economical markets; the impact of the COVID-nineteen pandemic on our and our customers’, vendors’, and partners’ operations and future financial performance; our history of cyberspace losses; our limited operating history; risks associated with managing our rapid growth; our power 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 power to effectively increase sales to large customers; bug with our internal systems, network, or data, including bodily or perceived breaches or failures; rapidly evolving technological developments in the market; length of sales cycles; activities of our paying and free customers or the content of their websites and other Cyberspace properties that use our network and products; changes in the legal, tax, and regulatory environment applicable to our concern; and full 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 just not express to, risks detailed in our filings with the SEC, including our Quarterly Report on Class 10-Q filed on November 05, 2021, as well as other filings that nosotros may make from time to time with the SEC.

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The forward-looking statements made in this press release relate only to events every bit of the date on which the statements are made. We undertake no obligation to update any forrad-looking statements made in this press release to reverberate events or circumstances afterward the appointment of this press release or to reverberate new data or the occurrence of unanticipated events, except as required past law. Nosotros may not really achieve the plans, intentions, or expectations disclosed in our forrad-looking statements, and you should not identify undue reliance on our forward-looking statements.

About Cloudflare

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

Source: Cloudflare, Inc.

CLOUDFLARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

December 31,

Year Ended

December 31,

2021

2020

2021

2020

Revenue

$

193,596

$

125,926

$

656,426

$

431,059

Cost of revenue(one)(2)

42,496

29,065

147,134

101,055

Gross profit

151,100

96,861

509,292

330,004

Operating expenses:

Sales and marketing(1)

96,219

63,552

328,065

217,875

Research and development(i)(3)

61,762

34,757

189,408

127,144

Full general and administrative(1)(3)

34,183

23,293

119,503

91,753

Total operating expenses

192,164

121,602

636,976

436,772

Loss from operations

(41,064

)

(24,741

)

(127,684

)

(106,768

)

Not-operating income (expense):

Interest income

668

846

ane,970

6,588

Interest expense(4)

(16,108

)

(ten,062

)

(49,234

)

(24,964

)

Loss on extinguishment of debt

(72,234

)

Other income (expense), net

(426

)

113

(794

)

171

Total not-operating income (expense), net

(15,866

)

(nine,103

)

(120,292

)

(xviii,205

)

Loss before income taxes

(56,930

)

(33,844

)

(247,976

)

(124,973

)

Provision for (do good from) income taxes

20,571

177

12,333

(5,603

)

Internet loss

$

(77,501

)

$

(34,021

)

$

(260,309

)

$

(119,370

)

Net loss per share attributable to common stockholders, bones and diluted

$

(0.24

)

$

(0.11

)

$

(0.83

)

$

(0.forty

)

Weighted-average shares used in computing net loss per share owing to mutual stockholders, bones and diluted

320,331

303,813

312,321

299,774

____________

(1) Includes stock-based bounty and related employer payroll taxes as follows:

Price of revenue

$

1,337

$

478

$

3,703

$

i,466

Sales and marketing

10,184

5,363

32,869

17,678

Research and development

24,747

nine,080

61,056

30,497

General and administrative

5,830

3,404

19,706

13,875

Total stock-based compensation and related employer payroll taxes

$

42,098

$

18,325

$

117,334

$

63,516

(two) Includes amortization of acquired intangible assets equally follows:

Cost of revenue

$

846

$

950

$

ii,946

$

3,081

Total amortization of acquired intangible assets

$

846

$

950

$

two,946

$

iii,081

(3) Includes conquering-related and other expenses as follows:

Research and development

$

$

$

$

5,725

General and administrative

380

380

554

Total acquisition-related and other expenses

$

380

$

$

380

$

six,279

(iv) Includes amortization of debt discounts and issuance costs as follows:

Amortization of debt discounts and issuance costs

$

15,686

$

8,764

$

46,174

$

21,629

Total amortization of debt discounts and issuance costs

$

fifteen,686

$

eight,764

$

46,174

$

21,629

CLOUDFLARE, INC.

CONDENSED CONSOLIDATED Balance SHEETS

(in thousands, except par value)

(unaudited)

December 31,

2021

December 31,

2020

Avails

Electric current assets:

Greenbacks and greenbacks equivalents

$

313,777

$

108,895

Available-for-sale securities

1,508,066

923,201

Accounts receivable, net

95,543

63,499

Contract assets

six,079

3,538

Restricted cash curt-term

521

2,591

Prepaid expenses and other current avails

29,433

28,230

Total electric current assets

ane,953,419

ane,129,954

Property and equipment, net

183,736

123,688

Goodwill

23,530

17,167

Acquired intangible assets, net

ane,254

2,800

Operating lease correct-of-use avails

130,314

43,148

Deferred contract acquisition costs, noncurrent

70,320

44,176

Restricted cash

6,660

6,660

Other noncurrent assets

two,838

13,058

Total assets

$

2,372,071

$

1,380,651

Liabilities, Temporary Equity, and Stockholders’ Disinterestedness

Current liabilities:

Accounts payable

$

26,086

$

xiv,485

Accrued expenses and other current liabilities

38,085

20,217

Accrued compensation

65,905

25,410

Operating lease liabilities

25,175

17,717

Liability for early practise of unvested stock options

4,651

8,603

Deferred revenue

116,546

54,945

Current portion of convertible senior notes, cyberspace

12,117

Total current liabilities

288,565

141,377

Convertible senior notes, net

1,146,877

383,275

Operating lease liabilities, noncurrent

109,037

27,309

Deferred acquirement, noncurrent

4,680

1,891

Other noncurrent liabilities

seven,114

ix,859

Full liabilities

one,556,273

563,711

Temporary equity, convertible senior notes

4,439

Stockholders’ Equity:

Grade A common stock; $0.001 par value; 2,250,000 shares authorized as of December 31, 2021 and 2020; 277,708 and 249,401 shares issued and outstanding as of December 31, 2021 and 2020, respectively

277

249

Class B common stock; $0.001 par value; 315,000 shares authorized as of December 31, 2021 and 2020; 45,904 and 59,239 shares issued and outstanding every bit of December 31, 2021 and 2020, respectively

44

55

Additional paid-in capital letter

i,494,512

1,236,993

Accumulated deficit

(680,829

)

(420,520

)

Accumulated other comprehensive income (loss)

(2,645

)

163

Total stockholders’ disinterestedness

811,359

816,940

Full liabilities, temporary equity, and stockholders’ equity

$

2,372,071

$

1,380,651

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CLOUDFLARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Year Ended December 31, 2021

2021

2020

Cash Flows From Operating Activities

Net loss

$

(260,309

)

$

(119,370

)

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

Depreciation and amortization expense

66,607

49,387

Non-cash operating charter costs

25,091

19,765

Amortization of deferred contract acquisition costs

29,267

17,324

Stock-based compensation expense

xc,136

56,334

Amortization of debt disbelieve and issuance costs

46,174

21,629

Internet accretion of discounts and amortization of premiums on available-for-sale securities

eight,357

ane,642

Deferred income taxes

8,738

(half dozen,145

)

Provision for bad debt

three,804

3,368

Loss on extinguishment of debt

72,234

Exchange of convertible senior notes attributable to the accreted interest related to debt discount

(29,353

)

Other

511

ane

Changes in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable, internet

(35,848

)

(33,000

)

Contract assets

(ii,541

)

(1,475

)

Deferred contract acquisition costs

(55,411

)

(36,315

)

Prepaid expenses and other current avails

(two,395

)

(11,634

)

Other noncurrent avails

1,535

(2,268

)

Accounts payable

2,462

1,690

Accrued expenses and other current liabilities

58,897

17,075

Operating lease liabilities

(23,071

)

(20,718

)

Deferred revenue

64,390

25,189

Other noncurrent liabilities

(4,627

)

392

Cyberspace greenbacks provided by (used in) operating activities

64,648

(17,129

)

Cash Flows From Investing Activities

Purchases of property and equipment

(92,986

)

(56,375

)

Capitalized internal-utilize software

(fourteen,752

)

(xviii,587

)

Cash paid for acquisitions, net of cash caused

(5,605

)

(13,941

)

Purchases of available-for-sale securities

(one,589,265

)

(1,267,015

)

Sales of available-for-sale securities

25,714

Maturities of available-for-auction securities

967,519

840,248

Other investing activities

53

397

Net cash used in investing activities

(709,322

)

(515,273

)

Greenbacks Flows From Financing Activities

Gross proceeds from issuance of convertible senior notes

1,293,750

575,000

Purchases of capped calls related to convertible senior notes

(86,293

)

(67,333

)

Cash consideration paid in exchange of convertible senior debt

(370,647

)

Cash paid for issuance costs on convertible senior notes

(xix,797

)

(12,542

)

Proceeds from the exercise of stock options

21,385

7,457

Proceeds from the early exercise of stock options

115

241

Repurchases of unvested mutual stock

(189

)

(157

)

Payments on note payable

(200

)

Proceeds from the issuance of mutual stock for employee stock buy plan

14,984

10,923

Payment of revenue enhancement withholding obligation on RSU settlement

(iii,634

)

(8,101

)

Payment of tax withholding obligation on common stock issued under employee stock buy plan

(376

)

Payment of indemnity holdback

(2,188

)

Net cash provided by financing activities

847,486

504,912

Net increase (decrease) in cash, cash equivalents, and restricted cash

202,812

(27,490

)

Cash, cash equivalents, and restricted cash, commencement of period

118,146

145,636

Greenbacks, cash equivalents, and restricted cash, finish of flow

$

320,958

$

118,146

CLOUDFLARE, INC.

RECONCILIATION OF GAAP TO Not-GAAP Financial MEASURES

(in thousands, except per share amounts)

(unaudited)

Iii Months Ended

Dec 31,

Year Ended

Dec 31,

2021

2020

2021

2020

Reconciliation of cost of revenue:

GAAP cost of revenue

$

42,496

$

29,065

$

147,134

$

101,055

Less: Stock-based compensation and related employer payroll taxes

(1,337

)

(478

)

(3,703

)

(one,466

)

Less: Acquittal of caused intangible avails

(846

)

(950

)

(2,946

)

(3,081

)

Non-GAAP cost of revenue

$

40,313

$

27,637

$

140,485

$

96,508

Reconciliation of gross profit:

GAAP gross profit

$

151,100

$

96,861

$

509,292

$

330,004

Add: Stock-based compensation and related employer payroll taxes

1,337

478

3,703

one,466

Add together: Acquittal of caused intangible assets

846

950

two,946

three,081

Non-GAAP gross profit

$

153,283

$

98,289

$

515,941

$

334,551

GAAP gross margin

78.0

%

76.9

%

77.half-dozen

%

76.six

%

Non-GAAP gross margin

79.two

%

78.1

%

78.6

%

77.six

%

Reconciliation of operating expenses:

GAAP sales and marketing

$

96,219

$

63,552

$

328,065

$

217,875

Less: Stock-based compensation and related employer payroll taxes

(ten,184

)

(5,363

)

(32,869

)

(17,678

)

Non-GAAP sales and marketing

$

86,035

$

58,189

$

295,196

$

200,197

GAAP inquiry and development

$

61,762

$

34,757

$

189,408

$

127,144

Less: Stock-based compensation and related employer payroll taxes

(24,747

)

(9,080

)

(61,056

)

(thirty,497

)

Less: Acquisition-related and other expenses

(5,725

)

Non-GAAP inquiry and evolution

$

37,015

$

25,677

$

128,352

$

xc,922

GAAP general and administrative

$

34,183

$

23,293

$

119,503

$

91,753

Less: Stock-based compensation and related employer payroll taxes

(5,830

)

(3,404

)

(19,706

)

(13,875

)

Less: Acquisition-related and other expenses

(380

)

(380

)

(554

)

Non-GAAP general and administrative

$

27,973

$

19,889

$

99,417

$

77,324

Reconciliation of income (loss) from operations:

GAAP loss from operations

$

(41,064

)

$

(24,741

)

$

(127,684

)

$

(106,768

)

Add: Stock-based bounty and related employer payroll taxes

42,098

18,325

117,334

63,516

Add: Amortization of acquired intangible assets

846

950

ii,946

3,081

Add: Acquisition-related and other expenses

380

380

6,279

Non-GAAP income (loss) from operations

$

2,260

$

(5,466

)

$

(7,024

)

$

(33,892

)

GAAP operating margin

(21.2

)%

(19.6

)%

(xix.five

)%

(24.8

)%

Non-GAAP operating margin

one.2

%

(iv.iii

)%

(1.1

)%

(7.ix

)%

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