Slide 1: Investor Day 2024
INVESTOR DAY 2024 May 30, 2024
Slide 2: Safe Harbor and Other Information
Safe Harbor and Other Information This presentation has been prepared by Cloudflare, Inc. (“Cloudflare”) for informational purposes only and not for any other purpose. Nothing contained in this presentation is, or should be construed as, a recommendation, promise, or representation by the presenter
Slide 3: Welcome
Welcome Phil Winslow Vice President of Strategic Finance, Treasury, & Investor Relations 3
Slide 4: We are helping build a better Internet
OUR MISSION We are helping build a better Internet 4
Slide 5: Cloudflare is built for what's next
Physical Virtualized Multi-Tenant Hardware Function Cloud Compute & Storage Virtualization Developer-friendly Server ⋅ Disk 2006 Infrastructure platform application services Security Virtual Zero Trust FW ⋅ Proxy ⋅ MTA 2017 Infrastructure appliance security services Network Software-defined 2022 Int
Slide 6: Early Cloudflare website
bs joupriare GB coupriare Home Helo Signup —_Login Watch our video Give us five minutes and we'll supercharge your website. Free Pro Enterprise For websites that want For websites that want more For high-traffic sites that performance and security control and insight into need enterprise-class, take
Slide 7: Make the Internet work the way it should
Make the Internet work the way it should Get Started Today A Growing Global Network Built for Scale 10 Tops Capacity and 115 Data Center Global Footprint bs joupriare
Slide 8: Helping Build a Better Internet
Helping Build a Better Internet ‘Trusted by over 16 milion Intemet properties, Cloudfiare is one of the world’s fp largest cloud network platforms. Give your global users a faster, more secure, ‘and more reliable internet experience. (© eetew comers Cloud-Jitsu: Migrating 23TB Building AMP experienc
Slide 9: Connect, protect and build everywhere
Connect, protect and build everywhere Put the comectvity coud to work for you @ Control Regain visibility and contra’ of IT and securly across on-prem, pubic cous, ‘SeaS, and the internet Users and Public an x. san) = on 4 Speed Aceeterate application and network perfomance while pil developing new
Slide 10: Analyst recognition across product areas
Application Security Zero Trust & Developer & Performance Network Services Services NEW LEADER in KuppingerCole Leadership NEW NICHE PROVIDER in Gartner Magic NEW LEADER in Forrester Wave for Compass for WAF (2024) Quadrant for SSE (2024) Edge Development Platforms (2023) NEW LEADER & OUTPERFORMER i
Slide 11: With Cloudflare, customers can:
With Cloudflare, customers can: ● Connect users, networks, applications, and clouds globally ● Protect data, applications, infrastructure, and users everywhere ● Accelerate application performance and user experiences on any device, anywhere ● Build full-stack applications on a modern cloud platform
Slide 12: Agenda and speakers
Phil Winslow 10:15 am - 10:20 am Opening Remarks Vice President of Strategic Finance, Treasury, & Investor Relations Annika Garbers 10:20 am - 10:40 am Network-as-a-Service Director of Product Rita Kozlov 10:40 am - 11:00 am AI Vice President of Product Mark Anderson 11:00 am - 11:20 am Go-To-Market
Slide 13: Network-as-a-Service
Network-as-a-Service Annika Garbers Director of Product for Network Services 13
Slide 14: Current network & security infrastructure is not architected for the digital future
Current network & security infrastructure is not architected for the digital future Transform customer & Transform workforce developer experience experience ● New revenue ● Remote dev teams Everyone works hybrid ● Improve productivity ● streams ● Reduce threat Reduce attack surface ● Faster onboardi
Slide 15: But, why? A brief history of networking
But, why? — A brief history of networking 15
Slide 16: Centralized networking & security in castle-and-moat architecture
WHERE WE WERE: NETWORK PERIMETER Centralized networking & security in castle-and-moat architecture Employees, apps and data within a walled castle Dedicated connectivity defined private network Security enforced at the perimeter 16
Slide 17: Users, data, and applications are distributed anywhere
WHERE WE ARE NOW: HYBRID OVERLAY Users, data, and applications are distributed anywhere… Storage and compute migrating to cloud Remote/hybrid work as the new norm Network and security …were an afterthought 17
Slide 18: Causing an explosion of point solutions
WHERE WE ARE NOW: HYBRID OVERLAY …Causing an explosion of point solutions Disparate solutions address specific problems but don’t integrate well Sprawl creates gaps in security and visibility Costly overhead in deploying and managing patchwork of new and legacy 18
Slide 19: The Internet is replacing the corporate network
WHERE WE ARE GOING: INTERNET-NATIVE The Internet is replacing the corporate network Transform customer & Transform workforce developer experience experience Business drivers impact how data is stored and transmitted over your network IT priorities demand changes to both network connectivity and netw
Slide 20: How would you design the network from scratch?
How would you design the network if you were starting from scratch? 20
Slide 21: Core principles in building a global network platform
Core principles in building a global network platform for a distributed world Control Plane Single user interface & API for configuration and management & End-to-end visibility for every traffic flow Data Plane Comprehensive on-ramps for devices, branches, data centers, and clouds & Consistent secur
Slide 22: A single network with local capabilities and global scale
INFRASTRUCTURE Be everywhere & Be interconnected A single network that delivers local capabilities with global scale 320+ cities in 120+ countries, including mainland China ~50 ms from ~95% of the world’s Internet-connected population ~13,000 networks directly connect to Cloudflare, including ISPs,
Slide 23: Anycast routing to secure and accelerate
INFRASTRUCTURE Be everywhere & Be interconnected Anycast routing to secure close to the source and accelerate to the destination Other Vendors Cloudflare Unicast routing, in which a single IP address is Anycast enables Cloudflare to announce the IP Network 2 associated with a single server, data cen
Slide 24: A global backbone for private and public traffic
INFRASTRUCTURE Be everywhere & Be interconnected A global backbone for private + public traffic transport to steer around problems on the public Internet Other Vendors Cloudflare Latency Packet loss Jitter Latency Packet loss Jitter Public Public Public Network/Cloud destination with ven
Slide 25: Comprehensive on-ramps to connect and secure
DATA PLANE Comprehensive on-ramps & Consistent security controls Comprehensive on-ramps to connect and secure users, branches, clouds, data centers, applications, and/or IoT to any resource ● Connecting “any-to-any” is not enough ● The future of networking is one “end-to-end” architecture – connecti
Slide 26: Every service built to run on every server
DATA PLANE Comprehensive on-ramps & Consistent security controls Every service built to run on every server in every data center Every Cloudflare Built to run over service every Cloudflare server In every Cloudflare data center Across 320+ cities . in 120+ countries Note: Figures as of March 31, 202
Slide 27: A unified control plane minimizes complexity
CONTROL PLANE Single user interface & API & End-to-end visibility A unified control plane minimizes complexity, lowers IT overhead, and improves performance Other Vendors Cloudflare Locations only run a subset of services – leading to Network 2 Single control plane with single-pass inspection manage
Slide 28: One user interface, one API, and one policy
CONTROL PLANE Single user interface & API & End-to-end visibility Visualize and manage every traffic flow with one user interface, one API, and one policy ● With visibility across the entire IT infrastructure, Cloudflare can aggregate signals from various sources — including users, devices, applicat
Slide 29: What's possible with these principles applied?
What’s possible with these principles applied? — Cloudflare is built for what’s next Your Customers Your Apps App Security & Performance Customer Facing Apps Legitimate Traffic Control Plane Clouds Zero Trust and Inbound Network Security Traffic Data Center & Performance Malicious Traffic Self-Hoste
Slide 30: What's possible with these principles applied?
What’s possible with these principles applied? — Cloudflare is built for what’s next Your Customers Your Apps App Security LB+Routing & Performance Customer Facing Apps DNS+CDN+Traffic Acceleration Legitimate Traffic Clouds WAF+API+Bot Protection Zero Trust and Inbound Network Security Traffic Data
Slide 31: What's possible with these principles applied?
What’s possible with these principles applied? — Cloudflare is built for what’s next Your Customers Your Apps App Security LB+Routing & Performance Customer Facing Apps DNS+CDN+Traffic Acceleration Legitimate Traffic Clouds WAF+API+Bot Protection Zero Trust and Inbound Network Security Traffic Data
Slide 32: Bringing it all together
Bringing it all together Network Perimeter Hybrid Overlay Internet-Native Simplified orchestration and Automated orchestration via single Configuration By MSP through service request management via centralized controller dashboard Last-mile Best-path selection available Minimal on-premises deploymen
Slide 33: Competitors lack our underlying architecture advantages
Competitors lack our underlying architecture advantages Strong Moderate Weak 33
Slide 34: Built to solve the problems of a distributed world
Cloudflare is built to solve the problems of a distributed world — now and for the future 34
Slide 35: AI
AI Rita Kozlov Vice President of Product for Cloudflare Developer Platform 35
Slide 36: Cloudflare's vision for developers
Cloudflare’s vision for developers To help build a better Internet with a modern cloud platform that accelerates developer velocity and drives better end user experiences ✔ X Ecosystem of Automate Reliable, scalable, No surprise bills, foundational decision making & secure by default predictable cos
Slide 37: Building blocks to create a full-stack application (2018)
Building blocks to create a full-stack application 2018 Lambda / Lambda at Edge/ Serverless Compute Workers Cloudfront Functions Functions Cloud Functions Object Storage S3 Blob Storage Cloud Storage Web Development Amplify App Service Firebase Queue SQS Queues Cloud Tasks Durable Execution Step Fun
Slide 38: Building blocks to create a full-stack application (2020)
Building blocks to create a full-stack application 2020 Lambda / Lambda at Edge/ Serverless Compute Workers Cloudfront Functions Functions Cloud Functions Object Storage S3 Blob Storage Cloud Storage Web Development Pages Amplify App Service Firebase Queue SQS Queues Cloud Tasks Durable Execution St
Slide 39: Building blocks to create a full-stack application (2022)
Building blocks to create a full-stack application 2022 Lambda / Lambda at Edge/ Serverless Compute Workers Cloudfront Functions Functions Cloud Functions Object Storage R2 S3 Blob Storage Cloud Storage Web Development Pages Amplify App Service Firebase Queue SQS Queues Cloud Tasks Durable Execution
Slide 40: Building blocks to create a full-stack application (2023)
Building blocks to create a full-stack application 2023 Lambda / Lambda at Edge/ Serverless Compute Workers Cloudfront Functions Functions Cloud Functions Object Storage R2 S3 Blob Storage Cloud Storage Web Development Pages Amplify App Service Firebase Queue Queues SQS Queues Cloud Tasks Durable Ex
Slide 41: Building blocks to create a full-stack application (2024)
Building blocks to create a full-stack application 2024 Lambda / Lambda at Edge/ Serverless Compute Workers Cloudfront Functions Functions Cloud Functions Object Storage R2 S3 Blob Storage Cloud Storage Web Development Pages Amplify App Service Firebase Queue Queues SQS Queues Cloud Tasks Durable Ex
Slide 42: 2 million developers on Workers platform
2 MILLION developers building on the Cloudflare Workers platform 42
Slide 43: AI is the next paradigm shift
AI is the next paradigm shift in the way applications are built Cloud Social 2000 2010 2007 2022 + Mobile AI “ “The ability to build a generative AI business without needing to invest significant dollars developing sophisticated models…significantly reduces (and even eliminates) the upfront costs pr
Slide 44: AI is reshaping how organizations work
AI is reshaping how organizations work, and the shift is already in motion Today… By 2026… By 2030… 44% >80% 50% of developers are currently using AI of enterprises will be using of your knowledge workers’ tasks in their development process1 GenAI-enabled APIs, models, will be augmented with GenAI t
Slide 45: AI workloads: train and infer
When we say “AI,” what are the workloads involved in making that happen? Train Infer 45
Slide 46: Where the focus of AI has been
When we say “AI,” what are the workloads involved in making that happen? Where the focus of AI has been… Train Infer 46
Slide 47: Unlock the best prices across cloud providers with R2
Unlock the best prices across cloud providers with R2 Train Store training data in R2 to move between clouds with zero egress fees Eliminate the need for complex data transfers or duplication of data sets Do more with your data through Cloudflare’s partnerships 47
Slide 48: Where the focus of AI is going
When we say “AI,” what are the workloads involved in making that happen? Where the focus of AI is going… Train Infer 48
Slide 49: Inference is the biggest AI opportunity
Inference is the biggest AI opportunity — But, where should it happen? User’s device Centralized cloud 49
Slide 50: Inference on centralized clouds has problems
Inference on centralized clouds has problems… User’s device Centralized cloud ● Cost vs. reliability trade-off ● Too far from user ● Data locality concerns 50
Slide 51: End user devices have problems too
…But, so too do end user devices User’s device Centralized cloud ● Close to user ● Cost vs. reliability ● Not powerful enough trade-off ● Some models are too ● Too far from user large/complex ● Data locality concerns 51
Slide 52: A globally distributed network helps scale AI inference
A globally distributed network helps developers scale AI inference, while staying close to the end user Distributed network User’s device Centralized cloud 52
Slide 53: Cloudflare is in the Goldilocks Zone for AI inferencing
Cloudflare is in the “Goldilocks Zone” for AI inferencing 53
Slide 54: Run inference tasks on Workers AI
Run inference tasks on Workers AI, the first serverless AI inference platform Infer Use built-in models from Workers AI to generate embeddings ● Don’t need to worry about Store embeddings in managing GPUs Vectorize ● Pay only for what you use Transform each query ● Automatically scale as you into an
Slide 55: AI fits seamlessly into our developer platform
AI fits seamlessly into our developer platform Application AI Run inference for generative AI models Developers choose these tools based on… Compute Storage Network Developer Experience Power the logic of an Provide contextual Send information Allows for focus on application application information
Slide 56: Leading AI companies already rely on Cloudflare
Leading AI companies already rely on Cloudflare Top 50 generative AI Web products, by unique monthly visits Source: Top 50 Generative AI Web Products based on a16z Consumer report as of March 2024. This includes generative AI Web products only and does not include mobile apps. Cloudflare customers a
Slide 57: There's more to inference than running models
There’s more to inference than running models Run AI on region: Earth Train Infer Comply Secure Optimize Data storage Serverless Data localization Web application, Monitoring & Store your training data development Control where data is API, & DDoS controls on R2 to avoid paying Run and deploy models
Slide 58: Control where data is stored and inspected
Control where data is stored and inspected with a private-by-default approach Comply Control where data is stored and inspected with Regional Services and Data Localization Suite Privacy-first approach means that your customer data will not be used for training purposes 58
Slide 59: Secure how AI resources are consumed
Secure how AI resources are consumed Secure Identify abuse and attacks before they reach and tamper with Large Language Models (LLMs) with Firewall for AI Scan every API request with an LLM prompt for patterns and signatures of possible attacks, deployed close to the end user to protect models from
Slide 60: Observe and control AI applications
Observe and control AI applications Optimize Observe traffic patterns, usage, logs, and cost with AI Gateway Provide visibility into traffic & malicious actors Alleviate the burden of cost & speed with caching and rate-limiting AI Gateway is a full proxy with caching, rate limiting, request retries,
Slide 61: Generative AI use cases on Workers
Generative AI use cases on Workers Text generation Code generation Generative AI models can be employed for Automatically generate code snippets or text generation tasks, including content entire programs based on natural creation, automatic text summarization, language descriptions, thereby expedit
Slide 62: Why Cloudflare for AI?
Why Cloudflare for AI? Network Scale Ease of use No trade-offs One global network One control plane One programmable architecture ● Scale and enforce controls as ● Simple deployment and ● Layer new security without you consume AI policies as you consume AI disrupting how you consume AI ● Accelerate
Slide 63: Go-To-Market
Go-To-Market Mark Anderson President of Revenue 63
Slide 64: The market is coming to where Cloudflare is already
“Why did I join Cloudflare?” — The market is coming to where Cloudflare is already 64
Slide 65: The C-Suite is navigating an uncertain outlook
The C-Suite is navigating an uncertain economic outlook and a volatile geopolitical landscape Challenge Opportunity Ever increasing Generate greater operational bills revenues Continuous Save costs infrastructure sprawl Vendor fatigue 65 65
Slide 66: Legacy networks add rising complexity and costs
WHAT GOT YOU HERE… Legacy networks and products are only adding to the rising complexity and costs No visibility or control of infrastructure sprawl Silos of point network and security solutions Lack of scale and flexibility This complexity and loss of control increase costs, risk, and time to value
Slide 67: Introducing Connectivity Cloud
…WON’T GET YOU THERE Introducing Connectivity Cloud A radically different approach for customers to connect, protect, accelerate, and build their businesses – enabling everything and everyone to be everywhere, while retaining complete control Businesses gain a competitive edge with: Any-to-any conne
Slide 68: Cloudflare is the only composable, Internet-native platform
WHAT WE OFFER Cloudflare is the only composable, Internet-native platform… …that delivers local capabilities with global scale Cloudflare Cloudflare Cloudflare Cloudflare Platform Zero Trust Services Network Services Application Services 1 Cloudflare One Zero Trust Network Access WAN-as-a-Service WA
Slide 69: Customer perspective: simplify and consolidate on a single platform
WHAT WE OFFER Customer Current State Loss of control, vendor sprawl Future State Cloudflare’s connectivity cloud perspective: Applications simplify and Akamai • F5 • Fastly • Imperva consolidate Content Delivery Web Application Bot ✔ Content Delivery Network Network Firewall Management on a single,
Slide 70: Accelerating GTM Momentum
Accelerating GTM Momentum 70
Slide 71: Physics 101: momentum
Physics 101 p=mv Momentum, n. Mass, n. Velocity, n. the quantity of motion in a the quantity of matter within a given a quantity that designates speed moving body, expressed as the object together with the direction of product of its mass and velocity movement 71
Slide 72: Physics 101 translated to B2B sales
Physics 101…translated to B2B sales p=mv ACV Capacity Productivity 72
Slide 73: Last year, performance constrained
p=mv Last year… Last year, we were performance constrained and have focused on refining our go-to-market strategies and operations to drive improved productivity 73
Slide 74: Now: improving sales productivity
p=mv …Now Rolling 4-Quarter ACV per Account Executive (Net) We are encouraged by the improvement in sales productivity from the trough of last year toward productivity levels previously achieved 74
Slide 75: 2024 Action Plan
2024 Action Plan 75
Slide 76: Physics 102 translated to B2B sales
Physics 102…translated to B2B sales ∆x p = m ∆t Direction, n. Pace, n. { Momentum, n. Mass, n. Velocity, n. quantity that designates the distance moved in a specific direction divided by the time taken 76
Slide 77: Top action items in 2024
Top 5 action items in 2024 Add stage- Become more March Sell Power up appropriate systematic towards the the platform, with talent and targeted Enterprise sell solutions partners 77
Slide 78: Add stage-appropriate talent across the sales process
#1: ADD STAGE-APPROPRIATE TALENT Add stage-appropriate talent across the sales process Solution Onboard / Lead Gen Pre-Pipeline Qualify Discovery Proposal Negotiate Close Design Renewal CAM Sales Ops RFx/Contracts Customer Support Deal Desk, Legal SA SA CSM SA SE CSE Solution Specialist MRK AE/xAE B
Slide 79: Become more systematic and targeted
#2: BECOME MORE SYSTEMATIC AND TARGETED Become more systematic and targeted Majors Enterprise High-touch sales model Field driven System integrators Named Public Sector Medium-touch sales model Territory Named Field and reseller driven Digital Native Midmarket Supported by inside Commercial Startup
Slide 80: 360-degree enterprise customer engagements
#3: MARCH TOWARDS THE ENTERPRISE 360-degree enterprise customer engagements Focus on the Customer Lifetime Value (CLV) to maximize total account penetration Facilitate high cross-functional coordination Build intimate customer relationships Increase focus on the customer journey 80
Slide 81: Just scratching the surface with enterprise accounts
#3: MARCH TOWARDS THE ENTERPRISE Just scratching the surface with enterprise accounts Number of $1M+ Customers $1M+ customers represent less than 1% of Cloudflare’s total paying customers Source: Latest company reports, filings, and investor presentations as of May 29, 2024. Cloudflare and ServiceNo
Slide 82: Engage customers with three sales motions
#4: SELL THE PLATFORM, SELL THE SOLUTIONS Engage customers with three sales motions 1. Top Down Position the platform, deliver solutions. Customer Strategic Initiatives Connectivity Cloud Use Case Use Case Solution Solution Products 2. Solutions Over 3. Bottom Up Sell solutions against customer prio
Slide 83: Top Down: platform pitch for bigger deals
#4: SELL THE PLATFORM, SELL THE SOLUTIONS Top Down: Targeting the right audience with a platform pitch for bigger deals CIO | CTO | CISO | CFO $$ Problems: Enable, scale, and protect an agile business in line with CEO strategy Solutions: Cloudflare platform for Security, Connectivity, Privacy, Perf
Slide 84: Solutions Over: sales play combinations by customer priority
#4: SELL THE PLATFORM, SELL THE SOLUTIONS Solutions Over: Unlocking solution/sales play combinations based on customer priorities Customer Priorities Cloudflare’s connectivity cloud services: 1 Secure Websites, applications, & APIs WAF, API Shield, DNS Firewall, L7 DDoS, Bot Management, Rate Limitin
Slide 85: The power of partnership
#5: POWER UP WITH PARTNERS The power of partnership Partners reach 1000s of customers each PARTNERS CUSTOMERS
Slide 86: New PowerUP partner program
#5: POWER UP WITH PARTNERS New PowerUP partner program One Simplified Enhanced Partner Improved Partner Strategic Planning Global Partner Profitability Experience Program Framework Align benefits and Improved tools and requirements with Select Revised tier structure Partner discounts processes to si
Slide 87: The market is coming to where Cloudflare is already
The market is coming to where Cloudflare is already, and the time is now Internet is the Cloudflare is the Data is the Latency is the Zero Trust is the new highway new fabric for new oil new currency new transportation to success digital success 87
Slide 88: Financials
Financials Thomas Seifert Chief Financial Officer 88
Slide 89: Efficient and productive growth at scale
Growth The ability to drive efficient and productive growth at scale separates the best technology companies in the Efficiency/ world from all Scale Productivity others 89
Slide 90: Growth drivers
Growth Growing large Expanding product Extending into customer cohort portfolio adjacent markets 90
Slide 91: Track record of delivering revenue growth
Track record of delivering revenue growth Investment in Total Revenue ($M) enterprise sales $1,297 Large customer momentum R $975 CAG % 46 Land and expand $656 strategy drives growth across cohorts $431 $287 Increasing penetration $193 across the entire product portfolio 2018 2019 2020 2021 2022 202
Slide 92: Significant Growth in Large Customer Cohorts
GROWING LARGE CUSTOMER COHORT Significant Growth in Large Customer Cohorts $100K+ $500K+ $1M+ Customers 2,756 Customers 346 Customers 118 35% 56% 39% GR 2,042 Y/Y R Y/Y AGR Y/Y CA G C 85 % A % C 222 49 % 54 1,416 70 56 121 828 32 71 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 Note: L
Slide 93: Rapid enterprise expansion
GROWING LARGE CUSTOMER COHORT Rapid enterprise expansion Revenue ($M) by All Customers $5M+: ~32% of Fortune 1,000, 25x* and 7 of the Top 10 are $1M-$5M: 22x paying customers $500K-$1M: 23x Large enterprise $100K-$500K: 15x go-to-market additions Enterprise-grade <$100K: product portfolio 4x 2018 20
Slide 94: Increasing enterprise volume + scale
GROWING LARGE CUSTOMER COHORT Increasing enterprise volume + scale Minimum ARR Required to be a Top Account Top 10 Top 25 Top 100 Customer Customer Customer $10.0M $4.0M $1.5M 5.6x 4.5x 4.9x 4-year 4-year 4-year Growth Growth Growth $2.0M $4.4M $588K $1.8M $893K $303K 2019 2021 2023 2019 2021 2023 2
Slide 95: Increasing enterprise volume + customer lifetime
GROWING LARGE CUSTOMER COHORT Increasing enterprise volume + customer lifetime Average Customer Lifetime (Years) by Revenue Contribution Cohort The average 70%+ lifetime of $1M+ customers is more than 70% higher than that of <$100K customers Note: For three months ended December 31, 2023. Average cu
Slide 96: A platform constantly delivering innovation
EXPANDING PRODUCT PORTFOLIO A platform constantly delivering innovation Everywhere for everyone Connect, protect, accelerate, and build Note: Products represented are revenue generating and generally available, with the exception of Vectorize and AI Gateway, which are currently in beta. 96
Slide 97: Consistent TAM expansion
EXTENDING INTO ADJACENT MARKETS Consistent TAM expansion Cloudflare $222B Developer Services $206B Areas for Potential Application Platform Incremental Growth $191B ● ● Object Storage $176B Cloudflare Network Services AI 1 Cloudflare One ● Network Firewall ● MPLS ● SD-WAN Database ● Intrusion Detect
Slide 98: Land-and-expand strategy drives growth
EXPANDING PRODUCT PORTFOLIO Land-and-expand strategy drives growth Revenue Contribution by Product Attach Rate Cohorts ($M) ‘23 vs. ’19 24.5x 19.5x 16.0x 12.5x 9.5x Note: Growth factors on the Revenue Contribution chart (e.g., 15.0x for 10+ Products) are calculated as Q4’23 revenue divided by Q4’20
Slide 99: Increasing product adoption + customer lifetime
EXPANDING PRODUCT PORTFOLIO Increasing product adoption + customer lifetime Average Customer Lifetime (Years) The average by Product Attach Rate Cohort lifetime of customers 20%+ adopting 10+ products is more than 20% higher than customers adopting 4+ products Note: For three months ended December 3
Slide 100: There's a reason we use the term Acts
EXTENDING INTO ADJACENT MARKETS There’s a reason we use the term “Acts”... SD-WAN SSE Cloudflare is uniquely positioned: ● CIOs, CTOs, CSOs, and production engineers trust us from our Act I products — Application Services ● Our network infrastructure is already in-place and ready to handle scale ● W
Slide 101: Acts in a play build on each other
EXTENDING INTO ADJACENT MARKETS …Because acts in a play build on each other Annual Contract Value (ACV) by Product Area Connect and protect customers’ external, public-facing systems and infrastructure & Connect and protect customers’ internal, private systems and infrastructure Application Security
Slide 102: A multi-act play: product attach rates
EXTENDING INTO ADJACENT MARKETS A multi-act play… Product Attach Rates by Act in 2023 Act I Act II Act III Application Zero Trust Network Developer Services Services Services Services 90%+ 25%+ 15%+ 25%+ of Contracted of Contracted of Contracted of Contracted Customers Customers Customers Customers
Slide 103: That is just getting started
EXTENDING INTO ADJACENT MARKETS …That is just getting started Annualized Recurring Revenue Potential Opportunity of Current Products (ARR) by Product SKU within Existing Customer Base $7.0 Billion Total Potential $5.6 Billion Potential Whitespace $1.4 Billion ARR ending 2023 Note: Annualized Recurri
Slide 104: Profitability
Profitability Unit Long-term economics operating model 104
Slide 105: Elasticity and leverage in our operating model
Elasticity and leverage in our operating model Non-GAAP Operating Expenses & Operating Margin (% of Revenue) 2019 2020 2021 2022 2023 2024E* 9% 10% 4% -8% -1% 22% -25% 22% 21% 22% 22% 46% 45% 42% 40% 52% 19% 17% 21% 20% 27% 12% 14% 15% 18% 23% COGS S&M R&D G&A Operating Margin Note: See the Appendix
Slide 106: Unit economics
Unit economics Unit Economic Margin by Component What does it “cost to book” $1 of Cost to Book incremental ARR? CTB = Sales & (CTB) Marketing cost per dollar of incremental ARR How much does it “cost to serve” Cost to Serve the lifetime revenue? CTS = (CTS) Delivery, R&D, Support & G&A cost as % of
Slide 107: Cost to book
UNIT ECONOMICS Cost to book Increase sales team specialization, focusing on different customer segments, Pipeline ($M) vs. Rolling 4-Quarter buyer personas, and industries ACV per Account Executive (Net) Invest in comprehensive sales training and ongoing enablement programs Leverage data analytics t
Slide 108: Cost to serve
UNIT ECONOMICS Cost to serve Gross margin is a reflection of the efficiency Cost to Serve by Component and elasticity of our network architecture 2019 2020 2021 2022 2023 Non-GAAP Operating 22% 22% 21% 22% 22% Continue to prioritize Expenses as a % of Revenue product innovation that can be monetized
Slide 109: Long-term operating model
Unit economics Long-term operating model support 20%+ long-term operating Q1 margins Long-Term 2021 2022 2023 2024 Model Gross Leverage efficiency and 79 % 78 % 78 % 80 % elasticity of our network and 75% - 77% Margin ingress/egress dynamics Sales & Marketing Scale go-to-market operations 45 % 42 %
Slide 110: Cloudflare's business: short, medium and long-term
Cloudflare’s business… Short-term Medium-term Long-term ● Accelerating our initiatives to ● Expanding sales capacity with ● Capturing the large and build a world-class stage-appropriate talent while growing market opportunity go-to-market organization — also making additional that is increasingly mo
Slide 111: Q&A
Q&A Matthew Prince Michelle Zatlyn Thomas Seifert Mark Anderson Co-founder & Chief Co-founder, President, & Chief Financial Officer President of Revenue Executive Officer Chief Operating Officer 111
Slide 112: Appendix
Appendix
Slide 113: GAAP to Non-GAAP Reconciliation (Annual)
GAAP to Non-GAAP Reconciliation (Annual) 113 © 2024 Cloudflare, Inc.
Slide 114: GAAP to Non-GAAP Reconciliation (Quarterly)
GAAP to Non-GAAP Reconciliation (Quarterly) 114 © 2024 Cloudflare, Inc.
Slide 115: Definitions & Methodologies
Appendix Definitions & Methodologies Paying Customers. We believe our ability to grow the number of paying customers on our network provides a key indicator of growth of our business and our future business opportunities. We define a paying customer at the end of the quarter as a person or entity wh
Slide 116: Definitions & Methodologies
Appendix Definitions & Methodologies Annualized Recurring Revenue (ARR). Annual Recurring Revenue, or ARR, is defined as the annualized value of our customer subscription contracts as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing ter