Cloudflare, Inc. · NYSE:NET
Cloudflare — Investor Day (May 2022)
22 slides from Cloudflare's investor day presentation, May 12, 2022
Slide 1: Investor Day
Investor Day Thomas Seifert Chief Financial Officer May 2022 © Copyright Cloudflare, Inc.
Slide 2: Safe Harbor
Safe Harbor This presentation and the accompanying oral commentary have 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 b
Slide 3: Key Financial Highlights
Key Financial Highlights $135B 1,537 54% 78% 2.3% Total Large Y/Y GAAP Non-GAAP Addressable Customers Revenue Gross Op Profit Market in 2024 Growth Margin Margin 4x TAM ~300% +210% maintained Break-even since IPO increase increase in >76% since 1 year ahead of from IPO revenue IPO schedule since IPO
Slide 4: Innovation Drives Massive TAM Expansion
Innovation Drives Massive TAM Expansion Areas for Potential Incremental Growth $135B R2 Object Storage Cloudflare One $125B $115B Cloudflare Network Serverless Services ● Carrier Services (MPLS & SD-WAN) Cloudflare $80B ● Offices Database Application Services Cloudflare Zero Trust Services ● Applica
Slide 5: Track Record of Delivering Revenue Growth
Track Record of Delivering Revenue Growth Investment in enterprise sales Total Revenue ($M) $656 Large customer momentum AGR $431 51 %C Land and expand $287 strategy drives growth across cohorts $193 $135 Strong penetration $85 across the entire product portfolio 2016 2017 2018 2019 2020 2021 © Copy
Slide 6: Investment in Enterprise Sales Yields Significant ROI
Investment in Enterprise Sales Yields Significant ROI 26% of Fortune 1,000 Large Customers - Revenue Contribution and 13 of the Top 20 are paying customers >$100,000 Annualized Revenue ($M) $492 (Annualized) Large enterprise go-to-market additions $353 58% revenue GR Enterprise grade CA product port
Slide 7: Significant Growth in Large Customer Cohorts
Significant Growth in Large Customer Cohorts $100K+ $500K+ $1M+ Customers Customers Customers 143 1,537 62 1,416 121 68% 56 63% Y/Y 72% R AG GR Y/Y Y/Y A R C G C A % % C 64 54 % 828 71 81 32 51 526 17 2019 2020 2021 Q1 2019 2020 2021 Q1 2019 2020 2021 Q1 2022 2022 2022 © Copyright Cloudflare, Inc. No
Slide 8: Strong Dollar-Based Net Retention
Strong Dollar-Based Net Retention DNR includes all paying customers 127% 124% 124% 125% 123% Large customers are a 119% tailwind to DNR 116% 115% Gross retention above 90% Continuous innovation offers expansion opportunities Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 © Copyright Cloudflare, Inc.
Slide 9: Product Attach: Land and Expand Strategy Drives Growth
Land and Expand Strategy Drives Growth 2019 2020 2021 81% 79% 77% 70% Product Attach 64% 58% Rates 57% 49% 42% Number of 5+ 6+ 7+ 5+ 6+ 7+ 5+ 6+ 7+ Products © Copyright Cloudflare, Inc. Note: Attach Rates at 2019, 2020 and 2021 are as of the fiscal year ended December 31.
Slide 10: Product Attach Rates in 2021
Product Attach Rates in 2021 Application Zero Trust Network Workers Services Services 75%+ 10%+ 10%+ 15%+ of Contracted of Contracted of Contracted of Contracted Customers Customers Customers Customers © Copyright Cloudflare, Inc. Note: Product Attach Rates are calculated based on the total install b
Slide 11: Broadly Diversified Customer Base
Broadly Diversified Customer Base 2021 Revenue Mix by 2021 Revenue Mix by 2021 Revenue Mix by Customer Type Geography Top 100 Customers SMB Large Other 7% Top 100 14% 54% 29% U.S. APAC 52% 15% Mid-Market EMEA Other 32% 26% 71% Note: See the Appendix for how we define “Large Customers.” Mid-Market cu
Slide 12: Strong & Consistent Gross Margin
Strong & Consistent Gross Margin Non-GAAP Gross Margin 79% 79% 79% 78% 78% Gross margin gives opportunity to be highly strategic Zero Trust products are accretive to gross margin In Q1’22, traffic increased 75.8% year-over-year across our network Size of Cloudflare’s network in Q1’21 Q2’21 Q3’21 Q4’
Slide 13: ESG: A Natural Extension of our Business Model
ESG: A Natural Extension of our Business Model Helping Build a Sustainable Internet When we democratize access to cyber security tools and solutions, we make the Internet faster, more reliable, and more secure. ARM Servers Getting more energy efficient and increasing our requests per watt is a criti
Slide 14: Leverage of Our Operating Model
Leverage of Our Operating Model Non-GAAP Operating Margin (25)%. (8)% (5)%. 23% (1)% 2% Operating Expense as a % of Revenue 27% 18% 17% 15% 15% 21% 20% 21% 19% 52% 46% 45% 46% 42% 2019 2020 2021 Q1 Q1 2021 2022 S&M R&D G&A © Copyright Cloudflare, Inc. Note: See the Appendix for GAAP to Non-GAAP recon
Slide 15: Guidance
Guidance (as of May 05, 2022) Q2 2022 FY 2022 FY 2022 Network Capex as % of Revenue Revenue $226.5 - 227.5 Revenue $955.0 - 959.0 Y/Y Growth 49% Y/Y Growth 45% - 46% 12%-14% Operating Loss ($2.0) - ($1.0) Operating Income $10.0 - $14.0 Operating Margin (0%) - (1%) Operating Margin 1% EPS ($0.01) - $
Slide 16: Long-Term Model
Long-Term Model Q1 Long-Term 2019 2020 2021 2022 Model Non-GAAP Gross Margin 78 % 78 % 79 % 79 % 75% - 77% Sales & Marketing 52 % 46 % 45 % 42 % 27% - 29% (% of revenue) Research & Development 27 % 21 % 20 % 19 % 18% - 20% (% of revenue) General & Administrative 23 % 18 % 15 % 15 % 8% - 10% (% of re
Slide 17: Why We Win: Our Business Model
Why We Win Innovation drives a massive and growing total addressable market Proven track record of delivering strong and consistent revenue growth Our Business Significant enterprise traction yields robust Model large customer growth Highly efficient business model with attractive gross margin Multi
Slide 18: Q&A
Q&A Matthew Michelle Thomas Prince Zatlyn Seifert Chief Executive President & Chief Chief Financial Officer Operating Officer Officer © Copyright Cloudflare, Inc.
Slide 19: Appendix
Appendix © Copyright Cloudflare, Inc.
Slide 20: GAAP to Non-GAAP Reconciliation (Annual)
GAAP to Non-GAAP Reconciliation (Annual) © Copyright Cloudflare, Inc.
Slide 21: GAAP to Non-GAAP Reconciliation (Quarterly)
GAAP to Non-GAAP Reconciliation (Quarterly) © Copyright Cloudflare, Inc.
Slide 22: Definitions
Definitions 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 who has generated revenue d