Cloudflare, Inc. · NYSE:NET
Cloudflare — Investor Day (May 2023)
135 slides from Cloudflare's investor day presentation, May 4, 2023
Slide 1: Investor Day 2023
CONNECT 2023 Investor Day 2023 May 4, 2023
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: Welcome
Welcome Phil Winslow Vice President of Strategic Finance, Treasury, & Investor Relations
Slide 4: Agenda
Phil Winslow 10:15 am - 10:20 am Welcome VP of Strategic Finance, Treasury, & Investor Relations Patrick Donahue 10:20 am - 10:35 am Product: Application Services VP of Product - Application Security Rustam Lalkaka 10:35 am - 10:50 am Product: Network Services VP of Product - Network Services Annika
Slide 5: Product: Innovation is at the Heart of Cloudflare
Product: Innovation is at the Heart of Cloudflare
Slide 6: Our Mission: We are helping build a better Internet
Our Mission We are helping build a better Internet.
Slide 7: What We Do
What We Do — We help organizations of every size protect websites, people, and networks and build and accelerate applications… powered by one of the world’s largest cloud networks Solution: Cloudflare Services include: Secure Hybrid Work → Zero Trust Network Access, Gateway, RBI, CASB, Cloud Email S
Slide 8: What We Offer
What We Offer Cloudflare Cloudflare Cloudflare Cloudflare Platform Network Services Zero Trust Services Application Services 1 Cloudflare One WAN-as-a-Service Zero Trust Network Access WAF with API Protection Firewall-as-a-Service Secure Web Gateway Rate Limiting L3 & L4 DDoS Protection Cloud Access
Slide 9: What Makes Us Different
What Makes Us Different NETWORK EASE SHARED NO TRADE OFFS SCALE OF USE INTELLIGENCE
Slide 10: Act I: Application Services
Act I: Application Services Patrick Donahue VP Product - Application Security
Slide 11: Apps Have Left the Corporate Data Center
Apps Have Left the Corporate Data Center Yesterday’s application delivery User Internet Self-Hosted Apps Network rack
Slide 12: Apps Have Left the Corporate Data Center – Requiring New Solutions
Apps Have Left the Corporate Data Center – Requiring New Solutions Yesterday’s application delivery Today’s application delivery Network rack Self-Hosted Apps Minimal control User Internet Self-Hosted Apps User Internet SaaS Apps Insufficient Capabilities Network rack Cloud-hosted Apps
Slide 13: Customer Problems in Act I
Customer Problems in Act I Problem Description Buyer Persona Legacy Bandaids Modern Competitors Application “My site, and the network on which it F5/NGINX, Akamai, Director of (Network) AWS, Azure, GCP Performance and runs, is my business. I need it to be as Neustar, NetScout/Arbor, Infrastructure F
Slide 14: Customer Problems in Act I
Customer Problems in Act I Problem Description Buyer Persona Legacy Bandaids Modern Competitors Application Performance and Network Reliability Director of Web Application Cost “Any content served by Cloudflare and Edgio (Edgecast), Akamai, AWS, Azure, GCP Infrastructure/ Efficiency not my origin sa
Slide 15: Customer Problems in Act I
Customer Problems in Act I Problem Description Buyer Persona Legacy Bandaids Modern Competitors Application Performance and Network Reliability Application Cost Efficiency Application/API “If my applications are compromised, my Director of Web F5 (Shape), Imperva, AWS, Azure, GCP, Akamai, Management
Slide 16: Customer Problems in Act I
Customer Problems in Act I Problem Description Buyer Persona Legacy Bandaids Modern Competitors Application Performance and Network Reliability Application Cost Efficiency Application/API Management and Protection “If my applications are used fraudulently, Salt Security, NoName, Application or in a
Slide 17: Customer Problems in Act I
Customer Problems in Act I Problem Description Buyer Persona Legacy Bandaids Modern Competitors Application Performance and Network Reliability Application Cost Efficiency Application/API Management and Protection Application Fraud Prevention Early Warning “My security team needs a trusted CrowdStri
Slide 18: Customer Problems in Act I
Customer Problems in Act I Problem Description Buyer Persona Legacy Bandaids Modern Competitors Application Performance and Network Reliability Application Cost Efficiency Application/API Management and Protection Application Fraud Prevention Early Warning and Analysis of Threats Director of Web Com
Slide 19: Act I: Application Security & Performance as a Platform
Act I: Application Security & Performance as a Platform Problem Application Security Application Performance DNS Argo Smart Routing Application and Network Application Fast, secure and resilient DNS Accelerate traffic DDoS TLS/SSL Performance and Keep networks online and Data security Load Balancing
Slide 20: Only Cloudflare & Big Clouds Address All These Application Challenges
COMPETITIVE LANDSCAPE Only Cloudflare & Big 3 Clouds Address All of these Application Challenges… Performance/ Reliability Abuse/Fraud Prevention Origin Resource Efficiency API Management Threat Intelligence Compliance/ Data Localization
Slide 21: But Only Cloudflare Excels across the Board
COMPETITIVE LANDSCAPE …But Only Cloudflare Excels across the Board — While Avoiding Lock-In Performance/Reliability Strong Moderate Moderate Moderate Abuse/Fraud Prevention Strong Moderate Weak Weak Origin Resource Efficiency Strong Moderate Moderate Moderate API Management New Strong Moderate Stron
Slide 22: Why We Win Today
ACT I COMPETITIVE LANDSCAPE Why We Win Today 1. Platform benefits, 4. “Value” / cost reduction including ease of use and breadth of offering 5. Accessibility of technical leadership 2. Product velocity and (Product, Engineering) buy-in to our vision to customer 3. Affirmation from 6. Hybrid-/multi-c
Slide 23: Why We Will Win Tomorrow
ACT I COMPETITIVE LANDSCAPE Why We Will Win Tomorrow — Customers Will Consolidate to a Single Platform over Time Platforms provide Point-cloud solutions inherent structural lack our network and advantages for security, development velocity performance, and ease of use Hardware vendors are unable to
Slide 24: What Makes Us Different
What Makes Us Different NETWORK EASE SHARED NO TRADE OFFS SCALE OF USE INTELLIGENCE Security + Performance 1. Absorb the largest 1. Single dashboard to 1. Every request improves 1. Traditional security attacks, anywhere in the control entire product app security products offerings increase world sui
Slide 25: Act II: Network Services
Act II: Network Services Rustam Lalkaka VP Product - Network Services 25
Slide 26: Cloudflare's Global Network
Cloudflare’s Global Network 285+ cities in 100+ countries, including mainland China 12,000+ networks directly connect to Cloudflare, including ISPs, cloud providers and large enterprises 197 Tbps of network edge capacity and growing the largest attack on record was 1.5Tbps 230+ backbone links dedica
Slide 27: The Need for Speed
WHY THE CLOUDFLARE NETWORK MATTERS The Need for Speed September 2021 Cloudflare is committed to being the fastest network in every country 100 Tbps 25M req/s Network capacity HTTP throughput
Slide 28: The Need for Speed
WHY THE CLOUDFLARE NETWORK MATTERS The Need for Speed November 2021 Cloudflare is committed to being the fastest network in every country 100 Tbps 28M req/s Network capacity HTTP throughput
Slide 29: The Need for Speed
WHY THE CLOUDFLARE NETWORK MATTERS The Need for Speed November 2022 Cloudflare is committed to being the fastest network in every country 172 Tbps 39M req/s Network capacity HTTP throughput
Slide 30: The Need for Speed
WHY THE CLOUDFLARE NETWORK MATTERS The Need for Speed March 2023 Cloudflare is committed to being the fastest network in every country 197 Tbps 46M req/s Network capacity HTTP throughput
Slide 31: Act I: Protecting Public-Facing Infrastructure
Act I: Protecting Public-Facing Infrastructure Attacker More secure Faster Internet User More reliable Customer Websites & HTTP Applications Cloudflare Global Anycast Network
Slide 32: Protecting Public-Facing Infrastructure at the Network Level
Act I: Protecting Public-Facing Infrastructure at the Network Level Attacker More secure Faster Internet User More reliable Cloudflare Global Anycast Network Customer Datacenter
Slide 33: Cloudflare Protection at All Layers of the OSI Stack
Cloudflare Protection at All Layers of the OSI Stack L7 DDoS, WAF, Bot 7 Application Layer Management, API Security 6 Presentation Layer 5 Session Layer 4 Transport Layer Spectrum Magic Transit, 3 Network Layer Magic Firewall 2 Datalink Layer Cloudflare Network Interconnect 1 Physical Layer
Slide 34: Magic Transit Solves the Problems of Legacy Competitors
MAGIC TRANSIT Magic Transit Solves the Problems of Legacy Competitors Specialized hardware Additional Network Hop L7 Services expensive, capacity-limited, can’t keep up with (WAF, CDN, etc) changing attack landscape Added Latency Attack Traffic Centralized DDoS Scrubbing Legitimate Traffic Centers S
Slide 35: Magic Firewall Provides Cloud-Native Security for Your Entire Network
MAGIC FIREWALL Magic Firewall Provides Cloud-Native Security for Your Entire Network Magic Firewall enforces consistent security policies across customers’ branch offices, data centers, cloud Magic Firewall properties, and end-user devices. Network firewall-as-a-service Internet ● Consistent securit
Slide 36: What's Next after Act I?
What’s Next after Act I? Our customers’ public-facing networks are more secure, faster, and more reliable. We’re replacing legacy hardware boxes and band-aid point solutions.
Slide 37: Enterprise Networks were Not Built for What They Have Become
Act II: Enterprise Networks were Not Built for What They Have Become Self-hosted private DC, Office users colo and cloud FWaaS MPLS DDoS Legacy WAN DNSF Direct DLP Remote users Internet Azure Access vWAN Self-hosted public cloud SD-WAN AWS ZTNA Transit Gateway Broadband External users SWG SaaS apps
Slide 38: Cloudflare is Secure, Fast, Reliable, Any-to-Any & End-to-End
Cloudflare is Secure, Fast, Reliable, Any-to-Any & End-to-End, Composable Office users Private Cloud/DC/Colocation PaaS SASE Third parties (Zero Trust & Network) Secured connectivity Public Cloud Application Developer Secure, Build IaaS distribute serverless & accelerate apps & websites Remote Users
Slide 39: Magic WAN Connects & Protects Private Infrastructure
MAGIC WAN Magic WAN Connects & Protects Private Infrastructure… Built-in, not bolt-on, security Get cloud-native DDoS protection, network firewalling, Internet and zero trust functionality — (incl SaaS apps) Attacker all delivered as-a-service Operational agility up, (Multi) Cloud costs down Remote
Slide 40: Magic WAN Connector: Easy On-ramp for Physical Locations
MAGIC WAN CONNECTOR …with an Easy On-ramp for Physical Locations Remote Employee Magic WAN Connector More secure Faster Anycast IPsec tunnels ● Cloudflare software, More reliable partner hardware Cloudflare Global Anycast Network ● Zero-touch configuration ● Smart traffic steering Data Center (Priva
Slide 41: Cloudflare One is the Next Evolution in Network Design
CLOUDFLARE ONE Cloudflare One is the Next Evolution in Network Design Aspect Example MPLS SD-WAN Magic WAN New site setup and Simplified orchestration via Simplified orchestration Configuration Manual configuration SaaS portal via SaaS portal Available via hardware or Last mile traffic Traffic balan
Slide 42: SASE Competitive Landscape
CLOUDFLARE ONE SASE Competitive Landscape SSE With addition of Magic WAN Connector SD-WAN Network
Slide 43: Laying the Foundation to be a Universal Network Fabric
We’re Laying the Foundation to be a Universal Network Fabric for IoT for Hybrid- & Multi-Cloud for Service Providers Connectivity and security Fabric and orchestration to Network services tailored for Zero Trust SIM and facilitate complex, secure, toward ISP and telco use Internet of Things device p
Slide 44: What Makes Us Different?
What Makes Us Different? NETWORK EASE SHARED NO TRADE OFFS SCALE OF USE INTELLIGENCE Security + Performance 1. Capacity to easily 1. Buy SASE in one place 1. Unique view of Internet 1. Filtering happens close absorb the world’s instead of cobbling health allows us to see to users, applications, larg
Slide 45: Act II: Zero Trust Services
Act II: Zero Trust Services Annika Garbers Product Manager 45
Slide 46: Apps Have Left the Corporate Data Center
Apps Have Left the Corporate Data Center Today’s Corporate Network: Brittle and Fractured MPLS Office Internet Apps MPLS Data Center MPLS MPLS MPLS Bottleneck MPLS Self-Hosted Apps Office VPN Data Center Remote User SaaS Apps
Slide 47: Apps Have Left the Corporate Data Center, Requiring New Solutions
Apps Have Left the Corporate Data Center, Requiring New Solutions Today’s Corporate Network: Brittle and Fractured What’s Next: Optimized Security and Connectivity MPLS Full Offices Mesh Internet Apps Office Internet Apps MPLS Data Center MPLS MPLS MPLS Bottleneck MPLS Self-Hosted Apps Data Centers
Slide 48: What is SASE?
What is SASE? Connectivity Zero Trust & Network Services Services How do I connect my users, How do I secure, manage, devices, and applications? and filter my applications and data? ● User connectivity ● Network connectivity ● Zero Trust Access Control Secure Access ● Traffic steering & ● DNS Filter
Slide 49: Cloudflare One is Our Unified SASE Platform
Cloudflare One is Our Unified SASE Platform
Slide 50: Customer Problems in Act II
Customer Problems in Act II Problem Description Buyer Persona Legacy Bandaid Modern Competitor “I need to connect sites Site-to-Site SD-WAN vendors (offices, retail, mfg) to offices CIO MPLS links Connectivity (Viptela, Silver Peak) and data centers.”
Slide 51: Customer Problems in Act II
Customer Problems in Act II Problem Description Buyer Persona Legacy Bandaid Modern Competitor “I need to connect sites Site-to-Site SD-WAN vendors (offices, retail, mfg) to offices CIO MPLS links Connectivity (Viptela, Silver Peak) and data centers.” Internal Cloud-Based ZTNA “I need team members t
Slide 52: Customer Problems in Act II
Customer Problems in Act II Problem Description Buyer Persona Legacy Bandaid Modern Competitor “I need to connect sites Site-to-Site SD-WAN vendors (offices, retail, mfg) to offices CIO MPLS links Connectivity (Viptela, Silver Peak) and data centers.” Internal Cloud-Based ZTNA “I need team members t
Slide 53: Customer Problems in Act II
Customer Problems in Act II Problem Description Buyer Persona Legacy Bandaid Modern Competitor “I need to connect sites Site-to-Site SD-WAN vendors (offices, retail, mfg) to offices CIO MPLS links Connectivity (Viptela, Silver Peak) and data centers.” Internal Cloud-Based ZTNA “I need team members t
Slide 54: Customer Problems in Act II
Customer Problems in Act II Problem Description Buyer Persona Legacy Bandaid Modern Competitor “I need to connect sites Site-to-Site SD-WAN vendors (offices, retail, mfg) to offices CIO MPLS links Connectivity (Viptela, Silver Peak) and data centers.” Internal Cloud-Based ZTNA “I need team members t
Slide 55: A Full-Stack SASE Platform
CLOUDFLARE ONE A Full-Stack SASE Platform (Zero Trust Services + Network Services) Cloudflare On-Ramps Cloudflare Cloudflare Security Services Network One Control Plane One Management Interface For Edge Services Clientless Access Zero Trust Cloud Access Secure Web Firewall as a WAN as a Device Clien
Slide 56: No Existing Vendor Was Prepared to Solve the Full Stack of Problems
COMPETITIVE LANDSCAPE No Existing Vendor was Prepared to Solve the Full Stack of Problems… Why? ● Inflexible architecture SSE combined with decisions to deploy dedicated or purpose-built hardware ● Avoid competing with revenue-generating partners SD-WAN ● Unwilling to divert attention from primary r
Slide 57: As a Result…
COMPETITIVE LANDSCAPE As a Result… 1. SSE vendors are paired up with a connectivity vendor SSE 2. Or, they cobble together point solutions through multiple acquisitions Why are these problematic for customers? ● A patchwork of multiple security vendors creates opportunities for blind spots and gaps
Slide 58: Cloudflare One is a Single, Comprehensive SASE Solution
COMPETITIVE LANDSCAPE Cloudflare One is a Single, Comprehensive, SASE Solution that also Addresses Adjacent Customer Problems SSE Adjacent Problems ● Email Security ● DDoS Mitigation ● WAF With addition of Magic WAN Connector ● IoT/Device Security SD-WAN Network
Slide 59: Our Speed Advantage
WHY THE CLOUDFLARE NETWORK MATTERS Our Speed Advantage (or: Location, Location, Location + Backbone) Cloudflare Zscaler Backbone Palo Alto Networks Netskope Note: The source of the data in these maps is https://sasecloudmap.com/.
Slide 60: Our One Network Advantage
WHY THE CLOUDFLARE NETWORK MATTERS Our One Network Advantage Trusted connectivity within 50ms of 95% of the world’s population Many fragmented clouds, Many control panels Every network location is available to every customer, and every service built vs. Cloudflare to run in every network location Ev
Slide 61: Cloudflare's Threat Intelligence Engine
WHY THE CLOUDFLARE NETWORK MATTERS Cloudflare’s Threat Intelligence Engine Additional Data models transform data 1st-party sources of data 3rd-party data to intel 1.1.1.1 app Tens of millions of devices, 1.1.1.1 app 1+ trillion queries per day Cloudflare augmented SSL/TLS cert. transparency monitor
Slide 62: What Makes Us Different?
What Makes Us Different? NETWORK EASE SHARED NO TRADE OFFS SCALE OF USE INTELLIGENCE Security + Performance 1. Same quality of service and 1. Enterprise buyers 1. Smarter blocks applied 1. We improve speed security filtering anywhere experiment on free by bringing security on the globe plans and the
Slide 63: Act III: Developer Services
Act III: Developer Services Aly Cabral VP Product - Developer Platform
Slide 64: After We Established Act I, We Needed to Iterate to Find our Next Act
HOW DID WE GET INTO ACT III? After We Established Act I, We Needed to Iterate to Find our Next Act ? Act I Application Services built on our global network We started building and deploying applications at the edge of our global network to find our next big product
Slide 65: We Faced Many Problems that Came with Shipping at a Global Scale
HOW DID WE GET INTO ACT III? We Faced Many Problems that Came with Shipping at a Global Scale Geo-load balancing New regions to improve performance CDN & caching optimization Scaling and capacity management Load balancing to distribute load Data localization
Slide 66: After We Established Act I, We Needed to Iterate to Find our Next Act
HOW DID WE GET INTO ACT III? After We Established Act I, We Needed to Iterate to Find our Next Act ? Act I Application Services built on our global network Simultaneously, customers asked us to deliver more features and configurations on our Act I products
Slide 67: After We Established Act I, We Needed to Iterate to Find our Next Act
HOW DID WE GET INTO ACT III? After We Established Act I, We Needed to Iterate to Find our Next Act Workers ? Act I Application Services building and deploying built on our global network applications at the edge of our global network
Slide 68: Our Customers Asked Us to Help Them Move Fast Too
HOW DID WE GET INTO ACT III? Our Customers Asked Us to Help Them Move Fast Too Act I Act II Application Services Zero Trust Services built on our global network built on Workers built on our global network Act III Developer Services building and deploying applications at the edge of our global netwo
Slide 69: Developers Face Many Problems When Building Applications
WHY ACT III? Developers Face Many Problems When Building Applications Problem Description “I need to take an application Production that’s working locally and deploy it Readiness at scale” Pace of “I need to move fast to keep up innovation with competition” These problems are not new to us… Vendor “
Slide 70: We've Solved these Problems Before with Our Act I Products
WHY ACT III? We’ve Solved these Problems Before with Our Act I Products Act I Problem Description Highlights Secure Load Act I “I need to take an application Production balancing, Help developers that’s working locally and deploy it Readiness DDoS, Bots, scale and secure at scale” Scale Waiting Room
Slide 71: We Can Solve these Same Problems Again, Earlier in the Build Process
WHY ACT III? We Can Solve these Same Problems Again, Now Earlier in the Build Process Act I Act III Problem Description Highlights Highlights Secure Load Act I “I need to take an application Production balancing, Help developers that’s working locally and deploy it Workers Readiness DDoS, Bots, scal
Slide 72: Act III Complements Act I with Storage, Compute, and Developer Experience
WHY ACT III? Act III Complements Act I with Storage, Compute, and Developer Experience – Freeing Developers to Select the Best Solution for the Problem at Hand Plan Build Deploy Scale Secure Act III Act I The earlier we get involved in the development Developers are usually locked in to their tools
Slide 73: Developers Need Various Building Blocks to Create a Full-Stack Application
WHY IS CLOUDFLARE THE RIGHT COMPANY FOR THIS? Developers Need Various Building Blocks to Create a Full-Stack Application Application Developers choose these tools based on… Compute Storage Network Developer Experience Power the logic of an Provide contextual Send information Allows for focus on appl
Slide 74: Platform Maturity Continues to Accelerate
WHY IS CLOUDFLARE THE RIGHT COMPANY FOR THIS? Platform Maturity Continues to Accelerate Cloudflare Developer Platform Compute Data Storage Developer Services Workers Cron Workers Durable D1 Data Pages Stream Platforms Magic NAT Bundled Triggers KV Objects Storage Developer Products Fully programmabl
Slide 75: Cloudflare is the Only Holistic Developer Platform with All the Tools
HOW WE COMPETE Cloudflare is the Only Holistic Developer Developer Experience Platform with All the Tools Compute Cloudflare is uniquely positioned: ● Network infrastructure is already With addition in-place and ready to handle scale of R2 ● Developers trust us from our Act I products ● More agile a
Slide 76: R2 Object Storage Benefits
HOW WE COMPETE R2 Object Storage Benefits Zero egress fees Region: Automatic Lower, more predictable costs, Performant and compliant without the data lock-in data placement by default Worker integration S3-compliant Customize data processing Easy migration from and storage with code S3-compliant pro
Slide 77: R2 Use Cases
HOW WE COMPETE R2 Use Cases Static assets Media files Logs Data platform
Slide 78: Why Developers Choose Our Products
HOW WE COMPETE Why Developers Choose Our Products Load Workers KV R2 D1 CDN DNS Balancing Pages Wrangler Compute Storage Network Developer Experience Power the logic Provide contextual Send information to/from Allows for focus on of an application information different locations application differen
Slide 79: How We Compare to Incumbent Cloud Providers
COMPETITIVE LANDSCAPE How We Compare to Incumbent Cloud Providers Cloud Infrastructure Networking Strong Moderate Compute Specific Strong Storage Specific Strong Databases New + Specific Strong Developer Experience Strong Moderate Data Localization Strong Moderate Avoids Cloud Vendor Lock-In? Yes No
Slide 80: What Makes Us Different?
What Makes Us Different? NETWORK EASE SHARED NO TRADE OFFS SCALE OF USE INTELLIGENCE Cost + Performance 1. The network allows us 1. Ease of use allows 1. Shared intelligence 1. We don’t force to support the most developers to focus on allows us to make the developers to tradeoff critical workloads a
Slide 81: Go-To-Market: Becoming World Class
Go-To-Market: Becoming World Class Marc Boroditsky President of Revenue May 4, 2023
Slide 82: Why are We Here?
Why are We Here?
Slide 83: Why are We Here?
Why are We Here?
Slide 84: Where We Excel
Where We Excel CLOUDFLARE
Slide 85: A Platform Constantly Delivering Innovation
A Platform Constantly Delivering Innovation Legend: Legend: Application Services Zero Trust Services Network Services Developer Services Platform PAYGO
Slide 86: Strength of Product
Strength of Product ● 2023 GigaOM Radar for Application & API ● 2023 GigaOM Radar for CDN: LEADER ● 2023 KuppingerCole Leadership Compass for Security: LEADER ● 2023 GigaOM Radar for DNS Security: LEADER SASE: LEADER ● 2022 Gartner Magic Quadrant for Web ● 2022 IDC CDN MarketScape: LEADER ● 2022 Kup
Slide 87: Product Innovation That Translates into Pipeline Generation
Product Innovation That Translates into Pipeline Generation New Pipeline Generation ($M) 55 % CA GR ~4x in-quarter pipeline coverage ratio Annualized
Slide 88: Significant Growth in Large Customer Cohorts
Significant Growth in Large Customer Cohorts $100K+ $500K+ $1M+ Customers 2,042 Customers 222 Customers 85 44% 83% 52% R Y/Y R Y/Y Y/Y G R G G A 1,416 A A C C 56 C % 3% % 57 71 6 121 828 32 71 526 51 17 2019 2020 2021 2022 2019 2020 2021 2022 2019 2020 2021 2022 Note: Large Customer data are as of y
Slide 89: Top Sellers Are Consistent High Performers
Top Sellers Are Consistent High Performers Average Quarterly Productivity of High Performing Account Executives (AE) Top 15% -1.7% Achieved 129% of quota over the last four quarters Approximately 27% started within the last 18 months Note: 2022 is representative of the four quarter average of the 20
Slide 90: Where We Need Improvement
Where We Need Improvement CLOUDFLARE
Slide 91: We Are Not Limited by TAM, Opportunity, or Capacity
We Are Not Limited by TAM, Opportunity, or Capacity… Not Limited by TAM Total addressable market $146 billion in 2023 Not Limited by Opportunity Accelerating new pipeline generation Not Limited by Capacity Too many AEs not making their targets Performance Constrained Note: Total Addressable Market f
Slide 92: We Are Performance Constrained
…We Are Performance Constrained Example of Recent Distribution of Non-Ramping Account Executive (AE) Quota Attainment Bimodal distribution of quota attainment Not capacity constrained Indicates performance AEs well above challenges quota Note: The line is an approximate representation of quota attai
Slide 93: We Are Performance Constrained
…We Are Performance Constrained Example of Recent Distribution of Non-Ramping Account Executive (AE) Quota Attainment Bimodal distribution of quota attainment Not capacity constrained Indicates performance AEs well AEs well below above challenges quota quota Note: The line is an approximate represen
Slide 94: We Are Performance Constrained
…We Are Performance Constrained Example of Recent Distribution of Non-Ramping Account Executive (AE) Quota Attainment Bimodal distribution of quota attainment Not capacity constrained Indicates performance AEs well AEs well below above challenges quota quota Note: The line is an approximate represen
Slide 95: Areas Identified for Improvement
Areas Identified for Improvement… Talent Relaxed standards — hiring profile, enablement, and performance 01 management 02 Customer Journey Limited data and understanding of what drives customer to land, expand, and adoption of platform 03 Metrics & Processes Limited unifying input/output metrics; in
Slide 96: Compounded by Selling at Cloudflare being Very Complex
po int …Compounded by Selling at Cloudflare being Very Complex C atch P a n e l m os Work Lighthous N in ja Make my e ers e LinkedIn POs Dea i l d D l Des k Number Ne Bu R2 CTO Usage CPO twor k Outreach Bundles Caps Build RFPIO Privacy C V Ironclad Pipeline ISO e A C C F 1 Pric Tableau o w t h st Li
Slide 97: 2023 Action Plan
2023 Action Plan CLOUDFLARE
Slide 98: Our Opportunity is Performance Improvement
Our Opportunity is Performance Improvement Illustrative Example of a More Normalized Distribution of Non-Ramping Account Executive (AE) Quota Attainment If quota attainment performance had a more normalized distribution, average 80% of AEs 80% of AEs80% AE productivity exceeding exceeding 80% of quo
Slide 99: Initiatives in 2023 to Improve Performance
What are the Initiatives in 2023 to Improve Performance? #1: #2: #3: #4: #5: Build Regional Sell The Way Become Partner with Operate as Revenue The Customer Trusted Product One Revenue Machines Buys Advisors for Team Customers Upgrade Go-To-Market Talent
Slide 100: Upgrade Go-To-Market Talent
WHAT ARE THE INITIATIVES IN 2023 TO IMPROVE PERFORMANCE? Upgrade Go-To-Market Talent Low Performance AEs Productivity per AE — Low vs. Average vs. ACV Contribution High Performance Low performance: 4% Note: Both graphs utilize data from Q1 2023. We define low performance as having not achieved more
Slide 101: Build Regional Revenue Machines
WHAT ARE THE INITIATIVES IN 2023 TO IMPROVE PERFORMANCE? UNIFYING METRIC: Build Regional Revenue Machines Sales Productivity Ratio-Oriented Model (AE:Role) ● Organize by global region, AMER EMEA APJC country, segment x:1 x:1 x:1 x:1 x:1 x:1 x:1 ● Standardize by segments and customer size breaks Cust
Slide 102: Sell The Way The Customer Buys
WHAT ARE THE INITIATIVES IN 2023 TO IMPROVE PERFORMANCE? UNIFYING METRIC: Sell The Way The Customer Buys Pipeline Coverage ● Market-driven model (TAM/SAM by product, geography, and industry) to align coverage, resources, and priorities ● Map customer journey — free, PAYGO, trial, land, Corporate Nar
Slide 103: Become Trusted Advisors for Our Customers
WHAT ARE THE INITIATIVES IN 2023 TO IMPROVE PERFORMANCE? UNIFYING METRIC: Become Trusted Advisors for Our Customers CSAT at Each Touch ● Enable First Line Sales Managers (FLSM) as coaches that identify, develop, and retain great talent while driving higher levels of performance Trusted Gain Advisor
Slide 104: Partner with Product
WHAT ARE THE INITIATIVES IN 2023 TO IMPROVE PERFORMANCE? UNIFYING METRIC: Partner with Product Revenue by Product Partner with Product to create Organize based on product Solution Leadership Teams roadmap, consistent release with a shared ownership model process, and support model for new products P
Slide 105: Operate as One Revenue Team
WHAT ARE THE INITIATIVES IN 2023 TO IMPROVE PERFORMANCE? UNIFYING METRIC: Operate as One Revenue Team Engagement ● Align with Finance and Product on targets based on opportunity, capacity, and productivity — making goals rational but Sales challenging ● Roll down priorities with all leaders creating
Slide 106: Becoming World Class in Go-To-Market
Upgrade talent and invest in Becoming World Class in Go-To-Market comprehensive training and ongoing enablement Increase sales team specialization, focusing on different customer Product Network segments, buyer personas, Go-To-Market Innovation Stability and industries Leverage data analytics to mak
Slide 107: Financials: Profitable Growth At Scale
Financials: Profitable Growth At Scale Thomas Seifert Chief Financial Officer May 4, 2023
Slide 108: Where We Are Today: Growth and Profitability
Where We Are Today Growth Profitability
Slide 109: Key Financial Highlights
Key Financial Highlights $146B 2,156 $1.2B 76% 6.7% Total GAAP Non-GAAP Addressable Large Revenue Gross Op Profit Market in 2023 Customers Run Rate Margin Margin 4.6x TAM ~460% +330% maintained record since IPO increase increase in >75% since operating from IPO revenue IPO profit and since IPO margi
Slide 110: Consistent & Deliberate TAM Expansion
Consistent & Deliberate TAM Expansion Cloudflare Developer Services Areas for Potential $204B ● Application Platform Incremental Growth ● Object Storage $183B $164B AI $146B Cloudflare 1 Cloudflare One Network Services Database ● Carrier Services (MPLS & SD-WAN) Internet of Cloudflare Cloudflare Zer
Slide 111: Track Record of Delivering Revenue Growth
Track Record of Delivering Revenue Growth Investments in Total Revenue ($M) enterprise sales $975 Large customer momentum R CAG $656 % 49 Land and expand strategy drives growth $431 across cohorts $287 Increasing penetration $193 across an expanding $135 product portfolio 2017 2018 2019 2020 2021 20
Slide 112: Negative Headlines…
WHAT’S CHANGED? Negative Headlines…
Slide 113: Elongated Sales Cycles Countered Improving New Pipeline Generation
WHAT’S CHANGED? …Elongated Sales Cycles, Which Countered Improving New Pipeline Generation… New Pipeline Growth (% y/y) vs. Sales Cycles (Days) Significantly longer sales cycles in Q1’23 (~27% longer than last four quarter average) — most notably in large customer upsell deals
Slide 114: Expectation for Delayed ACV Bookings & Revenue Recognition
WHAT’S CHANGED? …Driving Our Expectation for Delayed ACV Bookings & Revenue Recognition Illustrative Example of Potential Illustrative Example of Potential Impact to ACV & Revenue by Fiscal Year — Cumulative Revenue over Two Fiscal Years — Normal vs. Elongated Sales Cycles Normal vs. Elongated Sales
Slide 115: Elasticity of & Leverage in Our Operating Model
Elasticity of & Leverage in Our Operating Model Non-GAAP Operating Expenses & Operating Margin (% of Revenue) 2023 2018 2019 2020 2021 2022 (4/27 Guidance) 4% 6% -8% -1% 22% 22% -25% 22% 21% 22% -30% 46% 45% 42% 48% 52% 20% 19% 21% 27% 27% 14% 15% 18% 31% 23% Operating COGS S&M R&D G&A Margin Note:
Slide 116: The Path to Our Goal of $5B of Revenue
The Path to Our Goal of $5B of Revenue A Platform That Compelling Unit Economics Constantly Delivers Driving Profitable Growth Innovation at Scale
Slide 117: A Platform That Constantly Delivers Innovation
A Platform That Constantly Delivers Innovation Growing Large Expanding Extending into Customer Product Adjacent Cohort Portfolio Markets
Slide 118: Rapid Enterprise Expansion
GROWING LARGE CUSTOMER COHORT Rapid Enterprise Expansion Revenue ($M) by All Customers $5M+: 30% of Fortune 1,000 18x* and 6 of the Top 10 are $1M-$5M: 16x paying customers $500K-$1M: 14x Large enterprise $100K-$500K: 11x go-to-market additions Enterprise grade <$100K: product portfolio 3x 2018 2019
Slide 119: 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 $6.2M $2.6M $888K 4.9X 4.4X 4.0X 4-year 4-year 4-year Growth Growth Growth $1.5M $413K $2.2M $1.3M $599K $219K 2018 2020 2022 2018 2020 2022 20
Slide 120: Land and Expand Strategy Drives Growth
EXPANDING PRODUCT PORTFOLIO Land and Expand Strategy Drives Growth Product Attach Rates by Number of Products Purchased 48% 44% 27% 34% 29% 24% 16% 22% 18% 13% 8% 6% 8+ 9+ 10+ 8+ 9+ 10+ 8+ 9+ 10+ 8+ 9+ 10+ 2019 2020 2021 2022 Note: Attach rates for 2019, 2020, 2021, and 2022 are as of the fiscal yea
Slide 121: Increasing Product Adoption & Revenue Contribution
EXPANDING PRODUCT PORTFOLIO Increasing Product Adoption & Revenue Contribution Revenue Contribution by Product Attach Rate Cohorts ($M) ‘22 vs. ’19 15.0x 13.0x 11.0x 8.5x 7.0x Note: Growth factors on the Revenue Contribution chart (e.g., 15.0x for 10+ Products) are calculated as Q4’22 revenue divide
Slide 122: A Multi-Act Play…
EXTENDING INTO ADJACENT MARKETS A Multi-Act Play… Product Attach Rates by Act in 2022 Act I Act II Act III Application Zero Trust Network Developer Services Services Services Services 90%+ 20%+ 15%+ 20%+ of Contracted of Contracted of Contracted of Contracted Customers Customers Customers Customers
Slide 123: …That is Just Beginning
EXTENDING INTO ADJACENT MARKETS …That is Just Beginning Annual Contract Value (ACV) by Act Note: Contribution by Act is calculated based on the annual contract value of contracted customers during the respective fiscal years for the 12 months ended as of December 31. See the Appendix for how we defi
Slide 124: Compelling Unit Economics Driving Profitable Growth at Scale
Compelling Unit Economics Driving Profitable Growth at Scale Unit Long-term Economics Operating Model
Slide 125: Unit Economic Margin
Unit Economic Margin 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 4
Slide 126: Long-Term Operating Model
Long-Term Operating Model Unit economics support 20%+ long-term operating Q1 margins. Long-Term 2020 2021 2022 2023 Model Gross Leverage efficiency and 78 % 79 % 78 % 78 % elasticity of our network and 75% - 77% Margin ingress/egress dynamics Sales & Marketing Scale go-to-market operations 46 % 45 %
Slide 127: Why We Win Summary
Why We Win Innovation drives a massive and growing total addressable market Significant enterprise traction yields robust large customer growth Summary Invest in go-to-market talent Highly efficient business model with attractive unit economics Multiple levers to scale free cash flow © Copyright Clo
Slide 128: Q&A
Q&A Matthew Michelle Thomas Prince Zatlyn Seifert Co-founder and Chief Co-founder, Chief Financial Executive Officer President and Chief Officer Operating Officer
Slide 129: Appendix
Appendix
Slide 130: GAAP to Non-GAAP Reconciliation (Annual)
GAAP to Non-GAAP Reconciliation (Annual) © Copyright Cloudflare, Inc.
Slide 131: GAAP to Non-GAAP Reconciliation (Quarterly)
GAAP to Non-GAAP Reconciliation (Quarterly) © Copyright Cloudflare, Inc.
Slide 132: Key Business Metrics
APPENDIX Key Business Metrics Paying Customers Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 126,735 132,390 140,096 148,184 151,803 156,000 162,086 168,159 y/y growth 32% 31% 26% 24% 20% 18% 16% 13% Paying Customers (> $100,000 Annualized Revenue) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q
Slide 133: Guidance (as of April 27, 2023)
Guidance (as of April 27, 2023) Q2 2023 FY 2023 FY 2023 Network Capex as % of Revenue Revenue $305.0 - 306.0 Revenue $1,280.0 - 1,284.0 Y/Y Growth 30% Y/Y Growth 31 - 32% 11%-13% Operating Income $14.0 - $15.0 Operating Income $73.0 - $77.0 Operating Margin 5% Operating Margin 6% EPS $0.07 - $0.08 E
Slide 134: Effects of Improving Unit Economic Margin KPIs
APPENDIX Effects of Improving Unit Economic Margin KPIs Effect of Lower Effect of Lower Effects of Lower Attrition & Cost to Book Cost to Serve Higher Expansion
Slide 135: Definitions
APPENDIX 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