Company Quick10K Filing
Cloudflare
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-04
10-Q 2019-09-30 Filed 2019-11-12
S-1 2019-08-15 Public Filing
8-K 2020-08-06 Earnings, Regulation FD, Exhibits
8-K 2020-06-02
8-K 2020-05-12
8-K 2020-05-07
8-K 2020-02-13
8-K 2020-01-07
8-K 2019-11-07

NET 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1. Organization and Basis of Presentation
Note 2. Summary of Significant Accounting Policies
Note 3. Revenue
Note 4. Fair Value Measurements
Note 5. Balance Sheet Components
Note 6. Leases
Note 7. Debt
Note 8. Commitments and Contingencies
Note 9. Preferred Stock
Note 10. Common Stock
Note 11. Stock - Based Compensation
Note 12. Net Loss per Share Attributable To Common Stockholders
Note 13. Income Taxes
Note 14. Business Combinations
Note 15. Segment and Geographic Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits
EX-31.1 q220-10qex311.htm
EX-31.2 q220-10qex312.htm
EX-32.1 q220-10qex321.htm

Cloudflare Earnings 2020-06-30

Balance SheetIncome StatementCash Flow

cloud-20200630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
FORM 10-Q
__________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to              
Commission file number: 001-39039
__________________________________________________
Cloudflare, Inc.
(Exact name of registrant as specified in its charter)
__________________________________________________
Delaware

27-0805829
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)
101 Townsend Street
San Francisco, California 94107
(Address of principal executive offices and zip code)
(888) 993-5273
(Registrant’s telephone number, including area code)
__________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Class A Common Stock, $0.001 par valueNETThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer

Accelerated filer





Non-accelerated filer

Smaller reporting company








Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No ☒
As of August 4, 2020, 192,731,407 shares of the registrant's Class A common stock were outstanding and 112,994,701 shares of the registrant's Class B common stock were outstanding.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words, or other similar terms or expressions that concern our expectations, strategy, plans, or intentions.
Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
the impact of the ongoing COVID-19 pandemic, including on our and our customers’, vendors’, and partners’ respective businesses and the markets in which we and our customers, vendors, and partners operate;
our ability to retain and upgrade paying customers;
our ability to attract new customers or convert free customers to paying customers;
our future financial performance, including trends in revenue, costs of revenue, gross profit or gross margin, operating expenses, paying customers, and free cash flow;
our ability to achieve or maintain profitability;
the consequences we may face resulting from the activities of our customers and the actions we take in response, including associated theories of liability;
the demand for our products or for solutions for security, performance, and reliability in general;
possible harm caused by significant disruption of service, loss or unauthorized access to customers’ content, or the actual or perceived failure of our products to prevent security incidents;
our ability to compete successfully in competitive markets;
our ability to respond to rapid technological changes;
our ability to continue to innovate and develop new products;
our expectations and management of future growth;
our ability to maintain existing co-location relationships, ISP partnerships, and other interconnection arrangements around the world;
our ability to offer high-quality customer support;
our ability to manage our global operations;
our expectations of and ability to comply with applicable laws around the world;
our ability to correctly estimate our tax obligations around the world;
our ability to service the interest on our convertible senior notes and repay such notes, to the extent required;
our ability to attract and retain key personnel and other highly qualified personnel;
our ability to maintain our brand;
our ability to prevent serious errors or defects across, and to otherwise maintain the uninterrupted operation of, our network;
our ability to maintain, protect, and enhance our intellectual property; and
our ability to successfully identify, acquire, and integrate companies and assets.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of
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operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report on Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission (the SEC) that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
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PART I—FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CLOUDFLARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(unaudited)
June 30,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents$313,983  $138,976  
Available-for-sale securities755,108  497,972  
Accounts receivable, net43,646  33,867  
Contract assets2,224  2,063  
Prepaid expenses and other current assets17,163  16,994  
Total current assets1,132,124  689,872  
Property and equipment, net114,549  101,466  
Goodwill17,167  4,083  
Acquired intangible assets, net4,200  31  
Operating lease right-of-use assets46,150    
Deferred contract acquisition costs, noncurrent33,880  25,184  
Restricted cash8,847  6,660  
Other noncurrent assets7,138  3,528  
Total assets$1,364,055  $830,824  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$17,278  $11,463  
Accrued expenses and other current liabilities32,076  28,314  
Operating lease liabilities 17,239    
Liability for early exercise of unvested stock options10,735  13,263  
Deferred revenue43,419  30,843  
Total current liabilities120,747  83,883  
Convertible senior notes, net365,949    
Build-to-suit lease financing obligation  10,506  
Operating lease liabilities, noncurrent30,869    
Deferred revenue, noncurrent1,599  804  
Other noncurrent liabilities9,273  9,803  
Total liabilities528,437  104,996  
Commitments and contingencies (Note 8)
Stockholders’ Equity:
Class A common stock; $0.001 par value; 2,250,000 shares authorized as of June 30, 2020 and December 31, 2019; 184,900 and 87,072 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
184  87  
Class B common stock; $0.001 par value; 315,000 shares authorized as of June 30, 2020 and December 31, 2019; 120,524 and 213,101 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
116  207  
Additional paid-in capital1,194,125  1,027,179  
Accumulated deficit(360,031) (301,706) 
Accumulated other comprehensive income 1,224  61  
Total stockholders’ equity835,618  725,828  
Total liabilities and stockholders’ equity$1,364,055  $830,824  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CLOUDFLARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Revenue$99,721  $67,424  $190,971  $129,151  
Cost of revenue24,164  14,832  44,985  29,192  
Gross profit75,557  52,592  145,986  99,959  
Operating expenses:
Sales and marketing51,376  35,836  98,341  66,653  
Research and development28,131  18,868  61,485  36,517  
General and administrative20,754  17,659  46,935  33,707  
Total operating expenses100,261  72,363  206,761  136,877  
Loss from operations(24,704) (19,771) (60,775) (36,918) 
Non-operating income (expense):
Interest income1,857  830  4,426  1,743  
Interest expense(5,007) (290) (5,074) (563) 
Other income (expense), net(219) (86) 266  (379) 
Total non-operating income (expense), net(3,369) 454  (382) 801  
Loss before income taxes(28,073) (19,317) (61,157) (36,117) 
Provision for (benefit from) income taxes(1,938) 389  (2,276) 703  
Net loss$(26,135) $(19,706) $(58,881) $(36,820) 
Net loss per share attributable to common stockholders, basic and diluted
$(0.09) $(0.23) $(0.20) $(0.43) 
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
299,321  85,683  297,392  85,382  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CLOUDFLARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Net loss$(26,135) $(19,706) $(58,881) $(36,820) 
Other comprehensive income (loss):
Change in unrealized gain (loss) on investments, net of tax
(183) 51  1,163  123  
Other comprehensive income (loss)(183) 51  1,163  123  
Comprehensive loss$(26,318) $(19,655) $(57,718) $(36,697) 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CLOUDFLARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
(unaudited)


Three Months Ended June 30, 2020
Redeemable convertible preferred stockClass A common stockClass B common stockAdditional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
income (loss)
Total
stockholders’
equity (deficit)
SharesAmountSharesAmountSharesAmount
Balance as of March 31, 2020  $  154,622  $154  148,735  $143  $1,038,544  $(333,896) $1,407  $706,352  
Issuance of common stock in connection with acquisition
—  —  —  —  —  —  717  —  —  717  
Issuance of common stock upon exercise of stock options
—  —      1,079  1  1,659  —  —  1,660  
Repurchases of unvested common stock
—  —  (8) —  —  —  —  —  —  —  
Issuance of common stock related to early exercised stock options
—  —  —  —  21  —  —  —  —  —  
Vesting of shares issued upon early exercise of stock options
—  —  —  —  —  1  1,287  —  —  1,288  
Issuance of common stock related to settlement of RSUs
—  —  50  —  522  1    —  —  1  
Tax withholding on RSU settlement
—  —    —  (5) —  (193) —  —  (193) 
Conversion of Class B to Class A common stock
—  —  29,828  30  (29,828) (30) —  —  —    
Equity component of convertible senior notes, net of issuance costs
—  —  —  —  —  —  200,812  —  —  200,812  
Purchases of capped calls related to convertible senior notes
—  —  —  —  —  —  (67,333) —  —  (67,333) 
Common stock issued under employee stock purchase plan
—  —  421  —  —  —  5,447  —  —  5,447  
Tax withholding on common stock issued under employee stock purchase plan
—  —  (13) —  —  —  (376) —  —  (376) 
Stock-based compensation
—  —  —  —  —  —  13,561  —  —  13,561  
Net loss
—  —  —  —  —  —  —  (26,135) —  (26,135) 
Other comprehensive income (loss)
—  —  —  —  —  —  —  —  (183) (183) 
Balance as of June 30, 2020  $  184,900  $184  120,524  $116  $1,194,125  $(360,031) $1,224  $835,618  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CLOUDFLARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
(unaudited)

Three Months Ended June 30, 2019
Redeemable convertible
preferred stock
Common StockAdditional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
income (loss)
Total
stockholders’
equity (deficit)
SharesAmountSharesAmount
Balance as of March 31, 2019165,658  $331,521  92,293  $85  $84,668  $(212,992) $15  $(128,224) 
Issuance of common stock upon exercise of stock options
    235  1  385  —  —  386  
Repurchases of unvested common stock
—  —  (31) —  —  —  —  —  
Issuance of common stock related to early exercised stock options
—  —  189  —  —  —  —  —  
Vesting of shares issued upon early exercise of stock options
—  —  —  —  942  —  —  942  
Stock-based compensation
—  —  —  —  1,116  —  —  1,116  
Net loss
—  —  —  —  —  (19,706) —  (19,706) 
Other comprehensive income (loss)
—  —  —  —  —  —  51  51  
Balance as of June 30, 2019165,658  $331,521  92,686  $86  $87,111  $(232,698) $66  $(145,435) 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CLOUDFLARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
(unaudited)

Six Months Ended June 30, 2020
Redeemable convertible
preferred stock
Class A common stockClass B common stockAdditional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
income
Total
stockholders’
equity
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 2019  $  87,072  $87  213,101  $207  $1,027,179  $(301,706) $61  $725,828  
Cumulative effect adjustment from adoption of ASC 842
—  —  —  —  —  —  —  556  —  556  
Issuance of common stock in connection with acquisition
—  —  107  —  —  —  1,821  —  —  1,821  
Issuance of unvested restricted stock in connection with acquisition
—  —  841  —  —  —  —  —  —  —  
Issuance of common stock upon exercise of stock options
—  —  —  —  2,582  2  4,333  —  —  4,335  
Repurchases of unvested common stock
—  —  (37) —  —  —  —  —  —  —  
Issuance of common stock related to early exercised stock options
—  —  —  —  36  —  —  —  —  —  
Vesting of shares issued upon early exercise of stock options
—  —  —  —  —  2  2,509  —  —  2,511  
Issuance of common stock related to settlement of RSUs
—  —  82  —  1,645  2  (1) —  —  1  
Tax withholding on RSU settlement
—  —  (11) —  (402) —  (7,308) —  —  (7,308) 
Conversion of Class B to Class A common stock
—  —  96,438  97  (96,438) (97) —  —  —    
Equity component of convertible senior notes, net of issuance costs
—  —  —  —  —  —  200,812