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
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Note 3. Revenue
Note 4. Fair Value Measurements
Note 5. Balance Sheet Components
Note 6. Note Payable
Note 7. Commitments and Contingencies
Note 8. Redeemable Convertible Preferred Stock
Note 9. Common Stock
Note 10. Stock - Based Compensation
Note 11. Net Loss per Share Attributable To Common Stockholders
Note 12. Income Taxes
Note 13. Guarantees and Indemnifications
Note 14. Related Party Transactions
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-3.1 net-20190930x10qex31.htm
EX-3.2 net-20190930x10qex32.htm
EX-31.1 net-20190930x10qex311.htm
EX-31.2 net-20190930x10qex312.htm
EX-32.1 net-20190930x10qex321.htm

Cloudflare Earnings 2019-09-30

Balance SheetIncome StatementCash Flow

Document
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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 September 30, 2019
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 November 8, 2019, 86,870,214 shares of the registrant's Class A common stock were outstanding and 213,320,072 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:
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 attract and retain key personnel and 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 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
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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 per share data)
(unaudited)
September 30,
2019
December 31,
2018
Assets
Current assets:
Cash and cash equivalents$501,706  $25,055  
Marketable securities143,399  135,602  
Accounts receivable, net32,205  25,155  
Contract assets1,470  1,552  
Prepaid expenses and other current assets16,898  9,373  
Total current assets695,678  196,737  
Long-term investments16,169    
Property and equipment, net92,485  73,210  
Goodwill4,083  4,083  
Acquired intangible assets, net62  156  
Deferred contract acquisition costs, noncurrent21,141  15,940  
Restricted cash6,660  6,371  
Other noncurrent assets3,569  1,883  
Total assets$839,847  $298,380  
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable$9,517  $14,285  
Accrued expenses and other current liabilities23,121  15,699  
Note payable, current portion37  255  
Liability for early exercise of unvested stock options14,629  14,323  
Deferred revenue29,835  16,817  
Total current liabilities77,139  61,379  
Build-to-suit lease financing obligation10,501  10,443  
Deferred revenue, noncurrent816  220  
Redeemable convertible preferred stock warrant liability  1,618  
Other noncurrent liabilities10,993  6,704  
Total liabilities99,449  80,364  
Commitments and contingencies (Note 7)
Redeemable Convertible Preferred Stock
Redeemable convertible preferred stock; $0.001 par value; zero and 168,108 shares authorized as of September 30, 2019 and December 31, 2018, respectively; zero and 165,658 shares issued and outstanding with aggregate liquidation preference of zero and $332,041 as of September 30, 2019 and December 31, 2018, respectively
  331,521  
Stockholders’ Equity (Deficit)
Class A common stock; $0.001 par value; 2,250,000 and 550,000 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 86,839 and zero shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
87    
Class B common stock; $0.001 par value; 315,000 and 300,000 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 213,308 and 91,542 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
207  85  
Additional paid-in capital1,013,582  82,345  
Accumulated deficit(273,551) (195,878) 
Accumulated other comprehensive income (loss)73  (57) 
Total stockholders’ equity (deficit)740,398  (113,505) 
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $839,847  $298,380  

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CLOUDFLARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2019201820192018
Revenue$73,941  $50,070  $203,092  $137,175  
Cost of revenue16,033  11,209  45,225  30,581  
Gross profit57,908  38,861  157,867  106,594  
Operating expenses:
Sales and marketing45,538  24,462  112,191  66,206  
Research and development27,863  14,827  64,380  39,113  
General and administrative25,593  36,040  59,300  69,081  
Total operating expenses98,994  75,329  235,871  174,400  
Loss from operations(41,086) (36,468) (78,004) (67,806) 
Non-operating income (expense):
Interest income1,079  387  2,822  847  
Interest expense(407) (251) (970) (726) 
Other expense, net(651) (1,240) (1,030) (1,903) 
Total non-operating income (expense), net21  (1,104) 822  (1,782) 
Loss before income taxes(41,065) (37,572) (77,182) (69,588) 
Provision for (benefit from) income taxes(212) 417  491  889  
Net loss$(40,853) $(37,989) $(77,673) $(70,477) 
Net loss per share attributable to common stockholders, basic and diluted
$(0.35) $(0.47) $(0.81) $(0.88) 
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
118,056  81,579  96,393  79,755  

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
September 30,
Nine Months Ended
September 30,
2019201820192018
Net loss$(40,853) $(37,989) $(77,673) $(70,477) 
Other comprehensive income (loss):
Change in unrealized gain (loss) on investments, net of tax
7  (2) 130  40  
Other comprehensive income (loss)7  (2) 130  40  
Comprehensive loss$(40,846) $(37,991) $(77,543) $(70,437) 

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 September 30, 2019
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 June 30, 2019165,658  $331,521    $  92,686  $86  $87,111  $(232,698) $66  $(145,435) 
Issuance of common stock upon initial public offering, net of underwriting discounts and issuance costs
—  —  40,250  40  —  —  565,001  —  —  565,041  
Conversion of redeemable convertible preferred stock to common stock upon initial public offering
(165,658) (331,521) 31,381  31  134,277  135  331,355  —  —  331,521  
Conversion of redeemable convertible preferred stock warrants into common stock warrants and issuance of common stock upon net exercise of common stock warrants
—  —  —  —  174  —  3,135  —  —  3,135  
Issuance of common stock upon exercise of stock options
—  —  9  1  1,108  1  1,833  —  —  1,835  
Repurchases of unvested common stock
—  —  —  —  (33) —  —  —  —  —  
Issuance of common stock related to early exercised stock options
—  —  —  —  295  —  —  —  —  —  
Vesting of shares issued upon early exercise of stock options
—  —  —  —  —  —  951  —  —  951  
Conversion of Class B to Class A common stock
—  —  15,199  15  (15,199) (15) —  —  —    
Stock-based compensation
—  —  —  —  —  —  24,196  —  —  24,196  
Net loss
—  —  —  —  —  —  —  (40,853) —  (40,853) 
Other comprehensive income (loss)
—  —  —  —  —  —  —  —  7  7  
Balance as of September 30, 2019  $  86,839  $87  213,308  $207  $1,013,582  $(273,551) $73  $740,398  












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


Three Months Ended September 30, 2018
Redeemable convertible
preferred stock
Common StockAdditional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
income (loss)
Total
stockholders’
equity (deficit)
SharesAmountSharesAmount
Balance as of June 30, 2018152,022  $181,546  80,879  $79  $51,816  $(141,202) $(64) $(89,371) 
Issuance of Series D redeemable convertible preferred stock, net of issuance costs of $25
13,636  149,975  —  —  —  —  —  —  
Issuance of common stock upon exercise of stock options
—  —  4,870  5  3,716  —  —  3,721  
Repurchases of unvested common stock
—  —  (2) —  —  —  —  —  
Issuance of common stock related to early exercised stock options
—  —  5,674  —  —  —  —  —  
Vesting of restricted common stock
—  —  75  —  3  —  —  3  
Vesting of shares issued upon early exercise of stock options
—  —  —  —  447  —  —  447  
Stock-based compensation
—  —  —  —  24,520  —  —  24,520  
Net loss
—  —  —  —  —  (37,989) —  (37,989) 
Other comprehensive income (loss)
—  —  —  —  —  —  (2) (2) 
Balance as of September 30, 2018165,658  $331,521  91,496  $84  $80,502  $(179,191) $(66) $(98,671) 



















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)—CONTINUED
(in thousands)
(unaudited)


Nine Months Ended September 30, 2019
Redeemable convertible
preferred stock
Class A common stockClass B common stockAdditional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
income (loss)
Total
stockholders’
equity (deficit)
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 2018165,658  $331,521    $  91,542  $85  $82,345  $(195,878) $(57) $(113,505) 
Issuance of common stock upon initial public offering, net of underwriting discounts and issuance costs
—  —  40,250