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Cloudflare — INVESTOR DAY 2024 - INVESTOR SESSION SLIDES Presentation deck (company IR deck)
Cloudflare (NET) · 0 slides · Filed Oct 21, 2026
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Slide 1 — INVESTOR DAY
INVESTOR DAY 2024 May 30, 2024
Slide 2 — Safe Harbor and Other Information
2 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 or Cloudflare or any officer, director, employee, agent, or advisor of Cloudflare. This presentation does not purport to be all-inclusive or to contain all of the information you may desire. Except as otherwise set forth in this presentation, information provided in this presentation speaks only as of the date set forth on the cover page of this presentation. This presentation and the accompanying oral commentary contain express and implied “forward-looking” statements within the meaning of the federal securities laws, and these statements involve substantial risks, assumptions, and uncertainties. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, the current and planned development and functionality of our products, demand for our products, our ability to effectively sell our existing and new products, expectations of future operating results or financial performance, business strategy and plans, the impact of adverse macroeconomic conditions, such as inflation, changes in interest rates, actual or potential bank failures and recessionary concerns, the impact of the Hamas-Israel and Russia-Ukraine conflicts and other areas of geopolitical tension around the world, or any potential worsening or expansion of those conflicts or tensions, market volatility, size and growth opportunities, the calculation of certain of our key financial and operating metrics, capital expenditures, plans for future operations, competitive position, rapidly evolving technological developments, including advancements in AI, and strategic relationships, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “would,” “continue,” “ongoing” or the negative of these terms or other comparable terminology. You should not put undue reliance on any forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. Actual results could differ materially from our current expectations as a result of many factors, including those identified in the “Risk Factors” section of our filings made with the Securities and Exchange Commission ("SEC"). You can locate these reports on our investor relations website (https://cloudflare.NET) or on the SEC website (www.sec.gov). If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements included in this presentation represent our views only as of the date of this presentation, and except as required by law, we assume no obligation and do not intend to update these forward-looking statements or to conform these statements to actual results or to changes in our expectations. In addition to our results determined in accordance with generally accepted accounting principles (“GAAP”), this presentation includes certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not as a substitute for or superior to measures of financial performance prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. See the appendix for a reconciliation of those measures to the most directly comparable GAAP measures. This presentation and the accompanying oral commentary may contain statistical data, estimates, and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on our internal sources. This information involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. Accordingly, we make no representations as to the accuracy or completeness of that data nor do we undertake to update such data after the date of this presentation. By attending or receiving this presentation you acknowledge that you will be solely responsible for your own assessment of the market and our market position and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of our business and products. The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the network and products of Cloudflare. Safe Harbor and Other Information
Slide 3 — Welcome
Phil Winslow Vice President of Strategic Finance, Treasury, & Investor Relations Welcome 3
Slide 4 — We are helping build
4 OUR MISSION We are helping build a better Internet
Slide 5 — Cloudflare is built for what’s next
Physical Hardware Multi-Tenant Cloud Virtualized Function Compute & Storage Infrastructure Server ⋅ Disk Virtualization platform Developer-friendly application services 2006 Security Infrastructure Virtual appliance Zero Trust security services Network Infrastructure Router ⋅ VPN ⋅ MPLS Software-defined WAN & perimeter Internet-native network services 2022 2017 FW ⋅ Proxy ⋅ MTA 5 Cloudflare is built for what’s next
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Slide 10 — Application Security
Recognized in 35 reports Recognized in 24 reports Recognized in 20 reports LEADER in KuppingerCole Leadership Compass for WAF (2024) LEADER & OUTPERFORMER in GigaOm Radar for CDN (2024) CUSTOMER’S CHOICE in Gartner Peer Insights ‘Voice of the Customer’ DDoS Mitigation Solutions (2023) LEADER in GigaOm Radar for Application & API (2023) LEADER in Gartner Magic Quadrant for WAAP (2022) LEADER in Forrester Wave for Web Application Firewalls (2022) LEADER in IDC MarketScape for CDN (2022) STRONG PERFORMER in Forrester Wave for Bot Management (2022) LEADER in Forrester Wave for DDOS Mitigation Solutions (2021) LEADER in Forrester Wave for Edge Development Platforms (2023) OUTPERFORMER & CHALLENGER in GigaOm Radar for Alternatives to S3 (2023) LEADER in Forrester New Wave for Edge Development Platforms (2021) STRONG PERFORMER in Forrester New Wave for FaaS (2020) Application Security & Performance Zero Trust & Network Services Developer Services NEW NICHE PROVIDER in Gartner Magic Quadrant for SSE (2024) STRONG PERFORMER in Forrester Wave for SSE (2024) CUSTOMER’S CHOICE in Gartner Peer Insights ‘Voice of the Customer’ ZTNA (2024) LEADER in IDC MarketScape for ZTNA (2023) LEADER in IDC MarketScape for NESaaS (2023) LEADER in Forrester Wave for Email Security (2023) STRONG PERFORMER in Forrester Wave for Zero Trust Platforms (2023) LEADER in KuppingerCole Leadership Compass for SASE (2023) NEW NEW NEW NEW NEW NEW NEW NEW NEW NEW NEW NEW Note: As of May 2024. 10
Slide 11 — With Cloudflare,
11 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 with no vendor lock-in
Slide 12 — 10:15 am - 10:20 am
10:15 am - 10:20 am Opening Remarks Phil Winslow Vice President of Strategic Finance, Treasury, & Investor Relations 10:20 am - 10:40 am Network-as-a-Service Annika Garbers Director of Product 10:40 am - 11:00 am AI Rita Kozlov Vice President of Product 11:00 am - 11:20 am Go-To-Market Mark Anderson President of Revenue 11:20 am - 11:40 am Financials Thomas Seifert Chief Financial Officer 11:40 am - 12:15 pm Q&A Matthew Prince Co-founder & Chief Executive Officer Michelle Zatlyn Co-founder, President, & Chief Operating Officer Thomas Seifert Chief Financial Officer Mark Anderson President of Revenue 12
Slide 13 — Network-as-a-Service
Annika Garbers Director of Product for Network Services Network-as-a-Service 13
Slide 14 — Current network & security infrastructure
Current network & security infrastructure is not architected for the digital future 14 ●New revenue streams ●Faster innovation ●Reduce data risk Business drivers Transform workforce experience Transform customer & developer experience IT priorities ●Remote dev teams ●Reduce threat exposure ●Improve compliance ●Cloud migration ●Reduce BW costs ●Agile branch access ●Shadow IT visibility ●Remediate SaaS config ●Simplify remote access ●Consolidate clouds ●Consistent visibility ●Consistent policy ●Standardize network ●Amazing UX ●Simplified operations ●Improve productivity ●Faster onboarding ●Easy M&A ●Everyone works hybrid ●Reduce attack surface ●Lower CapEx/OpEx The network must adapt 14
Slide 15 — But, why?
15 But, why? — A brief history of networking
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…
Users, data, and applications are distributed anywhere… WHERE WE ARE NOW: HYBRID OVERLAY 17 Storage and compute migrating to cloud Remote/hybrid work as the new norm Network and security …were an afterthought
Slide 18 — …Causing an explosion of point solutions
WHERE WE ARE NOW: HYBRID OVERLAY 18 …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
Slide 19 — The Internet is replacing the corporate network
Business drivers impact how data is stored and transmitted over your network IT priorities demand changes to both network connectivity and network security Centralized model Virtualize the network with Internet breakouts Shift security to the cloud and bolt onto network Hybrid Overlay Shift 1 Shift 2 Internet-Native Enable Internet to be your network 19 The Internet is replacing the corporate network WHERE WE ARE GOING: INTERNET-NATIVE Transform workforce experience Transform customer & developer experience MPLS ⋅ VPN ⋅ FW SWG ⋅ DNS MPLS ⋅ VPN ⋅ FW ⋅ SD-WAN SWG ⋅ DNS ⋅ CASB ⋅ ZTNA ⋅ RBI Complete Network- & Security-as-a-Service Modernize security to one cloud
Slide 20 — How would you design the
How would you design the network if you were starting from scratch? 20
Slide 21 — Be everywhere
Be everywhere because users, applications, and data are too Be interconnected so traffic gets where it’s going quickly and reliably & & & Comprehensive on-ramps for devices, branches, data centers, and clouds Consistent security controls across everything that’s connected Single user interface & API for configuration and management End-to-end visibility for every traffic flow 21 Core principles in building a global network platform for a distributed world Infrastructure Control Plane Data Plane
Slide 22 — 320+ cities
Note: Figures as of March 31, 2024, except for network capacity, which is as of April 30, 2024. 22 320+ cities in 120+ countries, including mainland China ~50 ms from ~95% of the world’s Internet-connected population 280 Tbps of network capacity and growing ~13,000 networks directly connect to Cloudflare, including ISPs, cloud providers, and large enterprises Cloudflare city (as of Q1 2024) A single network that delivers local capabilities with global scale INFRASTRUCTURE INFRASTRUCTURE Be everywhere & Be interconnected Cloudflare backbone (as of Q1 2024)
Slide 23 — Anycast routing to secure close to the source and accelerate
Network 2 Network 3 Anycast enables Cloudflare to announce the IP addresses of our services from every data center worldwide. Traffic is routed to the closest data center — with no backhauling or performance tradeoffs 23 Anycast routing to secure close to the source and accelerate to the destination INFRASTRUCTURE INFRASTRUCTURE Be everywhere & Be interconnected Unicast routing, in which a single IP address is associated with a single server, data center, and/or application, means requests to access that application may have very different routing experiences Other Vendors Cloudflare
Slide 24 — A global backbone for private + public traffic transport to steer
Private Network/Cloud with vendor’s clientless, client, app, or WAN connector Middle Mile over Public Internet inherently not resilient or performant by default Public Network/Cloud with vendor’s connector Public destination Best path selection (10x more peers & global backbone) Optional Private Network or Cloud Interconnection @ IXP or or 320+ Cities Private destination Latency Jitter Packet loss Latency Jitter Packet loss or Closest DC to source 24 INFRASTRUCTURE A global backbone for private + public traffic transport to steer around problems on the public Internet INFRASTRUCTURE Optional Cloud Interconnection @ IXP Optional Private Interconnection @ IXP Be everywhere & Be interconnected Other Vendors Cloudflare Only peers (public & private interconnections) All other DCs in the network Public destination How many cities? Private destination Closest DC to source Only peers (public & private interconnections) Private source Private source All other DCs in the network
Slide 25 — Comprehensive on-ramps to connect and secure users, branches,
25 DATA PLANE Comprehensive on-ramps to connect and secure users, branches, clouds, data centers, applications, and/or IoT to any resource Comprehensive on-ramps & Consistent security controls ● Connecting “any-to-any” is not enough ● The future of networking is one “end-to-end” architecture – connecting any source to any destination from anywhere with commodity Internet as the underlay
Slide 26 — Every service built to run on every server
Note: Figures as of March 31, 2024. Every Cloudflare service Built to run over every Cloudflare server In every Cloudflare data center 26 Across 320+ cities . in 120+ countries Every service built to run on every server in every data center Comprehensive on-ramps & Consistent security controls DATA PLANE
Slide 27 — A unified control plane minimizes complexity, lowers IT overhead, and
Network 2 Network 3 Single control plane with single-pass inspection simplifies management and integration while also minimizing any impact to performance Locations only run a subset of services – leading to management and integration complexity while also constraining performance 27 CONTROL PLANE A unified control plane minimizes complexity, lowers IT overhead, and improves performance Cloudflare Single user interface & API & End-to-end visibility Other Vendors
Slide 28 — Visualize and manage every traffic flow with one user interface,
28 Visualize and manage every traffic flow with one user interface, one API, and one policy CONTROL PLANE ● With visibility across the entire IT infrastructure, Cloudflare can aggregate signals from various sources — including users, devices, applications, and networks ● On the frontend for administrators, each service is managed from one interface with one policy for ease of operations Single user interface & API & End-to-end visibility
Slide 29 — What’s possible with these principles applied?
Your Customers Internet Apps SaaS Apps Inbound Traffic Malicious Traffic Legitimate Traffic Your Apps Outbound Traffic Contractors Employees App Security & Performance Zero Trust and Network Security & Performance Your People Self-Hosted Apps Data Center Customer Facing Apps Zero Trust Security & Performance Offices Apps You Use 29 What’s possible with these principles applied? — Cloudflare is built for what’s next Infrastructure Data Plane Control Plane Clouds
Slide 30 — What’s possible with these principles applied?
Your Customers Internet Apps SaaS Apps Malicious Traffic Legitimate Traffic Apps You Use Your Apps Contractors Employees Your People Self-Hosted Apps Data Center Clouds Customer Facing Apps Offices Inbound Traffic Outbound Traffic App Security & Performance Zero Trust and Network Security & Performance Zero Trust Security & Performance LB+Routing DNS+CDN+Traffic Acceleration WAF+API+Bot Protection Secure Web Gateway Remote Browser Isolation Firewall as a Service Zero Trust Network Access L3/4 DDoS Protection 30 What’s possible with these principles applied? — Cloudflare is built for what’s next
Slide 31 — What’s possible with these principles applied?
Your Customers Internet Apps SaaS Apps Malicious Traffic Legitimate Traffic Apps You Use Your Apps Contractors Employees Your People Self-Hosted Apps Data Center Clouds Customer Facing Apps Offices Inbound Traffic Outbound Traffic App Security & Performance Zero Trust and Network Security & Performance Zero Trust Security & Performance LB+Routing DNS+CDN+Traffic Acceleration WAF+API+Bot Protection Secure Web Gateway Remote Browser Isolation Firewall as a Service Zero Trust Network Access L3/4 DDoS Protection 31 What’s possible with these principles applied? — Cloudflare is built for what’s next
Slide 32 — Bringing it all together
Configuration By MSP through service request Simplified orchestration and management via centralized controller Automated orchestration via single dashboard Last-mile traffic control Covered by MPLS SLAs Best-path selection available in SD-WAN appliance Minimal on-premises deployment to control local decision making Middle-mile traffic control Covered by MPLS SLAs “Tunnel Spaghetti” and still no control over the middle mile Integrated traffic management and private backbone controls in a unified dashboard Cloud integration Centralized breakout Decentralized breakout Native connectivity with Cloud Network Interconnect (CNI) Security Patchwork of hardware controls Patchwork of hardware and/or software controls Native integration with user, data, application, & network security tools Cost High cost for hardware and connectivity (e.g., MPLS) Optimized connectivity costs at the expense of increased hardware and software costs Decreased hardware and connectivity costs for maximized ROI Network Perimeter Hybrid Overlay Internet-Native Bringing it all together 32
Slide 33 — Competitors lack our underlying architecture advantages
33 Strong Moderate Weak Competitors lack our underlying architecture advantages
Slide 34 — Cloudflare is built to solve
Cloudflare is built to solve the problems of a distributed world — now and for the future 34
Slide 35 — Rita Kozlov
Rita Kozlov Vice President of Product for Cloudflare Developer Platform AI 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 Ecosystem of foundational technology Automate decision making No surprise bills, predictable costs Reliable, scalable, & secure by default ✔ X 36
Slide 37 — 2018
Building blocks to create a full-stack application 2018 Video Streaming NoSQL Database Analytic Database Data Streaming API Gateway Object Storage Serverless Compute Web Development Queue Durable Execution Relational Database Database Proxy Workers Workers KV Stream RDS Proxy Step Function SQS Amplify S3 RDS Kinesis Redshift DynamoDB / DocumentDB / Keyspaces API Gateway IVS Azure SQL Gateway Durable Functions Queues App Service Blob Storage Azure SQL Database Functions Azure Stream Analytics Azure Synapse Azure Cosmos DB API Gateway Azure Media Services Cloud SQL Auth Proxy Workflows Cloud Tasks Firebase Cloud Storage Google Cloud SQL Cloud Functions Dataflow BigQuery Bigtable / Firestore / Firebase API Gateway Live Streaming Lambda / Lambda at Edge/ Cloudfront Functions 37
Slide 38 — 2020
Building blocks to create a full-stack application 2020 Video Streaming NoSQL Database Analytic Database Data Streaming API Gateway Object Storage Serverless Compute Web Development Queue Durable Execution Relational Database Database Proxy Workers Workers KV / Durable Objects Stream RDS Proxy Step Function SQS Amplify S3 RDS Kinesis Redshift DynamoDB / DocumentDB / Keyspaces API Gateway IVS Azure SQL Gateway Durable Functions Queues App Service Blob Storage Azure SQL Database Functions Azure Stream Analytics Azure Synapse Azure Cosmos DB API Gateway Azure Media Services Cloud SQL Auth Proxy Workflows Cloud Tasks Firebase Cloud Storage Google Cloud SQL Cloud Functions Dataflow BigQuery Bigtable / Firestore / Firebase API Gateway Live Streaming Lambda / Lambda at Edge/ Cloudfront Functions Pages 38
Slide 39 — 2022
Building blocks to create a full-stack application 2022 Video Streaming NoSQL Database Analytic Database Data Streaming API Gateway Object Storage Serverless Compute Web Development Queue Durable Execution Relational Database Database Proxy Pages R2 Workers Workers KV / Durable Objects API Gateway Stream RDS Proxy Step Function SQS Amplify S3 RDS Kinesis Redshift DynamoDB / DocumentDB / Keyspaces API Gateway IVS Azure SQL Gateway Durable Functions Queues App Service Blob Storage Azure SQL Database Functions Azure Stream Analytics Azure Synapse Azure Cosmos DB API Gateway Azure Media Services Cloud SQL Auth Proxy Workflows Cloud Tasks Firebase Cloud Storage Google Cloud SQL Cloud Functions Dataflow BigQuery Bigtable / Firestore / Firebase API Gateway Live Streaming Lambda / Lambda at Edge/ Cloudfront Functions 39
Slide 40 — 2023
Building blocks to create a full-stack application 2023 Video Streaming NoSQL Database Analytic Database Data Streaming API Gateway Object Storage Serverless Compute Web Development Queue Durable Execution Relational Database Database Proxy Queues Pages R2 Workers Workers KV / Durable Objects API Gateway Stream RDS Proxy Step Function SQS Amplify S3 RDS Kinesis Redshift DynamoDB / DocumentDB / Keyspaces API Gateway IVS Azure SQL Gateway Durable Functions Queues App Service Blob Storage Azure SQL Database Functions Azure Stream Analytics Azure Synapse Azure Cosmos DB API Gateway Azure Media Services Cloud SQL Auth Proxy Workflows Cloud Tasks Firebase Cloud Storage Google Cloud SQL Cloud Functions Dataflow BigQuery Bigtable / Firestore / Firebase API Gateway Live Streaming Lambda / Lambda at Edge/ Cloudfront Functions 40
Slide 41 — 2024
Building blocks to create a full-stack application 2024 Video Streaming NoSQL Database Analytic Database Data Streaming API Gateway Object Storage Serverless Compute Web Development Queue Durable Execution Relational Database Database Proxy Hyperdrive Workflows Queues Pages R2 D1 Workers Pipelines Workers KV / Durable Objects API Gateway Stream RDS Proxy Step Function SQS Amplify S3 RDS Kinesis Redshift DynamoDB / DocumentDB / Keyspaces API Gateway IVS Azure SQL Gateway Durable Functions Queues App Service Blob Storage Azure SQL Database Functions Azure Stream Analytics Azure Synapse Azure Cosmos DB API Gateway Azure Media Services Cloud SQL Auth Proxy Workflows Cloud Tasks Firebase Cloud Storage Google Cloud SQL Cloud Functions Dataflow BigQuery Bigtable / Firestore / Firebase API Gateway Live Streaming Analytic Engine Lambda / Lambda at Edge/ Cloudfront Functions 41
Slide 42 — 2 MILLION
2 MILLION developers building on the Cloudflare Workers platform 42
Slide 43 — “
“ AI is the next paradigm shift in the way applications are built 2022 + AI 2010 Social 2007 Mobile 2000 Cloud “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 previously associated with building an AI business.” Source: Base10 43
Slide 44 — 44%
AI is reshaping how organizations work, and the shift is already in motion of developers are currently using AI in their development process1 of enterprises will be using GenAI-enabled APIs, models, and/or apps deployed in production environments (up from 5% today)2 of your knowledge workers’ tasks will be augmented with GenAI to boost productivity or raise average quality of work (up from <1% today)3 44% >80% 50% Today… By 2026… By 2030… 1. Stack Overflow survey (May 2023), 90K respondents 2. Source: "A CTO’s Guide to the Generative AI Technology Landscape", Gartner, Arun Chandrasekaran, Radu Miclaus, Eric Goodness, 09/18/2023 3. Source: "Emerging Tech: The Key Technology Approaches That Define Generative AI", Gartner, Alfonso Velosa, Annette Jump, Ray Valdes, Radu Miclaus, Eric Goodness, Anthony Bradley, 09/06/2023 44
Slide 45 — Train
45 When we say “AI,” what are the workloads involved in making that happen? Train Infer
Slide 46 — Train
Train 46 When we say “AI,” what are the workloads involved in making that happen? Infer Where the focus of AI has been…
Slide 47 — Unlock the best prices across cloud providers
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 Unlock the best prices across cloud providers with R2 47
Slide 48 — Infer
Infer 48 When we say “AI,” what are the workloads involved in making that happen? Train Where the focus of AI is going…
Slide 49 — Inference is the biggest AI opportunity
Inference is the biggest AI opportunity — But, where should it happen? 49 User’s device Centralized cloud
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 — …But, so too do end user devices
…But, so too do end user devices User’s device Centralized cloud ● Cost vs. reliability trade-off ● Too far from user ● Data locality concerns ● Close to user ● Not powerful enough ● Some models are too large/complex 51
Slide 52 — A globally distributed network helps developers scale
52 Distributed network User’s device Centralized cloud A globally distributed network helps developers scale AI inference, while staying close to the end user
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, the first
Infer Use built-in models from Workers AI to generate embeddings Store embeddings in Vectorize Transform each query into an embedding with Workers AI Query Vectorize for similar vectors Retrieve source content from R2 or KV Run inference tasks on Workers AI, the first serverless AI inference platform 54 ● Don’t need to worry about managing GPUs ● Pay only for what you use ● Automatically scale as you grow
Slide 55 — AI fits seamlessly into our developer platform
AI fits seamlessly into our developer platform Network Send information to/from different locations Storage Provide contextual information Developer Experience Allows for focus on application differentiation Application Developers choose these tools based on… Compute Power the logic of an application AI Run inference for generative AI models 55
Slide 56 — Leading AI companies already rely on Cloudflare
Leading AI companies already rely on Cloudflare 56 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 as of April 2024.
Slide 57 — There’s more to inference than running models
Run AI on region: Earth There’s more to inference than running models Data storage Store your training data on R2 to avoid paying egress fees and retain flexibility for multi-cloud architectures Serverless development Run and deploy models through Workers AI, powered by our newly deployed GPUs Vector database Store and query your embeddings for faster (and cheaper!) vector lookups with Vectorize Monitoring & controls Connect your AI app to AI Gateway for better observability with analytics and controlled scalability via caching and rate limiting Data localization Control where data is inspected with Regional Services and Data Localization Suite Web application, API, & DDoS protection Protect AI services from bad actors with easy to configure security without performance impacts with Firewall for AI 57 Comply Secure Optimize Train Infer
Slide 58 — Control where data is stored and inspected with
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 Control where data is stored and inspected with a private-by-default approach 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 abuse almost immediately 59
Slide 60 — 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 Observe and control AI applications AI Gateway is a full proxy with caching, rate limiting, request retries, analytics, and tracking of AI usage to mitigate data loss and AI integrity 60
Slide 61 — Generative AI use cases on Workers
Generative AI use cases on Workers 61 Code generation Automatically generate code snippets or entire programs based on natural language descriptions, thereby expediting software development processes. Text generation Generative AI models can be employed for text generation tasks, including content creation, automatic text summarization, and chatbot responses. Image synthesis Generative Adversarial Networks (GANs) can create realistic images, contributing to applications such as art generation, image editing, and data augmentation for computer vision tasks. Music compositions AI models can generate music compositions based on learned patterns, assisting in music production, creating background scores, and inspiring musicians in the creative process. Drug discovery Generative AI can accelerate drug discovery by suggesting novel molecular structures for drugs compounds, providing researchers with potential candidates for further exploration. Design and creativity Generative AI can assist designers by suggesting new designs for products, logos, or others creative projects. This capability can be particularly useful for ideation and rapid prototyping.
Slide 62 — Why Cloudflare for AI?
Why Cloudflare for AI? Network Scale Ease of use No trade-offs Experiment with AI securely with partners One control plane ●Simple deployment and policies as you consume AI ●Templates to get onboarded quickly as you build AI One programmable architecture ●Layer new security without disrupting how you consume AI ●Built-in privacy and compliance as you build AI One global network ●Scale and enforce controls as you consume AI ●Accelerate inference, querying and caching as you build AI 62
Slide 63 — Go-To-Market
Mark Anderson President of Revenue Go-To-Market 63
Slide 64 — “Why did I join Cloudflare?”
“Why did I join Cloudflare?” — The market is coming to where Cloudflare is already 64
Slide 65 — The C-Suite is navigating an uncertain economic outlook
The C-Suite is navigating an uncertain economic outlook and a volatile geopolitical landscape 65 Save costs Generate greater revenues Ever increasing operational bills Continuous infrastructure sprawl Opportunity Challenge 65 Vendor fatigue
Slide 66 — Legacy networks and products are only adding to the rising
Legacy networks and products are only adding to the rising complexity and costs This complexity and loss of control increase costs, risk, and time to value No visibility or control of infrastructure sprawl Silos of point network and security solutions Lack of scale and flexibility WHAT GOT YOU HERE… 66
Slide 67 — Introducing Connectivity Cloud
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 connectivity AI and innovative apps Multi-cloud flexibility Secured workforce Powered by a global network at scale …WON’T GET YOU THERE 67
Slide 68 — Cloudflare is the only composable, Internet-native platform…
Compliance/Privacy: FedRAMP, ISO, SOC, PCI, GDPR compliant, Logs & Analytics, Data Localization Suite Cloudflare Application Services Cloudflare Global Network Cloudflare Zero Trust Services Cloudflare Network Services Cloudflare One Zero Trust Network Access Remote Browser Isolation Data Loss Prevention Network Interconnect Smart Routing WAN-as-a-Service Firewall-as-a-Service L3 & L4 DDoS Protection Rate Limiting Load Balancing Bot Management CDN and DNS L7 DDoS Protection WAF with API Protection Secure Web Gateway Cloud Access Security Broker Cloud Email Security IDS/IPS Cloudflare Platform Workers Pages Durable Objects Stream Cloudflare Developer Platform R2 Workers KV Images 1 WHAT WE OFFER 68 …that delivers local capabilities with global scale Cloudflare is the only composable, Internet-native platform…
Slide 69 — Customer
Total Cost of Ownership 69 Customer perspective: simplify and consolidate on a single, unified platform WHAT WE OFFER TCO Reduction Current State Loss of control, vendor sprawl Future State Cloudflare’s connectivity cloud Employees Applications Content Delivery Network DDoS Protection Web Application Firewall API Security Akamai • F5 • Fastly • Imperva Cisco • Fortinet • VMware • AT&T Palo Alto Networks • Zscaler • Netskope Bot Management DNS Secure Web Gateway Cloud Access Security Broker Zero Trust Network Access DLP Email Security Sandbox & Browser Isolation SD-WAN Appliance MPLS Network Firewall Networks ✔ Content Delivery Network ✔ Web Application Firewall ✔ DDoS Protection (L7-L3) ✔ API Security & Management ✔ Bot Management ✔ Cloud Secure Web Gateway ✔ Zero Trust Network Access ✔ Cloud Access Security Broker ✔ Data Loss Prevention ✔ Cloud Sandbox & Browser Isolation ✔ Cloud Firewall & Intrusion Prevention ✔ WAN-as-a-Service ✔ SD-WAN Connector ✔ Multi-cloud Networking
Slide 70 — Accelerating
Accelerating GTM Momentum 70
Slide 71 — p = m v
Physics 101 p = m v Mass, n. the quantity of matter within a given object Velocity, n. a quantity that designates speed together with the direction of movement Momentum, n. the quantity of motion in a moving body, expressed as the product of its mass and velocity 71
Slide 72 — p = m v
Physics 101…translated to B2B sales p = m v Capacity Productivity ACV 72
Slide 73 — Last year…
Last year… p = m v 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
…Now p = m v 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
2024 Action Plan 75
Slide 76 — {
{ Physics 102…translated to B2B sales p = m Velocity, n. quantity that designates the distance moved in a specific direction divided by the time taken ∆x ∆t Direction, n. Pace, n. Momentum, n. Mass, n. 76
Slide 77 — Top 5 action items in 2024
Become more systematic and targeted March towards the Enterprise Sell the platform, sell solutions Power up with partners Add stage- appropriate talent 77 Top 5 action items in 2024
Slide 78 — Add stage-appropriate talent across the sales process
#1: ADD STAGE-APPROPRIATE TALENT Lead Gen Pre-Pipeline Qualify Discovery Solution Design Proposal Negotiate Close Onboard / Renewal Repeat for continual upsell / expansion opportunities BDR . AE/xAE SE CSE CSM Solution Specialist CAM SA Sales Ops RFx/Contracts Deal Desk, Legal Customer Support SA SA Pre-sales . Post- sales MRK 78 Add stage-appropriate talent across the sales process
Slide 79 — Become more systematic and targeted
Become more systematic and targeted #2: BECOME MORE SYSTEMATIC AND TARGETED 79 Low-touch sales model Inside and reseller driven Medium-touch sales model Field and reseller driven Supported by inside High-touch sales model Field driven System integrators Public Sector Named Startup Commercial Territory Named Majors Midmarket Enterprise Digital Native
Slide 80 — 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 #3: MARCH TOWARDS THE ENTERPRISE 80 360-degree enterprise customer engagements
Slide 81 — $1M+
#3: MARCH TOWARDS THE ENTERPRISE Source: Latest company reports, filings, and investor presentations as of May 29, 2024. Cloudflare and ServiceNow are as of March 31, 2024. MongoDB, Okta, Zscaler, CrowdStrike, and Splunk are as of January 31, 2024. UiPath is as of April 30, 2024. Atlassian is as of June 30, 2023. Datadog is as of December 31, 2023. Palo Alto Networks and Snowflake are as of April 30, 2024. Akamai is as of May 19, 2022. $1M+ customers represent less than 1% of Cloudflare’s total paying customers Number of $1M+ Customers 81 Just scratching the surface with enterprise accounts
Slide 82 — Engage customers with three sales motions
Connectivity Cloud 82 Customer Strategic Initiatives Products 1. Top Down Position the platform, deliver solutions. 3. Bottom Up Sell use cases that address specific pain points – outages, under attack, etc. – then sell the platform. Use Case Use Case 2. Solutions Over Sell solutions against customer priorities, then expand to selling the platform. Solution Solution #4: SELL THE PLATFORM, SELL THE SOLUTIONS Engage customers with three sales motions
Slide 83 — Top Down: Targeting the right audience with a platform pitch
#4: SELL THE PLATFORM, SELL THE SOLUTIONS VP Security | VP Networking Problems: Secure the enterprise; connect users, data and devices Solutions: Zero Trust, Magic Transit, Magic WAN, Magic Firewall CIO | CTO | CISO | CFO Problems: Enable, scale, and protect an agile business in line with CEO strategy Solutions: Cloudflare platform for Security, Connectivity, Privacy, Performance, and Agile Development $ $$ $$$ Developer | IT Practitioner Problems: Build and manage applications to execute against the strategy set by leadership Solutions: Workers, Application Performance Top Down: Targeting the right audience with a platform pitch for bigger deals 83
Slide 84 — CDN, Cache Reserve, DNS, Argo Smart Routing, Images,
CDN, Cache Reserve, DNS, Argo Smart Routing, Images, Stream, Load Balancing, China Network WAF, API Shield, DNS Firewall, L7 DDoS, Bot Management, Rate Limiting, Page Shield, Firewall for AI, Spectrum Workers, KV, Durable Objects, Pages, R2, D1, Images, Stream, Workers AI, AI Gateway, Vectorize, Data Localization Suite Access, Gateway, RBI, CASB, Area 1, DLP Magic Transit, Magic Firewall Cloudflare Global Network 1 2 3 4 6 5 Cloudflare’s connectivity cloud services: Accelerate application performance & improve customer experience Secure access for your workforce Modernize WAN & replace MPLS Secure Websites, applications, & APIs Build innovative applications & augmenting with AI Protect the network Customer Priorities #4: SELL THE PLATFORM, SELL THE SOLUTIONS 84 Solutions Over: Unlocking solution/sales play combinations based on customer priorities Magic WAN, Magic Cloud Networking, CNI Express, Argo Smart Routing
Slide 85 — The power of partnership
#5: POWER UP WITH PARTNERS PARTNERS CUSTOMERS Partners reach 1000s of customers each The power of partnership
Slide 86 — New PowerUP partner program
New PowerUP partner program #5: POWER UP WITH PARTNERS One Simplified Global Partner Program Revised tier structure driving transactional partners through distribution Specializations based on partner type, business model or product orientation Enhanced Partner Profitability Framework Partner discounts and incentives based on Reward for Value Transparent and predictable pricing Improved Partner Experience Improved tools and processes to simplify transacting with Cloudflare Strategic Planning Align benefits and requirements with Select and Elite Tiers vs Focus Partners Introduce Business Planning 86
Slide 87 — The market is coming to where Cloudflare is already, and the
The market is coming to where Cloudflare is already, and the time is now 87 Data is the new oil Latency is the new currency Internet is the new highway to success Zero Trust is the new transportation Cloudflare is the new fabric for digital success
Slide 88 — Financials
Thomas Seifert Chief Financial Officer Financials 88
Slide 89 — The ability to
The ability to drive efficient and productive growth at scale separates the best technology companies in the world from all others Scale Efficiency/ Productivity Growth 89
Slide 90 — Growth
Growth Growing large customer cohort Extending into adjacent markets Expanding product portfolio 90
Slide 91 — Track record of delivering revenue growth
Total Revenue ($M) 46% CAGR $193 $287 $431 2018 2019 2020 2021 $656 $975 2022 $1,297 2023 Investment in enterprise sales Large customer momentum Land and expand strategy drives growth across cohorts Increasing penetration across the entire product portfolio Track record of delivering revenue growth 91
Slide 92 — Significant Growth in Large Customer Cohorts
Significant Growth in Large Customer Cohorts 92 GROWING LARGE CUSTOMER COHORT Note: Large Customer data are as of year end. See the Appendix for how we define Large Customers, which are the same as $100K+ customers. $500K+ and $1M+ customers are defined in the same manner, except we use $500K+ and $1M+, respectively, of Annualized Revenue instead of $100K+. 49% CAGR 2021 2022 2023 $100K+ Customers 2,756 2,042 1,416 $500K+ Customers $1M+ Customers 828 2020 2021 2022 2023 2020 2022 2021 2023 2020 346 222 121 71 118 85 56 32 70% CAGR 54% CAGR 56% Y/Y 39% Y/Y 35% Y/Y
Slide 93 — Rapid enterprise expansion
$1M-$5M: 22x $500K-$1M: 23x $100K-$500K: 15x Note: Growth factors (e.g., 4x for <$100K) are calculated as Q4’23 revenue divided by Q1’18 revenue, except for $5M+, which compares Q4’23 to Q4’18. Fortune 1,000 figures are as of March 31, 2024. <$100K: 4x $5M+: 25x* Rapid enterprise expansion GROWING LARGE CUSTOMER COHORT Revenue ($M) by All Customers 2022 2021 2020 2019 2018 2023 ~32% of Fortune 1,000, and 7 of the Top 10 are paying customers Large enterprise go-to-market additions Enterprise-grade product portfolio 93
Slide 94 — Increasing enterprise volume + scale
Increasing enterprise volume + scale 94 GROWING LARGE CUSTOMER COHORT Top 100 Customer Note: See Appendix for definition of Annual Recurring Revenue (ARR). 2023 2019 2021 Top 10 Customer Top 25 Customer $10.0M $4.4M $1.8M 2023 2019 2021 $4.0M $2.0M $893K 2023 2019 2021 $1.5M $588K $303K Minimum ARR Required to be a Top Account 5.6x 4-year Growth 4.5x 4-year Growth 4.9x 4-year Growth
Slide 95 — The average
The average lifetime of $1M+ customers is more than 70% higher than that of <$100K customers Increasing enterprise volume + customer lifetime GROWING LARGE CUSTOMER COHORT Average Customer Lifetime (Years) by Revenue Contribution Cohort 70%+ Note: For three months ended December 31, 2023. Average customer lifetime (years) is calculated by 1 / (Churn % + Contraction % + Downgrade %) for each respective cohort. 95
Slide 96 — A platform constantly
96 A platform constantly delivering innovation Connect, protect, accelerate, and build Everywhere for everyone EXPANDING PRODUCT PORTFOLIO 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
Consistent TAM expansion Cloudflare Zero Trust Services Note: Graphic is prepared by Cloudflare. Total Addressable Market figures are Cloudflare estimates based on Gartner and IDC market forecasts. Figures reflect the markets addressed by our current product offerings. IDC markets covered include DDoS protection services, CDN, Bot Management, and API Security. All other markets are covered by Gartner forecasts. For full citation details on the Gartner forecasts used in Cloudflare’s estimations, see the Appendix. ● Application Delivery Controllers ● CDN ● DDoS ● Web Application Firewall ● Bot Management ● Anti-Fraud ● Threat Intelligence ● VPN ● Content Filtering ● Remote Browser Isolation ● Data Loss Prevention ● Privileged Access Management ● Network Analytics ● Email Security ● CASB Cloudflare Developer Services ● Application Platform ● Object Storage ● Network Firewall ● MPLS ● SD-WAN ● Intrusion Detection & Prevention ● Multicloud Networking 2018 2024 2025 2027 $222B $176B Cloudflare Application Services Cloudflare Network Services $191B 2026 $206B Areas for Potential Incremental Growth AI Internet of Things 5G Cellular Database Network Services $32B Cloudflare One 1 EXTENDING INTO ADJACENT MARKETS 97
Slide 98 — Land-and-expand strategy drives growth
Land-and-expand strategy drives growth 98 EXPANDING PRODUCT PORTFOLIO Note: Growth factors on the Revenue Contribution chart (e.g., 15.0x for 10+ Products) are calculated as Q4’23 revenue divided by Q4’20 revenue contribution from the respective cohort. Growth factors are rounded to the nearest 0.5x. ‘23 vs. ’19 Revenue Contribution by Product Attach Rate Cohorts ($M) 24.5x 12.5x 19.5x 16.0x 9.5x
Slide 99 — The average
Increasing product adoption + customer lifetime EXPANDING PRODUCT PORTFOLIO The average lifetime of customers adopting 10+ products is more than 20% higher than customers adopting 4+ products Average Customer Lifetime (Years) by Product Attach Rate Cohort 20%+ Note: For three months ended December 31, 2023. Average customer lifetime (years) is calculated by 1 / (Churn % + Contraction % + Downgrade %) for each respective cohort. 99
Slide 100 — There’s a reason we use the
SD-WAN Multi-cloud Networking Application Security SSE 100 EXTENDING INTO ADJACENT MARKETS 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 ● We natively developed Act II products — Zero Trust, Magic Transit, WAN-as-a-Service, etc. — on the same infrastructure, platform, and control plane as our Act I products There’s a reason we use the term “Acts”...
Slide 101 — Annual Contract Value (ACV) by Product Area
Annual Contract Value (ACV) by Product Area …Because acts in a play build on each other EXTENDING INTO ADJACENT MARKETS Connect and protect customers’ external, public-facing systems and infrastructure & Connect and protect customers’ internal, private systems and infrastructure Note: Contribution by product area 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 define Annual Contract Value (ACV) and contracted customers. Application Security, Zero Trust, & Network Services Other 101
Slide 102 — A multi-act play…
A multi-act play… 102 EXTENDING INTO ADJACENT MARKETS Note: Attach rates are calculated based on the total installed base of contracted customers. It is defined as the percentage of total contracted customers that purchased the product as of December 31, 2023. See the Appendix for how we define contracted customers. 90%+ of Contracted Customers 25%+ of Contracted Customers 25%+ of Contracted Customers 15%+ of Contracted Customers Zero Trust Services Application Services Network Services Developer Services Act I Act II Act III Product Attach Rates by Act in 2023
Slide 103 — …That is just getting started
…That is just getting started 103 EXTENDING INTO ADJACENT MARKETS Potential Opportunity of Current Products within Existing Customer Base $1.4 Billion ARR ending 2023 $7.0 Billion Total Potential $5.6 Billion Potential Whitespace Annualized Recurring Revenue (ARR) by Product SKU Note: Annualized Recurring Revenue by Product SKU as of December 31, 2023 for contracted customers. See the Appendix for how we define Annualized Recurring Revenue (ARR) and contracted customers. Potential Opportunity of Current Products within Existing Customer Base is determined as of September 30, 2023. See the Appendix for the methodology we use to determine the Potential Opportunity of Current Products within Existing Customer Base.
Slide 104 — Profitability
Profitability Unit economics Long-term operating model 104
Slide 105 — Elasticity and leverage in our operating model
Note: See the Appendix for GAAP to Non-GAAP reconciliation. *2024E is based on full-year mid-point guidance provided by Cloudflare on May 2, 2024. This forward looking guidance speaks only as of such date and the inclusion of such guidance in this presentation should not be interpreted as a confirmation or affirmation of such guidance as of any other date. Except as required by law, we assume no obligation and do not intend to update these forward-looking statements or to conform these statements to actual results or to changes in our expectations. Elasticity and leverage in our operating model 105 Non-GAAP Operating Expenses & Operating Margin (% of Revenue) S&M G&A R&D COGS 27% 52% 22% 23% 21% 46% 22% 18% 20% 45% 21% 15% 19% 42% 22% 14% -25% -8% -1% 4% 2019 2020 2021 2022 2023 9% 2024E* 10% 22% 40% 17% 12% Operating Margin
Slide 106 — Unit economics
Unit Economic Margin by Component Unit economics 106 Attrition What’s the expected lifetime revenue from $1 ARR? Lifetime Revenue (LTR) = $1 ARR / attrition rate Cost to Book (CTB) Cost to Serve (CTS) How much does it “cost to serve” the lifetime revenue? CTS = Delivery, R&D, Support & G&A cost as % of ARR Note: Unit economic margin in this and subsequent slides are calculations based on assumptions derived from Cloudflare’s historical operations regarding unit lifetime revenue and subscription economics, including cost to book, cost to serve, and attrition dynamics. Unit economic margin is not operating margin. The calculations charted are as of fourth quarter of the respective years. What does it “cost to book” $1 of incremental ARR? CTB = Sales & Marketing cost per dollar of incremental ARR Unit Economic Margin What is the economic margin created by $1 ARR? Unit Economic Margin = [LTR - CTB - (CTS * LTR) ] / LTR 41% Unit Economic Margin
Slide 107 — Cost to book
Pipeline ($M) vs. Rolling 4-Quarter ACV per Account Executive (Net) 107 Invest in comprehensive sales training and ongoing enablement programs Emphasize consultative selling and prioritize customer success to drive repeat business, referrals, and upsell opportunities Increase sales team specialization, focusing on different customer segments, buyer personas, and industries Leverage data analytics to make informed decisions on resource allocation and prioritize high-value opportunities Closely partner with product development to better address customer needs and close deals more efficiently Cost to book UNIT ECONOMICS Reaccelearing sales productivity improves cost to book – combined with growing pipeline – give us confidence to invest in (1) further performance improvements and (2) expand capacity Note: See the Appendix for how we define Annual Contract Value (ACV).
Slide 108 — Cost to serve
Cost to Serve by Component Continue to prioritize product innovation that can be monetized across our growing customer base Gross margin is a reflection of the efficiency and elasticity of our network architecture Benefit from economies of scale, as well as opportunities for AI and automation, in G&A Note: See Appendix for GAAP to Non-GAAP reconciliation. Calculations are based on fiscal year. Percentages may not sum due to rounding. Figures are calculated based upon the respective underlying non-rounded data. 27% 22% 23% 21% 22% 18% 20% 21% 15% 19% 22% 14% G&A R&D COGS Non-GAAP Operating Expenses as a % of Revenue 2019 2020 2021 2022 72% 61% 56% 54% Cost to serve UNIT ECONOMICS 17% 22% 12% 2023 50% 108
Slide 109 — Long-term operating model
© 2024 Cloudflare, Inc. Long-term operating model Note: Metrics shown are Non-GAAP. See Appendix for GAAP financial measures and GAAP to Non-GAAP reconciliation. 109 2021 2022 2023 Q1 2024 Long-Term Model Gross Margin 79 % 78 % 78 % 80 % Leverage efficiency and elasticity of our network and ingress/egress dynamics 75% - 77% Sales & Marketing (% of revenue) 45 % 42 % 40 % 41 % Scale go-to-market operations with a focus on improving productivity 27% - 29% Research & Development (% of revenue) 20 % 19 % 17 % 16 % Continue to prioritize product innovation 18% - 20% General & Administrative (% of revenue) 15 % 14 % 12 % 11 % Benefit from economies of scale and automation 8% - 10% Operating Margin (1)% 4% 9% 11% 20%+ Free Cash Flow Margin (7)% (4)% 9% 9% ~25%+ Unit economics support 20%+ long-term operating margins
Slide 110 — Medium-term
Medium-term Short-term ● Accelerating our initiatives to build a world-class go-to-market organization — people, processes, and systems ● Operating in an uncertain macroeconomic and geopolitical landscape ● Expanding sales capacity with stage-appropriate talent while also making additional go-to-market improvements ● Investing in great engineering and product to deliver incredible value to our customers with new and existing solutions ● Capturing the large and growing market opportunity that is increasingly moving to where Cloudflare is already uniquely positioned ● Enhancing and expanding our product portfolio built on a single, global cloud platform ● Continuing to leverage a highly-efficient business model to disrupt markets and deliver profitable growth at scale Long-term 110 Cloudflare’s business…
Slide 111 — Q&A
Q&A Matthew Prince Co-founder & Chief Executive Officer Michelle Zatlyn Co-founder, President, & Chief Operating Officer Thomas Seifert Chief Financial Officer 111 Mark Anderson President of Revenue
Slide 112 — Appendix
Appendix
Slide 113 — GAAP to
© 2024 Cloudflare, Inc. GAAP to Non-GAAP Reconciliation (Annual) 113
Slide 114 — GAAP to
© 2024 Cloudflare, Inc. GAAP to Non-GAAP Reconciliation (Quarterly) 114
Slide 115 — Definitions & Methodologies
© 2024 Cloudflare, Inc. 115 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 and has an active contract with us or one of our partners during such quarter, excluding (i) customers that were not acquired through ordinary sales channels, (ii) customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and Warp, which agreements and customers together represent an insignificant amount of our revenue. An entity is defined as a company, a government institution, a non-profit organization, or a distinct business unit of a large company. An active contract is defined as a customer relationship for which we have provided services during the quarter. Paying Customers (> $100,000 Annualized Revenue). While we continue to grow customers across all sizes, over time, our large customers have contributed an increasing share of our revenue. We view the number of customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts. To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each customer in the quarter and multiply that amount by four. For example, if we signed a new customer that generated $1,800 of revenue in a quarter, that customer would account for $7,200 of Annualized Revenue for that year. Our Annualized Revenue calculation excludes (i) agreements that were not entered into through ordinary sales channels, (ii) revenue generated from customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and Warp, which agreements and customers together represent an insignificant amount of our revenue. Our Annualized Revenue metric also includes any usage charges by a customer during a period, which represents a small portion of our total revenue and may not be recurring. As a result, Annualized Revenue may be higher than actual revenue over the course of the year. Dollar-Based Net Retention. Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period. Our dollar-based net retention excludes the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. We believe this provides a more meaningful representation of our ability to add incremental business from existing paying customers as they renew and expand their contracts. Contracted Customers. Our contracted customers, which consist of customers that enter into contracts for our Enterprise subscription plan, have contracts that typically range from one to three years and are typically billed on a monthly or annual basis. Our agreements with contracted customers are tailored and priced to meet their varying needs and requirements. Enterprise subscription plan agreements for our contracted customers generally include a base subscription and a smaller portion based on usage or per seat. Definitions & Methodologies Appendix
Slide 116 — Definitions & Methodologies
© 2024 Cloudflare, Inc. 116 Definitions & Methodologies Appendix 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 terms. ARR is calculated by multiplying the revenue in the fourth quarter of each respective year by four. Annual Contract Value (ACV). Annual Contract Value, or ACV, is defined as the subscription revenue that we would contractually expect to recognize over the term of the contract divided by the term of the contract in years. Total Addressable Market. Total Addressable Market figures are Cloudflare estimates based on Gartner and IDC market forecasts. Figures reflect the markets addressed by our current product offerings. IDC markets covered include DDoS protection services, CDN, Bot Management, and API Security. All other markets are covered by Gartner forecasts and include the following Gartner sources: (1) Forecast: Information Security and Risk Management, Worldwide, 2022-2028, 1Q24 Update, Shailendra Upadhyay, Christian Canales, et.al., 03/29/2023; (2) Forecast: Enterprise Network Equipment by Market Segment, Worldwide, 2022-2028, 1Q24 Update, Christian Canales, Naresh Singh, et.al., 03/27/2024, and (3) Forecast: Enterprise Infrastructure Software, Worldwide, 2022-2028, 1Q24 Update, Arunasree Cheparthi, Robin Schumacher, et.al., 03/22/2024. Methodology of Potential Opportunity of Current Products within Existing Customer Base. The analysis begins with the reported or estimated revenue of each Cloudflare existing customer on the measurement date. If reported customer revenue is not available, a proxy customer revenue is estimated based on various factors, including the customer’s last outside funding date, amount, and implied valuation. An IT spend % of revenue (based on a third party estimate) is then applied to the customer’s reported or estimated revenue based on the customer’s industry and size, followed by a TAM (Total Addressable Market) % of Global IT Spend (as obtained from a third party estimate), and SAM (Serviceable Addressable Market) % to TAM at the country level, to get to the potential opportunity from the existing Cloudflare customer. However, if the customer’s current ARR is greater than that number, then the customer’s current ARR with a multiplier of 1.5x or less is used for the potential opportunity from that existing customer.