Cloudflare NET Q4 2023 Earnings after market close on 2/8/24
So far 3 relevant documents to look at; all found at Cloudflare Investor Relations website (if you get your financial data from other sources I would encourage you to stop and Use The Source, Luke! Always Always Investor Relations)
Here we are:
https://cloudflare.net/financials/quarterly-results/default.aspx
- Press Release: highlights
- Earnings Supplemental: my main doc I review
- Earnings transcript
- 10Q/K: Not yet there as of this note
Let’s review some highlights
Three months ago on 11/2/2023 they told us that they would deliver revenue up to $353M, guiding for a 5.2% QoQ growth and 28% YoY growth. The initial reaction priced the stock at about $65 and throughout the Q led it up to $90 just before earnings. Congrats and Hello to all the Longs!
After market close on 2/8/24 they delivered $362.5M in revenue, beating the guidance by 2.7%, resulting in QoQ 8% growth, and YoY 32% revenue growth, bravo !
(For the Full Year 2023 the revenue came in at $1297M, a 33% YoY revenue growth. )
Adjusted Gross Profit margin for Q4 was 79%, steady as usual
Stock Based Compensation cost was $77.3M, 21% of revenue, an average of the last few quarters.
Net Operating Cash Flow came it at 24% of revenue, $85.4M, an uptick from previous Qs
Cash Flows from Operations over the last 8 Quarters, notice uptick in Deferred Revenue in the last Q
Free Cash Flow was $50.7M, 14% of revenue
Looks like CapEx total was about 10% or rev
One of my worries is that FCF is lower than SBC; but slowly improving (compare to Monday SBC at 11% of revenue and FCF 27%)
Remaining Performance Obligation (RPO) jumped up to $1245M, a 15% growth from previous Q and 37% YoY. AS a refresher: RPO is a metric for Deferred Revenue plus Backlog (included unbilled revenue) and is a metric for revenue potential but not yet realized, it’s better to just look at Revenue but RPO can give us a glimpse into future revenue (but not always)
The one set of metrics that matter to me is Customer growth
Here we see they have a total of 189791 paying customers, they added 7764 customers in the last Q. and 27705 in the last year (17% growth YoY, matching previous year)
Customers with $100K+ ARR increased at the similar rate as last two quarters, they added 198 and ended Q4 with 2756
They finally disclosed mega large customers at Q4.
$500K+ customers are at 346, 56% increase from last year of 222
$1M+ customers 118, 39% increase from last year of 85
And 3 customers pay $20M+
Headcount increased by 153 employees, ending at 3682
Cloudflare now has $1673M in Cash, bravo !
Onto Earnings call transcript (18 pages, and I encourage you to listened to it as well, if you don’t have much time then listen at least to Q&A part of the call)
Prepared Remarks highlights I find instructive
- We had an exceptionally strong quarter
- strength in our largest customers with a record number of net new customers spending more than both $0.5 million a year and $1 million a year on an annualized basis.
- signed our largest new logo with an expected total contract value over $30 million
- and our largest customer renewal with a total contract value of $60 million.
- blew away our previous record for new ACV booked in a quarter. In Q4, new ACV booked grew nearly 40% year-over-year
- Go To Market machinery great, hired Mark Anderson
- We were awarded a three-year contract with a ceiling value of $33 million for the U.S. Department of Commerce
- A leading technology company expanded their relationship with Cloudflare, signing a three-year $6.6 million contract for Cloudflare’s Zero Trust suite to protect access for 10,000 employees and contractors
- A Fortune 500 hospitality company expanded their relationship with Cloudflare, signing a five-year $4.3 million contract for 20,000 Zero Trust seats.
- A Fortune 500 technology company signed a two-year $6 million contract for advanced application security.
- A sophisticated tech company with one of the most technical and daring engineering teams signed a two-year $646,000 contract.
- A large US commercial airline expanded their relationship with Cloudflare, signing a two-year $857,000 contract to procure Zero Trust seats.
- local government authority in the UK signed a five-year $2.1 million contract for 4,700 Zero Trust seats
(NOTE: the theme here seems to be: our Zero Trust products are winning customers)
AI theme
- As of the end of 2023, we deployed GPUs in 120 cities globally, meaningfully ahead of our target of 100 cities.
- By the end of 2024, we plan to have inference-tuned GPUs deployed in nearly every city that makes up Cloudflare’s global network and within milliseconds of nearly every device connected to the Internet worldwide.
- From our launch in September to the month of December, the average number of daily Workers AI requests increased 9x.
- We are also extremely encouraged by the interest in Vectorize our vector database
Overall: It feels like we’re once again firing on all cylinders
I am skipping Questions and Answers Part for now after I re-listen and re-read the ER call transcript
Overall things are going great for me as an investor in Cloudflare
Initial Price reaction was a bit crazy, stock went up to $116 and then sharp down to $98 this morning. It’s just Randomness to me
Disclosure: I hold 18% of our Baconski Family Portfolio in Cloudflare
Thanks,
Baconski
Cheers !
Congrats to Mark Anderson
