NET Q4 and full year results

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https://cloudflare.net/news/news-details/2021/Cloudflare-Ann…

Cloudflare Announces Fourth Quarter and Fiscal Year 2020 Financial Results
02/11/2021
Fiscal year 2020 revenue totaled $431 million, representing an increase of 50% year-over-year; Q4 revenue totaled $126 million, also representing an increase of 50% year-over-year
Fiscal year 2020 GAAP operating margin of (24.8)%, representing an improvement of 1,280 basis points year-over-year; non-GAAP operating margin of (7.9)%, representing an improvement of 1,690 basis points year-over-year
Dollar-based net retention of 119%, representing an improvement of 300 basis points sequentially, driven by continued strength from large enterprise customers
SAN FRANCISCO–(BUSINESS WIRE)-- Cloudflare, Inc. (NYSE: NET), the security, performance, and reliability company helping to build a better Internet, today announced financial results for its fourth quarter and fiscal year ended December 31, 2020.

“We had a remarkable end to a year we’ll never forget, delivering a record fourth quarter and full year 2020. Our paid customer count grew to more than 111,000, with our largest customers continuing to be our strongest growth area,” said Matthew Prince, co-founder and CEO of Cloudflare. “We helped our customers shift away from the weight of the appliances that held them down when they needed flexibility to succeed, and delivered more than 550 products and capabilities during 2020 that also supported needs bigger than all of us—whether it was helping to secure the US election from cyberattacks or ensuring COVID-19 vaccine registration sites withstand demand with Project Fair Shot. Innovation is the energy that fuels Cloudflare, differentiates us in the market, and enables us to help build a better Internet.”

Fourth Quarter 2020 Financial Highlights

Revenue: Total revenue of $125.9 million, representing an increase of 50% year-over-year.
Gross Profit: GAAP gross profit was $96.9 million, or 76.9% gross margin, compared to $65.7 million, or 78.3%, in the fourth quarter of 2019. Non-GAAP gross profit was $98.3 million, or 78.1% gross margin, compared to $66.0 million, or 78.7%, in the fourth quarter of 2019.
Operating Loss: GAAP loss from operations was $24.7 million, or 19.6% of total revenue, compared to $29.9 million, or 35.7% of total revenue, in the fourth quarter of 2019. Non-GAAP loss from operations was $5.5 million, or 4.3% of total revenue, compared to $18.3 million, or 21.8% of total revenue, in the fourth quarter of 2019.
Net Loss: GAAP net loss was $34.0 million, compared to $28.2 million in the fourth quarter of 2019. Non-GAAP net loss was $7.4 million, compared to $16.4 million in the fourth quarter of 2019. GAAP net loss per share was $0.11, compared to $0.10 in the fourth quarter of 2019. Non-GAAP net loss per share was $0.02, compared to $0.06 in the fourth quarter of 2019.
Cash Flow: Net cash flow from operations was negative $8.8 million, compared to negative $8.6 million for the fourth quarter of 2019. Free cash flow was negative $23.5 million, or 19% of total revenue, compared to negative $23.5 million, or 28% of total revenue, in the fourth quarter of 2019.
Cash, cash equivalents, and available-for-sale securities were $1,032.1 million as of December 31, 2020.

Lee

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A bit disappointed in the growth numbers here. QoQ of about 10% annualizes to about 50%. Was hoping for closer to 60%. Seems they’ve remained a 50% grower give or take since their first report. Nothing wrong with 50%… was just expecting more.

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Looking at the year over year growth for last 4 quarters it was accelerating. But the net retention rate and operating margins are up.

Let me cogitate on this. I have a little cash left. Might add some as it is down after hours.

Cheers
Qazulight

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I saw the numbers and though one may quibble 50% vs. 60% annualized, I’ll say that my eyeball test as a physician in the ER and the ICU is that we are only going to need more Cloudfare at least for their healthcare applications because of their reliability and security.

A year in, and we are still expanding Cloudfare usage at my hospital. And it’s not a trend that will reverse after COVID - this is a seismic change in how we do medicine from a practice workflow standpoint and from a reimbursement perspective. To wit:

Any patient with a respiratory complaint doesn’t make it inside my ER anymore (unless they’re unstable or getting admitted). They are seen in a “respiratory tent” and Cloudfare underpins the technology by which we take a history and examine the patient. In the ICU, I stand on the other side of a glass wall of a COVID patient and converse via the same technology, and perform nurse-aided exams. This cuts our use of personal protective equipment, and insurers now reimburse us at the same rate for these virtual encounters as they do real ones where I physically touch a patient. This Jack will not be put back in the box, at least in healthcare.

Obviously there are many diverse industry types that Cloudfare is penetrating, but at least in healthcare, they will ride the wave of both pure telemedicine plays, but also brick-and-mortal hospital and clinic settings where direct contact will be less frequent.

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Wondering how YoY comparisons are playing on analysts minds. With COVID still rampant, can we make meaningful comparisons on sales and forecasts? I know my company is doing 100% virtual sales calls, and zero trade shows, so there is a weird slant on the books from reduced travel, expenses, etc.

Just not sure what to make of these reports. I see DDOG having a similar impact.

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On the surface this appears to be a business-as-usual report and I’m pretty happy with it.
The worry is deceleration. Did I hear/read there were some one-time events last quarter that could allow us to consider it a ~50% YoY quarter? That would allow us to discount some of last quarter and the view looks more stable. However, they are forecasting lower. The statement says:

" * Total revenue of $130 to $131 million"

This would create a QoQ growth rate of just 4%. However, if they beat by 6%, which seems reasonable, they are roughly inline with recent quarters again and re-accelerating that YoY number:


	 +6%    **Dec-20**	Sep-20	Jun-20	Mar-20	Dec-19	Sep-19
Revenue	138.86  **126**     114.2	99.7	91.3	83.9	73.9
YoY	52%     **50%**     55%	48%	38%	40%	41%
QoQ	10.2%   **10.3%**   14.5%	 9.2%	 8.8%	13.5%	 9.6%

Of course if they just repeat 10% four times we are at 40% growth YoY. I believe I heard them say they expect to be in the high-30s% so this doesn’t seem like a stretch, and perhaps even shooting far to low.

Notice nothing in this post discusses the business beyond sales. Did anyone pick up anything of note? So far the only thing I see worth discussing is this top-line stuff. DBNR going up 3% to 119% is great but not real exciting.

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Minor quibble: 10% QoQ is equivalent to 46% YoY, not 40%.

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Quibble away! That is a very good point I lazy-ed away the compound growth…the best part! /facepalm!

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The full year '21 rev guide of about $590mil is disappointing. The company is valuation very expensive and guiding revs for next year at ~+37% isn’t great

Bnh

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I rewrote my prior post to make matters more clear. Please see the bolded question now in the middle and remember I don’t do this professionally, right🙃. I’ll ask that my prior post be taken down.

After listening to the CC, I’m not taking Guidance as meaningful (They’ve got to beat and raise for the whole year and RPO was up 17% QoQ, after being up 25% sequentially on Q3).

Because Cloudflare is not primarily usage based, I believe the 75% conversion of their free Teams last quarter was what bumped QoQ Revenue Growth for Q3 to 14.5%. Without this bump in Q4, Rev Gr QoQ was 10.3%(higher than March 8.8%or June 9.2%). So if I see Q3 revenue in this light, I do not see declining revenue growth, when looking at QoQ. I see somewhat steady acceleration of revenue growth QoQ (from Q1 8.8% to Q2 9.2% to Q3 9.6%(+4.9%bump) to 10.3%).

Looking at this +4.9% of Increase of Q3revenue increase due to the 75% of 2000+ developers being converted to payers, does that look possible to anyone but me?

According to the the CC, Cloudflare had more customers adds this quarter than all of last year. And despite their Freemium sales model they increased NRR to 119%.
This and my recent prior posts reguarding their incredible pace of innovation, increasing their TAM substantially, I’m holding at 24% of my portfolio.

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