Cloudflare, Inc. (NET) Bundle
A Brief History of H3
H3, a leading player in the cloud services sector, has experienced significant growth and transformation since its inception. As of 2024, the company has reached key financial milestones that reflect its strategic direction and market positioning.
Company Overview
Founded in 2010, H3 has evolved from a startup to a major provider of cloud infrastructure solutions, catering to a diverse range of clients. The company focuses on delivering innovative services that enhance digital transformation for businesses globally.
Financial Performance
For the nine months ended September 30, 2024, H3 reported total revenues of $1,209.7 million, marking a 29% increase from $934.3 million in the same period of 2023. The revenue growth was primarily driven by a 22% increase in the number of paying customers and a strong dollar-based net retention rate of 110%.
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenue | $430.1 million | $335.6 million | 28% |
| Cost of Revenue | $96.0 million | $78.1 million | 23% |
| Gross Margin | 78% | 77% | 1% |
| Net Loss | $(15.3) million | $(23.5) million | 35% |
Investment and Expansion
In 2024, H3 has significantly invested in expanding its infrastructure, including capital expenditures of $111.9 million. This investment aims to enhance service capacity and improve operational efficiency. The company also increased its cash reserves, holding $182.9 million in cash and cash equivalents by September 30, 2024.
Stock Performance
As of September 30, 2024, H3's stock has shown resilience in the market, trading at approximately $18.50 per share. The company has consistently implemented stock buyback programs and engaged in strategic equity issuances to bolster its capital structure.
| Stock Performance Metric | Value |
|---|---|
| Current Share Price | $18.50 |
| Market Capitalization | $5.5 billion |
| Shares Outstanding | 304.4 million |
Future Outlook
Looking ahead, H3 plans to continue its aggressive growth strategy by exploring new markets and enhancing its product offerings. The company is well-positioned to capitalize on the increasing demand for cloud services and digital infrastructure solutions.
Key Business Metrics
| Metric | Value (End of Q3 2024) |
|---|---|
| Paying Customers | 221,540 |
| Average Revenue per User (ARPU) | $1,800 |
| Annualized Revenue per Paying Customer | $100,000+ |
As of September 30, 2024, H3's financial health remains robust, with a strategic focus on innovation and customer satisfaction driving its growth trajectory. The company continues to adapt to market dynamics while maintaining its commitment to delivering high-quality services to its clients.
A Who Owns Cloudflare, Inc. (NET)
Overview of Ownership Structure
As of September 30, 2024, Cloudflare, Inc. has both Class A and Class B common stock. The Class A common stock has one vote per share, while the Class B common stock has ten votes per share. This dual-class structure provides significant voting control to the holders of Class B shares, primarily the co-founders and executive officers.
Major Shareholders
Collectively, the co-founders and executive officers hold approximately 53.3% of the voting power of Cloudflare's capital stock. Directors, executive officers, and holders of more than 5% of the stock together control 74.8% of the voting power as of the same date.
| Shareholder Type | Percentage of Voting Power |
|---|---|
| Co-founders and Executive Officers | 53.3% |
| Directors and Executive Officers (Total) | 74.8% |
Class Distribution of Common Stock
As of September 30, 2024, the distribution of Cloudflare's common stock is as follows:
| Class | Shares Issued | Voting Power |
|---|---|---|
| Class A Common Stock | 305,386 | 1 vote per share |
| Class B Common Stock | 37,661 | 10 votes per share |
Recent Stock Performance
As of the end of the third quarter of 2024, Cloudflare's performance metrics were as follows:
| Metric | Value |
|---|---|
| Class A Share Price | $85.00 |
| Market Capitalization | $26.05 billion |
| Revenue (Last Quarter) | $430.1 million |
| Net Loss (Last Quarter) | $(15.3) million |
| Total Assets | $3.06 billion |
Stockholder Equity
The stockholders' equity as of September 30, 2024, is summarized below:
| Equity Component | Value (in thousands) |
|---|---|
| Class A Common Stock | $305 |
| Class B Common Stock | $37 |
| Additional Paid-in Capital | $2,046,593 |
| Accumulated Deficit | $(1,089,792) |
| Accumulated Other Comprehensive Income | $15,947 |
| Total Stockholders' Equity | $973,090 |
Conclusion on Ownership Dynamics
The concentrated ownership structure of Cloudflare, with significant control resting in the hands of its co-founders and executive officers, plays a crucial role in its corporate governance. This structure enables them to maintain a strategic direction that aligns with their vision for the company while potentially limiting the influence of outside shareholders in corporate decisions.
Cloudflare, Inc. (NET) Mission Statement
Cloudflare’s mission is to help build a better Internet. The company strives to enhance the security, performance, and reliability of the Internet for its customers. Cloudflare has built a global network that delivers a broad range of services to businesses of all sizes and in all geographies. This includes making their applications more secure, improving performance, and eliminating the costs and complexities associated with managing individual network hardware. Cloudflare's network serves as a scalable, easy-to-use, unified control plane to deliver security, performance, and reliability across on-premises, hybrid, cloud, and software-as-a-service (SaaS) applications.
Financial Overview
As of September 30, 2024, Cloudflare reported total revenue of $430,082,000 for the third quarter, compared to $335,603,000 for the same period in 2023, reflecting a growth of approximately 28.2% year-over-year. For the nine months ended September 30, 2024, revenue was $1,209,680,000, compared to $934,272,000 for the same period in 2023, marking an increase of approximately 29.4%.
| Financial Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Revenue | $430,082,000 | $335,603,000 | $1,209,680,000 | $934,272,000 |
| Gross Profit | $334,115,000 | $257,534,000 | $939,664,000 | $710,550,000 |
| Net Loss | $(15,331,000) | $(23,535,000) | $(65,952,000) | $(156,084,000) |
| Operating Expenses | $364,909,000 | $296,746,000 | $1,059,706,000 | $853,206,000 |
Key Business Metrics
As of September 30, 2024, Cloudflare reported 221,540 paying customers, an increase from 182,027 in the previous year. The number of customers with annualized revenue greater than $100,000 reached 3,265, up from 2,558 in September 2023. The company's dollar-based net retention rate was 110%, down from 116% in the previous year, indicating a slight decline in revenue retention from existing customers.
| Business Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Paying Customers | 221,540 | 182,027 |
| Customers (> $100,000 Annualized Revenue) | 3,265 | 2,558 |
| Dollar-Based Net Retention Rate | 110% | 116% |
Stock Performance
As of October 24, 2024, Cloudflare had 305,713,757 shares of Class A common stock and 37,480,159 shares of Class B common stock outstanding. The total stockholders' equity was reported at $973,090,000, an increase from $763,047,000 at the end of 2023.
| Stock Information | As of October 24, 2024 | As of December 31, 2023 |
|---|---|---|
| Class A Common Stock Outstanding | 305,713,757 | 298,089,000 |
| Class B Common Stock Outstanding | 37,480,159 | 39,443,000 |
| Total Stockholders' Equity | $973,090,000 | $763,047,000 |
Recent Developments
In the third quarter of 2024, Cloudflare reported a net loss of $(15,331,000), a decrease from $(23,535,000) in Q3 2023. The company continues to focus on expanding its service offerings and enhancing its network capabilities. Cloudflare initiated a foreign exchange hedging program in Q2 2024 to mitigate currency fluctuations on its non-U.S. dollar denominated currency exposures.
As of September 30, 2024, the company’s total assets amounted to $3,062,746,000, up from $2,759,767,000 at the end of 2023.
| Asset Overview | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Total Assets | $3,062,746,000 | $2,759,767,000 |
| Total Liabilities | $2,089,656,000 | $1,996,720,000 |
How Cloudflare, Inc. (NET) Works
Business Model
Cloudflare, Inc. operates as a global cloud services provider, offering a suite of products designed to enhance website performance, security, and reliability. Its primary offerings include content delivery network (CDN) services, DDoS protection, Internet security, and domain name system (DNS) services. The company utilizes a subscription-based model, which allows it to generate recurring revenue from its customers.
Financial Performance
As of September 30, 2024, Cloudflare reported a revenue of $430,082,000 for the three months ended September 30, 2024, representing a 28% increase compared to $335,603,000 for the same period in 2023. For the nine months ended September 30, 2024, the revenue was $1,209,680,000, a 29% increase from $934,272,000 in 2023.
| Period | Revenue ($) | Change ($) | Change (%) |
|---|---|---|---|
| Three Months Ended September 30, 2024 | 430,082,000 | 94,479,000 | 28% |
| Three Months Ended September 30, 2023 | 335,603,000 | - | - |
| Nine Months Ended September 30, 2024 | 1,209,680,000 | 275,408,000 | 29% |
| Nine Months Ended September 30, 2023 | 934,272,000 | - | - |
Cost of Revenue and Gross Margin
For the three months ended September 30, 2024, the cost of revenue was $95,967,000, up 23% from $78,069,000 in 2023. The gross margin for this period was 78%, compared to 77% in the previous year. For the nine months ended September 30, 2024, the cost of revenue was $270,016,000, reflecting a 21% increase from $223,722,000 in 2023. Gross margin for this period remained steady at 78% compared to 76% in 2023.
| Period | Cost of Revenue ($) | Gross Margin (%) |
|---|---|---|
| Three Months Ended September 30, 2024 | 95,967,000 | 78% |
| Three Months Ended September 30, 2023 | 78,069,000 | 77% |
| Nine Months Ended September 30, 2024 | 270,016,000 | 78% |
| Nine Months Ended September 30, 2023 | 223,722,000 | 76% |
Operating Expenses
Operating expenses for the three months ended September 30, 2024, totaled $364,909,000, up from $296,746,000 in 2023, marking a 23% increase. The breakdown of operating expenses includes:
- Sales and marketing: $185,221,000 (up 23% from $150,214,000)
- Research and development: $110,911,000 (up 22% from $90,593,000)
- General and administrative: $68,777,000 (up 23% from $55,939,000)
Net Loss
Cloudflare reported a net loss of $15,331,000 for the three months ended September 30, 2024, compared to a net loss of $23,535,000 for the same period in 2023. For the nine months ended September 30, 2024, the net loss was $65,952,000, down from $156,084,000 in the prior year.
| Period | Net Loss ($) |
|---|---|
| Three Months Ended September 30, 2024 | (15,331,000) |
| Three Months Ended September 30, 2023 | (23,535,000) |
| Nine Months Ended September 30, 2024 | (65,952,000) |
| Nine Months Ended September 30, 2023 | (156,084,000) |
Customer Metrics
As of September 30, 2024, Cloudflare reported 221,540 paying customers, an increase of 22% from 182,027 in 2023. Additionally, the number of customers contributing more than $100,000 in annual revenue grew to 3,265, up from 2,558 in the previous year.
| Customer Metric | 2024 | 2023 |
|---|---|---|
| Total Paying Customers | 221,540 | 182,027 |
| Customers > $100,000 Annual Revenue | 3,265 | 2,558 |
Cash Flow and Liquidity
For the nine months ended September 30, 2024, Cloudflare generated $253,121,000 in net cash from operating activities, compared to $168,965,000 in 2023. The company reported free cash flow of $119,161,000, a significant increase from $68,748,000 in the prior year.
| Cash Flow Metric | 2024 ($) | 2023 ($) |
|---|---|---|
| Net Cash from Operating Activities | 253,121,000 | 168,965,000 |
| Free Cash Flow | 119,161,000 | 68,748,000 |
Balance Sheet Highlights
As of September 30, 2024, Cloudflare's total stockholders' equity was $973,090,000, up from $763,047,000 at the end of 2023. The company had total liabilities of $2,089,656,000, resulting in total assets of $3,062,746,000.
| Balance Sheet Item | Amount ($) |
|---|---|
| Total Assets | 3,062,746,000 |
| Total Liabilities | 2,089,656,000 |
| Total Stockholders' Equity | 973,090,000 |
How Cloudflare, Inc. (NET) Makes Money
Revenue Streams
Cloudflare primarily generates revenue through subscription services. The total revenue for the three months ended September 30, 2024, was $430.1 million, an increase of 28% compared to $335.6 million for the same period in 2023. For the nine months ended September 30, 2024, revenue reached $1.21 billion, up 29% from $934.3 million in 2023.
Customer Base
As of September 30, 2024, Cloudflare had 221,540 paying customers, a 22% increase from 182,027 in the previous year. Among these, 3,265 customers contributed more than $100,000 in annualized revenue, up from 2,558 in 2023.
Revenue by Region
| Region | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | % of Total Revenue Q3 2024 | % of Total Revenue Q3 2023 |
|---|---|---|---|---|
| United States | $214,955 | $175,519 | 50% | 52% |
| Europe, Middle East, and Africa | $121,802 | $92,705 | 28% | 28% |
| Asia Pacific | $59,103 | $42,960 | 14% | 13% |
| Other | $34,222 | $24,419 | 8% | 7% |
Cost Structure
The cost of revenue for Q3 2024 was $96.0 million, representing a 23% increase from $78.1 million in Q3 2023. For the nine months ended September 30, 2024, cost of revenue was $270.0 million, up 21% from $223.7 million in 2023.
Operating Expenses
- Sales and Marketing: For Q3 2024, expenses totaled $185.2 million, a 23% increase from $150.2 million in Q3 2023. For the nine months, expenses were $553.8 million, a 28% rise from $433.9 million.
- Research and Development: Q3 2024 expenses were $110.9 million, up 22% from $90.6 million in Q3 2023. For the nine months, expenses reached $301.2 million, a 15% increase from $261.7 million.
- General and Administrative: For Q3 2024, expenses totaled $68.8 million, reflecting a 23% increase from $55.9 million in Q3 2023. For the nine-month period, expenses were $204.7 million, up 30% from $157.6 million.
Profitability Metrics
Gross profit for Q3 2024 was $334.1 million, yielding a gross margin of 78%, consistent with Q3 2023. The loss from operations for Q3 2024 was $30.8 million, compared to a loss of $39.2 million in Q3 2023.
Non-Operating Income and Expenses
In Q3 2024, Cloudflare reported interest income of $22.5 million and interest expense of $1.4 million. The net loss for the quarter was $15.3 million, compared to a net loss of $23.5 million in Q3 2023.
Stockholder Equity
As of September 30, 2024, Cloudflare's total stockholders' equity was $973.1 million, up from $763.0 million at the end of 2023.
Cash Flow Metrics
Cloudflare generated $253.1 million in cash from operating activities for the nine months ended September 30, 2024, compared to $169.0 million in the same period of 2023.
Conclusion of Financial Analysis
The metrics above illustrate Cloudflare's growth trajectory, customer acquisition strategy, and cost management efforts as it navigates the competitive landscape of cloud services and cybersecurity.
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Resources:
- Cloudflare, Inc. (NET) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Cloudflare, Inc. (NET)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Cloudflare, Inc. (NET)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.