Cloudflare Announces First Quarter 2024 Financial Results

  • First quarter revenue totaled $378.6 million, representing an increase of 30% year-over-year
  • GAAP loss from operations of $54.6 million, or 14% of revenue, and non-GAAP income from operations of $42.4 million, or 11% of revenue
  • Operating cash flow of $73.6 million, or 19% of revenue, and free cash flow of $35.6 million, or 9% of revenue

Cloudflare, Inc. (NYSE: NET), the leading connectivity cloud company, today announced financial results for its first quarter ended March 31, 2024.

“The first quarter marked a strong start to the year, as we grew revenue 30% year-over-year to $378.6 million—fueled by a record number of net-new customers year-over-year spending more than $100,000, $500,000, and $1 million with Cloudflare on an annualized basis. I'm incredibly proud of the fact that our team has been able to continue to build our network, service larger and larger customers, and launch entirely new categories of products—including in the AI space—while also remaining disciplined with our gross and operating margins and our free cash flow,” said Matthew Prince, co-founder & CEO of Cloudflare. “We’ve also delivered a double-digit year-over-year improvement in sales productivity again this quarter. Cloudflare has always been powered by our relentless innovation engine, and I’m encouraged by our progress in building a go-to-market engine that will also be the envy of the industry.”

First Quarter Fiscal 2024 Financial Highlights

  • Revenue: Total revenue of $378.6 million, representing an increase of 30% year-over-year.
  • Gross Profit: GAAP gross profit was $293.6 million, or 77.5% gross margin, compared to $219.7 million, or 75.7%, in the first quarter of 2023. Non-GAAP gross profit was $301.1 million, or 79.5% gross margin, compared to $225.9 million, or 77.8%, in the first quarter of 2023.
  • Operating Income (Loss): GAAP loss from operations was $54.6 million, or 14.4% of revenue, compared to $47.3 million, or 16.3% of revenue, in the first quarter of 2023. Non-GAAP income from operations was $42.4 million, or 11.2% of revenue, compared to $19.4 million, or 6.7% of revenue, in the first quarter of 2023.
  • Net Income (Loss): GAAP net loss was $35.5 million, compared to $38.1 million in the first quarter of 2023. GAAP net loss per basic and diluted share was $0.10, compared to $0.12 in the first quarter of 2023. Non-GAAP net income was $58.2 million, compared to $27.2 million in the first quarter of 2023. Non-GAAP net income per diluted share was $0.16, compared to $0.08 in the first quarter of 2023.
  • Cash Flow: Net cash flow from operating activities was $73.6 million, compared to $36.4 million for the first quarter of 2023. Free cash flow was $35.6 million, or 9% of revenue, compared to $13.9 million, or 5% of revenue, in the first quarter of 2023.
  • Cash, cash equivalents, and available-for-sale securities were $1,716.2 million as of March 31, 2024.

The section titled "Non-GAAP Financial Information" below describes our usage of non-GAAP financial measures. Reconciliations between historical GAAP and non-GAAP information are contained at the end of this press release following the accompanying financial data.

Financial Outlook

For the second quarter of fiscal 2024, we expect:

  • Total revenue of $393.5 to $394.5 million
  • Non-GAAP income from operations of $35.0 to $36.0 million
  • Non-GAAP net income per share of $0.14, utilizing weighted average common shares outstanding of approximately 360 million

For the full year fiscal 2024, we expect:

  • Total revenue of $1,648.0 to $1,652.0 million
  • Non-GAAP income from operations of $160.0 to $164.0 million
  • Non-GAAP net income per share of $0.60 to $0.61, utilizing weighted average common shares outstanding of approximately 361 million

These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Conference Call Information

Cloudflare will host an investor conference call to discuss its first quarter ended March 31, 2024 earnings results today at 2:00 p.m. Pacific time (5:00 p.m. Eastern time). Interested parties can access the call by dialing (877) 400-4517 from the United States or (332) 251-2620 internationally with conference ID 3723782. A live webcast of the conference call will be accessible from the investor relations website at https://cloudflare.NET. A replay will be available approximately two hours after the conclusion of the live event and will remain available for approximately one year.

Supplemental Financial and Other Information

Supplemental financial and other information can be accessed through the Company’s investor relations website at https://cloudflare.NET.

Non-GAAP Financial Information

Cloudflare believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Reconciliations of non-GAAP financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future. For further information regarding why Cloudflare believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the “Explanation of Non-GAAP Financial Measures” section at the end of this press release.

Available Information

Cloudflare intends to use its press releases, website, investor relations website, news site, blog, X account, Facebook account, and Instagram account, in addition to filings made with the Securities and Exchange Commission (SEC) and public conference calls, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “explore,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these words, or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. However, not all forward-looking statements contain these identifying words. Forward-looking statements expressed or implied in this press release include, but are not limited to, statements regarding our future financial and operating performance, our reputation and performance in the market, general market trends, our estimated and projected revenue, non-GAAP income from operations and non-GAAP net income per share, shares outstanding, the benefits to customers from using our products, the expected functionality and performance of our products, the demand by customers for our products, our plans and objectives for future operations, growth, initiatives, or strategies, our market opportunity, and comments made by our CEO and others. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the impact of adverse macroeconomic conditions, such as inflation, high interest rates, actual or potential bank failures and recessionary concerns, on our and our customers’, vendors’, and partners’ operations and future financial performance; 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 geopolitical tensions; our history of net losses; risks associated with managing our rapid growth; our ability to attract and retain new customers (including new large customers); our ability to retain and upgrade paying customers and convert free customers to paying customers; our ability to expand the number of products we sell to paying customers; our ability to effectively increase sales to large customers; our ability to increase brand awareness; our ability to continue to innovate and develop new products and product features; our ability to generate demand for our products; our ability to effectively attract, train, and retain our sales force to be able to sell our existing and new products and product features; our sales team’s productivity; our ability to effectively attract, integrate and retain key personnel; problems with our internal systems, network, or data, including actual or perceived breaches or failures; rapidly evolving technological developments, including advancements in AI, in the market; length of our sales cycles and the timing of payments by our customers; activities of our paying and free customers or the content of their websites and other Internet properties that use our network and products; foreign currency fluctuations; changes in the legal, tax, and regulatory environment applicable to our business; and other general market, political, economic, and business conditions. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our filings with the SEC, including our Annual Report on Form 10-K filed on February 21, 2024, as well as other filings that we may make from time to time with the SEC.

The forward-looking statements made in this press release relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

About Cloudflare

Cloudflare, Inc. (NYSE: NET) is the leading connectivity cloud company on a mission to help build a better Internet. It empowers organizations to make their employees, applications and networks faster and more secure everywhere, while reducing complexity and cost. Cloudflare’s connectivity cloud delivers the most full-featured, unified platform of cloud-native products and developer tools, so any organization can gain the control they need to work, develop, and accelerate their business.

Powered by one of the world’s largest and most interconnected networks, Cloudflare blocks billions of threats online for its customers every day. It is trusted by millions of organizations – from the largest brands to entrepreneurs and small businesses to nonprofits, humanitarian groups, and governments across the globe.

Learn more about Cloudflare’s connectivity cloud at cloudflare.com/connectivity-cloud. Learn more about the latest Internet trends and insights at radar.cloudflare.com.

CLOUDFLARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

Three Months Ended

March 31,

 

2024

 

2023

Revenue

$

378,602

 

 

$

290,175

 

Cost of revenue(1)(2)

 

85,038

 

 

 

70,432

 

Gross profit

 

293,564

 

 

 

219,743

 

Operating expenses:

 

 

 

Sales and marketing(1)(2)(3)

 

194,102

 

 

 

137,001

 

Research and development(1)

 

87,703

 

 

 

81,539

 

General and administrative(1)

 

66,309

 

 

 

48,475

 

Total operating expenses

 

348,114

 

 

 

267,015

 

Loss from operations

 

(54,550

)

 

 

(47,272

)

Non-operating income (expense):

 

 

 

Interest income

 

21,252

 

 

 

13,487

 

Interest expense(4)

 

(1,100

)

 

 

(2,126

)

Other income (expense), net

 

1,124

 

 

 

(857

)

Total non-operating income, net

 

21,276

 

 

 

10,504

 

Loss before income taxes

 

(33,274

)

 

 

(36,768

)

Provision for income taxes

 

2,269

 

 

 

1,314

 

Net loss

$

(35,543

)

 

$

(38,082

)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.10

)

 

$

(0.12

)

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

 

338,583

 

 

 

330,389

 

____________

(1) Includes stock-based compensation and related employer payroll taxes as follows:

Cost of revenue

$

2,822

 

$

1,803

Sales and marketing

 

21,775

 

 

15,868

Research and development

 

28,980

 

 

30,216

General and administrative

 

23,150

 

 

13,863

Total stock-based compensation and related employer payroll taxes

$

76,727

 

$

61,750

(2) Includes amortization of acquired intangible assets as follows:

Cost of revenue

$

4,691

 

$

4,311

Sales and marketing

 

575

 

 

576

Total amortization of acquired intangible assets

$

5,266

 

$

4,887

(3) Includes one-time compensation charge as follows:

Sales and marketing

$

15,000

 

$

Total one-time compensation charge

$

15,000

 

$

(4) Includes amortization of debt issuance costs as follows:

Interest expense

$

990

 

$

1,163

Total amortization of debt issuance costs

$

990

 

$

1,163

CLOUDFLARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(unaudited)

 

March 31,

2024

 

December 31,

2023

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

254,401

 

 

$

86,864

 

Available-for-sale securities

 

1,461,801

 

 

 

1,586,880

 

Accounts receivable, net

 

213,183

 

 

 

248,268

 

Contract assets

 

11,589

 

 

 

11,041

 

Restricted cash short-term

 

5,535

 

 

 

2,522

 

Prepaid expenses and other current assets

 

69,663

 

 

 

47,502

 

Total current assets

 

2,016,172

 

 

 

1,983,077

 

Property and equipment, net

 

329,422

 

 

 

322,813

 

Goodwill

 

148,047

 

 

 

148,047

 

Acquired intangible assets, net

 

14,298

 

 

 

19,564

 

Operating lease right-of-use assets

 

141,820

 

 

 

138,556

 

Deferred contract acquisition costs, noncurrent

 

137,527

 

 

 

133,236

 

Restricted cash

 

1,838

 

 

 

1,838

 

Other noncurrent assets

 

12,506

 

 

 

12,636

 

Total assets

$

2,801,630

 

 

$

2,759,767

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

47,832

 

 

$

53,727

 

Accrued expenses and other current liabilities

 

68,412

 

 

 

63,597

 

Accrued compensation

 

62,299

 

 

 

63,801

 

Operating lease liabilities

 

39,273

 

 

 

38,351

 

Deferred revenue

 

356,243

 

 

 

347,608

 

Total current liabilities

 

574,059

 

 

 

567,084

 

Convertible senior notes, net

 

1,284,352

 

 

 

1,283,362

 

Operating lease liabilities, noncurrent

 

113,017

 

 

 

113,490

 

Deferred revenue, noncurrent

 

17,645

 

 

 

17,244

 

Other noncurrent liabilities

 

15,333

 

 

 

15,540

 

Total liabilities

 

2,004,406

 

 

 

1,996,720

 

Stockholders’ Equity

 

 

 

Class A common stock; $0.001 par value; 2,250,000 shares authorized as of March 31, 2024 and December 31, 2023; 301,023 and 298,089 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

300

 

 

 

297

 

Class B common stock; $0.001 par value; 315,000 shares authorized as of March 31, 2024 and December 31, 2023; 38,710 and 39,443 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

39

 

 

 

40

 

Additional paid-in capital

 

1,857,168

 

 

 

1,784,566

 

Accumulated deficit

 

(1,059,383

)

 

 

(1,023,840

)

Accumulated other comprehensive income (loss)

 

(900

)

 

 

1,984

 

Total stockholders’ equity

 

797,224

 

 

 

763,047

 

Total liabilities and stockholders’ equity

$

2,801,630

 

 

$

2,759,767

 

CLOUDFLARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Three Months Ended March 31,

 

2024

 

2023

Cash Flows from Operating Activities

 

 

 

Net loss

$

(35,543

)

 

$

(38,082

)

Adjustments to reconcile net loss to cash provided by operating activities:

 

 

 

Depreciation and amortization expense

 

30,112

 

 

 

31,509

 

Non-cash operating lease costs

 

11,863

 

 

 

11,061

 

Amortization of deferred contract acquisition costs

 

18,107

 

 

 

14,109

 

Stock-based compensation expense

 

69,723

 

 

 

57,401

 

Amortization of debt issuance costs

 

990

 

 

 

1,163

 

Net accretion of discounts and amortization of premiums on available-for-sale securities

 

(12,713

)

 

 

(8,228

)

Deferred income taxes

 

(276

)

 

 

(120

)

Provision for bad debt

 

3,223

 

 

 

1,576

 

Other

 

106

 

 

 

(14

)

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

Accounts receivable, net

 

31,862

 

 

 

(32,781

)

Contract assets

 

(548

)

 

 

269

 

Deferred contract acquisition costs

 

(22,398

)

 

 

(19,391

)

Prepaid expenses and other current assets

 

(23,022

)

 

 

(8,934

)

Other noncurrent assets

 

760

 

 

 

(811

)

Accounts payable

 

3,073

 

 

 

11,634

 

Accrued expenses and other current liabilities

 

3,838

 

 

 

650

 

Operating lease liabilities

 

(14,678

)

 

 

(6,908

)

Deferred revenue

 

9,036

 

 

 

21,881

 

Other noncurrent liabilities

 

64

 

 

 

430

 

Net cash provided by operating activities

 

73,579

 

 

 

36,414

 

Cash Flows from Investing Activities

 

 

 

Purchases of property and equipment

 

(32,056

)

 

 

(17,541

)

Capitalized internal-use software

 

(5,916

)

 

 

(4,970

)

Purchases of available-for-sale securities

 

(298,995

)

 

 

(476,206

)

Sales of available-for-sale securities

 

 

 

 

20,248

 

Maturities of available-for-sale securities

 

433,903

 

 

 

493,988

 

Other investing activities

 

14

 

 

 

48

 

Net cash provided by investing activities

 

96,950

 

 

 

15,567

 

Cash Flows from Financing Activities

 

 

 

Proceeds from the exercise of stock options

 

4,422

 

 

 

3,305

 

Payment of tax withholding obligation on RSU settlement

 

(4,401

)

 

 

(2,058

)

Net cash provided by financing activities

 

21

 

 

 

1,247

 

Net increase in cash, cash equivalents, and restricted cash

 

170,550

 

 

 

53,228

 

Cash, cash equivalents, and restricted cash, beginning of period

 

91,224

 

 

 

215,204

 

Cash, cash equivalents, and restricted cash, end of period

$

261,774

 

 

$

268,432

 

CLOUDFLARE, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

(unaudited)

 

Three Months Ended

March 31,

 

2024

 

2023

Reconciliation of cost of revenue:

 

 

 

GAAP cost of revenue

$

85,038

 

 

$

70,432

 

Less: Stock-based compensation and related employer payroll taxes

 

(2,822

)

 

 

(1,803

)

Less: Amortization of acquired intangible assets

 

(4,691

)

 

 

(4,311

)

Non-GAAP cost of revenue

$

77,525

 

 

$

64,318

 

Reconciliation of gross profit:

 

 

 

GAAP gross profit

$

293,564

 

 

$

219,743

 

Add: Stock-based compensation and related employer payroll taxes

 

2,822

 

 

 

1,803

 

Add: Amortization of acquired intangible assets

 

4,691

 

 

 

4,311

 

Non-GAAP gross profit

$

301,077

 

 

$

225,857

 

GAAP gross margin

 

77.5

%

 

 

75.7

%

Non-GAAP gross margin

 

79.5

%

 

 

77.8

%

Reconciliation of operating expenses:

 

 

 

GAAP sales and marketing

$

194,102

 

 

$

137,001

 

Less: Stock-based compensation and related employer payroll taxes

 

(21,775

)

 

 

(15,868

)

Less: Amortization of acquired intangible assets

 

(575

)

 

 

(576

)

Less: One-time compensation charge

 

(15,000

)

 

 

 

Non-GAAP sales and marketing

$

156,752

 

 

$

120,557

 

GAAP research and development

$

87,703

 

 

$

81,539

 

Less: Stock-based compensation and related employer payroll taxes

 

(28,980

)

 

 

(30,216

)

Non-GAAP research and development

$

58,723

 

 

$

51,323

 

GAAP general and administrative

$

66,309

 

 

$

48,475

 

Less: Stock-based compensation and related employer payroll taxes

 

(23,150

)

 

 

(13,863

)

Non-GAAP general and administrative

$

43,159

 

 

$

34,612

 

Reconciliation of income (loss) from operations:

 

 

 

GAAP loss from operations

$

(54,550

)

 

$

(47,272

)

Add: Stock-based compensation and related employer payroll taxes

 

76,727

 

 

 

61,750

 

Add: Amortization of acquired intangible assets

 

5,266

 

 

 

4,887

 

Add: One-time compensation charge

 

15,000

 

 

 

 

Non-GAAP income from operations

$

42,443

 

 

$

19,365

 

GAAP operating margin

 

(14.4

)%

 

 

(16.3

)%

Non-GAAP operating margin

 

11.2

%

 

 

6.7

%

CLOUDFLARE, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

(unaudited)

 

Three Months Ended

March 31,

 

2024

 

2023

Reconciliation of interest expense:

 

 

 

GAAP interest expense

$

(1,100

)

 

$

(2,126

)

Add: Amortization of debt issuance costs

 

990

 

 

 

1,163

 

Non-GAAP interest expense

$

(110

)

 

$

(963

)

Reconciliation of provision for income taxes:

 

 

 

GAAP provision for income taxes

$

2,269

 

 

$

1,314

 

Income tax effect of non-GAAP adjustments

 

4,290

 

 

 

2,537

 

Non-GAAP provision for income taxes

$

6,559

 

 

$

3,851

 

Reconciliation of net income (loss) and net income (loss) per share:

 

 

 

GAAP net loss attributable to common stockholders

$

(35,543

)

 

$

(38,082

)

Add: Stock-based compensation and related employer payroll taxes

 

76,727

 

 

 

61,750

 

Add: Amortization of acquired intangible assets

 

5,266

 

 

 

4,887

 

Add: One-time compensation charge

 

15,000

 

 

 

 

Add: Amortization of debt issuance costs

 

990

 

 

 

1,163

 

Income tax effect of non-GAAP adjustments

 

(4,290

)

 

 

(2,537

)

Non-GAAP net income

$

58,150

 

 

$

27,181

 

 

 

 

 

GAAP net loss per share, basic

$

(0.10

)

 

$

(0.12

)

 

 

 

 

GAAP net loss per share, diluted

$

(0.10

)

 

$

(0.12

)

Add: Stock-based compensation and related employer payroll taxes

 

0.23

 

 

 

0.19

 

Add: Amortization of acquired intangible assets

 

0.02

 

 

 

0.01

 

Add: One-time compensation charge

 

0.04

 

 

 

 

Add: Amortization of debt issuance costs

 

 

 

 

 

Income tax effect of non-GAAP adjustment

 

(0.01

)

 

 

(0.01

)

Effect of dilutive shares

 

(0.02

)

 

 

0.01

 

Non-GAAP net income per share, diluted(1)(2)

$

0.16

 

 

$

0.08

 

 

 

 

 

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic

 

338,583

 

 

 

330,389

 

Weighted-average shares used in computing non-GAAP net income per share attributable to common stockholders, diluted(2)

 

356,206

 

 

 

342,005

 

____________

(1) Totals may not sum due to rounding. Figures are calculated based upon the respective underlying non-rounded data.

(2) For the period in which we had non-GAAP net income, diluted non-GAAP net income per share is calculated using weighted-average shares, adjusted for dilutive potential shares that were assumed outstanding during period.

CLOUDFLARE, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

(unaudited)

 

Three Months Ended

March 31,

2024

 

2023

Free cash flow

 

 

 

Net cash provided by operating activities

$

73,579

 

 

$

36,414

 

Less: Purchases of property and equipment

 

(32,056

)

 

 

(17,541

)

Less: Capitalized internal-use software

 

(5,916

)

 

 

(4,970

)

Free cash flow

$

35,607

 

 

$

13,903

 

Net cash provided by investing activities

$

96,950

 

 

$

15,567

 

Net cash provided by financing activities

$

21

 

 

$

1,247

 

Net cash provided by operating activities

(percentage of revenue)

 

19

%

 

 

13

%

Less: Purchases of property and equipment

(percentage of revenue)

 

(8

)%

 

 

(6

)%

Less: Capitalized internal-use software

(percentage of revenue)

 

(2

)%

 

 

(2

)%

Free cash flow margin(1)

 

9

%

 

 

5

%

____________

(1) Totals may not sum due to rounding. Figures are calculated based upon the respective underlying non-rounded data.

Explanation of Non-GAAP Financial Measures

In addition to our results determined in accordance with generally accepted accounting principles in the United States (U.S. GAAP), we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In particular, free cash flow is not a substitute for cash provided by operating activities. Additionally, the utility of free cash flow as a measure of our liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP 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. A reconciliation is provided above for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Items Excluded from Non-GAAP Measures. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. We exclude employer payroll tax expenses related to stock-based compensation, which is a cash expense, from certain of our non-GAAP financial measures because such expenses are dependent on the price of our Class A common stock and other factors that are beyond our control and do not correlate to the operation of our business. We exclude amortization of acquired intangible assets, which is a non-cash expense, related to business combinations from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. We exclude acquisition-related and other expenses from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. Acquisition-related and other expenses can be cash or non-cash expenses and include third-party transaction costs and compensation expense for key acquired personnel. We also excluded the one-time cash compensation charge incurred during the three months ended March 31, 2024 from certain of our non-GAAP financial measures because it was not attributable to services provided and did not correlate to the ongoing operation of our business. We exclude amortization of debt issuance costs and loss on extinguishment of debt, which are non-cash expenses, from certain of our non-GAAP financial measures because such expenses have no direct correlation to the operation of our business.

Non-GAAP Gross Profit and Non-GAAP Gross Margin. We define non-GAAP gross profit and non-GAAP gross margin as U.S. GAAP gross profit and U.S. GAAP gross margin, respectively, excluding stock-based compensation and related employer payroll taxes and amortization of acquired intangible assets.

Non-GAAP Income (Loss) from Operations and Non-GAAP Operating Margin. We define non-GAAP income (loss) from operations and non-GAAP operating margin as U.S. GAAP loss from operations and U.S. GAAP operating margin, respectively, excluding stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses.

Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) per Share, Diluted. We define non-GAAP net income (loss) as GAAP net income (loss) adjusted for stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses, amortization of issuance costs, loss on extinguishment of debt, and a non-GAAP provision for (benefit from) income taxes. Generally, the difference between our GAAP and non-GAAP income tax expense (benefit) is primarily due to adjustments in stock-based compensation and related employer payroll taxes, amortization of acquired intangibles associated with business combinations, acquisition-related and other expenses, and amortization of issuance costs. We define non-GAAP net loss per share, diluted, as non-GAAP net loss divided by the weighted-average common shares outstanding. Calculation of non-GAAP net loss per share, diluted excludes all potentially dilutive securities as their effect is antidilutive. We define non-GAAP net income per share, diluted, as non-GAAP net income divided by the weighted-average common shares outstanding, adjusted for dilutive potential shares that were assumed outstanding during period. Currently, potential dilutive effect mainly consists of employee equity incentive plans and convertible senior notes. We believe that excluding these items from non-GAAP net income (loss) per share, diluted, provides management and investors with greater visibility into the underlying performance of our core business operating results.

Free Cash Flow and Free Cash Flow Margin. Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized internal-use software. Free cash flow margin is calculated as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property and equipment and capitalized internal-use software, can be used for strategic initiatives, including investing in our business, and strengthening our financial position. We believe that historical and future trends in free cash flow and free cash flow margin, even if negative, provide useful information about the amount of cash generated by our operating activities that is available (or not available) to be used for strategic initiatives. For example, if free cash flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. One limitation of free cash flow and free cash flow margin is that they do not reflect our future contractual commitments. Additionally, free cash flow does not represent the total increase or decrease in our cash balance for a given period.

Contacts

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.