Website infrastructure and security company Cloudflare went public in September last year and recently reported a strong quarter. With a new acquisition and a PaaS edge, the company looks promising.
Revenues for the fourth quarter grew 51% to $83.9 million, ahead of the Street’s estimate of $79.1 million. Net loss was $28.2 million, compared with a loss of $16.7 million a year ago. Non GAAP EPS was $0.06 compared with the Street’s estimate of $0.07.
Fiscal year 2019 revenue grew 49% to
$287 million. GAAP
gross profit was $223.6 million, or 77.9% gross margin, compared to $149.1
million, or 77.4%, in fiscal 2018. GAAP net loss was $105.8 million, compared
to $87.2 million for fiscal 2018. Non-GAAP net loss was $69.5 million, compared
to $59.5 million for fiscal 2018. GAAP net loss per share was $0.72, compared
to $1.08 for fiscal 2018. Non-GAAP net loss per share was $0.48, compared to
$0.73 for fiscal 2018.
The company added a record 300,000 customers
during the fourth quarter and ended 2019 with 2.6 million total customers, up 34%
y-o-y. It added over 5,800 paying
customers in Q4 and now has over 82,000 paying customers, up 22% y-o-y. Its
large customer count increased 76% to 550 total large customers with a net add
of 237 large customers over the year and 75 over the quarter. Its large
customers are defined as customers with over $100,000 in annualized billings. The
number of Internet properties using Cloudflare platform grew by 10 million to
26 million in 2019.
Dollar-based net retention stood at 112% in
the fourth quarter, which shows that existing customers tend to renew their
Cloudflare contracts at larger sizes. This metric is also on the rise, moving
up from 110% in the third quarter.
For the first quarter, Cloudflare forecast
revenues of $87-$88 million with a non-GAAP net loss of $0.06-$0.05 per share.
The market estimates revenues of $87.71 million with net loss of $0.06 per share.
Cloudflare expects to end fiscal 2020 with revenues of $389-$393 million with a
loss of $0.21-$0.19 per share. The market was looking for revenues of $510.89
million with loss of $0.14 per share.
Cloudflare’s New Offerings and Acquisition
San Francisco-based CloudFlare was founded in 2009 by Harvard
students Michelle Zatlyn, Matthew Prince, and their friend Lee Holloway as an
online service that helps improve website performance while ensuring security. As the world shifts
towards scalable cloud services, Cloudflare has also built a large cloud
network that spans 200 cities worldwide and is within less than 100
milliseconds of nearly everyone connected to the Internet. Last month, it
announced Cloudflare for Teams to ensure that the people and teams within its
organization can access the tools they need to do their job while staying safe
from malware and other online threats.
The Cloudflare for
Teams suite is built around two complementary products, Cloudflare Access and
Cloudflare Gateway that leverage
its unified, global platform and
its extensive threat intelligence data. Cloudflare Access is a modern-day VPN,
providing fast and granular access control for internal and external
applications. Cloudflare Gateway is the modern next-generation firewall for malware
and ensure compliance with organization policies on any device anywhere in the
world without sacrificing performance. It has already won clients like
Ericsson, Ziff Davis, and 23andMe.
In January, Cloudflare
announced the acquisition of browser isolation startup S2 Systems founded in
2018 by former Microsoft employees. Based in Kirkland, Washington, S2 develops remote browser isolation technology that executes
browser code in the cloud rather than on the user’s device. This solution keeps
security threats safely isolated from end devices, protecting against one of
the biggest enterprise security threats. The company expects S2 technology to
enhance Cloudflare for Teams, ensuring it can protect even the most
security-conscious organizations without slowing them down. Terms of the deal
were not disclosed. S2’s employees will move into Cloudflare’s new Seattle office
following the acquisition.
Cloudflare’s New Edge
Other new products
gaining traction are Magic Transit and Workers edge computing platform. Magic Transit is a
software-defined networking product that offers IP transit with DDoS
protection, next-gen firewall, and traffic acceleration for on-premise and data
center networks from a single, easy-to-use interface.
computing platformallows developers to build and deploy serverless applications
on the Cloudflare
edge network. Cloudflare
developers to augment existing applications or create entirely new ones without
configuring or maintaining infrastructure. The superior speed of development and
flexibility that the platform offers is proving to be a differentiating factor
in a large percentage of Cloudflare’s new deals.
competition is from on-premise network hardware vendors such as Cisco, F5,
Check Point, FireEye, Imperva, Palo Alto Networks, Juniper Networks, and
Riverbed. Other competitors Zscaler, OpenDNS (Cisco), Akamai, Limelight,
Fastly, Edgecast (Verizon), Dyn (Oracle), Neustar, UltraDNS as well as some
services provided by the major public cloud vendors including AWS, GCP, Azure,