1. $NET (Network architecture for the modern internet)
Problem: Cost and complexity of managing and integrating individual network hardware on premises
Solution: Flexible, scalable & efficient server-less network architecture that provides security, performance & reliability
Problem: Cost and complexity of managing and integrating individual network hardware on premises
Solution: Flexible, scalable & efficient server-less network architecture that provides security, performance & reliability
2. $NET Moat is the size, sophistication and distributed nature of network architecture
99% of the Internet connected developed world is located within 100 milliseconds of their network
Lots of Cisco boxes need to be replaced as the world shifts to work from anywhere
99% of the Internet connected developed world is located within 100 milliseconds of their network
Lots of Cisco boxes need to be replaced as the world shifts to work from anywhere
3. $NET is creating the future of what a network that powers a business looks like.
Fast, reliable & secure.
CIOs express pain and loss of productivity relying on on-premise hardware and need a different architecture. Cloudflare solves the pain of maintaining a local network
Fast, reliable & secure.
CIOs express pain and loss of productivity relying on on-premise hardware and need a different architecture. Cloudflare solves the pain of maintaining a local network
4. $NET has a wide customer base across all industry verticals that solidifies its claim of its offering as mission critical
Pay-as-you-go customers --> SME & Individuals
Contracted Customers --> Enterprise (Revenue base)
Low CAC --> Free --> Part of infrastructure --> Trust
Pay-as-you-go customers --> SME & Individuals
Contracted Customers --> Enterprise (Revenue base)
Low CAC --> Free --> Part of infrastructure --> Trust
5. $NET Free customer base drives innovation and adoption which is key to building a brand shaping the market.
Diverse threats and problems are identified at an earlier stage which helps to improve products and create effective solutions.
Provides data to invest behind demand
Diverse threats and problems are identified at an earlier stage which helps to improve products and create effective solutions.
Provides data to invest behind demand
6. $NET has benefited from COVID and made strong moves to showcase the value of its platform by providing free offerings for
Cloudflare for Teams (Security) - Contract with a Telemedicine company
Cloudfare Workers (Edge Computing) - Contract with Food Delivery Service
Cloudflare for Teams (Security) - Contract with a Telemedicine company
Cloudfare Workers (Edge Computing) - Contract with Food Delivery Service
7. $NET systems improved during COVID
Firewall team released a series of improvements that shaves 40% of processing time off every request
Network got faster while requiring less hardware. Full deep packet inspection and threat analysis done with speed at scale
Firewall team released a series of improvements that shaves 40% of processing time off every request
Network got faster while requiring less hardware. Full deep packet inspection and threat analysis done with speed at scale
8. $NET metrics are solid and indicate heavy investment into growth
Revenue growth: approx 50% (evenly between US & International)
GM: approx 75%
Dollar Net Retention: 117% (expect volatility from a revenue but not from billing & ACV)
OPEX is controlled as a % of revenue
Revenue growth: approx 50% (evenly between US & International)
GM: approx 75%
Dollar Net Retention: 117% (expect volatility from a revenue but not from billing & ACV)
OPEX is controlled as a % of revenue
9. $NET is expecting 36% YoY growth for 2020 with backlog & deferred revenue (RPO) at least 50% of guidance
Announced a new partnership with JD Cloud
Cloudflare pitches itself as one global network (platform) that allows traffic to be managed through a single user interface
Announced a new partnership with JD Cloud
Cloudflare pitches itself as one global network (platform) that allows traffic to be managed through a single user interface
10. $NET FCF continues to see variability and should be tracked to ensure billings are flowing to cash
Variability is due to fluctuations in working capital and growth in enterprise business which contract based billed monthly versus subscriptions for SMEs and others
Variability is due to fluctuations in working capital and growth in enterprise business which contract based billed monthly versus subscriptions for SMEs and others
11. $NET lives in the same space as $FSLY with a pricier valuation and has run up due to the tailwinds as it powers the modern network in the cloud
LTM EV/S - 31x
NTM EV/S - approx 24x
CEO is positive that the uptake in Cloudflare for Teams bodes well for future revenues
LTM EV/S - 31x
NTM EV/S - approx 24x
CEO is positive that the uptake in Cloudflare for Teams bodes well for future revenues
12. $NET operating leverage is starting to kick in with a reduction in operating loss margin
Serverless architecture deployed on commodity hardware
Single software stack across network
Symbiotic relationship with ISPs
Scale allows for lower bandwidth costs and efficiency
Serverless architecture deployed on commodity hardware
Single software stack across network
Symbiotic relationship with ISPs
Scale allows for lower bandwidth costs and efficiency
13. While $FSLY seems to focus specifically on Content Delivery Networks (CDN) driven by the potential of Edge Computing driving up its valuation to match $NET, $NET has a suite of cybersecurity products (not fully monetized) and is trying to shape the whole cloud vertical
14. TAM is currently $32 billion as per Cloudflare's presentations and is expected to grow to $47 billion by 2022.
Based on their presentation - the keystone focus seems to be to build around security which would be prudent
Can it continue its 40-50% growth rate & create FCF?
Based on their presentation - the keystone focus seems to be to build around security which would be prudent
Can it continue its 40-50% growth rate & create FCF?
15. $NET is on my watchlist as I study the space. The valuation is a little rich for me right now.
On the surface, it seems to bring value and offer mission critical services. I also really like how they are using the free layer to test demand/product and direct investments
On the surface, it seems to bring value and offer mission critical services. I also really like how they are using the free layer to test demand/product and direct investments
