Cloudflare(US:NET)2024-05-03 00:20Financial Data and Key Metrics Changes - Total revenue for Q1 2024 increased by 30% year-over-year to $378.6 million [139] - Gross margin was 79.5%, up from 78.9% in the previous quarter and 77.8% year-over-year [140] - Operating profit was $42.4 million, representing an operating margin of 11.2% [6] - Net income for the quarter was $58.2 million, or $0.16 per share [16] - Free cash flow was $35.6 million, or 9% of revenue, compared to $13.9 million, or 5% of revenue, in the same period last year [16] Business Line Data and Key Metrics Changes - The dollar-based net retention rate remained steady at 115% [14] - The number of paying customers increased by 17% year-over-year to approximately 197,000 [44] - Large customers increased by 33% year-over-year, totaling about 2,900 [44] - Operating expenses as a percentage of revenue decreased by 3% year-over-year to 68% [45] Market Data and Key Metrics Changes - U.S. revenue represented 52% of total revenue, increasing by 28% year-over-year [139] - EMEA accounted for 28% of revenue, with a 35% year-over-year increase [139] - APAC represented 12% of revenue, increasing by 22% year-over-year [139] Company Strategy and Development Direction - The company aims to enhance its go-to-market efforts and expand sales capacity, with plans to accelerate headcount additions in the coming quarters [15] - Cloudflare is focusing on operational excellence and long-term growth while delivering significant shareholder value [17] - The company is committed to building a world-class enterprise sales organization and becoming a strategic vendor for Fortune 500 companies [38] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the macroeconomic environment, noting increased uncertainty and geopolitical tensions [122][78] - Despite short-term uncertainties, management remains optimistic about long-term growth opportunities [9][122] - The company is observing a mix of positive and negative signals in the market, leading to a prudent outlook for 2024 [142][78] Other Important Information - The company generated strong free cash flow driven by an uptick in collections on accounts receivable [13] - The remaining performance obligations (RPO) increased by 40% year-over-year to $1.343 billion [16] - The company is rolling out GPUs across its network, with over 150 cities globally equipped, enhancing its AI capabilities [125] Q&A Session Summary Question: Can you discuss the progress in the SASE market? - Management highlighted that their SASE platform is significantly better and faster than competitors, leading to increased market share [49] Question: How should we think about billings in the context of the expanded usage-based pricing model? - Management acknowledged that while billings are not a primary metric, they are optimistic about the adoption of their usage-based pricing model [20] Question: Can you provide examples of applications built on Workers AI? - Examples include a food ordering company generating food images, photo editing platforms enhancing images, and startups creating songs in various languages [23][24] Question: What are the implications of the macroeconomic environment on your guidance? - Management noted that while there are concerns about the macro environment, they do not see clear signals of a slowdown like in previous years [96][78] Question: Are there any competitors emerging in the serverless low latency space? - Management believes they have a unique position and do not see significant competition in their serverless architecture offerings [113]