Cloudflare: the 10 best conference call quotes
Hi
I know how busy the earnings season is for interested investors. That’s why I plan to summarize some conference calls by selecting the best quotes. This time, the words are from Matthew Prince, founder and CEO of Cloudflare. If you don’t want to miss these in the future, feel free to subscribe. It’s free.
Before we go to the quotes, I wanted to share this chart with you. It’s an overview of Cloudflare’s revenue growth since it’s a public company. I update the chart (and some others) every quarter for the subscribers of my paid service Potential Multibaggers. The Multis also got a full analysis of the earnings. If you want to read it, you can do that for free, as there is a two-week free trial for Potential Multibaggers. You can read everything there, although you will probably need more than two weeks of full-time reading to read all the information. :-) If it’s not for you, or you don’t have the means, you can easily cancel with a few clicks. There is a 20% discount for the first year now.
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Let’s start with the quotes now. The floor is yours, Matthew!
During economic slowdowns, we believe that it's important to show discipline and optimize for efficiency. We have our hands on the levers of our business and a full-throttle innovation engine that is the envy of the industry. There's no better time to outpace the competition and continue to deliver products on our customers' ‘must-have’ list.”
While there will be some variability in our free cash flow quarterly, we expect to be free cash flow positive in 2023 and in the years after that.
While our gross renewal rates remain as high as ever, like others in the industry, we're seeing customers take longer to sign new and expansion deals with us. Procurement departments are definitely in the mode of measure two or three times before cutting one. We still see a clear path to dollar-based net retention over 130% as we ramp seat-based products, like Zero Trust and storage-based products like R2, and we won't be satisfied until we get there.
If we're honest with ourselves, our go-to-market organization hasn't yet been fully optimized.
As our product become more complicated and we are selling to larger and larger customers, it's increasingly clear that we need to step up our game in marketing and sales. I introduced Marc Boroditsky who joined last quarter to lead our sales organization. Last week, he briefed me and Michelle on his first 100 days. My initial reaction, if I'm honest, was embarrassment over some of the basic things we should have been doing better. But my second reaction was excitement as there are so many opportunities for us to improve.
Based on that, around this time last year, we began slowing our pace of hiring to ensure we didn't get over our skis. That paid off and kept us from having to take more drastic actions like many of our peers. It's also given us the ability to sensibly invest in our team as amazing talent comes on the market. To give you some sense, in 2022, we have over 400,000 people apply for approximately 1,300 positions at Cloudflare. That demand to work at Cloudflare has allowed us to continue to hire incredible talent while remaining disciplined in overall compensation.
What I think our challenge is in the Zero Trust space is not winning customers that know about us, but making sure that customers that are in the market for Zero Trust services are aware that that's something we do.
The frustration that I still have is when I’ll meet with a customer and oftentimes they'll literally say, you should build something that is in the Zero Trust space, competing with Zscaler or Palo Alto Networks. And so when we're in those deals, we find ourselves winning very often.
12.5 years ago when clouds got started that allowed us the conditions and opportunities to build the company. I think it would be very challenging today for somebody to replicate the network that we have, and that network continues to allow us to deliver more and more services
(About ChatGPT)
A leading generative AI company signed a one-year $1 million deal. The company had been a user of our free tier since 2017. And this deal originally started out as a relatively small gateway DNS opportunity to replace Cisco Umbrella. However, when their browser-based application debuted in late November, demand for the company's AI-generated content absolutely exploded with unprecedented rates of adoption.
Their Azure Front Door had quickly proved insufficient at handling the massive load on their services from legitimate users as well as keeping fraudulent users from exhausting their resources. They started off with CVM, DDoS, bot management, gateway DNS and more. We are actively exploring various paths for expansion to support their incredible growth as well as emerging use cases of their AI models and applications with Cloudflare Worker, API Shield, imagery sizing and more.
(About AI companies in general)
They are, by their very nature, multi-cloud, but the data egress policies make it prohibitive to move large training sets between the clouds. Enter Cloudflare Worker.
What we're finding with these AI companies is that R2 and other Workers products naturally become the glue at the center of a multi-cloud ecosystem. R2 has become the natural neutral place for these AI companies to store their training data in order to make sure it can be inexpensively and efficiently accessed from anywhere. It's obvious in retrospect. But it's a use case we didn't anticipate.
At Cloudflare, we've always thought of ourselves as stacking S curves one behind another. And so I always think of sort of our application services products as sort of our first act. We think of our Zero Trust products as our second act. And we think of our Workers products as our third act.
In the meantime, keep growing!