Q3 2024 Cloudflare Inc Earnings Call Transcript
Key Points
- Cloudflare Inc (NET) achieved a revenue of $430.1 million in Q3 2024, marking a 28% year-over-year increase.
- The company added a record 219 new large customers, bringing the total to 3,265 large customers, also up 28% year over year.
- Gross margin remained strong at 78.8%, above the long-term target range of 75% to 77%.
- Free cash flow was $45.3 million, exceeding expectations while investing in network enhancements.
- Cloudflare's go-to-market transformation reached a critical inflection point, with improvements in sales productivity and a focus on enterprise sales.
- Dollar-based net retention decreased to 110%, down 2 percentage points quarter over quarter, due to a shift to pool of funds deals.
- Some larger deals in the US slipped out of the quarter, attributed to transitional changes under new sales leadership.
- Sales cycles lengthened during the quarter, impacting short-term revenue recognition.
- The IT spending environment remained cautious, with customers emphasizing cost efficiency and ROI.
- Despite improvements, the sales capacity in North America was constrained, affecting the ability to close larger deals.
Good afternoon, ladies and gentlemen, and welcome to Cloudflare Q3 '24 earnings call. (Operator Instructions) Thank you. So I would now like to turn the call over to our first speaker, Philip Winslow. Please go ahead.
Thanks for joining us today to discuss Cloudflare's financial results for the third quarter of 2024. With me on the call, we have Matthew Prince, Co-Founder and CEO; Michelle Zatlyn, Co-Founder, President and COO; and Thomas Seifert, CFO. By now, everyone should have access to our earnings announcement. This announcement as well as our supplemental financial information may be found on our Investor Relations website.
As a reminder, we'll be making forward-looking statements during today's discussion including, but not limited to, our customers, vendors and partners operations and future financial performance, our anticipated product launches and the timing and market potential of those products, our anticipated future financial and operating
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