#1CLOUDFLARE Investor Presentation December 31, 2021 CLOUDFLARE © Copyright Cloudflare, Inc.#2Safe Harbor This presentation and the accompanying oral commentary have been prepared by Cloudflare, Inc. ("Cloudflare") for informational purposes only and not for any other purpose. Nothing contained in this presentation is, or should be construed as, a recommendation, promise, or representation by the presenter or Cloudflare or any officer, director, employee, agent, or advisor of Cloudflare. This presentation does not purport to be all-inclusive or to contain all of the information you may desire. Information provided in this presentation and the accompanying oral commentary speak only as of the date set forth on the cover page of this presentation. This presentation and the accompanying oral commentary contain express and implied "forward-looking" statements within the meaning of the federal securities laws, and these statements involve substantial risks, assumptions, and uncertainties. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, the current and planned functionality of our products, expectations of future operating results or financial performance, business strategy and plans, the impact of the COVID-19 pandemic on our and other businesses and economic conditions generally, market trends, size and growth opportunities, the calculation of certain of our key financial and operating metrics, capital expenditures, plans for future operations, competitive position, technological capabilities, and strategic relationships, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "intend," "potential," "would," "continue," "ongoing" or the negative of these terms or other comparable terminology. You should not put undue reliance on any forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. Actual results could differ materially from our current expectations as a result of many factors, including those identified in the "Risk Factors" section of our filings made with the Securities and Exchange Commission ("SEC"). You can locate these reports on our investor relations website (https://cloudflare.NET) or on the SEC website (www.sec.gov). If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements included in this presentation represent our views only as of the date of this presentation, and except as required by law, we assume no obligation and do not intend to update these forward-looking statements or to conform these statements to actual results or to changes in our expectations. In addition to our results determined in accordance with generally accepted accounting principles ("GAAP"), this presentation includes certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not as a substitute for or superior to measures of financial performance prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. See the appendix for a reconciliation of those measures to the most directly comparable GAAP measures. This presentation and the accompanying oral commentary may contain statistical data, estimates, and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on our internal sources. This information involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. Accordingly, we make no representations as to the accuracy or completeness of that data nor do we undertake to update such data after the date of this presentation. By attending or receiving this presentation you acknowledge that you will be solely responsible for your own assessment of the market and our market position and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of our business and products. The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the network and products of Cloudflare. CLOUDFLARE Copyright Cloudflare, Inc.#32010 Launched 140K+ Paying Customers 250+ Cities in Network >50% Of Revenue from Large Customers 2,439 Employees CLOUDFLARE © Copyright Cloudflare, Inc. 78% GAAP Gross Margin Cloudflare at a Glance Total Revenue ($M) 51% CAGR $287 $431 $656 2019 2020 2021 54% $126 $194 Q4 2020 Q4 2021 Large Customers > $100,000 Annualized Revenue 64% CAGR 526 828 1,416 2019 2020 2021 Note: Unless indicated otherwise, all data in orange shaded area of slide are as of December 31, 2021, except revenue from Large Customers and GAAP gross margin are for three months ended December 31, 2021. Large Customers data in white shaded area of slide are as of applicable year ends. See Appendix for "Large Customers" definition.#4Environmental, Social, Governance Building a Greener Internet Green Compute on Cloudflare Workers Green Hosting with Cloudflare Pages Published first Greenhouse Gas Emissions Report CLOUDFLARE ©Copyright Cloudflare, Inc. Promoting Human Rights Published Human Rights Policy Athenian Project International Expansion Published UN Communication on Progress (COP) Building Sustainable Communities Launched Project Pangea Released first Diversity, Equity, Inclusion Report Published First Impact Report Joined the 1% Pledge PLEDGE 1% PROUD MEMBER We are powering our network with 100% renewable energy and committed to removing all historical emissions from our global network by 2025 For more information, visit https://www.cloudflare.com/impact/#5Cloudflare's mission is to Help build a better Internet CLOUDFLARE © Copyright Cloudflare, Inc.#6The Internet was not built for what it has become. CLOUDFLARE © Copyright Cloudflare, Inc. ARPANET LOGICAL MAP, MARCH 1977 POP-10 CDC 7600 POP-11 PDP-11 POP-10 CDC 6 600 MOFFETT LBL UTAH ILLINOIS PDP-10 PDP-10 DATA- COMPUTER PDP-10 POP-11 DEC-2050 PLURIBUS POP-10 WPAFB PLI MIT 6 CCA RCC5 RCC PDP-11 PDP-11 360/67 PDP-11 POP-10 LLL HAWAN AMESIS AMES 16 PDP-10 POP-11 PDP-11 SRI 2 SRI 51 PDP-11 DEC-1090 SPS-41 PDP-11 PDP-11 PDP-11 PDP-11 POP-10 H6180 50 PDP-11 H68/80 PDP-11 SPS-41 PDP-11 MIT 44 POP-10 PDP-11 POP-10 PDP-10 XEROX MAXC PDP-10 PDP-11 ANL PDP-10 PDP-10 CMU RCC 49 ECLIPSE DEC-1080 H316 DCU-50 BBN 40 LINCOLN PDP-10 NOVA-BOO PARC-MAXC2 BBN 300 CDC6600 PDP-11 RADC H-6180 370/168 CDC7600 C.mmp SUMEX TYMSHARE STANFORD, VARIAN 73 370/195 SCOTT H-6160 PDP-11 SPS-41 DEC CDC6600 DEC-1090 PDP-11 POP-10 POP-10 HARVARD PDP-11 FNWC POP-1 PDP-10 SPS-41 PDP-11 POP-11 CDC6500 CDC3200 OGWC POP-11 NYU POP-11 PDP-10 UNIVAC 1108] SCAL MP32 Сросв PDP-10 TRUTGERS BELVOIR UNIVAC-1108 PDP-11 POP-11 H716 VPDP 11 PDP-11 360/44 PLI POP-11 DCEC POP ABERDEEN SDAC NORSAR UCLA Usc 360/91 360/40 umma360/40 POP-IN NSA NUC PDP-11 POP-10 360/40 360/40 ARPA NELC POP-11 PLURIBUS NBS LONDON MITRE FPS AP-1208 PDP-11 PDP-10 370-150 RAND POP POP-15 POP-11 PDP-10 PDP-11 POP-9 PDP-11 DEC-2040 POP-10 POP-10 POP-10 PDP-11 XGP 8-4700 PDP-11 XGP ISI 52 POP-10 ISI 22 AFWL ◇ IMP □ TIP A PLURIBUS IMP SATELLITE CIRCUIT POP-1 TEXAS GUNTER EGLIN PDP-11 CDC6600 ✓ PDP-11 85500 EGLIN POP-11 PENTAGON ☑POP-9 360/195 GEC 4080 ICL 470 CDC6400 CDC6600 CDC 7600 (PLEASE NOTE THAT WHILE THIS MAP SHOWS THE HOST POPULATION OF THE NETWORK ACCORDING TO THE BEST INFORMATION OBTAINABLE, NO CLAIM CAN BE MADE FOR ITS ACCURACY) NAMES SHOWN ARE IMP NAMES. NOT INECESSARILY HOST NAMES#7From Endless Hardware to a Global Cloud Platform BAND-AID BOXES • Costly and complex • Web of dependencies Specialized hardware On-premise only • Point solutions . BETTER INTERNET Easy-to-use, flexible, and scalable • Unified control plane • • • Serverless cloud architecture Cloud, hybrid, on-premise, and SaaS Broad, integrated product platform CLOUDFLARE Global Cloud Platform#8CLOUDFLARE Evolution of Enterprise Stack Hardware/Software (Buy) Yesterday CISCO. f5 riverbed SAP Check Point SOFTWARE TECHNOLOGIES LTD. paloalto Juniper NETWORKS NETWORK FIREEYE™ Services/Cloud (Rent) Tomorrow CLOUDFLARE workday. Microsoft ORACLE APPLICATION NETSUITE ® hp EMC² Copyright Cloudflare, Inc. Lenovo DELL Sun microsystems zendesk A Adobe salesforce servicenow. box shopify Dropbox box Alibaba Cloud STORE/COMPUTE COMPAQ Google Cloud Microsoft Azure aws#9An Integrated Global Cloud Platform Cloudflare Zero Trust Services Cloudflare Network Services Cloudflare Application Services CLOUDFLARE 1 Cloudflare One Cloudflare for Teams suite ZTNA with Private Routing Remote Browser Isolation SWG with CASB WAN-as-a-Service Firewall-as-a-Service L3 & L4 DDoS Protection Network Interconnect Smart Routing Identity/Endpoint Integration WAF with API Protection Rate Limiting Load Balancing Bot Management L7 DDoS Protection CDN and DNS Cloudflare Edge Developer Platform Workers {Workers KV Pages Durable Objects Video Streaming Cloudflare Global Network Global Edge: 250+ cities, 95% of population within 50ms, 10,000 interconnects, 121 Tbps capacity, China Network Building Blocks: SSL/TLS, mTLS, Authoritative/Recursive DNS, DNSSEC, DNS over HTTP, L4-7 over Wireguard Compliance/Privacy: ISO, SOC, PCI, GDPR-compliant Logs & Analytics, Data Localization Suite Copyright Cloudflare, Inc. ZTNA = Zero Trust Network Access | SWG = Secure Web Gateway | CASB = Cloud Access Security Broker#10We Operate at Massive Scale 101B 140K+ >50% Cyber Threats Blocked per Day Total Paying Customers Of Revenue from Large Customers CLOUDFLARE © Copyright Cloudflare, Inc. 48% Of Revenue from Outside of the U.S. Note: Cyber threats blocked per day is average over the three months ended December 31, 2021. All other figures as of or for the three months ended December 31, 2021. See Appendix for "Paying Customers" and "Large Customers" definitions.#11CLOUDFLARE • CLOUDFLARE © Copyright Cloudflare, Inc. • Our Flexible, Scalable, & Efficient Serverless Architecture Abstracts underlying infrastructure Dynamically optimizes and leverages capacity across network Single unified code base Deployment on commodity hardware#12A Global Network Powering our Platform 250+ cities in 100+ countries, including mainland China 10,000 networks directly connect to Cloudflare, including ISPS, cloud providers, and large enterprises of 121 Tbps of network capacity and growing 140,000+ paying customers Plans for 1,000+ of the world's busiest office buildings and multi-dwelling units to link directly with the Cloudflare network in the future 71% year-over-year Large Customer growth in Q4'21 Cloudflare city- 95% of the world's population is within 50 ms of a Cloudflare data center Note: All figures as of December 31, 2021. See Appendix for "Large Customers" definition.#13Our Product & Network Flywheels Drive Our Business Serve Everyone Network Product * CLOUDFLARE® Better Products Increased Efficiency Helping Build a Better Internet Serverless Architecture Ease of use CLOUDFLARE © Copyright Cloudflare, Inc. Global Scale#14Data Intelligence & Quality Assurance at Scale Global sensor network with paying customers in 175+ countries. Machine learning systems improve products with every customer's request. Immune system for the Internet blocking an average of 101 billion cyber threats each day. Rapid development cycles and QA through free users volunteering to test new products. CLOUDFLARE Copyright Cloudflare, Inc. Note: Cyber threats blocked per day is approximate average over the three months ended December 31, 2021. Other figures as of the three months ended December 31, 2021.#15Our Competitive Advantages 101010101 10010 1101010 1010 0 SHARED INTELLIGENCE NETWORK EASE SCALE OF USE CLOUDFLARE ©Copyright Cloudflare, Inc. 1010 101 10010 10 1101 0101 1010 010 NO TRADE OFFS Security + Performance#16Our Favorable Competitive Position On-Premise TUT CLOUDFLARE Copyright Cloudflare, Inc. Point Solutions SA G • Limitations • Complex and expensive Not suited to address cloud-based and hybrid deployments Architected to deliver single point / more narrow product portfolio Customers are increasingly looking for an integrated platform offering security, performance, and reliability through a single vendor Public Cloud Cx • Inability to serve as a unified control plane across on-premise, cloud, hybrid, and SaaS infrastructure Customer lock-in and competition concerns#17Innovation Drives TAM Expansion Areas for Potential Incremental Growth Cloudflare 1 Cloudflare One $100B Network Services < $86B Carrier Services (MPLS & SD-WAN) Serverless $72B Cloudflare Application Services • Application Delivery Controllers • WAN • CDN DDoS • Intrusion Detection & Prevention • Firewall $32B n CLOUDFLARE Copyright Cloudflare, Inc. Cloudflare Zero Trust Services • VPN • Content Filtering Remote Browser Isolation • Data Loss Prevention • Privileged Access Management • Network Analytics Internet of Things (485) IDDE 5G Cellular Consumer 2018 2020 2022 2024 Note: Total Addressable Market represents expected spend by year from our analysis based on IDC data. Figures reflect the markets addressed by our current product offerings.#18Traditional Go-To-Market Model Inverted We don't build ahead of the curve. Sources of Leverage Self service adoption for customers of all sizes Natural expansion Pulled into new geographies CLOUDFLARE Model Get customers Add sales reps to service new customer segments Spend marketing budget • Pulled up market CLOUDFLARE © Copyright Cloudflare, Inc.#19. Acquire new customers Grow awareness • Field sales Our Strategy for Growth International coverage Expand channel partnerships CLOUDFLARE Copyright Cloudflare, Inc. Expand relationships with existing customers • Upgrading to premium plans Increased usage . Adding products ° Develop new products Extend our serverless platform strategy High product velocity Set pace for innovation in market Expand into new markets to expand TAM Enable a new class of applications Power store and compute workloads Increase stickiness Opens new market opportunity#20CLOUDFLARE Financial Overview CLOUDFLARE © Copyright Cloudflare, Inc.#21Key Financial Highlights $86B Large Addressable Market in 2022 52% Y/Y FY21 Revenue Growth 78% FY21 GAAP Gross Margin 1,416 Large Customers CLOUDFLARE © Copyright Cloudflare, Inc. Note: Total Addressable Market represents 2022 expected spend from our analysis based on IDC data. Year-over-year revenue growth and gross margin are as of the twelve months ended December 31, 2021. Large Customers is as of December 31, 2021. See the Appendix for how we define "Large Customers."#22CLOUDFLARE Track Record of Delivering Revenue Growth Total Revenue ($M) 51% CAGR $287 $431 $656 $85 $135 2016 ©Copyright Cloudflare, Inc. $193 2017 2018 2019 2020 2021 Do Investment in enterprise sales Large customer momentum Land and expand strategy drives growth across cohorts 100% Subscription-based revenue model Note: Subscription-based revenue includes related support services and usage fees.#23Large Customer Growth 1,416 Large Customers >$100,000 Annualized Revenue 69% CAGR 828 294 526 2018 CLOUDFLARE © Copyright Cloudflare, Inc. 2019 2020 2021 Large Customers - Revenue Contribution >$100,000 Annualized Revenue ($M) 78% CAGR $62 32% revenue $117 2018 Note: Large Customers data are as of year end. See the Appendix for how we define "Large Customers." 41% revenue 2019 $198 46% revenue $353 54% revenue 2020 2021#24$100K+ Customers 294 69% CAGR 526 828 Significant Growth in Large Customer Cohorts 1,416 $500K+ Customers $1M+ Customers 121 2018 2019 2020 2021 CLOUDFLARE Copyright Cloudflare, Inc. 27 65% CAGR 51 555 71 2018 2019 2020 2021 11 72% CAGR 17 32 56 2018 2019 2020 2021 Note: Large customers data are as of year end. See the Appendix for how we define "Large Customers," which are the same as $100K+ customers. $500K+ and $1M+ customers are defined in the same manner, except we use $500K+ and $1M+, respectively, of Annualized Revenue instead of $100K+.#25CLOUDFLARE Strong Dollar-Based Net Retention 125% 124% 124% 123% 119% Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 © Copyright Cloudflare, Inc. Note: See the Appendix for how we define "Dollar-Based Net Retention." Gross revenue retention is defined as 1 - gross revenue churn. Do DNR includes all paying customers Large customers are a tailwind to DNR Gross retention above 90% DNR benefits from strong upsell, expansion, and new product introductions Cloudflare One offers 1 bundling opportunities#26Non-GAAP Gross Margin 79% 79% 78% 78% 78% Attractive & Consistent Gross Margin Serverless architecture deployed on commodity hardware Single software stack across the network Symbiotic relationship with ISPS Leverage idle capacity across network Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 CLOUDFLARE ©Copyright Cloudflare, Inc. Note: See Appendix for GAAP to Non-GAAP reconciliation.#27Leverage of Our Operating Model Non-GAAP Operating Margin (25)% (8)%. (4)% 23% (1)% Operating Expense as a % of Revenue 1% 18% 27% 15% 16% 14% 21% 20% 20% 19% CLOUDFLARE Copyright Cloudflare, Inc. 52% 46% 45% 46% 44% 2019 2020 S&M Note: See the Appendix for GAAP to Non-GAAP reconciliation. 2021 Q4 Q4 2020 2021 R&D G&A#28Q1 2022 Revenue Y/Y Growth $205.0 206.0 48% - 49% Guidance (as of Feb. 10, 2022) Revenue Y/Y Growth FY 2022 $927.0 931.0 41% -42% FY 2022 Network Capex as % of Revenue 12%-14% Operating Income Operating Margin $0.5 - $1.5 0% - 1% Operating Income Operating Margin $10.0 - $14.0 1% - 2% EPS CLOUDFLARE Copyright Cloudflare, Inc. $0.00 $0.01 EPS $0.03 $0.04 Note: These forward looking statements were provided by us on February 10, 2022. This forward looking guidance speaks only as of such date and the inclusion of such guidance in this presentation should not be interpreted as a confirmation or affirmation of such guidance as of any other date. Except as required by law, we assume no obligation and do not intend to update these forward-looking statements or to conform these statements to actual results or to changes in our expectations.#29Long-Term Model 2018 2019 2020 2021 Long-Term Model 75%-77% Non-GAAP Gross Margin 78% 78% 78 % 79% I Sales & Marketing 48 % 52 % 46% 45% 27% -29% (% of revenue) Research & Development 27% 27% 21% 20% 18%-20% (% of revenue) General & Administrative 31% 23 % 18% 15% 8%-10% (% of revenue) Non-GAAP Operating (30)% (25)% (8)% (1)% 20% + Margin CLOUDFLARE Copyright Cloudflare, Inc. Note: Metrics shown are Non-GAAP. See Appendix for GAAP financial measures and GAAP to Non-GAAP reconciliation.#30Cash, Cash Equiv, & AFS ($ in millions) Strong Cash Position Raised $565 million in our IPO that priced on September 12th, 2019, net of fees and expenses Raised $495 million in our Convertible Notes Offering due 2025 that priced on May 13th, 2020, net of issuance costs and a capped call with respect to the 2025 convertible notes Raised $790 million in our Convertible Note Offering due 2026 that priced on August 10th, 2021, net of the repurchase of 2025 notes, issuance costs, and a capped call with respect to the 2026 convertible notes $2,000 $1,667 Cash Balance $1,814 $1,822 $1,333 $1,032 $1,035 $1,034 $1,000 $667 $333 $0 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 CLOUDFLARE Copyright Cloudflare, Inc. Operating Cash Flow ($ millions) Operating Cash Flow & Margin $50.0 $38.0 17% 30% 21% $40.6 20% 10% $26.0 5% 2% $23.5 -4% 0% $14.0 -7% $2.0 $2.0 ($8.8) $7.5 ($6.9) -10% ($10.0) -20% Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021#31Our Business Model D0. Disrupting a large and growing total addressable market Widely distributed global cloud platform Expansive product portfolio; open to developer innovation Highly efficient business model and low fundamental cost structure CLOUDFLARE © Copyright Cloudflare, Inc. High growth subscription revenue model with attractive gross margin#32CLOUDFLARE © Copyright Cloudflare, Inc. CLOUDFLARE® Appendix#33GAAP to Non-GAAP Reconciliation (Annual) Non-GAAP Gross Profit GAAP Gross Margin Non-GAAP Gross Margin 2019 2020 2021 GAAP Cost of Revenue Less: Stock-based Compensation Expense & Related Payroll Taxes $63,423 -$716 $101,055 -$1,466 $147,134 Less: Amortization of Acquired Intangible Assets Non-GAAP Cost of Revenue GAAP Gross Profit Add: Stock-based Compensation & Related Payroll Taxes Add: Amortization of Acquired Intangible Assets -$125 $62,582 $223,599 $716 $125 -$3,081 $96,508 -$3,703 -$2,946 $140,485 $330,004 $509,292 $1,466 $3,703 $224,440 78% 78% $3,081 $334,551 77% 78% $2,946 $515,941 78% 79% GAAP Sales and Marketing $159,298 Less: Stock-based Compensation & Related Payroll Taxes -$8,709 $217,875 -$17,678 $328,065 -$32,869 Non-GAAP Sales and Marketing $150,589 GAAP S&M Expense as a % of Revenue 56% $200,197 51% $295,196 50% Non-GAAP S&M Expense as a % of Revenue 52% 46% 45% GAAP Research and Development $90,669 $127,144 $189,408 Less: Stock-based Compensation & Related Payroll Taxes -$13,037 -$30,497 -$61,056 Less: Acquisition-related and other expenses -$5,725 Non-GAAP Research and Development $77,632 $90,922 $128,352 GAAP R&D Expense as a % of Revenue 32% 29% 29% Non-GAAP R&D Expense as a % of Revenue GAAP General and Administrative 27% 21% 20% $81,578 $91,753 $119,503 Less: Stock-based Compensation & Related Payroll Taxes -$14,165 Less: Acquisition-related and other expenses Non-GAAP General and Administrative Expense GAAP G&A Expense as a % of Revenue Non-GAAP G&A Expense as a % of Revenue $67,413 28% 23% -$13,875 -$554 $77,324 -$19,706 -$380 $99,417 21% 18% 18% 15% GAAP Loss from Operations -$107,946 Add: Stock-based Compensation & Related Payroll Taxes Add: Amortization of Acquired Intangible Assets Add: Acquisition-related and other expenses Non-GAAP Loss from Operations $36,627 $125 -$71,194 -38% -25% -$106,768 $63,516 $3,081 $6,279 -$33,892 -25% -8% -$127,684 $117,334 $2,946 $380 -$7,024 -19% -1% CLOUDFLARE © Copyright Cloudflare, Inc. GAAP Operating Margin Non-GAAP Operating Margin#34GAAP to Non-GAAP Reconciliation (Quarterly) CLOUDFLARE © Copyright Cloudflare, Inc. Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 GAAP Cost of Revenue Less: Stock-based Compensation Expense & Related Payroll Taxes $29,065 -$478 $32,084 -$523 $35,029 $37,525 $42,496 -$803 -$1,040 -$1,337 Less: Amortization of Acquired Intangible Assets Non-GAAP Cost of Revenue -$950 -$700 -$700 -$700 -$846 $27,637 $30,861 $33,526 $35,785 GAAP Gross Profit $96,861 $105,971 $117,399 $134,822 $40,313 $151,100 Add: Stock-based Compensation & Related Payroll Taxes $478 $523 $803 Add: Amortization of Acquired Intangible Assets $950 $700 $700 $1,040 $700 $1,337 Non-GAAP Gross Profit $98,289 $107,194 $118,902 GAAP Gross Margin 77% 77% 77% $136,562 78% $846 $153,283 78% Non-GAAP Gross Margin 78% 78% 78% 79% 79% GAAP Sales and Marketing $63,552 $69,974 $75,995 $85,877 $96,219 Less: Stock-based Compensation & Related Payroll Taxes -$5,363 -$6,835 -$7,579 -$8,271 -$10,184 Non-GAAP Sales and Marketing $58,189 $63,139 $68,416 $77,606 $86,035 GAAP S&M Expense as a % of Revenue 50% 51% 50% 50% 50% Non-GAAP S&M Expense as a % of Revenue 46% 46% 45% 45% 44% GAAP Research and Development $34,757 $39,527 $41,349 $46,770 $61,762 Less: Stock-based Compensation & Related Payroll Taxes -$9,080 -$11,058 -$11,280 -$13,971 -$24,747 Non-GAAP Research and Development $25,677 $28,469 $30,069 $32,799 $37,015 GAAP R&D Expense as a % of Revenue 28% 29% 27% 27% 32% Non-GAAP R&D Expense as a % of Revenue 20% 21% 20% 19% 19% GAAP General and Administrative $23,293 $27,724 Less: Stock-based Compensation & Related Payroll Taxes -$3,404 -$4,648 $28,927 -$4,486 $28,669 $34,183 -$4,742 -$5,830 Less: Acquisition-related and other expenses -$380 Non-GAAP General and Administrative Expense $19,889 $23,076 $24,441 $23,927 $27,973 GAAP G&A Expense as a % of Revenue 18% Non-GAAP G&A Expense as a % of Revenue 16% 20% 17% 19% 16% 17% 18% 14% 14% GAAP Loss from Operations -$24,741 Add: Stock-based Compensation & Related Payroll Taxes Add: Amortization of Acquired Intangible Assets $18,325 $950 -$31,254 $23,064 $700 -$28,872 $24,148 $700 -$26,494 $28,024 $700 -$41,064 $42,098 $846 Add: Acquisition-related and other expenses $380 Non-GAAP Loss from Operations -$5,466 GAAP Operating Margin -20% Non-GAAP Operating Margin -4% -$7,490 -23% -5% -$4,024 $2,230 $2,260 -19% -15% -21% -3% 1% 1%#35Definitions Paying Customers. We believe our ability to grow the number of paying customers on our network provides a key indicator of growth of our business and our future business opportunities. We define a paying customer at the end of the quarter as a person or entity who has generated revenue during such quarter, excluding (i) customers that were not acquired through ordinary sales channels, (ii) customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and Warp, which agreements and customers together represent an insignificant amount of our revenue. An entity is defined as a company, a government institution, a non-profit organization, or a distinct business unit of a large company that has an active contract with us or one of our partners. Large Customers (> $100,000 Annualized Revenue). While we continue to grow customers across all sizes, over time, our large customers have contributed an increasing share of our revenue. We view the number of customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts. To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each customer in the quarter and multiply that amount by four. For example, if we signed a new customer that generated $1,800 of revenue in a quarter, that customer would account for $7,200 of Annualized Revenue for that year. Our Annualized Revenue calculation excludes (i) agreements that were not entered into through our ordinary sales channels, (ii) revenue generated from customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and Warp, which agreements and customers together represent an insignificant amount of our revenue. Our Annualized Revenue metric also includes any usage charges by a customer during a period, which represents a small portion of our total revenue and may not be recurring. As a result, Annualized Revenue may be higher than actual revenue over the course of the year. Dollar-Based Net Retention. Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period. Our dollar-based net retention excludes professional services and the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. CLOUDFLARE © Copyright Cloudflare, Inc.