Cloudflare Long-Term Financials and Business Strategy

GAAP to Non-GAAP Reconciliation CLOUDFLARE Copyright Cloudflare, Inc. 2016 2017 GAAP Cost of Revenue $23,962 $28,788 2018 $43,537 2019 Q3 2019 Q3 2020 $63,423 $16,033 $27,005 Less: Stock-based Compensation Expense -$64 -$47 -$119 -$716 -$397 -$354 Less: Amortization of Acquired Intangible Assets -$38 -$462 -$517 -$125 -$31 -$700 Non-GAAP Cost of Revenue $23,860 $28,279 $42,901 $62,582 $15,605 $25,951 GAAP Gross Profit $60,829 $106,127 $149,137 $223,599 $57,908 $87,157 Add: Stock-based Compensation & Related Payroll Taxes $64 $47 $119 $716 $397 $354 Add: Amortization of Acquired Intangible Assets $38 Non-GAAP Gross Profit $60,931 $462 $106,636 GAAP Gross Margin 72% Non-GAAP Gross Margin 72% 79% 79% $517 $149,773 77% 78% $125 $31 $700 $224,440 $58,336 $88,211 78% 78% 76% 78% 79% 77% GAAP Sales and Marketing $40,122 $61,899 $94,394 $159,298 $45,538 $55,982 Less: Stock-based Compensation & Related Payroll Taxes -$381 Non-GAAP Sales and Marketing $39,741 -$488 $61,411 -$979 $93,415 -$8,709 $150,589 -$4,880 -$4,761 $40,658 $51,221 GAAP S&M Expense as a % of Revenue 47% 46% 49% 56% 62% 49% Non-GAAP S&M Expense as a % of Revenue 47% 46% 48% 52% 55% 45% GAAP Research and Development $23,663 $33,650 $54,463 $90,669 $27,863 $30,902 Less: Stock-based Compensation & Related Payroll Taxes -$1,043 -$969 -$1,532 -$13,037 -$7,801 -$7,373 Non-GAAP Research and Development $22,620 $32,681 $52,931 $77,632 $20,062 $23,529 GAAP R&D Expense as a % of Revenue 28% 25% 28% 32% 38% 27% Non-GAAP R&D Expense as a % of Revenue 27% 24% 27% 27% 27% 21% GAAP General and Administrative $14,073 $20,308 $85,179 $81,578 $25,593 $21,525 Less: Stock-based Compensation & Related Payroll Taxes -$4,212 -$1,251 -$24,717 -$14,165 -$9,833 -$3,518 Non-GAAP General and Administrative Expense $9,861 $19,057 $60,462 $67,413 $15,760 $18,007 GAAP G&A Expense as a % of Revenue 17% 15% 44% 28% 35% 19% Non-GAAP G&A Expense as a % of Revenue 12% 14% 31% 23% 21% 16% GAAP Loss from Operations -$17,029 -$9,730 Add: Stock-based Compensation & Related Payroll Taxes $5,700 Add: Amortization of Acquired Intangible Assets $38 $2,755 $462 Non-GAAP Loss from Operations -$11,291 -$6,513 -$84,899 $27,347 $517 -$57,035 GAAP Operating Margin Non-GAAP Operating Margin -20% -7% -44% -$107,946 $36,627 $125 -$71,194 -38% -$41,086 $22,911 -$21,252 $16,006 $31 $700 -$18,144 -$4,546 -56% -19% -13% -5% -30% -25% -25% -4% 29 Note: $ in thousands. 29

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