Company: NET
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001477333-25-000082
Chunk: 357

Company: Cloudflare, Inc.
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 1
Chunk 357
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 We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. We exclude employer payroll tax expenses related to stock-based compensation, which is a cash expense, from certain of our non-GAAP financial measures, because such expenses are dependent upon the price of our Class A common stock and other factors that are beyond our control and do not correlate to the operation of our business. We exclude amortization of acquired intangible assets, which is a non-cash expense, related to business combinations from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. We exclude acquisition-related and other expenses from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. Acquisition-related and other expenses can be cash or non-cash expenses incurred in connection with the acquisition, and include third-party transaction costs and compensation expense for key acquired personnel. We also excluded the one-time cash compensation charge incurred during the three months ended March 31, 2024 from certain of our non-GAAP financial measures because it was not attributable to services provided and did not correlate to the ongoing operation of our business.

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Three Months EndedMarch 31,20252024(dollars in thousands)Loss from operations$(53,247)$(54,550)Add:Stock-based compensation expense and related employer payroll taxes105,895 76,727 Amortization of acquired intangible assets3,241 5,266 Acquisition-related and other expenses112 — One-time compensation charge— 15,000 Non-GAAP income from operations$56,001 $42,443 Operating margin(11)%(14)%Non-GAAP operating margin (non-GAAP income from operations as a percentage of revenue)12 %11 %

Free Cash Flow and Free Cash Flow Margin

Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized internal-use software. Free cash flow margin is calculated as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property and equipment and capitalized internal-use software, can