Company: NET
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0001477333-25-000137
Chunk: 412

Company: Cloudflare, Inc.
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 8
Chunk 412
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 Plan (2019 Plan) provides for the granting of stock options, restricted stock, RSUs, stock appreciation rights, performance shares, PSUs, and performance awards for the Company's Class A common stock to the Company's employees, directors, and consultants. Certain outstanding equity awards were granted under the Company’s 2010 Equity Incentive Plan that is no longer active, but continues to govern the outstanding equity awards granted thereunder.Stock OptionsThe Company has granted to certain executive officers and other key employees 10-year stock options with market conditions that vest and become exercisable to purchase shares of the Company's Class A common stock if the Company achieves certain stock price milestones and the employee continues to provide services to the Company through the applicable vesting dates (the Performance Options). The exercise price per share and the number of tranches and corresponding stock price milestones for the tranches of the Performance Options outstanding at such time were amended in the fiscal year ended December 31, 2023. As of June 30, 2025, there were approximately 3.6 million outstanding Performance Options.The Company recognizes stock-based compensation expense for the Performance Options based on the grant date fair value and using a graded attribution method over the weighted-average requisite service period. The total stock-based compensation expense for the Performance Options for the three months ended June 30, 2025 and 2024 were $11.6 million and $9.9 million, respectively, and for the six months ended June 30, 2025 and 2024 were $14.1 million and $12.5 million, respectively. As of June 30, 2025, there was $114.1 million of unrecognized stock-based 

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compensation expense related to the Performance Options that is expected to be recognized over a weighted-average period of 3.5 years.Restricted Stock Units and Performance Stock UnitsDuring the three months ended March 31, 2025, the Company’s Board of Directors granted to the Company’s CEO and President (each, a Co-Founder) an aggregate of 350,220 PSUs with market conditions that vest if the Company achieves certain stock price milestones and the Co-Founders, individually, continue to provide services to the Company through the applicable vesting dates.The weighted average assumptions used to determine the fair value of the PSUs with market conditions were as follows:2025Expected term (in years)7.0Expected volatility64.7 %Risk-free interest rate4.3 %Dividend yield