Company: NET
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001477333-25-000082
Chunk: 382

Company: Cloudflare, Inc.
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 8
Chunk 382
---
 the investee, the extent of the loss related to the credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security, and whether or not the Company will be required to sell the security before the recovery of its amortized cost. As of March 31, 2025, the Company's investment portfolio consisted of investment grade securities with an average credit rating of AA.The Company carries the 2026 Notes (as defined below) issued in August 2021 at face value less the unamortized issuance costs on its condensed consolidated balance sheets and presents that fair value for disclosure purposes only. As of March 31, 2025, the fair value of the 2026 Notes was $1,297.8 million. The fair value of the 2026 Notes, which are classified as Level II financial instruments, was determined based on the quoted bid prices of the 2026 Notes in an over-the-counter market on the last trading day of the reporting period. For further details on the 2026 Notes, refer to Note 7 to these condensed consolidated financial statements.The fair value measurements for the derivative asset related to the 2025 Capped Calls (as defined below) are determined using the Black-Scholes option-pricing model with Level II inputs. The derivative asset was recognized as a result of the Company electing to cash settle the 2025 Capped Calls. For further details on the 2025 Capped Calls, refer to Note 7 to these condensed consolidated financial statements.The Company classifies financial instruments in Level III of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level III financial instruments typically also rely on a number of inputs that are readily observable, either directly or indirectly. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. There were no financial instruments classified as Level III of the fair value hierarchy as of March 31, 2025 and December 31, 2024.

Note 5. Balance Sheet Components

Accounts Receivable, NetAs of March 31, 2025 and December 31, 2024, the Company’s allowance for doubtful accounts was $8.3 million and $8.2 million, respectively. Provision for bad debt for the three months ended March 31, 202