Company: NET
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001477333-25-000082
Chunk: 339

Company: Cloudflare, Inc.
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 1
Chunk 339
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 privately-negotiated capped call option transactions (the 2025 Capped Calls) with certain financial institution counterparties. The 2025 Capped Calls each have an initial strike price of approximately $37.43 per share of the Company's Class A common stock, subject to certain adjustments, which corresponds to the initial conversion price of the 2025 Notes. The 2025 Capped Calls each have an initial cap price of $57.58 per share, subject to certain adjustments. The 2025 Capped Calls expire between March and May 2025 and will be settled in accordance with their terms in May 2025.In March 2025, the Company elected cash settlement for the 2025 Capped Calls. Upon the last 2025 Capped Calls expiration in May 2025, the Company expects to receive cash in connection with the settlements. Upon the cash settlement elections, the 2025 Capped Calls no longer met the criteria for equity classification and were reclassified from additional paid-in capital to derivative asset, with an estimated fair value at cash settlement election date of $308.3 million. The derivative asset was included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheet as of March 31, 2025. The fair value of the derivative asset did not change as of the balance sheet date. The Company used the Black-Scholes option-pricing model to determine the fair value of the derivative asset, with significant inputs being the expected term, risk free rate, volatility and the Company’s share price as of the valuation dates.Refer to Note 7 to the consolidated financial statements in Part II, Item 8 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for further information on the 2025 Notes and 2025 Capped Calls.The net carrying amounts of the 2026 Notes were as follows:March 31, 2025December 31, 2024(in thousands)Principal$1,293,750 $1,293,750 Unamortized debt issuance costs(5,439)(6,429)Carrying amount, net$1,288,311 $1,287,321 The following tables set forth total interest expense recognized related to the 2026 Notes:Three Months Ended March 31,20252024(in thousands)Amortization of debt issuance costs990 990 Total$990 $990 Revolving Credit Facility