Cloudflare, Inc. (NET - Free Report) reported better-than-expected results for the first quarter of 2020. The company posted loss per share of 4 cents, narrower than the Zacks Consensus Estimate of a loss of 6 cents. The quarterly loss also came in narrower than the year-ago quarter’s loss per share of 19 cents.
Total revenues jumped 48% year over year to $91.3 million, surpassing the Zacks Consensus Estimate of $87 million. Elevated demand for its cloud-based solutions amid the coronavirus-led remote working wave mainly aided the company’s top-line results.
Geographically, sales in the U.S. region climbed 44% year over year and represent 40% of the total revenues. The company recorded a 62% year-over-year surge in its international business, mainly driven by a 58% increase in Europe.
During the first quarter, the company added 250K new customers, bringing the total free and paying customer count at 2.8 million, representing a year-over-year jump of 40%.
Additionally, Cloudflare added 5,000 new paying customers during the quarter, thereby increasing the total number of paying customer count to 89,000. Large customers (annual billings of more than $100,000) were 536 at the end of the first quarter, up 65% year on year. Additionally, the company’s dollar base net retention rate was 117% in the quarter, up 1% from the year-ago quarter.
Non-GAAP gross profit soared 50.8% year over year to $71.5 million, while margin expanded 150 basis points (bps) to 78.3%. Improved network efficiency mainly bolstered gross margin in the March-end quarter.
Non-GAAP total operating expenses flared up 35% year on year to $85.9 million primarily due to a 43% increase in headcounts. However, as a percentage of revenues, operating expenses shrunk 900 bps to 94%.
Non-GAAP loss from operations narrowed down to $14.4 million in the first quarter from the year-ago quarter’s $16.1 million.
Balance Sheet and Cash Flow
Cloudflare ended the first quarter with cash, cash equivalents and marketable securities of $588 million compared with the prior quarter’s $637 million. Moreover, the company had outstanding debt (operating lease liabilities) of $51 million as of Mar 31, 2020.
During the quarter, the company used $14.3 million of cash for operational activities. Free cash flow was also a negative $30.6 million.
For the second quarter, Cloudflare expects revenues between $93.5 million and $94.5 million. The Zacks Consensus Estimate for the ongoing-quarter revenue is pegged at $92.5 million.
Non-GAAP operating loss is projected at $190-$20 million. The company anticipates reporting non-GAAP loss per share of 5-6 cents. The Zacks Consensus Estimate currently stands at a loss of 6 cents per share.
Furthermore, Cloudflare reaffirmed its outlook for the full year. The company anticipates to generate revenues of $389-$393 million. The consensus estimate is pegged at $387.7 million.
Non-GAAP loss from operation is expected to be within the $61-$65 million range. Cloudflare projects reporting loss per share between 19 cents and 21 cents in 2020. The Zacks Consensus Estimate stands at a loss per share of 20 cents.
Zacks Rank and Key Picks
Currently, Cloudflare carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector include Inphi Corporation (IPHI - Free Report) , Workday, Inc. (WDAY - Free Report) and NVIDIA Corporation (NVDA - Free Report) , each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for Inphi, Workday and NVIDIA is currently pegged at 37.6%, 26.2%, and 15.2%, respectively.
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