Rather than re-write it myself, I'll just quote my friend MBI:
"Cloudflare issued a 0% ~$1.3 Bn 2026 convertible bond in August 2021. Since the conversion price is $191.34 (>3x current price), Cloudflare may, in fact, end up receiving "free money" from the generous convertible bondholders. Cloudflare reported ~1.6 Bn cash (and ~200 Mn net cash) on its balance sheet in 2Q'22"
Their balance sheet is quite strong, they have great unit economics, very sticky revenues in largely mission-critical areas (infrastructure, security, identity) and have said that they'll run about breakeven going forward, so the burn phase should be over. But if they're ever in trouble, the levers are in their hands to increase profitability, they've just been re-investing a lot through the income statement by hiring a lot but they can slow that down at their discretion.
Hi Liberty,
What sources would you recommend for understanding Cloudflare?
Hey,
MBI has a good deep dive here:
https://www.mbi-deepdives.com/net/
Muji has written a bunch about it here:
https://hhhypergrowth.com/tag/net/
MT Capital also wrote about them here:
https://mtcapital.substack.com/p/cloudflare-net
And I've written a lot about them too, often doing commentary around presentation and transcripts:
https://www.google.ca/search?q=site%3Alibertyrpf.com+cloudflare
I hope that's useful! 💚 🥃
Wow, thanks.
My pleasure!
Hi!
Thanks for reading, and for writing!
Rather than re-write it myself, I'll just quote my friend MBI:
"Cloudflare issued a 0% ~$1.3 Bn 2026 convertible bond in August 2021. Since the conversion price is $191.34 (>3x current price), Cloudflare may, in fact, end up receiving "free money" from the generous convertible bondholders. Cloudflare reported ~1.6 Bn cash (and ~200 Mn net cash) on its balance sheet in 2Q'22"
Their balance sheet is quite strong, they have great unit economics, very sticky revenues in largely mission-critical areas (infrastructure, security, identity) and have said that they'll run about breakeven going forward, so the burn phase should be over. But if they're ever in trouble, the levers are in their hands to increase profitability, they've just been re-investing a lot through the income statement by hiring a lot but they can slow that down at their discretion.