Q3 2024 Cloudflare Inc Earnings Call
Speaker Change: Good afternoon ladies and gentlemen and welcome to Cloudflare Q324 earnest call. All lines have been placed on mute to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during this time, click the price star followed by the number 1 on your telephone keypad.
Speaker Change: If you would like to withdraw your question, press star 1 again. And please limit yourself to one question and one follow-up. Thank you. I would now like to turn the call over to our first speaker, Philip Winslow. Please go ahead.
Philip Winslow: Thank you for joining us today to discuss Cloudflare's financial results for the third quarter of 2024. With me on the call, we have Matthew Prince, co-founder and CEO, Michelle Zetlin, co-founder, president and COO, and Thomas Seifert, CFO.
Philip Winslow: By now, everyone should have access to our earnings announcement. This announcement, as well as our supplemental financial information, may be found on our investor relations website.
Philip Winslow: Our anticipated product launches and the timing and market potential of those products, our anticipated future financial and operating performance, and our expectations regarding future macroeconomic conditions.
Philip Winslow: These statements and other comments are not guarantees of future performance, and are subject to risks and uncertainty, much of which is beyond our control.
Philip Winslow: Our actual results may differ significantly from those projected or suggested in any of our forward-looking statements.
Philip Winslow: These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future.
Philip Winslow: We undertake no obligation to update these statements after this call.
Philip Winslow: For a more complete discussion of the risks and uncertainties that could impact our future offering results and financial condition, please see our filings with the SEC, as well as in today's earnings press release.
Philip Winslow: Unless otherwise noted, all numbers we talk about today, other than revenue, will be on an adjusted, non-GAAP basis.
Philip Winslow: You may find a reconciliation of GAAP to non-GAAP financial measures that are included in our earnings release on our investor relations website.
Philip Winslow: For historical periods, a gap to non-gap reconciliation can be found in the supplemental financial information referenced a few moments ago.
Speaker Change: We would also like to inform you that we will be participating in the RBC Capital Markets Global TIMT Conference on November 20th and the Wells Fargo 8th Annual TIMT Summit on December 4th. Now I'd like to turn the call over to Matthew.
Matthew Prince: Thank you, Phil. We are pleased with our results for the third quarter, exceeding expectations for revenue, operating margin, and free cash flow, while also reaching what I believe is a critical inflection point in our rebuild of our go-to-market organization.
Matthew Prince: During the third quarter, we achieved revenue of $430.1 million, up 28% year-over-year. We added a record 219 new large customers, those that pay us more than $100,000 per year, and now have 3,265 large customers, up 28% year-over-year.
Matthew Prince: We also achieved a new milestone of counting 35% of the Fortune 500 as paying CloudFlare customers.
Matthew Prince: Revenue contribution from large customers during the quarter remain consistent at 67% up from 65% in the third quarter last year.
Matthew Prince: Our dollar-based net retention was 110%, down two percentage points quarter over quarter.
Matthew Prince: While customer return remains consistently low, our shift to more pool-of-funds deals with our largest customers, which represented nearly 10% of new ACV booked in the quarter, up from 1% a year ago, has put downward pressure on dollar-based net retention and changed the shape of revenue recognition in the short term.
Matthew Prince: Over the long term, however, we believe Pool of Fund deals are very positive for the business as they represent our largest customers, making a broad commitment to Cloudflare's overall platform.
Matthew Prince: Our gross margin was 78.8%, remaining above our long-term target range of 75 to 77%, and up a tad from 78.7% in the same quarter last year. We delivered an operating profit of $63.5 million, representing an operating margin of 14.8%.
Matthew Prince: Our continued strength in operating margin underscores our commitment to operational efficiency and productivity.
Matthew Prince: Free cash flow came in at $45.3 million, ahead of expectations even as we are investing in our network and enhanced capabilities like faster, more capable GPUs around the world.
Matthew Prince: In Q3, the IT spending environment remained consistent with prior quarters, with customers closely scrutinizing every deal, emphasizing cost efficiency, and seeking meaningful ROI.
Matthew Prince: This cautious approach isn't new. It's something we understand and, as a must-have, not a nice-to-have, benefit from relative to some of our peers.
Matthew Prince: Moreover, our broad platform has allowed us to solve multiple problems for customers from a single vendor, giving us an advantage over many of our point solution competitors.
Matthew Prince: However, some larger deals slipped out of the quarter in the U.S. in particular during what was a transitional period under new sales leadership in that region. These deals are still active and in our pipeline, with many having already closed this quarter.
Matthew Prince: Although changes in our sales force may have impacted the short-term cadence of some larger deal cycles.
Matthew Prince: What stood out to me is that the third quarter felt like we hit the inflection point in the rebuild of our go-to-market team.
Matthew Prince: Mark Anderson has lived up to being a world-class sales leader. He's hired stage-appropriate talent across our go-to-market organization, been fair but relentless with performance management, and brought discipline and focus to our team.
Matthew Prince: That's showing in the numbers. Our sales productivity has continued to improve and is now back around the best levels we saw in 2022. Mark believes there's still significant headroom above where we are as we focus not on batting average, but on slugging percentage.
Matthew Prince: shifting more of our account executives to enterprise sales with higher quotas and the ability to sell bigger deals.
Matthew Prince: As we've worked through performance management and up-leveling the team, our ramped rep capacity has been essentially flat for the last four quarters. When I said we've hit an inflection point, this is the biggest thing that I'm watching.
Matthew Prince: Starting in 2025, we expect the number of ramped reps will begin to increase meaningfully again, but with a shift towards more real sluggers who can bring in more enterprise deals.
Matthew Prince: To make it tangible, nearly 70% of new sales hires this year are in the enterprise segment compared with 40% on average over the prior two years.
Matthew Prince: As you may recall from Mark's presentation at Investor Day earlier this year, momentum in ACV growth is a product of sales capacity times productivity.
Matthew Prince: We've made solid improvements in productivity. Now, we're about to start to see the capacity of our sales force re-accelerate. I'm excited to be coming out the other side of our go-to-market transformation, and we expect these initiatives will deliver improving ACV momentum in the coming quarters.
Matthew Prince: As I've shared with some of you, if I think about the last 15 years at Cloudflare, there's always something that I'm worried about, something that's broken, or as Michelle would say, an opportunity to improve.
Matthew Prince: It's always tended to be one of three things—sale, stability, or shipping. I picture it sort of like a hockey puck sliding around points in a triangle etched in the ice.
Matthew Prince: You get good at selling a product, the more demanding customers buy it.
Matthew Prince: That causes whatever level of service that was acceptable before to no longer be acceptable, so you focus on improving stability. And as you have demanding customers and put in place better systems and processes to ensure stability, it starts to hamstring your ability to ship new products.
Matthew Prince: At some level, my job is to live in the future, so I started to worry about go-to-market two years ago.
Matthew Prince: About a year ago, it became clear that we were going to be able to bring on Mark Anderson and meaningfully up-level that team.
Matthew Prince: Right on cue, as I stopped worrying about go to market, we suffered the stability incident last year. We focus on things and we fix them. And today our stability, even with our broad products and more demanding customers is world-class.
Matthew Prince: So, I was gearing up to start worrying about shipping when, ahead of schedule, I got introduced to C.J. Desai, one of the most proven product and engineering leaders who is now our chief product and engineering officer.
Matthew Prince: He knows how to ship. So now I find myself in the strange position of having to look for new things to worry about in the medium term.
Matthew Prince: Undoubtedly, given our ambition, we'll find new challenges. But I'm heartened that incredible leaders like Mark Anderson, CJ Desai, Stephanie Cohen, all of whom had incredible offers to be CEOs at other organizations, have been able to make a difference in the world today.
Matthew Prince: believed in Cloudflare's mission and the opportunity we have to build the next iconic technology company to turn down those other offers and join our team over the last year. With that, let me turn to some customer wins from the quarter.
Matthew Prince: A rapidly growing AI company expanded their relationship with Cloudflare, signing a one-year $7 million pool of funds contract for workers AI.
Matthew Prince: This company signed a $500,000 contract in Q2 for Cloudflare to be their quote, platform for AI, for inference.
Speaker Change: Storage, Image Optimization, and Application Security. They quickly recognized the value of our platform and are now moving all of their workloads over to make CloudFlare their single inference cloud platform.
Speaker Change: With Workers AI, this customer is able to improve cost efficiency with our pay-per-inference model and also eliminate the need for a dedicated team to run and manage their infrastructure.
Speaker Change: Realizing a nearly 2x performance improvement over traditional public clouds with Workers AI was just the cherry on top. This win is just the beginning for Workers AI.
Speaker Change: A rapidly growing technology company signed a three-and-a-half-year, $2.4 million contract for R2 workers and application security.
Speaker Change: Key concerns for this customer were high egress fees, unpredictable cost spikes, and vendor lock-in with a hyperscale public cloud provider. And they viewed R2 as a strategic tool to allow them to unlock paths to realize the full benefits of the cloud.
Speaker Change: With Cloudflare Workers, R2, and Application Services, all on one platform, this customer was able to increase their global application performance by 3.5x and drive down their TCO. This customer is also working closely with our product team on some exciting new developments around Workers AI.
Speaker Change: A rapidly growing operator of a large satellite internet constellation signed a three-year $4 million pool of funds contract for our full suite of FedRAMP products.
Speaker Change: A Fortune 100 technology company signed a two-year, $4.2 million contract. This customer sought resiliency on their most critical dynamic traffic, which was previously only routed through a centralized hyperscaler.
Speaker Change: With CloudFlare, they are not only able to gain greater resiliency, but also realize better performance and more robust security capabilities.
Speaker Change: We continue to see resiliency emerge as a key theme, enabling Cloudflare to establish a beachhead inside large enterprise accounts alongside incumbent providers.
Speaker Change: A global 2,000 manufacturing company expanded their relationship with Cloudflare, signing a three-year, $2.4 million contract for 45,000 Zero Trust seats, along with Magic WAN and Magic Firewall, to provide secure access to more than 600 offices.
Speaker Change: Their multi-vendor incumbent architecture with a first-generation Zero Trust competitor and other on-premise vendors led to gaps in security and a lack of visibility.
Speaker Change: After evaluating several vendors, CloudFlare demonstrated a superior technical solution to their 200 use cases, in addition to increasing their security posture and consolidating multiple point solutions onto a unified SaaSy platform.
Speaker Change: In the words of the customer, quote, Cloudflare is our Swiss Army knife. We can do so many things.
Speaker Change: A large technology company in Europe expanded their relationship with Cloudflare, signing a one-year, $5.3 million contract for more than 40,000 seats of access, gateway, data loss prevention, along with remote browser isolation, workers, and application security.
Speaker Change: with a company looking to not only enhance its security posture, but also consolidate onto one platform, our innovative Zero Trust roadmap was a key differentiator. In the words of the customer, quote, we are an engineering-driven company. We build most of our tech, so we want something modern, effective, and secure.
Speaker Change: Finally, I wanted to congratulate President Trump on his election victory and also recognize Vice President Harris for a hard-fought campaign.
Speaker Change: Both candidates were CloudFlare customers, both were targeted by cyberattacks, and I'm proud that we were able to defend them both without incident.
Speaker Change: I'm even more proud of something else. More than half of U.S. states and most of the so-called battleground states rely on Cloudflare's Athenian project, where we provide free service to any officials administering elections whether they're in red, blue, or purple states.
Speaker Change: We couldn't have built CloudFlare without a stable, functioning political system. And key to that is making sure that you can trust the democratic process.
Speaker Change: I wanted to thank our team who've been on call for the last several months and especially over the last few weeks.
Speaker Change: to come to the aid of election officials and campaigns whenever they've had a need.
Speaker Change: There will be lots of stories from the 2024 presidential election, but cyber attacks won't be a meaningful part of any of them. And I'm proud that Klappler is part of the reason why. With that, I'll turn it over to Thomas. Thomas, take it away.
Thomas Seifert: Thank you, Matthew, and thank you to everyone for joining us.
Thomas Seifert: We're pleased with our execution during the third quarter, as we've made further progress on our go-to-market transformation.
Delivering another double-digit year-over-year improvement in sales productivity.
However,
Thomas Seifert: Sales cycles lengthened during the quarter and some larger deals slipped out of the quarter, in the US in particular. Importantly, these are still active deals.
Speaker Change: As Matthew mentioned earlier, the third quarter marked a key inflection point in our go-to-market transformation, with net sales capacity having bottomed.
Speaker Change: Similar to last quarter, we continue to increase hiring in our sales organization with a particular focus on onboarding enterprise account executives with proven track records.
Speaker Change: We expect the number of Rent Enterprise Account Executives to accelerate exiting 2024 and throughout 2025, and this is particularly the case in the U.S.
Speaker Change: Turning to revenue. Total revenue for the third quarter increased 28% year-over-year to $430.1 million.
Speaker Change: The third quarter was highlighted by ongoing strength in Pool of Fund Contracts, momentum with Worker AI, and continued high prioritization of security by our customers.
Speaker Change: From a geographic perspective, the U.S. represented 50% of revenue and increased 22% year-over-year.
Speaker Change: EMEA represented 28% of revenue and increased 31% year over year.
APAC represented 14% of revenues and increased to 38% year-over-year.
Speaker Change: We were again pleased to see a notable uptick in both sequential and year-over-year growth in APAC.
Speaker Change: Turning to our customer metrics, in the third quarter, we had about 221,500 paying customers, an increase of 22% year-over-year.
Speaker Change: We ended the quarter with 3,265 large customers, representing an increase of 28% year-over-year and a record addition of 219 large customers in the quarter.
Speaker Change: Our dollar-based net retention was 110% during the third quarter, representing a decrease of two percentage points sequentially.
Speaker Change: The decline in DNR was driven by slower net expansion in our larger customer cohorts.
Speaker Change: Increased platform deals in the form of pool of funds contracts, which, as a reminder, reduce friction to adoption across our product portfolio, but can impact the shape of revenue recognition, as well as deferred revenue, TRPO, and cash flow.
Speaker Change: and anniversary in the price increase to our pro and business payable plans last year.
Speaker Change: As we mentioned last quarter, we expect new customers to contribute a higher percentage of our overall year-over-year revenue growth for the next several quarters.
Moving to cross-margin.
Speaker Change: Third quarter gross margin was 78.8%, representing a decrease of 20 basis points sequentially and an increase of 10 basis points year over year.
Network CapEx represented 10% of revenue in the third quarter.
Speaker Change: During the quarter, we saw a notable shift in customer conversations and buying behavior from AI training to AI inference, including our first multimillion-dollar workers AI contract.
Speaker Change: This gives us confidence to continue to increase our investment in higher-end GPUs as well as the breadth of our GPU rollout as we provision greater capacity to support demand in 2025.
Speaker Change: As a result, we continue to expect network CapEx to increase again in the fourth quarter to reach 10 to 12% of revenue for the full year 2024.
Turning to operating expenses.
Speaker Change: Third quarter operating expenses as a percentage of revenue decreased by 2% year over year to 64% as we remain committed to driving higher productivity and greater efficiency across our operations.
Speaker Change: Our total number of employees increased 18% year-over-year, bringing our total headcount to about 4,200 at the end of the quarter.
Speaker Change: Sales and marketing expenses were $160.2 million for the quarter. Sales and marketing as a percentage of revenue decreased to 37 from 38% in the same quarter last year.
Speaker Change: Research and development expenses were $70.5 million in the quarter. R&D as a percentage of revenue remained consistent at 16% compared to the same quarter last year.
General and administrative expenses were $45 million for the quarter.
Speaker Change: GNA as a percentage of revenue decreased to 10% from 11% in the same quarter last year.
Speaker Change: Operating income was $63.5 million, an increase of nearly 50% year over year, compared to $42.5 million in the same period last year.
Speaker Change: Third quarter operating margin was 14.8%, an increase of 210 basis points year-over-year.
Speaker Change: These results highlight our continued focus on becoming more efficient and more productive, given that operational excellence is a long-term competitive advantage.
Turning to Net Income and the Balance Sheet.
Speaker Change: Our net income in the quarter was $72.6 million, or a dilutive net income per share of $0.20.
Maintaining a strong commitment to being fiscally responsible and acting as good stewards of Investor capital. We ended the third quarter was $1 $8 billion in cash cash equivalents and available for sale securities.
Speaker Change: Maintaining our strong commitment to being fiscally responsible and acting as good stewards of investors' capital, we ended the third quarter with $1.8 billion in cash, cash equivalents, and available for sale securities.
Speaker Change: Free cash flow was $45 3 million in the quarter or 11% of revenue compared to $34 9 million or 10% of revenue in the same period last year.
Speaker Change: Pre-cap flow was $45.3 million in the quarter, or 11% of revenue, compared to $34.9 million, or 10% of revenue, in the same period last year.
Speaker Change: Remaining performance obligations, our Po came in at $1 billion and $503 million.
Speaker Change: Remaining Performance Obligations, or RPO, came in at $1,503,000,000, representing an increase of 6% sequentially and 39% year-over-year.
Speaker Change: Representing an increase of 6% sequentially and 39% year over year.
Speaker Change: <unk> was 70% of total <unk>.
Current RPO was 70% of total RPO.
Speaker Change: Moving to guidance for the fourth quarter and full year 2024.
Speaker Change: Moving to guidance for the fourth quarter and full year 2024.
Speaker Change: We are pleased with our execution during the third quarter and we remain prudent in our outlook for 2024 as we reached a key inflection point in our go to market transformation.
Speaker Change: We are pleased with our execution during the third quarter and we remain prudent in our outlook for 2024 if we reach a key inflection point in our go-to-market transformation.
Speaker Change: For the fourth quarter, we expect revenue in the range of $451 million to $452 million.
Speaker Change: For the fourth quarter, we expect revenue in the range of $451 to $452 million, representing an increase of 25% year-over-year at the midpoint.
Speaker Change: Renting an increase of 25% year over year at the midpoint.
Speaker Change: We expect operating income in the range of 57% to $58 million.
Speaker Change: We expect operating income in the range of $57 to $58 million, and we expect an effective tax rate of 16%.
Speaker Change: And we expect an effective tax rate of 16%.
Speaker Change: We expect diluted net income per share of <unk> 18 cents, assuming approximately 360 million shares outstanding.
Speaker Change: We expect a diluted net income per share of 18 cents, assuming approximately 360 million shares outstanding.
Speaker Change: For the full year 2024, we expect revenue in the range of $1 661 billion to $1 66 2 billion.
Speaker Change: For the full year 2024, we expect revenue in the range of $1.661 billion to $1.662 billion, representing an increase of 28% year-over-year.
Speaker Change: Representing an increase of 28% year over year.
We expect operating income for the full year in the range of $220 million to $221 million and we expect an effective tax rate of 13% for 2024.
Speaker Change: We expect operating income for the full year in the range of $220 to $221 million, and we expect an effective tax rate of 13% for 2024.
Speaker Change: We expect diluted net income per share over that period to be 74.
Speaker Change: We expect our looted net income per share over that period to be 74 cents, assuming approximately 357 million shares outstanding.
Speaker Change: Assuming approximately 357 million shares outstanding.
Speaker Change: As mentioned last quarter, we continue to analyze our ability to implement certain tax planning strategies in order to manage current and future cash tax liabilities.
Speaker Change: As mentioned last quarter, we continue to analyze our ability to implement certain tax planning strategies in order to manage current and future cash tax liabilities.
We'll provide an update on this.
Speaker Change: We will provide an update once this tax planning review is completed, if the outcome were to impact our expectations for CloudFlare's non-GAAP effective tax rate for the fourth quarter.
Speaker Change: Planning review is completed.
Speaker Change: The outcome were to impact our expectation for cloud first non-GAAP effective tax rate for the fourth quarter.
Speaker Change: Regardless of the outcome, we expect our non-GAAP effective tax rate of 19% to 22% beginning in 2025.
Speaker Change: Regardless of the outcome, we expect a non-GAAP effective tax rate of 19 to 22 percent beginning in 2025.
Speaker Change: However, I want to remind everyone that we still have significant net operating loss carry forwards and tax credit attributes available to offset cash taxes in the future.
Speaker Change: However, I would remind everyone that we still have significant net operating loss carried forward and tax credit attributes available to offset cash taxes in the future.
Speaker Change: We expect free cash flow to be consistent with our prior guidance of approximately $160 million to $164 million.
Speaker Change: We expect free cash flow to be consistent with our prior guidance of approximately $160 to $164 million for the full year 2024.
Speaker Change: For the full year 2024.
Speaker Change: In closing our teams remain committed to driving operational excellence, ensuring long term growth and delivering significant shareholder value.
Speaker Change: Like to thank our employees for their dedication to our mission as well as our customers for trusting us to help them modernize transform and secure their businesses and with that I'd like to open it up for questions. Operator, Please poll for questions.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question at this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. And please limit yourself to one question and one follow-up.
Speaker Change: I'd like to ask a question at this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star One again, please limit yourself to one question and one follow up.
Speaker Change: And your first question comes from the line of Plateau Hedberg with RBC capital markets. Please go ahead.
Speaker Change: And your first question comes from the line of Matthew Hedberg with RBC Capital Markets. Matthew, please go ahead.
Speaker Change: Great. Thanks for taking my questions guys. Congrats on the results Matthew maybe I'll start with you.
Speaker Change: Great. Thanks for taking my questions, guys. Congrats on the results. Matthew, maybe I'll start with you. In the past, you've talked about sort of the crystal ball nature of Cloudflare. And I guess I'm wondering, when you look into that crystal ball now, what is it telling you about the external business environment? And then perhaps, could you give a bit more color on maybe even the quantity of the U.S.-based slip deals?
Speaker Change: You've talked about sort of the crystal ball nature of cloud player and I guess I'm wondering when you look into that Crystal ball now what is it telling you about the external business environment, and then perhaps could you give a bit more color on the.
Speaker Change: Maybe it even though the quantity of the IOL space slipped deals.
Speaker Change: Yes.
Speaker Change: Matt first of all thank you for the question.
I am.
Speaker Change: No not shy about talking about.
not shy about talking about
Speaker Change: What we see or talking about macro concerns that are out there I don't think that we see any anything that is worse and in fact, I think we see an environment that maybe ever so slightly improved we saw real strength actually in Europe I know another number of other companies Havent seen the same but we executed well there and continue to see strength there Asia.
Speaker Change: what we see. We're talking about macro concerns that are out there.
Speaker Change: I don't think that we see anything that is worse than, in fact, I think we see an environment that maybe is.
Speaker Change: You know, ever so slightly improved. We saw real strength actually in Europe. I know a number of other companies.
Speaker Change: I haven't seen the same, but we executed well there and continue to see strength there. Asia has performed very well. And actually, from everything we've seen in the crystal ball, North America has leveled off to slightly improved.
Speaker Change: It's performed very well and actually from everything we've seen the crystal ball North Americas is.
Speaker Change: Leveled off to slightly improved I think where we.
I think where we have room to improve ourselves
Speaker Change: Where we are where we have room to improve ourselves.
Speaker Change: And where I'm optimistic looking forward.
Speaker Change: and where I'm optimistic looking forward is around our own internal execution. It has nothing to do with the macro. And the good news is that...
Speaker Change: Is around our own internal execution has nothing to do with the macro.
Speaker Change: And the good news is that.
Speaker Change: With our team in Europe, which has seen the most consistent sales productivity over the last eight quarters.
Speaker Change: With our team in Europe, which has seen, you know, the most consistent
sales productivity over the last eight quarters.
Speaker Change: Sales productivity increased by 22% year over year in Q3.
Speaker Change: You know, they've had sales productivity increased by 22% year over year in Q3. They are running the playbook that we're running.
Speaker Change: They are running.
Speaker Change: Running the playbook that we're running now in North America. There is a smaller team. So it's faster for us to be able to make those changes, but thats, where it same thing in Asia.
Speaker Change: Now, in North America, there's a smaller team, so it's faster for us to be able to make those changes, but that's that's work. Same thing in Asia, where they saw actually a sales productivity bump.
Where they thought <unk> sales productivity booms bump of 40% over the past three quarters.
of 40%.
over the past three quarters.
Speaker Change: And then had the highest productivity of any region. This year, so I think the macro.
Speaker Change: and they've had the highest AE productivity of any region this year. So I think the macro, I don't think there's anything about the macro that gives us more pause today than before. If anything, I think it's improving. And what I'm very optimistic about is that the
Speaker Change: I don't think Theres anything about the macro that gives us more pause today than before if anything I think it's improving and what what I am very optimistic about is that the <unk>.
Speaker Change: Laces, where we've already gotten through our improvement of our go to market team, we're seeing the benefits of that and now we're rolling that out to our largest market and we see that in Q1, you see a dramatic increase starting in the number of ramped reps and.
Speaker Change: places where we've already gotten through our improvement of our go to market team, we're seeing the benefits of that. And now we're rolling that out to our largest market. And we see that in Q1, you see a dramatic increase, starting in the number of ramped reps.
Speaker Change: That gives me a lot of confidence in the consistency of the macro also allows us to invest with confidence.
Speaker Change: and that gives me a lot of confidence and the consistency of the macro also allows us to invest with confidence.
Speaker Change: Got it thanks, maybe just a quick one follow up for Thomas the pool of fund deal. It seems like it's pressuring enter or maybe even CRP on revenue.
Speaker Change: The Pool of Fund Deals seems like it's pressuring NRR, maybe even CRPO in revenue. Is there a way, or I guess, you know, how would you have us think through the impact of that, especially as we kind of think towards 2025? I know it's a short-term thing, and it certainly benefits the long-term model, but any sort of guideposts that you can give us on the relative impact?
Speaker Change: Is there a way or I guess, how would you have us think through the impact of that especially as we as we kind of think towards 2025 I know, it's a short term thing and it certainly benefits the long term model of it but any sort of guidepost that you can give us on the relative impact.
Speaker Change: Yes, we gave a couple of.
Speaker Change: We gave a couple of stats on the call. So the share of Pula Funds deals in the quarter now creeped up to 10% which is a good result.
Speaker Change: That's on the call. So the share of pool of funds deals in the quarter creeped up to 10%, which is a good result.
Speaker Change: It would pressure as you rightfully said DNR and the short term, but I think it takes friction out of the <unk>.
Speaker Change: It will pressure, as you rightfully said, DNR in the short term,
Speaker Change: The process for our customers consuming our product and services moving forward. So we think that.
of the process.
Speaker Change: for all customers consuming our product and services moving forward. So we think...
Speaker Change: This is going to be with us for the next two to three quarters, but provides all of the upside from an expansion.
Speaker Change: that this is going to be with us for the next two to three quarters, but provides all the upside.
Speaker Change: Yes.
Speaker Change: from an expansion of the degrees of freedom we have and our customers have to expand moving forward.
Speaker Change: Sure.
Speaker Change: Use of freedom, we have and our customers have to extent moving forward.
Speaker Change: Thanks, a lot.
Thanks a lot.
Speaker Change: Your next question comes from the line of Andrew Nowinski with Wells Fargo. Andrew. Please go ahead.
Speaker Change: Your next question comes from the line of Andrew Nowinski with Wells Fargo. Andrew, please go ahead.
Andrew Nowinski: Okay. Good afternoon, and congrats on the nice quarter.
Speaker Change: Hi.
Speaker Change: I want to start with a question on.
I want to start with a question on
Speaker Change: Your AI. So you mentioned that a number of conversations with customers began to shift this quarter from AI training to AI in France, I think you signed a large workers I ideal just give any more color.
Speaker Change: your AI. So you mentioned that a number of conversations with customers began to shift this quarter from AI training to AI inference. And I think you signed a large workers I AI deal. Just give any more color on the AI landscape and some of the feedback you're hearing on on workers AI.
On the AI landscape.
Speaker Change: Some of the feedback you are hearing on workers' AI.
Andrew Nowinski: Yes, Andy Thanks for the question.
Yeah, Andy, thanks for the question. I mean, I'm
Andrew Nowinski: I am.
Andrew Nowinski: Yes.
Andrew Nowinski: Really.
really amazed at how quickly
Andrew Nowinski: Amazed at how quickly the AI platform that we launched is taking off and how many people are getting real value.
Speaker Change: The AI platform that we launched is taking off and how many people are getting real value from it. And so, as we mentioned, one of the leading AI companies signed a $7 million one-year contract with us to move their inference.
Speaker Change: From that and so as we mentioned.
Speaker Change: One of the leading AI companies signed a $7 million one year contract with us to move their inference to our.
Speaker Change: Our platform what they saw was that they were able to get significantly better performance, while also being able to run at a much.
Speaker Change: to our platform. What they saw was that they were able to get significantly better performance.
while also being able to run at a much higher
Speaker Change: Higher.
Speaker Change: ROI on the investment that they made over what they were seeing trying to manage it themselves through hyperscale public clouds. That's a story that is playing out over and over again I think it's a story that is accelerating and in order to support that we have made the investments to increase not only just the number.
Speaker Change: ROI on the investment that they made over what they were seeing trying to manage it themselves.
But also the <unk>.
Speaker Change: Power of the Gpus that we're deploying around the world, but I think is unique about cloud flare is two things one we are actually able to deliver in fred's incredibly close to where anyone is on earth, because we've deployed the inference capabilities across at this point nearly all of our network.
Speaker Change: But in addition to that we've actually done the work to get higher utilization out of those same GPU resources, where what we see when we survey customers that are trying to manage this themselves through a hyperscale public clouds that they're getting utilization rates that are sort of in the five to 10.
Speaker Change: 10% range.
Speaker Change: The resources that they're buying we're able to deliver much higher utilization and in the process of that that means that we can actually pass on.
Speaker Change: The effective savings to our customers so they not only save and not having to maintain their own team.
Speaker Change: To manage these these virtual machines and containers, but they also saved because we can do more with the same GPU resources that are that are being deployed so I'm incredibly excited that this is something which I think we are sort of starting to we're starting to shift.
Speaker Change: Two people, who have built their models and now they actually wanted to deploy them and customer facing ways and when they do that I think workers AI is the most powerful platform to be able to deliver.
Speaker Change: <unk> tasks at a global level.
Speaker Change: Thank you that was that was really helpful.
Speaker Change: And I guess as my follow up I wanted to ask about.
Speaker Change: Just the team you've built I think you've done a really nice job building out one of the best management teams in the industry and including the recent hire of CJ So and.
Speaker Change: And you seem to find a new way to use your network with a new product every quarter, but I'm wondering if you can give us any color in terms of the direction that TJ wants to take cloud focused product development.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: I'm, just really honored by the caliber of people who.
Speaker Change: Have have.
Speaker Change: Joseph.
Speaker Change: Take the next stage of their career and bet on Michelle in my vision.
For the future of what cloud flare is and so Mark Anderson.
Speaker Change: T J Desai Stephanie Cohen.
Speaker Change: And it goes down the list of top both managers, but then also top individual contributors.
Speaker Change: The caliber of talent that we get is is remarkable we're on pace to probably have over $1 5 million applicants.
Speaker Change: That apply to work at cloud flare in 2024.
Speaker Change: And we're just getting the cream of the crop of people. Those are obviously names that you all recognize.
Speaker Change: But across our entire team.
Speaker Change: I did an orientation session today I know, it's just remarkable to see all of the people who are are betting on cloud flares vision and that that gives me an enormous amount of hope.
Speaker Change: We will continue to be able to drive incredible innovation over over the long term I think CJ really brings a number of different things one of them that I really love US is his understanding and focus on the enterprise and so is we're building out a go to market.
Speaker Change: <unk> is now able to sell very large deals two very important customers what I referenced in my prepared remarks was that that would then put pressure on our product and engineering team to make sure that they can deliver those enterprise class features.
Speaker Change: To satisfy what our sales team delivered and there is no one in the world who is better at that than CJ and so we're honored to have him on board.
Speaker Change: Team is incredibly excited to be to be working with him and I think just watch this space because theres going to be a lot of a lot of exciting development to come.
Speaker Change: Sounds good thank you.
Speaker Change: Our next question comes from the lineup of Mark Murphy with J P. Morgan Mark. Please go ahead.
Speaker Change: Thank you so much I'll add my congrats and I agree with Andy that I think C. J is just an incredible higher.
Speaker Change: Matthew.
Speaker Change: It seems like you are capable of adding about 100000, new developers per months I believe onto the platform I think across two or 3 million developers.
Speaker Change: And now you have vector idea of hyperdrive, there's so many there's so many new products.
Speaker Change: The stats out there there are $30 billion genre of 100 million developers, depending on how you define it how many of those.
Do you think are viable candidates for cloud flare and you know what.
Speaker Change: Do you think is attainable over time, and then I have a quick follow up.
Speaker Change: Yes, I mean, I think all of them are viable candidates for cloud flare and we want to make the platform support any any of their their needs.
Speaker Change: That doesn't mean that every application is going to make sense to run right on class. Later, if you have a legacy application if you're trying to run SAP Hana, we're not the right place to do that.
Speaker Change: But if there is a company that's building.
Speaker Change: The thing that's going to disrupt SAP. Hana then then we're absolutely the place to do that and so if you look across the AIA ecosystem. If you look across.
Speaker Change: Sort of blockchain and crypto currency ecosystem, if you look at across anywhere where someone who is able to start with a blank slate where.
Speaker Change: Seeing adoption rates in the top startups top companies in the spaces that are well north of 50% in some cases, well north of 75% of the industry. So what we think the excitement around the platform is is.
Speaker Change: Is palpable.
Speaker Change: It is again taken off much faster I think our secret is is that customers zero for everything that we do at cloud flare is cloud for ourselves and that.
Speaker Change: And that that's been a great formula if we build things that our own developers slot. It turns out a lot of other other developers want to develop the same way that <unk> does and that's driving I think a lot of a lot of.
Speaker Change: Excitement and a lot of interest in the platform.
Thank you and then I appreciate that as a follow up there's been a couple of comments now that the AI models are advancing so fast that they're actually doubling every six months.
Speaker Change: Which is hard to believe they are advancing so fast it no I think we're looking at the reasoning and the long duration in France.
We're starting to hear the inferencing is going to have to be multi nodal and using infiniband, it's a pretty big step up and so I'm just curious maybe how you see that developing.
Speaker Change: How might that.
Speaker Change: Play into your architecture as these models has become so much more demanding.
Speaker Change: I think that we're really good at figuring out how to make very complicated hard tasks distributed.
Speaker Change: Across across our network.
Speaker Change: And so far what we're seeing is that even in cases, where there are models that maybe need more than one machine to run.
Speaker Change: We've been able to very efficiently.
Speaker Change: Do the hard engineering work to split that apart in ways that often.
Speaker Change: It might be different than how how some others are approaching approaching it but get a much higher level of utilization at the core of cloud flare that the first thing that we really did was we built a network, where we could move data faster and more reliably more efficiently meaning.
Deeper and more securely than anyone else and that then means that we can often time taken inference task maybe it's the big in France task is going to take some time it might be that we don't answer it as close to the user as possible it might be that we spread that out.
Speaker Change: Across multiple different machines, and then pull the answer back and those might be on the other side of the Earth in some cases.
Speaker Change: So that network and that ability for us to utilize the entire networks they have and effectively.
Speaker Change: Squeeze as much efficiency out and squeeze it about utilization out as possible that's been key to what we've done.
Speaker Change: Across the board with Cpus memory with storage networking and now we're just running the same play with Gpus and so so far there havent been.
We have not hit limits that our engineering team Hasnt found ways around and I think that where we are.
We feel pretty optimistic that even as AI continues to accelerate the place that youre going to want to do in Fred's is on class large network.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Brett <unk> with Jefferies. Brent. Please go ahead.
Speaker Change: Thanks. Good afternoon, Matthew is just on the go to market changes.
Speaker Change: Then questions just in terms of when.
Speaker Change: You talk about the push outs.
Speaker Change: We always see this and you've seen this in past quarters. It was this quarter more pronounced on the push outs or is this.
Speaker Change: Just something Youre, commenting hey, we made some sales changes. This this is the natural side effect I think everyone kind of just curious about the magnitude of that push was that.
Speaker Change: Greater kind of equal to what <unk> seen historically in past in past quarters.
Speaker Change: I think that it was.
Speaker Change: I think that.
Speaker Change: What what we.
Speaker Change: So this quarter that was a little bit different as we started to see that the capacity.
Speaker Change: Held us back at some level and and that that we had had two especially in North America cut deeper.
Speaker Change: Then I think we initially expected and Mark I think did a great job with performance management is coming in and continuing to do the hard work fine that really great people on our team and make sure. The day that they were taking care of it but also by the people that weren't going to be up to up to snuff and move them off the team what.
Speaker Change: I think the big change, though is I think we see that the inflection point for that and we've and we've crossed it we're really starting in Q1.
Speaker Change: The capacity and we know that that's going to tick up because there are people who are already on the team. They are just ramping right and we know what the ramp rates are and we know that.
Speaker Change: How that builds the capacity starts to really tick up in Q1, and assuming we're continuing to able be able to hire to plan, which we expect will be able to given the caliber and quality of the candidates that we get that continues to tick up over the course of 2025. So I don't think there was something that was dramatically different I do.
Speaker Change: Thank that we.
Speaker Change: We have made the productivity gains we have seen the success in other regions and now we're bringing that to what is our largest market, which is north America.
Speaker Change: And we see again that inflection point.
Speaker Change: In the not too distant future.
Speaker Change: Okay.
Speaker Change: You called out workers and you've been talking about this for a while but I guess, how how important is this now and the overall platform.
Speaker Change: Shifting.
Speaker Change: And the adoption how are you seeing this as.
Speaker Change: As customers are coming to you for multiple things are you seeing this as a as a big add on big driver how would you characterize where we're at in the adoption of workers.
Speaker Change: Yes, I think that.
Speaker Change: I have.
Speaker Change: At copper, we always thinks that we're stacking different S curves.
Speaker Change: Behind another so we have we have older products that are in more mature markets.
Speaker Change: That are sort of at the tail end of their their S curve and that's those are great products and we win a lot of deals from those and those customers because we're best of breed in that often then adopt other other parts of that I think are.
Speaker Change: Where we are right in that sort of hockey stick growth.
Speaker Change: Seeing a lot of success is with our zero trust products, which are which are taking off with workers I think that we are.
Speaker Change: I keep thinking we're.
Speaker Change: Kind of in the beginning of that the S curve of growth, but boy the S curve, even in the beginning as a steeper than I imagine there's a lot. That's there, but we are not I would say optimizing this as much for how do we extract the most revenue I think we're still optimizing very much for adoption.
Speaker Change: And.
What I like is that.
Speaker Change: Oftentimes workers become the conversation around how.
Speaker Change: How we how we actually adopt the entire platform because people want to they want to.
Speaker Change: Sign a pool of funds deal because their developers are excited about what workers delivers they don't know exactly how much of it that theyre going to use they know they're going to use the overall platform, but workers is then oftentimes a place where people say listen I want to put this in place I want to make sure our workers as part of that and then oftentimes, we're finding that customers will.
Speaker Change: <unk> used up their entire pool of funds well before.
Speaker Change: The contract duration and oftentimes what's driving that.
Speaker Change: And just the excitement of their teams around building new tools on workers.
Speaker Change: Thank you.
Speaker Change: Alright, just one robin connection problems with the operator.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: And the operators reconnecting it will just be a few moments.
Speaker Change: Okay.
Speaker Change: I don't think we have the technical ability to call on people otherwise we would.
Speaker Change: Okay.
Speaker Change: Thank you for joining us today to discuss cloud players financial result.
Speaker Change: For the third quarter of 2024 with me on the call we have Matthew Prince co founder and CEO, Michelle Deadwood co founder President and CFO.
Speaker Change: Yeah.
Speaker Change: Sorry, everyone for the confusion and delay.
Speaker Change: Yes.
Speaker Change: Okay for the next question, we have shell a L. B T D. Cohen. Please go ahead.
Speaker Change: Thank you hi, good afternoon, everybody congrats on the very solid performance.
Speaker Change: For Thomas or Matthew.
There's no question the number of seven digit and probably eight digit transactions are on the right.
Speaker Change: We've seen some some company from security related companies assisting larger customers with financing related expertise.
Speaker Change: What's the what's the current thinking.
Speaker Change: Along these lines is it something that your customers are beginning to talk to you about.
Speaker Change: What could be the approach here. Thank you.
Speaker Change: Okay.
Speaker Change: I guess I can take a stab at it and then Thomas might have had more than youre, saying like financing so that they can spread payments out over a longer period of time or can you say more about what what you're what what exactly youre thinking about saying that.
Speaker Change: Actually as as they grow with you and want to consume more of our services.
Speaker Change: At time.
Speaker Change: They get addicted to some of your services.
Speaker Change: They would add it would probably ask for.
Speaker Change: Flexibility.
Speaker Change: Assistance in terms of.
Payments or maybe kind of asking you to utilize some of your balance sheet.
Speaker Change: In their favor.
Speaker Change: Yes, we don't we don't.
Thomas Seifert: Thomas can add more but we don't we don't do any customer financing today I think we had generally been.
Thomas Seifert: The highest ROI provider and because we are a SaaS service.
You pay for it as you can see them I think that that's often been different with hardware.
Thomas Seifert: Company's debt.
Thomas Seifert: That that might have a different model, but but that isn't something that im aware of that theres, a theres a lot of demand for them on our side in terms of I don't know if there's anything you'd add.
Thomas Seifert: To finance customers.
Speaker Change: Doing business with us.
Speaker Change: This has not been a topic so far.
Speaker Change: Our next question comes from the line up Tim Horan with Oppenheimer. Please go ahead hi.
Tim Horan: Hi, guys, there's a lot of moving parts, obviously with the sales productivity and limited capacity there in the pooling can you maybe.
Speaker Change: Talk about the timing of when revenue growth can accelerate again do you think the fourth quarter were around 25% guide is that the bottom or do you think it is a still a few more quarters out and related to this can you update us on what you think the timing of so the $5 billion revenue target that you have and I had a quick product.
Speaker Change: Follow up thank you.
Speaker Change: Yes. Thank you for the question as we said before for US in our subscription business model revenue is a very much a lagging metric.
Speaker Change: Sales capacity as this is a product of the amount of head count we have and the productivity progress. They are making this translates into a pipeline and sales prospect.
Speaker Change: Into ACB and then ACB is recognized ratably over the lifetime of the contract as revenue. So it's a very much lagging indicator and as we said before models like this they are slow on their way.
Speaker Change: Down, but they are also slowing their way up but the important part is.
Speaker Change: As you heard in materials prepared remark that we think we have reached this key inflection point with net sales capacity now which is the leading growth indicators.
Speaker Change: <unk> pocket so from there on we expect sales activity translating the ACB moves.
Speaker Change: Moving moving forward and growing up and Youll see this already in those parts of the World where this current version and transition has happened successfully revenue was up <unk>.
Speaker Change: 38% already in APAC and it was up 31% in Europe, which is our highest productivity.
Speaker Change: <unk> has been.
Speaker Change: Over the last several quarters. So we think we have bottomed out from there from a net sales capacity perspective and move forward from there.
Speaker Change: I know the $5 billion target, maybe what year end and then just on the product side.
Speaker Change: Have you improved the process on going general availability with wood products I know in the past that took a little longer than expected and I guess related to this when do you think containers can hit G.
Speaker Change: Yes.
Speaker Change: Not.
Speaker Change: Yes, I would say I don't think that I don't think that we.
Speaker Change: I wouldn't say things have taken longer than expected I think that our strategy has always been to get products into the market.
As quickly as possible, let people play with them and test them and use them.
Speaker Change: Understand that there will be.
Speaker Change: Early early product and Thats part of the power of having the millions of customers tens of millions of customers that we do is that we can we can do that and get immediate product feedback and then iterate quickly and then use the GAA process as a time to signal when it's the right time for.
Speaker Change: For for products to be put in production used by our largest customers and have the confidence around that I think that that has.
Speaker Change: Slow down or accelerate I think it's kind of always been the process that we've gone through some products take longer somehow private pay to take less time.
Speaker Change: Painters are already in market, we have a number of of of large customers that use them to do to do interesting things how broadly we make that available.
Speaker Change: I'm thinking that where we are very much testing what I think doesn't make sense is to just release a product that doesn't have any differentiation doesn't have any advantage over existing container solutions and so that's I think what we are talking to customers about it I think we are using our usual process, but.
Technically there's nothing that keeps us from launching that tomorrow I think what we want to do is make sure that when we do that it has such a compelling value proposition.
Speaker Change: That that it is that it just becomes a no brainer.
Speaker Change: For people for people to use.
Speaker Change: Well the strategy is working.
Speaker Change: Yes.
Speaker Change: Our next question comes from the line of Joel Fishbein with <unk> Securities Jello. Please go ahead.
Speaker Change: Thank you thanks for the question Matthew loved.
Matthew Prince: Love to get an update from you on the public sector, obviously, you've got fed ramp certification you've seen some.
Matthew Prince: Good.
Matthew Prince: Customers there just love to hear what's happening there and then also as it relates to that is where they are do you think they are in their adoption of of inference that'd be helpful. Thanks.
Speaker Change: Yes, I think the public sector has that was really an area of strength for us in 2023 that we have not it is not it continues to perform but it had been I would say been on one of our just standout stars I think that that is is because we've been nurturing relationships and I think that youll see it reemerge.
Speaker Change: <unk> as a real driver of growth for us.
Speaker Change: Going forward, but I think it is not not had been as much of a stand out as it was last year.
Speaker Change: What what is.
Speaker Change: I am constantly reminded of is how.
Speaker Change: Okay.
Speaker Change: People, who work in governments are almost by definition mission driven and they really appreciate the work that we do and so the number of notes that I've gotten from very senior people across the U S government thanking us for what we did around the election, making sure that anytime.
Speaker Change: There was a problem.
Speaker Change: They knew that they could call on our team that we had people available 24 hours a day to help with any county official in any state anywhere in the country that was seeing some type of an attack and I'm proud of what we've done with that that is the most effective marketing that we can do for our public sector business.
Speaker Change: And what we find time and time again is that as we do those good works it turns into significant deals for us going forward and so.
Speaker Change: I think that it will be a very big it will continue to be a big and growing part of our business.
Speaker Change: And we have the pieces in place now.
Speaker Change: There are really no roadblocks from from us winning more federal business.
Speaker Change: And do you feel like you have the sales capacity necessary there to hit that market.
Speaker Change: I think we are building that that sales capacity I think we've got some really.
Speaker Change: Amazing leaders, there and I think that what.
Speaker Change: Hi.
Speaker Change: Mark Anderson.
Speaker Change: Sadly in North America for US has perhaps been as Scott.
Enormous.
Speaker Change: Pedigree of selling into federal markets and we have we have reps that we've hired to cover that space and they are ramping and I think that youll youll see them be able to again deliver.
Speaker Change: Very very large deals I don't I don't think that we are right now capacity constrained.
Speaker Change: In the federal space.
Speaker Change: Great. Thank you so much.
Speaker Change: Our next question comes from the line of Jonathan Ho with William Blair. Jonathan. Please go ahead.
Jonathan Ho: Hi, good evening.
Speaker Change: Wanted to get a little bit more color from some of the product side of things and particularly those around sort of the data orientation can you maybe give us a sense of how our two in day, one are sharing within your customer base and whether these products are helping drive some of the growth around AI and sort of the insurance modeling as well. Thank you.
Speaker Change: Yes, I think they are.
Speaker Change: Our two definitely as or to the magic continues to be on that if you have a large dataset and you need to move it to wherever.
Speaker Change: There is excess GPU capacity that are too as a ability to do that and so I think that especially in training workloads.
Speaker Change: We are seeing are too.
Speaker Change: <unk> be something that is as is often the gateway into using the rest of of cloud flaring and then that is is helping us.
Speaker Change: When more and more.
Speaker Change: Of the AI workloads, especially on the on the inference side.
Speaker Change: I think the one.
Speaker Change: There is less.
Speaker Change: That is thats driving in the in the AI space directly it's a.
Speaker Change: More of a traditional sequel database, but I think that these components together.
Have have come together, where now people are building full application on top of class a workers. So you need a database you need an object store you need all of these primitives and these primitives together are allowing us to.
Speaker Change: When much more complicated application much more complicated workloads and and that's that's that's important and we continue to innovate in that space I think what we did with hyperdrive.
Speaker Change: Some of the announcements that we had around birthday week with with durable objects.
Speaker Change: And durable databases are are really.
Speaker Change: Very unique primitives that you can only get on cloud flare and I think youre going to start to see applications that just would've been prohibitively difficult to build in the past, especially around.
Speaker Change: Synchronization worldwide a lot of game companies are starting to use some of these primitives to be able to think.
Speaker Change: There.
Layers dates and things that were they were in the path extremely difficult to build.
Speaker Change: <unk>.
Speaker Change: That is something that.
Speaker Change: I think youre going to see more and more applications that just couldn't be built anywhere other than cloud flare and that's I think that's incredibly exciting for the space.
Speaker Change: Excellent. Thank you.
Speaker Change: Hey yourself further question at this time I will now turn the call back over to Matthew <unk> for closing remarks Matthew.
Matthew Prince: Thank you we had a number of technical difficulties.
Matthew Prince: I would take it personally that the after hours stock went up the most when we were.
Matthew Prince: On mute for a period of time, but I do appreciate all of the work that goes into these calls that really pulling together these quarters, we've got an incredible team.
Matthew Prince: <unk> continues to execute that team is building and ramping now and I just wanted to say thank you to everyone for all the hard work over the course of the last quarter, especially over the course of this week, where we've been all hands on deck to make sure that the U S election went off without cyber attacks being a big part of it. Thank you so much and we'll see back here again next quarter.
Speaker Change: Today's call. Thank you all for joining you may now disconnect.
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