Venkisakthi
2021-06-30
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Cloudflare Is Much More Scalable Than You Think<blockquote>Cloudflare比您想象的更具可扩展性</blockquote>
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We have seen investors classifying Cloudflare as a cloud or web security company, or a content delivery network [CDN], or an identity access management [IAM] company. The fact is, while Cloudflare is involved in all of those, the company actually has a much larger scale of operation. Cloudflare sees itself as “a networking company”, that “you have to think about [Cloudflare] almost like Cisco-as-a-service. Anything where you would have bought and acquired hardware on-premise, whether it's firewalls, routers, load balancers, VPNs, we offer this as a service from our network. And this network is masked by now.”</p><p><blockquote>对于不同的投资者来说，Cloudflare (NET) 已经像许多事情一样为人所知。我们已经看到投资者将Cloudflare归类为云或网络安全公司、内容交付网络[CDN]或身份访问管理[IAM]公司。事实是，虽然Cloudflare参与了所有这些，但该公司实际上拥有更大的经营规模。Cloudflare 将自己视为 “一家网络公司”，“你必须把 [Cloudflare] 看作思科即服务。无论你在哪里购买和收购硬件，无论是防火墙、路由器、负载平衡器还是 VPN，我们都通过我们的网络提供这种服务。而这个网络现在已经被屏蔽了”。</blockquote></p><p> In fact, CEO Matthew Prince emphasized:</p><p><blockquote>事实上，首席执行官马修·普林斯强调：</blockquote></p><p> So the reason that we picked the ticker symbol NET was because, fundamentally, what it is that we sell is the network that you plug into and then you don't have to worry about anything else. And so that's what we want to deliver. And so a piece of that is you want to make sure you have a fast network. A piece of that is you want to make sure you have a reliable network. But a big piece of that is you want to make sure that you have a network which is helping you solve the security problems that you have. We think that one of the key reasons that Cloudflare wanted investors to clearly understand the company's scope of business is to allow investors to have the appropriate strategic view of the company’s still-expanding TAM, which the company highlighted has been expanding since its IPO in 2019. Although the company started with a TAM of $37B in 2019, which then saw it being revised upwards to $72B, and now the company is looking at a TAM of $100B over the next 3 years.</p><p><blockquote>因此，我们选择股票代码网的原因是因为，从根本上说，我们销售的是您插入的网络，然后您不必担心其他任何事情。这就是我们想要传达的。所以其中一部分是你要确保你有一个快速的网络。其中一部分是你要确保你有一个可靠的网络。但其中很大一部分是你要确保你有一个网络来帮助你解决你的安全问题。我们认为，Cloudflare 希望投资者清楚地了解公司业务范围的关键原因之一是让投资者对公司仍在扩张的 TAM 有一个适当的战略观点，该公司强调，自 2019 年首次公开募股以来，TAM 一直在扩张。尽管该公司在 2019 年的 TAM 为 37B 美元，但随后上调至 72B 美元，现在该公司正在考虑在未来 3 年内实现 100B 美元的 TAM。</blockquote></p><p> <b>Cloudflare is the Undisputed Market Leader in DDoS Protection</b></p><p><blockquote><b>Cloudflare是DDoS防护领域无可争议的市场领导者</b></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c5a18d2b88858258dd3212a23e6a41c4\" tg-width=\"600\" tg-height=\"371\"><span>DDoS and bot protection software market share worldwide as of Apr 21. Data source: Datanyze</span></p><p><blockquote><p class=\"t-img-caption\"><span>截至4月21日，DDoS和机器人防护软件全球市场份额。数据来源：Datanyze</span></p></blockquote></p><p> While Cloudflare started with “load balancing, firewalling, DDoS mitigation services” and the company is the undisputed worldwide market leader in DDoS protection with an 81.4% market share, the company has moved swiftly to extend its TAM to VPN and remote browser isolation service (through its S2 Systems Corporation acquisition in Jan 20), targeting these two markets with Cloudflare for Teams, and thebrowser isolation servicewhich can also be added on to its Teams product. However, its third TAM extension in which the company planned to “disrupt the corporate network and Multiprotocol Label Switching [MPLS]” through itsCloudflare Magic Transitproduct by protecting companies' on-premise data centers which saw the company entering to disrupt the highly lucrative stronghold of \"the Ciscos (CSCO) of this worlds and Fortinets (FTNT) and Check Points (CHKP) and Palo Altos (PANW) and Riverbeds.\"</p><p><blockquote>虽然 Cloudflare 以 “负载平衡、防火墙、DDoS 缓解服务 ”起家，并且该公司是 DDoS 防护领域无可争议的全球市场领导者，市场份额为 81.4%，但该公司已迅速将其 TAM 扩展到 VPN 和远程浏览器隔离服务（通过 1 月 20 日收购 S2 Systems Corporation），针对这两个市场推出了 Cloudflare for Teams 和浏览器隔离服务，后者也可以添加到其 Teams 产品中。然而，在其第三次 TAM 扩展中，该公司计划通过其 Cloudflare Magic Transitproduct 通过保护公司的内部数据中心来 “破坏企业网络和多协议标签交换 [MPLS]”，该公司进入该扩展是为了破坏 “这个世界的思科 (CSCO)、Fortinets (FTNT)、Check Points (CHKP)、Palo Altos (PANW) 和 Riverbeds ”的高利润据点。</blockquote></p><p> Therefore, investors should be able to clearly appreciate the extremely high scalability of Cloudflare’s business model and its ambitions to take on the market’s biggest on-premise security players in their home ground. Magic Transit will be a key player in the company’s penetration of its enterprise segment as “the MPLS spend is a significant dollar item in the budgets of our customers” would help the company to build up its enterprise segment which has been growing rapidly.</p><p><blockquote>因此，投资者应该能够清楚地认识到 Cloudflare 商业模式极高的可扩展性，以及它在本土与市场上最大的本地安全公司抗衡的雄心。Magic Transit 将成为公司打入企业部门的关键参与者，因为 “MPLS 支出是我们客户预算中的一个重要项目 ”将有助于公司建立快速增长的企业部门。</blockquote></p><p> <b>Rapidly Expanding Enterprise Segment</b></p><p><blockquote><b>快速扩张的企业部门</b></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/fa220975bc1c2c02ff1e97a20a87a09d\" tg-width=\"600\" tg-height=\"371\"><span>Large / Enterprise customers trend. Data source: Company filings</span></p><p><blockquote><p class=\"t-img-caption\"><span>大型/企业客户趋势。数据来源：公司文件</span></p></blockquote></p><p></p><p> The company has certainly made tremendous inroads into the enterprise segment, which is now the company’s “fastest growing business”. While it may seem like its 945 enterprise customers as of Q1'21 (this segment has grown at a CAGR of 69% from Q1’18), pales in comparison to its customer total of 119,206, this segment now represents the majority of the company’s revenue as Cloudflare highlighted: “This is now 50%, a little bit more than 50% of our revenue.” In fact, the chart alone would not do full justice to the company’s ability in penetrating this segment as the larger paying customers within the enterprise segment have been growing even faster, as Cloudflare further added: “Let's look at customers that give us more than $500,000 or even more than $1 million a year, the larger the cohort, the faster the growth. So our largest cohort, so $1 million-plus customers, has been growing north of 70% now consistently over last the 7 quarters”</p><p><blockquote>该公司无疑在企业领域取得了巨大进步，而企业领域现在是该公司 “增长最快的业务”。虽然截至 21 年第一季度，该细分市场拥有 945 家企业客户（与 18 年第一季度相比，该细分市场的复合年增长率为 69%），但与 119,206 家客户相比，该细分市场现在占公司收入的大部分，正如 Cloudflare 所强调的那样： “这现在占我们收入的 50%，略高于 50%”。事实上，仅凭图表并不能完全反映公司在这一细分市场的渗透能力，因为企业细分市场中较大的付费客户增长速度更快，Cloudflare 进一步补充道： “让我们看看年收入超过 50 万美元甚至超过 100 万美元的客户，群体越大，增长速度就越快。因此，我们最大的客户群体，即 100 万美元以上的客户，在过去 7 个季度中一直保持在 70% 以上的增长速度”。</blockquote></p><p> <b>Expansion of Products Helps to Sustain its DBNRR</b></p><p><blockquote><b>产品扩张有助于维持其 DBNRR</b></blockquote></p><p> While investors may have been inundated with the number or scope of products or services that the company has been offering to its customers, Cloudflare highlighted that in fact, “first of all, the more products we have, the easier expansion becomes.” The company has of course been mindful of building products that provide significant value to its customers and have seen its customers move up the product adoption ladder rapidly over the years.</p><p><blockquote>虽然投资者可能已经被公司向客户提供的产品或服务的数量或范围所淹没，但 Cloudflare 强调，事实上，“首先，我们拥有的产品越多，扩张就越容易”。当然，该公司一直致力于打造为客户提供重大价值的产品，并看到客户多年来在产品采用阶梯上迅速上升。</blockquote></p><p> Importantly, the company attaches a \"magic number\" to its customers’ product adoption: 4 products per customer. It emphasized that while at IPO 70% of its customers were using 4 products each, “that number has now moved far beyond 80%. And now more than 70% of the customers are using 5 products. So with the increase in the product portfolio, we've been able to sell more products to existing customers”</p><p><blockquote>重要的是，该公司为客户的产品采用率附上了一个 “神奇数字”：每位客户 4 种产品。该公司强调，在首次公开募股时，70% 的客户每人使用 4 种产品，“但现在这一数字已远远超过 80%。现在，超过 70% 的客户使用 5 种产品。因此，随着产品组合的增加，我们已经能够向现有客户销售更多产品”。</blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/3cc7b20c40180d118295622722286980\" tg-width=\"600\" tg-height=\"371\"><span>Dollar-based Net Retention Rate [DBNRR]. Data source: Company filings</span></p><p><blockquote><p class=\"t-img-caption\"><span>基于美元的净保留率[DBNRR]。数据来源：公司文件</span></p></blockquote></p><p> That has seen the company consistently maintaining its DBNRR over the years, while it posted its most impressive DBNRR of 123% over the last 3 years in Q1’21. While its DBNRR is in line with its SaaS peers median of 120%, we are confident that the company would continue to maintain a consistently high level of DBNRR as more and more of its customers adopt more products moving forward, “and with that, [leading to] the stickiness of the product and [having] the churn rates come down.”</p><p><blockquote>这使得该公司多年来一直保持着其 DBNRR，而在 21 年第一季度，该公司的 DBNRR 达到了过去 3 年最令人印象深刻的 123%。虽然其 DBNRR 符合 SaaS 同行 120% 的中位数，但我们相信，随着越来越多的客户采用更多产品，该公司将继续保持高水平的 DBNRR，“从而[导致]产品的粘性和[使]流失率下降”。</blockquote></p><p> <b>Cloudflare was Never Designed as a CDN</b></p><p><blockquote><b>Cloudflare从未被设计成CDN</b></blockquote></p><p> Many investors often compared Cloudflare to Fastly (FSLY) as competitors in the content-delivery networks (CDN) space. While we think NET certainly competes in that space with FSLY, the company specifically wanted to remind investors that:</p><p><blockquote>许多投资者经常将 Cloudflare 与 Fastly (FSLY) 作为内容交付网络 (CDN) 领域的竞争对手进行比较。虽然我们认为 NET 肯定会在该领域与 FSLY 竞争，但该公司特别想提醒投资者：</blockquote></p><p> We were never designed as a CDN. We had to provide CDN-like functionalities in order to deliver security and performance-based products and services at the edge of our network. But CDN was a means to achieve that, but not the business model in itself. We are pricing our products differently. We have no usage -- or hardly any usage-based pricings. Even today, less than a low single digit of our revenue is variable billing-based. And of that, less than 1/3 is really bandwidth-driven. We had recently highlighted in an article on FSLY and reminded investors that FSLY is not your typical SaaS model, as the company mainly derives its revenue from usage, rather than subscriptions. On the other hand, NET derives the majority of its revenue from subscriptions, and therefore the revenue model driving their respective businesses is entirely different.</p><p><blockquote>我们从来都不是被设计成CDN的。我们必须提供类似CDN的功能，以便在我们的网络边缘提供基于安全性和性能的产品和服务。但CDN是实现这一目标的一种手段，但不是商业模式本身。我们对产品的定价不同。我们没有使用——或者几乎没有任何基于使用的定价。即使在今天，我们的收入中也不到一位数是基于可变计费的。其中，不到1/3是真正由带宽驱动的。我们最近在一篇关于 FSLY 的文章中强调，并提醒投资者，FSLY 不是典型的 SaaS 模式，因为该公司的收入主要来自使用量，而不是订阅。另一方面，NET 的大部分收入来自订阅，因此推动各自业务的收入模式完全不同。</blockquote></p><p> In fact, the unpredictable bandwidth cost of usage-based model was one of the key reasons why NET chose not to adopt a usage-based revenue model as the company wanted to focus on driving down costs for its customers with an offering that bills in a “predictable and reliable way”. Cloudflare’s priority would then turn to finding ways to “drive the cost of bandwidth to close to 0 over time” by making sure its “software-defined network could allow any server anywhere in our network to run any different function that we did and to be able to shift traffic around to deliver a level of efficiency that no one else has.”</p><p><blockquote>事实上，基于使用情况的模式的带宽成本不可预测是 NET 选择不采用基于使用情况的收入模式的主要原因之一，因为该公司希望通过以 “可预测和可靠的方式 ”收费的产品来降低成本。然后，Cloudflare 的首要任务将转向寻找方法，通过确保其 “软件定义的网络可以允许我们网络中任何地方的任何服务器运行我们所做的任何不同功能，并能够转移流量，以提供其他人无法比拟的效率”，来 “随着时间的推移，将带宽成本降低到接近于零”。</blockquote></p><p> CEO Matthew Prince also succinctly added:</p><p><blockquote>首席执行官马修·普林斯也简洁地补充道：</blockquote></p><p></p><p> And so where I think a typical CDN company worries about things like how many people are going to tune into the Super Bowl and is the new show on Disney+ going to be popular or not, I spend my days worrying about what are the new cyber threats coming out of Russia or Iran, around the world and how do we stay in front of those. And so again, just completely different businesses. Therefore, investors could be assured that those type of usage volatility that FSLY had endured whenever they lost a major customer like we saw inTikTokis unlikely to happen to NET, simply because Cloudflare doesn’t bill by usage, and therefore providing the kind or revenue visibility that we have come to expect of typical SaaS companies.</p><p><blockquote>因此，当我认为一家典型的CDN公司担心有多少人会收看超级碗比赛，以及Disney+上的新节目是否会受欢迎时，我整天都在担心来自俄罗斯或伊朗、世界各地的新网络威胁，以及我们如何应对这些威胁。同样，只是完全不同的业务。因此，投资者可以放心，每当 FSLY 失去像我们看到 inTikTokis 这样的大客户时，他们都会忍受的那种使用波动不太可能发生在 NET 上，原因很简单，Cloudflare 不按使用量计费，因此提供了我们对典型 SaaS 公司所期望的那种或收入可见性。</blockquote></p><p> However, Cloudflare’s subscriptions-based revenue model is not without its inherent disadvantage as compared to FSLY’s usage-based billing model whenever there’s a huge surge in its customers’ usage, like what the company experienced last year during the throes of the pandemic:</p><p><blockquote>然而，与 FSLY 基于使用量的计费模式相比，Cloudflare 基于订阅的收入模式并非没有固有的缺点，每当客户使用量大幅激增时，就像该公司去年在大流行病的阵痛中所经历的那样：</blockquote></p><p> All of a sudden, we saw this dramatic uptick and a dramatic spike in the amount of bandwidth that people were using across our services. And unlike traditional CDNs, we couldn't just pass those costs on to our customers. And so those actually, I think, were pretty substantial headwinds to us, and I'm proud of our team for really adjusting, solving customers' problems, focusing on expanding our existing customers and making them bigger customers and getting more efficient over time. And so I think that what were headwinds for us are turning into tailwinds now, where we're seeing the sort of bandwidth usage plateauing, which is attractive for kind of our cost side of our business. <b>Cloudflare's Excellent Margins</b></p><p><blockquote>突然间，我们看到了人们在我们服务中使用的带宽量的急剧上升和急剧激增。与传统的CDN不同，我们不能将这些成本转嫁给我们的客户。因此，我认为这些实际上对我们来说是相当大的阻力，我为我们的团队真正调整、解决客户问题、专注于扩大现有客户并使他们成为更大的客户并随着时间的推移变得更加高效感到自豪。因此，我认为对我们来说的阻力现在正在变成顺风，我们看到带宽使用量趋于稳定，这对我们业务的成本方面很有吸引力。<b>Cloudflare 的出色利润</b></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/94dc84122254553246848c5eee09615d\" tg-width=\"1280\" tg-height=\"727\"><span>NET and FSLY Gross margin. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>净利润和 FSLY 毛利率。数据来源：S&P Capital IQ</span></p></blockquote></p><p> While the company had to deal with the dramatic increased bandwidth costs that its subscriptions model wasn’t designed for in the first place last year, it had still managed to maintain its gross margins consistently north of 75% over time, which easily outperformed FSLY’s usage-based revenue model. We believe the company’s full suite of networking products has helped the company to strongly diversify its revenue base, which lends further credence to the superb execution of the company’s business model across multiple markets and industry verticals, strengthening its revenue resilience against any unexpected slowdown or unanticipated costs surge. If investors were to coin Cloudflare as a “Jack of all trades”, we think it may be apt to call it a “master of all” as well.</p><p><blockquote>虽然该公司不得不应对带宽成本急剧增加的问题，而去年其订阅模式本来就不是为其设计的，但随着时间的推移，该公司仍设法将毛利率始终保持在 75% 以上，轻松超过了 FSLY 基于使用量的收入模式。我们相信，公司的全套网络产品帮助公司实现了收入基础的多元化，这进一步证明了公司商业模式在多个市场和垂直行业中的卓越执行力，增强了公司应对任何意外放缓或意外成本激增的收入弹性。如果投资者将 Cloudflare 视为 “万事通”，我们认为它也可能倾向于将其看涨期权为 “万事通”。</blockquote></p><p> <b>Expected to Turn EBIT and FCF Profitable</b></p><p><blockquote><b>预计息税前利润和自由现金流盈利</b></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/7f441756caaca11d36431b00ab64f090\" tg-width=\"1280\" tg-height=\"678\"><span>NET projected revenue mean consensus and projected YoY revenue growth. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>净收入预计意味着共识和预计同比收入增长。数据来源：S&P Capital IQ</span></p></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/eec9b55dc6e235a1304a54224c0f90b7\" tg-width=\"1280\" tg-height=\"711\"><span>NET projected EBIT margin and projected unlevered FCF margin. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>净预计息税前利润率和预计无杠杆自由现金流利润率。数据来源：S&P Capital IQ</span></p></blockquote></p><p> Even though NET has yet to achieve FCF and EBIT profitability, the company has guided for a long-term operating margin of 20%, which in our model we think is highly achievable over time as we projected the company to achieve an EBIT margin of 15.7% by the end of FY 25 especially when the company is still expected to post rapid revenue growth north of 30% in the years ahead.</p><p><blockquote>尽管 NET 尚未实现 FCF 和 EBIT 盈利能力，但该公司已设定 20% 的长期营业利润率，在我们的模型中，我们认为随着时间的推移，这是高度可以实现的，因为我们预计该公司将实现 EBIT 利润率到 25 财年末达到 15.7%，特别是当该公司仍有望在未来几年实现 30% 以上的快速增长时。</blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c617eade5b53ed1383b6438691464f52\" tg-width=\"1280\" tg-height=\"711\"><span>NET LTM SG&A margin. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>LTM SG&A 净利润。数据来源：S&P Capital IQ</span></p></blockquote></p><p> Our confidence is mainly predicated on the sustained improvement in operating leverage that the company has been demonstrating in its SG&A margins, which has been the company’s largest operating expense segment. We believe that the company is likely to maintain this improvement moving forward that would cascade down strongly to its EBIT margins and move the company towards EBIT and FCF profitability in the next few years. Therefore, the party is surely just getting started for NET.</p><p><blockquote>我们的信心主要基于公司在 SG&A 利润率中所表现出的运营杠杆的持续改善，而 SG&A 利润率一直是公司最大的运营费用部分。我们相信，该公司可能会在未来保持这种改善，这将强烈影响其息税前利润率，并推动公司在未来几年实现息税前利润率和自由现金流盈利。因此，这个派对肯定才刚刚开始。</blockquote></p><p> Valuations are Compelling If Execution is Sustained</p><p><blockquote>如果持续执行，估值将是令人信服的</blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c991d9200f0424a6c2739f78335a667e\" tg-width=\"1280\" tg-height=\"726\"><span>NET EV / Fwd Rev. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>净电动汽车 / Fwd 修订版。数据来源：S&P Capital IQ</span></p></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/b81c5bc076bc34bcc9135201909e8028\" tg-width=\"1000\" tg-height=\"600\"><span>NET NTM (TEV / Rev).</span></p><p><blockquote><p class=\"t-img-caption\"><span>净NTM（TEV/Rev）。</span></p></blockquote></p><p></p><p> While we continue to applaud NET’s superb business model and world-class execution, we are aware that this is unlikely to be lost among astute market participants. Therefore, we were not surprised to observe NET’s EV / FY+1 Rev is valued at 52x, while its mean is about 35.5x over the last one year. Based on our calculations of NET’s expected revenue growth rate in the next few years, we derived an expected share price 4Y CAGR of 19.66%, even at the current price level, representing potentially market-beating returns in the years ahead, if the company is able to maintain its excellent execution track record and achieve its growth targets.</p><p><blockquote>虽然我们继续为 NET 卓越的商业模式和世界一流的执行力喝彩，但我们也意识到，精明的市场参与者不太可能忘记这一点。因此，我们对 NET 的 EV / FY+1 Rev 值为 52 倍，而过去一年的平均值约为 35.5 倍并不感到惊讶。根据我们对 NET 未来几年预期收入增长率的计算，我们得出的预期股价 4 年复合年增长率为 19.66%，即使在当前价格水平下，如果该公司能够保持其出色的执行记录并实现其增长目标，未来几年的回报可能会跑赢市场。</blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/52ff2c1614d64bd26c28b2b3c0c17488\" tg-width=\"1280\" tg-height=\"442\"><span>Projected FY 25 share price and projected 4Y CAGR. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>预计 25 财年股价和预计 4 年复合年增长率。数据来源：S&P Capital IQ</span></p></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/f5eac1f8292520dd62f2d5c23328a0a9\" tg-width=\"1280\" tg-height=\"783\"><span>Source: TradingView</span></p><p><blockquote><p class=\"t-img-caption\"><span>来源：TradingView</span></p></blockquote></p><p> While we were somewhat fortunate to enter our full position in NET at about $30 last Sep, based on the current price action, we don’t think there is any optimal entry point for new investors right now, even if we think that based on the current price level, NET would likely continue to outperform the market.</p><p><blockquote>虽然我们在去年 9 月以 30 美元左右的价格进入了 NET 的全部头寸，但根据目前的价格走势，我们认为现在没有新投资者的最佳入场点，即使我们认为根据目前的价格水平，NET 可能会继续跑赢大盘。</blockquote></p><p> Therefore, we would encourage investors who consider price action in their decision-making to wait for a retracement first, while investors who do not consider price action may enter now if they have high conviction of NET’s execution in the next few years.</p><p><blockquote>因此，我们鼓励在决策中考虑价格走势的投资者先等待回调，而不考虑价格走势的投资者如果对未来几年 NET 的执行情况有高度的信心，现在就可以进场。</blockquote></p><p> While we would not add more positions at the current price level, we would surely keep the stock on our watchlist to consider increasing our exposure at the next retracement.</p><p><blockquote>虽然我们不会在当前价格水平上增加更多头寸，但我们肯定会将该股保留在我们的观察名单上，以考虑在下一次回撤时增加我们的风险敞口。</blockquote></p><p> <b>Wrapping It All Up</b></p><p><blockquote><b>把这一切都包起来</b></blockquote></p><p> Cloudflare has been a true outperformer for its investors since its IPO in 2019, and we think that the company’s growth story has barely just begun as it moves towards EBIT and FCF profitability in the next few years. Investors in NET are encouraged to sit tight and enjoy many years of solid growth to come.</p><p><blockquote>自 2019 年首次公开募股以来，Cloudflare 一直是投资者真正的优秀公司，我们认为，随着公司在未来几年实现息税前利润和自由现金流盈利，公司的增长故事才刚刚开始。NET 的投资者被鼓励坐以待毙，享受未来许多年的稳健增长。</blockquote></p><p></p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Cloudflare Is Much More Scalable Than You Think<blockquote>Cloudflare比您想象的更具可扩展性</blockquote></title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 12.5px; color: #7E829C; margin: 0;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCloudflare Is Much More Scalable Than You Think<blockquote>Cloudflare比您想象的更具可扩展性</blockquote>\n</h2>\n<h4 class=\"meta\">\n<p class=\"head\">\n<strong class=\"h-name small\">seekingalpha</strong><span class=\"h-time small\">2021-06-30 16:53</span>\n</p>\n</h4>\n</header>\n<article>\n<p><b>Summary</b></p><p><blockquote><b>总结</b></blockquote></p><p> <ul> <li>We think Cloudflare’s business model has not been well understood by investors.</li> <li>While Cloudflare operates in the Content Delivery Networks space, it has never positioned itself as a CDN player.</li> <li>We present a clearer view of what Cloudflare represents, in order for investors to more appropriately appreciate the high scalability of the company’s business model.</li> <li>While we think Cloudflare is primed for outperformance even at the current price level, we would prefer to add further only at the next retracement.</li> </ul> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/5bd63105e871f3b7086e6743081853b5\" tg-width=\"1536\" tg-height=\"1022\"><span>Steve Jennings/Getty Images Entertainment</span></p><p><blockquote><ul><li>我们认为投资者并没有很好地理解 Cloudflare 的商业模式。</li><li>虽然Cloudflare在内容交付网络领域运营，但它从未将自己定位为CDN玩家。</li><li>我们对 Cloudflare 所代表的意义进行了更清晰的阐述，以便投资者能够更恰当地理解该公司商业模式的高可扩展性。</li><li>虽然我们认为 Cloudflare 即使在当前价格水平上也能表现出色，但我们更愿意仅在下一次回撤时进一步上涨。</li></ul><p class=\"t-img-caption\"><span>史蒂夫·詹宁斯/盖蒂图片社娱乐</span></p></blockquote></p><p> <b>Understanding Cloudflare's Business Model</b></p><p><blockquote><b>了解Cloudflare的商业模式</b></blockquote></p><p> Cloudflare (NET) has come to be known as many things to different investors. We have seen investors classifying Cloudflare as a cloud or web security company, or a content delivery network [CDN], or an identity access management [IAM] company. The fact is, while Cloudflare is involved in all of those, the company actually has a much larger scale of operation. Cloudflare sees itself as “a networking company”, that “you have to think about [Cloudflare] almost like Cisco-as-a-service. Anything where you would have bought and acquired hardware on-premise, whether it's firewalls, routers, load balancers, VPNs, we offer this as a service from our network. And this network is masked by now.”</p><p><blockquote>对于不同的投资者来说，Cloudflare (NET) 已经像许多事情一样为人所知。我们已经看到投资者将Cloudflare归类为云或网络安全公司、内容交付网络[CDN]或身份访问管理[IAM]公司。事实是，虽然Cloudflare参与了所有这些，但该公司实际上拥有更大的经营规模。Cloudflare 将自己视为 “一家网络公司”，“你必须把 [Cloudflare] 看作思科即服务。无论你在哪里购买和收购硬件，无论是防火墙、路由器、负载平衡器还是 VPN，我们都通过我们的网络提供这种服务。而这个网络现在已经被屏蔽了”。</blockquote></p><p> In fact, CEO Matthew Prince emphasized:</p><p><blockquote>事实上，首席执行官马修·普林斯强调：</blockquote></p><p> So the reason that we picked the ticker symbol NET was because, fundamentally, what it is that we sell is the network that you plug into and then you don't have to worry about anything else. And so that's what we want to deliver. And so a piece of that is you want to make sure you have a fast network. A piece of that is you want to make sure you have a reliable network. But a big piece of that is you want to make sure that you have a network which is helping you solve the security problems that you have. We think that one of the key reasons that Cloudflare wanted investors to clearly understand the company's scope of business is to allow investors to have the appropriate strategic view of the company’s still-expanding TAM, which the company highlighted has been expanding since its IPO in 2019. Although the company started with a TAM of $37B in 2019, which then saw it being revised upwards to $72B, and now the company is looking at a TAM of $100B over the next 3 years.</p><p><blockquote>因此，我们选择股票代码网的原因是因为，从根本上说，我们销售的是您插入的网络，然后您不必担心其他任何事情。这就是我们想要传达的。所以其中一部分是你要确保你有一个快速的网络。其中一部分是你要确保你有一个可靠的网络。但其中很大一部分是你要确保你有一个网络来帮助你解决你的安全问题。我们认为，Cloudflare 希望投资者清楚地了解公司业务范围的关键原因之一是让投资者对公司仍在扩张的 TAM 有一个适当的战略观点，该公司强调，自 2019 年首次公开募股以来，TAM 一直在扩张。尽管该公司在 2019 年的 TAM 为 37B 美元，但随后上调至 72B 美元，现在该公司正在考虑在未来 3 年内实现 100B 美元的 TAM。</blockquote></p><p> <b>Cloudflare is the Undisputed Market Leader in DDoS Protection</b></p><p><blockquote><b>Cloudflare是DDoS防护领域无可争议的市场领导者</b></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c5a18d2b88858258dd3212a23e6a41c4\" tg-width=\"600\" tg-height=\"371\"><span>DDoS and bot protection software market share worldwide as of Apr 21. Data source: Datanyze</span></p><p><blockquote><p class=\"t-img-caption\"><span>截至4月21日，DDoS和机器人防护软件全球市场份额。数据来源：Datanyze</span></p></blockquote></p><p> While Cloudflare started with “load balancing, firewalling, DDoS mitigation services” and the company is the undisputed worldwide market leader in DDoS protection with an 81.4% market share, the company has moved swiftly to extend its TAM to VPN and remote browser isolation service (through its S2 Systems Corporation acquisition in Jan 20), targeting these two markets with Cloudflare for Teams, and thebrowser isolation servicewhich can also be added on to its Teams product. However, its third TAM extension in which the company planned to “disrupt the corporate network and Multiprotocol Label Switching [MPLS]” through itsCloudflare Magic Transitproduct by protecting companies' on-premise data centers which saw the company entering to disrupt the highly lucrative stronghold of \"the Ciscos (CSCO) of this worlds and Fortinets (FTNT) and Check Points (CHKP) and Palo Altos (PANW) and Riverbeds.\"</p><p><blockquote>虽然 Cloudflare 以 “负载平衡、防火墙、DDoS 缓解服务 ”起家，并且该公司是 DDoS 防护领域无可争议的全球市场领导者，市场份额为 81.4%，但该公司已迅速将其 TAM 扩展到 VPN 和远程浏览器隔离服务（通过 1 月 20 日收购 S2 Systems Corporation），针对这两个市场推出了 Cloudflare for Teams 和浏览器隔离服务，后者也可以添加到其 Teams 产品中。然而，在其第三次 TAM 扩展中，该公司计划通过其 Cloudflare Magic Transitproduct 通过保护公司的内部数据中心来 “破坏企业网络和多协议标签交换 [MPLS]”，该公司进入该扩展是为了破坏 “这个世界的思科 (CSCO)、Fortinets (FTNT)、Check Points (CHKP)、Palo Altos (PANW) 和 Riverbeds ”的高利润据点。</blockquote></p><p> Therefore, investors should be able to clearly appreciate the extremely high scalability of Cloudflare’s business model and its ambitions to take on the market’s biggest on-premise security players in their home ground. Magic Transit will be a key player in the company’s penetration of its enterprise segment as “the MPLS spend is a significant dollar item in the budgets of our customers” would help the company to build up its enterprise segment which has been growing rapidly.</p><p><blockquote>因此，投资者应该能够清楚地认识到 Cloudflare 商业模式极高的可扩展性，以及它在本土与市场上最大的本地安全公司抗衡的雄心。Magic Transit 将成为公司打入企业部门的关键参与者，因为 “MPLS 支出是我们客户预算中的一个重要项目 ”将有助于公司建立快速增长的企业部门。</blockquote></p><p> <b>Rapidly Expanding Enterprise Segment</b></p><p><blockquote><b>快速扩张的企业部门</b></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/fa220975bc1c2c02ff1e97a20a87a09d\" tg-width=\"600\" tg-height=\"371\"><span>Large / Enterprise customers trend. Data source: Company filings</span></p><p><blockquote><p class=\"t-img-caption\"><span>大型/企业客户趋势。数据来源：公司文件</span></p></blockquote></p><p></p><p> The company has certainly made tremendous inroads into the enterprise segment, which is now the company’s “fastest growing business”. While it may seem like its 945 enterprise customers as of Q1'21 (this segment has grown at a CAGR of 69% from Q1’18), pales in comparison to its customer total of 119,206, this segment now represents the majority of the company’s revenue as Cloudflare highlighted: “This is now 50%, a little bit more than 50% of our revenue.” In fact, the chart alone would not do full justice to the company’s ability in penetrating this segment as the larger paying customers within the enterprise segment have been growing even faster, as Cloudflare further added: “Let's look at customers that give us more than $500,000 or even more than $1 million a year, the larger the cohort, the faster the growth. So our largest cohort, so $1 million-plus customers, has been growing north of 70% now consistently over last the 7 quarters”</p><p><blockquote>该公司无疑在企业领域取得了巨大进步，而企业领域现在是该公司 “增长最快的业务”。虽然截至 21 年第一季度，该细分市场拥有 945 家企业客户（与 18 年第一季度相比，该细分市场的复合年增长率为 69%），但与 119,206 家客户相比，该细分市场现在占公司收入的大部分，正如 Cloudflare 所强调的那样： “这现在占我们收入的 50%，略高于 50%”。事实上，仅凭图表并不能完全反映公司在这一细分市场的渗透能力，因为企业细分市场中较大的付费客户增长速度更快，Cloudflare 进一步补充道： “让我们看看年收入超过 50 万美元甚至超过 100 万美元的客户，群体越大，增长速度就越快。因此，我们最大的客户群体，即 100 万美元以上的客户，在过去 7 个季度中一直保持在 70% 以上的增长速度”。</blockquote></p><p> <b>Expansion of Products Helps to Sustain its DBNRR</b></p><p><blockquote><b>产品扩张有助于维持其 DBNRR</b></blockquote></p><p> While investors may have been inundated with the number or scope of products or services that the company has been offering to its customers, Cloudflare highlighted that in fact, “first of all, the more products we have, the easier expansion becomes.” The company has of course been mindful of building products that provide significant value to its customers and have seen its customers move up the product adoption ladder rapidly over the years.</p><p><blockquote>虽然投资者可能已经被公司向客户提供的产品或服务的数量或范围所淹没，但 Cloudflare 强调，事实上，“首先，我们拥有的产品越多，扩张就越容易”。当然，该公司一直致力于打造为客户提供重大价值的产品，并看到客户多年来在产品采用阶梯上迅速上升。</blockquote></p><p> Importantly, the company attaches a \"magic number\" to its customers’ product adoption: 4 products per customer. It emphasized that while at IPO 70% of its customers were using 4 products each, “that number has now moved far beyond 80%. And now more than 70% of the customers are using 5 products. So with the increase in the product portfolio, we've been able to sell more products to existing customers”</p><p><blockquote>重要的是，该公司为客户的产品采用率附上了一个 “神奇数字”：每位客户 4 种产品。该公司强调，在首次公开募股时，70% 的客户每人使用 4 种产品，“但现在这一数字已远远超过 80%。现在，超过 70% 的客户使用 5 种产品。因此，随着产品组合的增加，我们已经能够向现有客户销售更多产品”。</blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/3cc7b20c40180d118295622722286980\" tg-width=\"600\" tg-height=\"371\"><span>Dollar-based Net Retention Rate [DBNRR]. Data source: Company filings</span></p><p><blockquote><p class=\"t-img-caption\"><span>基于美元的净保留率[DBNRR]。数据来源：公司文件</span></p></blockquote></p><p> That has seen the company consistently maintaining its DBNRR over the years, while it posted its most impressive DBNRR of 123% over the last 3 years in Q1’21. While its DBNRR is in line with its SaaS peers median of 120%, we are confident that the company would continue to maintain a consistently high level of DBNRR as more and more of its customers adopt more products moving forward, “and with that, [leading to] the stickiness of the product and [having] the churn rates come down.”</p><p><blockquote>这使得该公司多年来一直保持着其 DBNRR，而在 21 年第一季度，该公司的 DBNRR 达到了过去 3 年最令人印象深刻的 123%。虽然其 DBNRR 符合 SaaS 同行 120% 的中位数，但我们相信，随着越来越多的客户采用更多产品，该公司将继续保持高水平的 DBNRR，“从而[导致]产品的粘性和[使]流失率下降”。</blockquote></p><p> <b>Cloudflare was Never Designed as a CDN</b></p><p><blockquote><b>Cloudflare从未被设计成CDN</b></blockquote></p><p> Many investors often compared Cloudflare to Fastly (FSLY) as competitors in the content-delivery networks (CDN) space. While we think NET certainly competes in that space with FSLY, the company specifically wanted to remind investors that:</p><p><blockquote>许多投资者经常将 Cloudflare 与 Fastly (FSLY) 作为内容交付网络 (CDN) 领域的竞争对手进行比较。虽然我们认为 NET 肯定会在该领域与 FSLY 竞争，但该公司特别想提醒投资者：</blockquote></p><p> We were never designed as a CDN. We had to provide CDN-like functionalities in order to deliver security and performance-based products and services at the edge of our network. But CDN was a means to achieve that, but not the business model in itself. We are pricing our products differently. We have no usage -- or hardly any usage-based pricings. Even today, less than a low single digit of our revenue is variable billing-based. And of that, less than 1/3 is really bandwidth-driven. We had recently highlighted in an article on FSLY and reminded investors that FSLY is not your typical SaaS model, as the company mainly derives its revenue from usage, rather than subscriptions. On the other hand, NET derives the majority of its revenue from subscriptions, and therefore the revenue model driving their respective businesses is entirely different.</p><p><blockquote>我们从来都不是被设计成CDN的。我们必须提供类似CDN的功能，以便在我们的网络边缘提供基于安全性和性能的产品和服务。但CDN是实现这一目标的一种手段，但不是商业模式本身。我们对产品的定价不同。我们没有使用——或者几乎没有任何基于使用的定价。即使在今天，我们的收入中也不到一位数是基于可变计费的。其中，不到1/3是真正由带宽驱动的。我们最近在一篇关于 FSLY 的文章中强调，并提醒投资者，FSLY 不是典型的 SaaS 模式，因为该公司的收入主要来自使用量，而不是订阅。另一方面，NET 的大部分收入来自订阅，因此推动各自业务的收入模式完全不同。</blockquote></p><p> In fact, the unpredictable bandwidth cost of usage-based model was one of the key reasons why NET chose not to adopt a usage-based revenue model as the company wanted to focus on driving down costs for its customers with an offering that bills in a “predictable and reliable way”. Cloudflare’s priority would then turn to finding ways to “drive the cost of bandwidth to close to 0 over time” by making sure its “software-defined network could allow any server anywhere in our network to run any different function that we did and to be able to shift traffic around to deliver a level of efficiency that no one else has.”</p><p><blockquote>事实上，基于使用情况的模式的带宽成本不可预测是 NET 选择不采用基于使用情况的收入模式的主要原因之一，因为该公司希望通过以 “可预测和可靠的方式 ”收费的产品来降低成本。然后，Cloudflare 的首要任务将转向寻找方法，通过确保其 “软件定义的网络可以允许我们网络中任何地方的任何服务器运行我们所做的任何不同功能，并能够转移流量，以提供其他人无法比拟的效率”，来 “随着时间的推移，将带宽成本降低到接近于零”。</blockquote></p><p> CEO Matthew Prince also succinctly added:</p><p><blockquote>首席执行官马修·普林斯也简洁地补充道：</blockquote></p><p></p><p> And so where I think a typical CDN company worries about things like how many people are going to tune into the Super Bowl and is the new show on Disney+ going to be popular or not, I spend my days worrying about what are the new cyber threats coming out of Russia or Iran, around the world and how do we stay in front of those. And so again, just completely different businesses. Therefore, investors could be assured that those type of usage volatility that FSLY had endured whenever they lost a major customer like we saw inTikTokis unlikely to happen to NET, simply because Cloudflare doesn’t bill by usage, and therefore providing the kind or revenue visibility that we have come to expect of typical SaaS companies.</p><p><blockquote>因此，当我认为一家典型的CDN公司担心有多少人会收看超级碗比赛，以及Disney+上的新节目是否会受欢迎时，我整天都在担心来自俄罗斯或伊朗、世界各地的新网络威胁，以及我们如何应对这些威胁。同样，只是完全不同的业务。因此，投资者可以放心，每当 FSLY 失去像我们看到 inTikTokis 这样的大客户时，他们都会忍受的那种使用波动不太可能发生在 NET 上，原因很简单，Cloudflare 不按使用量计费，因此提供了我们对典型 SaaS 公司所期望的那种或收入可见性。</blockquote></p><p> However, Cloudflare’s subscriptions-based revenue model is not without its inherent disadvantage as compared to FSLY’s usage-based billing model whenever there’s a huge surge in its customers’ usage, like what the company experienced last year during the throes of the pandemic:</p><p><blockquote>然而，与 FSLY 基于使用量的计费模式相比，Cloudflare 基于订阅的收入模式并非没有固有的缺点，每当客户使用量大幅激增时，就像该公司去年在大流行病的阵痛中所经历的那样：</blockquote></p><p> All of a sudden, we saw this dramatic uptick and a dramatic spike in the amount of bandwidth that people were using across our services. And unlike traditional CDNs, we couldn't just pass those costs on to our customers. And so those actually, I think, were pretty substantial headwinds to us, and I'm proud of our team for really adjusting, solving customers' problems, focusing on expanding our existing customers and making them bigger customers and getting more efficient over time. And so I think that what were headwinds for us are turning into tailwinds now, where we're seeing the sort of bandwidth usage plateauing, which is attractive for kind of our cost side of our business. <b>Cloudflare's Excellent Margins</b></p><p><blockquote>突然间，我们看到了人们在我们服务中使用的带宽量的急剧上升和急剧激增。与传统的CDN不同，我们不能将这些成本转嫁给我们的客户。因此，我认为这些实际上对我们来说是相当大的阻力，我为我们的团队真正调整、解决客户问题、专注于扩大现有客户并使他们成为更大的客户并随着时间的推移变得更加高效感到自豪。因此，我认为对我们来说的阻力现在正在变成顺风，我们看到带宽使用量趋于稳定，这对我们业务的成本方面很有吸引力。<b>Cloudflare 的出色利润</b></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/94dc84122254553246848c5eee09615d\" tg-width=\"1280\" tg-height=\"727\"><span>NET and FSLY Gross margin. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>净利润和 FSLY 毛利率。数据来源：S&P Capital IQ</span></p></blockquote></p><p> While the company had to deal with the dramatic increased bandwidth costs that its subscriptions model wasn’t designed for in the first place last year, it had still managed to maintain its gross margins consistently north of 75% over time, which easily outperformed FSLY’s usage-based revenue model. We believe the company’s full suite of networking products has helped the company to strongly diversify its revenue base, which lends further credence to the superb execution of the company’s business model across multiple markets and industry verticals, strengthening its revenue resilience against any unexpected slowdown or unanticipated costs surge. If investors were to coin Cloudflare as a “Jack of all trades”, we think it may be apt to call it a “master of all” as well.</p><p><blockquote>虽然该公司不得不应对带宽成本急剧增加的问题，而去年其订阅模式本来就不是为其设计的，但随着时间的推移，该公司仍设法将毛利率始终保持在 75% 以上，轻松超过了 FSLY 基于使用量的收入模式。我们相信，公司的全套网络产品帮助公司实现了收入基础的多元化，这进一步证明了公司商业模式在多个市场和垂直行业中的卓越执行力，增强了公司应对任何意外放缓或意外成本激增的收入弹性。如果投资者将 Cloudflare 视为 “万事通”，我们认为它也可能倾向于将其看涨期权为 “万事通”。</blockquote></p><p> <b>Expected to Turn EBIT and FCF Profitable</b></p><p><blockquote><b>预计息税前利润和自由现金流盈利</b></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/7f441756caaca11d36431b00ab64f090\" tg-width=\"1280\" tg-height=\"678\"><span>NET projected revenue mean consensus and projected YoY revenue growth. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>净收入预计意味着共识和预计同比收入增长。数据来源：S&P Capital IQ</span></p></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/eec9b55dc6e235a1304a54224c0f90b7\" tg-width=\"1280\" tg-height=\"711\"><span>NET projected EBIT margin and projected unlevered FCF margin. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>净预计息税前利润率和预计无杠杆自由现金流利润率。数据来源：S&P Capital IQ</span></p></blockquote></p><p> Even though NET has yet to achieve FCF and EBIT profitability, the company has guided for a long-term operating margin of 20%, which in our model we think is highly achievable over time as we projected the company to achieve an EBIT margin of 15.7% by the end of FY 25 especially when the company is still expected to post rapid revenue growth north of 30% in the years ahead.</p><p><blockquote>尽管 NET 尚未实现 FCF 和 EBIT 盈利能力，但该公司已设定 20% 的长期营业利润率，在我们的模型中，我们认为随着时间的推移，这是高度可以实现的，因为我们预计该公司将实现 EBIT 利润率到 25 财年末达到 15.7%，特别是当该公司仍有望在未来几年实现 30% 以上的快速增长时。</blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c617eade5b53ed1383b6438691464f52\" tg-width=\"1280\" tg-height=\"711\"><span>NET LTM SG&A margin. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>LTM SG&A 净利润。数据来源：S&P Capital IQ</span></p></blockquote></p><p> Our confidence is mainly predicated on the sustained improvement in operating leverage that the company has been demonstrating in its SG&A margins, which has been the company’s largest operating expense segment. We believe that the company is likely to maintain this improvement moving forward that would cascade down strongly to its EBIT margins and move the company towards EBIT and FCF profitability in the next few years. Therefore, the party is surely just getting started for NET.</p><p><blockquote>我们的信心主要基于公司在 SG&A 利润率中所表现出的运营杠杆的持续改善，而 SG&A 利润率一直是公司最大的运营费用部分。我们相信，该公司可能会在未来保持这种改善，这将强烈影响其息税前利润率，并推动公司在未来几年实现息税前利润率和自由现金流盈利。因此，这个派对肯定才刚刚开始。</blockquote></p><p> Valuations are Compelling If Execution is Sustained</p><p><blockquote>如果持续执行，估值将是令人信服的</blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c991d9200f0424a6c2739f78335a667e\" tg-width=\"1280\" tg-height=\"726\"><span>NET EV / Fwd Rev. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>净电动汽车 / Fwd 修订版。数据来源：S&P Capital IQ</span></p></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/b81c5bc076bc34bcc9135201909e8028\" tg-width=\"1000\" tg-height=\"600\"><span>NET NTM (TEV / Rev).</span></p><p><blockquote><p class=\"t-img-caption\"><span>净NTM（TEV/Rev）。</span></p></blockquote></p><p></p><p> While we continue to applaud NET’s superb business model and world-class execution, we are aware that this is unlikely to be lost among astute market participants. Therefore, we were not surprised to observe NET’s EV / FY+1 Rev is valued at 52x, while its mean is about 35.5x over the last one year. Based on our calculations of NET’s expected revenue growth rate in the next few years, we derived an expected share price 4Y CAGR of 19.66%, even at the current price level, representing potentially market-beating returns in the years ahead, if the company is able to maintain its excellent execution track record and achieve its growth targets.</p><p><blockquote>虽然我们继续为 NET 卓越的商业模式和世界一流的执行力喝彩，但我们也意识到，精明的市场参与者不太可能忘记这一点。因此，我们对 NET 的 EV / FY+1 Rev 值为 52 倍，而过去一年的平均值约为 35.5 倍并不感到惊讶。根据我们对 NET 未来几年预期收入增长率的计算，我们得出的预期股价 4 年复合年增长率为 19.66%，即使在当前价格水平下，如果该公司能够保持其出色的执行记录并实现其增长目标，未来几年的回报可能会跑赢市场。</blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/52ff2c1614d64bd26c28b2b3c0c17488\" tg-width=\"1280\" tg-height=\"442\"><span>Projected FY 25 share price and projected 4Y CAGR. Data source: S&P Capital IQ</span></p><p><blockquote><p class=\"t-img-caption\"><span>预计 25 财年股价和预计 4 年复合年增长率。数据来源：S&P Capital IQ</span></p></blockquote></p><p> <p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/f5eac1f8292520dd62f2d5c23328a0a9\" tg-width=\"1280\" tg-height=\"783\"><span>Source: TradingView</span></p><p><blockquote><p class=\"t-img-caption\"><span>来源：TradingView</span></p></blockquote></p><p> While we were somewhat fortunate to enter our full position in NET at about $30 last Sep, based on the current price action, we don’t think there is any optimal entry point for new investors right now, even if we think that based on the current price level, NET would likely continue to outperform the market.</p><p><blockquote>虽然我们在去年 9 月以 30 美元左右的价格进入了 NET 的全部头寸，但根据目前的价格走势，我们认为现在没有新投资者的最佳入场点，即使我们认为根据目前的价格水平，NET 可能会继续跑赢大盘。</blockquote></p><p> Therefore, we would encourage investors who consider price action in their decision-making to wait for a retracement first, while investors who do not consider price action may enter now if they have high conviction of NET’s execution in the next few years.</p><p><blockquote>因此，我们鼓励在决策中考虑价格走势的投资者先等待回调，而不考虑价格走势的投资者如果对未来几年 NET 的执行情况有高度的信心，现在就可以进场。</blockquote></p><p> While we would not add more positions at the current price level, we would surely keep the stock on our watchlist to consider increasing our exposure at the next retracement.</p><p><blockquote>虽然我们不会在当前价格水平上增加更多头寸，但我们肯定会将该股保留在我们的观察名单上，以考虑在下一次回撤时增加我们的风险敞口。</blockquote></p><p> <b>Wrapping It All Up</b></p><p><blockquote><b>把这一切都包起来</b></blockquote></p><p> Cloudflare has been a true outperformer for its investors since its IPO in 2019, and we think that the company’s growth story has barely just begun as it moves towards EBIT and FCF profitability in the next few years. Investors in NET are encouraged to sit tight and enjoy many years of solid growth to come.</p><p><blockquote>自 2019 年首次公开募股以来，Cloudflare 一直是投资者真正的优秀公司，我们认为，随着公司在未来几年实现息税前利润和自由现金流盈利，公司的增长故事才刚刚开始。NET 的投资者被鼓励坐以待毙，享受未来许多年的稳健增长。</blockquote></p><p></p>\n<div class=\"bt-text\">\n\n\n<p> 来源：<a href=\"https://seekingalpha.com/article/4437171-cloudflare-is-much-more-scalable-than-you-think\">seekingalpha</a></p>\n<p>为提升您的阅读体验，我们对本页面进行了排版优化</p>\n\n\n</div>\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NET":"Cloudflare, Inc."},"source_url":"https://seekingalpha.com/article/4437171-cloudflare-is-much-more-scalable-than-you-think","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1181301986","content_text":"Summary\n\nWe think Cloudflare’s business model has not been well understood by investors.\nWhile Cloudflare operates in the Content Delivery Networks space, it has never positioned itself as a CDN player.\nWe present a clearer view of what Cloudflare represents, in order for investors to more appropriately appreciate the high scalability of the company’s business model.\nWhile we think Cloudflare is primed for outperformance even at the current price level, we would prefer to add further only at the next retracement.\n\nSteve Jennings/Getty Images Entertainment\nUnderstanding Cloudflare's Business Model\nCloudflare (NET) has come to be known as many things to different investors. We have seen investors classifying Cloudflare as a cloud or web security company, or a content delivery network [CDN], or an identity access management [IAM] company. The fact is, while Cloudflare is involved in all of those, the company actually has a much larger scale of operation. Cloudflare sees itself as “a networking company”, that “you have to think about [Cloudflare] almost like Cisco-as-a-service. Anything where you would have bought and acquired hardware on-premise, whether it's firewalls, routers, load balancers, VPNs, we offer this as a service from our network. And this network is masked by now.”\nIn fact, CEO Matthew Prince emphasized:\n\n So the reason that we picked the ticker symbol NET was because, fundamentally, what it is that we sell is the network that you plug into and then you don't have to worry about anything else. And so that's what we want to deliver. And so a piece of that is you want to make sure you have a fast network. A piece of that is you want to make sure you have a reliable network. But a big piece of that is you want to make sure that you have a network which is helping you solve the security problems that you have.\n\nWe think that one of the key reasons that Cloudflare wanted investors to clearly understand the company's scope of business is to allow investors to have the appropriate strategic view of the company’s still-expanding TAM, which the company highlighted has been expanding since its IPO in 2019. Although the company started with a TAM of $37B in 2019, which then saw it being revised upwards to $72B, and now the company is looking at a TAM of $100B over the next 3 years.\nCloudflare is the Undisputed Market Leader in DDoS Protection\nDDoS and bot protection software market share worldwide as of Apr 21. Data source: Datanyze\nWhile Cloudflare started with “load balancing, firewalling, DDoS mitigation services” and the company is the undisputed worldwide market leader in DDoS protection with an 81.4% market share, the company has moved swiftly to extend its TAM to VPN and remote browser isolation service (through its S2 Systems Corporation acquisition in Jan 20), targeting these two markets with Cloudflare for Teams, and thebrowser isolation servicewhich can also be added on to its Teams product. However, its third TAM extension in which the company planned to “disrupt the corporate network and Multiprotocol Label Switching [MPLS]” through itsCloudflare Magic Transitproduct by protecting companies' on-premise data centers which saw the company entering to disrupt the highly lucrative stronghold of \"the Ciscos (CSCO) of this worlds and Fortinets (FTNT) and Check Points (CHKP) and Palo Altos (PANW) and Riverbeds.\"\nTherefore, investors should be able to clearly appreciate the extremely high scalability of Cloudflare’s business model and its ambitions to take on the market’s biggest on-premise security players in their home ground. Magic Transit will be a key player in the company’s penetration of its enterprise segment as “the MPLS spend is a significant dollar item in the budgets of our customers” would help the company to build up its enterprise segment which has been growing rapidly.\nRapidly Expanding Enterprise Segment\nLarge / Enterprise customers trend. Data source: Company filings\nThe company has certainly made tremendous inroads into the enterprise segment, which is now the company’s “fastest growing business”. While it may seem like its 945 enterprise customers as of Q1'21 (this segment has grown at a CAGR of 69% from Q1’18), pales in comparison to its customer total of 119,206, this segment now represents the majority of the company’s revenue as Cloudflare highlighted: “This is now 50%, a little bit more than 50% of our revenue.” In fact, the chart alone would not do full justice to the company’s ability in penetrating this segment as the larger paying customers within the enterprise segment have been growing even faster, as Cloudflare further added: “Let's look at customers that give us more than $500,000 or even more than $1 million a year, the larger the cohort, the faster the growth. So our largest cohort, so $1 million-plus customers, has been growing north of 70% now consistently over last the 7 quarters”\nExpansion of Products Helps to Sustain its DBNRR\nWhile investors may have been inundated with the number or scope of products or services that the company has been offering to its customers, Cloudflare highlighted that in fact, “first of all, the more products we have, the easier expansion becomes.” The company has of course been mindful of building products that provide significant value to its customers and have seen its customers move up the product adoption ladder rapidly over the years.\nImportantly, the company attaches a \"magic number\" to its customers’ product adoption: 4 products per customer. It emphasized that while at IPO 70% of its customers were using 4 products each, “that number has now moved far beyond 80%. And now more than 70% of the customers are using 5 products. So with the increase in the product portfolio, we've been able to sell more products to existing customers”\nDollar-based Net Retention Rate [DBNRR]. Data source: Company filings\nThat has seen the company consistently maintaining its DBNRR over the years, while it posted its most impressive DBNRR of 123% over the last 3 years in Q1’21. While its DBNRR is in line with its SaaS peers median of 120%, we are confident that the company would continue to maintain a consistently high level of DBNRR as more and more of its customers adopt more products moving forward, “and with that, [leading to] the stickiness of the product and [having] the churn rates come down.”\nCloudflare was Never Designed as a CDN\nMany investors often compared Cloudflare to Fastly (FSLY) as competitors in the content-delivery networks (CDN) space. While we think NET certainly competes in that space with FSLY, the company specifically wanted to remind investors that:\n\n We were never designed as a CDN. We had to provide CDN-like functionalities in order to deliver security and performance-based products and services at the edge of our network. But CDN was a means to achieve that, but not the business model in itself. We are pricing our products differently. We have no usage -- or hardly any usage-based pricings. Even today, less than a low single digit of our revenue is variable billing-based. And of that, less than 1/3 is really bandwidth-driven.\n\nWe had recently highlighted in an article on FSLY and reminded investors that FSLY is not your typical SaaS model, as the company mainly derives its revenue from usage, rather than subscriptions. On the other hand, NET derives the majority of its revenue from subscriptions, and therefore the revenue model driving their respective businesses is entirely different.\nIn fact, the unpredictable bandwidth cost of usage-based model was one of the key reasons why NET chose not to adopt a usage-based revenue model as the company wanted to focus on driving down costs for its customers with an offering that bills in a “predictable and reliable way”. Cloudflare’s priority would then turn to finding ways to “drive the cost of bandwidth to close to 0 over time” by making sure its “software-defined network could allow any server anywhere in our network to run any different function that we did and to be able to shift traffic around to deliver a level of efficiency that no one else has.”\nCEO Matthew Prince also succinctly added:\n\n And so where I think a typical CDN company worries about things like how many people are going to tune into the Super Bowl and is the new show on Disney+ going to be popular or not, I spend my days worrying about what are the new cyber threats coming out of Russia or Iran, around the world and how do we stay in front of those. And so again, just completely different businesses.\n\nTherefore, investors could be assured that those type of usage volatility that FSLY had endured whenever they lost a major customer like we saw inTikTokis unlikely to happen to NET, simply because Cloudflare doesn’t bill by usage, and therefore providing the kind or revenue visibility that we have come to expect of typical SaaS companies.\nHowever, Cloudflare’s subscriptions-based revenue model is not without its inherent disadvantage as compared to FSLY’s usage-based billing model whenever there’s a huge surge in its customers’ usage, like what the company experienced last year during the throes of the pandemic:\n\n All of a sudden, we saw this dramatic uptick and a dramatic spike in the amount of bandwidth that people were using across our services. And unlike traditional CDNs, we couldn't just pass those costs on to our customers. And so those actually, I think, were pretty substantial headwinds to us, and I'm proud of our team for really adjusting, solving customers' problems, focusing on expanding our existing customers and making them bigger customers and getting more efficient over time. And so I think that what were headwinds for us are turning into tailwinds now, where we're seeing the sort of bandwidth usage plateauing, which is attractive for kind of our cost side of our business.\n\nCloudflare's Excellent Margins\nNET and FSLY Gross margin. Data source: S&P Capital IQ\nWhile the company had to deal with the dramatic increased bandwidth costs that its subscriptions model wasn’t designed for in the first place last year, it had still managed to maintain its gross margins consistently north of 75% over time, which easily outperformed FSLY’s usage-based revenue model. We believe the company’s full suite of networking products has helped the company to strongly diversify its revenue base, which lends further credence to the superb execution of the company’s business model across multiple markets and industry verticals, strengthening its revenue resilience against any unexpected slowdown or unanticipated costs surge. If investors were to coin Cloudflare as a “Jack of all trades”, we think it may be apt to call it a “master of all” as well.\nExpected to Turn EBIT and FCF Profitable\nNET projected revenue mean consensus and projected YoY revenue growth. Data source: S&P Capital IQ\nNET projected EBIT margin and projected unlevered FCF margin. Data source: S&P Capital IQ\nEven though NET has yet to achieve FCF and EBIT profitability, the company has guided for a long-term operating margin of 20%, which in our model we think is highly achievable over time as we projected the company to achieve an EBIT margin of 15.7% by the end of FY 25 especially when the company is still expected to post rapid revenue growth north of 30% in the years ahead.\nNET LTM SG&A margin. Data source: S&P Capital IQ\nOur confidence is mainly predicated on the sustained improvement in operating leverage that the company has been demonstrating in its SG&A margins, which has been the company’s largest operating expense segment. We believe that the company is likely to maintain this improvement moving forward that would cascade down strongly to its EBIT margins and move the company towards EBIT and FCF profitability in the next few years. Therefore, the party is surely just getting started for NET.\nValuations are Compelling If Execution is Sustained\nNET EV / Fwd Rev. Data source: S&P Capital IQ\nNET NTM (TEV / Rev).\nWhile we continue to applaud NET’s superb business model and world-class execution, we are aware that this is unlikely to be lost among astute market participants. Therefore, we were not surprised to observe NET’s EV / FY+1 Rev is valued at 52x, while its mean is about 35.5x over the last one year. Based on our calculations of NET’s expected revenue growth rate in the next few years, we derived an expected share price 4Y CAGR of 19.66%, even at the current price level, representing potentially market-beating returns in the years ahead, if the company is able to maintain its excellent execution track record and achieve its growth targets.\nProjected FY 25 share price and projected 4Y CAGR. Data source: S&P Capital IQ\nSource: TradingView\nWhile we were somewhat fortunate to enter our full position in NET at about $30 last Sep, based on the current price action, we don’t think there is any optimal entry point for new investors right now, even if we think that based on the current price level, NET would likely continue to outperform the market.\nTherefore, we would encourage investors who consider price action in their decision-making to wait for a retracement first, while investors who do not consider price action may enter now if they have high conviction of NET’s execution in the next few years.\nWhile we would not add more positions at the current price level, we would surely keep the stock on our watchlist to consider increasing our exposure at the next retracement.\nWrapping It All Up\nCloudflare has been a true outperformer for its investors since its IPO in 2019, and we think that the company’s growth story has barely just begun as it moves towards EBIT and FCF profitability in the next few years. Investors in NET are encouraged to sit tight and enjoy many years of solid growth to come.","news_type":1,"symbols_score_info":{"NET":0.9}},"isVote":1,"tweetType":1,"viewCount":2801,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":6,"subscribersOnly":false,"subscribersOnlyAccessible":false,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/151002987"}
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