Cloudflare Inc

Previous wording

•Contracted customers. Our contracted customers, which consist of customers that enter into contracts for our Enterprise subscription plan, have contracts that typically range from one to three years and are typically billed on a monthly or annual basis. Our agreements with contracted customers are tailored and priced to meet their varying needs and requirements. Enterprise subscription plan agreements for our contracted customers generally include a base subscription and a smaller portion based on usage or per seat.

Current wording

•Contracted customers. Our contracted customers, which consist of customers that enter into contracts for our Enterprise subscription plan, have contracts that typically range from one to three years and are typically billed on a monthly or annual basis. Our agreements with contracted customers are tailored and priced to meet their varying needs and requirements. Enterprise subscription plan agreements for our contracted customers generally include a base subscription and a smaller portion based on usage or per seat. Agreements with certain of our larger enterprise customers may be structured as a "pool of funds" in which the customer commits to spend at least a specified amount on our products during the subscription period. These “pool of funds” arrangements do not require the customer to subscribe for specific products or spend any specific amounts during any month, quarter or, if applicable, year of the subscription period, but the funds must be utilized during the subscription period as they are non-refundable and non-reimbursable.

Previous wording

◦International reach. Our global network, with a presence in more than 320 cities and over 120 countries worldwide, has helped to foster our strong international growth. International markets represented 48% and 47% of our revenue in the three months ended March 31, 2024 and 2023, respectively, and we intend to continue to invest in our international growth as a strategy to expand our customer base around the world.

Current wording

◦International reach. Our global network, with a presence in more than 330 cities and over 120 countries worldwide, has helped to foster our strong international growth. International markets represented 49% and 47% of our revenue in the three months ended June 30, 2024 and 2023, respectively, and we intend to continue to invest in our international growth as a strategy to expand our customer base around the world.

Previous wording

We are closely monitoring macroeconomic developments and global events, such as the Hamas-Israel and the Russia-Ukraine conflicts and the potential worsening or expansion of those conflicts and other areas of geopolitical tension around the world, and how they may adversely impact our and our customers’ businesses. Weak economic conditions or significant uncertainty regarding the stability of financial markets related to stock market volatility, inflation, recession, changes in tariffs, trade agreements or governmental fiscal, monetary and tax policies, among others, also could adversely impact our and our customers’ business, financial condition and operating results. In addition, general tightening in the credit market, lower levels of liquidity, increases in rates of default and bankruptcy, and significant volatility in equity and fixed-income markets could all negatively impact our customers’ purchasing decisions. Potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycle for certain types of customers and sales (including sales to new customers and expansion sales to existing customers), slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth over that period (including with respect to new customers). We believe macroeconomic uncertainty could persist through the remainder of 2024. As a result, we expect that some or all of the negative trends described in this paragraph may emerge or recur during future quarters.

Current wording

We are closely monitoring macroeconomic developments and global events, such as the Hamas-Israel and the Russia-Ukraine conflicts and the potential worsening or expansion of those conflicts and other areas of geopolitical tension around the world, and other geopolitical events such as elections and other governmental changes, and, in each case, how they may adversely impact our and our customers’ businesses. Weak economic conditions or significant uncertainty regarding the stability of financial markets related to stock market volatility, inflation, recession, changes in tariffs, trade agreements or governmental fiscal, monetary and tax policies, among others, also could adversely impact our and our customers’ business, financial condition and operating results. In addition, general tightening in the credit market, lower levels of liquidity, increases in rates of default and bankruptcy, and significant volatility in equity and fixed-income markets could all negatively impact our customers’ purchasing decisions. Potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycle for certain types of customers and sales (including sales to new customers and expansion sales to existing customers), slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth over that period (including with respect to new customers). We believe macroeconomic uncertainty could persist through the remainder of 2024. As a result, we expect that some or all of the negative trends described in this paragraph may emerge or recur during future quarters.

Previous wording

We believe our ability to grow the number of paying customers on our network provides a key indicator of growth of our business and our future business opportunities. We define a paying customer at the end of the quarter as a person or entity who has generated revenue and has an active contract with us or one of our partners during such quarter, excluding (i) customers that were not acquired through ordinary sales channels, (ii) customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and WARP, which agreements and customers together represent an insignificant amount of our revenue. An entity is defined as a company, a government institution, a non-profit organization, or a distinct business unit of a large company. An active contract is defined as a customer relationship for which we have provided services during the quarter. The number of paying customers was 197,138 and 168,159 as of March 31, 2024 and March 31, 2023, respectively.

Current wording

We believe our ability to grow the number of paying customers on our network provides a key indicator of growth of our business and our future business opportunities. We define a paying customer at the end of the quarter as a person or entity who has generated revenue and has an active contract with us or one of our partners during such quarter, excluding (i) customers that were not acquired through ordinary sales channels, (ii) customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and WARP, which agreements and customers together represent an insignificant amount of our revenue. An entity is defined as a company, a government institution, a non-profit organization, or a distinct business unit of a large company. An active contract is defined as a customer relationship for which we have provided services during the quarter. The number of paying customers was 210,166 and 174,129 as of June 30, 2024 and June 30, 2023, respectively.

Previous wording

While we continue to grow customers across all sizes, over time, our large customers have contributed an increasing share of our revenue. We view the number of customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts. To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each customer in the quarter and multiply that amount by four. For example, if we signed a new customer that generated $1,800 of revenue in a quarter, that customer would account for $7,200 of Annualized Revenue for that year. Our Annualized Revenue calculation excludes (i) agreements that were not entered into through ordinary sales channels, (ii) revenue generated from customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and WARP, which agreements and customers together represent an insignificant amount of our revenue. Our Annualized Revenue metric also includes any usage charges by a customer during a period, which represents a small portion of our total revenue and may not be recurring. As a result, Annualized Revenue may be higher than actual revenue over the course of the year. The number of paying customers with Annualized Revenue greater than $100,000 was 2,878 and 2,156 as of March 31, 2024 and March 31, 2023, respectively.

Current wording

While we continue to grow customers across all sizes, over time, our large customers have contributed an increasing share of our revenue. We view the number of customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts. To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each customer in the quarter and multiply that amount by four. For example, if we signed a new customer that generated $1,800 of revenue in a quarter, that customer would account for $7,200 of Annualized Revenue for that year. Our Annualized Revenue calculation excludes (i) agreements that were not entered into through ordinary sales channels, (ii) revenue generated from customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and WARP, which agreements and customers together represent an insignificant amount of our revenue. Our Annualized Revenue metric also includes any usage charges by a customer during a period, which represents a small portion of our total revenue and may not be recurring. As a result, Annualized Revenue may be higher than actual revenue over the course of the year. The number of paying customers with Annualized Revenue greater than $100,000 was 3,046 and 2,352 as of June 30, 2024 and June 30, 2023, respectively.

Previous wording

Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period. Our dollar-based net retention excludes the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. We believe this provides a more meaningful representation of our ability to add incremental business from existing paying customers as they renew and expand their contracts. Our dollar-based net retention rates for the three months ended March 31, 2024 and March 31, 2023 were 115% and 117%, respectively.

Current wording

Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period. Our dollar-based net retention excludes the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. We believe this provides a more meaningful representation of our ability to add incremental business from existing paying customers as they renew and expand their contracts. Our dollar-based net retention rates for the three months ended June 30, 2024 and June 30, 2023 were 112% and 115%, respectively.

Previous wording

Comparison of Three Months Ended March 31, 2024 and 2023

Current wording

Comparison of Three and Six Months Ended June 30, 2024 and 2023

Previous wording

Revenue increased by $88.4 million, or 30%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase in revenue was primarily due to the addition of new paying customers, as our number of paying customers increased by 17% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 115% for the three months ended March 31, 2024.

Current wording

Revenue increased by $92.5 million and $180.9 million, or 30% and 30%, respectively, for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023. The increase in revenue was primarily due to the addition of new paying customers, as our number of paying customers increased by 21% as of June 30, 2024 compared to the prior period ended June 30, 2023, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 112% for the three months ended June 30, 2024.

Previous wording

Cost of revenue increased by $14.6 million, or 21%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in the cost of revenue was primarily due to an increase of $5.1 million in employee-related costs, and an increase of $4.0 million of third-party technology services costs.

Current wording

Cost of revenue increased by $13.8 million, or 18%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in the cost of revenue was primarily due to an increase of $4.9 million in employee-related costs, and an increase of $4.3 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth.

Previous wording

Sales and marketing expenses increased by $57.1 million, or 42%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily driven by $38.3 million in increased employee-related costs due to a $15.0 million one-time compensation charge and an 8% increase in headcount in our sales and marketing organization, including an increase of $6.6 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $6.0 million in co-location and bandwidth expenses for free customers, an increase of $5.6 million in expenses for marketing programs due to investments in brand awareness advertising, third-party industry events, and digital performance marketing, and an increase of $2.2 million in travel-related expenses.

Current wording

Sales and marketing expenses increased by $84.9 million, or 30%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily driven by $52.0 million in increased employee-related costs due to a $15.0 million one-time compensation charge and a 6% increase in headcount in our sales and marketing organization, including an increase of $11.5 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $13.9 million in expenses for marketing programs due to acquisitions, investments in brand awareness advertising, third-party industry events, and digital performance marketing, an increase of $8.2 million in co-location and bandwidth expenses for free customers, an increase of $4.6 million in travel-related expenses, and an increase of $2.7 million in subscription expenses.

Previous wording

Research and development expenses increased by $6.2 million, or 8%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily driven by $6.4 million in increased employee-related costs due to a 12% increase in headcount in our research and development organization.

Current wording

Research and development expenses increased by $12.9 million, or 14%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily driven by $10.7 million in increased employee-related costs due to a 24% increase in headcount in our research and development organization.

Previous wording

General and administrative expenses increased by $17.8 million, or 37%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily driven by $11.6 million in increased employee-related costs due to an 8% increase in headcount in our general and administrative organization, including an increase of $6.9 million in stock-based compensation expense, and an increase of $1.5 million in professional fees for third-party accounting, consulting, and legal services.

Current wording

General and administrative expenses increased by $34.3 million, or 34%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily driven by $26.3 million in increased employee-related costs due to an 17% increase in headcount in our general and administrative organization, including an increase of $18.3 million in stock-based compensation expense, and an increase of $3.8 million in professional fees for third-party accounting, consulting, and legal services.

Previous wording

Interest income increased by $7.8 million, or 58%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily driven by an increase in interest rates.

Current wording

Interest income increased by $5.2 million and $12.9 million, or 31% and 43%, respectively, for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023. The increase was primarily driven by an increase in interest rates and investment balance.

Previous wording

Interest expense did not significantly fluctuate during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Current wording

Interest expense did not significantly fluctuate during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023.

Previous wording

Other income (expense), net did not significantly fluctuate for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Other income (expense), net did not significantly fluctuate for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023.

Previous wording

The net change in income taxes for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is $1.0 million. The income tax expense of $2.3 million and $1.3 million for the three months ended March 31, 2024 and March 31, 2023, respectively, was primarily related to withholding taxes in the United States and income tax expense from profitable foreign jurisdictions.

Current wording

The net change in income taxes for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 is $0.3 million. The income tax expense of $1.1 million for the three months ended June 30, 2024 was primarily related to withholding taxes in the United States and income tax expense from profitable foreign jurisdictions, offset by the partial release of the U.S. and U.K. valuation allowances in connection with acquisitions. The income tax expense of $1.5 million for the three months ended June 30, 2023 was primarily related to withholding taxes in the United States and income tax expense from profitable foreign jurisdictions.

Previous wording

Since our inception, we have financed our operations primarily through net proceeds from the sale of our equity and debt securities, as well as payments received from customers using our global network and products, and we expect to continue to finance our operations using the same sources for the foreseeable future. In May 2020, we issued $575.0 million aggregate principal amount of the 2025 Notes in a private offering to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act, from which we received total proceeds, net of initial purchaser discounts and commissions and debt issuance costs, of $562.5 million. In August 2021, we issued $1,293.8 million aggregate principal amount of the 2026 Notes in a private offering to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act, from which we received total proceeds, net of initial purchaser discounts and commissions and debt issuance costs of $1,274.0 million. Concurrently with the completion of the offering of the 2026 Notes, we also entered into privately-negotiated exchange agreements with certain holders of the 2025 Notes to exchange approximately $400 million in aggregate principal amount of the 2025 Notes for an aggregate of $400.7 million in cash (including accrued interest) and approximately 7.6 million shares of our Class A common stock. In May 2023, we repurchased approximately $123.0 million in aggregate principal amount of the 2025 Notes for $172.7 million in cash (including accrued interest). Subsequently, in July 2023, we settled conversions of the remaining $35.4 million aggregated principal amount outstanding of the 2025 Notes in a combination of$35.4 million cash and approxima tely 0.5 million shares of our Class A common stock.

Current wording

Since our inception, we have financed our operations primarily through net proceeds from the sale of our equity and debt securities, as well as payments received from customers using our global network and products, and we expect to continue to finance our operations using the same sources for the foreseeable future. In May 2020, we issued $575.0 million aggregate principal amount of the 2025 Notes in a private offering to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act, from which we received total proceeds, net of initial purchaser discounts and commissions and debt issuance costs, of $562.5 million. In August 2021, we issued $1,293.8 million aggregate principal amount of the 2026 Notes in a private offering to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act, from which we received total proceeds, net of initial purchaser discounts and commissions and debt issuance costs of $1,274.0 million. Concurrently with the completion of the offering of the 2026 Notes, we also entered into privately-negotiated exchange agreements with certain holders of the 2025 Notes to exchange approximately $400 million in aggregate principal amount of the 2025 Notes for an aggregate of $400.7 million in cash (including accrued interest) and approximately 7.6 million shares of our Class A common stock. In May 2023, we repurchased approximately $123.0 million in aggregate principal amount of the 2025 Notes for $172.7 million in cash (including accrued interest). Subsequently, in July 2023, we settled conversions of the remaining $35.4 million aggregated principal amount outstanding of the 2025 Notes in a combination of$35.4 million cash and approxima tely 0.5 million shares of our Class A common stock. In May 2024, the Company entered into a credit agreement with a syndicated group of lenders, which provides for a senior secured $400.0 million revolving credit facility (the Revolving Credit Facility), with a sublimit of $30.0 million available for the issuance of letters of credit and $30.0 million available for swingline borrowings. The credit agreement permits the Company to increase the commitments under the Revolving Credit Facility by an aggregate principal amount of up to $150.0 million, subject to the satisfaction of certain conditions. The proceeds of the loans under the Revolving Credit Facility may be used for working capital and general corporate purposes. As of June 30, 2024, no loans were outstanding under the Revolving Credit Facility. Letters of credit issued under the credit agreement were not material as of June 30, 2024.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $254.4 million, including $21.9 million held by our foreign subsidiaries. Our cash and cash equivalents primarily consist of cash and highly liquid money market funds. We also had available-for-sale securities of $1,461.8 million consisting of U.S. treasury securities, commercial paper, and corporate bonds. As of March 31, 2024, our investment portfolio consisted of investment grade securities with an average credit rating of AA. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1,059.4 million as of March 31, 2024. We expect to continue to incur operating losses and cash flow that may fluctuate between positive and negative for the foreseeable future due to the investments we intend to make in our business, and as a result we may require additional capital resources to execute on our strategic initiatives to grow our business.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $157.0 million, including $12.9 million held by our foreign subsidiaries. Our cash and cash equivalents primarily consist of cash and highly liquid money market funds. We also had available-for-sale securities of $1,600.4 million consisting of corporate bonds, U.S. treasury securities, U.S. government agency securities, and commercial paper. As of June 30, 2024, our investment portfolio consisted of investment grade securities with an average credit rating of AA. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1,074.5 million as of June 30, 2024. We expect to continue to incur operating losses and cash flow that may fluctuate between positive and negative for the foreseeable future due to the investments we intend to make in our business, and as a result we may require additional capital resources to execute on our strategic initiatives to grow our business.

Previous wording

We believe that our existing cash, cash equivalents, and available-for-sale securities will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. For the period beyond the next 12 months, we believe we will be able to meet our working capital and capital expenditure needs from our existing cash, cash equivalents, and available-for-sale-securities, the cash flows from our operating activities and, if necessary, proceeds from potential equity or debt financings. Our assessments of the period of time through which our existing financial resources will be adequate to support our operations and our expected sources of capital for the future operation of our business after such period of time are forward-looking statements and involve risks and uncertainties. Our actual results could vary as a result of, and our near- and long-term future capital requirements will depend on, many factors, including our growth rate, subscription renewal activity, the timing and extent of spending to support our infrastructure and research and development efforts, the expansion of sales and marketing activities, the timing of new introductions of products or features, the continuing market adoption of our global network and products, and the impact of macroeconomic conditions to our and our customers', vendors', and partners' businesses. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights, and such acquisitions and investments could increase our need for additional capital. We have based our estimates on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Additionally, some of the factors that may influence our operations are not within our control, such as general economic conditions. We may seek, or be required to seek, additional equity or debt financing from time to time in the future. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results, and financial condition would be adversely affected.

Current wording

We believe that our existing cash, cash equivalents, available-for-sale securities, and available capacity under the Revolving Credit Facility will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. For the period beyond the next 12 months, we believe we will be able to meet our working capital and capital expenditure needs from our existing cash, cash equivalents, available-for-sale-securities, available borrowings under the Revolving Credit Facility, the cash flows from our operating activities and, if necessary, proceeds from other potential equity or debt financings. Our assessments of the period of time through which our existing financial resources will be adequate to support our operations and our expected sources of capital for the future operation of our business after such period of time are forward-looking statements and involve risks and uncertainties. Our actual results could vary as a result of, and our near- and long-term future capital requirements will depend on, many factors, including our growth rate, subscription renewal activity, the timing and extent of spending to support our infrastructure and research and development efforts, the expansion of sales and marketing activities, the timing of new introductions of products or features, the continuing market adoption of our global network and products, and the impact of macroeconomic conditions to our and our customers', vendors', and partners' businesses. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights, and such acquisitions and investments could increase our need for additional capital. We have based our estimates on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Additionally, some of the factors that may influence our operations are not within our control, such as general economic conditions. We may seek, or be required to seek, additional equity or debt financing from time to time in the future. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results, and financial condition would be adversely affected.

Previous wording

In addition to the contractual obligations described above, as of March 31, 2024, we had $7.4 million recognized as total restricted cash on our condensed consolidated balance sheets which mainly related to irrevocable standby letters of credit and bank guarantees that are required under lease agreements and indemnity holdback consideration associated with asset acquisitions.

Current wording

In addition to the contractual obligations described above, as of June 30, 2024, we had $3.0 million recognized as total restricted cash on our condensed consolidated balance sheets mainly related to indemnity holdback consideration associated with asset acquisitions and business combinations.

Previous wording

Net cash provided by operating activities during the three months ended March 31, 2024 was $73.6 million, which resulted from a net loss of $35.5 million, adjusted for non-cash charges of $121.1 million and net cash outflow of $12.0 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $69.7 million for stock-based compensation expense, $30.1 million for depreciation and amortization expense, $18.1 million for amortization of deferred contract acquisition costs, $11.9 million for non-cash operating lease costs, $3.2 million for provision of bad debt, and $1.0 million for amortization of convertible note issuance costs, which were partially offset by $12.7 million for net accretion of discounts. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $23.0 million increase in prepaid expenses and other current assets related to operating activities, a $22.4 million increase in deferred contract acquisition costs due to the addition of new customers, and $14.7 million in payments related to operating lease liabilities, which were partially offset by a $31.9 million decrease in accounts receivable, net, which decreased due to strong cash collection from our customers, a $9.0 million increase in deferred revenue, a $3.8 million increase in accrued expenses and other current liabilities, and a $3.1 million increase in accounts payable related to operating activities.

Current wording

Net cash provided by operating activities during the six months ended June 30, 2024 was $148.4 million, which resulted from a net loss of $50.6 million, adjusted for non-cash charges of $257.3 million and net cash outflow of $58.3 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $155.7 million for stock-based compensation expense, $59.8 million for depreciation and amortization expense, $37.0 million for amortization of deferred contract acquisition costs, $23.1 million for non-cash operating lease costs, $4.8 million for provision of bad debt, and $2.0 million for amortization of convertible note issuance costs, which were partially offset by $24.0 million for net accretion of discounts. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $48.1 million increase in deferred contract acquisition costs due to the addition of new customers, $25.0 million in payments related to operating lease liabilities, a $24.7 million increase in prepaid expenses and other current assets related to operating activities, a $6.7 million increase in accounts receivable, net, which increased due to lower cash collection from our customers, a $1.9 million increase in other noncurrent assets, and a $1.9 million increase in contract assets, which were partially offset by a $29.7 million increase in deferred revenue and a $16.0 million increase in accounts payable related to operating activities

Previous wording

Net cash provided by operating activities during the three months ended March 31, 2023 was $36.4 million, which resulted from a net loss of $38.1 million, adjusted for non-cash charges of $108.5 million and net cash outflow of $34.0 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $57.4 million for stock-based compensation expense, $31.5 million for depreciation and amortization expense, $14.1 million for amortization of deferred contract acquisition costs, $11.1 million for non-cash operating lease costs, $1.6 million for provision of bad debt, and $1.2 million for amortization of convertible note issuance costs, which were partially offset by $8.2 million for net accretion of discounts and amortization of premiums on available-for-sale securities. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $32.8 million increase in accounts receivable, net, which increased due to our growing customer base and timing of collections from our customers, $19.4 million increase in deferred contract acquisition costs due to the addition of new customers, a $8.9 million increase in prepaid expenses and other current assets, and $6.9 million in payments related to operating lease liabilities, which were partially offset by a $21.9 million increase in deferred revenue, a $11.6 million increase in accounts payable, and a $0.7 million increase in accrued expenses and other current liabilities.

Current wording

Net cash provided by operating activities during the six months ended June 30, 2023 was $100.9 million, which resulted from a net loss of $132.5 million, adjusted for non-cash charges of $281.5 million and net cash outflow of $48.1 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $125.8 million for stock-based compensation expense, $65.2 million for depreciation and amortization expense, $50.3 million for loss on extinguishment of debt, $29.0 million for amortization of deferred contract acquisition costs, $21.9 million for non-cash operating lease costs, $6.0 million for provision of bad debt, and $2.5 million for amortization of convertible note issuance costs, which were partially offset by $19.1 million for net accretion of discounts. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $43.3 million increase in deferred contract acquisition costs due to the addition of new customers, a $35.4 million increase in accounts receivable, net, which increased due to our growing customer base and timing of collections from our customers, $18.1 million in payments related to operating lease liabilities, and a $14.0 million increase in prepaid expenses and other current assets related to operating activities, which were partially offset by a $56.5 million increase in deferred revenue, a $6.6 million increase in accounts payable related to operating activities, and a $1.5 million increase in accrued expenses and other current liabilities related to operating activities.

Previous wording

Net cash provided by investing activities during the three months ended March 31, 2024 of $97.0 million resulted primarily from the maturities of available-for-sale securities of $433.9 million, which were partially offset by the purchases of available-for-sale securities of $299.0 million, capital expenditures of $32.1 million, and capitalization of internal-use software development costs of $5.9 million.

Current wording

Net cash used in investing activities during the six months ended June 30, 2024 of $86.8 million resulted primarily from the purchases of available-for-sale securities of $790.7 million, capital expenditures of $61.7 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $14.0 million, and capitalization of internal-use software development costs of $12.8 million, which were partially offset by the maturities of available-for-sale securities of $792.4 million.

Previous wording

Net cash provided by investing activities during the three months ended March 31, 2023 of $15.6 million resulted primarily from the maturities of available-for-sale securities of $494.0 million and the sales of available-for-sale securities of $20.2 million, which was partially offset by the purchases of available-for-sale securities of $476.2 million, capital expenditures of $17.5 million, and capitalization of internal-use software development costs of $5.0 million.

Current wording

Net cash provided by investing activities during the six months ended June 30, 2023 of $15.7 million resulted primarily from the maturities of available-for-sale securities of $857.5 million and the sales of available-for-sale securities of $20.2 million, which were partially offset by the purchases of available-for-sale securities of $795.1 million, capital expenditures of $56.3 million, and capitalization of internal-use software development costs of $10.7 million.

Previous wording

Net cash provided by financing activities of $1.2 million during the three months ended March 31, 2023 was primarily due to $3.3 million of proceeds from the exercise of vested stock options, which were partially offset by $2.1 million in payments of tax withholding on RSU settlements.

Current wording

Net cash provided by financing activities of $7.2 million during the six months ended June 30, 2024 was primarily due to $10.5 million proceeds from the issuance of Class A common stock pursuant to the 2019 Employee Stock Purchase Plan (ESPP) and $7.6 million of proceeds from the exercise of vested stock options, which were partially offset by $8.8 million of payments of tax withholding on RSU settlements and $2.1 million cash paid for issuance costs on revolving credit facility.

Previous wording

Our significant accounting policies are discussed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no significant changes to these policies for the three months ended March 31, 2024, except as noted below.

Current wording

Our significant accounting policies are discussed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no significant changes to these policies for the six months ended June 30, 2024, except as noted below.

Previous wording

In January 2024, we completed an assessment of the useful lives of our servers-network infrastructure, resulting in a change in the estimated useful lives of our servers-network infrastructure from four years to five years. This change in accounting estimate was effective beginning fiscal year 2024. Based on the carrying value of assets in service as of December 31, 2023, the change resulted in a reduction of depreciation expense of $6.2 million for the three months ended March 31, 2024, recorded primarily in cost of revenue. We expect this change in accounting estimate to result in a reduction of depreciation expense of approximately $20 million for the full fiscal year 2024 for assets in service as of December 31, 2023.

Current wording

In January 2024, we completed an assessment of the useful lives of our servers-network infrastructure, resulting in a change in the estimated useful lives of our servers-network infrastructure from four years to five years. This change in accounting estimate was effective beginning fiscal year 2024. Based on the carrying value of assets in service as of December 31, 2023, the change resulted in a reduction of depreciation expense of $11.9 million for the six months ended June 30, 2024, recorded primarily in cost of revenue. We expect this change in accounting estimate to result in a reduction of depreciation expense of approximately $20 million for the full fiscal year 2024 for assets in service as of December 31, 2023.