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Fastly Announces First Quarter 2022 Financial Results

May 4, 2022 4:05 PM EDT

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  • Record quarterly revenue exceeds quarterly guidance range
  • First quarter revenue of $102.4 million, up 5% quarter-over-quarter
  • First quarter revenue Net Retention Rate (LTM) of 115%

 

SAN FRANCISCO--(BUSINESS WIRE)-- Fastly, Inc. (NYSE: FSLY), the world’s fastest global edge cloud network provider, today announced financial results for its first quarter ended March 31, 2022.

“We are pleased to kick off 2022 with strong revenue growth that exceeded guidance and a record-breaking quarter for Fastly as we passed the $100M milestone for the first time,” said Joshua Bixby, CEO of Fastly.

“The first quarter also brought strong analyst and customer validation for our product portfolio. These accolades showcase our customers' ongoing satisfaction and usage of Fastly’s products as we accelerate the delivery of our product roadmap,” continued Bixby. “We look forward to sharing further details on our differentiation, product roadmap, customer acquisition, and financial growth strategy at our Investor Day on May 12.”

Fastly today separately announced that the Board has initiated a search to identify the next CEO to lead the company through its next phase of growth. Once a successor is appointed, current CEO Joshua Bixby will step down as CEO and from the Fastly Board of Directors.

Three months ended

March 31,

 

2022

 

 

 

2021

 

Revenue

$

102,382

 

$

84,852

 

Gross Margin
GAAP gross margin

 

47.3

%

 

55.8

%

Non-GAAP gross margin

 

52.6

%

 

60.1

%

Operating loss
GAAP operating loss

$

(63,004

)

$

(49,963

)

Non-GAAP operating loss

$

(17,740

)

$

(12,905

)

Net loss per share
GAAP net loss per common share—basic and diluted

$

(0.54

)

$

(0.44

)

Non-GAAP net loss per common share—basic and diluted

$

(0.15

)

$

(0.12

)

First Quarter 2022 Financial Summary

  • Total revenue of $102.4 million, representing 5% sequential growth and 21% year-over-year growth.
  • GAAP gross margin of 47.3%, compared to 55.8% in the first quarter of 2021. Non-GAAP gross margin of 52.6%, compared to 60.1% in the first quarter of 2021.
  • GAAP net loss of $64.3 million, compared to $50.7 million in the first quarter of 2021. Non-GAAP net loss of $18.0 million, compared to $13.6 million in the first quarter of 2021.
  • GAAP net loss per basic and diluted shares of $0.54 compared to $0.44 in the first quarter of 2021. Non-GAAP net loss per basic and diluted shares of $0.15, compared to $0.12 in the first quarter of 2021.

Key Metrics

  • Trailing 12 month net retention rate (NRR LTM)1 decreased to 115% in the first quarter from 118% in the fourth quarter 2021.
  • Dollar-Based Net Expansion Rate (DBNER)2 decreased to 118% in the first quarter from 121% in the fourth quarter 2021.
  • Total customer count of 2,880 in the first quarter, of which 457 were enterprise3 customers.
  • Average enterprise customer spend of $722K in the first quarter, up 3% quarter-over-quarter.

For a reconciliation of non-GAAP financial measures to their corresponding GAAP measures, please refer to the reconciliation table at the end of this press release.

Recent Business Highlights

  • Recognized as the only vendor named as Gartner Peer Insights Customers’ Choice for web application and API protection for four consecutive years.
  • Acquired Fanout to unlock real-time app development at the edge with reduced time-to-market, reduced friction, and unprecedented scale.
  • Recognized as a leader by IDC MarketScape in the Worldwide Commercial CDN 2022 Vendor Assessment.
  • Launched a new Observability dashboard that brings end-to-end security, delivery, application and performance metrics into a unified view.
  • Accelerated edge adoption with a new [email protected] Partner Ecosystem, designed to help customers build a variety of edge computing use cases utilizing major cloud service provider integrations.
Second Quarter and Full Year 2022 Guidance:
 
Q2 2022 Full Year 2022
Total Revenue (millions) $99.0 - $102.0 $405.0 - $415.0
Non-GAAP Operating Loss (millions) ($21.5) - ($18.5) ($70.0) - ($60.0)
Non-GAAP Net Loss per share (4)(5) ($0.18) - ($0.15) ($0.60) - ($0.50)

Conference Call Information

Fastly will host an investor conference call to discuss its results at 2:00 p.m. PT / 5:00 p.m. ET on Wednesday, May 4, 2022.

Date:

Wednesday, May 4, 2022

Time:

2:00 p.m. PT / 5:00 p.m. ET

Webcast:

https://investors.fastly.com

Dial-in:

888-330-2022 (US/CA) or 646-960-0690 (Intl.)

Conf. ID#:

7543239

Please dial in at least 10 minutes prior to the 2:00 p.m. PT start time. A live webcast of the call will be available at https://investors.fastly.com where listeners may log on to the event by selecting the webcast link under the “Quarterly Results” section.

A telephone replay of the conference call will be available at approximately 5:00 p.m. PT, May 4 through May 18, 2022 by dialing 800-770-2030 or 647-362-9199 and entering the passcode 7543239.

About Fastly

Fastly is upgrading the internet experience to give people and organizations more control, faster content, and more dynamic applications. By combining the world’s fastest global edge cloud network with powerful software, Fastly helps customers develop, deliver, and secure modern distributed applications and compelling digital experiences. Fastly’s customers include many of the world’s most prominent companies, including Pinterest, The New York Times, and GitHub. For more information on our mission and products, visit https://www.fastly.com/.

Forward-Looking Statements

This press release contains “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us on the date of this press release. Forward-looking statements may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements include, but are not limited to, statements regarding our future financial and operating performance, including our outlook and guidance, the demand for our platform, and our ability to deliver on our long-term strategy. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Important factors that could cause our actual results to differ materially are detailed from time to time in the reports Fastly files with the Securities and Exchange Commission (“SEC”), including in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022. Copies of reports filed with the SEC are posted on Fastly’s website and are available from Fastly without charge.

Use of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses the following non-GAAP measures of financial performance: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP basic and diluted net loss per common share, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, free cash flow and adjusted EBITDA. The presentation of this additional financial information is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. These non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In addition, these non-GAAP financial measures may be different from the non-GAAP financial measures used by other companies. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. Management compensates for these limitations by reconciling these non-GAAP financial measures to the most comparable GAAP financial measures within our earnings releases.

Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, Non-GAAP net loss and non-GAAP basic and diluted net loss per common share, non-GAAP research and development, non-GAAP sales and marketing, and non-GAAP general and administrative differ from GAAP in that they exclude stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses and amortization of debt discount and issuance costs.

Adjusted EBITDA: excludes stock-based compensation expense, depreciation and other amortization expenses, amortization of acquired intangible assets, acquisition-related expenses, interest income, interest expense (including amortization of debt discount and issuance costs) other income (expense), (net), and income taxes.

Acquisition-related Expenses: consists of acquisition-related charges that are not related to ongoing operations. Management considers its operating results without the acquisition-related expenses when evaluating its ongoing non-GAAP performance and its ongoing adjusted EBITDA performance because these charges may not be reflective of our core business, ongoing operating results, or future outlook.

Amortization of Acquired Intangible Assets: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases and acquisitions. Amortization of acquired intangible assets is included in the following cost and expense line items of our GAAP presentation: cost of revenue and sales and marketing. Management considers its operating results without the amortization expense of our acquired intangible assets when evaluating its ongoing non-GAAP performance and its ongoing adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of asset purchases and acquisitions and may not be reflective of our core business, ongoing operating results, or future outlook.

Amortization of Debt Discount and Issuance Costs: consists primarily of amortization expenses related to our debt obligations. Management considers its non-GAAP net loss and adjusted EBITDA results without this activity when evaluating its ongoing performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. These are included in our total interest expense.

Capital Expenditures: cash used for purchases of property and equipment and capitalized internal-use software, as reflected in our statement of cash flows.

Depreciation and Other Amortization Expense: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases. Depreciation and amortization expense is included in the following cost and expense line items of our GAAP presentation: cost of revenue, research and development, sales and marketing, and general and administrative. Management considers its operating results without the depreciation and other amortization expense when evaluating its ongoing adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of asset purchases and may not be reflective of our core business, ongoing operating results, or future outlook.

Free Cash Flow: calculated as net cash used in operating activities less capital expenditures.

Income Taxes: consists primarily of expenses recognized related to state and foreign income taxes. Management considers its adjusted EBITDA results without these charges when evaluating its ongoing performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Interest Expense: consists primarily of interest expense related to our debt instruments, including amortization of debt discount and issuance costs. Management considers its operating results without total interest expense when evaluating its non-GAAP net loss and its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Interest Income: consists primarily of interest income related to our marketable securities. Management considers its adjusted EBITDA results without this activity when evaluating its ongoing performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Non-GAAP Operating Loss: calculated as GAAP revenue less non-GAAP cost of revenue and non-GAAP operating expenses.

Other Income (Expense), Net: consists primarily of foreign currency transaction gains and losses. Management considers its operating results without other income (expense), net when evaluating its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Stock-based Compensation Expense: consists of expenses for stock options, restricted stock units, performance awards, restricted stock awards and Employee Stock Purchase Plan ("ESPP") under our equity incentive plans. Stock-based compensation is included in the following cost and expense line items of our GAAP presentation: cost of revenue, research and development, sales and marketing, and general and administrative.

Although stock-based compensation is an expense for the Company and is viewed as a form of compensation, management excludes stock-based compensation from our non-GAAP measures and adjusted EBITDA results for purposes of evaluating our continuing operating performance primarily because it is a non-cash expense not believed by management to be reflective of our core business, ongoing operating results, or future outlook. In addition, the value of some stock-based instruments is determined using formulas that incorporate variables, such as market volatility, that are beyond our control.

Management believes these non-GAAP financial measures and adjusted EBITDA serve as useful metrics for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods and to those of peer companies, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors' overall understanding of our current financial performance.

Key Metrics

1 We calculate LTM Net Retention Rate by dividing the total customer revenue for the prior twelve-month period (“prior 12-month period”) ending at the beginning of the last twelve-month period (“LTM period”) minus revenue contraction due to billing decreases or customer churn, plus revenue expansion due to billing increases during the LTM period from the same customers by the total prior 12-month period revenue. We believe the LTM Net Retention Rate is supplemental as it removes some of the volatility that is inherent in a usage-based business model.

2 We calculate Dollar-Based Net Expansion Rate by dividing the revenue for a given period from customers who remained customers as of the last day of the given period (the “current” period) by the revenue from the same customers for the same period measured one year prior (the “base” period). The revenue included in the current period excludes revenue from (i) customers that churned after the end of the base period and (ii) new customers that entered into a customer agreement after the end of the base period.

3 Enterprise customers are defined as those spending $100,000 or more in a twelve-month period.

4 Assumes weighted average basic shares outstanding of 121.4 million in Q2 2022 and 121.8 million for the full year 2022.

5 Non-GAAP Net Loss per share is calculated as full-year Non-GAAP Net Loss divided by weighted average basic shares for the full year 2022.

Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
 
Three months ended
March 31,

 

2022

 

 

2021

 

Revenue

$

102,382

 

$

84,852

 

Cost of revenue(1)

 

53,915

 

 

37,494

 

Gross profit

 

48,467

 

 

47,358

 

Operating expenses:
Research and development(1)

 

40,437

 

 

28,988

 

Sales and marketing(1)

 

41,480

 

 

34,872

 

General and administrative(1)

 

29,554

 

 

33,461

 

Total operating expenses

 

111,471

 

 

97,321

 

Loss from operations

 

(63,004

)

 

(49,963

)

Interest income

 

681

 

 

174

 

Interest expense

 

(1,622

)

 

(661

)

Other expense

 

(279

)

 

(64

)

Loss before income taxes

 

(64,224

)

 

(50,514

)

Income tax expense

 

40

 

 

169

 

Net loss

$

(64,264

)

$

(50,683

)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.54

)

$

(0.44

)

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

 

119,673

 

 

114,134

 

 
__________
 
(1) Includes stock-based compensation expense as follows:
 
Three months ended
March 31,

 

2022

 

 

2021

 

Cost of revenue

$

2,946

 

$

1,186

 

Research and development

 

18,589

 

 

7,958

 

Sales and marketing

 

10,094

 

 

5,008

 

General and administrative

 

8,393

 

 

16,686

 

Total

$

40,022

 

$

30,838

 

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, unaudited)
Three months ended
March 31,

 

2022

 

 

2021

 

Gross Profit
GAAP gross profit

$

48,467

 

$

47,358

 

Stock-based compensation

 

2,946

 

 

1,186

 

Amortization of acquired intangible assets

 

2,475

 

 

2,475

 

Non-GAAP gross profit

$

53,888

 

$

51,019

 

GAAP gross margin

 

47.3

%

 

55.8

%

Non-GAAP gross margin

 

52.6

%

 

60.1

%

 
Research and development
GAAP research and development

$

40,437

 

$

28,988

 

Stock-based compensation

 

(18,589

)

 

(7,958

)

Non-GAAP research and development

$

21,848

 

$

21,030

 

 
Sales and marketing
GAAP sales and marketing

 

41,480

 

 

34,872

 

Stock-based compensation

 

(10,094

)

 

(5,008

)

Amortization of acquired intangible assets

 

(2,709

)

 

(2,816

)

Non-GAAP sales and marketing

 

28,677

 

 

27,048

 

 
General and administrative
GAAP general and administrative

$

29,554

 

$

33,461

 

Stock-based compensation

 

(8,393

)

 

(16,686

)

Acquisition-related expenses

 

(58

)

 

(929

)

Non-GAAP general and administrative

$

21,103

 

$

15,846

 

 
Operating loss
GAAP operating loss

$

(63,004

)

$

(49,963

)

Stock-based compensation

 

40,022

 

 

30,838

 

Amortization of acquired intangible assets

 

5,184

 

 

5,291

 

Acquisition-related expenses

 

58

 

 

929

 

Non-GAAP operating loss

$

(17,740

)

$

(12,905

)

 
Net loss
GAAP net loss

$

(64,264

)

$

(50,683

)

Stock-based compensation

 

40,022

 

 

30,838

 

Amortization of acquired intangible assets

 

5,184

 

 

5,291

 

Amortization of debt discount and issuance costs

 

963

 

 

-

 

Acquisition-related expenses

 

58

 

 

929

 

Non-GAAP loss

$

(18,037

)

$

(13,625

)

 
Non-GAAP net loss per common share—basic and diluted

$

(0.15

)

$

(0.12

)

Weighted average basic and diluted common shares

 

119,673

 

 

114,134

 

 
Three months ended
March 31,

 

2022

 

 

2021

 

Adjusted EBITDA
GAAP net loss

$

(64,264

)

$

(50,683

)

Stock-based compensation

 

40,022

 

 

30,838

 

Depreciation and other amortization

 

9,975

 

 

6,491

 

Amortization of acquired intangible assets

 

5,184

 

 

5,291

 

Interest income

 

(681

)

 

(174

)

Interest expense

 

1,622

 

 

661

 

Other expense

 

279

 

 

64

 

Income tax expense

 

40

 

 

169

 

Acquisition-related expenses

 

58

 

 

929

 

Adjusted EBITDA

$

(7,765

)

$

(6,414

)

Condensed Consolidated Balance Sheets
(in thousands)
As of As of
March 31, 2022 December 31, 2022
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents

$

245,794

 

$

166,068

 

Marketable securities, current

 

393,950

 

 

361,795

 

Accounts receivable, net of allowance for credit losses

 

73,717

 

 

64,625

 

Prepaid expenses and other current assets

 

23,616

 

 

32,160

 

Total current assets

 

737,077

 

 

624,648

 

Property and equipment, net

 

174,550

 

 

166,961

 

Operating lease right-of-use assets, net

 

63,455

 

 

69,631

 

Goodwill

 

637,570

 

 

636,805

 

Intangible assets, net

 

97,287

 

 

102,596

 

Marketable securities, non-current

 

394,464

 

 

528,911

 

Other assets

 

30,020

 

 

29,468

 

Total assets

$

2,134,423

 

$

2,159,020

 

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable

$

8,248.0

 

$

9,257.0

 

Accrued expenses

 

49,902

 

 

36,112

 

Finance lease liabilities, current

 

26,766

 

 

21,125

 

Operating lease liabilities, current

 

18,688

 

 

20,271

 

Other current liabilities

 

36,569

 

 

45,107

 

Total current liabilities

 

140,173

 

 

131,872

 

Long-term debt

 

934,121

 

 

933,205

 

Finance lease liabilities, noncurrent

 

28,867

 

 

22,293

 

Operating lease liabilities, noncurrent

 

52,334

 

 

55,114

 

Other long-term liabilities

 

2,205

 

 

2,583

 

Total liabilities

 

1,157,700

 

 

1,145,067

 

Stockholders’ equity:
Class A common stock

 

2

 

 

2

 

Additional paid-in capital

 

1,561,371

 

 

1,527,468

 

Accumulated other comprehensive loss

 

(9,496

)

 

(2,627

)

Accumulated deficit

 

(575,154

)

 

(510,890

)

Total stockholders’ equity

 

976,723

 

 

1,013,953

 

Total liabilities and stockholders’ equity

$

2,134,423

 

$

2,159,020

 

Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
Three months ended
March 31,

 

2022

 

 

2021

 

Cash flows from operating activities:
Net loss

$

(64,264

)

$

(50,683

)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense

 

9,850

 

 

6,419

 

Amortization of intangible assets

 

5,309

 

 

5,363

 

Amortization of right-of-use assets and other

 

6,839

 

 

6,357

 

Amortization of debt discount and issuance costs

 

964

 

 

332

 

Amortization of deferred contract costs

 

1,851

 

 

1,411

 

Stock-based compensation

 

40,022

 

 

30,838

 

Provision for credit losses

 

127

 

 

(420

)

Interest on finance lease

 

(591

)

 

(330

)

Loss on disposals of property and equipment

 

268

 

 

27

 

Amortization and accretion of discounts and premiums on investments

 

957

 

 

 

Other adjustments

 

128

 

 

64

 

Changes in operating assets and liabilities:
Accounts receivable

 

(9,219

)

 

(1,685

)

Prepaid expenses and other current assets

 

(2,111

)

 

(1,680

)

Other assets

 

(2,451

)

 

(2,952

)

Accounts payable

 

(2,492

)

 

2,119

 

Accrued expenses

 

4,891

 

 

(755

)

Operating lease liabilities

 

(6,557

)

 

(6,365

)

Other liabilities

 

3,289

 

 

1,071

 

Net cash used in operating activities

 

(13,190

)

 

(10,869

)

Cash flows from investing activities:
Purchases of marketable securities

 

(148,193

)

 

(64,331

)

Sales of marketable securities

 

2,301

 

 

12,497

 

Maturities of marketable securities

 

240,547

 

 

25,503

 

Business acquisitions, net of cash acquired

 

(775

)

 

 

Purchases of property and equipment

 

(2,387

)

 

(8,079

)

Capitalized internal-use software

 

(3,810

)

 

(989

)

Net cash provided by (used in) investing activities

 

87,683

 

 

(35,399

)

Cash flows from financing activities:
Issuance of convertible note, net of issuance costs

 

 

 

930,775

 

Payments of other debt issuance costs

 

 

 

(1,351

)

Repayments of finance lease liabilities

 

(7,159

)

 

(2,951

)

Cash received for restricted stock sold in advance of vesting conditions

 

10,655

 

 

 

Cash paid for early sale of restricted shares

 

(3,498

)

 

 

Proceeds from exercise of vested stock options

 

3,048

 

 

2,719

 

Proceeds from employee stock purchase plan

 

2,406

 

 

3,071

 

Net cash provided by financing activities

 

5,452

 

 

932,263

 

Effects of exchange rate changes on cash, cash equivalents, and restricted cash

 

(219

)

 

(112

)

Net increase in cash, cash equivalents, and restricted cash

 

79,726

 

 

885,883

 

Cash, cash equivalents, and restricted cash at beginning of period

 

166,961

 

 

63,880

 

Cash, cash equivalents, and restricted cash at end of period

 

246,687

 

 

949,763

 

Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows:
Cash and cash equivalents

 

245,794

 

 

948,783

 

Restricted cash, current

 

 

 

87

 

Restricted cash, non-current

 

893

 

 

893

 

Total cash, cash equivalents, and restricted cash

$

246,687

 

$

949,763

 

 

Free Cash Flow

(in thousands, unaudited)
Three months ended
March 31,

 

2022

 

 

2021

 

Cash flow provided by (used in) operations

$

(13,190

)

$

(10,869

)

Capital expenditures(1)

 

(6,197

)

 

(9,068

)

Free Cash Flow

$

(19,387

)

$

(19,937

)

__________
(1) Capital Expenditures are defined as cash used for purchases of property and equipment and capitalized internal-use software, as reflected in our statement of cash flows.

Source: Fastly, Inc.

Investor Contact:
Vernon Essi, Jr.
[email protected]

Media Contact:
[email protected]

Source: Fastly, Inc.



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