Fastly, Inc. [FSLY] Filings

10-Q 1 fsly-20240630.htm 10-Q fsly-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________

FORM 10-Q

____________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38897

____________________________

FASTLY, INC.

(Exact name of registrant as specified in its charter)

____________________________


Delaware						27-5411834
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

475 Brannan Street, Suite 300

San Francisco, CA 94107

(Address of principal executive offices) (Zip code)

(844) 432-7859

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address, or former fiscal year, if changed since last report)

____________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.00002 par value

FSLY

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2024, 138.6 million shares of the registrants’ Class A common stock were outstanding.

TABLE OF CONTENTS


		Page
	Part I - Financial Information
Item 1.	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets as of J une 30 , 2024 and December 31, 2023	5
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30 , 2024 and 2023	6
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023	7
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30 , 2024 and 2023	8
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30 , 2024 and 2023	10
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	49
	Part II - Other Information	51
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 3.	Defaults Upon Senior Securities	89
Item 4.	Mine Safety Disclosures	89
Item 5.	Other Information	90
Item 6.	Exhibits	91
	Signatures	92

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will,” “would,” “target,” or the negative of these terms or other similar expressions.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, regarding, amongst other things:

•defects, interruptions, outages, delays in performance, or similar problems with our platform;

•our ability to attract new enterprise customers and to have existing enterprise customers continue and increase their use of our platform;

•the potential loss or significant reduction in usage by one or more of our major customers;

•component delays, shortages, and price increases;

•our limited operating history and history of operating losses;

•the potential that security measures, or those of third parties upon which we rely, are compromised, or the security, confidentiality, integrity or availability of our information technology, software, services, networks, communications or data is compromised, limited or fails;

•our ability to efficiently develop and sell new products and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences;

•our ability to forecast our revenue accurately and manage our expenditures;

•our ability to effectively develop and expand our marketing and sales capabilities;

•our ability to compete effectively with existing competitors and new market entrants;

•our ability to maintain and enhance our brand;

•our ability to identify and integrate acquisitions, strategic investments, partnerships, or alliances;

•our ability to attract and retain qualified employees and key personnel;

•our reliance on the performance of highly skilled personnel, including our senior management and other key employees, and the loss or transition of one or more of such personnel, or of a significant number of our team members;

•our involvement in class-action lawsuits and other litigation matters;

•our estimates or judgments relating to our critical accounting estimates may prove to be incorrect or impaired; and

•stock price volatility, and the potential decline in the value of our Class A common stock.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (www.fastly.com/investors), our filings with the Securities and Exchange Commission, our corporate X (formerly known as Twitter) account (@Fastly), our blog (www.fastly.com/blog), our corporate LinkedIn account (www.linkedin.com/company/fastly), webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about us, our products, and other issues. It is possible that the information that we make available on these mediums may be deemed to be material information. We therefore encourage investors and others interested in us to review the information that we make available through these channels.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FASTLY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)


	As of June 30, 2024		As of December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	147,196	$	107,921
Marketable securities, current	164,569		214,799
Accounts receivable, net of allowance for credit losses of $7,345 and $7,054 as of June 30, 2024 and December 31, 2023, respectively	113,878		120,498
Prepaid expenses and other current assets	25,312		20,455
Total current assets	450,955		463,673
Property and equipment, net	177,058		176,608
Operating lease right-of-use assets, net	52,451		55,212
Goodwill	670,356		670,356
Intangible assets, net	52,676		62,475
Marketable securities, non-current	—		6,088
Other assets	79,176		90,779
Total assets	$	1,482,672	$	1,525,191
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,532	$	5,611
Accrued expenses	34,445		61,818
Finance lease liabilities, current	8,178		15,684
Operating lease liabilities, current	25,399		24,042
Other current liabilities	35,748		40,539
Total current liabilities	109,302		147,694
Long-term debt	344,167		343,507
Finance lease liabilities, non-current	—		1,602
Operating lease liabilities, non-current	44,634		48,484
Other long-term liabilities	3,382		4,416
Total liabilities	501,485		545,703
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock	3		3
Additional paid-in capital	1,903,374		1,815,245
Accumulated other comprehensive loss	(282)		(1,008)
Accumulated deficit	(921,908)		(834,752)
Total stockholders’ equity	981,187		979,488
Total liabilities and stockholders’ equity	$	1,482,672	$	1,525,191

The accompanying notes are an integral part of the condensed consolidated financial statements.

FASTLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Revenue	$	132,371	$	122,831	$	265,891	$	240,395
Cost of revenue	59,470		58,617		119,756		115,927
Gross profit	72,901		64,214		146,135		124,468
Operating expenses:
Research and development	35,106		37,421		73,354		74,852
Sales and marketing	52,959		47,797		102,566		92,068
General and administrative	28,433		28,823		60,072		54,650
Impairment expense	3,137		—		3,137		—
Total operating expenses	119,635		114,041		239,129		221,570
Loss from operations	(46,734)		(49,827)		(92,994)		(97,102)
Net gain on extinguishment of debt	—		36,760		—		36,760
Interest income	3,937		4,508		7,785		8,694
Interest expense	(464)		(1,232)		(1,043)		(2,445)
Other income (expense), net	193		(803)		104		(1,053)
Loss before income tax expense	(43,068)		(10,594)		(86,148)		(55,146)
Income tax expense	661		110		1,008		245
Net loss	$	(43,729)	$	(10,704)	$	(87,156)	$	(55,391)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.32)	$	(0.08)	$	(0.64)	$	(0.44)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	137,444		127,863		136,015		126,648

The accompanying notes are an integral part of the condensed consolidated financial statements.

FASTLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Net loss	$	(43,729)	$	(10,704)	$	(87,156)	$	(55,391)
Other comprehensive income:
Foreign currency translation adjustment	—		474		—		558
Unrealized gain on investments in available-for-sale-securities	239		1,968		726		5,576
Total other comprehensive income	$	239	$	2,442	$	726	$	6,134
Comprehensive loss	$	(43,490)	$	(8,262)	$	(86,430)	$	(49,257)

The accompanying notes are an integral part of the condensed consolidated financial statements.

FASTLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands; unaudited)


	Three months ended June 30, 2024
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at March 31, 2024	136,484	$	3	$	1,870,503	$	(521)	$	(878,179)	$	991,806
Exercise of vested stock options	48	—		180		—		—		180
Vesting of restricted stock units	1,320	—		—		—		—		—
Shares issued under ESPP	544	—		4,053		—		—		4,053
Stock-based compensation	—	—		28,638		—		—		28,638
Net loss	—	—		—		—		(43,729)		(43,729)
Other comprehensive income	—	—		—		239		—		239
Balance at June 30, 2024	138,396	$	3	$	1,903,374	$	(282)	$	(921,908)	$	981,187



	Three months ended June 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at March 31, 2023	126,784	$	2	$	1,710,498	$	(5,594)	$	(746,351)	$	958,555
Exercise of vested stock options	77	—		535		—		—		535
Vesting of restricted stock units	1,469	—		—		—		—		—
Shares issued under ESPP	697	—		4,977		—		—		4,977
Stock-based compensation	—	—		31,949		—		—		31,949
Net loss	—	—		—		—		(10,704)		(10,704)
Other comprehensive income	—	—		—		2,442		—		2,442
Balance at June 30, 2023	129,027	$	2	$	1,747,959	$	(3,152)	$	(757,055)	$	987,754



	Six months ended June 30, 2024
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2023	132,992	$	3	$	1,815,245	$	(1,008)	$	(834,752)	$	979,488
Exercise of vested stock options	119	—		291		—		—		291
Vesting of restricted stock units	2,852	—		—		—		—		—
Issuance of restricted stock units related to bonus program	1,889	—		26,849		—		—		26,849
Shares issued under ESPP	544	—		4,053		—		—		4,053
Stock-based compensation	—	—		56,936		—		—		56,936
Net loss	—	—		—		—		(87,156)		(87,156)
Other comprehensive income	—	—		—		726		—		726
Balance at June 30, 2024	138,396	$	3	$	1,903,374	$	(282)	$	(921,908)	$	981,187



	Six months ended June 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2022	124,336	$	2	$	1,666,106	$	(9,286)	$	(701,664)	$	955,158
Exercise of vested stock options	121	—		871		—		—		871
Vesting of restricted stock units	2,680	—		—		—		—		—
Issuance of restricted stock units related to bonus program	1,193	—		16,599		—		—		16,599
Shares issued under ESPP	697	—		4,977		—		—		4,977
Stock-based compensation	—	—		59,406		—		—		59,406
Net loss	—	—		—		—		(55,391)		(55,391)
Other comprehensive income	—	—		—		6,134		—		6,134
Balance at June 30, 2023	129,027	$	2	$	1,747,959	$	(3,152)	$	(757,055)	$	987,754

The accompanying notes are an integral part of the condensed consolidated financial statements.

FASTLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands; unaudited)


	Six months ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(87,156)	$	(55,391)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense	26,595		24,960
Amortization of intangible assets	9,799		10,350
Non-cash lease expense	11,356		11,763
Amortization of debt discount and issuance costs	703		1,519
Amortization of deferred contract costs	9,104		7,171
Stock-based compensation	57,969		65,143
Deferred income taxes	561		—
Provision for credit losses	1,346		1,100
Loss on disposals of property and equipment	444		547
Amortization of premiums (discounts) on investments	(2,402)		747
Impairment of operating lease right-of-use assets	—		187
Impairment expense	3,137		—
Net gain on extinguishment of debt	—		(36,760)
Other adjustments	(437)		(328)
Changes in operating assets and liabilities:
Accounts receivable	5,274		10,183
Prepaid expenses and other current assets	(4,831)		(417)
Other assets	(5,024)		(11,983)
Accounts payable	(240)		944
Accrued expenses	(6,849)		(6,593)
Operating lease liabilities	(12,012)		(12,432)
Other liabilities	(1,153)		5,419
Net cash provided by operating activities	6,184		16,129
Cash flows from investing activities:
Purchases of marketable securities	(117,197)		—
Sales of marketable securities	—		774
Maturities of marketable securities	176,677		342,095
Advance payment for purchase of property and equipment	(790)		—
Purchases of property and equipment	(3,365)		(7,958)
Proceeds from sale of property and equipment	24		36
Capitalized internal-use software	(13,674)		(10,439)
Net cash provided by investing activities	41,675		324,508
Cash flows from financing activities:
Cash paid for debt extinguishment	—		(196,934)
Repayments of finance lease liabilities	(9,108)		(15,202)
Payment of deferred consideration for business acquisitions	(3,771)		(4,393)
Proceeds from exercise of vested stock options	291		871
Proceeds from employee stock purchase plan	3,915		4,787
Net cash used in financing activities	(8,673)		(210,871)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash	(61)		585
Net increase in cash, cash equivalents, and restricted cash	39,125		130,351
Cash, cash equivalents, and restricted cash at beginning of period	108,071		143,541
Cash, cash equivalents, and restricted cash at end of period	$	147,196	$	273,892

The accompanying notes are an integral part of the condensed consolidated financial statements.

FASTLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued

(in thousands)

(unaudited)


	Six months ended June 30,
	2024		2023
Supplemental disclosure of cash flow information:
Cash paid for interest	$	338	$	926
Cash paid for income taxes, net of refunds received	$	526	$	451
Cash paid for finance lease interest	$	272	$	806
Noncash investing and financing activities:
Net increase (decrease) in property and equipment included in accounts payable and accrued expenses	$	(739)	$	623
Capitalized stock-based compensation	$	5,430	$	3,227
Assets obtained in exchange for operating lease obligations	$	5,275	$	1,324
Net non-cash change in operating lease assets and liabilities associated with modifications and terminations	$	4,238	$	1,090
Deployments of prepaid capital equipment	$	7,773	$	1,639

Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows:
Cash and cash equivalents	$	147,196	$	273,742
Restricted cash, current	—		150
Total cash, cash equivalents, and restricted cash	$	147,196	$	273,892

The accompanying notes are an integral part of the condensed consolidated financial statements.

1. Nature of Business

Fastly, Inc. has built an edge cloud platform that can process, serve, and secure its customers' applications as close to their end users as possible. The Company was incorporated in Delaware in 2011 and is headquartered in San Francisco, California.

As used herein, “Fastly,” “the Company,” “its” and similar terms include Fastly, Inc. and its subsidiaries, unless the context indicates otherwise.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements and footnotes have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on February 21, 2024. The Company’s condensed consolidated financial statements include its accounts and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company’s condensed consolidated financial statements are unaudited but include all adjustments of a normal recurring nature necessary for a fair presentation of its quarterly results. The Company’s condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Actual results and outcomes could differ significantly from the Company’s estimates, judgments, and assumptions. Significant estimates, judgments, and assumptions used in these financial statements include, but are not limited to, those related to revenue, accounts receivable and related reserves, internal-use software development costs, the incremental borrowing rate related to the Company’s lease liabilities, fair value of assets acquired and liabilities assumed during business combinations, useful lives of acquired intangible assets and property and equipment, fair value of the Company’s long-lived assets as well as goodwill, income tax reserves, and accounting for stock-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates are reflected in the consolidated financial statements in the period of change and prospectively from the date of the change in estimate.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies as compared to those described in “Note 2 – Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Recently Adopted and Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting - Improvements to Reportable Segment Disclosures,” which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The guidance is effective for the Company's annual periods beginning in 2024 and interim periods beginning in the first quarter of fiscal year 2025. The Company is currently evaluating the impact of the new guidance.

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The guidance is effective for the Company's annual periods beginning in 2025. The Company

is currently evaluating the impact of the new guidance and intends to adopt the guidance prospectively when it becomes effective in 2025.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable.

The Company’s cash, cash equivalents, and marketable securities primarily consisted of bank deposits, money market funds, investment-grade commercial paper, corporate notes and bonds, U.S. treasury securities, municipal securities, foreign government and supranational securities and asset-backed securities held at major financial institutions that the Company believes to be of high credit standing. The primary focus of its investment strategy is to preserve capital and meet liquidity requirements. The Company’s investment policy limits the amount of credit exposure with any one financial institution or commercial issuer. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash equivalents to the extent recorded in the balance sheets. While the Company has not experienced any losses in such accounts and the Company has historically maintained its cash in multiple financial institutions, the failure of Silicon Valley Bank (“SVB”) in March 2023, at which the Company held cash and cash equivalents in multiple accounts, exposed the Company to limited credit risk prior to the completion by the Federal Deposit Insurance Corporation (“FDIC”) of the resolution of SVB in a manner that fully protected all depositors.

Concentrations of credit risk with respect to accounts receivable are primarily limited to certain customers to which the Company makes substantial sales. The Company’s customer base consists of a large number of geographically dispersed customers diversified across several industries. No customer accounted for more than 10% of revenue for both the three and six months ended June 30, 2024 and 2023. Affiliated customers that are business units of a single company in the streaming entertainment space generated an aggregate of 11% and 12% of the Company’s revenue for the three months ended June 30, 2024 and 2023, respectively and 11% for both the six months ended June 30, 2024 and 2023. The same affiliated customers accounted for an aggregate of 23% of the Company’s accounts receivable balance as of December 31, 2023. As of June 30, 2024, no customer accounted for more than 10% of accounts receivable. As of December 31, 2023, one customer accounted for more than 10% of accounts receivable. Affiliated customers that are business units of a different single company accounted for 13% of the total accounts receivable balance as of June 30, 2024.

3. Revenue

Revenue by geography is based on the billing address of the customer. Aside from the United States, no other single country accounted for more than 10% of revenue for both the three and six months ended June 30, 2024 and 2023. The following table presents the Company’s net revenue by geographic region:


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
	(in thousands)
United States	$	97,968	$	89,873	$	196,466	$	175,237
Asia Pacific	17,322		17,267		36,421		33,698
Europe	12,103		10,868		23,349		21,384
All other	4,978		4,823		9,655		10,076
Total revenue	$	132,371	$	122,831	$	265,891	$	240,395

The majority of the Company’s revenue is derived from enterprise customers, which are defined as customers with annualized current quarter revenue in excess of $100,000. This is calculated by taking the sum of revenue for each customer within the quarter and multiplying it by four. The following table presents the Company's net revenue for enterprise and non-enterprise customers:


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
	(in thousands)
Enterprise customers	$	120,731	$	112,660	$	242,791	$	220,033
Non-enterprise customers	11,640		10,171		23,100		20,362
Total revenue	$	132,371	$	122,831	$	265,891	$	240,395

The Company reports its revenue by three product lines: Network Services, Security and Other. Network Services include solutions designed to improve performance of websites, apps, application programming interfaces (“APIs”) and digital media. Security includes products designed to protect websites, apps, APIs and users. Other includes Compute solutions that allow developers to build and deploy modern web applications on Fastly's edge cloud platform, and Observability solutions that provide real-time logs, data and metrics streamed from Fastly's edge platform for actionable insights. The following table presents the Company’s revenue by product line:


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
	(in thousands)
Network Services	$	104,158	$	98,487	$	210,154	$	192,794
Security	25,368		22,530		49,968		43,738
Other	2,845		1,814		5,769		3,863
Total revenue	$	132,371	$	122,831	$	265,891	$	240,395

Contract balances

The timing of revenue recognition may differ from the timing of invoicing to customers. The Company has an unconditional right to consideration when it invoices its customers and records a receivable. The Company records a contract asset, or unbilled receivable, when revenue is recognized prior to invoicing. The Company records a contract liability, or deferred revenue, when a contract is billed in advance of revenue being recognized.

Deferred revenue pertains to amounts billed to customers for which revenue has not been recognized, which primarily consists of the unearned portions of billings for the Company’s security subscription services and the unearned portion of edge cloud platform usage. Amounts that have been invoiced for annual subscriptions, but not collected, are recorded in accounts receivable and in unearned revenue or in revenue depending on whether services have been delivered to the customer. The Company’s payment terms and conditions vary by contract type, and generally range from 30 to 90 days.

The following table presents the Company’s contract assets and contract liabilities as of June 30, 2024 and as of December 31, 2023:


	As of June 30, 2024		As of December 31, 2023
	(in thousands)
Contract assets	$	—	$	621
Contract liabilities	$	37,122	$	38,150

The following table presents revenue recognized during the three and six months ended June 30, 2024 and 2023 from amounts included in the contract liability at the beginning of the period:


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
	(in thousands)
Revenue recognized in the period from amounts included in contract liability at the beginning of the period	$	14,254	$	12,046	$	23,652	$	21,195

Remaining performance obligations

As of June 30, 2024, the aggregate amount of the transaction price in our contracts allocated to remaining performance obligations that are unsatisfied or partially unsatisfied was $223.1 million. This amount includes future committed revenue for periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied. The Company has elected to not provide certain information about its remaining performance obligations for service contracts with an original contract duration of one year or less. As of June 30, 2024, the Company expects to recognize approximately 78% of its remaining performance obligations over the next 12 months. The Company’s typical contractual term with its customers is one year, although terms may vary by contract.

Costs to obtain a contract

As of June 30, 2024 and December 31, 2023, the Company's costs to obtain contracts were as follows:


	As of June 30, 2024		As of December 31, 2023
	(in thousands)
Deferred contract costs, net	$	56,885	$	61,981

During the three months ended June 30, 2024 and 2023, the Company recognized $4.5 million and $3.7 million of amortization related to deferred contract costs, respectively. During the six months ended June 30, 2024 and 2023, the Company recognized $9.1 million and $7.2 million of amortization related to deferred contract costs, respectively. These costs are recorded within sales and marketing expenses on the accompanying condensed consolidated statements of operations.

4. Investments and Fair Value Measurements

The Company's total cash, cash equivalents and marketable securities consisted of the following:


	As of June 30, 2024		As of December 31, 2023
	(in thousands)
Cash and cash equivalents:
Cash	$	15,646	$	21,269
U.S. Treasury securities	74,637		52,830
Money market funds	54,821		21,166
Commercial paper	2,092		12,656
Total cash and cash equivalents(1)	$	147,196	$	107,921
Marketable securities:
U.S. Treasury securities	$	20,754	$	73,448
Corporate notes and bonds	64,147		105,566
Commercial paper	79,668		25,934
Agency bonds	—		9,851
Total marketable securities, current(2)	$	164,569	$	214,799
Corporate notes and bonds	—		5,999
Asset-backed securities	—		89
Total marketable securities, non-current(3)	$	—	$	6,088
Total marketable securities	$	164,569	$	220,887
Total cash and cash equivalents and marketable securities	$	311,765	$	328,808

(1) The Company’s cash equivalents include investments with an original maturity date of three months or less.

(2) The Company classifies its marketable securities as current, where it intends to hold the securities for less than 12 months.

(3) The Company classifies its marketable securities are non-current, where it intends to hold the securities for longer than 12 months.

The following table summarizes adjusted cost, gross unrealized gains and losses, and fair value related to cash equivalents and available-for-sale securities on the accompanying condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023:


	As of June 30, 2024
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
	(in thousands)
Cash equivalents:
Money market funds	$	54,821	$	—	$	—	$	54,821
U.S. Treasury securities	74,635		2		—		74,637
Commercial paper	2,093		—		(1)		2,092
Marketable securities:
U.S. Treasury securities	20,760		—		(6)		20,754
Corporate notes and bonds	64,256		20		(129)		64,147
Commercial paper	79,726		—		(58)		79,668
Total	$	296,291	$	22	$	(194)	$	296,119

	As of December 31, 2023
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
	(in thousands)
Cash equivalents:
U.S. Treasury securities	$	52,824	$	6	$	—	$	52,830
Commercial paper	12,663		—		(7)		12,656
Marketable securities:
U.S. Treasury securities	73,444		8		(4)		73,448
Corporate notes and bonds	112,487		9		(931)		111,565
Commercial paper	25,946		—		(12)		25,934
Asset-backed securities	89		—		—		89
Agency bonds	9,854		—		(3)		9,851
Total	$	287,307	$	23	$	(957)	$	286,373

There were no material realized gains or losses from sales of marketable securities that were reclassified out of accumulated other comprehensive loss into other income during the three and six months ended June 30, 2024 and 2023. Investments are reviewed periodically to identify possible other-than-temporary impairments. For the three and six months ended June 30, 2024 and 2023, the Company did not record any impairment charges for its marketable debt securities in its condensed consolidated statements of operations. No impairment loss has been recorded on the securities as the Company does not intend to sell any impaired securities, nor is it more likely than not that the Company would be required to sell impaired securities before recovery of amortized cost basis. Furthermore, the Company has determined that the decline in fair value of the investment is not due to credit related factors.

Fair Value of Financial Instruments

For certain of the Company's financial instruments, including cash held in banks, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There is a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity, which require management judgment or estimation.

The Company measures its cash equivalents, marketable securities, and restricted cash at fair value. The Company classifies its cash equivalents, marketable securities and restricted cash within Level 1 or Level 2 because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The Company classifies its investments, which are comprised of corporate notes and bonds, U.S. treasury securities, foreign government and supranational securities and asset-backed securities within Level 2 of the fair value hierarchy because the fair value of these securities is priced by using inputs based on non-binding market consensus prices that are primarily corroborated by observable market data or quoted market prices for similar instruments.

Financial assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments:


	As of June 30, 2024
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents:
Money market funds	$	54,821	$	—	$	—	$	54,821
U.S. Treasury securities	—		74,637		—		74,637
Commercial paper	—		2,092		—		2,092
Total cash equivalents	54,821		76,729		—		131,550
Marketable securities:
U.S. Treasury securities	—		20,754		—		20,754
Corporate notes and bonds	—		64,147		—		64,147
Commercial paper	—		79,668		—		79,668
Total marketable securities	—		164,569		—		164,569
Total financial assets	$	54,821	$	241,298	$	—	$	296,119


	As of December 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents:
Money market funds	$	21,166	$	—	$	—	$	21,166
U.S. Treasury securities	—		52,830		—		52,830
Commercial paper	—		12,656		—		12,656
Total cash equivalents	21,166		65,486		—		86,652
Marketable securities:
U.S. Treasury securities	—		73,448		—		73,448
Corporate notes and bonds	—		111,565		—		111,565
Commercial paper	—		25,934		—		25,934
Asset-backed securities	—		89		—		89
Agency bonds	—		9,851		—		9,851
Total marketable securities	—		220,887		—		220,887
Restricted cash:
Restricted cash, current	150		—		—		150
Total restricted cash	150		—		—		150
Total financial assets	$	21,316	$	286,373	$	—	$	307,689

We had no restricted cash as of June 30, 2024. The restricted cash balance as of December 31, 2023 was $0.2 million and consisted of letters of credit related to lease arrangements that were collateralized by the Company’s cash. The amount was classified as current on the Company’s balance sheets.

There were no transfers of assets and liabilities measured at fair value between Level 1 and Level 2, or between Level 2 and Level 3, during the three and six months ended June 30, 2024 and 2023.

5. Balance Sheet Information

Property and Equipment, Net

Property and equipment, net consisted of the following:


	As of June 30, 2024		As of December 31, 2023
	(in thousands)
Computer and networking equipment	$	233,295	$	224,313
Leasehold improvements	8,130		8,605
Furniture and fixtures	2,175		2,142
Office equipment	1,234		1,228
Internal-use software	108,247		97,623
Property and equipment, gross	$	353,081	$	333,911
Accumulated depreciation and amortization	(176,023)		(157,303)
Property and equipment, net	$	177,058	$	176,608

During both the three and six months ended June 30, 2024, the Company recognized a non-recurring impairment charge of $1.8 million related to an internal-use software project the Company does not plan to continue with and therefore abandoned. This impairment charge is included within the impairment expense line in the Company's condensed consolidated statements of operations. There were no impairments during the three and six months ended June 30, 2023.

Depreciation on property and equipment for the three months ended June 30, 2024 and 2023 was approximately $13.3 million and $12.9 million, respectively. Included in these amounts was amortization expense for capitalized internal-use software costs of approximately $4.0 million and $3.2 million for the three months ended June 30, 2024 and 2023, respectively.

Depreciation on property and equipment for the six months ended June 30, 2024 and 2023 was approximately $26.6 million and $25.0 million, respectively. Included in these amounts was amortization expense for capitalized internal-use software costs of approximately $7.9 million and $6.1 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024 and December 31, 2023, the unamortized balance of capitalized internal-use software costs on the Company’s condensed consolidated balance sheets was approximately $71.6 million and $62.6 million, respectively.

The Company leases certain networking equipment from various third parties through equipment finance leases. The Company’s networking equipment assets as of June 30, 2024 and December 31, 2023, included a total of $74.6 million and $74.7 million acquired under finance lease agreements, respectively. These leases are capitalized in property and equipment, and the related amortization of assets under finance leases is included in depreciation and amortization expense. The accumulated depreciation of the associated networking equipment assets under finance leases totaled $47.0 million and $40.1 million as of June 30, 2024 and December 31, 2023, respectively.

Other Assets

Other assets consisted of the following:


	As of June 30, 2024		As of December 31, 2023
	(in thousands)
Deferred contract costs, net	$	56,885	$	61,981
Advance payment for purchase of property and equipment	17,440		24,509
Other assets	4,851		4,289
Total other assets	$	79,176	$	90,779

Accrued Expenses

Accrued expenses consisted of the following:


	As of June 30, 2024		As of December 31, 2023
	(in thousands)
Accrued compensation and related benefits	$	10,931	$	14,918
Accrued bonus	2,928		24,614
Accrued colocation and bandwidth costs	12,409		14,362
Other tax liabilities	3,970		4,344
Other accrued expenses	4,207		3,580
Total accrued expenses	$	34,445	$	61,818

Other Current Liabilities

Other current liabilities consisted of the following:


	As of June 30, 2024		As of December 31, 2023
	(in thousands)
Deferred revenue	$	33,857	$	33,824
Accrued computer and networking equipment	792		1,673
Holdback payable	—		3,771
Other current liabilities	1,099		1,271
Total other current liabilities	$	35,748	$	40,539

Accumulated Other Comprehensive Loss

For the three and six months ended June 30, 2024 and 2023, components of accumulated other comprehensive loss, net of taxes, were as follows (in thousands):


	Foreign Currency Translation		Available-for-sale investments		Accumulated Other Comprehensive Income (Loss)
Balance, March 31, 2024	$	(12)	$	(509)	$	(521)
Other comprehensive income	—		239		239
Balance, June 30, 2024	$	(12)	$	(270)	$	(282)


	Foreign Currency Translation		Available-for-sale investments		Accumulated Other Comprehensive Income (Loss)
Balance, March 31, 2023	$	(493)	$	(5,101)	$	(5,594)
Other comprehensive income	474		1,968		2,442
Balance, June 30, 2023	$	(19)	$	(3,133)	$	(3,152)


	Foreign Currency Translation		Available-for-sale investments		Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2023	$	(12)	$	(996)	$	(1,008)
Other comprehensive income	—		726		726
Balance, June 30, 2024	$	(12)	$	(270)	$	(282)


	Foreign Currency Translation		Available-for-sale investments		Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2022	$	(577)	$	(8,709)	$	(9,286)
Other comprehensive income	558		5,576		6,134
Balance, June 30, 2023	$	(19)	$	(3,133)	$	(3,152)

There was no material tax impact on the amounts presented.

6. Leases

The Company has operating leases for corporate offices and data centers (“colocation” leases), and finance leases for networking equipment. The Company’s operating leases have remaining lease terms ranging from less than 1 year to 6 years, some of which include options to extend the leases. The Company’s finance leases have remaining lease terms up to 1 year. The Company also subleases a portion of its corporate office spaces. The Company’s subleases have remaining lease terms ranging from less than 1 year to 6 years. The Company’s sublease income was $0.3 million for both the three months ended June 30, 2024 and 2023. The Company’s sublease income was $0.7 million and $0.6 million for the six months ended June 30, 2024 and 2023, respectively.

The components of lease cost were as follows:


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
	(in thousands)
Operating lease costs:
Operating lease cost	$	6,832	$	6,832	$	13,438	$	14,033
Variable lease cost	3,981		3,790		8,228		7,367
Total operating lease costs	$	10,813	$	10,622	$	21,666	$	21,400

Finance lease costs:
Amortization of assets under finance lease	$	3,440	$	3,619	$	7,035	$	7,242
Interest	110		367		272		806
Total finance lease costs	$	3,550	$	3,986	$	7,307	$	8,048

The short-term lease costs were not material for either of the three and six months ended June 30, 2024 and 2023.

During both the three and six months ended June 30, 2024, the Company recognized a non-recurring impairment charge of $1.3 million related to right-of-use assets mainly due to the Company exiting a certain office facility. This impairment charge is included within the impairment expense line in the Company's condensed consolidated statements of operations. The Company did not recognize any material impairment on its operating lease right-of-use assets for either of the three and six months ended June 30, 2023.


	As of June 30, 2024		As of December 31, 2023
Weighted Average Remaining Lease Term (in years):
Operating leases	3.15		3.48
Finance leases	0.65		1.00

Weighted Average Discount Rate:
Operating leases	6.29	%	6.03	%
Finance leases	4.66	%	4.67	%

Future minimum lease payments under non-cancellable leases as of June 30, 2024 were as follows:


	Operating Leases		Finance Leases
	(in thousands)
Remaining 2024	$	16,683	$	6,683
2025	24,123		1,617
2026	21,152		—
2027	11,907		—
2028	3,069		—
Thereafter	1,973		—
Total future minimum lease payments	$	78,907	$	8,300
Less: imputed interest	(7,115)		(122)
Total liability	$	71,792	$	8,178

As of June 30, 2024, the Company has undiscounted commitments of $1.8 million for operating leases that have not yet commenced, and therefore are not included in the right-of-use asset or operating lease liability. These operating leases will commence in the third quarter of 2024 with lease terms of 3 years.

7. Goodwill and Intangible Assets

Goodwill

As of each of June 30, 2024 and December 31, 2023, the Company’s goodwill was $670.4 million. The Company did not record an impairment charge on goodwill during each of the three and six months ended June 30, 2024 and 2023.

As of June 30, 2024 and December 31, 2023, the Company’s intangible assets consisted of the following:


	As of June 30, 2024						As of December 31, 2023
	Gross carrying value		Accumulated amortization		Net carrying value		Gross carrying value		Accumulated amortization		Net carrying value
	(in thousands)
Intangible assets:
Customer relationships	$	69,860	$	(32,918)	$	36,942	$	69,860	$	(28,473)	$	41,387
Developed technology	50,130		(37,453)		12,677		50,130		(32,424)		17,706
Trade names	3,910		(3,618)		292		3,910		(3,542)		368
Internet protocol addresses	4,984		(2,219)		2,765		4,984		(1,970)		3,014
Total intangible assets	$	128,884	$	(76,208)	$	52,676	$	128,884	$	(66,409)	$	62,475

The Company’s customer relationships, developed technology, trade names and internet protocol addresses represent intangible assets subject to amortization. Amortization expense was $4.9 million and $5.2 million for the three months ended June 30, 2024 and 2023, respectively. Amortization expense was $9.8 million and $10.4 million for the six months ended June 30, 2024 and 2023, respectively.

The Company did not purchase any intangible assets during both the three and six months ended June 30, 2024 and 2023. The Company did not record an impairment charge on its intangible assets during both the three and six months ended June 30, 2024 and 2023.

The expected amortization expense of intangible assets subject to amortization as of June 30, 2024 is as follows:


	As of June 30, 2024
	(in thousands)
Remainder of 2024	$	9,800
2025	16,976
2026	9,193
2027	9,051
2028	6,891
Thereafter	765
Total	$	52,676

8. Debt Instruments

Senior Secured Credit Facilities Agreement

On February 16, 2021, the Company entered into a Senior Secured Credit Facilities Agreement (“Credit Agreement”) with the lenders from time to time party thereto (the “Lenders”) and Silicon Valley Bank, as a lender and as administrative agent and collateral agent for the Lenders, for an aggregate commitment amount of $100.0 million with a maturity date of February 16, 2024. The Company recorded $0.6 million of debt issuance costs associated with the Credit Agreement in other assets on the Company’s condensed consolidated balance sheet.

The Credit Agreement originally bore interest at a rate per annum equal to the sum of LIBOR for the applicable interest period plus 1.75% to 2.00%, depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement. On June 28, 2023, the Company entered into the First Amendment to Credit Agreement with the Lenders

and First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank)), as a lender and as administrative agent and collateral agent for the Lenders, which, among other things, amended the interest rate provisions of the Credit Agreement to replace LIBOR with the Secured Overnight Finance Rate (“SOFR”) as the interest rate benchmark. On February 16, 2024, the Company entered into the Second Amendment to Credit Agreement with the Lenders and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as a lender and as administrative agent and collateral agent for the Lenders, which, among other things, extended the maturity date of the loans under the Credit Agreement to June 14, 2024. On April 30, 2024, the Company entered into the Third Amendment to Credit Agreement with the Lenders and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as a lender and as administrative agent and collateral agent for the Lenders, which, among other things, extended the maturity date of the loans under the Credit Agreement to April 30, 2027 and decreased the commitment amount from $100.0 million to $60.0 million, including a $10.0 million sublimit for the issuance of letters of credit, and a swingline subfacility of up to $20.0 million. As amended, the revolving loans bear interest, at the Company’s election, at an annual rate based on SOFR or a base rate. Loans based on SOFR bear interest at a rate per annum equal to SOFR, plus an adjustment of

Fastly, Inc. [FSLY] Filings
10-Q	[2024-08-08]
10-Q	[2024-05-01]
10-K	[2024-02-22]
10-Q	[2023-11-03]
10-Q	[2023-08-02]
10-Q	[2023-05-03]
10-K	[2023-02-27]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-05]
10-K	[2022-03-01]
10-Q	[2021-11-08]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-01]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
S-1	[2020-05-18]
10-Q	[2020-05-08]
10-K	[2020-03-04]
10-Q	[2019-11-08]
10-Q	[2019-08-09]
S-1	[2019-04-19]