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Fastly Announces Fourth Quarter and Full Year 2021 Financial Results

  • Fourth quarter revenue of $97.7 million, up 13% quarter-over-quarter

  • Fourth quarter revenue Dollar-Based Net Expansion Rate of 121%

  • Annual ARR of 99.2%, demonstrating world class customer retention and low churn

SAN FRANCISCO, February 16, 2022--(BUSINESS WIRE)--Fastly, Inc. (NYSE: FSLY), the world’s fastest global edge cloud network provider, today announced financial results for its fourth quarter and full year ended December 31, 2021.

"We finished 2021 on a strong note with fourth quarter revenue of $97.7 million, exceeding the midpoint of our guidance range by 7% and demonstrating momentum after facing setbacks earlier in the year," said Joshua Bixby, CEO of Fastly.

"Our foundational technology, differentiated by the scale and efficiency of our network, continues to attract and empower enterprise developers in their moments of inspiration. We continue to uniquely unlock programmable ways for our customers to build modern digital experiences for billions of people every day on our technology," continued Bixby. "Coupled with a strong roadmap of new products, including our recent launch of Fastly’s Next-Gen WAF, the industry’s first and only unified WAF, we are excited about our opportunities in 2022 as we expand our network and capture the future growth potential of our edge cloud network."

Three Months Ended

Year Ended

December 31

December 31

December 31

December 31

2021

2020

2021

2020

Revenue

$

97,717

$

82,649

$

354,330

$

290,874

Gross Margin

GAAP gross margin

50.9

%

59.2

%

52.9

%

58.7

%

Non-GAAP gross margin

55.8

%

63.7

%

57.7

%

60.9

%

Operating loss

GAAP operating loss

$

(56,656

)

$

(57,344

)

$

(219,021

)

$

(107,212

)

Non-GAAP operating loss

$

(11,734

)

$

(8,960

)

$

(55,134

)

$

(16,918

)

Net loss per share

GAAP net loss per common share—basic and diluted

$

(0.49

)

$

(0.40

)

$

(1.92

)

$

(0.93

)

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

$

(0.10

)

$

(0.09

)

$

(0.48

)

$

(0.18

)

Fourth Quarter 2021 Financial Summary

  • Total revenue of $97.7 million, representing 13% sequential growth and 18% year-over-year growth.

  • GAAP gross margin of 50.9%, compared to 59.2% in the fourth quarter of 2020. Non-GAAP gross margin of 55.8%, compared to 63.7% in the fourth quarter of 2020.

  • GAAP net loss of $57.5 million, compared to $45.7 million in the fourth quarter of 2020. Non-GAAP net loss of $11.7 million, compared to $10.5 million in the fourth quarter of 2020.

  • GAAP net loss per basic and diluted shares of $0.49 compared to $0.40 in the fourth quarter of 2020. Non-GAAP net loss per basic and diluted shares of $0.10, compared to $0.09 in the fourth quarter of 2020.

Full Year 2021 Financial Summary

  • Total revenue of $354.3 million, representing 22% growth year-over-year.

  • GAAP gross margin of 52.9%, compared to gross margin of 58.7% in fiscal 2020. Non-GAAP gross margin of 57.7%, compared to gross margin of 60.9% in fiscal 2020.

  • GAAP net loss of $222.7 million, compared to $95.9 million in fiscal 2020. Non-GAAP net loss of $55.9 million, compared to $18.8 million in fiscal 2020.

  • GAAP net loss per basic and diluted shares of $1.92 compared to $0.93 in fiscal 2020. Non-GAAP net loss per basic and diluted shares of $0.48, compared to $0.18 in fiscal 2020.

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.

Key Metrics

  • Trailing 12 month net retention rate (NRR LTM)1 increased to 118% in the fourth quarter from 114% in the third quarter.

  • Dollar-Based Net Expansion Rate (DBNER)2 increased to 121% in the fourth quarter from 118% in the third quarter.

  • Annual Revenue Retention (ARR)3 was 99.2% in 2021 compared to 99.3% in 2020 showcasing world class customer retention and revenue expansion.

  • Total customer count of 2,804 in the fourth quarter, of which 445 were enterprise4 customers.

Recent Business Highlights

  • Launched the edge deployment of our Next-Gen WAF, the industry's first and only unified Web Application Firewall, a key milestone in the integration of Signal Sciences’ industry-leading WAF and fulfilling Fastly’s vision for effective yet performant web app and API protection at the network edge.

  • A new integration with Glitch and Compute@Edge – which saw more than 2,000 enterprise developer sign-ups in the first week of its beta – enables developers of millions of sophisticated Glitch apps to deploy to the edge with 100x faster code execution startup time than other serverless solutions.

  • Welcomed Chief Product Officer Lakshmi Sharma and Chief Marketing Officer Margaret Arakawa who both bring broad experience scaling complex businesses with highly relevant cloud, security and go-to-market expertise from Google and Microsoft, respectively.

First Quarter and Full Year Fiscal 2022 Guidance

Q1 2022

Full Year 2022

Total Revenue (millions)

$97 - $100

$400 - $410

Non-GAAP Operating Loss (millions)

($18) - ($15)

($70) - ($60)

Non-GAAP Net Loss Per Share (5)(6)

($0.15) - ($0.13)

($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, February 16, 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, February 16 through March 8, 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, our ability to expand our network, the success of our Next-Gen WAF, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2021. Additional information will also be set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. 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 Expense: consists of one-time expenses related to the acquisition related activities. Management considers its operating results without the one-time acquisition-related expense when evaluating its ongoing non-GAAP performance and its ongoing adjusted EBITDA performance because these charges are one-time and 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 expense related to our debt obligations. 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. 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. In fiscal 2020, we recognized an income tax benefit from the result of a reduction in the valuation allowance recorded against our net deferred tax assets. In connection with the acquisition of Signal Sciences in 2020, we recorded a net deferred tax liability which provides an additional source of taxable income to support the realization of the pre-existing deferred tax assets. 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 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 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 Annual revenue retention rate is calculated by multiplying the final full month of revenue from a customer that terminated its contract with us (a Churned Customer) by the number of months remaining in the same calendar year (Annual Revenue Churn). The quotient of the Annual revenue Churn from all of our Churned Customers divided by our annual revenue of the same calendar year is then subtracted from 100% to determine our annual revenue retention rate.

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

5 Assumes weighted average basic shares outstanding of 119.3 million in Q1 2022 and 121.0 million for the full year 2022.

6 Non-GAAP Net Loss per share calculation is full-year Non-GAAP Net Loss divided by weighted average basic shares for the full year.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts, unaudited)

Three months ended December 31,

Year ended December 31,

2021

2020

2021

2020

Revenue

$

97,717

$

82,649

$

354,330

$

290,874

Cost of revenue(1)

47,944

33,753

167,002

120,007

Gross profit

$

49,773

$

48,896

$

187,328

$

170,867

Operating expenses:

Research and development(1)

34,997

25,590

126,859

74,814

Sales and marketing(1)

42,151

34,765

152,645

101,181

General and administrative(1)

29,281

45,885

126,845

102,084

Total operating expenses

106,429

106,240

406,349

278,079

Loss from operations

(56,656

)

(57,344

)

(219,021

)

(107,212

)

Interest income

552

178

1,282

1,628

Interest expense

(1,593

)

(452

)

(5,245

)

(1,549

)

Other income (expense), net

201

(697

)

356

(279

)

Loss before income tax expense (benefit)

(57,496

)

(58,315

)

(222,628

)

(107,412

)

Income tax expense (benefit)

25

(12,611

)

69

(11,480

)

Net loss

$

(57,521

)

$

(45,704

)

$

(222,697

)

$

(95,932

)

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

$

(0.49

)

$

(0.40

)

$

(1.92

)

$

(0.93

)

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

118,161

112,902

116,053

103,552

(1) Includes stock-based compensation expense as follows:

Three months ended December 31,

Year ended December 31,

2021

2020

2021

2020

Cost of revenue

$

2,316

$

1,255

$

7,227

$

3,889

Research and development

15,675

7,017

47,019

17,112

Sales and marketing

11,399

5,275

31,159

17,028

General and administrative

10,198

16,134

55,083

26,404

Total

$

39,588

$

29,681

$

140,488

$

64,433

Condensed Consolidated Balance Sheets

(in thousands, unaudited)

As of December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

166,068

$

62,900

Marketable securities

361,795

131,283

Accounts receivable, net

64,625

50,258

Restricted cash

87

Prepaid expenses and other current assets

32,160

16,728

Total current assets

$

624,648

$

261,256

Property and equipment, net

160,061

95,979

Operating lease right-of-use assets, net

69,631

60,019

Goodwill

636,805

635,590

Intangible assets, net

102,596

121,742

Marketable securities, non-current

528,911

20,448

Other assets

29,468

24,917

Total assets

$

2,152,120

$

1,219,951

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

9,257

$

9,150

Accrued expenses

36,112

34,334

Finance lease liabilities

21,125

11,033

Operating lease liabilities, current

20,271

19,895

Other current liabilities

38,207

19,677

Total current liabilities

124,972

94,089

Long-term debt, less current portion

933,205

Finance lease liabilities, noncurrent

22,293

14,707

Operating lease liabilities, noncurrent

55,114

44,890

Other long-term liabilities

2,583

4,400

Total liabilities

1,138,167

158,086

Stockholders’ equity:

Class A and Class B common stock

2

2

Additional paid-in capital

1,527,468

1,350,050

Accumulated other comprehensive income (loss)

(2,627

)

6

Accumulated deficit

(510,890

)

(288,193

)

Total stockholders’ equity

1,013,953

1,061,865

Total liabilities and stockholders’ equity

$

2,152,120

$

1,219,951

Condensed Consolidated Statement of Cash Flows

(in thousands, unaudited)

Year ended December 31,

2021

2020

Cash flows from operating activities:

Net loss

$

(222,697

)

$

(95,932

)

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

Depreciation and amortization

28,799

19,979

Amortization of acquired intangibles

21,238

5,078

Amortization of right-of-use assets and other

26,883

21,765

Amortization of debt issuance costs

3,185

219

Amortization of deferred contract costs

6,294

3,516

Stock-based compensation

140,488

64,433

Provision for Credit losses

196

1,719

Interest paid on capital leases

(1,754

)

(688

)

Gain (loss) on disposal of property and equipment

(300

)

653

Tax benefit related to release of valuation allowance

(12,950

)

Other adjustments

2,225

624

Changes in operating assets and liabilities:

Accounts receivable

(14,563

)

(9,264

)

Prepaid expenses and other current assets

(4,777

)

(5,550

)

Other assets

(10,423

)

(17,162

)

Accounts payable

146

4,059

Accrued expenses

...

4,261

12,992

Operating lease liabilities

(26,447

)

(18,264

)

Other liabilities

8,764