Company Overview - Fastly, Inc. is a cloud edge content delivery network that employs a full platform approach, positioning itself as a modern alternative in the industry [4]. Leadership and Experience - Vernon P. Essi has been leading the Investor Relations practice at Fastly for approximately 3.5 years, with prior experience in the semiconductor industry and as a former sell-side analyst on Wall Street [3].

Fastly (FSLY) Conference Summary - August 12, 2025 Company Overview - **Company**: Fastly - **Industry**: Cloud Edge Content Delivery Network (CDN) - **Key Competitors**: Akamai, Cloudflare, Edgio Core Points and Arguments 1. **Business Model**: Fastly operates a fully programmable cloud edge platform that enhances traffic flow optimization and efficiency, distinguishing itself from competitors using legacy equipment [6][7][10] 2. **Performance Metrics**: Fastly claims to be the performance leader in the CDN space, outperforming competitors in metrics such as time to first paint and cache hit ratio [11][12] 3. **Target Industries**: Historically focused on streaming media and gaming, Fastly is now expanding its reach into broader enterprise markets, emphasizing the importance of performance in user experience [13][14] 4. **Second Quarter Results**: Fastly reported better-than-expected performance with record Remaining Performance Obligations (RPO) and positive free cash flow, indicating improved customer commitments and financial health [15][16] 5. **Leadership Changes**: The company recently appointed a new CEO, Kib Compton, who has a strong background in product strategy and profitability, aiming to drive growth and stability [19][21][26] 6. **Sales Strategy**: The Chief Revenue Officer has restructured sales teams to focus on customer cohorts, enhancing the go-to-market strategy and improving customer acquisition [28][30] 7. **Security Offerings**: Fastly's security portfolio includes a web application firewall, bot mitigation, and DDoS protection, with recent enhancements like AI scraping tools and deception threat detection [36][37] 8. **Edge Computing Trends**: The industry is shifting from a central cloud mentality to edge computing, which allows for lower latency and more robust features, particularly beneficial for AI workloads [41][42] 9. **AI Integration**: Fastly is exploring AI workloads, including a product called AI Accelerator, which enhances customer service efficiency by reducing response times [43][44] 10. **Customer Concentration**: Fastly has reduced revenue dependency on its top 10 customers from 40% to the low 30s, aiming for a more balanced revenue stream while still focusing on growth opportunities within this segment [53][54] Additional Important Content 1. **Pricing Dynamics**: The company has seen stabilization in pricing due to market consolidation, with a year-over-year decline in revenue per gigabit now in the high teens, improving from previous years [58][59] 2. **International Expansion**: Fastly is expanding its international presence, particularly in the Asia-Pacific region, to tap into underpenetrated markets [65][66] 3. **Future Product Development**: The company plans to continue enhancing its security offerings and developing unique AI capabilities in its product portfolio [66]

Core Insights - Fastly (NYSE: FSLY) reported better-than-expected earnings for Q2'25, highlighting significant revenue growth and improvements in free cash flow [1] - The company achieved double-digit top-line growth and marked its second consecutive quarter of positive free cash flow [1] Financial Performance - Fastly's revenue growth was a key highlight, indicating strong demand for its cloud computing services [1] - The positive free cash flow reflects improved operational efficiency and financial health [1]

Core Insights - Fastly continues to experience double-digit revenue growth, with a significant increase in share price following positive earnings results and a smooth executive transition [1][2] Financial Performance - Fastly reported record revenue of nearly $149 million for Q2, representing a 12% increase compared to the same period in 2024 [3] - The company narrowed its non-GAAP net loss to $5 million ($0.03 per share) from over $8 million in the previous year [3] - Analysts had expected revenue of approximately $145 million and a net loss of $0.05 per share, indicating a double beat for the company [5] Future Guidance - Fastly raised its guidance for 2025, forecasting total revenue between $594 million and $602 million, with adjusted net loss projected at $0.04 to $0.10 per share [5] - The average analyst projection for revenue is slightly below $591 million, and for net loss, it is $0.10 per share [5] Analyst Upgrade - Following the earnings release, Craig-Hallum analyst Jeff Van Rhee upgraded Fastly's stock rating from hold to buy, setting a price target of $10 per share [6] Executive Changes - Fastly announced the appointment of Richard Wong as the new CFO, replacing Ronald Kisling, who is leaving for new opportunities [7]

Core Insights - Fastly (FSLY) reported a non-GAAP loss of 3 cents per share for Q2 2025, beating the Zacks Consensus Estimate by 40% and improving from a loss of 6 cents per share in the same quarter last year [1] - Revenues increased by 12.3% year over year to $148.7 million, surpassing the Zacks Consensus Estimate by 2.51% [1] - Fastly shares rose by 10.6% in pre-market trading, although they have declined by 30.9% year to date, underperforming the broader Zacks Computer and Technology sector, which returned 11% [1] Revenue Breakdown - Network services revenues grew by 10% year over year to $114.9 million [2] - Security revenues increased by 15% year over year to $29.3 million [2] Customer Metrics - The enterprise customer count reached 622, an increase of 21 from the previous year [3] - The top 10 customers contributed 31% of revenues, down from 34% in the year-ago quarter, with revenues from these customers increasing by 2% year over year [3] - Revenues from customers outside the top 10 rose by 17% year over year [3] Financial Performance - Non-GAAP gross margin was 59%, a contraction of 40 basis points year over year [3] - Research and development expenses rose by 12.3% year over year to $30.5 million, while general and administrative expenses increased by 9.6% to $21.2 million [4] - Sales and marketing expenses decreased by 6.8% year over year to $40.6 million [4] - Adjusted EBITDA margin expanded by 450 basis points year over year to 6% [4] - Non-GAAP operating loss was $4.6 million, an improvement from the $11.5 million loss reported in the same quarter last year [4] Balance Sheet - As of June 30, 2025, cash and cash equivalents stood at $1.07 billion, up from $924.7 million as of March 31 [5] Future Guidance - Fastly expects Q3 2025 revenues to be between $149 million and $153 million, indicating a growth of 7.9% from the year-ago quarter [6] - Non-GAAP operating income is projected to range from a loss of $1 million to earnings of $3 million, with expected earnings per share between a loss of 2 cents and earnings of 2 cents [7] - For the full year 2025, revenues are anticipated to be between $594 million and $602 million, reflecting an 8.6% growth from 2024 [8]

Core Viewpoint - Fastly reported record GAAP revenue of $148.7 million in Q2 2025, exceeding analyst expectations, while also narrowing its non-GAAP net loss per share, indicating operational progress despite ongoing profitability pressures [1][5][11] Financial Performance - GAAP revenue reached $148.7 million, a 12% increase year-over-year from $132.4 million in Q2 2024 [2][5] - Non-GAAP net loss per share improved to ($0.03), better than the anticipated ($0.05) loss, marking a 50% improvement from ($0.06) in Q2 2024 [2] - Free cash flow turned positive at $10.9 million, a significant recovery from a negative $18.5 million in the previous year [2][6] - Non-GAAP gross margin slightly decreased to 59.0%, down 0.4 percentage points from the previous year [2][6] - Operating loss on a non-GAAP basis narrowed to $4.6 million, a 60% improvement year-over-year from $11.5 million [2][6] Revenue Breakdown - Network services revenue was $114.9 million, up 10% year-over-year, while security revenue increased by 15% to $29.3 million [5] - The "Other" segment, which includes Compute and Observability products, surged 60% to $4.5 million [5][9] Customer Trends - Revenue concentration from the top 10 customers decreased to 31%, down from 34% a year ago, indicating improved diversification [7] - Revenue from customers outside the top ten grew by 17%, compared to only 2% growth from the top ten [7] - Remaining performance obligations reached a record $315 million, representing a 41% year-over-year growth [7] Product Innovation and Strategy - Fastly is focusing on enhancing its security offerings and expanding programmable edge services, including AI Bot Management and DDoS protection [4][9] - The company has seen a 130% year-over-year increase in renewals involving multi-product packages, indicating successful account penetration [8] Future Guidance - Management raised its FY2025 revenue guidance to between $594 million and $602 million, implying around 9% growth at the midpoint [11] - For Q3 2025, projected total revenue is expected to range from $149.0 million to $153.0 million [11] - The company anticipates reaching operating profitability in the second half of FY2025, with a non-GAAP operating loss forecasted between $9 million and $3 million [11]

Core Insights - Fastly reported revenue of $148.71 million for the quarter ended June 2025, reflecting a year-over-year increase of 12.3% [1] - The company's EPS was -$0.03, an improvement from -$0.07 in the same quarter last year, with a surprise of +40% compared to the consensus estimate of -$0.05 [1] - Fastly's revenue exceeded the Zacks Consensus Estimate of $145.07 million by 2.51% [1] Financial Performance Metrics - Fastly's enterprise customer count reached 622, surpassing the two-analyst average estimate of 600 [4] - Revenue from enterprise customers was $139.26 million, exceeding the average estimate of $135.45 million, marking a year-over-year increase of 15.4% [4] - Revenue by product included $4.5 million from Other, slightly above the average estimate of $4.47 million, $29.3 million from Security, compared to the average estimate of $29.65 million, and $114.9 million from Network Services, exceeding the average estimate of $111.21 million [4] Stock Performance - Fastly's shares have declined by 12.7% over the past month, while the Zacks S&P 500 composite increased by 0.5% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Fastly (FSLY) came out with a quarterly loss of $0.03 per share versus the Zacks Consensus Estimate of a loss of $0.05. This compares to a loss of $0.07 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +40.00%. A quarter ago, it was expected that this cloud software developer would post a loss of $0.06 per share when it actually produced a loss of $0.05, delivering a surprise of +16.67%. Over the last four quarters, the compan ...

Financial Data and Key Metrics Changes - Q2 revenue was $148.7 million, representing a 12% year-over-year growth, an improvement from 8% in Q1 [15][30] - Gross margin improved to 59%, a 170 basis point gain quarter-over-quarter [16][32] - Operating loss was $4.6 million, better than the guidance midpoint of $6 million [17][33] - Cash flow from operations was $26 million, or 17% of revenue, indicating strong cash management [18][35] - Free cash flow for Q2 was $10.9 million, a significant improvement from negative $18.5 million in Q2 2024 [36] Business Line Data and Key Metrics Changes - Security revenue reached a record high of $29.3 million, accounting for 20% of total revenue, with a 15% year-over-year growth [16][30] - Network services revenue was $114.9 million, growing 10% year-over-year [29] - Other products revenue grew 60% year-over-year, primarily driven by compute products [30] Market Data and Key Metrics Changes - Total customer count increased to 3,097, with enterprise customer count at 622, reflecting a 27 increase from the previous quarter [19] - LTM Net Revenue Retention (NRR) improved to 104%, up from 100% in Q1 [19][31] - Revenue from customers outside the top 10 grew 17% year-over-year, outpacing overall revenue growth [20][30] Company Strategy and Development Direction - The company aims to accelerate growth and drive towards profitability, focusing on customer needs and product responsiveness [9][10] - Three pillars of expansion include targeting performance-focused customers, cross-selling within the existing customer base, and geographic expansion [20][22] - A new leadership position was created to drive opportunities in the APJ region, indicating a focus on international revenue growth [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the pricing environment, citing increased discipline in negotiations and a stable macro environment [48][50] - The company anticipates continued double-digit growth rates year-over-year for Q3 revenue [18] - Guidance for 2025 revenue was raised to a range of $594 million to $602 million, reflecting a 10% annual growth at the midpoint [41] Other Important Information - The company announced leadership changes, with a new CFO, Richard Wong, joining the team [11][12] - The company is focused on improving customer acquisition and reducing onboarding friction, with a 50% increase in packages sold year-over-year [24] Q&A Session Summary Question: Is the management change a new chapter for Fastly? - Management acknowledged the change as a new chapter and emphasized the opportunity to build on established momentum and accelerate results [44][46] Question: What is the outlook for the pricing environment? - Management noted an improving pricing environment due to increased discipline in negotiations and stability in the macro environment [47][50] Question: Can you provide insights on the cross-sell initiative? - Management highlighted strong customer interest in new products and the impact of the platform strategy on cross-selling opportunities [53][55] Question: What is driving the volatility in security revenue growth? - Management explained that volatility was due to historical trends and customer concentration, but stability is expected moving forward [78][81] Question: Can you elaborate on competitive displacements in DDoS? - Management indicated that new DDoS and bot mitigation products have led to consolidations from third-party vendors, enhancing customer experience [82]

Part I - Financial Information [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited condensed consolidated financial statements for the period ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $82,487 | $286,175 | | Total current assets | $464,663 | $440,195 | | Goodwill | $670,356 | $670,356 | | Total assets | $1,463,177 | $1,451,359 | | **Liabilities & Equity** | | | | Total current liabilities | $312,803 | $104,456 | | Long-term debt | $149,883 | $337,614 | | Total liabilities | $520,530 | $486,109 | | Total stockholders' equity | $942,647 | $965,250 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $148,709 | $132,371 | $293,183 | $265,891 | | Gross Profit | $81,116 | $72,901 | $157,914 | $146,135 | | Loss from Operations | $(36,943) | $(46,734) | $(75,122) | $(92,994) | | Net Loss | $(37,541) | $(43,729) | $(76,689) | $(87,156) | | Net Loss Per Share | $(0.26) | $(0.32) | $(0.53) | $(0.64) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $43,086 | $6,184 | | Net cash provided by (used in) investing activities | $(248,839) | $41,675 | | Net cash provided by (used in) financing activities | $1,810 | $(8,673) | | **Net (decrease) increase in cash** | **$(203,688)** | **$39,125** | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Revenue by Product Line (in thousands) | Product Line | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Network Services | $114,877 | $104,158 | $228,106 | $210,154 | | Security | $29,267 | $25,368 | $55,702 | $49,968 | | Other | $4,565 | $2,845 | $9,375 | $5,769 | | **Total Revenue** | **$148,709** | **$132,371** | **$293,183** | **$265,891** | - As of June 30, 2025, the company had remaining performance obligations of **$315.1 million**, with approximately **72%** expected to be recognized as revenue over the next 12 months[49](index=49&type=chunk) Debt Instruments Carrying Value (in thousands) | Debt Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Principal amount | $338,594 | $338,594 | | Less: unamortized debt issuance costs | $(659) | $(980) | | Less: current portion of long-term debt | $(188,052) | — | | **Long-term debt, less current portion** | **$149,883** | **$337,614** | - The company is involved in a securities class action lawsuit and related stockholder derivative actions, but **no significant accruals for loss contingencies have been recorded** as a loss is not considered probable[109](index=109&type=chunk)[110](index=110&type=chunk)[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial performance, highlighting 12% YoY revenue growth and discussing key metrics, operations, and liquidity [Overview and Key Business Metrics](index=38&type=section&id=Overview%20and%20Key%20Business%20Metrics) - Fastly's edge cloud platform enables developers to build, secure, and deliver digital experiences for a diverse customer base[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) Key Business Metrics as of June 30 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Customer Count | 3,097 | 3,295 | | Enterprise Customer Count | 622 | 601 | | Last-Twelve Months Net Retention Rate (LTM NRR) | 104.4% | 109.6% | - Enterprise customers generated **94% of total annualized revenue** in Q2 2025, an increase from 91% in Q2 2024[191](index=191&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Revenue Growth (Q2 2025 vs Q2 2024) | Product Line | Q2 2025 Revenue (M) | Q2 2024 Revenue (M) | YoY Growth | | :--- | :--- | :--- | :--- | | Network Services | $114.9 | $104.2 | 10% | | Security | $29.3 | $25.4 | 15% | | Other | $4.5 | $2.8 | 60% | | **Total** | **$148.7** | **$132.4** | **12%** | - **Gross margin remained flat at 55%** for Q2 2025 compared to Q2 2024, as revenue growth was matched by increased network-related costs[221](index=221&type=chunk)[223](index=223&type=chunk) - Operating expenses decreased by 1% YoY in Q2 2025, driven by: - Sales and Marketing: Decreased by 4% due to lower personnel-related costs[225](index=225&type=chunk) - General and Administrative: Decreased by 14% due to lower stock-based compensation[226](index=226&type=chunk) - Research and Development: Increased by 20% due to higher stock-based compensation and lower capitalized software costs[228](index=228&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had **$321.2 million in cash, cash equivalents, and marketable securities**, which is considered sufficient for the next twelve months[242](index=242&type=chunk)[244](index=244&type=chunk) - Net cash from operating activities **increased significantly to $43.1 million** for the first six months of 2025, compared to $6.2 million in the prior year period[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - The company amended its Senior Secured Credit Facilities Agreement, reducing the commitment to **$60.0 million** and extending the maturity date to April 30, 2027[245](index=245&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate and currency exchange fluctuations, which are not considered material - The company's primary market risks are interest rate fluctuations affecting its **$321.2 million** in cash and investments, and foreign currency exchange rate changes[267](index=267&type=chunk)[268](index=268&type=chunk) - The company **does not currently use derivative financial instruments** to manage interest rate or currency risk exposure[267](index=267&type=chunk)[268](index=268&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed ineffective due to a material weakness in the revenue process, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2025, due to a material weakness[270](index=270&type=chunk) - The material weakness relates to deficiencies in the revenue process, caused by a lack of qualified personnel and insufficient controls over its third-party billing system[272](index=272&type=chunk) - Despite the material weakness, management concluded that the financial statements are **fairly presented in all material respects** in conformity with GAAP[271](index=271&type=chunk) Part II - Other Information [Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company faces a securities class action lawsuit and related derivative actions with an uncertain outcome - A securities class action lawsuit was filed against the company and certain officers on May 24, 2024, with a motion to dismiss filed on January 15, 2025[109](index=109&type=chunk)[279](index=279&type=chunk) - Several stockholder derivative actions with substantially similar allegations have also been filed and are **currently stayed** pending the resolution of the motion to dismiss[110](index=110&type=chunk) [Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) Key business risks include customer concentration, a material weakness in internal controls, and a history of operating losses - The company has **significant revenue concentration** from a limited number of customers, and a potential U.S. ban on TikTok could negatively impact business[298](index=298&type=chunk)[299](index=299&type=chunk) - A **material weakness in internal control over financial reporting** has been identified in the revenue process, which could lead to a loss of investor confidence if not remediated[394](index=394&type=chunk)[395](index=395&type=chunk) - The company has a history of operating losses, with an **accumulated deficit of $1,069.5 million** as of June 30, 2025, and expects to continue incurring losses[303](index=303&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=96&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the reporting period - None[484](index=484&type=chunk) [Other Information](index=97&type=section&id=Item%205.%20Other%20Information) Several executives, including the current and former CEO, adopted Rule 10b5-1 trading plans during the quarter Executive Rule 10b5-1 Trading Plan Adoptions (Q2 2025) | Name and Position | Adoption Date | Total Shares to be Sold | | :--- | :--- | :--- | | Todd Nightingale (Former CEO) | 6/3/2025 | 441,000 | | Charles Compton (CEO) | 6/3/2025 | 181,634 | | Artur Bergman (CTO) | 6/3/2025 | 2,917,357 | [Exhibits](index=98&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements and officer certifications