Fastly(US:FSLY)2025-05-07 21:30Financial Data and Key Metrics Changes - Q1 2025 revenue was $144.5 million, exceeding guidance of $136 million to $140 million, representing an 8% year-over-year growth compared to 2% in Q4 2024 [6][7][24] - Gross margin for Q1 2025 was 57.3%, slightly above projections but down from 59.6% in Q1 2024 [10][27] - Operating loss was $5.8 million, better than the guidance range of $11 million to $7 million [11][28] - Positive free cash flow of $8 million was generated, marking the first positive cash flow in eight quarters [12][30] Business Line Data and Key Metrics Changes - Network services revenue was $113.2 million, growing 7% year-over-year [24] - Security revenue was $26.4 million, also growing 7% year-over-year [24] - Revenue from other products, primarily compute, grew 64% year-over-year, contributing $4.8 million [20][24] Market Data and Key Metrics Changes - Revenue outside the top 10 customers grew 17% year-over-year, indicating revenue diversification [10][24] - The top 10 customers represented 33% of revenue, down from 38% in Q1 2024 [9][10] - The trailing twelve-month net retention rate was 100%, down from 102% in the prior quarter [26] Company Strategy and Development Direction - The company is focusing on a go-to-market transformation, enhancing customer acquisition and cross-selling efforts [7][12] - Emphasis on diversifying revenue sources and reducing reliance on top customers is evident, with a strategy to grow enterprise customer mix [10][12] - The security portfolio has been expanded, with three core offerings now available, aiming for increased penetration in existing customer accounts [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2025, expecting to achieve operating profit [21][37] - Despite macro uncertainties, no significant changes in buyer behavior or demand patterns have been observed [21][49] - The company raised its 2025 revenue guidance to $585 million to $595 million, reflecting a 9% annual growth at the midpoint [36] Other Important Information - The company is attending several conferences in Q2 2025 to enhance visibility and investor relations [5] - The impact of TikTok's U.S. operations on revenue has been cautiously managed, with guidance excluding potential revenue from TikTok after June 19 [33][34] Q&A Session Summary Question: What is driving incremental customer demand in network services? - Management noted strong customer acquisition in strategic verticals and enhanced sales execution under new leadership [39][40] Question: What percentage of customers are using WAF, and what is the adoption rate for DDoS and bot mitigation? - Approximately half of customers use multiple product lines, with WAF adoption being lower, indicating significant growth potential [43][44] Question: What drove the 64% growth in compute and observability? - The growth was primarily driven by demand for dynamic user experiences and innovative storage solutions [46][47] Question: What is the outlook for pricing stability in the market? - Management indicated a return to a more favorable pricing environment, expecting stabilization in pricing dynamics [64][65] Question: What are the drivers behind the sequential increase in RPO? - Strategic renewals, sales incentives, and the success of the packaging strategy contributed to the record RPO growth [52][53] Question: How is the company addressing potential geopolitical risks with TikTok? - Management expressed optimism about maintaining a strong relationship with TikTok and leveraging opportunities across the portfolio [60][61] Question: What is the expected EBITDA outlook for the year? - Management expects to see positive EBITDA for the year, particularly in the second half [78] Question: Why is security growth currently slow? - Management believes there is significant potential for growth in the security segment, particularly with new product offerings [82][83]