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Fastly Announces Second Quarter 2023 Financial Results

  • Record second quarter revenue of $122.8 million grew 20% year-over-year and exceeded the high end of our guidance range.
  • Expanded market reach with new packaging and pricing for our core services, making it easy for companies of all sizes to try, buy, and use the powerful Fastly platform.
  • Repurchased $236.4 million in aggregate principal amount of convertible debt for $195.7 million, reflecting a 17% discount to par, and resulted in a $36.8 million net gain.

Fastly, Inc. (NYSE: FSLY), one of the world’s fastest edge cloud platforms, today announced financial results for its second quarter ended June 30, 2023.

“I am pleased with the enormous progress the team has made and we’re proud of the revenue and operating performance of the second quarter, exceeding the top end of our guidance,” said Todd Nightingale, CEO of Fastly.

“We continue to execute on our strategic initiatives to simplify our go-to-market, increase our innovation velocity, and drive a new operational rigor and cost control throughout our business,” continued Nightingale. “All of this progress helps us drive our mission to make every user experience fast, safe, and engaging… fueling growth and delivering a strong financial result.”

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Revenue

 

$

122,831

 

 

$

102,518

 

 

$

240,395

 

 

$

204,900

 

Gross margin

 

 

 

 

 

 

 

 

GAAP gross margin

 

 

52.3

%

 

 

44.9

%

 

 

51.8

%

 

 

46.1

%

Non-GAAP gross margin

 

 

56.6

%

 

 

50.4

%

 

 

56.1

%

 

 

51.5

%

Operating loss

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(49,827

)

 

$

(68,968

)

 

$

(97,102

)

 

$

(131,972

)

Non-GAAP operating loss

 

$

(7,785

)

 

$

(26,893

)

 

$

(21,859

)

 

$

(44,633

)

Net loss per share

 

 

 

 

 

 

 

 

GAAP net loss per common share—basic and diluted

 

$

(0.08

)

 

$

(0.14

)

 

$

(0.44

)

 

$

(0.67

)

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

 

$

(0.04

)

 

$

(0.23

)

 

$

(0.12

)

 

$

(0.38

)

 

Second Quarter 2023 Financial Summary

  • Total revenue of $122.8 million, representing 20% year-over-year growth and 4% sequential increase.
  • GAAP gross margin of 52.3%, compared to 44.9% in the second quarter of 2022. Non-GAAP gross margin of 56.6%, compared to 50.4% in the second quarter of 2022.
  • GAAP net loss of $10.7 million, compared to $16.4 million in the second quarter of 2022. Non-GAAP net loss of $4.6 million, compared to $28.0 million in the second quarter of 2022.
  • GAAP net loss per basic and diluted shares of $0.08 compared to $0.14 in the second quarter of 2022. Non-GAAP net loss per basic and diluted shares of $0.04, compared to $0.23 in the second quarter of 2022.

Key Metrics

  • Trailing 12 month net retention rate (LTM NRR)1 remained flat at 116% in the second quarter compared to the first quarter.
  • Dollar-Based Net Expansion Rate (DBNER)2 increased to 123% in the second quarter from 121% in the first quarter.
  • Total customer count was 3,072 in the second quarter, down 28 from the first quarter; 551 were enterprise customers3 in the second quarter, up 11 from the first quarter.
  • Average enterprise customer spend4 of $818 thousand in the second quarter, up 3% quarter-over-quarter.

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

Second Quarter Business and Product Highlights

  • Expanded market reach with new packaging and pricing for our core services, including flat-rate pricing and tiered packages, making it easy for companies of all sizes to try, buy, and use the powerful Fastly platform.
  • Repurchased $236.4 million in aggregate principal amount of convertible debt for $195.7 million, reflecting a 17% discount to par, and resulted in a $36.8 million net gain.
  • Peter Alexander joined Fastly as Chief Marketing Officer, bringing his experience from Check Point as CMO in addition to CMO of Harmonic and marketing roles at Cisco.
  • Marshal Erwin joined Fastly as Chief Information Security Officer, bringing his experience from Mozilla as Chief Security Officer in addition to roles in the US intelligence community.
  • Karen Greenstein was promoted to General Counsel, joining Fastly in 2019 and serving as interim GC in addition to legal roles in digital media and entertainment.
  • Support for Mutual TLS two-way authentication released, providing a higher security posture requiring both the client and server to present trusted digital certificates, saving time and resources for our customers.
  • Released Dynamic Backends, enabling customers to create new backend server definitions seamlessly.
  • Introduced Core Cache API, a powerful set of API Primitives, enabling developers building on our Edge Compute platform to have access to our powerful, globally distributed cache network.
  • Premier Edge Deployment of our Next-Gen WAF released, bringing Advanced Rate Limiting and the Site Flagged IP signal for the Next-Gen WAF to the edge.
  • Limited availability of Certainly released, providing domain validated TLS certificates that are fully automated in our Fastly managed TLS services and enabling trusted identification of websites, improving security and reliability.

Third Quarter and Full Year 2023 Guidance

 

 

Q3 2023

 

Full Year 2023

Total Revenue (millions)

 

$125 - $128

 

$500- $510

Non-GAAP Operating Loss (millions)

 

($15.0) - ($13.0)

 

($49.0) - ($43.0)

Non-GAAP Net Loss per share (5)(6)

 

($0.09) - ($0.07)

 

($0.27) - ($0.21)

 

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future and cannot be reasonably determined or predicted at this time, although it is important to note that these factors could be material to Fastly’s future GAAP financial results.

Conference Call Information

Fastly will host an investor conference call to discuss its results at 1:30 p.m. PT / 4:30 p.m. ET on Wednesday, August 2, 2023.

Date:

Wednesday, August 2, 2023

Time:

1:30 p.m. PT / 4:30 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 1:30 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, August 2 through August 16, 2023 by dialing 800-770-2030 or 647-362-9199 and entering the passcode 7543239.

About Fastly

Fastly’s powerful and programmable edge cloud platform helps the world’s top brands deliver the fastest online experiences possible, while improving site performance, enhancing security, and empowering innovation at global scale. With world-class support that achieves 95%+ average annual customer satisfaction ratings, Fastly’s beloved suite of edge compute, delivery, and security offerings has been recognized as a leader by industry analysts such as IDC, Forrester and Gartner. Compared to legacy providers, Fastly’s powerful and modern network architecture is one of the fastest on the planet, empowering developers to deliver secure websites and apps at global scale with rapid time-to-market and industry-leading cost savings. Thousands of the world’s most prominent organizations trust Fastly to help them upgrade the internet experience, including Reddit, Pinterest, Stripe, Neiman Marcus, The New York Times, Epic Games, and GitHub. Learn more about Fastly at https://www.fastly.com/, and follow us @fastly.

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, our operation and cost management, our ability to innovate, our go-to-market efforts and our ability to deliver on our long-term strategy. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Important factors that could cause our actual results to differ materially are detailed from time to time in the reports Fastly files with the Securities and Exchange Commission (“SEC”), including in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023. 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, executive transition costs, net gain on extinguishment of debt 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, executive transition costs, interest income, interest expense, including amortization of debt discount and issuance costs, net gain on extinguishment of debt, other income (expense), net, and income taxes.

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

Amortization of Acquired Intangible Assets: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases and acquisitions. Management considers its operating results without this activity when evaluating its ongoing non-GAAP performance and its 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 operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA 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: consists of cash used for purchases of property and equipment, net of proceeds from sale of property and equipment, capitalized internal-use software and payments on finance lease obligations, 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. Management considers its operating results without this activity 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.

Executive Transition costs: consists of one-time cash and non-cash charges recognized with respect to changes in our executive’s employment status. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Free Cash Flow: calculated as net cash used in operating activities less purchases of property and equipment, net of proceeds from sale of property and equipment, principal payments of finance lease liabilities, capitalized internal-use software costs and advance payments made related to capital expenditures. Management specifically identifies adjusting items in the reconciliation of GAAP to non-GAAP financial measures. Management considers non-GAAP free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in Fastly's business and strengthening its balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures. The presentation of non-GAAP free cash flow is also not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.

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

Net Gain on Debt Extinguishment: relates to net gain on the partial repurchase of our outstanding convertible debt. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Other Income (Expense), Net: consists primarily of foreign currency transaction gains and losses. Management considers its operating results without this activity 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. Although stock-based compensation is an expense for the Company and is viewed as a form of compensation, management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA 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.

In the financial tables below, the Company provides a reconciliation of the most comparable GAAP financial measure to the historical non-GAAP financial measures used in this press release.

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

Under our new methodology, our number of customers are calculated based on the number of separate identifiable operating entities with which we have a billing relationship in good standing, from which we recognized revenue during the current quarter. Under our prior methodology, our number of customers are calculated based on the number of separate identifiable operating entities with which we have a billing relationship in good standing, from which we recognized revenue during the last month of the quarter. Under our new methodology, our enterprise customers are defined as those with annualized current quarter revenue in excess of $100,000. This is calculated by taking the revenue for each customer within the quarter and multiplying it by four. Under our prior methodology, our enterprise customers are defined as those with revenue in excess of $100,000 in the trailing 12-month period. Under our prior methodology, our total customer count was 2,965 in the second quarter, down 36 from the first quarter of 2023; 520 were enterprise customers in the second quarter, up 6 from the first quarter of 2023.

 

 

4

Under our new methodology, our average enterprise customer spend is calculated by taking the annualized current quarter revenue contributed by enterprise customers existing as of the current period, and dividing that by the number of enterprise customers as of the current period. Under our prior methodology, our average enterprise customer spend is calculated by taking the sum of the trailing 12-month revenue contributed by enterprise customers existing as of the current period, and dividing that by the number of enterprise customers as of the current period. Under our prior methodology, our average enterprise customer spend was $809 thousand in the second quarter, up 4% quarter-over-quarter.

 

 

5

Non-GAAP Net Loss per share is calculated as Non-GAAP Net Loss divided by weighted average basic shares for 2023.

 

 

6

Assumes weighted average basic shares outstanding of 129.9 million in Q3 2023 and 128.6 million for the full year 2023.

 

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts, unaudited)

 

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Revenue

 

$

122,831

 

 

$

102,518

 

 

$

240,395

 

 

$

204,900

 

Cost of revenue(1)

 

 

58,617

 

 

 

56,466

 

 

 

115,927

 

 

 

110,381

 

Gross profit

 

 

64,214

 

 

 

46,052

 

 

 

124,468

 

 

 

94,519

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development(1)

 

 

37,421

 

 

 

38,717

 

 

 

74,852

 

 

 

79,154

 

Sales and marketing(1)

 

 

47,797

 

 

 

46,760

 

 

 

92,068

 

 

 

88,240

 

General and administrative(1)

 

 

28,823

 

 

 

29,543

 

 

 

54,650

 

 

 

59,097

 

Total operating expenses

 

 

114,041

 

 

 

115,020

 

 

 

221,570

 

 

 

226,491

 

Loss from operations

 

 

(49,827

)

 

 

(68,968

)

 

 

(97,102

)

 

 

(131,972

)

Net gain on extinguishment of debt

 

 

36,760

 

 

 

54,391

 

 

 

36,760

 

 

 

54,391

 

Interest income

 

 

4,508

 

 

 

1,502

 

 

 

8,694

 

 

 

2,183

 

Interest expense

 

 

(1,232

)

 

 

(1,530

)

 

 

(2,445

)

 

 

(3,152

)

Other income (expense)

 

 

(803

)

 

 

(1,673

)

 

 

(1,053

)

 

 

(1,952

)

Loss before income taxes

 

 

(10,594

)

 

 

(16,278

)

 

 

(55,146

)

 

 

(80,502

)

Income tax expense

 

 

110

 

 

 

159

 

 

 

245

 

 

 

199

 

Net loss

 

$

(10,704

)

 

$

(16,437

)

 

$

(55,391

)

 

$

(80,701

)

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

 

$

(0.08

)

 

$

(0.14

)

 

$

(0.44

)

 

$

(0.67

)

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

 

 

127,863

 

 

 

121,242

 

 

 

126,648

 

 

 

120,295

 

__________

(1)

Includes stock-based compensation expense as follows:

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Cost of revenue

 

$

2,837

 

 

$

3,188

 

 

$

5,518

 

 

$

6,134

 

Research and development

 

 

12,205

 

 

 

13,889

 

 

 

23,686

 

 

 

32,478

 

Sales and marketing

 

 

9,877

 

 

 

10,184

 

 

 

16,582

 

 

 

20,278

 

General and administrative

 

 

12,073

 

 

 

7,717

 

 

 

19,357

 

 

 

16,110

 

Total

 

$

36,992

 

 

$

34,978

 

 

$

65,143

 

 

$

75,000

 

 

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, unaudited)

 

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Gross Profit

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

64,214

 

 

$

46,052

 

 

$

124,468

 

 

$

94,519

 

Stock-based compensation

 

 

2,837

 

 

 

3,188

 

 

 

5,518

 

 

 

6,134

 

Amortization of acquired intangible assets

 

 

2,475

 

 

 

2,475

 

 

 

4,950

 

 

 

4,950

 

Non-GAAP gross profit

 

$

69,526

 

 

$

51,715

 

 

$

134,936

 

 

$

105,603

 

GAAP gross margin

 

 

52.3

%

 

 

44.9

%

 

 

51.8

%

 

 

46.1

%

Non-GAAP gross margin

 

 

56.6

%

 

 

50.4

%

 

 

56.1

%

 

 

51.5

%

 

 

 

 

 

 

 

 

 

Research and development

 

 

 

 

 

 

 

 

GAAP research and development

 

$

37,421

 

 

$

38,717

 

 

$

74,852

 

 

$

79,154

 

Stock-based compensation

 

 

(12,205

)

 

 

(13,889

)

 

 

(23,686

)

 

 

(32,478

)

Non-GAAP research and development

 

$

25,216

 

 

$

24,828

 

 

$

51,166

 

 

$

46,676

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

 

 

 

 

 

 

GAAP sales and marketing

 

$

47,797

 

 

$

46,760

 

 

$

92,068

 

 

$

88,240

 

Stock-based compensation

 

 

(9,877

)

 

 

(10,184

)

 

 

(16,582

)

 

 

(20,278

)

Amortization of acquired intangible assets

 

 

(2,575

)

 

 

(2,710

)

 

 

(5,150

)

 

 

(5,419

)

Non-GAAP sales and marketing

 

$

35,345

 

 

$

33,866

 

 

$

70,336

 

 

$

62,543

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

 

 

 

 

 

 

GAAP general and administrative

 

$

28,823

 

 

$

29,543

 

 

$

54,650

 

 

$

59,097

 

Stock-based compensation

 

 

(12,073

)

 

 

(7,717

)

 

 

(19,357

)

 

 

(16,110

)

Acquisition-related expenses

 

 

 

 

 

(1,912

)

 

 

 

 

 

(1,970

)

Non-GAAP general and administrative

 

$

16,750

 

 

$

19,914

 

 

$

35,293

 

 

$

41,017

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(49,827

)

 

$

(68,968

)

 

$

(97,102

)

 

$

(131,972

)

Stock-based compensation

 

 

36,992

 

 

 

34,978

 

 

 

65,143

 

 

 

75,000

 

Amortization of acquired intangible assets

 

 

5,050

 

 

 

5,185

 

 

 

10,100

 

 

 

10,369

 

Acquisition-related expenses

 

 

 

 

 

1,912

 

 

 

 

 

 

1,970

 

Non-GAAP operating loss

 

$

(7,785

)

 

$

(26,893

)

 

$

(21,859

)

 

$

(44,633

)

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(10,704

)

 

$

(16,437

)

 

$

(55,391

)

 

$

(80,701

)

Stock-based compensation

 

 

36,992

 

 

 

34,978

 

 

 

65,143

 

 

 

75,000

 

Amortization of acquired intangible assets

 

 

5,050

 

 

 

5,185

 

 

 

10,100

 

 

 

10,369

 

Acquisition-related expenses

 

 

 

 

 

1,912

 

 

 

 

 

 

1,970

 

Net gain on extinguishment of debt

 

 

(36,760

)

 

 

(54,391

)

 

 

(36,760

)

 

 

(54,391

)

Amortization of debt discount and issuance costs

 

 

803

 

 

 

776

 

 

 

1,519

 

 

 

1,739

 

Non-GAAP loss

 

$

(4,619

)

 

$

(27,977

)

 

$

(15,389

)

 

$

(46,014

)

 

 

 

 

 

 

 

 

 

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

 

$

(0.04

)

 

$

(0.23

)

 

$

(0.12

)

 

$

(0.38

)

Weighted average basic and diluted common shares

 

 

127,863

 

 

 

121,242

 

 

 

126,648

 

 

 

120,295

 

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(10,704

)

 

$

(16,437

)

 

$

(55,391

)

 

$

(80,701

)

Stock-based compensation

 

 

36,992

 

 

 

34,978

 

 

 

65,143

 

 

 

75,000

 

Depreciation and other amortization

 

 

13,030

 

 

 

10,860

 

 

 

25,210

 

 

 

20,835

 

Amortization of acquired intangible assets

 

 

5,050

 

 

 

5,185

 

 

 

10,100

 

 

 

10,369

 

Acquisition-related expenses

 

 

 

 

 

1,912

 

 

 

 

 

 

1,970

 

Interest income

 

 

(4,508

)

 

 

(1,502

)

 

 

(8,694

)

 

 

(2,183

)

Interest expense

 

 

429

 

 

 

754

 

 

 

926

 

 

 

1,413

 

Amortization of debt discount and issuance costs

 

 

803

 

 

 

776

 

 

1,519

 

 

1,739

 

Net gain on extinguishment of debt

 

 

(36,760

)

 

 

(54,391

)

 

 

(36,760

)

 

 

(54,391

)

Other expense

 

 

803

 

 

 

1,673

 

 

 

1,053

 

 

 

1,952

 

Income tax expense

 

 

110

 

 

 

159

 

 

 

245

 

 

 

199

 

Adjusted EBITDA

 

$

5,245

 

 

$

(16,033

)

 

$

3,351

 

 

$

(23,798

)

 

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

As of

June 30, 2023

 

As of

December 31, 2022

 

 

(unaudited)

 

(audited)

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

273,742

 

 

$

143,391

 

Marketable securities, current

 

 

123,605

 

 

 

374,581

 

Accounts receivable, net of allowance for credit losses

 

 

78,295

 

 

 

89,578

 

Prepaid expenses and other current assets

 

 

29,500

 

 

 

28,933

 

Total current assets

 

 

505,142

 

 

 

636,483

 

Property and equipment, net

 

 

179,045

 

 

 

180,378

 

Operating lease right-of-use assets, net

 

 

56,733

 

 

 

68,440

 

Goodwill

 

 

670,356

 

 

 

670,185

 

Intangible assets, net

 

 

72,550

 

 

 

82,900

 

Marketable securities, non-current

 

 

78,042

 

 

 

165,105

 

Other assets

 

 

95,550

 

 

 

92,622

 

Total assets

 

$

1,657,418

 

 

$

1,896,113

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

5,561

 

 

$

4,786

 

Accrued expenses

 

 

47,001

 

 

 

61,161

 

Finance lease liabilities, current

 

 

22,233

 

 

 

28,954

 

Operating lease liabilities, current

 

 

20,575

 

 

 

23,026

 

Other current liabilities

 

 

36,234

 

 

 

34,394

 

Total current liabilities

 

 

131,604

 

 

 

152,321

 

Long-term debt

 

 

472,369

 

 

 

704,710

 

Finance lease liabilities, non-current

 

 

7,026

 

 

 

15,507

 

Operating lease liabilities, non-current

 

 

51,448

 

 

 

61,341

 

Other long-term liabilities

 

 

7,217

 

 

 

7,076

 

Total liabilities

 

 

669,664

 

 

 

940,955

 

Stockholders’ equity:

 

 

 

 

Common stock

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

1,747,959

 

 

 

1,666,106

 

Accumulated other comprehensive loss

 

 

(3,152

)

 

 

(9,286

)

Accumulated deficit

 

 

(757,055

)

 

 

(701,664

)

Total stockholders’ equity

 

 

987,754

 

 

 

955,158

 

Total liabilities and stockholders’ equity

 

$

1,657,418

 

 

$

1,896,113

 

 

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(10,704

)

 

$

(16,437

)

 

$

(55,391

)

 

$

(80,701

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

12,920

 

 

 

10,736

 

 

 

24,960

 

 

 

20,586

 

Amortization of intangible assets

 

 

5,175

 

 

 

5,309

 

 

 

10,350

 

 

 

10,618

 

Non-cash lease expense

 

 

5,648

 

 

 

5,608

 

 

 

11,763

 

 

 

11,522

 

Amortization of debt discount and issuance costs

 

 

803

 

 

 

775

 

 

 

1,519

 

 

 

1,739

 

Amortization of deferred contract costs

 

 

3,746

 

 

 

2,138

 

 

 

7,171

 

 

 

3,989

 

Stock-based compensation

 

 

36,992

 

 

 

34,978

 

 

 

65,143

 

 

 

75,000

 

Provision for credit losses

 

 

567

 

 

 

402

 

 

 

1,100

 

 

 

529

 

Loss on disposals of property and equipment

 

 

296

 

 

 

586

 

 

 

547

 

 

 

854

 

Amortization and accretion of discounts and premiums on investments

 

 

298

 

 

 

894

 

 

 

747

 

 

 

1,851

 

Impairment of operating lease right-of-use assets

 

 

187

 

 

 

 

 

 

187

 

 

 

 

Net gain on extinguishment of debt

 

 

(36,760

)

 

 

(54,391

)

 

 

(36,760

)

 

 

(54,391

)

Other adjustments

 

 

(85

)

 

 

(67

)

 

 

(328

)

 

 

61

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

6,482

 

 

 

5,097

 

 

 

10,183

 

 

 

(4,122

)

Prepaid expenses and other current assets

 

 

217

 

 

 

(2,701

)

 

 

(417

)

 

 

(4,812

)

Other assets

 

 

(4,771

)

 

 

(3,948

)

 

 

(11,983

)

 

 

(6,399

)

Accounts payable

 

 

1,119

 

 

 

3,336

 

 

 

944

 

 

 

844

 

Accrued expenses

 

 

234

 

 

 

(3,729

)

 

 

(6,593

)

 

 

1,162

 

Operating lease liabilities

 

 

(6,682

)

 

 

(5,349

)

 

 

(12,432

)

 

 

(10,981

)

Other liabilities

 

 

9,308

 

 

 

83

 

 

 

5,419

 

 

 

2,781

 

Net cash provided by (used in) operating activities

 

 

24,990

 

 

 

(16,680

)

 

 

16,129

 

 

 

(29,870

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

 

 

 

(207,286

)

 

 

 

 

 

(355,479

)

Sales of marketable securities

 

 

774

 

 

 

159,552

 

 

 

774

 

 

 

161,853

 

Maturities of marketable securities

 

 

114,884

 

 

 

127,333

 

 

 

342,095

 

 

 

367,880

 

Business acquisitions, net of cash acquired

 

 

 

 

 

(25,224

)

 

 

 

 

 

(25,999

)

Advance payment for purchase of property and equipment

 

 

 

 

 

(29,310

)

 

 

 

 

 

(29,310

)

Purchases of property and equipment

 

 

(4,464

)

 

 

(4,151

)

 

 

(7,958

)

 

 

(8,815

)

Proceeds from sale of property and equipment

 

 

14

 

 

 

241

 

 

 

36

 

 

 

241

 

Capitalized internal-use software

 

 

(6,230

)

 

 

(4,926

)

 

 

(10,439

)

 

 

(8,736

)

Net cash provided by investing activities

 

 

104,978

 

 

 

16,229

 

 

 

324,508

 

 

 

101,635

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Cash paid for debt extinguishment

 

 

(196,934

)

 

 

(177,082

)

 

 

(196,934

)

 

 

(177,082

)

Repayments of finance lease liabilities

 

 

(6,557

)

 

 

(6,147

)

 

 

(15,202

)

 

 

(11,029

)

Cash received for restricted stock sold in advance of vesting conditions

 

 

 

 

 

 

 

 

 

 

 

10,655

 

Cash paid for early sale of restricted shares

 

 

 

 

 

(3,539

)

 

 

 

 

 

(7,037

)

Payment of deferred consideration for business acquisitions

 

 

(4,393

)

 

 

 

 

 

(4,393

)

 

 

 

Proceeds from exercise of vested stock options

 

 

535

 

 

 

1,721

 

 

 

871

 

 

 

4,769

 

Proceeds from employee stock purchase plan

 

 

2,191

 

 

 

1,571

 

 

 

4,787

 

 

 

3,977

 

Net cash used in financing activities

 

 

(205,158

)

 

 

(183,476

)

 

 

(210,871

)

 

 

(175,747

)

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

 

 

469

 

 

 

(100

)

 

 

585

 

 

 

(319

)

Net increase in cash, cash equivalents, and restricted cash

 

 

(74,721

)

 

 

(184,027

)

 

 

130,351

 

 

 

(104,301

)

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

 

 

348,613

 

 

 

246,687

 

 

 

143,541

 

 

 

166,961

 

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

 

 

273,892

 

 

 

62,660

 

 

 

273,892

 

 

 

62,660

 

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

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

273,742

 

 

 

62,510

 

 

 

273,742

 

 

 

62,510

 

Restricted cash, current

 

 

150

 

 

 

150

 

 

 

150

 

 

 

150

 

Total cash, cash equivalents, and restricted cash

 

$

273,892

 

 

$

62,660

 

 

$

273,892

 

 

$

62,660

 

 

Free Cash Flow

(in thousands, unaudited)

 

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Cash flow provided by (used in) operations

 

$

24,990

 

 

$

(16,680

)

 

$

16,129

 

 

$

(29,870

)

Capital expenditures(1)

 

 

(17,237

)

 

 

(14,983

)

 

$

(33,563

)

 

$

(28,339

)

Advance payment for purchase of property and equipment(2)

 

 

 

 

 

(29,310

)

 

$

 

 

$

(29,310

)

Free Cash Flow

 

$

7,753

 

 

$

(60,973

)

 

$

(17,434

)

 

$

(87,519

)

__________

(1)

Capital expenditures are defined as cash used for purchases of property and equipment, net of proceeds from sale of property and equipment, and capitalized internal-use software and payments on finance lease obligations, as reflected in our statement of cash flows.

 

(2)

As reflected in our statement of cash flows. In the six months ended June 30, 2023, we received $1.6 million of capital equipment that was prepaid prior to the current quarter.

Source: Fastly, Inc.

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