Earnings call transcript Q1 2023

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Operator

Good afternoon. My name is Julian, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Fastly's First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

to at conference Fastly. like Essi, to Investor Relations Please turn now over the Vern I'd go ahead.

Vernon Essi

welcome, and earnings you, everyone first our Thank quarter conference call. to XXXX

Ron shortly dialing CEO, Also, will Nightingale; XXX-XXXX, webcast Fastly's ID a the this be and replay website, can XXX-XXX-XXXX be of conference today's through call us number for will have We be of and CFO, archived and today. conclusion Kisling referencing Todd after The our fastly.com, by accessed available with one year. call.

investor release, be A in which all today's Investor our earnings copy of furnished in found of related press financial are portion can tables and website. Relations supplement, X-K the today, filing Fastly's of

including of strategy, These expected and statements related to those call, projected could and this future or and to During to materially known cause our from actual product risks, sales, future unknown during statements, performance call. financial long-term results, the growth are subject implied prospects. overall uncertainties we will statements forward-looking differ that business, the assumptions results make

encourage factors earnings regarding for discussion refer the to further our cause XX-Q Please of documents. in and sections factors differ. with refer to quarter XX-K and for recent particular, supplement these to the risk our Form filed business, information Risk SEC first that could our our release you For We and most XXXX please Form the Factors. a results to read entitled

this except non-GAAP update we statements date. statements, certain as financial undertake available us today's to note forward-looking on We Also by discuss measures. call law. will information on to obligation as that this during required Also the are call, forward-looking based no of any

earnings to intended are website. numbers our our we the substitute most to revenue today are the and non-GAAP non-GAAP for Unless directly Reconciliations basis. will measures supplement not be These otherwise GAAP a provided Investor than GAAP in comparable Relations on release measures on results. an adjusted financial noted, other be all discuss

that we we Conference on William York conferences Technology Before Xth. Blair Investor Day New on Also the will the in be in begin second Francisco we Growth Annual our two San and Xth, in attending June be Global comments, BMA June will note on Conference June XX Stock please hosting quarter: our Exchange. Chicago prepared XXrd at

to With over Todd. Todd? that, I'll the turn call

Todd Nightingale

Thanks, everyone, today. joining Vern. thanks so much and Hi, for us

first the motion update discuss product I'll a First, a in financial our call quarter and hand quick guidance quarter provide our give financial and and detail. before to and I on Ron over summary results market annual go-to and brief then fourth of to results highlights strategy the

able record We million, quarter-over-quarter. which X% congratulate weaker maintain were and quarter our first on typically reported guidance pleased exceeded to of range decline XX% the and we revenue seasonality. year-over-year Fastly that a QX. healthy due solid quarter I'm to to $XXX.X like closing grew out revenue and I'd team

for this said I to XXXX and level an believe as beyond. in still us opportunity remains last However, I outperform that quarter,

retention customer engine and strong. growth Our remains

in XXX% XXX% from quarter the was NRR QX. first LTM Our down in

the to However, year ground XXX% compared in it gained ago quarter.

to metrics despite XXX% the in in our efforts was XXX% year. they within QX XXX% indicate to existing of DBNER expanded but headwinds expansion Our compared of Both the years and down in customers. prior healthy first quarter, QX, in these last shown from declines have continue seasonal

to of we've provide our more effort metrics some current our an In definitions. into performance, visibility changed

of on number customer methodology calculates Our based month end instead count customers revenue quarter revenue. new of end the total

this revenue of average newer spend the of Accordingly, based during the Our revenue is our spending new enterprise enterprise on based excess instead customer in months. trailing now customer is over on in $XXX,XXX count XX annualized quarter, approach. $XX,XXX

of all changes on the Ron provide these next we have metrics more will XX and detail for months. legacy will

to $XXX,XXX last customer X% average a decline quarter-over-quarter X% compared from $XXX,XXX, was up Our representing year. spend of QX enterprise was

to We've focused more complete momentum customer grow We've success we've seen voice on journey portfolio. wins saw and WAF standalone success product continued Next-Gen quarter, continued expanding upsell success customer they and our to teams aligned with as customers sale. both share logo our be new we last into seen wallet as and our in Similar strong our portfolio. and

service time as we edge well having and sell computed anticipate observability customers, new the network over opportunity course, Of to delivery these our modules. as

share and Airlines new our Frontier first wins strategic and key saw our for We to important excited some leisure. I'm momentum travel continuing us. at win and expansion verticals

wins first The platform the win highlighted logo also staffing and helps by at for appropriate individuals coverage. solution professionals with CareRev healthcare life sciences and healthcare first a a quarter in connect marked five HealthSherpa that new our healthcare

momentum privacy logo browsing We're for new four notably with wins Google also cybersecurity vertical seeing their private in the and with solution. most

compared QX the increased customers enterprise XXX year-over-year. quarter QX in seven count the XX to XX totaled and X,XXX, in which was quarter Our year-over-year, first increase of by compared to XXX and customers total an customer

our margin quarter-over-quarter, our but continue through XXX with the other cost XXX initiatives and finding point amount large peering pleased But gross point basis costs was for our work XX.X% a will a we this decline revenue, basis increased rigorously as fixed Our savings XXXX. I'm for of first representing peak result, of with increase optimization network quarter, and year. are sized be have on that to to traffic. continue

a take spending pattern. talk me let our Also, about moment to quick

keeping I the $X was due about than As of see on you were margin, the rigorous $X cost half controls anticipated budget of cost cost from can our million underspend the and operating by to QX control teams our effects roughly lower see to management. million. was happy expenses operating

certain second other will those the due expenses, The into the of and anticipate was we timing half push to quarter. that

sales as also expenses. product a to is a of we teams to in diligence headwinds, a to and in merit coming some expect rigor to we Regardless, past detail our tax financial onetime of call. later expect first marketing processes see some been as refund, the increases But adding in do the the QX, seasonal on credit will In have OpEx our discuss other OpEx Ron XXXX half few from expected, months. the and event have

the detailed plan business will slower guide, excluding see OpEx top-line in half. tax you as that and growth far we sustainable to As onetime trend the our the than our long-term growing even benefit, we our reconfigure continue into second is for

business Now on to our highlights.

introduced developers about ability durable as There experiences. the even how releases create giving can you more the expanded supplement quarter we accelerate engine first help gears responsive, and our more we roadmap in shifted config will our to our several such the new quarter, personalized During business. were set. technology this our into feature store, innovation product us computer-aided in I'm excited see

component We is end privacy. allows ensuring HTTP data launched the HTTP critical architecture without the users from of Relay. receipt beta a that metadata, any of identifying the Oblivious the This user Fastly Oblivious request of

quarter, three wins. but already security managed new simplified In in attacks. existing from This are to our been security to enterprise customer launched the infrastructure. the launch customers quarter, also service gives access have customers our protect rising to XX/X our anticipating already our direct monitoring this a packaging early later our teams availability, first there We're secure we performing service web application

fastest you quarter. to during to and few a Moving our share and to to those go-to-market first partners global entire program the that introduced partner value a give excited network I'm on access with in our announcements deliver for milestone occurred fast We greater customers developments, new partners partner portfolio.

will help program I'm This received process. star a excited customers' pricing new features which rating. onboarding only we not quoting streamline that. our model super but about greatly with our also and simplified discounting CRM tiered and simplify new program X expect The discounting,

is us some Super Fastly and stream exciting capabilities. Our we since also our quarter differentiated showcase powerful to live an first most gave opportunity Bowl, it of at the to

our During the reached a traffic and streaming precision record automated our event, path. supported XX.X per terabits second, systems autopilot by routing bandwidth

Marquee and was been opportunities human major done with event live the live and Bowl. real years markets. event Thanks involvement Super to infrastructure telemetry strength and efficiently more service always events. have events than less backed in a by and Fastly offers utilizing with in been prior our our event at international The the prior time other observability the engaging of capabilities monitoring in sporting success which far we've

respect selected privacy is HTTP the to to this enhance protecting privacy Google tracking. Fastly by its innovate only initiative relay FLEDGE. billions Oblivious will user to continue in and earlier, users mentioned sandbox effort, was with I space. partner solution online To browser we're the third-party security or of for Chrome in privacy online we and As designed This date, privacy

This has in as financial discussed, success importantly audience, changes realigned strategic structural We've to our teams and our departmental the into most our groups. our to I put processes functional success other place is initiatives, across just but this results. in yielded

pleased I'm the far, in XXXX. we're So with making progress

glad I'm is the projections that our and accurate holding see planning have diligence yielding to of been our projections.

our the lowering to and through strong to expect find our guidance experience. We and both below outperform streamline our line, above and strategically to efforts guidance that employee velocity, hold hope ways of go-to-market annual the innovation friction

update and increased. world, an to believe gave Fastly. to make larger the is cloud to from reach community to to easier, I I mid empowered for segment acquire a a enormous and of across potential only channel, team shared my The our a the to deploy market, motivated opportunity months then excitement I faster web to quarter, technology on Last amazing with has six first rate it best customers talent there around you the an at the its Fastly. at simplify offering this bring

a the enthusiasm solutions real all engaging. for real experiences Fastly fast, safe mission and our and Fastly's a to better a are employees Our have make customers for where have internet place passion

Let am excited saying me by about road ahead. close how the I

and digital way and work I of significant do the but plenty digital the of Fastly to there's experiences define built success course every are almost mission everywhere around the delivered drive have a Of will impact and experiences those the organization on will believe world.

on sharing and coming investor regarding acquisition look in our I to our our and you progress, focus of in June. more growth, forward quarters velocity the conference and customer with our fuel innovation our at

details the Ron. turn to and over discuss Ron? quarter now guidance, the I'll financial of call the And to

Ron Kisling

and exceeding revenue the year-over-year metrics first results, results discuss $XXX based. business million, million. joining discussions our $XXX unless Thank us you, of forward Note review Todd. to $XXX.X XX% for to quarter And will our financial then in everyone non-GAAP increased guidance. and my for million all otherwise are the financial stated, I of top today, our end Total guidance that thanks,

that aware Signal the or rates XX% adjustments the first purchase is revenue. increase, year-over-year at was we percentage to whole the figures, the the quarter, growth deferred excluding products Sciences calculate price from actual of to increase and In of XX% Be nearest revenue revenue of XX% impact related percent. revenue rounded off

traffic customers. benefit the to partner with quarter. given relative expansion smaller and we past, enterprise fourth shared continue investments our typically continue we've XXXX This gains packaging share simplified healthy in is give seasonally the And as to in confidence We quarter market to revenue what coupled our offerings, see to share, efforts our of from program, launch market our a weak guidance. relatively go our the us in that from

from Our but trailing ago year from XX up XXX% retention slightly the down rate XXX%, quarter, in prior in net the quarter. XXX% months was

strong. churn experience and remain We low of X% than continue less dynamics very customer our to retention

end stated, classified we Todd QX, was had of at the As enterprise. customers which X,XXX as of XXX

now the we to metrics changes visibility investment moment customer to are more to community. implementing in count me the take our time real Let discuss a provide

an or XX,XXX with As enterprise going customer, Todd the revenue any in which more indicated, count in revenue. during or customer forward, to XXX,XXX quarter, annual as we previously equates more will

our months customer account seasonality or our enterprise using more approach new Because on XXX,XXX on see more customers. most enterprise recent with to customer to respect quarter, to saw customer enterprise we XX provides Previously, we count. revenue, than identify expect accounts enterprise reported based for LTM editions LTM information enterprise our we of new in trailing customer revenue the

month and credits with a customers single in last count we customer. Previously, calculation Additionally, by on total quarter an counted our other be we active quarter the customer. of This methodology active have customers. customer simplified the now to in adjustments eliminating count the month with our customers or simplifies made otherwise for revenue as an revenue active in

to the discontinue with year both for our on we both transparency, methodology intend all fiscal and to provide basis prior a prior To will of report trended for the continue the XXXX reporting our in the periodic and investor new methodologies our reports, and use SEC for supplement XXXX. metrics filed of

for annualized on of QX. total using down revenue accounted an XX% Enterprise XX% in basis, from methodology customers our new

was X% of quarter, and from customer average XXX,XXX, from compared previous XXX,XXX, the to QX enterprise up spend XXX,XXX Our down in year. X% last

XX QX XXXX. first customers quarter of in a contribution in decrease slight revenues of our top Our total XXXX, XX% XX% from comprised the the

I financial first our will now results turn the for of to quarter. rest the

quarter Our basis in sports fourth gross viewership. compared and points the decline margin shopping quarter XXX onetime the holiday prior our reflects that fourth the in margin excluding from sequential decline the to seasonality of XX.X% for gross due adjustment in XXX to was live quarter. streaming it to first XX% This XXXX, would expectations patterns

in this gross on margin have in for to moment. a traffic As quarter, be million compared peak sized to Operating which I'll the We improving saw the results up traffic, XX% our quarter. a down XX.X ramps. QX expectations. Todd mentioned, X% relative large expenses and operating fixed expand from to approximately X were first in sequentially and as our fourth our of million expenses XXXX amount costs unfavorability

of slip result of the margins in quarter. million. the that revenue loss high-end expectations operating certain million, loss high-end remainder This of exceeding half expenses an our combined measures $XX.X into the will this the our $XX $XX in with with second favourability guidance was million line guidance in of with to above About expense to operating the range due control of gross of resulted marketing

$XX or the was first a compared a for $XX.X loss of or and to loss basic share loss $X.XX basic QX in per million quarter loss share, in a diluted diluted million net and $X.XX net Our XXXX.

$X.X was million to negative adjusted compared QX Our XXXX. EBITDA negative $X.X first quarter the for million in

marketable those to million quarter equivalents, including ended classified we and cash investments, Turning in long-term. XXX with the balance approximately cash, the sheet, securities as

of by equipment negative commitments. any improvement for million advance of to million future A a was XX flow due advanced in was cash reduced for $XX this million quarters. negative and free prepayments million. the Our material majority commitments do quarters sequentially from equipment property XX anticipate We fourth in prepayments not decrease $XX

Our outlook expenditures XXXX. quarter were X% approximately our in at high-end X% X% first the expenditures revenue revenue capital capital for to of of the of cash of of

be full the timing line of We to with deployment, capital expect outlook quarterly expenditures but due expect to our to vary the for in year.

capital expenditures capitalized As software. a internal reminder, our use cash include

that these current our in outlook to undertake I the second materially, based year law. the following by will like to differ may discuss except no as statements update and and statements to now on forward full statements. and turn forward as results I'd quarter to of future, XXXX. the remind Actual expectations include today, required everyone are obligation we again looking looking

products. and XXXX expansion line by outlook Our in ability second and year full strong quarter reflect top acquisition and deliver enhanced part enterprise customer new continued driven customers, via within our to improved our growth

is have we on guidance the revenue today. based Our that visibility

growth our over expect expense year improvement a growth XXXX in the operating losses to revenue for meaningful in lag and expect to continue We XXXX.

last of we our initiatives we revenue in our existing quarter, As our customers go-to-market efforts our expansion and part to new are and growth investing accelerate to customer continue acquisition. stated as

leverage We these in greater in will G&A meaningful and in costs see see we costs decreased in drive of XXXX operations. our R&D. efficiencies our product as expect a and continue to investments opportunities and And Especially G&A for across revenue. percentage our to have

with see better expect second sequentially quarter. into to the second first Historically, a XXXX, slightly is revenue revenue quarter. In the quarter flat trajectory we

$XXX at XX% midpoint. and the $XXX X% expect million, representing revenue For annual the growth range the to we in sequential million growth of second quarter,

our discussed, half we for are capacity we that higher revenue managing As traffic XXXX. network expect in and the have second we of

In quarter margins the line generally points. first or second to in basis gross quarter, be we plus margins, minus anticipate our XXX our gross with

first as year within We to year, half changes negative see prior margins any margin in meaningful our the and we not second trajectory striking accretion the gross distance pricing compared XX%. full exit did For quarter. gross the to the the quarter see of expect positive to or in continued to with

customer than to from but in of a XXXX. winning we traffic We quarter major will expect the second of back that anticipate into further peak the This for is result past delivery pricing and traffic. a quarter trajectory size our cost be revenue fixed ramping lower trajectory consistent return in it the second to in base its quarters, our to its half be over the normal four

However, reductions costs with pricing expectations. ongoing remain in bandwidth line to our margins I our as mentioned, previously And XXXX network optimization in changes. expect any offset gross we existing and should

in have increase QX second We employer the from of expenses operating quarter our to QX of typically increases is and we a the impact of sales at beginning quarter. due diminish in in payroll continued payroll against the and Historically, concentration second to employer taxes. the second sales salary Annual taxes quarter, smaller to less the a of the and the increases in see the experienced as events. significant third half concentration see of substantially at begin impact marketing then we of year, the than marketing

and results below mentioned in QX I approximately place certain control $X spend to the put slipped previously, hiring expense into million our the around earlier quarter. What's as measures happened operating due we Additionally, to due is our projections. other marketing and second were half spending

partially refund to this increase $X.X in sales of increase We and relative taxes and related for continue however, approximately trend This will to years. use million QX. in expenses mitigated overpayment a be of an expect QX to to operating prior by

than course XXXX. margin are operating sets a revenue expenses quarter expected growth to and XX% loss the on This operating of for a towards Excluding this by QX increase less our in us the lags impact XX%. refund, year-over-year

the the quarter, in $XX result, operating a of we of to loss per $XX $X.XX share. loss million the and to second non-GAAP As non-GAAP million expect $X.XX

prior and million year our XX% of expect to annual XXXX, growth maintaining range revenue For guidance as we're calendar $XXX midpoint. a $XXX million, in a representing

loss an XXXX. midpoint million reflecting margin non-GAAP operating XX% XX% We compared to of expect a at of $XX operating the to $XX million negative in operating margin an negative at

income and loss rates in million We $XX approximately that call interest in expected on of in per share. are in $X.XX earn expect currently our interest like increase I cash non-GAAP interest meaningful out a income to to the we increase in recent a resulting also to is investments. XXXX. And $X.XX

we for we'd you to support Before open for questions, thank it your Fastly. like in interest your and Operator?

Operator

Instructions] first ahead. comes question Boolani Please Our [Operator from from Fatima Citi. go

line open. is Your

Fatima Boolani

my Hi, on Todd, when really you it in Thank customer. important good a afternoon. question. the very I'll for like start marquee beachhead taking you with Google seems a

so, source of maybe share if just of have And security? the was I'll you the some into why term? contract give us are implications the us the And And near contours like and -- sole quick complexion with provider hoping of of what some can mechanics and medium up, browser the some and you a relay the around looks then give can I us private win the on, please. term of you both financial the Ron follow can

Todd Nightingale

a the that making helped to really are experience, I that to deal, that's call. faster, core. Fastly it I a but adding missions question. kind web Thanks great think experience just and Sure. for between partnership team for aligned, our the the not product the Thanks Yes, safer. Google And It's a really browsing so team. of the a great -- close of it was think great the there's privacy

that technology was us experience I The browsing out place. partners. the built technology we some other in had helps with in been private think needed it infrastructure had really

-- performance and for the way was a made this built with ease think partner proposal in source the, stuff. of just in landmark product for security in that really over And was the which incredibly years. of I case, ways, I'm the the Fastly that's the architecture and I together. out obvious focused of think, be been it on Google teams win the to I couple And a for think past team. And the super was this was lot a real onboarding best a technology excited here. sole partnered really We've

Ron?

Ron Kisling

privacy, a to high on our a mean, think they're while revenue really the I I of business, the Yes, margin leverages technology engagements deals, opportunity, we've these of I contributions that, nice from browser are, couple think overall done well. privacy, revenue. sort They

sort and of think, as meaningful would us a what customers one, within say with really revenue I to revenues is expand from grow contributed potentially, nice you to I sort of other to, it gives said, customers. opportunities an to those to, over time those opportunity

Fatima Boolani

you. Thank Yes.

I lost think you I there.

Todd Nightingale

other any Are you question? there,

Fatima Boolani

Yes, I there. you lost think I

any thinking some a pipe that transaction if come While specific back some instance transacted to that's might did maybe pricing, any that a commentary just of might bit. your pressure telling of kind that commentary downward more or that the a is coming of entering bringing from if put large a I'm you just within be pressure, at large curious can I'm mentioned whom on larger to standpoint? just interim subject with and base customer the there's are curious, customer up pricing at he's particular be lower mindful this But the of that down little the renewal revenues one-off pricing sort just delivery in to comment be we that concentration going if of for very period. a you similar just fluctuations down some should renewals

Todd Nightingale

good question. a That's

I think, sort think was was consolidation situation suppliers. there where a mentioned, we unique you're the one a I of of

levels our materially. increased so, traffic And

impacted per more really your of from by impact of less just volume. And annual in an of so, sort traffic, pricing price the of what sort driving discounts, particular this would renewal volume you're by customer the say you impacted but as terms

on to we your increased take network, to we think though, see we're traffic this, on impact, the as no peering I this gross margin about additional efficiency, allows margins, of is with little a us things the as the impact across expectations. and our really adverse seeing of the gross this, one our sort talk bit

been more on one seen a it's an we reasons if call lower, annual call I QX that maybe couple historically. is, think and this discounts think want I we've to quarters where you -- we great really a of the to see, basis really broadly, rewrites, we saw been it out as of or

I think as customers I an go efficiency. other nothing we looking forward, there's out, think, of I element market what particular than would are the is for call

trajectory, that over think what time. we But than don't specifically the some increase again, as could And that an see more tried I characterize see price and one to being about renewal you a issue. annual was material spoke we down. a would volume

Operator

Louthan question from from comes Please next Our ahead. go Raymond James. Frank

open. is line Your

Frank Louthan

there to follow-up, to price more just leverage some that's any you for being you about think are is doing or deals are any keep margins the And those other streaming And Thanks. could larger that web -- capabilities disciplined? to of customers as is there? now other things there changing What far those you you're players? larger thinking able kind you're how or as

Todd Nightingale

and lot Great portfolio, helping the even portfolio, compute one something here looking that's seeing about customers. question lately, velocity the thing the portfolio To LTM when and NRR a analyze, and we've growth observability. be we security is the honest, and think we existing within really at expansion, been

to strategic renewal, think, negotiation think that stronger ways, that renewal some been helping. sometimes to opportunity portfolio changes success, explore part We're as partner. seeing I of that which a in And degree customers us our the our has taking a position rest a in puts at the and I also as of time,

there more a the every internet opportunity year. and and success seen but as become year significant there's think portfolio of customers. lately, less a think more within I of an going to We've movement using that of renewals and driving part be There's the I partner bandwidth more customer's bit expansion some strategic and costs those infrastructure. that, always see We're to a the a on natural always every expanding here. voluntary status a to these real bandwidth going little amount by

Anything to add?

Ron Kisling

the that those is add would that see inch. expansion of what most is thing one we renewal that really One I see think is, typically cycle, when we I opportunities

So of tied huge a to And kind just portfolio lot of increasing increasing pricing, traffic sea But annual change up. is to or times adopting, the relative that either that levels. it's these a, market. it's the come not customer renewals product also

so us And server I efficiency, expansion think get us efficiency network that, then of network, to that continuing that very last bandwidth, into of the kind the cost we've which year increased their take traffic really and motion. efficiencies over advantage built efficiently. allow the of that dropping of to And we our that allow absorb additional

opportunity renewables, maybe while there's expand to pricing an a component these So, customer. are us that also within for

Operator

Jonathan from from comes question next go Our Blair. William Ho Please ahead.

Your line is open.

Jonathan Ho

there either, out you or these of some given One happening the sales the macro length in Just customers understand of thing changing maybe environment? I commit? term I or seeing are what's is what that's was, And to anything wanted willing to a little bit out cycles better guess, there?

Todd Nightingale

how trying don't today. business. trying the the financials, of a exposure been our sort macro financial affect the or lot like to telco/service We might of little see, to to, I'll start. but Yes, a been we've more analyst to companies, of SMB we have to work space, exposure effects have service and providers, like don't provider. we've much I'd

the might effects that the be market macro us. down of that parts So really affect don't those slowing

significant here, As we haven't far deal of a takes shift. terms but seen in cycles and go, the puts these as

some performance consolidation. negotiating looking as being They good in there's do a But deal the our strategic of manage leader, price some to fewer to vendor simplify seen around that vendor understand customers their teams see good want and competitive, trend do And to for maybe consolidation. a We to large cycle of we us looking haven't at point their vendors, view, puts us be from why that more there. tends puts operation make but I prevailing a takes, teams efficient. are position

Ron Kisling

of kind a I I'd don't think I to we're, for as anything, know, service core think, Yes, you providing add the Company. the

are not has change. haven't But are it's I efficiency. some list for to deal played seen real cut. looking terms of us really necessarily companies on They takes any I on That where to out drive of expansion. think the well the cycle. I put there's Like So, looking in said,

deals cycles, these of taking but sure to actually accelerated some anecdotally, Yes. our incredibly have longer, I'm have some efficiency are quickly. largest and gone dynamics, trying cycles Some drive

Jonathan Ho

enterprise it's Excellent. now decision better I it's with that what Yes, I as methodology the also you to bit a little I were well, guess, revenue wanted bit little understand your a capturing accurate prior customer know, you not current maybe maybe guess, I the change the to methodology? with more think enterprise, count why like and

Todd Nightingale

while from investors we've did, very historical we it talked something I've a we've some heard that backwards It's was looking. way the about for actually, input

so terms didn't in give of terms in customers contemporaneous by the average. months we're XX trailing a looking And it of adding view real at enterprise progress a making

business and information And like. we're we of this is so view level was, really customer customer starting the last look what in is to acquisition, better the of on progress XX quarter internally, provides enterprise XX think reflect better over current in how And months, definitely the terms the real and acquisitions making, our been the to in doing. at we've look time this

is to numbers metric. transparent. we a in As doing to for But did we we're much quarters, we how this think next timely business. quarter, the this make we are going to want more want fully To that understand this, three share be sure both the

Ron Kisling

try looking relevant. leading that always our I'll transparent to within be motivation happening and business, that we're just data It XXX%, managing helps about making for the the more way indicators. just what's we're the now, also add to was more

we're I think new line with much teams, that these so, with helps numbers internally these well. metrics, more our And tracking so in that as

Operator

from Please question Next Fish Sandler. comes James Piper from go ahead.

is line Your open.

James Fish

that? before how until had long program of get kinds new Todd, about this talked of partners kind have signed the us but you the has packaging could many bit pricing, had of what through how adoption you with of us the feedback you so new we little of customers of far, new been before, is details what remind modules? up packaging the kind a you kind point that how on there and majority on the at versus and And different walk can

Todd Nightingale

Yes.

existing sold utility for And on pure lot time. and call you So traditionally, pay is that ala strategic of of carte, costs And think, of Fastly to large I They analyze for been want for like utility we'll customers to a do model. they change model great. our models motion. that Really, to largely level nothing continue. feature a kind customers And tuning, them, their that And sophistication. a what type that model. of that has run at a I things a continue for with and want will buy works

market, for a our give feels more at one, of the so that that simplify the motion rest order that solution based. them to in comfortable motion, But and in number packages, offering product really buying and to ways line looking our customer initial it's acquisition

line and product a content would that observability you or you gives it compute. within basic options need all product and lines those edge security, delivery, the So

We've package you like buy of us feedback can packages, everything their a the them. one benefit. tiers need. so, month. one and the those large, works predictable of small, best you of of this gives a And they billed There's and kind billing. those packages that get three customers the medium you of for They every on get buy choose And same amount it lot to positive heard the side, and

a knowing the of bit feedback, surprised for And to onboarding platform. some risk what starting that customers and friction, the the having into customer a especially they're that will we believe new to and takes the be to hear that little not going guess by bill we're some lower of get that off concern billed

couple got of coming excited primary So we've even reason starting hills was predictable starting all-in-one are close the package that motivations moving those up super quarter, the to great. that's and to on the we're some are see to big this good model to early, a out and are is that a get excited to bring launch to about which customers. super feedback, excited see billing I

channel, is As for our VARs have new an this goes, we're program partners, channel our program past. that MSP to the through far amazing business resellers, been And as partner, to service which portfolio the bring partner to our great. to whole our bear writer portfolio brings the security partner really, in network. excited entire

because to that be through We because the will this SKU there's to believe channel, fewer also inclusive, the easier reliable, because of piece. packages all transact they're buy and predictable billing

And just The that. off. kicked program so also on bullish we're of kind partner

So getting we're tracking. really we're started,

is starting partner new how deal partner to next. and year, acquisition the end to the to numbers community. to a see of registration, hope later some pipeline big the working this and to how this movement I tracking affect year, activations, and see motion start by the definitely expect especially, way, but affecting Of the but driving see maybe we're the and course, customer I to real we're in revenue

James Fish

follow-up does kind growth there, artificially, is it's as customer or it a kind with if of quantitative a just to given Just kind really accelerating this of a the start so year, there movement near-term near-term? subscription impact that act base. to of way kind base of about to as really of headwind a bit that utility called if sounds the little unless packaging, count? Ron as it's opposed you kind a And think the usage away

Todd Nightingale

new really kind from we're incredible to it trajectory in going in deeply the haven't of this that of think don't penetrated past. a business, I be Yes, most to current adopting really impacts be that customers we the and are customers our segment going

the the current customers, customers. mean buy continue our to larger I of I model. those on going enterprise think most are to

will lot to as anticipate sort these the piece packaging a it's recurring streams. going our bigger having volatility, revenue is that impact a revenue of and a to impact up, build and it's the it of improve of reduce it predictability don't bigger an the of base of going have, So revenue, I we becomes as

Operator

Stanley. Sanjit next Morgan Singh Our ahead. comes from question Please from go

open. is line Your

Unidentified Analyst

on does on consolidate when like the traffic the But Hi, consolidate they strategy look our wanted solid conversation what a terms these the in these, can share consolidation I efforts? software, pricing the question. it's can like Congrats many in in much there, base? gain lately like consolidation this checks. of customer vendors and taking like the efforts kind vendors, more the for how for to that the accelerate how new has customer customer of down we've does commentary Fastly And like decides of to you made and across packaging, Wilson] multi-CDN quarter. a Sanjit. heard that efforts, Thanks [Matt to Fastly to theme circle in back

Todd Nightingale

isn't I those question. Yes, on consolidation category, you that. great that architecture vendor like customers largely who who for sophisticated large, People really running multi-CDN solely utility my think folks. give is can sense the multi-CDN into would tends a are building. packaging It's The for designed And really happen to fall customers. of want

in their time sometimes it's application, cost, whether total on a like, is And total host an feel origin, have a late directivity to whole it different the so, website, What whether metric can their But discussion is of expecting not matter. their that whether about effect customers on or that metrics ticking ways. and load I'm latency, the there. what it's of looks that and generally, total performance it's success

those that work this are about turning discussion either on overpriced to delivering or with, our by off Fastly measured vendors, give customers the or the system. are our then difficult a tools customers, aren't matter largely Get designed about to right there's who cetera. metrics et our And metrics

for leader, seen and performance here, a think customer success success. ton we so, are us, because set of on customer we focus I have we've a And

kind team that ensure about, is services their they customer our is base success extremely, user working active to care Our their experience. extremely and end user real the which real experience, of with

us, largely reasons. think, it's those I for so for And been a headwind

Unidentified Analyst

on exits that XX%? other the efforts Like XX%. kind year of 'XX? margins done what optimization distance still striking in on like above help within Are the network Fastly gross Is margins? to be of And side work margins are there gross gross more is the levers that there in pairing get to one can call

Todd Nightingale

tracking I've done. closely. this the efficiency work amazing that's stuff It's So been pretty being

we're side for On peering engineering And the there's there's sure, looking network that negotiation. contract network engineering at. work

of a traffic, reach record continues levels bigger to As and, buyer become we new network bandwidth. of our

is And so we're rates, better great. able to which negotiate

great, There's another depreciated, even guy that doing reads which to more efficient. making use. team. the side. it, think, with a I fully our still a really work milestone that's in hat There's our hardware teams existing for the side it's infrastructure more a amazing and a have been a infrastructure is that And great And is

less storage infrastructure, able making compute, both And hardware. or deploy efficient, also we're more our making so our more by cash but efficient efficient, to more

margin to And on in in on next amount is And or helping obviously, four quarter and but last because hardware the the really the of mentioned see much in efficiency doing think we side helps how the so, gross also in month immediate that's side, buy flow you'll it cash the seen that increase, of dropping precipitously work. way. to you'll door the appreciate see so, that just I infrastructure in a buy but out cash it quarters you've more every

Operator

of go comes from Please Bank America. Liani question ahead. next Our from Tal

line is Your open.

Unidentified Analyst

for Madeline today. Hi, question. guys, to the you. taking Tal talk for is Good on thanks to this And

But have expect do a if then packaging, follow-up product. on one packaging, take pivot at be to candidate who like-for-like a on I a you uplift see customer for Just quick would good and packaging, on one the any we all? new

Todd Nightingale

be for a here is that be I'm question, Yes, there'll would too. you, be intention tell I'll our breakeven. put it'll some that great customers, some sure it about takes

them motions onboard. the experience of lower customers little a trying drive experience faster, But and make really easier some to For easier they'll onboarding, that easier so end them by reach here to it it new end for for making we to can more to that for onboarding friction we're to and others better the little a maybe is a less. benefit that customers, be user spending

expect to time was headwind usage, them That's drive. can the mid level or team helped be more of three package, adjust. our entry pack I new starter a right won't they that the end success If they with the of over work confidence have would of we're we to a size, have customers a package looking platform. really customer with a goal. benefit about really to learn course, kind the And it it that's lot don't And pack the is point tiers surprises can their as tailwind. that and give having then high an By that that. starter

Unidentified Analyst

too, year we Thanks then product to side, well growth could categories? going uplift could of in talk terms any to development? just that, side so either has how for compute And much. pivot as security potentially the from just on on these this been top as of any of product chance priorities some And you the edge on see

Todd Nightingale

great. Yes,

part of On side, category. our incubation portfolio the compute

tell broader load and onto kind broader you easy the I'll are things we're that compute? on platform experiences? need, acquisition, tracking additional How they of, drive really force. focused the What features platform? that that motion those that their is the how our we developer you, in a to able driving bring our so quickly customers ramp And know, zone, customer we're Fastly incubation a can and So that of lot and like

real interesting expect something maybe QX. compute year. some to tech. love ways, revenue, but really I it least see use through to that has from uplift, customers, are well in next been going and And pretty optimistically, we I'd this that, on tailwinds significant has in and start finding But There year. focused see new cases especially to they're us at some stay

ago, security just time in interest of interest, a a of at a our from that's always RSA there. monitoring real, weeks teams the new really security world, of and ton it we've being experience the visibility couple great onto lead system, great because, operation center had security DDoS interest platform. view, motion demand a point around real all etc. gen is monitoring interesting, of being conference. sock of of the And that's protection, of work off DDoS run it's with that tons the a was we the There's around introduced From attacks the that that's motion, showing doing a done on tons tons gen And

it's some We service, interest in that. run And which up the very on we've service, second first the bullish and of that of benefits service getting let deals time, half. security pretty is that paid managed us, there, a significant enjoy already and efficient And I'm we we're as of a opened our ton to for see a the customers It's and cost internally, resource great. hoping for add resources. sort

Operator

Next question RBC Please comes Markets. from ahead. Capital go Rishi Jaluria from

open. is line Your

Unidentified Analyst

to This about maybe as taking the on security is or there Jaluria. different that you, really calling a roadmap, I a to for as that on into quarter features have could security Are the out? Rishi in but for I areas or for the Fastly of a service Thanks any see And you've you portfolio, Richard we on my capabilities start question. that then kind follow-up. nice are think it of was rollout of side. just kind managed follow-up identified want rest just think roll the XXXX security key that the you customers anything product maybe focus head the of

Todd Nightingale

that's In for we're, mind very scenario of us. that top

great. that in just mind. think been of our different ton, of of just here. has especially for of mind But It's is very of across cases use top space I the been that it proxy for about a As we've is have our types ton stuff super The thinking interest and interesting work customers, protection has e-commerce. browsing customers top off bulk incredibly anonymous private seen

And is area are used. constantly be years. XX are here the It's a going a best methods art next we technology. The what really to for send and state understand to with origins the information ton investing And signals is to the back we being of really the that that class changing. X, in to use interesting the changing, the

and space There's protection, ton for visibility in ton some get of specifically discussion across of be experience, early around R&D areas, service, But that and around real sort say right work off used on. early going security technology will those three focus and managed of DDoS interest you a now ton I interesting streaming of can a new too. the board, early and of the just security a types

compliance for technically sure and it statistics on protection, I'm we and on compliance on way if that considered stuff, But that controls it way the at be look different of side analysis not especially to stuff compliance, providing privacy too. focus streaming But and the would levels customers that and our security.

So there's going discussions in and compliance. as some that early space work on regional early piracy, well,

Unidentified Analyst

just And rollout new about of then and as we think pricing the packaging. the

great where at of the I product a you're get I reference of develop the elaborate didn't I to want lead should understanding you at don't a kind versus about we expect some And initiatives. know But say the enterprise? just where better you're it'd go where business today. growth as mix number of How today to guess, long-term? of necessarily more to be think and you SMB

Todd Nightingale

it's account and just No, motion successful today enterprise, touch that's think, been great I executive what a very And as largely, as with real sales customer business is to And a well. and but refer anyone question. Yes. would high for with our sales team, but a enterprise success sales motion not an us. team

lead how we motion think product And at right motion we when assisted sales, lead, now, product, sales growth. about look product

really the Our is first sales product assisted focusing motion. on enterprise step

folks sales strides for teams, billing, of sales visibility, our made entitlements step types of new with and some and sort automation for here new amazing visibility etc. free that's and service of we've of our So customers around full and management first types full our trial

sales And the helping friction, been again. that's us motion lower that

to smaller of attract, a will, lead their and pure the earlier us our in with and community All help earlier and more more about I thinking motion especially really platform lower in platform, that work of developer, get on compute customers kind more the product comfortable growth the and future board, true think, friction really student community our apply cycle. that on will for

it's to to we'll next motion this starting focused motion. enterprise honest, And bit on little look supported think us for I out PLG year, we're pure year. product be the a be sales think really I at

Operator

Our Power next from go from ahead. Please comes question Will Baird.

is Your open. line

Will Power

the the the you're latest WAF. Next-Gen kind remind seeing thoughts Love the And a much update touched Maybe security what element you lines sure just I guess with there for any some on if your is just, that trend us, look observability, second. are what trends of get maybe not on could I of I'm Todd, guess the like? on we've help to maybe then key side front? thing differentiators maybe just product on the on that other sticking

Todd Nightingale

Sure. Yes.

remarkable really is it's it's we many market it so most real Next-Gen see accuracy, Signal important the I our the WAF jewel Next-Gen crown and Science the passing and it's of WAF ways, the acquisition, think portfolio. differentiation part leading day. from in comes And is security market every application security in The the technology technology of stack.

that usage accuracy only. their almost to percentage, mode, And customers, malicious going which and our the run just WAF they means our the XX% that enormous differentiation solid, blocking in Next-Gen that but is they and faith, be A customers be of spuriously have and full enormously so trust blocking blocking is users attacks won't instead important. to

interesting, very on some days, cases. thing and early crown technology, I early number front, year, it's our remarkable. myself portfolio, security think to The is this Science, about one really that that the we're at it, I RSA observability Signal we've kind of customer is use the customers really, proud interesting It of but found talking it incredibly it's really seen of jewel really

We on observability. kind to space, this but observability. of stack in compete focus in are on not full FSO concept edge instead focused of looking the deeply edge We're complete really observability the

log signals ability most applications for from reliable running And observability most the users of that's the of give in are the get observability people a building to edge and new content up type stack to and world close the the resilient, needed sort this full possible. analyzed and right the the solution to kind websites of who as as rolled

now more. reachability know and the their traction. from days I'd So we'll a the early or performance think for they love can some very question us. to bit two experiencing. users little be It's starting users, a I those of quarter that just get to really get tracking, are We're not early but

Operator

from question Craig will from Please Jeff last Hallum. come Van go ahead. Our Rhee

line Your open. is

Daniel Hibshman

Jeff. Daniel Hibshman on for This is

terms in push successful of channels Just or there in or channel on number that the either in of channel goals, the percent channels, the be because anything of terms push? of just what the the we to quantify revenue of partners would

Todd Nightingale

a great That's question.

I'd seeing by channel to you We but see, I our aren't in goals. happy data internal and of I'd not the terms in be to give But thoughts disclosing slice channel, believe our some like service the channel, our be XX% fullness the marketplace of through as time, our channel, we demand, or cloud total should well reseller channels. business more both of as service of going

at adoption. that to power I speed would And also put not of entry goal here part think board can brought just easily. to the integrators, leverage software help, the which bear A barrier the faster help show Fastly and systems be increase customers, to those will this largely vibrant customers be help community, us partner on effectively the more big lower help integrate technology the Fastly that more healthy, but is technology and can expertise reach our shops, and of -- really, more

trusted and for that this is worth is being be a at bear expertise that position partners of it they look the that's part be invest, seeing those those it that be us that really would want And to XX%, I of success investment. it program we'd we is would enough partner a their big integrators them. for sure what sense where making like. systems think profitable that's me that And that would And in makes enough for our brought to for

Daniel Hibshman

of in you trending then guys so? quarters trend next decelerating several or been how are line one for the me. Just in that's ads And the just customer the looking pattern? next over thinking on pipe, a thoughts as the terms about at more year the customer Any in

Todd Nightingale

very that that question. track closely. appreciate I Yes. I

motion it that's I To it's here. lot there. we tune is partner we're be part honest, a an huge in of to of think improve a registration opportunity where and deal have why can focused the we area the really

sort for think platform. I partner to a our huge to opportunity that of bringing on has customers me contribute

efficiently friction gen with about optimizing terms motion to bring on believe onboarding mentioned, the the we in do demand RSA on talked we and etcetera. like focused more customers of can the lowering I of of trials, pressure course, and what deeply that, free the event, platform the we smaller Lowering

I think turn around. see, that that I we believe I the see you can trend, and

the next on be it So we're year. going super in to focused

Operator

would Todd I to turn to over for no We further closing back questions. remarks. like the have Nightingale call

Todd Nightingale

Amazing, thanks so much.

do as experiences a of We close this remain the We're we paced Before to better thank and to want as fast place. internet making the call, employees, and our take opportunity are ever engaging. customers, investors. course I our committed partners to all our our

Moving business to our to delivering shareholders. value our and forward, on growth remain execution, lasting we focused bringing

you so much all today. for you. Thank the time Thank

Operator

Thank call. for you participation. conference today's your concludes This

may now You disconnect.

Fastly (FSLY) 3 May 232023 Q1 Earnings call transcript