FSLY - Earnings call transcript Q1 2024

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Operator

Ladies and gentlemen, good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fastly First Quarter 2024 Earnings Conference Call. [Operator Instructions].

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

Vernon Essi

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

Fastly's and We with Todd CEO, have Nightingale; us CFO, today. Kisling, Ron

our referencing be of The fastly.com be Also, the available of this conclusion (XXX) can today's number will accessed webcast XXX-XXXX XXX-XXXX dialing and after call a replay and ID for archived through will by X conference year. call. be website, shortly

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

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

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

earnings this otherwise except non-GAAP update we statements are date. statements, intended Reconciliations numbers we discuss certain as financial the a will undertake GAAP to non-GAAP available are measures substitute our us today's to for Also forward-looking website. all on We financial non-GAAP revenue measures than results. Also by discuss on measures. the call not law. our provided will information basis. be on in and to obligation as note Investor today this Unless Relations release during required that the noted, are call, supplement forward-looking These GAAP based directly adjusted no most to comparable on an other be of any

the over Now to Todd. call I'll turn Todd?

Todd Nightingale

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

our a like to highlights. drive revenue financial relates growth. discuss will I'd forward it and to changes provide discuss summary give to over to initiatives revised detail. results in acquisition update of go-to-market and our quarter guidance our related as quick revenue quarter our I'll and financial first in path to the an and then hand to our customer First, our then Ron I first metrics, our call the results outlook

I'm of midpoint reported XX% million first range. $XXX.X pleased we our coming a year-over-year the representing and million to in that growth guidance $XXX quarter, for above million of revenue $XXX the

our improvement efforts NRR and quarterly up in growth this showed at and XXXX. Our first of declines quarter of retention XXX% from slightly XXX%, customer metric LTM reversing with the the end since QX's in level

by QX XXX count customer fourth in was the XX increased total to customers X,XXX by which Our and quarter year-over-year. compared the

of decrease to is XX. our below X QX. grew customers by offset at XX annual year-over-year mostly new in enterprise customers totaled net from dropped enterprise threshold in by threshold a This $XXX,XXX we On quarter. customer XXX brought customers revenue quarter, this the that We basis, due a Enterprise the in the seasonality. count

Our our points basis up the of first gross was ahead year-over-year XXX XX.X% quarter, continues in to and and margin expectations. improve

moment. loss loss more The million was split quarter this details better OpEx operating Ron was and materially of million of the a compared result to cost Our in I'm and first $XX $XX an the between as quarter upside operating higher of XXXX. to with million in share $XX.X very million. in loss control, $X.X first guidance margins was pleased better gross will roughly than with you our our

cash million as positive $XX.X it $X.X fuel operations. in growth importantly, moving helps flow us and with momentum especially posted we forward. EBITDA an adjusted million Lastly, I'm from operational here, continued pleased on positive execution the

will quarter, of sector let our highlights penetrating me business. provider. reliability health in growth industry the our us and solutions Now perfect fit. care, always quarter. imaging major new health more accounts existing vertical making a drive research the performance, first care in accelerate differentiation has and In deliver agency discuss our acquisition key a been the the better These and quarter wins the in continued an we company, sector had The leading customer and We help health a verticals. Fastly and on leading health customer first to wins government logo with success in diversifying care lighthouse amazing during important focused a

vertical, people are data app quarter, We which first won leading over billion MWM, the top continue publisher, the onboarding Fastly. to in we with penetrate across the services to mobile In we image be globe. mobile AI-driven platform serving now a the Spoons, tech. to selected In France, X.X will business market high developer app Bending content delivery proud model. In announce Fastly's we're supporting a services its a that and support optimization app leading customer

vertical to we won agents companies win. real real It's landed able one the over how that expertise XXX,XXX realtor we're the MoxiWorks, with with quarter, we great countries. build over new example a of upon this in also estate of discussed vertical and with last estate in which We XXX largest world's

first Fastly developers, customer quarter, introduced and professionals global the we a leaders. business for Fastly's of series Accelerate, exclusively of security in-person In events network developed

was at attended. and San event Francisco X in our held first headquarters widely April on was The

and similar worldwide New to with events in XXXX London, We up Sydney be will York follow. following with

of other the in Innovation users millions DEVIES to in the Lastly, and to cases private web Internet Our I'm top the help extend browsers widely beginning privacy OHTTP security. is Services: and pleased solution find used Best Fastly's announce to that Relay won Application for Award to on privacy Development! XXXX in used

solutions continued into and that's quarter, a why self-service we and focus enabled investment our product trials first generally platform available our across management bot log-in and QX. excited with for in improved to the unification I'm so drive platform and to platform-wide. key our strategy, expansion. platform feature becoming and We is In Expanding universal upgrades adoption

bot significantly takeovers management cybersecurity offering. is solutions the fraud, important combats abuse. the Our of This the automated at other and significantly our bot reduces account attacks online for security an bots milestone company, expanding risk attacks, edge distributed and

WAF and the to it security see We've capability both quickly. space. so great DDoS an uptick up bot make security incredibly complete seen this management expansion significant is application acquisition, customer here leveraging and services Our web in API best-in-class solutions offering and and tight new already

great a at is Fastly. velocity innovation Security example of

false with differentiated customers in WAF predominance to full Our highly positives operating and blocking mode. continues of be a low

and against Our competing products to market, bot XXX% management most on is and solution the well the is innovation was mature enhancements and already developed product significant there in-house come.

We and add-ons set by our with we In packages, price motion up throughout the continue simplicity, the fixed momentum our value foundation choice observability a Fastly enhancements security updated introduced first gained to XXXX newly year. packages strong in in SKUs, that and quarter especially to our launching customers. very delivering for packaging of XXXX,

all half of quarter, the you that the packaging share in exceeded I'm excited XXXX. with already we first first customer the purchases to in sold

their Package for reliable packaging confidence in customers customers Fastly. motion billing commitments. our longer-term signing provides for reliable, predictable shows Fastly and Our and by revenue up billing predictable, for gives pricing

year-over-year. our revenue Additionally, In and contribution the than more to grow deal registrations channel doubled program and continues mature. first quarter,

first the the for a fact, In a time, through deal largest quarter closed channel relationship. in

strategic in have partners our efforts. importance channel continue to go-to-market Our

has to pleased to our and within weeks. interviewed find quarter. with a the Officer right search expertise a numerous the a we're candidates strategic final to a I'm have and we've the CEO that new quarter. expertise Our we've I should focus to finalized and ability we We've key as been in down of a this second scale. made the Revenue grow selection few stages. the in balance handful, announce just a now operational happy narrowed and Chief I'm expect progress candidate

Now outlook to address going our let me turn forward.

of to of expected quarter outlook where financial the guidance first second year-over-year this address growth annual in X% and path of Ron to not X% course, year-over-year are this discuss disappointing. business and are we details and a moment, forward. let guidance XX% XXXX forecast will Our me our perform, modified our to growth, but

customers. a are from factors few a largest biggest short-term number of reduction environment. The There that challenging a contributed factor our of a small to revenue is

here, dropped few from a revenue XX strategy, quarter XX%. significant Many reasons first our and see are customers accounts this. the and we run top XX% from there XX of top did The multi-vendor a for volatility to

timing of the increased largest and long quarter. and clear, not in each strong of has but share we strategic Fastly in changes, them term. traffic historically, accounts, be gradually our we Firstly, volatility largest remain with our removed with greater we a been of volume position won this from any To have customers, saw rate

reversal in did consolidation we vendors, the Secondly, an a year. of of we addition last CDN some vendor accounts, saw see

usually are seeing the not traffic uptick customers. yet But this associated have slight from And rerates seen we typical expansion of level a thirdly, we commensurate with largest the our with motion.

to into an course success the logos notably we and one of the having revenue effect motion goes over the XX long-term the of aim new the in year. X new customer with our positively, continued very QX, customer our see the of are acquisition move motions on. increasing large will Very on seeing year new as We added acquisition, which results top

our growth. is we to strongly our correct, remain will forward, strategy on believe focus and Going committed we

to motions. continue will invest and customer acquisition We in our go-to-market

engage the cross-sell improving We are expansion, and revenue multi-vendor on driving unification and in largest committed visibility and platform We to share growth. accounts. us to and those customers traffic our shifting with helping remain drive we our focus way

with We wallet in bot to our portfolio with our to of will drive and the stickiness with investment engineering management effort expansion coupled continue share customers. this security drive

these on to in investments, a our to managing efforts focus continue clear long-term a growth. we with backdrop to As leading drive spend will discipline

satisfied on and I we turn first guidance, and QX growth quarter call of revenue In with acquisition. initiatives, now Ron? customer We're outlook and we are with pleased over will summary, innovation And financials guidance. the the our are Ron. laser-focused XXXX discuss details performance our to velocity the quarter but to not

Ronald Kisling

to in changes everyone, Note I metrics. to unless are will discuss financial our I'll results review our thanks, stated, joining financial today. and forward metrics non-GAAP that and all Todd, you, first business our discussion results turning Thank then otherwise my before disclosures us guidance. for based.

We most information focus sharing to the of provide useful understand business the our business. metrics on and progress to monitor the that continue

XXXX markets our is and are the Conversely, of our DBNRR, security, which number discontinued disclosing our Beginning delivery and which emerging first services, our we release, disclosure by have other, we products. absorbability revenue network countires with core products the quarter offering, product statistics. growth this NRR, offering quarterly and and of between bandwidth which line products is our offering, compute includes now

a trended We Supplement, be longer X-quarter are now have a because reporting we portfolio, history revenue Sciences on of our provided no Investor in this stand-alone full Signal security revenue basis. we providing will revenue from our

solution refer Sciences which been Fastly's now integrated firewall, our firewall to Signal acquired has WAF. we as with legacy Next-Gen

largely into has Note WAF taking revenue our of revenue the our or the Signal WAF firewall transitioned that legacy reflects integration. during Next-Gen that revenue WAF. decline place combined Sciences in impact the legacy security Our

prepared was supplement million. X was my revenue for comments. the quarter of million other I will our only as Lastly, revenue breakout here provide totaled Security trailing Network revenue $XX.X and Services $X.X revenue million. XXXX the $XX.X first quarters, the in includes

range Turning of to million ahead slightly midpoint to $XXX coming Revenue $XXX of million results. of the the first for to quarter XX% year-over-year $XXX.X our guidance in financial our million. increased

grew our seasonal and pattern. normal This in on revenue, customers. a lower degree decline we highlighted by to line, to sequential a Network traffic to quarter, by traffic gaming Specifically, million in security some in largest the X revenue largest e-commerce-related expansion our at product lesser million. particularly offset and $XXX XX% areas, grew resulted $XX.X traffic Services In year-over-year XX% first year-over-year experienced

XX% our of the reflecting of XXXX, in quarter total of Compared largest in Our first Also, revenue in QX of the accounted customer top first to customers. no XX% XX the traffic at revenues quarter. XX% customers over comprised XXXX. for our lower impact

healthy is the RPO our through quarter. quarter first the customer over Our from continue from and trailing very the quarter XXXX. million million, quarter, terms. and $XXX largest primarily low in XXX% their X% net quarter At from to $XXX decline was working and retention XX our XXX%, remaining fourth contract was in This ago down of up year to the down in prior due the months of from in down million the of figures demonstrate customers dynamics. $XXX XXX% first end These X% rate retention the obligations our 'XX churn

QX, enterprise total earlier, X% $XXX,XXX X,XXX customers shared of of of XXX we in compared XX Enterprise from quarter on QX $XXX,XXX, as was in the $XXX,XXX from customers X of at and Todd increase basis in quarter. X% spend had previous QX of customer a an classified As net the annualized compared up down XX% and revenue to enterprise, in end which were decrease of for last to accounted in XX% the an average year. QX fourth

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

the quarter for to gross onetime a XX improvement. in million was were XX.X% quarter compared basis take-or-pay reflecting that after payment, point margin true-up XX.X% $X.X XX.X% XXXX. the fourth adjusting Our margins fourth of gross quarter-over-quarter Recall

a margin services was in costs control and cost Our result of costs. bandwidth efforts continued gross transit improvement related

expenses million quarter. to Operating increase quarter, QX first $XX.X an the were XX% and in the from fourth X% compared sequentially up XXXX

operating remember resulted in operating quarter $X.X in gross that exceeding in seasonal in guidance employee $XX do with the to our better-than-expected profit range the our operating costs, of our the million high operating we million. loss end continued favorability of half a expenses, loss expenses This to $XX our year expected million management increased the of better slightly of due first combined costs in be first were than payroll calendar to of While employer taxes. our increase see an

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

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

up sheet. approximately at balance We million of in long ended QX classified million end the the equivalents, cash $XXX from with those marketable as quarter and to term, including Turning securities the cash, investments XXXX. $XXX

$XX.X to Our driven first to a was quarter cash positive increase quarter. from fourth free in cash million for quarter. flow in was increase from sequential million, This million the compared $X.X $XX.X primarily negative $XX.X increase fourth by operations our the $X.X an the million in negative negative million

high we coming to X% expenditures cash X% were just our above capital end of call. Our QX the of quarter approximately in of our guidance in on revenue X% the revenue shared first of

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

with For half the first be XXXX, anticipate our be deployments we the cash CapEx will to toward in the year. X% to of X% range weighted

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

our revenue of impact As customer product and customers challenging Todd pipeline. acquisition are of largest a we and new decline shared in remarks, facing environment his the overshadowing

dynamics and our visibility the today. business these have that reflects in we guidance Our

We a largest at sequential results in modest decline compared to customers. to traffic, due QX expect to our revenues flattish specifically lower our QX

We XXXX year CDN also drove early in not impact sequential of favorable will the the that growth occurred from period. prior XXXX consolidation benefit the that in same favorable in

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

we capacity We investment in initially cost our approximately build second to continue first gross in a gross be with in decline points basis than We margins typically see half better network expected. which half improvement being contributed disciplined and for seasonal had as very quarter traffic. peak our we the margin the first to XX revenues, in of

quarter, approximately to margins XX the our we anticipate second basis For minus will XXX or first basis decrease points relative plus gross the quarter, points.

QX As we slower than operating had expectations our our previously, by cost better and continued was hiring. loss moderately earlier management mentioned slightly

seasonal the employer impact of of and higher first decrease our payroll Our impact expenses ] second reflect will operating results quarter the gross margin expenses. in [ to operating half the

to to for to $XX to non-GAAP million non-GAAP As be share. second expect loss to loss and $X.XX operating million our the a increase per $XX result, $X.XX we quarter, our

million, in midpoint. year million of revenue we the to calendar at XXXX, growth the $XXX For expect reflecting $XXX of XX% annual range

plus gross basis continue our in spending XXXX increasing development. We to while by XXXX. points to discipline will and basis to XXXX investment to relative see expect or XXX go-to-market improvement our our and XXX product margin anticipate continue in margins points, gross approximately We minus improve

result, a a midpoint, we of operating loss XXXX's million X.X% over loss million, $XX the negative X.X% over margin an of by $XX our operating reflecting to XX% increase As range operating expect and at XX.X%. XX% of to non-GAAP XXXX's operating loss an of over over of improvement margin to

share expectations, expect the our to our to breakeven to free per to $X.XX, to in and million improve be our non-GAAP expect $XX negative in in improvement We reflecting XXXX compared to $X.XX loss close loss operating XXXX. cash flow we

line your the thank in Before would for Operator? and like Fastly. we questions, we support for you open to your interest

Operator

now [Operator will Instructions]. the question-and-answer first we with RBC. your session. Rishi question And comes begin Jaluria And from

Rishi Jaluria

headwinds. those speak in out, to consolidation start the tools you quick what XX follow-up And and And your arsenal in talked been first a pressure line with quarter, that? maybe how maybe with of in vendors me space. Ron. is days of down, Todd, bit Ron. in for the to terms relatively about let the a you little changed of like there's that Todd, to do what going Last have you historically. I've intensifying environment Wonderful. it's pointed got pricing you sounds spite after has It fact on, in start the exiting there more being kind you. counteract guide Can past pricing maybe as the now

Todd Nightingale

the appreciate I Yes, question.

of pricing us, sure pressure in are think pricing been for adjustments large and we're kind we general make used would projection I say impact trend accounts, that But saw got in. our more outsized saw that our I XX, we're the in That's top we we of or than sort what based trying had continues. XX to the that. market, slightly an to on -- seeing, the right to we doing some

bit but of changes. in Usually in increase And that, volume well. kind hope We pricing high key the pricing than I these of rest pressure there, we're -- accounts, large The as media see would have seeing some in little pretty Ron? see really good. a feel a we more primarily still that be the pricing. to commensurate especially in it's pretty normal. still Trends could accounts, been add Anything you of market the confident

Ronald Kisling

No, I saw think rerates the -- modest period more a we of historically.

I think the kind change in of we largest broad seen across have that market, but continues accounts. the a

Rishi Jaluria

of isn't that of then back you more Okay. of leading Got needs What more I have RPO that look highlighting then, it. -- you, to talked to pre-committed. should especially indicator, That's be so helpful. to is a even relevant to now for when consumption levels. healthy you at making for And fact you're what metric. happen the we declined given supplemental, good the still Can that RPO amount you maybe and on And kind business this the kind investor now sequentially was a speak do of year-over-year. more return Ron, why

Ronald Kisling

good a Yes. question. That's

see gain. see over to foremost, that start business packages, momentum as First time, and the more and I more we of

will on mentioned year. we call, Those more the we saw in full Todd than the packages of last in As half QX additive. be first saw

in the better will of year. of And indicator seen, it's grows, it it time, also this of to over a be that our as first the So volatility we've half particularly going some reduce business.

first X-year look But commit. our of a have the it of decline, basis. of our kind A have do lot foremost, terms In we largest do customers at on year-over-year of really and annual some customers contracts.

creating multiyear you're the that through of a what year-over-year as so is is declines burn have of just or some customers our contracts on they some RPO. their seeing sort basis ahead in really And renewal of headwinds who

Todd Nightingale

this. add I'll just

to to even enterprise as and start large more more more hit. more of become accounts reason over be to impact our and packaging looking that do seeing time midsized that's at line We're we the and engaging that going for think is they'll is enterprise in transition on shown metric I move packaging, and good believe on the forward. and a for I that will us relevant start

Operator

from We Frank will with take our question Raymond Louthan next James.

Frank Louthan

in Day, for take you First, kind rate. customers. net clearly Last different. you the the then then breakeven of that the cash higher mid-February mentioned it going were that just the engagement on team see here where Todd, tells year What that few How confidence the the you versus are And last still right the this we shift in to strategy gives can guided was Analyst in clarify the weeks in to that train free turn retention approach into year. us us in And on market sales guide. growth to guide and shift? and to Is direction? the in at And learned this to flow attainable? what when long new is the going path the you have engagement

Ronald Kisling

Yes.

On expenses with the revenue our outlook. to we're commitment cash think our in I continuing line free flow, managing

the in on free mentioned to breakeven headwinds, flow. create expect this our we does but some for close remarks, prepared be cash I As very XXXX to

Todd Nightingale

you As right as that's to and of believe real and conviction account real have I what that's the market you with doing And right for realities think react important react to speed, far incredibly have now. large engagement. I we're large Look, account the now. us and to management and the question

have the And way engage them, we that that a control The it. engage we and at carry our focus an resources And improve that believe drive like the we're platform, price performance control, that's product the opportunity with or penetration, to and top doing. and complete drive discount we way those dedicate drive the we categories their we line accounts way more to I exactly XX in more of lot optimize significant the what we Fastly, way more and and of they solution. all technology way that revenue. a XX

launched Right the pretty our -- running for But since a happy was engagement so accounts. couple with right those and it warranted, in is much weeks progress a we're where think our major just far. looking February, have now. projection driving that engagement all of for how in across far now, already higher at changed We're X a just now, We've of the we like new I'm been touch we has model. -- said the it model decisive transition undergoing accounts quarter, you change last and I and that's exactly those are

Frank Louthan

been think think little take -- you you've about a doing -- to How and right the is we formula you've going longer and now for to X or it? weeks, got and evolve? And this that's that should this

Todd Nightingale

on look, to it we're right I mean, but now. resourcing be think think formula I have going I we evolving for a while, the that quite

resources, a effort deployed quickly, of so a have I'm resources the far. happy of that the progress and lot significant lot very into We most with

Operator

of will our question Brooks Madeline America. Bank from take We with next

Madeline Brooks

what second about guess you. so growth, XX% for now? of more And growth is the too, driving look And in quarter that volatility? second second of half quarter, what's if guide, right at confidence the additionally, this you of to the right? for down back the is to And we we look Going suitable Todd, back given year the much into in we the I at reacceleration look your if half year. this If then quarter. X.X%

Todd Nightingale

Yes.

As well. half, the I and Ron acquisition We've customers has been this color can look strong. second on projection, and got at as add new ramping customer

being those able ramp We're the the been there. to revenues move new needle customers have We platform. seeing to and added

I to the -- we've I that can materialize half. second so think we're going pretty conviction high that And revenue got see in

there. that. The little the really down have comes really this so changed we've reason here an are consolidation our a reversed we even the in in impact. projection accounts large has significantly. little the accounts. and seen a engagement to model some pressure those additional see bit the in trend and a And up shift vendor adding has quarter and quarter of last from that been see that's a those that's pricing -- vendor folks why us weakness But in We've large for and large we there, pullback more is and And

Ronald Kisling

we would half The historically half add the tends have up business seasonality on have -- that is do I to only XX%. thing we about XX% in typically, the second acceleration second about or be

we when QX. mentioned, looked new the of believe at half, business quarter. that was the coming So Todd second look And we a that signed. second that in dynamics seen of intact took a customers at we we're as we where number And off in the seasonality we've the seeing is

Madeline Brooks

follow-up, just then too. And quick a maybe

stabilizing after you're second Or large As you do see if the accounts customer and with just the the year given what's through that now? understand those customer ramp quarter relatively? think of model declines the should on market in going customer the in those XX those end we do cohort acquisition. expect But we you in just accounts, that stay seeing trends

Todd Nightingale

for a But half. look, stop an to really there's us beat projection. that Obviously, is the the in success conservative. just see the but not -- to reflect trend recovering traffic levels find second there's some reverse, I to new in relatively and I we in those think large and reverse decline, guide projection up, our accounts. come because here want Yes. going we're we're the opportunity believe believe I we projection to We're mean I that. And revenue are signaling going

Operator

take We'll next Boolani Fatima from question our with Citigroup.

Unknown Analyst

impact and base understand borrowing the [ the uptake. annual standpoint deep new has you kick maybe [ the any package sense Can up and on visibility you in This variability quantify done is Can improve just currently Mark penetration revenue revenues. then that predictability of how pipeline just a way in ] and ] on give logo today? on up packaging the I showing acquisition build really just from -- Fatima. on for in on Maybe and a the

Todd Nightingale

just long effect that the X.X in where run, security booking close, us deal We're significantly drive some not beyond past in the portfolio. largest to channel partner also Look, we're new across will seeing on ago, packaging the the the I channel engaging really our the just acquisition registration. years starting customer see channel closed, broadening was through quarter, but And deal help solution. which was board. strong our of through think large the Yes. engagement This our

accounts, And are the of well. both small in trends these just so not and but I think midsized in helping accounts as large

should And down gives us it with of I'm -- which growth growth board, is has of that's those. and on where both our so where across much I importance midsize platform, great a on attractive feature think far. billing. had, XXs It those happy overages great helped us more no of really, model success to has of up of predictable enterprises large driving focus has traditional customers large biggest revenue channel both growth the think, of back really on and of into impact especially we're the I The initiatives. quickly, a some part part, the channel of has, And I move -- revenue, more the customers think, go-to-market. doubling this predictable packaging on and to had that the it sort for very big real new a initiative them a the revenue pretty in kind been give we've kind bringing very And the those So be. platform. it to the really

Unknown Analyst

it. Got

on the customer of We and -- Okay. recent some also overall? you of Just this that And of that a logo updated guidance? Maybe social is follow-up. your Can regulatories your is impact your give would in media us business to scrutiny how largest one reflected seeing. just touch like the

Todd Nightingale

a broke you're -- up think I'm you I said? you that that, a media customers, sorry, repeat is what little of Mark? bit. you social restructuring about could I a asking

Unknown Analyst

me Can no. now? Oh, you hear

Todd Nightingale

better. Yes, much

Unknown Analyst

want touch customers of some scrutiny Okay. one Great. your large the recent that to No, regulatory on see. media just of social I

get updated on it Just impact the how business you're of reflected that in your is and wanted of to logo guidance? the a thinking also and sense

Todd Nightingale

thanks And for completely. question. Yes, the repeating

in support committed you're be we're happen it. to that sort may but transition fully transition, them will of shake there, transition are we been transition it to engagement account to to there be has supporting, you sort to, this foremost, doubling come slice or they our way pretty through of being and strong, -- all with them and case any way significant customers be having on that of first think life, that however support I media sure, should our down any on referring through and For that able super the out positive we're should any

risk course, of in but are, I'm here, in pretty path the forward. confident modeling We some

Operator

question from with we take Fish James will And next our Piper Sandler.

James Fish

because for contract seeing anticipated really you any the are you your Guys, maybe moved weren't have assuming you renewals what main competitor, And you [indiscernible] large said you walk through way or and more to saw year. you're that. have best that now guys with? set but you [ this was one than minimum like earlier discussion, is the this the you level those issues that place just to up customers per guideline ask me so in ] our seeing Are volumes seeing your competitor

Ronald Kisling

I of see some about, Todd were customers as running, increases. the you did look large customer, with multiyear one. in instances, that some we in accompanied with So work within spoke each at each if are their changes commit, traffic not the And that you if traffic pricing dynamics different think they're amount

year. across sort Our spread renewals of the

added where largest of customers traffic And additional then CDN some those our an customers. secondly, at of our we reduced did see in levels that some they

so each different, traffic number share with bit customers. at of increasing CDNs our little were the changes, of one combination it was largest is the some really And of those the but a pricing a dynamics,

James Fish

is more, Ron. of But reflect question levels Right, you doesn't the essentially kind to earlier question have look, my include this Rishi's that you to minimum guys contract RPO guys intend all where RPO -- have.

level. guys roughly year just think I you historically, any on had minimum have contract given visibility XX% those to

about not of XX sitting here that. guess, saying, contract having this like guide guide, going revised is again? think days another minimum guys above we how Fastly be kind I level why to We're dropping as are So you much

Ronald Kisling

utility-based, our have commitment-based. some of customers, X are not commitment, mean guess at largest when them portion them things to I you while of significant Yes. look I do a clarify.

on that's, not an when contract. commitment customer the so that's within is reflected not And I there guess underlying the RPO

so cases see in customers don't and a customers the may going And do to -- of commit mix you're they be the consistently. that customer that a even have where of commit, traffic running above

or it basis. we on based forecasting of utility it are so a And predicting or traffic still level

Todd Nightingale

I messaging XX the our think rerates that point the your quarter. at And seen some slightly heard. in just accounts broader a it's to look more from competitive like, XX or say past that take lens, we've on fair largest I To we've in

the shipped largely, product we in is that here I fair confidence path of I've accounts and the those we back high not see growing as well. volume point, accounts just because think really and but that the I those in we're through moving adjusted got to the a penetration guide expanding think

Operator

Tim our with take from And we next Horan will question Oppenheimer.

Timothy Horan

you products, same Sort multiple customers? is services typically And of to network -- many those there? have hammer here. so you of how on many when what mentioned revenue, different topic like how selling do that what But like to like in the in maybe you are products else

Todd Nightingale

Yes.

et side includes image site full house, services of services the technology optimization of the streaming of on and it live which So event and network and rate live reservations, around, kinds content video terms obviously, replication cetera. we monitoring, -- and different and in both sell sell delivery We the around events delivery, world. streaming

expansion talk across -- largely gain into as traction, well. expansion and When about security, expansion I I'm to starting and the product observability really now talking into penetration about platform, into compute

Timothy Horan

mean it in Well I X% observability services? for revenue Or but is only a of -- And computes looks that in and revenue. like thanks category? is network the breakdown, different

Todd Nightingale

Observability falls into other.

Timothy Horan

And price this them on largest mean, front? bundle They point? pull to with them to one seem you mean, imply going competitors really would kind they were back win that last going like seeing customer's are were it I aggressively would of of CDN on to your use compute. back. or impacted I at they said quarter on and point seeing do is quality that last by X, pull customers the that this or that are back? think what like pricing your for Are strategy. not do at such you they're Or a if to you comments going your make pursue bundling be they going year to core that

Todd Nightingale

pricing there's they're the I deeply -- deploy sort the impacted account extremely are much think customers levels, the the performance, only customers, mature high-tech going and engaged there's that flexibility especially. are to And it think customers the I largest reliability is in in service of are can be an don't -- these pricing because front so there that. that The you like on

cohort return potential, that back really stronger if I And success. aggressive, not on And well seen think level just the bundling some engagement real performance, top on but as has are do those a pricing of to again, XX growth. that super the new We accounts. in I But those we're on I've in that's think accounts front, downmarket. where bundling to anything the competitive driving

as in also bundling, success with and getting our are We more packaging there well. seen solution aggressive we've

Timothy Horan

make or would back and price could and on down, a to going network somebody Or services after your machine you that guess fair, -- on they're But that do they core virtual legacy that's huge not core be is I move to else? think which legacy, -- basically market impact business? like customers' workloads decision Akamai customers the has mean, enough if to storage, I Akamai

Todd Nightingale

moving solutions, next-gen Fastly, that sort I compute, are storage, edge think who to type they serverless the delivering. we're looking of customers of for are technology

discount I -- to because currently It It's as back has small. compute I that don't quickly. it drives the being extreme I Moving don't accounts. there's of extremely compelling. do sort -- it's with on virtual stickiness real opportunity though wouldn't machines. it legacy see growing high think side. I

are because very We're complementary sides our our engagement drive very hard high that helps Our sat. have -- compute pushing with that so CDN customer works customer on of both business customers there. it business

Operator

take Rudy we will next And Instructions]. with question Kessinger [Operator D.A. our Davidson. from

Rudy Kessinger

CDNs just QX. and and halfway whatsoever. guess, et adding have other it want over I the mean, quarter these moving exactly They for just repricings, And I customers When that you guide share, guys contracts through asked to start you repricing control no gave repricing. understand, So with guys just I cetera. did these in

you didn't it just how us You have you I frame. any a X large repricing And it within don't guys a understand couple expected. months within mean I now did X-week out days. ago, of do turns told time you

Ronald Kisling

things. Yes, I of couple a think

of engage affected did than come we our historically. increase one, that early -- of the terms saw projections both some negotiations about, we thought And knew we've at of for March lot end dynamics not in year. of those discounts the with the really pricing, the bigger Todd think of motion on April in arose in that in of that the reversing the consolidating their rerates of seen in I terms some which CDNs, we the that then we traffic of the typical coming, traffic resulted a of as our that kind and trend spoke customers, when in were

the have an saw that our I different growth of time early all affecting was big our March, really on some frame and late the And would customers these we rate. were April, so revenue drivers. dynamics, outlook those but say impact largest outside when

Rudy Kessinger

Okay.

And it months. so low-cost the guess exited the conventional against is several smaller when wisdom space the it have go pricing would of your -- vendors the larger-than-expected pressure, X I just last over

And so there's space. low-cost the than thoughts in competitors fewer you traffic fewer concede any competitors, on price what given less just growth had -- And percent why on second Ron, just with guide so of to -- much actually what minimum visibility implied for Like mix... you lastly, this half revenue? revenue that what the do second half level then is half typical second have of

Todd Nightingale

first the half. I'll Yes. take

and fair But our it's is, our lot a projections a I of beginning piece need they the projection think we of the quarter, and in had the reflects I swing, It's end traffic accounts pricing to and we where have back believe accounts those to the look, handled And And very and large revenue think changing significant we pulled those there's think, growth We did I number I changed of where currently this and why QX. quarter, an be projection, look, opportunity question. a are. small has motion at this very -- specifically. important optimized where move that there. but see are to we're an projection our our have accounts, managed look, back. of

Ronald Kisling

these is the think again, second pricing in accounts had The I on a traffic would and/or and the while, only business a significant add is, on our thing March utility adjustments part basis. of their portion I largest April. in

reflects activities occurred accounts. And the that those largest in outlook so our

move accounts volatility as And the year. smaller less have should we so the through variability the in

Operator

take with And we Rhee Jeff next our Craig-Hallum. from Van question will

Unknown Analyst

This on for is Jeff. Daniel

of volatility changes You the some of Volatility mean quarterly just the with expand a or just you referencing Or terms sort onetime can is referenced the you just term volatility? of that in quarter? this earlier of what on larger changes some some did some volatility. customers, to in terms of

Todd Nightingale

we vendor very back or X towards -- We X very that bit to but commensurate that there projection would I carefully, a year consolidation X try that rerates folks would way projection. X was past trend little bit Yes. adding with pulling or And And here all we caused last which we of the X. little towards have We quarter. Usually, or the vendor had in volatility, negotiated which come saw vendors in increase, a volume a CDN of a model people believe. down saw there there. some aggressive, our consolidate rerate strong those trend couple our like affected a with -- as to and accounts a trends set that come seen up like a large and this

Unknown Analyst

assumptions believe One, traffic the in levels. And in, terms for just of the of about a contemplated asked is me. were I customers, baked what when the with second earlier the just and XX in then guidance top you sort

notion Let QX that me And you if to correct? actually for you could conservative, here from although would traffic from QX flat was to that and back just and levels it got see up thought expected Was go into the read Is modeling QX? in up QX. drive you stay actually that what you thought if and correct? those that actually think those were QX tick somewhat QX, you you in I would

Todd Nightingale

use. but our at patterns, wallet ROI an portfolio I expanding opportunity demonstrating performance modeling all product to the of counts superior using time is those share of of the have showing we believe that accounts we're the revenue by the and and those traffic What the the increase seasonality large more in sort demonstrating faster, clearly

why It's pushing to market, so change the really to react quickly why move right I And here model so very and for what now. hard think was we're on it engagement to so we're pertinent our us seeing in that

Operator

session. And gentlemen, and ladies I'll concludes for question-and-answer conference that now our turn closing the to remarks. back Nightingale Todd Mr.

Todd Nightingale

employees, business Thank our much growth time We execution, delivering to I lasting our your for to all you focused so customers, investors. thank and partners so Thanks our to today. all of shareholders. on bringing and our want much. our remain our value

Operator

Ladies and call, for your today's thank this and gentlemen, you we concludes participation.

disconnect. may now You

Fastly (FSLY) 1 May 242024 Q1 Earnings call transcript