FSLY - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. At this time, I would like to welcome everyone to today's Fastly Second Quarter 2024 Earnings Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Vernon Essi, Investor Relations at Fastly. ahead. go please Vernon,

Vernon Essi

our XXXX to conference second everyone, earnings quarter call. Welcome,

today, through supplement, and growth of Fastly's ] During the Investor this Kisling, this our results, accessed a and replay CEO, year. product business, filing have to available statements, for Relations way. CFO, will be call website, be we related [ archived will Todd today's are forward-looking during referencing related future of be make call. will copy financial today's in Fastly's X-K sales, of We assumptions Also, webcast press found call, release, uncertainties by and number including shortly risks, can performance future A portion differ conference materially dialing expected projected Nightingale; (XXX) overall in and which statements Ron statements X fastly.com, from of actual to after prospects. the call. and known to XXX-XXXX today. The tables with are can all and results our the investor financial and those ID furnished strategy, XXX-XXXX implied be long-term the subject of our unknown conclusion us that cause of could These earnings or

entitled non-GAAP with We XX-K financial risk forward-looking Form you measures. will a update law. Also on information that non-GAAP obligation documents. call further SEC undertake all and refer, noted, SEC, numbers discuss particular, call, during our Unless could and filings our today financial forward-looking these are differ. Please in Reconciliations quarterly this cause including business, our on we filed For with and the the Factors. regarding our Also factors in on supplement results. and XXXX as as other are adjusted please will that encourage reports information this any Form to for the These GAAP supplement sections report be to be today's the statements are our results us substitute directly provided earnings of by discussion We an read note factors except to website. annual our the our release based revenue to for refer certain to Relations to filed for Risk intended a comparable we statements, measures XX-Q filed discuss most GAAP to second to date. most quarter on on no non-GAAP Investor basis. available otherwise required not the earnings on release than recent measures

our we during please begin comments, the Nashville third on in XX. that prepared note the attending September quarter, Piper we [indiscernible] Before will Sandler be Conference

turn over call I'll the Todd. Now to

Todd Nightingale

joining our everyone, developments, then Thanks, Vern. technology I hand financial in reported of then call second second over to of so Today, our and to revenue and I initiatives go-to-market Ron the the above $XXX.X will results business much us. for our our and quarter, recent will cover our dynamics guidance. detail. We in results thank you facing the the million coming midpoint and the our guidance discuss and Hi, for forward. discuss quarter path

of and Our margins across good the gross cost loss to thanks operating strong business. the million favorable guidance was also midpoint, $XX.X control to

mitigate pressure This fastly our projections customers. traffic a has such initiatives the as this challenged largest projected on taken put has declined. We've in to the been our as results unfortunately, these as customers vendors shifted increased offset focus While I'm growth has currently largest not the we and delivery does those softened of to have impact. pleased profitability. accounts The challenges small with and has set industry in second with quarter, it execution face by

of rest effects those of customers and material for a in these Fastly's revenue, seeing the we're year. constitute our the portion However, projections

revenue the customers, XX of still quarter is this revenue customer a revenue, rest line these of top XX% XX% a which the the top in in This from year-over-year. we in XX in our in grow base result due business. dropped customers, quarter. Despite first proxy the actions initiated growth to to XX% fair a X% top year-over-year delivery Our was second our a Fastly's large as has drop for to transforming year we ago managed of our customer

customer it wallet our solution accommodate these cross-sell efforts taken more as that to to with we steps our drive platform large acquisition and go-to-market underscores in strategy continue the driving their and share strategy our changes customers Specifically, upsell. We've to customer bespoke cater to with bifurcate strategy. business expand multi-vendor

our gen an second base. quarter stability that our the to growth new for drive adjusting improvement for Fastly. X% to acquisition lost primarily line higher demand to sequentially a note, a compared and [ the strong business. This our success on are count large continue revenue growth basis, by we motions ] will in foundation other of customer acquisition to enterprise year-over-year the come. On grew moment quarter, Fastly expanding diverse on and reaching effectively years verticals with more the this transition we our first vertical. focus top busy dependence legacy and XXX outgrow This and mitigate and portfolio, over a must in in this customer multi-vendor By customer in showed growth on dynamic, our been we've haven't driving risk efforts customer building will We and count more the channel enterprise increase time. of transformation customer XXX customer by our is concentration this XX%. teams truly media While of of and and customers, our The in our to become X/X drive our the sales developing we in success business at

observability. security, Continued to customer growth. a network wallet and that innovation is delivery, in platform success compute is network key software-driven and best-in-class share Fastly acquisition durable edge offers services,

that customer for significantly we the application of and leading we features around its BOP world, create a seen customer our response web also to expectations. of customers allows our efficiencies with unified the release our that The to and offering on platform initial platform supporting offer our bring from will its their believe the functionality our for investing life applications future has general continue we our quarter, to solution. ramp not We're innovation to and but focus extended solidifies development. We success. Last approach extends have technology customers enhance our and mitigation in retention our that Fastly exceeded security share excited strong only and

cross-sell large a year, be last of in our shared we part success will security. As

and cornerstone engineers to already are is observability have designed next-gen WAF infrastructure, platform as of fast SaaS compute our technology testers on previously great Fastly speed been that we demoed cases will workloads in large performance onboard AI After which prevention, line their replace savings websites. Fastly well models. higher to complementary [ customers. revenue in product. conversions York accelerator fastest customer Fastly's our delivering [ builders AI improvement June, interest how enterprise core technology an next in Yoda available of there retailer been example This mitigation security edge is compute chose the in BOP as other a we This brands next-generation existing a noticeable unparalleled platform. as in plan this in customer. AI milestone this demonstrating this This cross-sell rapid cash The capable are we with ] and adoption its allowing deliver portfolio, to Fastly's and delivery and XXXX. truly momentum to a accounts. One and has generally London. retailer announced [ existing DDoS Fastly, partnership experience. We cash cost New online coming developers capabilities. performance is version as has platform, leveraging at for Relic New our an is runs a results, discussed the dramatic API example key a gave well. One our simple, importantly, make a And the at to access that ] solution to capture saw AI Recently, here power complete stand-alone power of to platform Now have activity that use retail we service. accelerate can and more engaged and moving that AI of seen Beta experienced technology great. edge and have proxy event cost-effective our application bought increase to ] a of and and the and launched luxury response from here management compute We've addition expanded Edge data include lab amazing. developer beta Yoda accelerator, a seeing with optimize the first it customer to Yoda, and was computing our leverages from the of worldwide. truly we of performance to applications in our to single accelerator the improvement technology shoppers. In And developer a existing is Fastly, code, event the language growth

We are map road AI incredibly excited ahead. about the

Imperva, Lovett markets. He's strategies you our was Turning and we'll go-to-market solutions in on ] motion, both from and technology on brought of [ capable he company for joins and expertise platform operating executive scale Akamai evolution ideal Prior reliable where an Scott Officer. global successful and customer experience transformation cybersecurity customer billion Chief that sales His him the have our line evolving thrilled share Cisco. Officer, of new path services. teams aspects to Revenue we've with I'm and growth. new to enterprise the the is team [ [ all in this ] the cybersecurity in to is delighted Scott over Revenue on ] $X driving delivering decades and Scott is the driving at role, at Chief Scott on he network and of few next with growth to go-to-market. multiproduct focusing I'm a accomplished candidate go-to-market acquisition board. as led to a years need revenue. and Imperva, us

free reaching expect and We packaging recent the foundation new upon build future first launched last evolved time marks is more our recently This with our our can to model we in year. come self-service you strong offerings. tier quarters. work launched and the market, packages the to continue PLG mix and match We

in We hit initial also saw material observability the second in ramp its quarter. which package, our a stride

customer our accelerating. our second the result, in purchases. a doubled the packaging And As is quarter, packaging purchases approximately motion quarter's first

it go-to-market channel deal the continue our registrations partners In second grew efforts. in XXXX use of quarter to our more compared doubled help contribution top than help and compared more anticipate first the to second us to and XX% to drive has from leverage the growth. strategic channel Our channel and opportunities the importance quarter, quarter to revenue line XXXX. have our our -- year-to-date We

moment a and acquire path strengthen continue this is to conclude me more we've this as business, a headwinds customer our large quarter this I large outlook and have we very exactly outside must dynamic accounts of business. customers outlook our discussed and let This than grow impact our seriously. We Unfortunately, And with and previously, new path the our we forward. proved on. progressed is diversify of media the that to discussion Now we're revenue as seen The cohort. expected. and continued the transition, take our will

Our X% year-over-year year-over-year materially are growth and modified XXXX guidance of plans. our of third below growth guidance X% budgeted quarter

of our align future revenue to invest action costs with appropriate take while level also to this in position to growth. have ourselves We

Over effectively through management expenses efficiencies year, in overhead. our we've count measured infrastructure controlled trimming head past the and

This a acquisition, for are differentiation customer that level through intensely we on our expansion be spend development reduction discretionary this next and in we workforce growth, growing focus edge to will include drives applicant the portfolio innovation business review company. restructuring our teams. In focused the staffing order achieve lasting a at of and levels. of and and web Now will

financial rigor path secure turn position positive differentiation is XXXX profit in beyond. will flow. Furthermore, competitiveness this an this details continue financial to to cash toward our in and maintaining over of step Ron. is enables to a invest this now And the vastly critical decision, to growth extremely in While the free operating maintain line difficult I and to we additional believe our call quarter top the and and to and discuss guidance,

Ronald Kisling

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

other million. our quarter, grew ahead by we reversal the midpoint traffic further that partially in $XXX.X in offset social The customer Services year-over-year of discussed platforms last revenue continuation Network declines see security our growth to services in we continued of of guidance coming to seen to year-over-year our largest customers for largest areas, $XXX.X million. In and media, from were revenue driven to of in million $XX.X from second Revenue also from gaming. sequential development a X% impacts XX% that year-over-year $XXX following million the historically quarter some consolidation particularly revenue have revenue the lower increased second customers sequential and and to $XXX in X% of year follow-on million, from network the we revenue QX typical declines than of in vendors the slightly grew rerate.

and We QX anticipate gigabit then per to more dynamic year-over-year revenue quarter. historical moderate line than continue the experience. in we begin will trend the declined services throughout typically fourth this network result, a As

customers quarter of declines quarter. impact the of largest the revenues compared of XX% from top XX% for reflecting more XX% customer second some QX our Our of to Also, than XXXX, second of XX no in in accounted the revenue our XXXX in comprised total the revenue customers.

year-over-year. of discussed, our revenue grew customers outside Todd XX As top XX%

customer opportunity towards As development broader bifurcated to outside more go-to-market XX continue transform market strategy, the top our customer will towards direct investment our we a our we strategy continue customers. business and and focus to acquisition

a the quarter, quarter XXX%, to is NRR our some the end is prior be XXXX. At And products total in million quarter. quarter. X% XXX% down $XXX the of $XXX,XXX, will prior revenue customers spend the a a accounted year. I decline to SaaS customers in second turn of million, financial year RPO average are sold last Our in trailing declines QX, headwind net the customer from $XXX to $XXX,XXX decrease down from in basis the from This quarter. largest X terms, XX% primarily will XX XXX down increase down down anticipate first compared of on had growth to largest an quarter X% to from prior which ago The for the down or QX, the due had the quarter-over-quarter. consistent in X,XXX second and the net quarter. committed of from customers their XXXX retention the sequential add now enterprise XX-month LTM over We million a our and remaining decline and enterprise the of a subscription at first quarter QX in customers. packaging the increase second this our customer revenue rate with our a option end RPO. We by due QX. Enterprise the of growth increase QX, of X% of customers of offset X% throughout partially customers to obligations on to in the enterprise net of revenue $XXX,XXX from X% of at of basis We was $XXX X% was the in and represented of XXX% through quarter contract our for from primarily This continue in our was our the results remainder rest of XXXX. working increasing annualized end in and

net quarter. Recall, basis for XXX costs costs. Operating a offset sales million expectations. This sales maintenance second first QX benefit XXXX our that marketing. loss for operating benefit XXXX, by XXXX. in first X% $XX with and We saw This than commissions profit G&A $XX.X we coming bandwidth better-than-expected expenses. our the basic better to compared in to was $X.XX a XX% were operating in loss XX.X% control impacting favorably lower part net comparisons. This in and slightly RSA million XXXX. was in margin expenses, services of our reported events from loss and quarter which software million virtually and modest gross guidance quarter, compared cost customer XX% the in at per sequentially Accelerate second related or year-over-year. XX.X% combined and second internal loss the we year-over-year we tax million up impacted driven the continue event-related in a million tax this in quarter, benefit points was $X.X [indiscernible] transit range capitalized to Adjusting QX of the to in and compared our resulted use expenses, million of costs a recorded onetime The in increase $X.X share related $X.X million. In favorability use an in by and gross R&D of a offset XXXX expense and increased $X.X by diluted or our impacts a and and of higher $X.XX of expenses operating expenses quarter XXXX as quarter, increase use related and XXXX, of cost the profit in XX.X% per QX second an up $XX.X loss support end benefit efforts operating loss to lower in were higher in the QX and Our share sales from from $XX our diluted basic million

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

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

in from decrease decrease the free driven $XX.X the first coming shared of first from second were cash in were $X.X capital benefited operations $XX.X XXXX million, we the quarter the year-end negative from operations a end of as was This flow primarily in first approximately decrease million million guidance compared to our to by our a above call. the $X.X in for expenditures sequential our negative X% to negative was receivables in Our cash million second revenue cash quarter $XX.X quarter Our quarter million in revenue QX collected cash quarter the X% high that from of in first of quarter. XX%

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

to we to X% anticipate will For XXXX, cash XX%. our increase CapEx

our we XXXX. our now fall differ these to However, to of statements. again expectations. I everyone law. the that future, remind on as of our medium- third full continue X% the closer to long-term and revenue no for to include to required the year to following statements discuss in like forward-looking previous will X% expect obligation I'd forward-looking cash and quarter update cap undertake except may statements as to based expectations are and current results we Actual today materially, outlook by

Todd will As believe remarks, in term. shared expansion acquisition, in customer we his lead are revenue new while growth to further we which seeing longer

facing decline impacting is continuing are revenue course which of our the growth. of our revenue XXXX, We of a some from throughout challenging adversely environment largest customers

Our revenue based visibility in guidance and reflects these business is that we today. dynamics have our

sequential modest at to flat revenue growth somewhat in largest to revenues some of QX QX expect We due lower our to compared customers.

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

disciplined to contributed than initially of cost be our expected. second we and XXX revenues, to which continue basis margin We in investment approximately better our network very quarter being points gross

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

new customer discretionary on enable overall measures mentioned, will product align innovation and cash our the staffing. investment contract acquisition while we Fastly of review our hire operating achieving As profit focus environment. structure new capitalize measures challenging be on go-to-market This goals. These and include our will our momentum, demand to spending, cost a renewals, requisitions taking Todd flow and to to to

expense approximately operating throughout These the marketing be and expect As sales a reductions G&A. spread result, XXXX. R&D, we half generate across savings million and will second in to of $XX

roughly impact third savings remainder that quarter impacting expect X/X will We of fourth the with the the the quarter.

third recording impact As a the compensation. anticipate a the in the charge GAAP result, restructuring we onetime millions of excluding in stock mid-single-digit quarter,

in I reflect reductions operating and margin the expense quarter the of gross mentioned. Our decrease third impact of beneficial will the impact just results operating the

$XX loss As third to to share. of loss expect $X $X.XX for million to million a the per quarter, and non-GAAP we non-GAAP decrease $X.XX net a to result, our operating

year continued outside expect million, with This $XXX calendar For range at some reflects to customers, existing growth reflecting in the XXXX, enterprise of $XXX customers X% our of the weakness revenue offset by midpoint. largest customers. and of annual largest we of our million newer growth

XXXX lower see to continue improvement to expect compared revenue yet we We cost leverage margin on gross XXXX in to as growth. incremental

result, improve Our we incremental gross basis minus will XX% a gross points on XXX basis relative or anticipate points, XXXX. to trailing of basis margin XXXX our approximately north a remains XXX by and margins plus as

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

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

cash As XXXX. this of drive investment go-to-market we enable free to product and continue flow and growth focus focus improving to returns. into acquisition to customer operating shareholder the we and while achieving cost us in This breakeven development look XXXX, income will realignment new in brings goal revenue believe to

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

Operator

And Instructions]. of Blair. first Ho our with question today from the William line Jonathan comes [Operator

Jonathan Ho

to these I of these Are customers. large wanted expect sort guard you maybe what stabilization to continuing? regards start Or caught with we out sort with declines? at on with levels? these detail they bit what happened a should more And little off of

Todd Nightingale

kind large accounts. there's that a for to those teams, our react a success and of for those media in needs their to very transformed of on kind traffic bespoke differentiation large that motion and Yes. We're their customers. within way. primarily really push profitability media, delivering We've in the And the they're to these certainly We service priorities trying of customers. business looking customer multi-vendor from we're and focusing mentioned those is definitely seeing there softness the accounts, of large and

have the we back which we've our obviously So outlook. yes, at the some projection terms But point. revenue we half, headwinds here for this in see consumed stabilized in of those accounts you believe

Jonathan Ho

Got the revised you up with us of And at terms understand sort then this are understand that you maybe been parameters large guidance, any up how these investors half it. out. Got contract year? just the derisked the guidance, do I help with came you it. the there can how to of taken potential in of feel here really renewals And are downside want other in coming think back the or just completely whether it's point?

Todd Nightingale

got more and that's pretty believe the [ view customer back more confidence to and year. the the XX insight -- profitability how engagement those it the the dynamics that half much due to given more to the fundamental and much we're were the more high giving now. Sure. accounts. And The back bespoke of a in to us and taking here pushes those are we or in but [ we into that's the for from half. and significant -- projections in pretty weren't make to projections touch ] obviously, operating, mention us these look, a approach correction The adjustments I largely should This motion were projections renewals, in the they ] to internal using we're a guidance due good our sort in -- and is change of top traffic lot we're the our we've softness made that accounts analytics

Ronald Kisling

have engagement mentioned, lot thing model. add only our these us given process, that of lot And is the year. would we a earlier I visibility at this customers. of what we the these revised of patterns than We changed more in senior dynamics at into our a engagement year. kind mean, much of a that's we've with believe the reliable those regular I Todd beginning customers dynamics -- the better added where had We've with really terms overall the largest outlook are customers

Operator

of comes Boolani Citi. with Our next line the question Fatima from

Fatima Boolani

broad-based I are typically restructuring that, efforts and, comment you that this to for in be ask why new back the to underway aspirations on be to do marketing the wanted customer lumped into of of resources. course, going sales recalibration a I driving to of half would hey, more your going year. in if about that? of of the and acquisition. terms is But to this be are in Specifically, wanted kind

[ that growth capacity it ] of out I prove a confidence blanket not of sales potentially give potentially you're those structure? And have kind So kind and What why a detrimental some sales would your follow-up. other your organization of then be hollowing aspirations? to could more that of

Todd Nightingale

growth real regardless point I delivering the question we're absolutely. spend same And us growth Yes, will the in on to line time, and go-to-market run line. at the that the that to And for at innovation we think to And -- areas the the always bottom continue on maintain and to our innovation. the designed restructuring really key top of in on volatility point need discipline org our very but restructuring room to technology us in customer on accounts. And to specifically, to sales these to in us drive top also revenue in and of wallet not acquisition just the customer -- of company efficient in adjust in line. our line focused in key peanut top help But our there'll the that restructuring parts to sort really AI. spend specifically, of means to and compute align the be invest long focus and the go-to-market discipline, and -- butter is drive we're we're help doing most allow order efficient not share give the across importantly, the and ourselves as a restructuring to a is in on invest this acquisition the most how efficiency security,

Fatima Boolani

just to with it. commentary Ron's CapEx. a And follow-up Got then on regards

XX%, model come to of out up have I to rebuild, network pretty talked a think X% just But meaningful you longer-term to and you X% X%. rearchitect leveling.

So level. their I'm delivery media ratcheting still your particularly of large the envelope of remains wondering some in traffic customers that context back why high,

incremental the pressures? So why CapEx would alleviate of that some not

Ronald Kisling

I Yes. of it. beyond dynamics a mean there's lot

that a been is, I a traffic. think seen global positive thing we one the have year has of basis, on more this things

so the regions we've CapEx lot And term, as higher levels out on we long these in to volume drive see geographically. where traffic A at and term play needed cost low bandwidth will support low we as the seen areas. We're of levels costs the this historically traffic look traffic levels, lower long and of able in in is drive which well ultimately some to efficiency. ultimately other because expanding

the in why So mix. some geographic X% some the long -- the term, right really we the to to is of revenue of as believe changes it footprint. X% the just our is term geographic we in And still driven long medium adjust that of by to traffic medium largely

Operator

our question Frank Raymond from with James. comes of the Louthan next And line

Frank Louthan

changed ] when sales then to not, far? where goals? Scott where revised think count so quarter that reach metrics quota be that your And guidelines head [indiscernible], will any where be quarter-bearing do And is And to need you Has if [ completed? does now?

Todd Nightingale

how on of ] [ Scott has only had -- months, for and couple impact you've much amazing a been The it's already.

make with very up cross-sell. side, acquisition growth making to order great capable focus been And a customer You've changes way in speed he's shouldn't also giving team I've really surprising at but maturing and he's been pretty on looking got, background and how carefully quickly impressed the that specifically term. in that. And both including of and he come in probably already, of I be sort our growing look, been incredibly the driving through revenue to short more think, business, changes efficient here has us the which

Frank Louthan

what percentage your the today? Okay. And you of clarify sales from channel come can

Todd Nightingale

I is future We've good customer leveraging success that those disclose. be channel we to say, and part we'll not think the continue a of the investments, transformation acquisition. But I We optimizing of a success invest this deal that drive this don't to there. channel. in going it's pretty channel, percent and number to disclose had especially registration channel around will from growing

Operator

the comes Morgan Singh next our with And question of Stanley. Sanjit from line

Sanjit Singh

company coming growth profitability sort single unprofitable. mean, in down a understanding of he taking, low macro in curve. fast to digits. is I start be sort a I question that top with With backdrop, you're likely overall its terms still the that there restructuring just actions you And still higher-level line and uncertain the unprofitable to risk where of have is growth of a the The and of sort pushing that business? macro sense on profitability or on next uncertain I few of further of your are top weakness if the while still nonmedia for you for how seem into to a -- years, about they just more does quarters at of sort thinking downturn. And side couple guys go you line, want see of to maybe is least get the a the like

Todd Nightingale

we this No, I question. Really, I as is see a important I an mean, way think the of think it's moment transition.

that build we're a not our and of make business go-to-market and restructuring rapidly media happening revenue building [indiscernible] can platform really complete change edge including drive et other through and compute, we're in large concentration drive this which why observability, especially foundation stickier run the extremely a that on a be base here. multi-CDN to It's higher customer in that's just the growth doing You true as line investments the to in true really cetera. play see build transition. play. able period cross-sell. And investments A areas stronger, around AI, in that's see order those needed multiproduct platform, into security, And the really delivery foundation accounts. And we but what to business is a will top those upon to

We adjusting line. that top are

maintain top in our take opportunity this and doing to as a We as adjusting company way well in line transform bottom our XXXX are as growth volatility. this drive really We're to to line an profitability. discipline it despite spend the to

Sanjit Singh

new the expect do sort sort Revenue the with And how tenure in organization? the in execution Understood. of that bring Chief Officer of this go-to-market magnitude of strategy terms you X change of the onboarded, to to being of year see you

Todd Nightingale

for the of lot ways. is big restructuring of begun the a in And the restructuring The reconfiguration -- Yes. that next that chunk a had Scott kind accelerating year. planning and of

is instead drive to NAV pulling I opportunity we're think, forward, urgency. think this I as able that do great. taking And an to

helping that and upsell I on long push the prepared motion motion cross-sell to think hard really enterprise it's us throughout accounts. of tail also

Operator

line from of Sandler. Instructions] the And Piper question James our with comes next [Operator Fish

Quinton Gabrielli

This is Quinton for Maybe on for Jim Fish. Ron.

you the prior And downside prior seeing guide minimum gauge? customers in sounded of commitments? minimum essentially those to top have got the to so this largest fall is it dropped the here, for little just just so delivery about when bit kind are now down change a you not tougher quarter, the think And just updated like embedding XX these we expectations Was minimum As commit? guide is below levels. been commitment case? Or the customers

Ronald Kisling

Yes.

commitment expected of So look our are. you largest below low commit. not traffic in the where customers, when all their many instances, have or levels And actually are levels a at meaningfully them

on this. process. about So our while really of if guide. in terms reliable Think these historically, And we've really commit a variable isn't, dynamics the you that's traffic. And of a we of will, around model of I think basis customers kind something with think spoken forecasting the utility had I

I translates that these own how senior of expectations out visibility level have play the traffic over patterns allocations, the around customers think business and is their the dynamics model customers better the do largest impact a internal their largest really sustained we much in a regularly traffic had reliable customers last that impact that we have significant and a of in than more view with anticipated quarter. I now they're believe our and greater break with remainder visibility increased with the more these this we into lot engagement was because place, will put year. much engagement we that into saw their

Quinton Gabrielli

customers. Obviously, That's reacceleration? taking across seen impacting of Or going XX Are haven't do like from traffic down that's some across just and vast well on side customers the then security. packaging with you rather sort of of is kind but of in kind incentives marketing that's kind sounds top are Got the kind to majority It segment. like pressure need see of it the deceleration? driving that it. place, security this impact of And sounds kind than helpful. stabilization of sits we and delivery sales of sticking the there any the

Todd Nightingale

top accounts be to media tend heavy. very delivery XX XX -- heavy, those Top Yes. very

bespoke delivery same it sure vertical. side both and building tend And those that on returning It's them growth outside to certainly really used of those the trying initiatives to And very does on primarily engagement media so the about fuel investing accounts, stay of we building -- be on is to in concentrated at enterprise on make we it's that in with the at top large outside top media accounts. And to the momentum putting see that specifically the about time, while the these it's of And motion, our concentrated fire. XX and same multi-vendor customer and been top we've and growth those there. really time. focus accounts

Operator

And question line of Will Power our comes from next Baird. from the

William Power

potential X competitors? And bit I really Or hoping else trying you top just industry I'm it down traffic was just all I or loss guess top is anything pressure. the on just X across Great. to this trends customers? maybe drill just kind to to broad-based more a share little of versus share could XX? the is on XX understand,

Todd Nightingale

really It's of is to a I Yes. top accounts, handful, of starting media, And number we're of we're the on bringing motion it those tier but in technology are across those we've and side, just a lower the security It these the we we've in to a expected. that way small very, market, why a lot as and [ large we a the really level rest accounts, multi-staticaps. more guess. lot And at handful, to -- in business. of for seriously. ] There's strength of that especially the in top had in than XX of all that potential some but top accounts, And not XX handful, less take is revenue small the a we stabilization business. seen than there engage changed of also real our just remainder see very

William Power

diversify to of just industry was looking their to I to there no, versus some other in being slowdown if was just on an customers Well, your costs? color ask reduce more any this of vendors XX going top traffic

Todd Nightingale

Yes. that vendor certainly I There's in here There maybe are mentioned mean again, that projections focused multi-vendor traffic a like expecting. softness the adding we time. and or this who there. call are, in last strategy people we are the on

accounts. of We any haven't those like been removed from

revenue affecting which have them. to projection, in is continue partnerships guidance. have very just strong of We each the the in We drops

Operator

with of Rhee next the line And Van Jeff our Craig-Hallum. question from comes

Jeff Van Rhee

Great.

Just me. X for

revenue it follow at proportionately, expectations can overall? much on reduction customers versus at the break to down Just Will's reduced loss question you up how just share of spend roughly customers was is media those

Todd Nightingale

due And But where those break question. It a handful repricing we're those. of a Yes. those softness of handful are we're those just see increases both And repricing, that just we for traffic board. expect we've do as sure, counts, revenue mentioned. much to accounts. seeing just promotions historically happening, Ron And on but with in We We part increase in seeing less side seen some is because business. occurring. We large traffic not see good we disclose down to the on this in areas It's those don't our of guidance. can we're across of repricings, a things expect There of them. always seeing numbers. -- natural the our as traffic there's both just to seen that, are as also are the impact revenue as a haven't that and of

Jeff Van Rhee

outlook on nonmedia if there media, to revision Okay. were look of outside And at did your implicit how in change to then guide, revenue? I the the

Todd Nightingale

enterprise revenue cetera. and to drive in diversified really more across healthier more globally more accurate top tied base going portfolio long top that And will closely what's it. predictable I again, growth. drive XX and et pretty compute, do nonmedia security going exactly the top are expansion and a but We and don't projection growth more broader disclose is all to to be about the the for verticals, the we really disclose momentum XX. outside And and it is the believe Fastly strong a numbers We feel in And building and the growth outside media the run. It's that there. XX in

accounts So outside in especially we media outside the those accounts, XX and back the large about feel pretty good projection top the half.

Operator

America. next of line question the Brooks Bank of with our from And comes Madeline

Madeline Brooks

for me. Just one

look at out should fourth for My so quarter for then continue XX% I that XQ, just of top similar customer XX and the top that the that if your those in rough with the talent, So with XX% implied business suggest revenues. math to guide to projecting by XX. customers. be would If right, XX top in customers X% suggest take not climb non-top XX roughly I decline trends, growth would around

suggest want healthy to of back call We half were last you momentum did in should a in, the the year I point kick from signed just to quarter's comments from year. see that -- we where that also customers a will

be bridge to other? to do -- added customers over that because So how given X the contradiction should guess, negative the the contribution as of the from of see XX me right, each we where gap is those of months. why help that we being guide over seem of last I healthy outside business, trends, in you X see XX% can should those correct were X% top guide customers and couple implied

Ronald Kisling

continued does I Yes. but from the question do And we I see any we rate slower that top expect while That mean in real XX, XX. sort half, saw we to really outlook in some decline rate question, or earlier of in non-top continue very healthy. think we what top that decline haven't to imply down, seen of our we the the saw addressing first to that think the decline half. the first outside decline we at growth be the of really see see to top XX strength continued saw in XX% not the XX of some the concentration concentration main comes while I the to we of I as kind customers, in our where -- think the XX%. We'll change expect in

what number? I clarify Sorry, Madeline, X% [indiscernible] could do

Madeline Brooks

X%, and your get X.X% the XQ and it's out but or first you -- implied getting. then the take what -- second back XQ rounding just quarter and you then I'm XQ would roughly quarter and I'm then If negative of implied guide decline. think you That's if guide,

Ron, that to then. reiterate Sorry, just

growth pace XX% of continue the saw of that year? the for you that the outside remainder [indiscernible] trajectory So it at to XX top

Ronald Kisling

half. rate I think see gross XX non-top the continued improvement a at implicit some deceleration, you that although should math, if see in top the in XX second of some nominal in the growth slower rate the you top outside XX, rates in

Todd Nightingale

really that's think what's I of going drive to revenue. the diversification our

I mentioned growth think to it's expect, the predominant customer of there. of and more of the more the our obviously, quarter, force becomes it's impactful, continue XX% XX% you come an the of dropped in as rest more -- do that the customer customer driving As the from as But and anomaly. become X think I accounts to for acquisition decline to healthy concentration down. That slowly effect to to that I just continue

Operator

next from Rudy line Kessinger Davidson. of D.A. the And comes our with question

Rudy Kessinger

there pure your floor? and is were $XX days $XX how QX. a off any it you said downside customers million? in traffic those just million, the ago. of revenue tomorrow? also guys What's of XX top $XX you million have potential XXX% So feel you you be? on further floor? there in all got much XX I guess could Are they you utility I Is but are good Or saying all have handle know that -- it, about

Ronald Kisling

point. mean, Yes. fair I

you the think at there a top look is mix. XX, I if

small and top positive hold. and earlier, Todd come some mentioned headwind. but not streaming a that have handful where a the across where, customers As meaningful amount of in of XX year. revenue the those traffic some a their some XX of top the all we've hold in new seen I of said Again, into sort customers their they earlier, commitment, to commitment a all have committed are momentum point. If these do customers We've this as customers of the levels those commitment there seen is it's do not of

dynamics moving got it's customers. different -- the of you've So there across each

and the there positive. these across are dynamics where the in to point there there commitments are not are customers all So headwinds are

Todd Nightingale

upside. to one have implemented we motion add part this last few new Part is that the driving to of space. into that. about in engagement Just and small more point has months, of that that that Traditionally, And customer commitments commitment additional getting we've hard in working relatively and the a market and huge balance rate larger been improving at changes. a for commitments utility exchange traffic

Rudy Kessinger

you record. in to lowest your Do growth on XX% year-over-year, What's there? expect product security, And half security second hot any expectation slowed is the with out in guide? acceleration input it Okay. then the for which

Todd Nightingale

product the we're some going projections Yes. But be focused and focused I'm not is I high on regrettable. that number growth line that represents XXs security. can -- the rate there, softness tell exciting, deeply product line. We don't deeply We're but security on disclose that that that you, certainly on by that to bringing back if XX% in not into higher.

Operator

[Operator Blakey Instructions]. line with And Markets. comes our the next question Tom KeyBanc from of Capital

Thomas Blakey

understand I to I'm a bit regard think kind with little to of XXXX, I trying just what guess, what's these media customers. into baked large

of lot you've a color think I given there.

just pricing. Maybe shifting to

There a from kind commentary I was quarter-on-quarter maybe Ron's [indiscernible] But prior think perspective. okay. was alarm of quarters think comments was there. no I some like of pricing in

in general what's to have the of If on nonmedia, us an just follow-up. dynamics you on just pricing there? could the if you a health help I on And if pricing? get And wanted could, update focus you the going

Todd Nightingale

think I Ron's statement the in point [indiscernible].

pretty media there's definitely as that that those on disclosures has We're your pressure accounts pricing pricing of on in a less to good the revenue, gross the pricing for us that has sure. target, honest I model profitability. top be which keep media media the pretty SaaS-style margins I'm line across teams security healthy. and are helping trend is our pretty about pricing and is side, feel in seeing tracking large seen those outside momentum great their launch those sure because well, pretty despite good, have in We the been deeply of focused packages. The model packaging, and are accounts is observability the surge delivery pricing accounts, the across but been just in space. think, And it. Outside seeing good on not that's environment of saw we We're successful. that I and

Thomas Blakey

second seems for the question a is the gross Yes, a to step be third the the signal Thanks, round margin. perform Great. second Todd. taking to quarter it quarter. in down then about I'll

Just 'XX prior the like about could we of walk XX% heading talking us us in quarters, around like exit there dynamics were where kind we maybe kind understand through of and that into be would targets helping that helpful.

Ronald Kisling

is it dynamics one I small bit. bit think higher of the seeing saw seen the little we've gross little the in pricing than Those we're past. decline a fluctuate tend fairly to on adjustments was decline margin you a a sequentially

If the declines sort that pricing the moderated you of recall, saw half. we half first in higher in of second 'XX,

rerates saw bring largest of profitability, didn't We traffic. this in same think I see and focused on first year dynamic to discounts the we that the where as didn't pricing we're going higher traffic. saw half additional some we see these customers

increasing are gross pricing that seeing a the going customers these Todd the half moving half in smaller to expect percentage, in of We as growth a concentration. to a margins year. largest and second non-top customers as and starts to soften this with little some the see favorability of course XX this we over about in the drive smaller And second bit our those this that we're forward where some become that's mitigate transition, the in spoke largest pressure

Operator

Q&A And our today. Tom. Thanks, right. All concludes that session

to Nightingale So turn remarks. closing I call Todd the will for over now back Todd?

Todd Nightingale

and Thanks. taken and Fastly's company lightly the this focus and to was for of for Restructuring transition Fastly, I decision of this necessary step, we all commitment on on as customers and care continued all thank the our time growth. employees deeply their for is marks want but our a a teams. moment of not team our

thank want and for on so the your and Thank much. to support. I To everyone for call interest joining you you us today.

Operator

concludes again, for and And call. all Todd. you ladies thank Thanks, today's joining, disconnect. and you may Once now that gentlemen,

Fastly (FSLY) 7 Aug 242024 Q2 Earnings call transcript