FSLY - Earnings call transcript Q3 2024

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Operator

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

I will now hand today's call over to Vern Essi, Investor Relations at Basle. sir. ahead, go Please

Vernon Essi

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

and CEO, and be can Todd with Fastly's Also, A referencing investor shortly will have We be after Nightingale conference Relations X for dialing The our fastly.com year. all filing of related (XXX) the copy call. of website. XXXXXXX today's release, be through X-K today's of and number archived portion are ID financial us replay found which CFO, webcast this of by tables accessed call will supplement, of be a website, our and Investor furnished available press earnings conclusion today. Fastly's in Kisling, in the can Ron XXX-XXXX today,

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

the report SEC, For our refer to release supplement with differ. the the business, third that XXXX further most our factors cause quarter please factors reports of regarding filings could for XX-K earnings with and recent Form information our our and Form XX-Q filed risk for filed our a annual results quarterly on on including filed SEC to discussion and

statements Unless call this based be to basis. of statements, than by noted, no in except will otherwise other revenue non-GAAP encourage update We call, all the Factors. today's on measures. as financial to documents. available during non-GAAP an required obligation we will today numbers note discuss we We you discuss this us particular to entitled certain Also are any law. forward-looking forward-looking these adjusted refer date. to Also, Risk information as undertake Please read that on sections the on

to supplement most for directly GAAP financial not These comparable release provided our and our measures substitute on Relations be are results. the GAAP website. are earnings a to measures Reconciliations Investor intended in the non-GAAP

begin we attending Capital and Technology Technology, Markets in New Telecommunications XX we Conference and RBC fourth Global note quarter, Internet, prepared on X. December the during that York be on Before the Conference Media our UBS Global will please and comments, AI Scottsdale, Arizona in the November

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

Todd Nightingale

restructuring. revenue result a faster-than-projected materially guidance especially and from you the will guidance much go-to-market to Thanks, over outside discuss above of benefits our we've progress will a Fastly. Vern. revenue detail. made, our and third Today, range in margins, of mix of revenue profitability the and Hi, the outside range. I have cost in quarter of an years Ron operating strength our $XXX,XXX, and media then end loss larger largest more the us. our This our the best quarter due and of than financial the and gains X better-than-expected joining of also in everyone, with XX customers in and reported third for results QX our will to of so we to hand thank of initiatives, growing and results to I share better coming in reported high our . We result cover I improve continuing We balanced the achieved $XXX.X was of coupled customers. the higher million, our top execution discuss technology customers guidance than call our of some gross in

top the revenue, the XX% from and in the represented more third our In third reported business. This mix XX% continued This in customers diversifying with line million quarter-over-quarter. of and company. levels indicator a we million quarter $X.X positive revenue to adjusted diversifying in strengthening revenue I'm year revenue. XX you down a share as our X% a the XX% for pleased excited with and in also resulted $XX.X made you net the we diverse EBITDA progress grew last our of good of down both of I'm that our quarter, progress third in our to Fastly profit top from share is record quarter, year-over-year.

strategy from moment which Fastly, of quarter, accounts last is Fastly. at goals Last in Revenue our for transition a we long-term an significant outside XX% XX%. of called our this point inflection quarter's improvement the for and key top growth XX to grew success a year-over-year, and

experiencing the single focused already the a more and benefits product, go customer market. moment, in investment While transition of a doesn't in to are we success happen

self-service to to released Specifically, major expansion manage portfolio, security onboarded pivoted more a our we new engagement a largest [indiscernible]. sales launched a to bespoke our multivendor new customers and with leadership, model

customer diversification our early growth on more reliable diversification, more our are There faster, enterprise changes These and for acquisition focus drive progress revenue will renewed growth seeing revenue We come. largest in is customers. and to Fastly.

showed efforts gains quarter. year-over-year solid the in third acquisition customer Our

count growth very We count We see this just $XXX,XXX year-over-year. quarter. tracking enterprise run our quarterly of our Our enterprise growth to looking X% XXX we'll and was all more in accounts. rate in midsized customer XXX, declined customer carefully rate but Quarter-over-quarter, dip saw enterprise a our be to count X%. enterprise customer definition compared actually methodology, below do volatility representing customers this drive

in count hope of customers enterprise and We returned XX%. discuss our quarter-over-quarter. is satisfied motions, moment. quarter-over-quarter result our growth aren't customer at a experienced X,XXX this which saw and net with I had accelerate growth levels XXXX. new a rate XXX of We QX sales this a of we the will end a increase self-service customers believe of in the result to in for growth churn We normal And in flat we rate while year-over-year X% enterprise

services, to in customer heritage, success Our compute believe is delivery, into acquisition transition leans technology key share and wallet continued a observability. software-driven security, and is that offers our Fastly's platform network innovation heavily it growth. the network best-in-class and edge we

We continue innovation the platform for and to solidifies but of not features development. that investment also in our web only leading future extends application technology its focus

The efficiencies functionality around success. their applications world. to We our our bring unified to customer allows customers believe life offer we our will create our supporting the enhance significantly approach in retention platform and customers' for Fastly that

security you with offerings place developments share in particular. me Let in our important some taking

We in the customer continue since from mitigation to bot release favorable quarter. response experience its first

door upsell. Fastly, for opportunities ease continued and and simple Our for attracts looking bot of cross-sell developed solution mitigation onboarding customers within opening wholly the use, for

automatic the of of from the and mitigation, protection of Fastly's launch successful heels This on DDoS we following our platform. DDoS application-level Fast other announced attacks. X solution provides adaptive bot the Layer general protection on availability

Our a platform with of enables Fastly DDoS button. customers of onboarding heritage of the the frictionless some industry. partnering sophisticated click had of a in and protection most the long implementation solution with We've this just at largest,

intellectual We market productizing it customer property tapping so benefit. entire into that and are the address to this broader base our can

in within application capable that solution growth DDoS with language AI cost allows enterprise adaptive acquisition launched believe quarter, of new response Last savings intelligence is this the release this the performance to customer leveraging We for of proprietary I offer. models. AI customer addition layer builders and a Fastly auto vector accelerator, version innovative beta we us delivering Additionally, driving our you to shared and large opportunities. proxy cross-sell an to

well. The very include OpenAI beyond interest Google and been added as to and has response we've Gemini our customers, from favorable LLM support

make will be accelerator and product I AI before excited demonstrates year-end. to purchase the generally year. the expect We the end it announcing launches by available look to innovation increase at announcement of this as of and forward velocity I'm for more Fastly,

towards new excited enterprise in more with logos. the sales and within experience particularly in new taking to in security security focused ahead. driving close Scott quarter, we're new taken offerings Since customers. joining the our with space, deep has I'll our transition first on this new discuss place driving transformation within existing the now efforts. Lovett, the order second opportunities wins the CRO, go-to-market our about And us steps and He's

Beyond we application the expertise vulnerabilities. cyberattacks experts. sharing providing that sales, mass across our Threat XX% report, trends Insights is and customers success matter our report messaging landscape. security of quarter, Fastly exploit subject targeted and attack In the API the web to using go-to-market the culmination latest branding, of released found the third multiple also techniques with The scanning

XX% We IT of how significant are year also an million. incidents revealed increase reported $X.X of average survey, the companies released professionals bought new our businesses. past the results in an over hurting which [indiscernible] bad with costing wars, of bots

our closely line with security offers. seem interest our in and in results we're These seeing new security portfolio the

which truly efforts, of are of and but just simplicity, our in the year our now pricing second our our in on packaging product, implementation. We focus in demonstrates ease not

Our was our customer new out kicking to Fastly. platform. in the have mix last resulted count off our growing self-service efforts fasting at model initial also PLG rolled while These efforts critical overall developers packages match with attracting and quarter,

we quarter, In demonstrated than our third strong the number year-over-year. packages doubled of packaging efforts more and growth, the sold

the a Our new compared logo to XX% year third of and packages quarter sold the represented XX% in packages ago. tripled

move to In bookings Lastly, grew registrations top forward. our leverage growth year-over-year. We partners grew quarter, year-over-year, year-to-date as our channel channel drive the and XX% go-to-market third opportunities efforts. we our more rounded line out dealer XX% our our and anticipate

me with discussion we the conclude out the close let Now as outlook year. our on

I a every The in difficult our year reduction the times, rigor strategy. impacted these profitability Looking and our we this, and and we strategy revenue department realign XXXX, challenges pulling that declines better. faced. and financial growth overall discipline turn, are implemented on largest foresee transition and back we our believe towards drive a In turning all through growth never we Fastly. not us been our are we has cost prompted of to corner. workforce from investment one suffered Ultimately, ago, did customers, we

that seasonally typically efforts Heading the believe I'm our X quarter, guidance. We've should across the much reflected be though we've shown quarter this there's this -- we pleased horizon, past typical the lift board make prior do as and years, the with on is signs will and work revenue quarter over very in sequential not of the fourth team the experienced we more benefiting fourth of from strong in progress proud months. into these

is the be we taking could dismissed seeing on some dynamics conservatism the past what result of X our quarters as we have accounts. shared it part, over the place this at largest more While of these are with

while a believe growth afford strong very past the large heavily of position these have in strategy to at revenue do focusing of these accounts We outside place impacts and that on worst we've also keep moved our advantages healthy important customers, and platform XXXX the capture optimistic diversification. I'm of us driving continue application opportunity in very to our the to share web prospects largest world's revenue workloads. our believe more [indiscernible] on inherent

And the of I discuss guidance detail, turn the to quarter details financial over call the Ron. now to and in will

Ronald Kisling

thank you, business you, Revenue third stated, quarter otherwise $XX.X $XXX Thank year-over-year year-over-year of guidance. guidance our million. $XXX security coming to everyone, discussion for for ahead all Note Services and to the in metrics our Network based. million, increased results of my XX% $XXX.X today. and well joining and grew unless Todd, to grew to $XXX.X before million. our are million X% X% turning million, year-over-year financial to results in revenue of revenue midpoint non-GAAP I'll us that forward financial the discuss

year-over-year live primarily gaming quarter, sports largest top XX% Lastly, previously emerging grew driven customers compute. mix third segment with certain million, customers, outside better-than-expected of of headwinds the traffic at category our $X.X XX that of strength balanced saw we've represents our a share Other and gains in to our which discussed. offsetting by we our In products

top revenue revenues the XX% impact our of in diverse compared the some and decline Our in QX XX% third XX of XXXX, of a quarter of customers from targeting our customer the largest to customers XXXX reflecting total more comprised strategy our of base.

third in outside year-over-year. Also, top of Revenue from no XX than more customer customers customers our for XX% XX% the quarter. of grew revenue accounted

in our broader share customer resulted top has into continued outside XX expansion on customers. the focus Our wallet acquisition expanding our of revenue customer segment. enterprise

LTM XXX% XXX% of in Our is anticipate trailing largest from the be ago remainder headwind in on retention down the This quarter. some our XXX% we XX-month decline this from revenue quarter and due to net year rate to the a through in primarily XXXX. down customers, our continue the was declines of and will prior to and NRR

other of $XXX XXXX. X% and million At the the a quarter larger million This in the million, which remaining are working adoption due on was third from contract of RPO quarter, our subscription SaaS was third our This end obligations the to our products, contract customers $XXX second increasing from packaging up offset sold with by X% their $XXX primarily down quarter over renewals customers or and terms. the basis. increase in XXXX of is through larger

As we a to of compared QX, XXX of the the end of second mentioned, at XX Todd XX had enterprise net customers quarter. in an decrease increase

financial up $XXX,XXX, of from the year-over-year $XXX,XXX Enterprise now quarter. of total previous on year. QX X% customers annualized our a was turn X%. in of X% an in revenue for The enterprise the rest count increased compared On last XX% for will QX basis $XXX,XXX quarter up from in to third I and the basis, average customer results QX. Enterprise customer spend in to XX% accounted

of up points better utilization we costs and offset a costs to higher on bandwidth XX.X% was on fixed lesser revenue traffic. higher-than-expected quarter QX XXXX our margin extent XX.X% from gross from XX.X% XXXX in and second as in basis transit the increased XXX by benefited Our to compared on

in Our on line a the in XXXX, of quarter an a restructuring reducing accounted $XX.X Operating a reflecting XX-month otherwise on continued the related costs quarter, incremental and environment. margin the reduction of our upside. for hiring compared XX% of Lower record to million in majority expenses employee gross in challenging cost than XX% the basis to better top our third revenue trailing recent expectations. were third a efforts hit

and expenses the million profit to a operating beating This our operating an loss of $XX gross better-than-expected with of XX% X% $X expenses, XXXX compared QX in operating better-than-expected third in a in in quarter. guidance from decrease This sequentially decrease range million. to second the quarter favorability represents combined our $X.X of loss operating million resulted

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

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

Todd As that and set to net for mentioned, quarterly both I'm adjusted income records Fastly. pleased highlight EBITDA

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

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

in Our of end quarter cash at lower capital expenditures were approximately shared X% third of of the our guidance call. our QX X% XX% revenue coming we on of the to in revenue

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

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

XXXX, customer adversely As throughout in his seeing shared we some facing Todd our further we continuing longer will from which of the growth. an impacting largest remarks, are declines in expansion environment growth course unexpectedly revenue revenue acquisition, lead challenging customers we of while of to our term, believe revenue new are

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

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

XXXX annual onetime $XXX true-ups we revenue representing For respectively. to the onetime $XXX amounts the revenue quarter in $X.X fourth recorded and fourth flattish not million XXXX, the to million expect we compared to any million expect growth. of Note, in $X.X quarter, million, experience the do in of the fourth range we revenue and quarter

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

fourth decline gross regions. margin with bandwidth sequential or This the we our XX plus in to basis XXX costs international traffic anticipate gross minus margin points. in third and decrease For quarter, primarily points deployment due colocation relative is will quarter, increased basis associated the to approximately increased

our quarter operating Guidance expenses quarter to reflect be anticipate the impact modestly from fourth for We fourth operating results decrease and up flat third lower will impact our the sequential margin quarter levels. gross of expenses. the beneficial in operating of

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

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

We continue relative We to compared or gross basis XXXX to anticipate leverage XXXX improvement yet growth. gross margins our on XXXX. by points as minus see margin will to XX expect incremental we revenue improve lower plus to basis XX XXXX cost in approximately points,

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

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

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

Operator

the first line Piper Your with of question Sandler. from Instructions] is [Operator Fish James

James Fish

of that at one our talked your profitability Todd, of the the I wallet about seeing especially and net very overall. [indiscernible] -- programs everybody What environment customers. -- But the place you that I large here And wondering conference. think had particular, to income to bankrupt. competitors with you that here business try is on that quarter are in with Congrats overlapping are entity Look, getting in what bankruptcy? competitive in in . customers, about further terms to even opportunity given you some share gain guys putting going

Unknown Executive

Yes.

right it's interesting shifted largely place and I in making where upside of have, a think and significant is opportunity I the accounts XXXX. that's accounts some a that straightforward. think towards market overlapping Fastly, traffic definitely transition seen largely, now, the fact, super like as But there's in the We've potential this here.

big in see to going area slightly lens. we're wider where a that's think shifts Maybe that in just I particular.

of of in building underscores services, us platform and I complete very just think customers observability I momentum a help And to lot of transition the network but compute strength, a these importance strategy think offer. here business, and our a well. going it more with a not also in it's security offering as the that's over complete we're where seeing and to

we've us bit a majority So seen think for of of probably that for us, is in upside the but far, little the opportunity 'XX. so I

James Fish

it. security little rate here? that as your And has may Got this side and point? And bit be where well what's generally easier Scott piece delivery to packaging a low-hanging maybe cross-sell? web specifically, the the then of that at penetration specifically, within on customers What's the attach security fruit or customers to .

Unknown Executive

disclose would super number of our We mind. It's still I tell think very top but penetration low. here, the cross-sell is Yes. you, I particular don't

X DDoS the WAF delivery on simplicity existing a I'm security onboard think an efficacy focused with that best-in-class customers innovation, X not content of in certainly quarters. focused a there's with that sure of the deployment mitigation see a a a releases last I just exactly can who opportunity. of our in are lot, or and surge even here the there's and We that's or security button. but customers bot big why ease And lot click true you we've platforms

cross-sell the really here innovation product drive this are we're far little area I And on opportunity. -- where and cross-sell the to we believe too far have we targeting platform far, penetration

Operator

line with Frank Your from the James. is next question Raymond Lau of

Frank Louthan

the the a like little business in nature. bit more bump was So here it onetime seems in

capture going could you tracking give quarter? a bit we on Can walk made us You're media about you on what early an Or higher? through same of are in Can you Is replicable. business the to it you've And thoughts the savings of some the the And that thought. efforts was. cost be a there little any kind to where that that you've on then was restructuring. driving cautious us possibly overall the what little it new? than found or success we you sooner little be -- a seen just idea

Todd Nightingale

revenue from We think volatility projected out much than those accounts. that in -- like better that's in to think results the and -- we be and project revenue we some correct correct quarters. are are growth outside of of projecting part really know not we're want right very the the I you're saw we saw being to year-over-year forward. And into moving really We there, you say growth careful projection important. we're QX, too that sure the there's top those revenue Sure. think And But the I we that's I the that the that result rate XX% top is XX. giving important to

reliable momentum diversified, seeing business projectable in and and no that to a lot transition and approaching acquiring doubt forward the on and growth diversified to a a long-term larger more reliable transition And focus starting We're there's outside on diversification therefore, focus business. of do market, has reliable on this this that more moving rate customers towards that growth. more media with driving build

chunk big bit projection. do our the a the bit possible. earlier, operational and rigor to largely, a than As little OpEx been believe pushing that far pretty time. we've a able we we've than side drove in Ron, the restructuring, improvements anything and and to and But efficiency our we And faster on as results there. more long savings, consistent were beat had control cost .[indiscernible]. of we little efficiently a making for cost believe

Ronald Kisling

some good savings favorability about $XX basically drive in execution versus restructuring I that's I a our again, original million is in [indiscernible] based -- going of XXXX. No, plan that the to the just we think a think on the the it's saw on traffic. spending And

Frank Louthan

-- you're it business what's growth opportunities a what of you just [indiscernible] and business. Is long mentioned have Or is does -- like where you when and media, you these software-based that some that can of just And rate? workloads what you Great. getting to getting? it more look data outside those are then are it characterize -- new think is happen that

Unknown Executive

for sure. Yes,

should I that compute, think, their of number the say, enjoy one, those see the business. think new they media, first very a more It of months help growth on is across will acquisition, leverage board, is the outside a really, stickier, very, that that across expand it's we're really more own workloads rate balance and will more help to portfolio makes XX in business platform logo powerful is results healthy motion and to infrastructure of diversified the a I their and much spend for our observability the drives more and It's customer motion Outside years a the their organization. us there's the there definitely media accelerated drive media, starting [indiscernible] business. multi-portfolio margins. which a is lot as security, platform teams loyal and It the platform. within across us more in developers healthy than couple in or, I of

about. excited really are we So

Operator

is Singh question the of Sanjit line with Morgan next Stanley. Your from

Sanjit Singh

to sounds is, growth to worse, when Todd, for flat a of sort the at returning your between like essentially be XX that on there growth guide, the would and growth, XX business. see is QX probably a top to your like to the I overarching seem but more top getting guess signal mix nice cadence about back looking look Nice It headwinds year-over-year we're [indiscernible]. non-top business question, XX getting so I my [indiscernible]

of it it healthily customers sort growing are And to the like double is your so XX in digits. XX% mix non-top looks like down because getting that XX%,

those like growth. lines kind of X fits thoughts out of sort any So crossed there on that where were reasonable

Todd Nightingale

Yes.

growth the customers, it's as so non-top I on we be more a tracking it. growth and about that tail And concentration disclosure, why lot. public the to a then that in I this think is something rate question, it's rate think dominated the carefully reduces good index longer the more overall more [indiscernible] growth of the by nonmedia more I'm believe going to we're rate. going and and and XX

I going a be for And I to be We've getting think pretty healthy a see keep momentum so diversifying our in success our as in increasingly, it customer us. be be. just our the not portfolio is we're really side diversifying and honest, think base. across pushing place to will much upside it's XXXX, to revenue seen think going security going But business, hard significant I to and the to of that But XX% at you're to us really diversification. time only on well.

Sanjit Singh

Maybe you can just follow up here on the security side.

in I'm your sort sure updates sort sales is growth of of more quarters? more management capabilities. stronger of what seeing . that of motion? to outlook interplay security but with of we the are sort couple sort next driving to WAF, Where partners, you're with bot next-generation updates So the the over for momentum security

Todd Nightingale

just not as but the XL, security. R&D of sort our And really, are restructuring background. that It's just Scott, investment from we pairing CRO, mind path the comes from with in go-to-market new look XXXX, of focused top security we a the to did. on forward, Yes. we And focus start for deeply especially certainly as we real

just the mind. And but be of not on side, -- so top to just the I across very, product security XXXX line area, in side, going -- a R&D not very believe really is board. I the

potential a acquisition. delivery really And -- with here. expand for and especially have it a start to a first it network and a new think was really we We've the security land ton our customers lot and motion got the -- time security more question, into -- I'm of developments, we in first to seeing in more onboard amazing and I mentioned cross-sell. the upside opportunity have to use logo actually momentum those the a in have platform when good there's we sales product ton, and to recent customers of new the comes services. as way to untapped

Operator

Your Power the Will next Baird. question line is from with of

William Power

the I'm in conservatism just sounds Great. to media just stable you're looked QX, actually Okay. customers which the currents a like pretty and headwinds but it were some side, the within still surface some XX And QX, clarify QX, maybe it coming some there's price that. in Todd, questions. seasonally encouraging. maybe with spending for there, top to cross me. has your back maybe yes, some in I still bit sure like mean

I'm you I you like what but that you Maybe understand is behind the the -- given in around just the worst can headwinds kind for so me? just triangulate to trying So of that of help think you confidence just some these also the sounded guess I'm it behind QX. worst underpins visibility got you

Unknown Executive

-- Yes. higher time, company. growth build strategy helping projection, a now the we've way for the have more shift certainly certainly dependent seen quarters. rate. on in the And and to more growth more the few I media, rate now confidence that the help business us and us have better more build XX% a down just mean I all think in is big of outside XX% we this That's in a reliable fullness better, of the from

have our have here. that seen projections important. of ago. As these better One doing demonstrating quarters been for market, think I serve we've we started the executive better customer that better the see is headwinds better to see benefits business And think, put business, these significant to rest more model we media engagement, by a when we X, performance far ease as really customers reliability, did is in we I able better that which place better business. we engagement so goes, few engagement, customer the of higher-touch with than

us, what's it business better that a predict Internet, a given motion don't much that the the bit. way But think, back our projection the in I that higher in touch it of like and Agio and measure success we of into return we to position, from what's business. big better help QX, ever that we've baked part A get visibility said, have projection. And growth to That will and systems, being little a to the and fuel business, growth. changed situation cetera, telemetry a that's think been also has et hoping here. business happening customer things to across We're this our better has that but business,

And model so a better return also building this a sort our of better revenue and engagement faster growth moving projection forward. of media for better and but our hopefully, business, to

William Power

even improved adds, I common particular other terms out of just, customer the then the guess, And to that nice verticals follow-on. there, the bit, mean, touched I new on terms to helping Okay. in customers the doing good. which this X particular outside was Any in I your there, are in success drive . cases revenue well XX. use in looked both actually you're growth, that a top or number know down of I and overall enterprise you variables maybe guess, but see either call ads

Todd Nightingale

Yes.

observability biggest media, complete anecdotal, to I've the but a looking little new in board. are our security, trend on them more of portfolio, the that think customers trend of and edge security in delivery, serious think, compute. I bringing success and a edge certainly see, biggest this filled pieces lot coming we've out new I couple last especially a engagement Network more on we're outside the is for fast, and logos And to services solution. seen starting as finding seen I've is those

has a security a us portfolio seen customers, our more the [indiscernible] portfolio me, they're solution. looking for. They're to I've . looking trend what for and these build big So is new finishing that's helped here complete

Operator

question next line Timothy is with from Your Oppenheimer. of Horan the

Timothy Horan

guys. Sorry,

than customers working have much said I at through you're you I their time related but on know visibility? what's our the space why bit customers when under CDN share where do other and color hyperscalers I are entrants the and more know been industry? been a talking of kind guess, -- the this, customers, mean, a guess are are where the you've on I And on with large coming for disappointing is little of applications, you've over, a obligations answering but on revenue a they this those will in maybe lot bit retaining you are large lower basis. has line or your gaining those -- it, just about it expected? visibility to obligations. that pressure. been whole the customers pricing whole think been has relative Is those volumes or like And I Or new have. the I

Ronald Kisling

Yes.

care. for with have much senior increased our particularly we've visibility the And kind sort They any when would largest at across to quarter. engagement what good come their drives expectations spread particular renewal. customers the I out in year. shared visibility levels, that don't with into better of is have decisions terms around pricing past, a renewals of the are our we of have concentration their In generally we what the really up in What of obligations, we say, contracts are, as

see that renewals have of results But up a renewal. We might sort little adjustments when at a good contracts come have new win date. of pricing. those those from we better certainly I each we those So much have single less for those be quarters. in to in we impact visibility what visibility think contract terms in contracts of at

Todd Nightingale

Yes.

it if I that's bit are at think opportunity see. the at looking going here. little edge we're the and it what than optimistic a of little I -- service consolidation fewer space that, whole in I saw to There's really to that 'XX make . think the lens in even and And Just seeing in I healthier environment exactly market, are seeing full guess there's of we the the from has through platform you look players 'XX. think players. been we fewer pricing change a we And a

Timothy Horan

AI how or just so color much any on that and Can about far? then you've experienced accelerator. question cost talk And what . you platform latency from around X the your on improved reduce you

Todd Nightingale

can building of of to solution onboarding development time, second, a type LLM single cost the same use line of Customers the lowering a a we the is the based of case. the reality me basically response there's requests has And to X Lncloud, our no chatbot with -- of like teams developer very of the I've well feel the cash video power code. experience. the leverage I public back use general from Accelerator the here can seconds can solutions. same common [indiscernible] power while Fastly There's or really and trivial semantic delivering response their the X power all quarter. those central to style those cloud. gotten match, the this brings in -- at more. lower availability of of cost think to is total single question, AI that And be LLM the platform go speed the It's the reason I'm Yes. using human or relatively customers on into provide the a bring our that But and great to X times doing and requests there the this fast at easy And that most like of total the case support very, most [indiscernible] deliquency doesn't time, the And launch always beta, every of solution. way below excited a awesome. demo. a

Operator

line the Rhee question next Hallum. with is Craig Your of Jeff Van from

Unknown Executive

I XX count, Maybe on clarification. the non-top just know up enterprise year-over-year. a little the XX% customer was

than the the have fall non-top Any your sequential other -- pattern drop? XX strength other that top threshold good wouldn't you of $XXX,XXX expected, talk very XX, I quarter. The many that you given the color would quarter. below overall can generally, the share? drop you in there have can the of So that about

James Fish

into tell saw to customer number. churn. do concern, not of I the way sort sensitive think a customers which dollar by quite and it story. customers even look have by trying you the of below you, in see a spent will the all non-top I -- I very at on increase above -- those swing be at customers lot we is look I we churn, I But that the did numbers did when in or tells their any not what shared did spent the I I'll that dig was to bit. or of XX amount same so the you total to When customers, average enterprise disclosures if

accounts. growing every saw that honest, saw we and we is that's including reliably and a love sure make I that that, We the make what up drift be to single to -- folks driving to per It's to be below that sure quarter. pushing growth every are we're numbers. quarter going that result some showed in not very, very hard commercial/enterprise $XX,XXX account, midsized in those really number threshold,

Jeff Van Rhee

financials, then if And XX% XX%. That's XX% I on the I I helpful. was to I last right, for minus guide FCF And the Ron, you to think heard guess, minus think XX% said quarter here.

the you quarter, across is treatment of what that lower. the but So into coming was to sort stability line message board in thought the with ticked X

about what talk there? Just happened

Sanjit Singh

Yes.

see I quarter. know We also, CapEx our from think X% as in cash did around -- better flow operations. the little did quarter, the was we we a in

those of lot And puts so takes. a and

the up The million the didn't restructuring, $XX but than which of we'll we other say that quarter, sort that thing prior the that the restructuring of to the we we wrap cash was calculations, impact did we in when the have have time by with the impact relative OpEx to the of flow in year free more savings. our

Jeff Van Rhee

count conclusion conclusion? Just that conservatism. . there talk great. Okay. And expectations maybe The a you not seasonal you be would color QX. last just for that just keep But I built any to just you on curious me in to evidence the or other here to what assume in guys want know than you down anecdotally uptick quantitatively just about to can then. came how

Ronald Kisling

of things. I Yes. think couple I mean a

I strength we some largest our see did some think go as customers increased QX, gaming we across into in live sports. and

to customers somewhat lower were we some those see largest going of think I revenue.

the of that also saw an seasonal uptick to couple that fourth we in of quarter. true-ups last that contributed some the We see years the in absence of

we And X so of QX, saw the revenue those QX ended higher on outlook. to when together with top flattish up revenue in we QX relatively bring we

also margin, not And note but that impact Jeff? only those revenue true-ups gross

Operator

Markets. of is with line Capital Jaluria Rishi Your RBC from the next question

Unknown Analyst

an But that give business. and shift into customers, Jaluria. the Rishi, you delivery the standpoint efforts for cohort. aren't XX [indiscernible] so more the way Chris if the services other those was I from mix wondering is of on update revenue This you and reliant security within top could of to us selling as customer on

Unknown Executive

look one. nature the on But by And pretty the new approaching their at The way, do we is know of as business delivery in XX very on results be compute those going big is that certainly we top security customers how their primarily in spend offering, portfolio expansion the a saw certainly from we everything good table. bespoke mean have can't top a there and across the the It's mind. compute of are on side. and side to a come that business. stickiness doesn't the we That we

seeing a are in the media space. event lot We security of activity

security we But there opportunity the there. from going every our diversifying is portfolio continues us Like I tell that that revenue full I again, don't security and come in I the at even think you, are more journey, beginning media. of think I'd and I so still a of that gain be part stickiness huge our focus. -- is will bulk we think And largely. to if from -- include to media reached our the for to think haven't the 'XX, [indiscernible]. of And capacity reached we've

Unknown Analyst

it. Got

about guidance? one. what into is mix think of embedded increasing? the And Just revenue one QX we How other should securities

Unknown Executive

mix of -- than QX. I that lot effects course, we in this as the QX product came result. honest. to far during better And think security quarter can complete in the yes, to a and The as went that, QX, I in the be wasn't launches these and of do

show our we seen of to revenue effect We haven't here. sales full leadership up seen in certainly, And haven't new the yet. the start that

company can better the we a than And XXXX. will significantly do for it think be focus big, in I big that.

Ronald Kisling

point, I I into putting that add, recent XXXX the Scott all as go-to-market you'll the efforts efforts. I'd is impact the is get see bigger thing and think think into only to The think Yes. Todd's releases really I we with

Operator

question Brooks line next America. from is Madeline of of with the Your Bank

Unknown Analyst

is, Bank with you, Madeline but Brooks such for especially This you one-offs customers? start for in was or with on this trends? that one. about the XQ questions the then expected of is the in contributed My you of the first the [indiscernible] unexpected America. first I'll question strength I've to talk there recovery Olympics the Were sustainability as And any these can outperformance? large few noted of X

Ronald Kisling

Yes.

the did third results quarter. I through the as quarter we in see think better-than-expected worked we

end I release that's anticipated going we strength into up into but QX strength from on was going we gains timing, XX, events, stronger sporting quarter. that think a where -- mentioned then a top than the we there they that lot we had and including an we that so saw the global share We live tied better growth strength medallions. acceleration. than spring anticipated little was outside see quarter. to events did in of And mentioned where acceleration some also we Todd earlier, But the expected saw see gaming, saw of call, as the was we to

Unknown Executive

posted again, year-over-year XX% outside on XX to XX% top the and transformation QX. in real shifting we diversification revenue. Yes, of our in growth focus and QX this that

there, to the going . for more to results to and starting see sustainable growth lead we're long-term think I that's company.

Unknown Analyst

over When that start security? year an from or now revenue there we more see thinking see but of quantify last is see Perfect. talked few this And other possibly then about the see just could breaking basically revenue, and what maybe should be to of into how in looking security we mix XXXX. network you you time. which about services now at will gone out about Or compute. and with And deceleration -- like going we guys XX%. your you XX% talk service I increase has to from in network We this know a questions, shift like

Todd Nightingale

than product the every further the Yes. Look, possible of more think of And of well. time the exactly well perhaps our market. for sure. services as going line don't lines diversification business in this time, I certainly X/X. I network we're come revenue decelerate. what going product XX% more I as I to certainly on, of see. that the pattern believe And see and and want more growth want to and to accelerate you're But think lines and see diversification below even is I is any lower we'll revenue fullness across to -- goes product I believe That in more

Operator

Kessinger line Your next question is of from D.A. the Davidson. with Rudy

Rudy Kessinger

bit between to accelerated said, a maybe to Ron, you I'm if the Or looks you -- suggested bit XX customer on in the you higher in I expected bit just Is could guess revenue accelerate. XX the know like break maybe more. last you guide, non-top it top like just XX XX? and top my is quarter, a lower, commentary the bit It curious, based revenue in non-top I the on QX, that what QX. head a QX. expectation? prior XX% in still it saw a about declines out

Ronald Kisling

the without That mean I guidance. likely reflected will with specifically do expect the fourth some customers a quarter. continue Yes. headwinds see It's QX. certain our of to think bring what quarter. quantifying, into going seen I down largest third continued see maybe in growth we think we relative little strong to is in our QX what into what that in QX will bit additional below concentration we've And we and saw I

Rudy Kessinger

XXX about then potentially the of is the margins, year, compression you a how QX should just top a more just in think this revenue in or you decline less XXXX? unpack basis QX contraction time, you're year. adjust we XX next maybe if had gross basis some last do feel in that this first likely I it? into in guess, driving on XX maybe Okay. point points What's QX margins gross I like point of benefit that Could in guiding still, gross And at And you even or the year. bit? for margins to the And your half about in

Ronald Kisling

Yes.

be certainly first visibility think largest we of dramatically we're QX, I seen into end their subset improved of going have we've question, those think I from headwinds move declines but nearing of some your our to headwinds and past do to worst in kind impacts going still our believe -- amongst we there's the But I customers. We behavior. of some the largest our the a think customers.

we strong with position, I and largest got very customers. good those a customers. we've which think growth continue keep a of outside healthy to these to have see strategy

On because and benefits gross some really our typically associated of volumes top one gross other international with increased the increased increased is the traffic. margin, and are I we're traffic, think we're those deployments point, of that really -- has your which bandwidth lower is [indiscernible] investment the dynamic to headwinds there. then seeing lower drive seeing to of international today onetime on margins

markets. we we in grow in opportunity with bring line that major international an as to Although those to more gross us there's for what continue see margins our

Operator

from of is next Fatima Your question the Citi. with line Boolani

Fatima Boolani

kind this diversify to to Todd, that you've work ago? away the a the have appreciate growing top can of very, composition color very please. just is a what a of versus of if from a outside I of us at and versus have you customers curious as can that can speak hard the year give on today follow-up year you XX some that. then And job top good I well, group today done been But composition ago? XX

Todd Nightingale

folks doesn't tends very media space bulk download in time or to mean in gaming the be mean could heavy. it It space at the X just video, Sure. but That streaming another.

digital might same is like more [indiscernible], that some those attack business have account. but of often as well the the And organizations of traditional look a course,

Fatima Boolani

we of rate be it you've when into as Got some the when a around should net we out progress this, some to we trough some it. start of next when Xth and headwinds, . to kind retention visibility factors year. if can through or number or Ron, the specifically in trends. you maybe of you retention were headwinds to on discussed guardrails clues relates business, kind out ongoing magnitude compression where of this what about see some type help you I of of give net the of and may but compression, But quarter rate on alluding the and shrinking us of those as think the have should troughing kind

Ronald Kisling

I a Yes, good Yes. it's question. mean .

us. as as the think of think year, I from said, move next and large we lot I the a customers behind I into headwinds are

of gone of has Given slow see basis, going to kind growth we and move on that that's out the where LTE the NRR LTM the or NRR.

LTM you we see would the some saw So move that second calculation. into as and we XXXX the some off half expect I middle of as in see you expansion headwinds of the year that of drop would sort

Operator

Our come from William the final Blair. of line Ho with Jonathan question will

Unknown Analyst

This I'd Jonathan is color Ho. to the slow where on to customer Jared you're potentially seeing side, some terms get to flip And [indiscernible] just more you business. or on security of success? additional products? the then in of specific back for any like And just go where some on type maybe

Unknown Executive

Yes.

we the The value, with I think mode leads complete in that advantage is last lot solution. and and and of the the the especially believe blocking really lot the of technology really the platform board. to that around be a able so fully edge technology all full really not I to deployed just seen product over a full really we've a the cut security fast or users last that Bob power be of alerting year where of on have -- now of get part along efficacy DDoS a success, our across there's above our run the and there. to very been moved And loyalty infrastructure the portfolio platform. enabled it there. We've so, and our it of a

add-on unification of adaptive the now of prevention think then that technology and DDoS here good. see our driving way platform and a I really customers feel that the confidence is to lot engaging with WAF and I So [indiscernible] the

fintech, in upside of us I has it to real the customers. like penetration logistics, untapped is for has think travel, e-commerce, delivery existing and a hospitality, et media, biggest verticals outside our this especially cetera, it potential

in lot why be security. of And a it's think for 'XX. an there's so us I to such upside That's focus just important going in

Operator

call the Nightingale. hand CEO, back now Todd over will I to

Todd Nightingale

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

Operator

joining. concludes for This today's you Thank call.

disconnect You lines. your may now

Fastly (FSLY) 6 Nov 242024 Q3 Earnings call transcript