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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 2, 2022

FASTLY, INC.

(Exact name of Registrant as Specified in Its Charter)


Delaware	001-38897	27-5411834
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

475 Brannan Street, Suite 300

San Francisco, CA 94107

(Address of principal executive offices) (Zip code)

(844) 432-7859

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):


☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Class A Common Stock, $0.00002 par value

“FSLY”

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On November 2, 2022, Fastly, Inc. (the "Company") announced its financial results for the quarter ended September 30, 2022 by issuing a press release. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Attached hereto as Exhibit 99.2 and incorporated by reference herein is the Company’s investor supplement, regarding results of the quarter ended September 30, 2022 (the “Investor Supplement”). The Investor Supplement will be posted to http://investors.fastly.com immediately after the filing of this Form 8-K.

The information furnished on this Form 8-K, including the exhibits attached, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d)Exhibits



Exhibit No.						Exhibit Description

99.1						Press Release dated November 2 , 2022
99.2						Investor Supplement for Third Quarter 2022 Results

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FASTLY, INC.

Dated:

November 2, 2022

By:

/s/ Ronald W. Kisling

Ronald W. Kisling

Chief Financial Officer

EX-99.1 2 ex991-fslypressrelease93022.htm EX-99.1 Document

Exhibit 99.1

Fastly Announces Third Quarter 2022 Financial Results

•Record quarterly revenue exceeded high-end of quarterly guidance range and grew 25% annually compared to prior quarter

•GAAP gross margin grew 370 bps sequentially; non-GAAP gross margin grew 320 basis points sequentially

•Average enterprise customer spend grew 4% sequentially

SAN FRANCISCO, November 2, 2022 — Fastly, Inc. (NYSE: FSLY), the world’s fastest edge cloud platform, today announced financial results for its third quarter ended September 30, 2022.

“We are pleased to announce another record quarter, continuing our revenue momentum into 2022 and exceeding the top end of our guidance range while improving our gross margin significantly,” said Todd Nightingale, CEO of Fastly.

“I’m excited that Fastly’s platform and differentiated products are driving both amazing new customer acquisition and increased existing customer usage,” continued Nightingale. “Our portfolio expansion strategy is working and we will be focusing our efforts on accelerating our cross-selling motion to drive growth into 2023.”


	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Revenue	$	108,504		$	86,735		$	313,404		$	256,613
Gross Margin
GAAP gross margin	48.6		%	52.4		%	47.0		%	53.6		%
Non-GAAP gross margin	53.6		%	57.5		%	52.2		%	58.4		%
Operating loss
GAAP operating loss	$	(65,765)		$	(54,934)		$	(197,737)		$	(162,365)
Non-GAAP operating loss	$	(19,841)		$	(12,935)		$	(64,474)		$	(43,400)
Net loss per share
GAAP net loss per common share—basic and diluted	$	(0.52)		$	(0.48)		$	(1.19)		$	(1.43)
Non-GAAP net loss per common share—basic and diluted	$	(0.14)		$	(0.11)		$	(0.52)		$	(0.38)

Third Quarter 2022 Financial Summary

•Total revenue of $108.5 million, representing 6% sequential growth and 25% year-over-year growth.

•GAAP gross margin of 48.6%, compared to 52.4% in the third quarter of 2021. Non-GAAP gross margin of 53.6%, compared to 57.5% in the third quarter of 2021.

•GAAP net loss of $63.4 million, compared to $56.2 million in the third quarter of 2021. Non-GAAP net loss of $16.8 million, compared to $13.2 million in the third quarter of 2021.

•GAAP net loss per basic and diluted shares of $0.52 compared to $0.48 in the third quarter of 2021. Non-GAAP net loss per basic and diluted shares of $0.14, compared to $0.11 in the third quarter of 2021.

Key Metrics

•Trailing 12-month net retention rate (NRR LTM)1 increased to 118% in the third quarter from 117% in the second quarter 2022.

•Dollar-Based Net Expansion Rate (DBNER)2 increased to 122% in the third quarter from 120% in the second quarter 2022.

•Total customer count of 2,925 in the third quarter, of which 482 were enterprise3 customers.

•Average enterprise customer spend of $759K in the third quarter, up 4% quarter-over-quarter.

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

Third Quarter Business Highlights

•Todd Nightingale joined Fastly as CEO, bringing his experience from Cisco where he led business strategy and development efforts for its multi-billion dollar networking portfolio as Executive VP and GM of Enterprise Networking and Cloud.

•Named a Challenger in Gartner® Magic Quadrant™ for Web Application and API Protection (WAAP). Along with our recent recognition as the Customers’ Choice for Web Application and API Protection for a fourth consecutive year, this validates Fastly’s first and only unified solution that protects Internet scale in any environment.

•Introduced the AWS Lambda agent for the Fastly Next-Gen WAF, further enhancing the ability to deploy Fastly’s Next-Gen WAF in more places and to support serverless and FaaS initiatives with one of the most popular serverless solutions on the market.

•Released general availability of a frictionless security solution, GraphQL inspection with Next-Gen WAF, supporting popular GraphQL APIs with GraphQL visibility and protection available right out of the box. Several customers in media streaming, financial services, and ecommerce achieve threat protection on their GraphQL with our turnkey solution.

•Selected by AWS as VIP Marketing Accelerate Partner to expand sales and distribution of Fastly Next-Gen WAF.

Fourth Quarter and Full Year 2022 Guidance


	Q4 2022	Full Year 2022
Total Revenue (millions)	$112 - $116	$425 - $429
Non-GAAP Operating Loss (millions)	($18.0) - ($14.0)	($82) - ($78)
Non-GAAP Net Loss per share (4)(5)	($0.15) - ($0.11)	($0.67) - ($0.63)

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

Conference Call Information

Fastly will host an investor conference call to discuss its results at 1:30 p.m. PT / 4:30 p.m. ET on Wednesday, November 2, 2022.

Date: Wednesday, November 2, 2022

Time: 1:30 p.m. PT / 4:30 p.m. ET

Webcast: https://investors.fastly.com

Dial-in: 888-330-2022 (US/CA) or 646-960-0690 (Intl.)

Conf. ID#: 7543239

Please dial in at least 10 minutes prior to the 1:30 p.m. PT start time. A live webcast of the call will be available at https://investors.fastly.com where listeners may log on to the event by selecting the webcast link under the “Quarterly Results” section.

A telephone replay of the conference call will be available at approximately 5:00 p.m. PT, November 2 through November 16, 2022 by dialing 800-770-2030 or 647-362-9199 and entering the passcode 7543239.

About Fastly

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

Forward-Looking Statements

This press release contains “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us on the date of this press release. Forward-looking statements may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements include, but are not limited to, statements regarding our future financial and operating performance, including our outlook and guidance, the demand for our platform, and our ability to deliver on our long-term strategy. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Important factors that could cause our actual results to differ materially are detailed from time to time in the reports Fastly files with the Securities and Exchange Commission (“SEC”), including in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2022. Copies of reports filed with the SEC are posted on Fastly’s website and are available from Fastly without charge.

Use of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses the following non-GAAP measures of financial performance: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP basic and diluted net loss per common share, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, free cash flow and adjusted EBITDA. The presentation of this additional financial information is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. These non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In addition, these non-GAAP financial measures may be different from the non-GAAP financial measures used by other companies. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. Management compensates for these limitations by reconciling these non-GAAP financial measures to the most comparable GAAP financial measures within our earnings releases.

Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss and non-GAAP basic and diluted net loss per common share, non-GAAP research and development, non-GAAP sales and marketing, and non-GAAP general and administrative differ from GAAP in that they exclude stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, executive transition costs, net gain on extinguishment of debt and amortization of debt discount and issuance costs.

Adjusted EBITDA: excludes stock-based compensation expense, depreciation and other amortization expenses, amortization of acquired intangible assets, acquisition-related expenses, executive transition costs, interest income, interest expense, including amortization of debt discount and issuance costs, net gain on extinguishment of debt, other income (expense), net, and income taxes.

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

Amortization of Acquired Intangible Assets: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases and acquisitions. Management considers its operating results without this activity when evaluating its ongoing non-GAAP performance and its adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of asset purchases and acquisitions and may not be reflective of our core business, ongoing operating results, or future outlook.

Amortization of Debt Discount and Issuance Costs: consists primarily of amortization expense related to our debt obligations. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. These are included in our total interest expense.

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

Depreciation and Other Amortization Expense: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases. Management considers its operating results without this activity when evaluating its ongoing adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of asset purchases and may not be reflective of our core business, ongoing operating results, or future outlook.

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

Free Cash Flow: calculated as net cash used in operating activities less capital expenditures, including any advance payments made related to capital expenditures.

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

Interest Expense: consists primarily of interest expense related to our debt instruments, including amortization of debt discount and issuance costs. Management considers its operating results without this activity when evaluating its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Interest Income: consists primarily of interest income related to our marketable securities. Management considers its operating results without this activity when evaluating its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

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

Other Income (Expense), Net: consists primarily of foreign currency transaction gains and losses. Management considers its operating results without this activity when evaluating its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Stock-based Compensation Expense: consists of expenses for stock options, restricted stock units, performance awards, restricted stock awards and Employee Stock Purchase Plan ("ESPP") under our equity incentive plans. Although stock-based compensation is an expense for the Company and is viewed as a form of compensation, management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance, primarily because it is a non-cash expense not believed by management to be reflective of our core business, ongoing operating results, or future outlook. In addition, the value of some stock-based instruments is determined using formulas that incorporate variables, such as market volatility, that are beyond our control.

Management believes these non-GAAP financial measures and adjusted EBITDA serve as useful metrics for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods and to those of peer companies, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors' overall understanding of our current financial performance.

Key Metrics

1 We calculate LTM Net Retention Rate by dividing the total customer revenue for the prior twelve-month period (“prior 12-month period”) ending at the beginning of the last twelve-month period (“LTM period”) minus revenue contraction due to billing decreases or customer churn, plus revenue expansion due to billing increases during the LTM period from the same customers by the total prior 12-month period revenue. We believe the LTM Net Retention Rate is supplemental as it removes some of the volatility that is inherent in a usage-based business model.

2 We calculate Dollar-Based Net Expansion Rate by dividing the revenue for a given period from customers who remained customers as of the last day of the given period (the “current” period) by the revenue from the same customers for the same period measured one year prior (the “base” period). The revenue included in the current period excludes revenue from (i) customers that churned after the end of the base period and (ii) new customers that entered into a customer agreement after the end of the base period.

3 Enterprise customers are defined as those spending $100,000 or more in the trailing twelve-month period.

4 Assumes weighted average basic shares outstanding of 123.6 million in Q4 2022 and 121.6 million for the full year 2022.

5 Non-GAAP Net Loss per share is calculated as Non-GAAP Net Loss divided by weighted average basic shares for 2022.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts, unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Revenue	$	108,504	$	86,735	$	313,404	$	256,613
Cost of revenue(1)	55,825		41,244		166,206		119,058
Gross profit	52,679		45,491		147,198		137,555
Operating expenses:
Research and development(1)	38,957		32,528		118,111		91,862
Sales and marketing(1)	47,006		39,288		135,246		110,494
General and administrative(1)	32,481		28,609		91,578		97,564
Total operating expenses	118,444		100,425		344,935		299,920
Loss from operations	(65,765)		(54,934)		(197,737)		(162,365)
Net gain on extinguishment of debt	—		—		54,391		—
Interest income	1,967		280		4,150		730
Interest expense	(1,381)		(1,555)		(4,533)		(3,652)
Other income (expense)	1,877		41		(75)		155
Loss before income taxes	(63,302)		(56,168)		(143,804)		(165,132)
Income tax expense	118		30		317		44
Net loss	$	(63,420)	$	(56,198)	$	(144,121)	$	(165,176)
Net income (loss) per share attributable to common stockholders, basic and diluted	$	(0.52)	$	(0.48)	$	(1.19)	$	(1.43)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic and diluted	122,339		116,475		121,094		115,320

__________

(1)Includes stock-based compensation expense as follows:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Cost of revenue	$	2,978	$	1,897	$	9,112	$	4,911
Research and development	14,488		14,752		46,966		31,344
Sales and marketing	10,920		9,121		31,198		19,760
General and administrative	10,992		10,866		27,102		44,885
Total	$	39,378	$	36,636	$	114,378	$	100,900

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Gross Profit
GAAP gross profit	$	52,679		$	45,491		$	147,198		$	137,555
Stock-based compensation	2,978			1,897			9,112			4,911
Amortization of acquired intangible assets	2,475			2,475			7,425			7,425
Non-GAAP gross profit	$	58,132		$	49,863		$	163,735		$	149,891
GAAP gross margin	48.6		%	52.4		%	47.0		%	53.6		%
Non-GAAP gross margin	53.6		%	57.5		%	52.2		%	58.4		%

Research and development
GAAP research and development	$	38,957		$	32,528		$	118,111		$	91,862
Stock-based compensation	(14,488)			(14,752)			(46,966)			(31,344)
Non-GAAP research and development	$	24,469		$	17,776		$	71,145		$	60,518

Sales and marketing
GAAP sales and marketing	$	47,006		$	39,288		$	135,246		$	110,494
Stock-based compensation	(10,920)			(9,121)			(31,198)			(19,760)
Amortization of acquired intangible assets	(2,897)			(2,709)			(8,316)			(8,234)
Non-GAAP sales and marketing	$	33,189		$	27,458		$	95,732		$	82,500

General and administrative
GAAP general and administrative	$	32,481		$	28,609		$	91,578		$	97,564
Stock-based compensation	(7,959)			(10,866)			(24,069)			(44,885)
Executive transition costs	(4,207)			—			(4,207)			—
Acquisition-related expenses	—			(179)			(1,970)			(2,406)
Non-GAAP general and administrative	$	20,315		$	17,564		$	61,332		$	50,273

Operating loss
GAAP operating loss	$	(65,765)		$	(54,934)		$	(197,737)		$	(162,365)
Stock-based compensation	36,345			36,636			111,345			100,900
Executive transition costs	4,207			—			4,207			—
Amortization of acquired intangible assets	5,372			5,184			15,741			15,659
Acquisition-related expenses	—			179			1,970			2,406
Non-GAAP operating loss	$	(19,841)		$	(12,935)		$	(64,474)		$	(43,400)

Net loss
GAAP net loss	$	(63,420)		$	(56,198)		$	(144,121)		$	(165,176)
Stock-based compensation	36,345			36,636			111,345			100,900
Executive transition costs	4,207			—			4,207			—
Amortization of acquired intangible assets	5,372			5,184			15,741			15,659
Acquisition-related expenses	—			179			1,970			2,406
Net gain on extinguishment of debt	—			—			(54,391)			—
Amortization of debt discount and issuance costs	714			967			2,453			1,960
Non-GAAP loss	$	(16,782)		$	(13,232)		$	(62,796)		$	(44,251)

Non-GAAP net loss per common share—basic and diluted	$	(0.14)		$	(0.11)		$	(0.52)		$	(0.38)
Weighted average basic and diluted common shares	122,339			116,475			121,094			115,320


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Adjusted EBITDA
GAAP net loss	$	(63,420)	$	(56,198)	$	(144,121)	$	(165,176)
Stock-based compensation	36,345		36,636		111,345		100,900
Executive transition costs	4,207		—		4,207		—
Depreciation and other amortization	10,786		7,489		31,621		20,980
Amortization of acquired intangible assets	5,372		5,184		15,741		15,659
Acquisition-related expenses	—		179		1,970		2,406
Interest income	(1,967)		(280)		(4,150)		(730)
Interest expense	667		588		2,080		1,692
Amortization of debt discount and issuance costs	714		967		2,453		1,960
Net gain on extinguishment of debt	—		—		(54,391)		—
Other expense (income)	(1,877)		(41)		75		(155)
Income tax expense	118		30		317		44
Adjusted EBITDA	$	(9,055)	$	(5,446)	$	(32,853)	$	(22,420)

Condensed Consolidated Balance Sheets

(in thousands)


	As of September 30, 2022		As of December 31, 2021
	(unaudited)		(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	87,897	$	166,068
Marketable securities, current	445,048		361,795
Accounts receivable, net of allowance for credit losses	72,914		64,625
Prepaid expenses and other current assets	31,321		32,160
Total current assets	637,180		624,648
Property and equipment, net	179,080		166,961
Operating lease right-of-use assets, net	72,374		69,631
Goodwill	670,158		636,805
Intangible assets, net	88,482		102,596
Marketable securities, non-current	186,066		528,911
Other assets	73,258		29,468
Total assets	$	1,906,598	$	2,159,020
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,265	$	9,257
Accrued expenses	54,186		36,112
Finance lease liabilities, current	27,807		21,125
Operating lease liabilities, current	20,919		20,271
Other current liabilities	33,422		45,107
Total current liabilities	144,599		131,872
Long-term debt	704,042		933,205
Finance lease liabilities, noncurrent	21,027		22,293
Operating lease liabilities, noncurrent	62,750		55,114
Other long-term liabilities	7,201		2,583
Total liabilities	939,619		1,145,067
Stockholders’ equity:
Class A common stock	2		2
Additional paid-in capital	1,634,666		1,527,468
Accumulated other comprehensive loss	(12,678)		(2,627)
Accumulated deficit	(655,011)		(510,890)
Total stockholders’ equity	966,979		1,013,953
Total liabilities and stockholders’ equity	$	1,906,598	$	2,159,020

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Cash flows from operating activities:
Net loss	$	(63,420)	$	(56,198)	$	(144,121)	$	(165,176)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	10,662		7,364		31,248		20,710
Amortization of intangible assets	5,496		5,309		16,114		15,929
Amortization of right-of-use assets and other	8,501		7,158		21,879		19,818
Amortization of debt discount and issuance costs	715		966		2,454		2,235
Amortization of deferred contract costs	2,031		1,621		6,020		4,567
Stock-based compensation	39,378		36,636		114,378		100,900
Provision for credit losses	1,253		236		1,782		41
Interest on finance lease	(603)		(524)		(1,843)		(1,259)
Loss on disposals of property and equipment	—		(204)		854		(177)
Amortization and accretion of discounts and premiums on investments	771		—		2,622		—
Net gain on extinguishment of debt	—		—		(54,391)		—
Other adjustments	(353)		683		(292)		1,496
Changes in operating assets and liabilities:
Accounts receivable	(5,949)		1,595		(10,071)		(4,017)
Prepaid expenses and other current assets	(975)		(8)		(5,787)		(5,502)
Other assets	(13,505)		(2,231)		(19,904)		(7,320)
Accounts payable	(4,301)		(1,815)		(3,457)		(1,653)
Accrued expenses	3,328		6,548		4,490		2,713
Operating lease liabilities	(7,830)		(6,879)		(20,667)		(19,735)
Other liabilities	(2,833)		(2,948)		1,188		5,856
Net cash used in operating activities	(27,634)		(2,691)		(57,504)		(30,574)
Cash flows from investing activities:
Purchases of marketable securities	—		(443,701)		(355,479)		(777,569)
Sales of marketable securities	—		51,739		161,853		64,236
Maturities of marketable securities	72,857		15,600		440,737		72,853
Business acquisitions, net of cash acquired and other related payments	(1,746)		—		(27,745)		—
Advance payment for purchase of property and equipment	(1,964)		—		(31,274)		—
Purchases of property and equipment	(2,631)		(20,254)		(11,446)		(31,267)
Proceeds from sale of property and equipment	125		291		366		291
Capitalized internal-use software	(5,120)		(7,619)		(13,856)		(10,299)
Purchase of intangible assets	—		1		—		(2,092)
Net cash provided by (used in) investing activities	61,521		(403,943)		163,156		(683,847)
Cash flows from financing activities:
Issuance of convertible note, net of issuance costs	—		—		—		930,775
Payments of other debt issuance costs	—		—		—		(1,351)
Net cash paid for debt extinguishment	—		—		(177,082)		—
Repayments of finance lease liabilities	(7,076)		(3,985)		(18,105)		(10,564)
Cash received for restricted stock sold in advance of vesting conditions	—		—		10,655		—
Cash paid for early sale of restricted shares	(3,618)		—		(10,655)		—
Proceeds from exercise of vested stock options	555		1,430		5,324		9,094
Proceeds from employee stock purchase plan	1,749		3,489		5,726		5,994
Net cash provided by (used in) financing activities	(8,390)		934		(184,137)		933,948
Effects of exchange rate changes on cash and cash equivalents	(110)		(242)		(429)		(383)
Net increase (decrease) in cash and cash equivalents	25,387		(405,942)		(78,914)		219,144
Cash and cash equivalents and restricted cash at beginning of period	62,660		688,966		166,961		63,880
Cash and cash equivalents and restricted cash at end of period	88,047		283,024		88,047		283,024
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows:
Cash and cash equivalents	87,897		282,131		87,897		282,131
Restricted cash, current	150		—		150		—
Restricted cash, non-current	—		893		—		893
Total cash, cash equivalents, and restricted cash	$	88,047	$	283,024	$	88,047	$	283,024

Free Cash Flow

(in thousands, unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Cash flow used in operations	$	(27,634)	$	(2,691)	$	(57,504)	$	(30,574)
Capital expenditures(1)	(14,702)		(31,567)		(43,041)		(51,839)
Advance payment for purchase of property and equipment(2)	$	(1,964)	$	—	$	(31,274)	$	—
Free Cash Flow	$	(44,300)	$	(34,258)	$	(131,819)	$	(82,413)

__________

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

(2)Advance payments for purchase of property and equipment relate to prepayments made for our capital expenditures in advance of receiving the asset, as reflected in our statement of cash flows.

Contacts:

Investor Contact:

Vernon Essi, Jr.

ir@fastly.com

Media Contact:

press@fastly.com

Source: Fastly, Inc.

EX-99.2 3 ex992-investorsupplement93.htm EX-99.2 Document

Exhibit 99.2

Third Quarter 2022 Investor Supplement

Product Developments

Security:

•Introduced the AWS Lambda agent for the Fastly Next-Gen WAF, further enhancing the ability to deploy Fastly’s Next-Gen WAF in more places, to support serverless and FaaS initiatives with one of the most popular serverless solutions on the market.

•Released general availability of GraphQL support with Next-Gen WAF, a frictionless security solution supporting popular GraphQL APIs with GraphQL visibility and protection available right out of the box.

Observability:

•Launched general availability of Origin Inspector, enabling users to have real-time and historical visibility into responses delivered from their origin servers to the Fastly Edge Cloud, and Domain Inspector, enabling users with traffic monitoring for a single fully qualified domain name (FQDN) or multiple domains within a Fastly service.

Leading Innovation:

•Redesigned the Fastly status page to include resources separated into Fastly’s Network Services, Security, Compute, and Observability product categories.

•Released in beta Compute@Edge support for Go, a programming language used to build large-scale network tools such as Docker, Kubernetes, Istio and Terraform.

Developer Relations:

•Glitch has surpassed 2 million developers, extending Fastly’s opportunity to convert their ideas into globally performant, secure and reliable applications at scale.

Key Metrics Highlights

•Trailing 12-month net retention rate (NRR LTM)1 was 118% in the third quarter, up from 117% in the second quarter 2022.

•Dollar-Based Net Expansion Rate (DBNER)2 was 122% in the third quarter, up from 120% in the second quarter 2022.

•Total customer count was 2,925, of which 482 were enterprise customers.4

•Average enterprise customer spend of $759K in the third quarter, up 4% quarter-over-quarter.

Corporate Development

•Todd Nightingale joined Fastly as CEO, bringing his experience from Cisco, where he led business strategy and development efforts for its networking portfolio.

Customer and Partner Highlights

•New Relic, a developer of cloud-based performance software for websites and applications, is now using Fastly’s Compute@Edge after experiencing quality issues with a competitor's edge-based solution.

•Nirvana Labs, an innovator in decentralized blockchain solutions, chose Fastly’s Edge and WAF capabilities for its rate limit performance over its existing provider.

•Saturn, a time-based scheduling and social network for high school students, chose Fastly’s Next-Gen WAF and network services over its incumbent provider.

Third Quarter 2022 Financial Highlights

•Record revenue of $108.5 million, representing 6% sequential growth and 25% year-over-year growth.

•GAAP gross margin of 48.6%, compared to 52.4% in the third quarter of 2021. Non-GAAP gross margin of 53.6%, compared to 57.5% in the third quarter of 2021.

•GAAP net loss per basic and diluted shares of $0.52 compared to $0.48 in the third quarter of 2021. Non-GAAP net loss5 per basic and diluted shares of $0.14, compared to $0.11 in the third quarter of 2021.

Fourth Quarter and Full Year 2022 Guidance:


	Q4 2022	Full Year 2022
Total Revenue (millions)	$112 - $116	$425 - $429
Non-GAAP Operating Loss (millions)(5)	($18.0) - ($14.0)	($82) - ($78)
Non-GAAP Net Loss per share (6) (7)	($0.15) - ($0.11)	($0.67) - ($0.63)

Calculations of Key and Other Selected Metrics – Quarterly

(unaudited)


	Q4 2020			Q1 2021			Q2 2021			Q3 2021			Q4 2021			Q1 2022			Q2 2022			Q3 2022
Total Customer Count	2,326			2,458			2,581			2,748			2,804			2,880			2,894			2,925
Enterprise Customer Count(4)	378			395			408			430			445			457			471			482
Enterprise Revenue % Total LTM	88		%	89		%	89		%	88		%	88		%	89		%	88		%	89		%
Enterprise Customer Average Spend LTM (in thousands)(8)	$	681		$	705		$	702		$	698		$	704		$	722		$	730		$	759
Net Retention Rate (NRR) Quarter(9)	116		%	110		%	93		%	112		%	107		%	114		%	128		%	115		%
Net Retention Rate (NRR) LTM(1)	137		%	135		%	121		%	114		%	118		%	115		%	117		%	118		%
Dollar-Based Net Expansion Rate (DBNER)(2)	144		%	141		%	126		%	118		%	121		%	118		%	120		%	122		%
Annual Revenue Retention Rate (ARR)(3)	99.3		%	—		%	—		%	—		%	99.2		%	—		%	—		%	—		%
Global Network Capacity	117 TB/sec			130 TB/sec			145 TB/sec			167 TB/sec			184 TB/sec			198 TB/sec			215 TB/sec			233 TB/sec
Countries	26			26			28			31			32			34			34			35
Markets	56			58			61			68			71			75			78			79

3 Annual revenue retention rate is calculated by subtracting the quotient of the Annual Revenue Churn from all of our Churned Customers divided by our annual revenue of the same calendar year from 100%. Our “Annual Revenue Churn” is calculated by multiplying the final full month of revenue from a customer that terminated its contract with us (a “Churned Customer”) by the number of months remaining in the same calendar year.

4 Enterprise customers are defined as those spending $100,000 or more in the trailing twelve-month period.

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

6 Assumes weighted average basic shares outstanding of 123.6 million in Q4 2022 and 121.6 million for the full year 2022.

7 Non-GAAP Net Loss per share is calculated as Non-GAAP Net Loss divided by weighted average basic shares for 2022.

8 Calculated based on trailing twelve-months.

9 Net Retention Rate measures the net change in monthly revenue from existing customers in the last month of the period (the “current" period month) compared to the last month of the same period one year prior (the “prior" period month). The revenue included in the current period month includes revenue from (i) revenue contraction due to billing decreases or customer churn and (ii) revenue expansion due to billing increases, but excludes revenue from new customers. We calculate Net Retention Rate by dividing the revenue from the current period month by the revenue in the prior period month.

Forward-Looking Statements

This investor supplement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, about us and our industry that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or Fastly's future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates,” “going to,” "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," "continue," “would,” or the negative of these words or other similar terms or expressions that concern Fastly's expectations, goals, strategy, priorities, plans, projections, or intentions. Forward-looking statements in this investor supplement include, but are not limited to, statements regarding Fastly’s future financial and operating performance, including its outlook and guidance; and Fastly's strategies, product and business plans. Fastly's expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that: Fastly is unable to attract and retain customers; Fastly's existing customers and partners do not maintain or increase usage of Fastly's platform; Fastly's platform and product features do not meet expectations, including due to defects, interruptions, security breaches, delays in performance or other similar problems; Fastly is unable to adapt to meet evolving market and customer demands and rapid technological change; Fastly is unable to comply with modified or new industry standards, laws and regulations; Fastly is unable to generate sufficient revenues to achieve or sustain profitability; Fastly’s limited operating history makes it difficult to evaluate its prospects and future operating results; Fastly is unable to effectively manage its growth; and Fastly is unable to compete effectively. The forward-looking statements contained in this investor supplement are also subject to other risks and uncertainties, including those more fully described in Fastly’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and additional information that will be set forth in Fastly’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, and other filings and reports that we may file from time to time with the SEC. The forward-looking statements in this investor supplement are based on information available to Fastly as of the date hereof, and Fastly disclaims any obligation to update any forward-looking statements, except as required by law.

Non-GAAP Financial Measures

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

Free Cash Flow: calculated as net cash used in operating activities less capital expenditures, including any advance payments made related to capital expenditures.

Interest Expense: consists primarily of interest expense related to our debt instruments, including amortization of debt discount and issuance costs. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

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

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

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

Consolidated Statements of Operations – Quarterly

(unaudited, in thousands, except per share amounts)


	Q4 2020		Q1 2021		Q2 2021		Q3 2021		Q4 2021		Q1 2022		Q2 2022		Q3 2022
Revenue	$	82,649	$	84,852	$	85,026	$	86,735	$	97,717	$	102,382	$	102,518	$	108,504
Cost of revenue(1)	33,753		37,494		40,320		41,244		47,944		53,915		56,466		55,825
Gross profit	48,896		47,358		44,706		45,491		49,773		48,467		46,052		52,679
Operating expenses:
Research and development(1)	25,590		28,988		30,346		32,528		34,997		40,437		38,717		38,957
Sales and marketing(1)	34,765		34,872		36,334		39,288		42,151		41,480		46,760		47,006
General and administrative (1)	45,885		33,461		35,494		28,609		29,281		29,554		29,543		32,481
Total operating expenses	106,240		97,321		102,174		100,425		106,429		111,471		115,020		118,444
Loss from operations	(57,344)		(49,963)		(57,468)		(54,934)		(56,656)		(63,004)		(68,968)		(65,765)
Net gain on extinguishment of debt	—		—		—		—		—		—		54,391		—
Interest income	178		174		276		280		552		681		1,502		1,967
Interest expense	(452)		(661)		(1,436)		(1,555)		(1,593)		(1,622)		(1,530)		(1,381)
Other income (expense)	(697)		(64)		178		41		201		(279)		(1,673)		1,877
Loss before income taxes	(58,315)		(50,514)		(58,450)		(56,168)		(57,496)		(64,224)		(16,278)		(63,302)
Income tax expense	(12,611)		169		(155)		30		25		40		159		118
Net loss	$	(45,704)	$	(50,683)	$	(58,295)	$	(56,198)	$	(57,521)	$	(64,264)	$	(16,437)	$	(63,420)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.40)	$	(0.44)	$	(0.51)	$	(0.48)	$	(0.49)	$	(0.54)	$	(0.14)	$	(0.52)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	112,902		114,134		115,326		116,475		118,161		119,673		121,242		122,339

__________

(1)Includes stock-based compensation expense as follows:


	Q4 2020		Q1 2021		Q2 2021		Q3 2021		Q4 2021		Q1 2022		Q2 2022		Q3 2022
Cost of revenue	$	1,255	$	1,186	$	1,828	$	1,897	$	2,316	$	2,946	$	3,188	$	2,978
Research and development	7,017		7,958		8,634		14,752		15,675		18,589		13,889		14,488
Sales and marketing	5,275		5,008		5,631		9,121		11,399		10,094		10,184		10,920
General and administrative	16,134		16,686		17,333		10,866		10,198		8,393		7,717		10,992
Total	$	29,681	$	30,838	$	33,426	$	36,636	$	39,588	$	40,022	$	34,978	$	39,378

Reconciliation of GAAP to Non-GAAP Financial Measures - Quarterly

(unaudited, in thousands, except per share amounts)


	Q4 2020			Q1 2021			Q2 2021			Q3 2021			Q4 2021			Q1 2022			Q2 2022			Q3 2022
Gross Profit																			.			.
GAAP gross Profit	$	48,896		$	47,358		$	44,706		$	45,491		$	49,773		$	48,467		$	46,052		$	52,679
Stock-based compensation	1,255			1,186			1,828			1,897			2,316			2,946			3,188			2,978
Amortization of acquired intangible assets	2,475			2,475			2,475			2,475			2,475			2,475			2,475			2,475
Non-GAAP gross profit	52,626			51,019			49,009			49,863			54,564			53,888			51,715			58,132
GAAP gross margin	59.2		%	55.8		%	52.6		%	52.4		%	50.9		%	47.3		%	44.9		%	48.6		%
Non-GAAP gross margin	63.7		%	60.1		%	57.6		%	57.5		%	55.8		%	52.6		%	50.4		%	53.6		%

Research and development
GAAP research and development	25,590			28,988			30,346			32,528			34,997			40,437			38,717			38,957
Stock-based compensation	(7,017)			(7,958)			(8,634)			(14,752)			(15,675)			(18,589)			(13,889)			(14,488)
Non-GAAP research and development	18,573			21,030			21,712			17,776			19,322			21,848			24,828			24,469

Sales and marketing
GAAP sales and marketing	34,765			34,872			36,334			39,288			42,151			41,480			46,760			47,006
Stock-based compensation	(5,275)			(5,008)			(5,631)			(9,121)			(11,399)			(10,094)			(10,184)			(10,920)
Amortization of acquired intangible assets	(2,603)			(2,816)			(2,709)			(2,709)			(2,710)			(2,709)			(2,710)			(2,897)
Non-GAAP sales and marketing	26,887			27,048			27,994			27,458			28,042			28,677			33,866			33,189

General and administrative
GAAP general and administrative	45,885			33,461			35,494			28,609			29,281			29,554			29,543			32,481
Stock-based compensation	(16,134)			(16,686)			(17,333)			(10,866)			(10,198)			(8,393)			(7,717)			(7,959)
Executive transition costs	—			—			—			—			—			—			—			(4,207)
Acquisition-related expenses	(13,625)			(929)			(1,298)			(179)			(149)			(58)			(1,912)			—
Non-GAAP general and administrative	16,126			15,846			16,863			17,564			18,934			21,103			19,914			20,315

Operating loss
GAAP operating loss	(57,344)			(49,963)			(57,468)			(54,934)			(56,656)			(63,004)			(68,968)			(65,765)
Stock-based compensation	29,681			30,838			33,426			36,636			39,588			40,022			34,978			36,345
Executive transition costs	—			—			—			—			—			—			—			4,207
Amortization of acquired intangible assets	5,078			5,291			5,184			5,184			5,185			5,184			5,185			5,372
Acquisition-related expenses	13,625			929			1,298			179			149			58			1,912			—
Non-GAAP operating loss	(8,960)			(12,905)			(17,560)			(12,935)			(11,734)			(17,740)			(26,893)			(19,841)

Net loss
GAAP net loss	(45,704)			(50,683)			(58,295)			(56,198)			(57,521)			(64,264)			(16,437)			(63,420)
Stock-based compensation	29,681			30,838			33,426			36,636			39,588			40,022			34,978			36,345
Executive transition costs	—			—			—			—			—			—			—			4,207
Amortization of acquired intangible assets	5,078			5,291			5,184			5,184			5,185			5,184			5,185			5,372
Acquisition-related expenses	13,625			929			1,298			179			149			58			1,912			—
Acquisition-related tax benefit	(13,154)			—			—			—			—			—			—			—
Net gain on extinguishment of debt	—			—			—			—			—			—			(54,391)			—
Amortization of debt issuance costs	—			—			993			967			947			963			776			714
Non-GAAP net loss	$	(10,474)		$	(13,625)		$	(17,394)		$	(13,232)		$	(11,652)		$	(18,037)		$	(27,977)		$	(16,782)

GAAP net loss per common share—basic and diluted	$	(0.40)		$	(0.44)		$	(0.51)		$	(0.48)		$	(0.49)		$	(0.54)		$	(0.14)		$	(0.52)
Non-GAAP net loss per common share—basic and diluted	$	(0.09)		$	(0.12)		$	(0.15)		$	(0.11)		$	(0.10)		$	(0.15)		$	(0.23)		$	(0.14)
Weighted average basic common shares	112,902			114,134			115,326			116,475			118,161			119,673			121,242			122,339

Reconciliation of GAAP to Non-GAAP Financial Measures - Quarterly (Continued)

(unaudited, in thousands, except per share amounts)


	Q4 2020		Q1 2021		Q2 2021		Q3 2021		Q4 2021		Q1 2022		Q2 2022		Q3 2022
Adjusted EBITDA
GAAP net loss	$	(45,704)	$	(50,683)	$	(58,295)	$	(56,198)	$	(57,521)	$	(64,264)	$	(16,437)	$	(63,420)
Stock-based compensation	29,681		30,838		33,426		36,636		39,588		40,022		34,978		36,345
Executive transition costs	—		—		—		—		—		—		—		4,207
Depreciation and other amortization	5,568		6,491		7,000		7,489		8,228		9,975		10,860		10,786
Amortization of acquired intangible assets	5,078		5,291		5,184		5,184		5,185		5,184		5,185		5,372
Acquisition-related expenses	13,625		929		1,298		179		149		58		1,912		—
Acquisition-related tax benefit	(13,154)		—		—		—		—		—		—		—
Interest income	(178)		(174)		(276)		(280)		(552)		(681)		(1,502)		(1,967)
Interest expense	452		661		443		588		646		659		754		667
Amortization of debt discount and issuance costs	—		—		993		967		947		963		776		714
Net gain on extinguishment of debt	—		—		—		—		—		—		(54,391)		—
Other (income) expense, net	697		64		(178)		(41)		(201)		279		1,673		(1,877)
Income tax (benefit) expense	543		169		(155)		30		25		40		159		118
Adjusted EBITDA	$	(3,392)	$	(6,414)	$	(10,560)	$	(5,446)	$	(3,506)	$	(7,765)	$	(16,033)	$	(9,055)

Non-GAAP Consolidated Statements of Operations - Quarterly

(unaudited, in thousands, except per share amounts)


	Q4 2020		Q1 2021		Q2 2021		Q3 2021		Q4 2021		Q1 2022		Q2 2022		Q3 2022
Revenue	$	82,649	$	84,852	$	85,026	$	86,735	$	97,717	$	102,382	$	102,518	$	108,504
Cost of revenue (1)(2)	30,023		33,833		36,017		36,872		43,153		48,494		50,803		50,372
Gross profit	52,626		51,019		49,009		49,863		54,564		53,888		51,715		58,132
Operating expenses:
Research and development(1)	18,573		21,030		21,712		17,776		19,322		21,848		24,828		24,469
Sales and marketing(1)(2)	26,887		27,048		27,994		27,458		28,042		28,677		33,866		33,189
General and administrative (1)(3)(7)	16,126		15,846		16,863		17,564		18,934		21,103		19,914		20,315
Total operating expenses	61,586		63,924		66,569		62,798		66,298		71,628		78,608		77,973
Income (loss) from operations(1)(2)(3)(7)	(8,960)		(12,905)		(17,560)		(12,935)		(11,734)		(17,740)		(26,893)		(19,841)
Interest income	178		174		276		280		552		681		1,502		1,967
Interest expense(4)	(452)		(661)		(443)		(588)		(646)		(659)		(754)		(667)
Other income (expense), net	(697)		(64)		178		41		201		(279)		(1,673)		1,877
Income (loss) before income tax expense (benefit)(5)	(9,931)		(13,456)		(17,549)		(13,202)		(11,627)		(17,997)		(27,818)		(16,664)
Income tax expense (benefit)(6)	543		169		(155)		30		25		40		159		118
Net income (loss)(1)(2)(3)(4)(5)(6)(7)	$	(10,474)	$	(13,625)	$	(17,394)	$	(13,232)	$	(11,652)	$	(18,037)	$	(27,977)	$	(16,782)
Net income (loss) per share attributable to common stockholders, basic and diluted	$	(0.09)	$	(0.12)	$	(0.15)	$	(0.11)	$	(0.10)	$	(0.15)	$	(0.23)	$	(0.14)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic and diluted	112,902		114,134		115,326		116,475		118,161		119,673		121,242		122,339

(1) Excludes stock-based compensation. See GAAP to Non-GAAP reconciliations.

(2) Excludes amortization of acquired intangible assets. See GAAP to Non-GAAP reconciliations.

(3) Excludes acquisition-related and other expenses. See GAAP to Non-GAAP reconciliations.

(4) Excludes amortization of debt discount and issuance costs. See GAAP to Non-GAAP reconciliations.

(5) Excludes net gain on extinguishment of debt. See GAAP to Non-GAAP reconciliations.

(6) Excludes acquisition-related tax benefit. See GAAP to Non-GAAP reconciliations.

(7) Excludes executive transition costs. See GAAP to Non-GAAP reconciliations.

Consolidated Balance Sheets - Quarterly

(unaudited, in thousands)


	Q4 2020		Q1 2021		Q2 2021		Q3 2021		Q4 2021		Q1 2022		Q2 2022		Q3 2022
Assets
Current assets:
Cash and cash equivalents	$	62,900	$	948,783	$	687,986	$	282,131	$	166,068	$	245,794	$	62,510	$	87,897
Marketable securities	131,283		147,793		241,744		361,290		361,795		393,950		419,905		445,048
Accounts receivable, net	50,258		52,363		56,065		54,234		64,625		73,717		68,218		72,914
Prepaid expenses and other current assets	16,815		18,495		22,309		22,230		32,160		23,616		29,037		31,321
Total current assets	261,256		1,167,434		1,008,104		719,885		624,648		737,077		579,670		637,180
Property and equipment, net	95,979		98,608		116,471		147,729		166,961		174,550		173,950		179,080
Operating lease right-of-use assets, net	60,019		63,305		62,630		70,149		69,631		63,455		69,861		72,374
Goodwill	635,590		635,645		635,646		635,635		636,805		637,570		670,186		670,158
Intangible assets, net	121,742		116,379		113,215		107,905		102,596		97,287		93,978		88,482
Marketable securities, non-current	20,448		29,930		173,227		429,489		528,911		394,464		284,951		186,066
Other assets	24,917		26,993		27,578		28,142		29,468		30,020		60,199		73,258
Total assets	$	1,219,951	$	2,138,294	$	2,136,871	$	2,138,934	$	2,159,020	$	2,134,423	$	1,932,795	$	1,906,598
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,150	$	12,019	$	10,202	$	7,766	$	9,257	$	8,248	$	10,011	$	8,265
Accrued expenses	34,334		36,320		28,609		36,063		36,112		49,902		49,943		54,186
Finance lease liabilities	11,033		10,910		14,773		18,675		21,125		26,766		28,088		27,807
Operating lease liabilities	19,895		20,011		19,713		20,007		20,271		18,688		19,243		20,919
Other current liabilities	19,677		19,036		29,735		24,758		45,107		36,569		33,705		33,422
Total current liabilities	94,089		98,296		103,032		107,269		131,872		140,173		140,990		144,599
Long-term debt, less current portion	—		930,291		931,385		932,305		933,205		934,121		703,375		704,042
Finance lease liabilities, noncurrent	14,707		13,648		19,685		24,659		22,293		28,867		26,479		21,027
Operating lease liabilities, noncurrent	44,890		47,505		47,177		54,066		55,114		52,334		60,657		62,750
Other long-term liabilities	4,400		3,520		6,502		5,056		2,583		2,205		7,556		7,201
Total liabilities	158,086		1,093,260		1,107,781		1,123,355		1,145,067		1,157,700		939,057		939,619
Stockholders’ equity:
Class A and Class B common stock	2		2		2		2		2		2		2		2
Additional paid-in capital	1,350,050		1,384,045		1,426,520		1,469,366		1,527,468		1,561,371		1,597,869		1,634,666
Accumulated other comprehensive income (loss)	6		(137)		(261)		(420)		(2,627)		(9,496)		(12,542)		(12,678)
Accumulated deficit	(288,193)		(338,876)		(397,171)		(453,369)		(510,890)		(575,154)		(591,591)		(655,011)
Total stockholders’ equity	1,061,865		1,045,034		1,029,090		1,015,579		1,013,953		976,723		993,738		966,979
Total liabilities and stockholders’ equity	$	1,219,951	$	2,138,294	$	2,136,871	$	2,138,934	$	2,159,020	$	2,134,423	$	1,932,795	$	1,906,598

Consolidated Statements of Cash Flows – Quarterly

(unaudited, in thousands)


	Q4 2020		Q1 2021		Q2 2021		Q3 2021		Q4 2021		Q1 2022		Q2 2022		Q3 2022
Cash flows from operating activities:
Net loss	$	(45,704)	$	(50,683)	$	(58,295)	$	(56,198)	$	(57,521)	$	(64,264)	$	(16,437)	$	(63,420)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,713		6,419		6,927		7,364		8,089		9,850		10,736		10,662
Amortization of acquired intangibles	4,933		5,363		5,257		5,309		5,309		5,309		5,309		5,496
Amortization of right-of-use assets and other	5,941		6,357		6,303		7,158		7,065		6,839		6,539		8,501
Amortization of debt issuance costs	161		332		937		966		950		964		775		715
Amortization of deferred contract costs	1,141		1,411		1,535		1,621		1,727		1,851		2,138		2,031
Stock-based compensation	29,681		30,838		33,426		36,636		39,588		40,022		34,978		39,378
Provision for doubtful accounts and credit losses	507		(420)		225		236		155		127		402		1,253
Interest paid on finance leases	(234)		(330)		(405)		(524)		(495)		(591)		(649)		(603)
(Gain) loss on disposal of property and equipment	786		27		—		(204)		(123)		268		586		—
Tax benefit related to release of valuation allowance	(12,950)		—		—		—		—		—		—		—
Amortization and accretion of discounts and premiums on investments	—		—		—		—		—		957		894		771
Net gain on extinguishment of debt	—		—		—		—		—		—		(54,391)		—
Other adjustments	448		64		749		683		729		128		(67)		(353)
Changes in operating assets and liabilities:
Accounts receivable	(2,595)		(1,685)		(3,927)		1,595		(10,546)		(9,219)		5,097		(5,949)
Prepaid expenses and other current assets	(1,772)		(1,680)		(3,814)		(8)		725		(2,111)		(2,701)		(975)
Other assets	(9,752)		(2,952)		(2,137)		(2,231)		(3,103)		(2,451)		(3,948)		(13,505)
Accounts payable	(2,987)		2,119		(1,957)		(1,815)		1,799		(2,492)		3,336		(4,301)
Accrued expenses	(4,232)		(755)		(3,080)		6,548		1,548		4,891		(3,729)		3,328
Operating lease liabilities	(5,412)		(6,365)		(6,491)		(6,879)		(6,712)		(6,557)		(6,280)		(7,830)
Other liabilities	5,178		1,071		7,733		(2,948)		2,908		3,289		732		(2,833)
Net cash provided by (used in) operating activities	(31,149)		(10,869)		(17,014)		(2,691)		(7,908)		(13,190)		(16,680)		(27,634)
Cash flows from investing activities:
Purchase of marketable securities	(64,698)		(64,331)		(269,537)		(443,701)		(150,586)		(148,193)		(207,286)		—
Sale of marketable securities	—		12,497		—		51,739		2,291		2,301		159,552		—
Maturities of marketable securities	5,001		25,503		31,750		15,600		45,232		240,547		127,333		72,857
Business acquisitions, net of cash acquired	(200,988)		—		—		—		(1,169)		(775)		(25,224)		(1,746)
Advance for purchase of property and equipment	—		—		—		—		—		—		(29,310)		(1,964)
Purchases of property and equipment	(5,126)		(8,079)		(2,934)		(20,254)		(3,549)		(4,664)		(4,151)		(2,631)
Proceeds from sale of property and equipment	425		—		—		291		297		—		241		125
Capitalized internal-use software	(2,049)		(989)		(1,691)		(7,619)		(3,180)		(3,810)		(4,926)		(5,120)
Purchases of intangible assets	—		—		(2,093)		1		—		—		—		—
Net cash provided by (used in) investing activities	(267,435)		(35,399)		(244,505)		(403,943)		(110,664)		85,406		16,229		61,521
Cash flows from financing activities:
Issuance of convertible note, net of issuance costs	—		930,775		—		—		—		—		—		—
Payments of debt issuance costs	—		(1,351)		—		—		—		—		—		—
Repayments of notes payable	(20,300)		—		—		—		—		—		—		—
Net Cash paid for debt extinguishment	—		—		—		—		—		—		(177,082)		—
Repayments of finance lease liabilities	(2,713)		(2,951)		(3,628)		(3,985)		(3,004)		(4,882)		(6,147)		(7,076)
Cash received for restricted stock sold in advance of vesting conditions	—		—		—		—		—		10,655		—		—
Cash paid for early sale of restricted shares	—		—		—		—		—		(3,498)		(3,539)		(3,618)
Proceeds from exercise of vested stock options	2,320		2,719		2,886		3,489		3,532		3,048		1,721		555
Proceeds from Employee Stock Purchase Plan	3,112		3,071		1,493		1,430		2,075		2,406		1,571		1,749
Net cash provided by (used in) financing activities	(17,581)		932,263		751		934		2,603		7,729		(183,476)		(8,390)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash	(10)		(112)		(29)		(242)		(94)		(219)		(100)		(110)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(316,175)		885,883		(260,797)		(405,942)		(116,063)		79,726		(184,027)		25,387
Cash, cash equivalents, and restricted cash at beginning of period	380,055		63,880		949,763		688,966		283,024		166,961		246,687		62,660
Cash, cash equivalents, and restricted cash at end of period	$	63,880	$	949,763	$	688,966	$	283,024	$	166,961	$	246,687	$	62,660	$	88,047

Free Cash Flow

(in thousands, unaudited)


	Quarter ended
		Q4 2020		Q1 2021		Q2 2021		Q3 2021		Q4 2021		Q1 2022		Q2 2022		Q3 2022
Cash flow provided by (used in) operations		$	(31,149)	$	(10,869)	$	(17,014)	$	(2,691)	$	(7,908)	$	(13,190)	$	(16,680)	$	(27,634)
Capital expenditures(1)		(9,463)		(12,019)		(8,253)		(31,567)		(9,436)		(13,356)		(14,983)		(14,702)
Advance payment for purchase of property and equipment(2)		—		—		—		—		—		—		(29,310)		(1,964)
Free Cash Flow		$	(40,612)	$	(22,888)	$	(25,267)	$	(34,258)	$	(17,344)	$	(26,546)	$	(60,973)	$	(44,300)

__________

(2)Advance payments for purchase of property and equipment relate to prepayments made for our capital expenditures in advance of receiving the asset, as reflected in our statement of cash flows.