Q4 2021 Fastly Inc Earnings Call

Speaker 1: Good day, my name is Savannah and I will be your conference call operator today. At this time, I would like to welcome everyone to the Fastly fourth quarter and full year 2021 financial results call. All lines have been placed on mute to prevent any background noise and after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, please press star one again.

Good day my name is Savannah, and I will be your conference call. Operator today at this time I would like to welcome everyone to the Fastly fourth quarter and full year 2021 .

Annual results call.

All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your telephone keypad. If he would like to withdraw your question. Please press star one again.

Speaker 1: Thank you. And I would now like to turn the conference over to Bernd Essie, Investor Relations at Fastly. Please go ahead.

Thank you and I would now like to turn the conference over to Bernd S E Investor Relations at Fastly. Please go ahead.

Speaker 2: Thank you, and welcome, everyone, to our fourth quarter and full year 2021 earnings conference call. We have Fastly's CEO , Joshua Bixby, and CFO , Ron Kisseling, with us today. The webcast of this call can be accessed through our website, fastly.com, and will be archived for one year. Also, a replay will be available by dialing 800-770-2030 and referencing conference ID number 754-3239 shortly after the conclusion of today's call.

Thank you and welcome everyone to our fourth quarter and full year 2021 earnings conference call, we have Fastly CEO , Joshua Bixby and CFO , Brian carefully with US today. The webcast. This call can be accessed through our website definitely dot com and will be archived for one year.

Also a replay will be available by dialing 870, 702030, and referencing conference IV number 7543239 shortly after the conclusion of today's call a.

Speaker 2: A copy of today's earnings press release, related financial tables, and investor supplement, all of which are furnished in our 8K filing today, can be found in the investor relations portion of FAFSA's website.

A copy of today's earnings press release related financial tables, and Investor supplement all of which are furnished in our 8-K filing today can be found in the investor relations portion of SaaS website.

Speaker 2: During this call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth, and overall future prospects.

During this call we will make forward looking statements, including statements related to the expected performance of our business future financial results strategy long term growth and overall future prospects.

Speaker 2: These statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected or implied during the call.

Statements are subject to known and unknown risks uncertainties and assumptions that could cause actual results to differ materially from those projected or implied during the call.

Speaker 2: For further information regarding risk factors for our business, please refer to our most recent annual and quarterly reports on Forms 10-K and 10-Q filed with the SEC and our fourth quarter 2021 earnings release and supplement for discussion of the factors that could cause our results to differ. Please refer in particular to the sections entitled risk factors. We encourage you to read these documents.

Further information regarding risk factors for our business. Please refer to our most recent annual and quarterly reports on forms 10-K, and 10-Q filed with the SEC.

Our fourth quarter 2021 earnings release and supplement for a discussion of the factors that could cause our results to differ please refer in particular to the sections entitled risk factors. We encourage you to read these documents.

Speaker 2: Also, note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statement except as required by law.

Also note that the forward looking statements on this call are based on information available to US as of today's date, we disclaim any obligation to update any forward looking statement, except as required by law.

Speaker 2: Also, during this call, we will discuss certain non-GAAP financial measures. Unless otherwise noted, all numbers we discussed today, other than revenue, will be on an adjusted non-GAAP basis.

Also during this call we will discuss certain non-GAAP financial measures unless otherwise noted all numbers, we discuss today other than revenue will be on an adjusted non-GAAP basis.

Speaker 2: Reconciliations to the most directly comparable GAAP financial measures are provided in the earnings relief and supplement on our investor relations website.

Reconciliations to the most directly comparable GAAP financial measures are provided in the earnings release supplement on our Investor Relations website.

Speaker 2: These non-GAAP measures are not intended to be a substitute for our GAAP results.

non-GAAP measures are not intended to be a substitute for our GAAP results before.

Speaker 2: Before we begin our prepared comments, please note that we will be attending Morgan Stanley 's Technology, Media, and Telecom Conference in San Francisco on March 7.

Before we begin our prepared comments. Please note that we will be attending Morgan Stanley 's technology media and Telecom conference in San Francisco on March seven.

Speaker 2: Also, we will be hosting an analyst day on May 12 in New York City, and we will be releasing further details regarding this event in the coming weeks. With that, I'll turn the call over to Joshua.

Also we will be hosting an analyst day on May 12 in New York City.

We will be releasing further details regarding this event in the coming weeks.

With that I'll turn the call over to Joshua Joshua.

Speaker 3: Thank you, Vern. Hi, everyone, and thanks for joining us today. I'm very pleased with our fourth quarter results. We increased our revenue to $97.7 million, a 13% quarter-over-quarter organic increase. This is by far our highest sequential growth since Q2 2020, and represents our third fastest sequential gain since we became a public company.

Thank you Brian .

Hi, everyone and thanks for joining us today I'm very pleased with our fourth quarter results, we increased our revenue to $97 7 million or 13% quarter over quarter organic increase this is by far our highest sequential growth since Q2 2020.

<unk> represents our third fastest sequential gain since we became a public company.

Speaker 3: Our customer retention and growth engine is strong. Our Q4 DBNER remains very robust and increased to 121%, and our LTM NRR was 118%, up from 114% in Q3. We closed out the year with an annual revenue churn of less than 1%, and an annual revenue retention rate of 99.2%.

Our customer retention and growth engine is strong our Q4 GB NAR remains very robust and increased to 121% and our LTM NR was 118%.

114% in Q3.

We closed out the year with an annual revenue churn of less than 1% and an annual revenue retention rate of 99, 2%.

Speaker 3: Fastly's value proposition to our customers is strong and our execution continues to improve.

<unk> value proposition to our customers is strong and our execution continues to improve.

Speaker 3: I'm excited to share with you key developments that will continue to drive our execution, further enhance our product offering, and differentiate us from our competitors.

Im excited to share with you key developments that will continue to drive our execution further enhance our product offering and differentiate us from our competitors.

Speaker 3: As most of you know, we've been retooling fastly for the next chapter of growth, onboarding a number of new key executives in 2021.

As most of you know we've been retooling fastly for the next chapter of growth Onboarding, a number of new key executives in 2021.

Speaker 3: These include Chief Revenue Officer Brett Shirk, early in 2021, Chief Financial Officer Ron Kisling, mid-year, and more recently, Chief Product Officer Lakshmi Sharma and Chief Marketing Officer Margaret Arakawa.

These include Chief revenue Officer, Brett Shark early in 2021, Chief Financial Officer, Ron Kisling, midyear and more recently Chief product Officer, Laxman Sharma, and Chief Marketing Officer, Margaret our kawa.

Speaker 3: What all of these executives have in common is experience scaling complex businesses with highly relevant cloud, security and go-to-market expertise from companies like Microsoft, Google and VMware.

What all of these executives having common is experienced scaling complex businesses with highly relevant cloud security and go to market expertise from companies like Microsoft Google and Vmware.

Speaker 3: the team is united in our common mission, which is to fuel the next modern digital experience by providing developers with a programmable and reliable edge cloud network that they adopt as their own.

The team is United in our common mission, which is to fuel. The next modern digital experience by providing developers with a programmable and reliable edge cloud network that they adopt as their own.

Speaker 3: One of the best parts of recruiting new executives is to see how excited they are when they realize how truly differentiated our foundational technology is from our competitors and how much opportunity exists in our business for growth.

One of the best parts of recruiting new executives is to see how excited they are when they realize how truly differentiated our foundational technology is from our competitors and how much opportunity exists in our business for growth.

Speaker 3: Central to this excitement is the key role developers play in our journey and the new and expanding power of distributed edge compute and security.

Central to this excitement is the key role developers play in our journey and the new and expanding power distributed edge compute and security.

Speaker 3: This all ties into the Fastly vision. We envision a world where all digital experiences are fast, engaging, and safe for everyone.

This all ties into the Fastly vision, we envision a world where all digital experiences are fast engaging and safe for everyone.

Speaker 3: This vision, as simple as it sounds, sets the tone for everything we do.

This vision as simple as it sounds sets the tone for everything we do.

Speaker 3: This is evident in our Edge Cloud Network's three core tenets. One, developers must be empowered to innovate.

This is evident in our edge cloud networks three core tenants one.

<unk> must be empowered to innovate to our enterprise platform must innovate ahead of market demands, while still being reliable scalable and secure and three we must provide exceptional flexibility and support.

Speaker 3: Two, our enterprise platform must innovate ahead of market demands while still being reliable, scalable, and secure. And three, we must provide exceptional flexibility and support.

Speaker 3: Fastly empowers developers at the moment of inspiration and ushers them on a journey to see their dreams come to life at the cloud edge with frictionless scale, security, and performance.

Vastly empowers developers at the moment of inspiration and ushers them on a journey to see their dreams come to life at the cloud edge with frictionless scale security and performance.

Speaker 3: To most of us as end users, this inspiration and development goes unnoticed until we experience it by using an e-commerce application that is instant or loading a very popular website with content curated to our liking.

Most of US as end users this inspiration and development goes unnoticed until we experienced it by using an E. Commerce application that this incident are loading a very popular website with content curated to our liking.

Speaker 3: all of which were developed on our infrastructure using our software. We literally touch billions of lives every day with our platform.

All of which were developed on our infrastructure using our software we literally touch billions of lives every day with our platform.

Speaker 3: In the fourth quarter, one of the largest publicly traded user review platforms leveraged Fastly's compute network to secure and cache APIs to crowdsource reviews about businesses for consumers all over the world.

In the fourth quarter, one of the largest publicly traded user review platforms leveraged athletes compute network, just securing cash <unk> to crowdsource reviews about businesses for consumers all over the world.

Speaker 3: They are now able to deliver great experiences and iterate quickly at the edge to accelerate their time to market with new features.

They are now able to deliver great experiences and iterate quickly at the edge to accelerate their time to market with new features.

Speaker 3: We are relentlessly innovating on our platform to anticipate market demands skating to where the puck will be.

We are relentlessly innovating on our platform to anticipate market demands skating to where the puck will be.

Speaker 3: Our platform is highly programmable, agile, fast, secure, built on open standards and can scale at lightning speed.

Our platform is highly programmable.

Jonathan fast secure built on open standards and can scale at lightning speeds.

Speaker 3: And make no mistake, these are very big differentiators relative to our competitors.

And make no mistake. These are very big differentiators relative to our competitors.

Speaker 3: Our differentiation starts with the scale and efficiency of our distributed network. Our delivery business, which is underpinned by our delivery portfolio, including our content delivery network, or CDN, remains one of the fastest in the world. In the quarter, our worldwide network remains on average 30% faster in the U.S. and Europe than our largest competitor in most countries and regions as measured by independent real user data.

Our differentiation starts with the scale and efficiency of our distributed network, our delivery business, which is underpinned by our delivery portfolio, including our content delivery network CDN remains one of the fastest in the world.

In the quarter, our worldwide network remains on average, 30% faster than the U S and Europe than our largest competitor in most countries and regions as measured by independent real user data.

Speaker 3: Our significant advantage in performance validates our unique architecture.

A significant advantage in performance validates our unique architecture.

Speaker 3: Performance is one of the most critical decision-making metrics for our customers.

<unk> is one of the most critical decision, making metrics for our customers that is why we see us winning business with marquee customers like a fortune 500 American diversified multinational mass media and entertainment conglomerate. This past quarter. They chose fastly due to our superior performance and global reach.

Speaker 3: That is why we see us winning business with marquee customers like a Fortune 500 American diversified multinational mass media and entertainment conglomerate this past quarter. They chose Fastly due to our superior performance and global reach. They also joined a growing list of our customers that have quickly expanded beyond delivery to run security features with our computed edge platform, which is a great affirmation of our land and expand strategy.

They also joined a growing list of our customers that are quickly expanded beyond delivery to one security features with our computed edge platform, which is a great affirmation of our land and expand strategy.

Speaker 3: It also further validates our view that delivery is a means to the edge.

It also further validates our view that delivery is a means to the edge.

Speaker 3: Fast delivery is critical, but so is efficient scale. The efficiency of our nearly 200 terabit per second global network is very hard for others to replicate. And only a few companies in the world have a network of this size.

Fast delivery is critical but so is efficient scale the efficiency of our nearly 200 Terabits per second global network is very hard for others to replicate.

In only a few companies in the world have a network of this size.

Speaker 3: The size of our network matters as it opens up opportunities to us that are close to others.

The size of our network matters as it opens up opportunities to us that are close to others.

Speaker 3: In the fourth quarter, we signed a Fortune 500 American mass media company news network for a lighthouse project built on Fastly's edge cloud network.

In the fourth quarter, we signed a fortune 500 American Mass Media Company News network for a lighthouse project built on SaaS lease edge cloud network, the ability to give full control to their developers using our compute platform as the inception, what's critical in their success, but it required a network of our size and reach.

Speaker 3: The ability to give full control to their developers using our compute platform as the inception was critical in their success, but it required a network of our size and reach. Fastly, it allowed them to speed up their mobile application by pushing content closer to users, transforming and serving images faster from the edge, and securing their digital property and application.

Lastly allowed them to speed up their mobile application by pushing content closer to users transforming and serving images faster from the edge and securing their digital property and application.

Speaker 3: Fastly, software-defined network, which powers our efficiency, remains a key differentiator.

Fast lease software defined network, which powers our efficiency remains a key differentiator, while our network delivers nearly half the traffic of our largest competitor at peak, we are running a 98% fewer servers based on data from their website.

Speaker 3: While our network delivers nearly half the traffic of our largest competitor at peak, we are running on 98% fewer servers based on data from their website.

Speaker 3: This is obviously transformational. We truly are enabling the next technological revolution.

This is obviously transformational we truly are enabling the next technological revolution.

Speaker 3: Some may refer to this as Industry 4.0, or in some instances Web 3.0, or even powering the emerging metaverse.

Some may refer to this as the industry Ford auto or in some instances web three dato or even powering the emerging meta versus.

Speaker 3: We are buzzword agnostic on this. You can call it whatever you like. It all involves distributed, fast, scalable, and secure experiences. And we know it's an increasingly higher demand from our customers.

We're buzzword agnostic on this and you can call it whatever you like.

All involves distributed fast scalable and secure experiences and we know it's an increasingly higher demand from our customers.

Speaker 3: This quarter, we would like to share with you some key principles which underlie our high-level product strategy. One, we are built by developers for developers. We are differentiated in the marketplace as an open community that developers want to develop with, and a company that you want to do business with.

This quarter, we would like to share with you some key principles, which underlie our high level product strategy. One we are built by developers for developers we are differentiated in the marketplace as an open community that developers want to develop with and a company that you want to do business with.

Speaker 3: And we are focused on meeting developers where they're at by making.

We are focused on meeting developers, where they are at by.

By making things easier for them.

Speaker 3: We believe this will accelerate customer acquisition and drive enterprise adoption.

We believe this will accelerate customer acquisition and drive enterprise adoption.

Speaker 3: Underscoring the openness of our development environment, since our last earnings call, developers have created their own native support for programming languages, such as JavaScript, Swift, and Zig, on Fastly's Computed Edge platform.

Underscoring the openness of our development environment since our last earnings call developers have created their own native support for programming languages, such as Java script, Swift and Zig on Fastly is computed edge platform.

Speaker 3: We also recently introduced cloud deploy, a wizard that customizes existing templates, creating an automated deployment workflow with best development practices and the fastest one button deployment in the industry. We simply make.

We also recently introduced cloud deploy a wizard that customizes existing templates couldnt automated deployment workflow with best development practices and the fastest one button deployment in the industry.

We simply make things as easy as possible for developers last quarter, we introduced our computed edge credit program, which offered qualifying enterprises the opportunity to encourage their exploration and experimentation on the platform I am pleased to share that nearly 40 customers took advantage of the program and due to the success of the program we continued.

Speaker 3: Last quarter, we introduced our Computed Edge Credit Program, which offered qualifying enterprises the opportunity to encourage their exploration and experimentation on the platform. I'm pleased to share that nearly 40 customers took advantage of the program, and due to the success of the program, we continued it through Q1 of 2022.

Through Q1 of 2022.

Speaker 3: Two, we have the fastest and most reliable programmable edge. Edge programmability is becoming a key decision-making criteria for enterprise buyers. A prime example was how a leading platform provider of streaming technology and services for businesses re-architected their infrastructure, using our computed edge platform to both minimize costs and improve ease of use.

Two we have the fastest and most reliable programmable edge edge Programmability is becoming a key decision making criteria for enterprise buyers are Prime example, with how a leading platform provider of streaming technology and services for businesses re architect their infrastructure using our computed edge platform.

To both minimize costs and improve ease of use another great example is our partnership with glitch there new integration with Fastly is computed edge will enable sophisticated glitch sites that scale infinitely with 100 times faster code execution startup time than other service solutions in the first week.

Speaker 3: Another great example is our partnership with Glitch. Their new integration with Fastly's Computed Edge will enable sophisticated Glitch sites that scale infinitely with 100 times faster code execution startup time than other serverless solutions. In the first week of our launch, we received over 2,000 enterprise developer signups for the Computed Edge beta on Glitch.

Of our launch we received over 2000 enterprise developer sign ups for the computed edge beta on glitch.

Speaker 3: Third, confidence inspiring security everywhere. Our network is uniquely architected to enable modern security.

And third <unk>.

Confidence inspiring security everywhere, our network is uniquely architected to enable modern security we.

Speaker 3: We see increased momentum in our security offerings. For example, in the fourth quarter, a global Fortune 500 insurance provider switched to Fastly after having issues with the inflexible deployment of their legacy services.

We see increased momentum in our security offerings for example in the fourth quarter, a global Fortune 500 insurance provider switch to Fastly after having issues with the flexible deployment of their legacy solution.

Speaker 3: Migration over to Fastly's next-gen WAF gave them the flexibility to deploy the solution both on-premises and in the cloud.

Migration over to Fastly as Nextgen WAF gave them the flexibility to deploy the solution both on premises and in the cloud.

Speaker 3: As security is an integral element to our product strategy, I'm very excited to share with you the recent availability of the Edge deployment of our next-gen WAF, the industry's first and only unified WAF. This is built on computed Edge. Unlike legacy rule-based WAFs, Fastly's next-generation WAF enables greater scalability, higher efficacy, and lower total cost of ownership.

As security is an integral element to our product strategy I'm very excited to share with you. The recent availability of the edge deployment of our Nextgen WAF the industry's first and only unified WAF. This is built on compute at edge.

Unlike legacy rule based WAF fast lease next generation WAF enables greater scalability higher efficacy and lower total cost of ownership.

Speaker 3: This modern unified web application and API protection solution will power and protect companies looking to further or begin their digital transformation.

This modern unified web application and API protection solution will power and protect companies looking to further or begin their digital transformation.

Speaker 3: This deployment formally completes the integration of SignalScience's industry-leading WAP.

This deployment, formerly completes the integration of signal sciences industry, leading WAF.

Speaker 3: And the customer response has been great. One of the world's leading Fortune 50 financial services companies was looking for a way to provide advanced web security across their application and infrastructure in a frictionless way without impacting performance. They chose the Fastly NextGen WAF, powered by Signal Sciences, because the unique signals-based technology gave them confidence knowing their critical web apps and APIs were safe from advanced threats.

And the customer response has been great one of the world's leading fortune 50 financial services companies was looking for a way to provide advanced web security crossed their application and infrastructure in a frictionless way without impacting performance. They chose Fastly Nextgen Wap powered by signal Sciences.

Because of the unique signals based technology gave them confidence in knowing their critical web apps and Apis were safe from advanced threats.

Speaker 3: Also, the ease of deployment across various infrastructures facilitated rolling out more applications globally in the future.

Also the ease of deployment across various infrastructures facilitated rolling out more applications globally in the future.

Speaker 3: We look to the next-gen WAF announcement and customer examples as the first in a string of many in 2022 that will be geared toward product execution and customer success.

We look to the next Gen WAF announcement and customer examples as the first in a string of many in 2022 that will be geared towards product execution and customer success.

Speaker 3: The team is excited about the opportunity that lies ahead in 2022.

The team is excited about the opportunity that lies ahead in 2022.

Speaker 3: I look forward to sharing with you further updates on our success when we meet up for our Analyst Day in May, where we will provide key updates on our long-term goals, on our product and go-to-market strategies.

I look forward to sharing with you further updates on our success when we meet up for our analyst day in May where we will provide key updates on our long term goals on our product and go to market strategies.

Speaker 3: to discuss the financial details of the quarter and guidance. I will now turn the call over to Ron. Ron?

To discuss the financial details of the quarter and guidance I will now turn the call over to Ron Ron.

Speaker 3: Thank you, Joshua, and thanks, everyone, for joining us. I'm still relatively new to Fastly, and I'm happy to be able to share our financial results and outlook with you on this, my second earnings call at Fastly.

Thank you Joshua and thanks, everyone for joining us I'm still relatively new to Fastly and I'm happy to be able to share our financial results and outlook with you on this my second earnings call. It baffling.

Speaker 3: I'm excited about the opportunity here at Fastly and the opportunities our differentiated technology gives us to drive growth and deliver fast, engaging, and safe digital experiences for everyone.

Excited about the opportunity here at Fastly and the opportunities are differentiated technology gives us to drive growth and deliver fast engaging digital.

Digital experiences for everyone.

Speaker 3: We're building a strong team in finance to build strategic insight into our business and to support fastly in executing on our goals and the vision Joshua discussed.

We're building a strong team in finance to build strategic insight into our business and to support Fastly and executing on our goal and the vision Joshua Scott.

Speaker 3: Today, I will discuss our financial results and business metrics, and then review our

Today, I will discuss our financial results and business metrics, and then review our forward guidance.

Speaker 3: Note that unless otherwise stated, all financial results in my discussion are non-GAAP based.

Note that unless otherwise stated all financial results in my discussion on non-GAAP basis.

Speaker 3: Total revenue for the fourth quarter increased 18% year-over-year to $97.7 million, exceeding our guidance of $90 to $93 million by 7% over our guidance mid-year.

Total revenue for the fourth quarter increased 18% year over year to $97 7 million exceeding our guidance of $90 million to $93 million by 7% over our guidance midpoint.

Speaker 3: In the fourth quarter, revenue from SignalSciences products was 11 percent of revenue, an increase of 58 percent over Q4 2020, which included a full quarter of SignalSciences revenue.

In the fourth quarter revenue from signal Sciences products was 11% of revenue an increase of 58% over Q4, 2020, which included a full quarter of Cigna Science's revenue.

Speaker 3: For the full year of 2021, total revenue was $354 million, up 22% year-over-year. Revenue growth was driven in part by revenue generated from products acquired from the acquisition of Signal Sciences in Q4 2020, and increased adoption of our modern edge network and product.

For the full year of 2021 total revenue was $354 million up 22% year over year revenue growth was driven in part by revenue generated from products acquired from the acquisition of signal Sciences in Q4, 2020 and increased adoption of our modern edge network and product.

Speaker 3: Our dollar-based net expansion rate, or DBNER, increased from 118% to 121% sequentially.

Our dollar based net expansion rate or DB.

Increased from 118% to 121% sequentially.

Speaker 3: We believe dbNER is a key metric in measuring the long-term value of our customer relationships and our ability to grow our revenue through increased usage of our platform and purchase of additional products by our distinct customers.

We believe <unk> is a key metric in measuring the long term value of our customer relationships and our ability to grow our revenue through increased usage of our platform and purchase of additional product by our existing customers.

Speaker 3: It is calculated on a trailing 12-month basis and removes churned customers as well as new customers during that 12-month period.

It is calculated on a trailing 12 months basis, and removes churn customers as well as new customers during that 12 month period.

Speaker 3: Our trailing 12-month net retention rate increased from 114% to 118% sequentially. We believe that our LCM net retention rate removes some of the usage space and seasonal volatility that is inherent in our business model.

Our trailing 12 months net retention rate increased from 114% to 118% sequentially. We believe that our LTM net retention rate removed some of the usage base and seasonal volatility that is inherent in our business model.

Speaker 3: Unlike DBNER, NRR includes customer additions as well as churn.

Unlike DB NAR.

<unk> includes customer additions as well as churn.

Speaker 3: As Joshua stated earlier, our annual retention rate was 99.2% and is reflective of very low customer churn of less than 1%.

As Joshua stated earlier, our annual retention rate was 99, 2% and is reflective of very low customer churn of less than 1%.

Speaker 3: We believe this is one of the lowest churn metrics in the industry.

We believe this is one of the lowest churn metrics in the industry.

Speaker 3: As of December 31st, 2021, we had 2,804 customers, of which 445 were classified as enterprise. Those customers with an excess of $100,000 of revenue over the previous 12 months.

December 31, 2021, we had 20 804 customers of which 445 were classified as an enterprise.

Those customers with an excess of 100000 of revenue over the previous 12 months.

Speaker 3: Our total customer count grew 21% over December 31st, 2020.

Our total customer count grew 21% over December 31 2020.

Speaker 3: We added 56 net new customers and 15 net new enterprise customers in the fourth quarter, compared to 167 and 22 respectively in the prior quarter. The sequential decline in net new customers was related to the seasonal trend of lower customer additions in the fourth quarter and the introduction of a new free tier for computed edge developers, which increased the total developers on the platform, but likely impacted new customer signups at the lower end.

We added 56, net new customers and 15 net new enterprise customers in the fourth quarter compared to 167 in 'twenty two respectively in the prior quarter.

The sequential decline in net new customers with related to the seasonal trend of lower customer additions in the fourth quarter and the introduction of the new free tier are computed edge developers, which increased the total developers on the platform, but likely impacted new customer sign ups at the lower end.

Speaker 3: As you can see from our very low churn rate of less than 1%, our customer acquisition dynamics remain strong.

As you can see from our very low churn rate of less than 1% our customer acquisition dynamics remained strong.

Speaker 3: Enterprise customers accounted for 88% of total revenue on a trailing 12-month basis in line with their contribution in Q3 and increased their average spend to $704,000 from $698,000 in the previous quarter.

Enterprise customers accounted for 88% of total revenue on a trailing 12 month basis in line with their contribution in Q3 and increase their average spend to 704000 from $698000 from the previous quarter.

Speaker 3: We also saw a reduction in revenue concentration as we grew our customer base. Our top 10 customers comprised 33% of our total revenues in the full year 2021 compared to 38% of our total revenues in the full year 2020.

We also saw a reduction in revenue concentration as we grew our customer base. Our top 10 customers comprised 33% of our total revenues in the full year 2021 compared to 38% of our total revenue in the full year 2020.

Speaker 3: Turning now to gross margin. Our gross margin is 55.8% for the fourth quarter compared to 57.5% in the third quarter.

Turning now to gross margin our gross margin was 55, 8% for the fourth quarter compared to 57, 5% in the third quarter as.

Speaker 3: As we've stated in prior quarters, gross margin is impacted by the timing and extent of our network investments, network utilization, and the mix of our revenue between customer segments.

As we've stated in prior quarters gross margin is impacted by the timing and extent of our network investments.

Network utilization and the mix of our revenue between customer segment.

Speaker 3: We did not see an increase in price compression across our customer segments in Qt.

We did not see an increase in price compression across our customer segment in Q4.

Speaker 3: We are continuing to innovate on our software-defined network by rolling out our next generation architecture in 2022.

We are continuing to innovate on our software defined network by Rolling out our next generation architecture in 2022.

Speaker 3: As we roll out our new sites, we will continue to incur costs on our existing sites until this transition is complete.

As we rollout our new site, we will continue to incur costs on our existing site until this transition is complete.

Speaker 3: Additionally, to address supply chain constraints, we accelerated investment to ensure adequate availability of equipment.

Additionally to address supply chain constraints, we accelerated investments to ensure adequate availability of equipment.

Speaker 3: These two factors are expected to reduce our 2022 gross margin by a couple hundred basis points as compared to our fourth quarter gross margin.

These two factors are expected to reduce our 2022 gross margin by a couple of hundred basis points as compared to our fourth quarter gross margin.

Speaker 3: We are committed to monitor our gross margin levels against ongoing investment in cloud computing and security. We are confident these investments will drive increased efficiency and lower costs across our network over time.

We are committed to monitor our gross margin levels against ongoing investments in cloud computing and security. We are confident these investments will drive increased efficiency and lower costs across our network over time.

Speaker 3: When combined with the impact of increasing security revenue mix as the share of our revenue and growing revenues from computed edge, we will see increased leverage and improved gross margins in the medium to long term. We will provide further details on our strategy at our Analyst Day inmay.

When combined with the impact of increasing security revenue mix as the share of our revenue and growing revenues from computed edge, we will see increased leverage and improved gross margins in the medium to long term. We will provide further details on our strategy at our analyst day in May.

Speaker 3: Operating expenses were $66.3 million in the fourth quarter, up 7.7 percent over Q4 2020. Operating expenses grew 34 percent to $259.6 million in 2021, from $194.1 million in 2020 due to headcount and other expenses from the Signal Sciences acquisition in Q4 2020 and increased investments during 2021.

Operating expenses were $66 3 million in the fourth quarter up seven 7% over Q4 2020 opt.

Operating expenses grew 34% to $259 $6 million in 2021 from $194 $1 million in 2020 due to head count and other expenses from the signal Sciences acquisition in Q4, 2020 and increased investments during 2021.

Speaker 3: Our operating loss for the quarter was $11.7 million, 29% under the midpoint of our operating loss guidance of $18 million to $15 million, driven by higher.

Our operating loss for the quarter was $11 7 million, 29% under the midpoint of our operating loss guidance of $18 million to $15 billion driven by higher revenues.

Speaker 3: Net loss for Q4 2021 was $11.7 million or a 10 cent loss per basic and diluted share compared to $10.5 million and a 9 cent loss per basic and diluted share in Q4.

Net loss for Q4, 2021 was $11 7 million or a <unk> or basic and diluted share compared to $10 5 million and a nine loss per basic and diluted share in Q4 2020.

Speaker 3: Net loss for fiscal year 2021 was $55.9 million, or a 48 cent loss per basic diluted share, compared to $19 million for full year 2020, or an 18% loss for basic and diluted share.

Net loss for fiscal year, 2021 was $55 9 million or.

For our 48 loss per basic and diluted share compared to $19 million for.

For full year, 2020, or an <unk> 18 loss per basic and diluted share in 2020.

Speaker 3: Turning now to the balance sheet, we ended Q4 2021 with $1.1 billion in cash, cash equivalents, marketable securities, and investments, including those classified as long-term.

Turning now to the balance sheet. We ended Q4 2021 with $1 $1 billion in cash cash equivalents marketable securities and investments, including those classified as long term.

Speaker 3: Our capital expenditures were 7% of revenue in the fourth quarter and 14% for the fiscal year 2021, in line with our previously communicated range of 12 to 14%.

Our capital expenditures were 7% of revenue in the fourth quarter and 14% for the fiscal year 2021 in line with our previously communicated range of 12% to 14%.

Speaker 3: Our capital expenditures include capitalized software. This, along with our foundational technology, drives efficiency and leverage in our network, which, as Joshua mentioned, is a competitive differentiator.

Our capital expenditures and capitalized software this along with our foundational technology drives efficiency and leveraging our network, which as Jonathan mentioned is a competitive differentiator.

Speaker 3: anddespite our transition to our next-generation network architecture.

Despite our transition to our next generation network architecture and acceleration of some investment due to supply chain constraints, we expect our capital expenditures in 2022 to remain at 12% to 14% of revenue.

Speaker 3: and acceleration of some investment due to supply chain constraints, we expect our capital expenditures in 2022 to remain at 12 to 14% of revenue.

Speaker 3: I will now turn to discuss our outlook for the first quarter and the full year of 2022.

I will now turn to discuss our outlook for the first quarter and the full year of 2022.

Speaker 3: I'd like to remind everyone again that the following statements are based on current expectations as of today and keep forward-looking state.

I'd like to remind everyone again that the following statements are based on current expectations as of today and include forward looking statements.

Speaker 3: Actual results may differ materially. We disclaim any obligation to update these forward-looking statements in the future, except as required by law.

Actual results may differ materially.

We disclaim any obligation to update these forward looking statements in the future except as required by law.

Speaker 3: Our first quarter and full year 2022 outlook reflects our continued ability to deliver strong top-line growth via improved customer acquisition and product enhancement.

Our first quarter and full year 2022 outlook reflects our continued ability to deliver strong top line growth.

The improved customer acquisition and product enhancements.

Speaker 3: Our revenue guidance is based on the visibility we have today and given our usage-based business model, we expect to gain additional visibility to our annual guidance as the year progresses.

Our revenue guidance is based on the visibility we have today and given our usage based business model, we expect to gain additional visibility to our annual guidance as the year progresses.

Speaker 3: For the first quarter, we expect revenue in the range of $97 to $100 million, representing 16% annual growth at the mid-term.

For the first quarter, we expect revenue in the range of 97% to $100 million.

Presenting 16% annual growth at the midpoint.

Speaker 3: We expect a non-GAAP operating loss of $15 to $18 million and a non-GAAP loss per share of 13 to 15 cents per share.

We expect our non-GAAP operating loss of $15 million to $18 million and the non-GAAP loss per share of 13 to 15 cents per share.

Speaker 3: For the full year 2022, we expect revenue in the range of $400 to $410 million.

For the full year of 2022, we expect revenue in the range of $400 million to $410 million.

Speaker 3: non-GAAP operating loss of $60 to $70 million and a non-GAAP net loss of $0.50 to $0.60 per share.

non-GAAP operating loss of $60 million to $70 million.

On a non-GAAP net loss of 50 to 60 per share.

Speaker 3: Before we open the line for questions, we would like to thank you for your interest and your support in Fastly, and we look forward to seeing you at our Investor Day in May.

Before we open the line for questions, we would like to thank you for your interest and your support and Fastly and we look forward to seeing you at our Investor day in May.

Operator.

Speaker 1: Thank you. And as a reminder, it is star one to ask a question. We'll pause for a moment to compile the Q&A roster.

Thank you and as a reminder, star one to ask a question.

Pause for a moment to compile the Q&A roster.

Speaker 1: And our first question will come from Janjit Singh with Morgan Stanley . Please go ahead.

And our first question will come from Ganji, Zhang with Morgan Stanley .

Please go ahead.

Speaker 4: Thank you for taking the question, and congrats on the Q4, really, the sequential growth, soon to be.

Thank you for taking the question.

Congrats on the Q4 really the sequential growth will be pretty good as well.

Speaker 4: As we look to the full year guide, Ron, I think you sort of alluded to it on...

Look to the full year guide Ron I think you sort of alluded to it on.

Speaker 4: that it's early days, but if I were just sort of to give you the basic sort of growth equation of FASCITY being traffic growth minus price erosion plus share gain or share loss, and then we get to have single finances on top. As you look across those four dimensions, what are sort of the starting assumptions across each of those four variables for your for your 2021?

In your script that it's early days, but if I were just sort of gives you the basic sort of growth equation of passenger.

Traffic growth minus price erosion plus share gainer of share loss.

Yes, we had a single client is on top as you look across those four dimensions, what are sort of the starting.

Starting assumptions across each of those four variables for your for your 2020 guide.

Yes.

Speaker 3: So a couple of things, I think one to level set, our business is usage-based and so that inherent volatility is reflected in our results. I think as we look at it and particularly seeing what came off of Q4 is increase in usage across our key customers, growing our customer base over the course of the year. I think as we look at it from a segment basis, I would expect to see growth across all of

So a couple of things I think wanted to level set the RV business is usage based and so that.

That inherent volatility reflected in our results I think as we look at it in particular are seeing what came off of Q4 is increase in usage across our key customers.

Growing our customer base over the course of the year and I think as we look at it from a segment basis I would expect to see growth across all of our segments. A couple of things to highlight I mentioned in Q4 and in prior quarters, we've seen our security business growing at a much faster rate.

Speaker 3: A couple of things to highlight, I mentioned in Q4 and in prior quarters, we've seen our security business growing at a much faster rate, it's an important part of every discussion.

It's an important part of every discussion.

Speaker 3: you know, we have with customers and so it will be one of the larger growers in terms of our revenue by product in 2022.

We have with customers and so it will be one of the larger growers in terms of our revenue by product in 2022.

Speaker 3: And I think lastly, when you start to look at, you know, pricing, I think what we saw in 2021 was a deceleration in price declines from what we've seen in the past. And so I would expect that trend to continue in terms of that being.

I think lastly, when you start to look at.

Pricing I think what we saw in 2021 was a deceleration.

In price declines from what we've seen in the past and so.

I would expect that trend to continue.

In terms of that being.

Speaker 3: you know, relatively muted, and guidance and security being the key drivers as we add customers.

Relatively.

Muted.

Guidance in security and being the key drivers as we add customers.

Speaker 4: Got it. And then, Joshua, as a follow-up, you laid out some operational goals for Computer to Edge. I think, if I remember off the top of my head, I think it was around 100,000 developers and really trying to boost the transactional volume. How do you feel, like, you know, with the free credit program, how do you feel you're sort of tracking to those operational goals for 2022 on the…

Got it and then just as a follow up you laid out some operational goals for a computer to add I think if I remember off the top of my head I think it was around 100000 developers and really trying to boost the transactional volume how do you feel like with the free credit program, how do you feel you're sort of tracking.

To those operational goals for 2022 on the compute at edge side.

Speaker 5: Yeah, so we laid out two. The first one was transactional volume for 22, and then the second one, which is really critical, is on the developer side.

Yes, so we've laid out to the first one was transactional volume for 'twenty two and then the second one which is really critical is on the developer side. We launched a few really important programs at the end of Q3, which we saw growth.

Speaker 5: You know, we launched a few really important programs at the end of Q3, which we saw growth in Q4. We talked about the credit program, where we offered up to a million dollars for customers to, you know, onboard, get ready, experience, compute. That was a really significant success. So seeing, you know, 40 customers sign up for that and extending that program, that was really successful. And I think that spoke to, really, the power of compute and also, you know, how early this is. It does take customers time to feel comfortable with moving those costs from central compute to the edge. The benefits are obvious, but they don't want to embarrass their CFO . I think on the other side, you know, and Ron.

Growth in Q4, we talked about the credit program, where we offered up to $1 million for for customers to onboard get ready experienced compute that was that was a really significant success sourcing.

When customers sign up for that and extending that program that was really successful and I think that that spoke to really the power of compute and also how early this is it does take customers time to feel comfortable with moving those those costs from central compute to the edge the benefits are obvious, but they don't want it.

<unk>, our CFO I think on the other side.

Speaker 5: talked about this, and I think it's an important dynamic, the success of the Computed Edge trial free tier for developers is critical to us. Because what we know is the developers are the decision makers. And when they try it, we are able to find all these great use cases and see the value.

And Ron talked about this and I think it is an important dynamic the success of the computed edge trial three tier for developers is critical to us because what we know is the developers of the decision makers and when they try it we were able to find all of these great use cases and see the value as I mentioned.

Speaker 5: You know, as I mentioned, you know, Glitch was a really interesting synergy there, really interesting business, and, you know, we were able to get 2,000 in the first week of having that on board. So we'll be giving updates at the analyst call specifically to both of those, but I was really pleased with the developer count and what we're seeing in that dynamic.

Glitches.

Really interesting synergy there are really interesting business and we were able to get 2000 in the first week of having that on board. So it will be giving updates at the analyst's call specifically to both of those but I was really pleased with the developer count and what we're seeing in that dynamic.

Yes.

Ready for the next question.

Speaker 1: And our next question will come from Frank Luzon with Raymond James.

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

Speaker 3: Please go ahead. Great. Thank you. I wanted to come back to the top-line growth. I mean, again, you're showing an 18 percent top-line growth in Q1, midpoint's about 15 percent, and you're guiding below that. You're saying that signal science is going to see better growth in the year. Where is it that you're being cautious on the growth rate to be guiding below that?

Please go ahead great.

Thank you I wanted to come back to the top line growth.

<unk>.

80% topline growth in Q1.

Midpoint of about 15% and youre getting below that youre, saying signal.

Do you see better growth in the year, where is it that you are you are being cautious on where.

The growth rate.

Regarding where you are.

Speaker 3: Yeah, I mean, I think more broadly speaking, you know, when we approach guidance, I think we certainly take into account, you know, the usage based business and some of that volatility and end up with guidance that we feel we have a high degree of confidence in.

Yes, I mean, I think more broadly speaking when we approach guidance I think we certainly take into account the use.

<unk> base business and some of that volatility and ended up with guidance that we feel we have a high degree of confidence and I think as you pointed out our Q1 revenue guidance reflects year over year growth of about 16%.

Speaker 3: I think as you point out, our Q1 revenue guidance reflects year-over-year growth at about 16%.

Speaker 3: you know, the full year, kind of at 14%. I think, you know, important thing, if you start to look at kind of the seasonal trend across the quarters.

Full year kind of at 14%.

I think the important thing if you start to look at kind of the seasonal trend across the quarters.

Speaker 3: What we've kind of seen in 21 is probably a better indicator Y and 20 was heavily indicated by impacted by COVID-19 and so I think.

What we've kind of seen in 'twenty, one is probably a better indicator of 2020 was heavily indicated by impacted by Covid and so I think yes.

Speaker 3: You know, typically as we look through the course of the year, you know, Q2 is going to be flattish generally with Q1. We start to see a couple percentage points, kind of an uptick in Q2 as you start to look at sequential growth. And then Q4 is typically up mid to high single digits. So I think that is kind of the trajectory. And as we move through the year, you know, we will gain additional visibility into our revenue and we'll continue to reflect that additional visibility into our guide.

Typically as we look through the course of the year Q2 is going to be flattish generally with Q1, we start to see a couple of percentage points kind of an uptick in Q2 as you start to look at sequential growth and then Q4 is typically up mid to high single digits. So I think that is kind of the trajectory and as we move through the year.

We will gain additional visibility into our revenue and we will continue to reflect that additional visibility.

Our guidance.

Speaker 6: Okay great, and can you talk a little bit to the increase in investments you're making that or adding to to the operating losses, what you?

Okay, Great and can you talk a little bit due to the increase in investments, you're making that are adding to the operating losses. What exactly are you investing in there. Yes. So I think there's two things I think on the operating loss if you kind of.

Speaker 3: Yeah, so I think there's two things. I think on the operating loss, if you kind of, you know.

Speaker 3: implicitly kind of back into our guidance, we are looking at an increase in investment across OPEX. I would say there's two key areas where we're making

<unk> kind of back into our guidance. We are looking at an increase in investment across Opex I would say there is two key areas, where we're making that investment one is continuing to invest in our sales organization, particularly around our enterprise sales organization.

Speaker 3: One is continuing to invest in our sales organization, particularly around our enterprise sales organization with the goal of increasing customers, particularly enterprise customers, where we see growth in revenue. We have seen success in that over the course of the year with the growth in customers. As we've seen, that also has driven a little bit less concentration in customers and less volatility in our business.

With the goal of increasing.

Customers, particularly enterprise customers, where we see growth in revenue.

We have seen success in that over the course of the year with the growth in customers.

And as we've seen that also is driven a little bit less concentration in customers.

And less volatility in our business.

Speaker 3: The other area I would be certainly supporting the marketing support. You know, we're happy to have Margaret Arcala join as our Chief Marketing Officer and really building out marketing programs in support of that sales organization to drive that customer growth.

The other area would be certainly supporting the marketing support.

We're happy to have Margaret our Cala joined as our Chief marketing Officer, and really building out marketing programs in support of that sales organization to drive that customer growth.

Speaker 3: The other area is to continue to invest in R&D, to continue to roll out products across the suite of our security products, for example, as the WAP that we just announced.

The other area is to continue to invest in R&D to <unk>.

Leading to rollout products across the suite of our security products for example, as the.

<unk>.

Last that we just announced earlier.

Speaker 3: In earlier this year to provide products, a product portfolio that makes it easier for enterprise customers to adopt our products. So really time together an enterprise sales force that can bring in those customers and a product portfolio that makes it easier to adopt our edge fouile platform.

Earlier this year.

To provide products a product portfolio that makes it easier for enterprise customers to adopt our products. So really tying together an enterprise sales force that can bring in those customers and a product portfolio that makes them easier to adopt our edge cloud platform.

Alright, great. Thank you. Thank you.

Speaker 1: Our next question will come from James Fish with Piper Sandler.

Our next question will come from James Fish with Piper Sandler.

Please go ahead.

Speaker 7: Yeah. Hey, guys, maybe just want to build on the last thing you just said, Ron, about kind of new products across the.

Yeah, Hey, guys, maybe just want to build on the last thing you guys said, Ron about kind of new products across security.

Speaker 7: As you guys are thinking about these further investments, be it organic or inorganic in the security space, are there areas in the portfolio that you think you should be adding to on the security side to be a bit more competitive across the entire portfolio? So, getting into kind of secure web proxy and SASE, for example, makes sense for Fastly, or is this a market that you guys plan on more partnering?

As you guys are thinking about these further investments be it organic or inorganic in the security space.

Are there are there areas in the portfolio that you think you should be adding too on the security side.

A bit more competitive across the entire portfolio. So it's getting into kind of secure web proxy in Saudi for example makes sense for Fastly or is this a market that you guys plan on more partnering.

Speaker 5: Yeah, it's a great question, Jim, you know, I think what we're hearing from our customers is a real focus on the web and API side of the business. So that's

Yes, that's a great question, Jim I think what we're hearing from our customers is a real focus on web and API side of the business. So that Ddos protection. That's Tls WAF, that's bought and so if you think if you look at that portfolio as Ron said the launch of the worse. The next generation WAF, which is powered by signal.

Speaker 5: DDoS protection, that's TLS, that's WAF, that's bots. And so if you think, if you look at that portfolio, as Ron said, you know, the launch of the WAF

Speaker 5: The next generation WAF, which is powered by Signal Sciences, is a very powerful story arc. As I mentioned, we have from Fortune 500 down to Fortune 50 customers, be it financial services or insurance, who are looking at the ability for the first time to be able to have a WAF that's on-prem, that's in the cloud, which is all connected together. That's a unique offering and very powerful. We want to keep doubling down on that. I think what you're going to see from us is a real focus in 2022 on...

Science is a very powerful story arc as I mentioned, we have from fortune 500 down to fortune 50 customers.

B or financial services or insurance. So we're looking at the ability for the first time to be able to have a WAF. That's on Prem that's in the cloud, which is all connected together and that's I think.

Unique offering and very powerful we want to keep doubling down on that so I think what youre going to see from US is a real focus in 'twenty two on that side.

Speaker 5: That side, this web, a P I mobile application buyer and there are a few important investments in that. I think you know this entire world around T? L's and certificates is an important area from a security perspective bought.

Web API mobile application buyer.

And there are a few important investments and that I think this entire world around Tls and then certificates as an important area from a security perspective bots remains an area that is a very fast moving area and an area that our customers are really interested in especially in the financial services side as well as on the retail <unk>.

Speaker 5: remains an area that is a very fast-moving area and an area that our customers are really interested in, especially in the financial services side, as well as on the retail and e-commerce side. So that's where you're going to see the investment. I think the move to an IT buyer...

E Commerce side, so thats, where youre going to see the investment I think the move to an <unk> buyer.

Speaker 5: is, you know, our network is really well-situated for that. I don't see that as a 22 investment, but it's a very interesting market. And I think whether we go through partners or whether we do it ourselves, you know, that's a question for the future. But right now we're really focusing in on this web and API buyer.

<unk> is our network is really well situated for that I don't see that as a 22 investment, but it's a very interesting market and I think whether we go through partners or whether we do it ourselves.

A question for the future, but right now we're really focusing in on this web and API buyer.

Speaker 7: Ok it makes makes sense, and you know not to be to that horse here. But on the guides here, you know Ron, are you taking a different approach to how you're guiding them? The team has historically in taking more of a kind of hair cutter or conservative approach with it as, as it does imply, you know what we've been talking about here around kind of low double digit growth for kind of the core delivery bus.

Okay.

Not to beat a dead horse here, but on the guide here.

Ron are you taking a different approach to how you are guiding them the team has historically.

And taking more of a kind of haircut our conservative approach whether it does is it does imply you know what we've been talking about here around kind of low double digit growth for kind of the core delivery business.

Speaker 7: when you look at what Sigmo Finance is probably growing, just kind of get a sense to, you know, is this kind of the bottom, and we could actually expect to eat and raise the truck here. Thanks, guys.

When you look at what signal Sciences, probably growing.

Trying to get a sense too.

Thats kind of the bottom and we could actually expect beat and raise it throughout the year. Thanks guys.

Speaker 3: Yeah So you, you know I don't want to necessarily sort of question exactly the philosophy that my predecessor had, but I thinkyou know I am taking, you know, what I would characterize as a very measured approach to guidance, where we have high confidence.

Yeah. So.

I don't want to necessarily sort of question exactly the philosophy that hit my predecessor had but I think I am taking what I would characterize as a very measured approach to guidance, where we have high confidence.

Speaker 3: in the numbers. I think your sort of comment to beat and raise I think is more around numbers where I feel comfortable with the numbers, you know, in each quarter. What I would come back to is the guidance reflects at a point in time the visibility we have into the business.

In the numbers.

Thank you sort of comment to beat and raise I think is more around.

Numbers, where I feel comfortable with the numbers.

In each quarter.

What I would come back to is the guidance reflects at a point in time the visibility we have into the business.

Speaker 3: And, you know, as we move through the year and we get additional visibility, we will reflect that, you know, in the guidance, but I'd come back to saying it's

And as we move through the year and we get additional visibility we will reflect that in the guidance.

But I would come back to saying it.

Speaker 3: the visibility that we have into what we see as to the revenue opportunity and growth.

The visibility that we have into what we see.

As to the revenue opportunity and growth.

Got it thanks.

Thanks.

Our next question will come from James Breen with William Blair.

Please go ahead.

Speaker 8: Thanks for taking the question. Just around sort of pricing competition, have you seen anything change in the market over the last quarter? One of your competitors talked about redoing some contracts with some of their large customers in the first half of this year. So do you have anything like that, customer contracts coming up for renewal that may impact growth? Thanks.

Thanks for taking the question.

Just around sort of pricing competition have you seen anything changed in the market over the last quarter.

One of your competitors talked about.

Redoing some contracts with some of our large.

Customers in the first half of this year. So do you have anything like that customers contracts coming up for renewal.

May impact growth. Thanks.

Speaker 5: Yeah, it's a great question. I mean, overall, the competitive dynamics have remained similar. As Ron said, we did see a deceleration in pricing compression. I think that speaks to, you know, in some ways, the supply constraints that were caused after COVID, which impacted a variety, all of us, frankly, in some form or another. I think the other thing is we're seeing a lot more discipline from some of the competitors in this space. We're seeing a renewed focus on ensuring that the business that they do is profitable. And that's good for, I think, for everyone. We're also seeing, as part of that, an increase in the performance overall in the market. So I feel like we have a market where what's happening is customers are looking, the customers that really matter are valuing performance and reliability and scalability more than ever. And because of that, we sort of have this have and have not world. There are a few of us that are.

Yes, it's a great question I mean overall the competitive dynamics have remained similar as Ron said, we did see a deceleration in pricing compression and I think that speaks to in some ways. The supply constraints that were caused after COVID-19 , which impacted a variety all of us frankly in some form or another I think the other thing.

As we're seeing a lot more discipline from some of the competitors in this space we're seeing.

Our renewed focus on.

On ensuring that the business that they do is profitable and thats good for I think for everyone.

We're also seen as part of that an increase in the performance overall in the market. So I feel like we have a market where whats happening is customers are looking at customers that really matter are valuing performance and reliability and scalability more than ever and because of that we sort of have this have and have not world. There are.

All of us that are.

Speaker 5: have products which you can deliver to that level, and if you can't deliver to that level, the embarrassment is significant. If you decide that you're gonna go stream the Super Bowl, or you have gotta, you know, the next launch of a new show, and it fails, it's very bizarre.

Half products, which you can deliver to that level and if you can't deliver to that level. The embarrassment as significant if you decide that you're going to stream. The Super Bowl or you had got it. The next launch of a new show and it fails. It's very visible we've seen these failures and so we're seeing a real change in tune now this isn't across all customers it's important to rip.

Speaker 5: We've seen these failures, and so we're seeing a real change in tune. Now, this isn't across all customers. I mean, it's important to remember that we are not in the real commoditized segments of the media delivery business. There's a lot of media which doesn't make money, which is struggling to find a business model that makes sense, and that's not the part that we're in. So I do think that there are some vendors that are in the highly commoditized media space, and we can't speak to that. But in the part of the media space that we're in.

Remember that we are not in the real commoditized segments of the media delivery business. There is a lot of media, which doesn't make money, which which which is struggling to find a business model that makes sense and that's not that's not the part that we're in so I do think that there are some vendors that are in the highly commoditized media space and we.

Can't speak to that but in the part of the media space that we're in we're not seeing any any change and actually in the non enterprise. The non media segment that continues to have incredible.

Speaker 5: we're not seeing any change and actually in the non-media segment.

Speaker 5: that continues to have incredible, you know, pricing dynamics. And it's primarily because there are really only two companies that can serve that big bank, that big insurance company, that big e-commerce site, and that changes the dynamics. So, you know, the other part of this, of course, is, you know, concentration of contracts, and we don't have that same concentration that others appear to have. We've got renewals coming up all the time, and there's nothing that we see in the Q1 dynamics that we'd call out there.

Pricing dynamics, and it's primarily because they are really only two companies that can serve that that big bank that big insurance company that the ecommerce site and that changes the dynamics.

The other part of this of course is concentration of contracts and we don't have that same concentration that others appear to have we've got renewals coming up all the time and there is nothing that we see in the Q1 dynamics that we'd call out there.

Speaker 8: Great. And just a follow-up on expansion and the network side, you know, some of the OTT shifts, you know, more sites opening internationally outside the U.S., is there any need to expand geographically with the network that you run over to take advantage of some of that growth?

Great and just a follow up on expansion in the network side some of the OTT shifts.

More sites opening internationally outside the U S is there any need to expand geographically with the network that you that you run over to take advantage of some of that growth.

Speaker 5: Yeah, I mean, the international growth is really impressive. We're seeing that everywhere, the dynamics are really significant. We're actually seeing some of the global providers who traditionally would sort of focus on a language footprint, right, so you'd work in English language countries, they're now, that's not the case. So we see media companies and others. So the demand is high. I think what you're going to see from us is a continued measured pace.

Yes, I mean, the international growth is really impressive.

We're seeing that everywhere. The dynamics are are really significant were actually seeing some of the global providers, who traditionally would sort of focus on it.

Language footprint right.

Work in English language countries. They are now that's not the case, so we see media companies and others. So.

The demand is high I think what youre going to see from US is a continued measured pace. We have said all along that if you go look at cities that have $1 million or 2 million people those should all be locations that.

Speaker 5: We have said all along that if you go, look at cities that have a million or two million people, those should all be locations that we need to deliver out of. If you look at the number of sites and locations we're in, you'll see a very measured approach to that. So you'll continue to see us invest. That investment will continue at the pace that we've seen it in the past. We don't see a need to dramatically accelerate it.

We need to deliver out of if you look at the number of sites and locations. We're in you will see a very measured approach to that so you'll continue to see us invest that investment will continue at the pace that we've seen it in the past, we don't see a need to dramatically accelerate it but as Ron said and I think is important in terms of understanding the dynamics of the business, we are making some pretty sick.

Speaker 5: But as Ron said, and I think it's important in terms of understanding the dynamics of the business, we are making some pretty significant investments.

<unk> investments in order to change in locations, we already exist from a.

Speaker 5: in order to change in locations we already exist from a, to a new model of delivery where we're connecting multiple sites together. And that will require us to have some redundancy or have some sites that are up, the old sites and the new sites, and we'll decommission those over the year. So I do think that's a dynamic that is playing out here, but overall measured approach with a continued focus on the international markets. Great, thanks. Thank you.

From a.

Our new model of delivery, where we're connecting multiple sites together and that will require us to have some redundancy. We're have some sites that are up the old sites and the new site and we will decommission those over the year. So I do think thats a dynamic that.

That is playing out here, but overall measured approach with a continued focus on the international markets.

Great. Thanks.

Our next question will come from will power with Baird.

Please go ahead.

Speaker 5: Great, thanks. A couple of questions. Maybe first, just coming back to the CapEx comments, I think you've got it to 12 to 14 percent of revenue, I think a similar level to last year. I'm just trying to understand how much that's customer driven.

Great. Thanks, a couple of questions, maybe first just coming back to the Capex comments, I think you've guided to 12% to 14% of revenue I think a similar level to last year I'm just trying to understand how much that's customer driven.

Speaker 5: versus getting in front of any potential supply constraints, and I guess really in light of the idea that you should have some efficiency advantages. I guess the second part of that question would be just trying to understand when we start to see that flow through the CapEx line. Is that starting 2023 or how to think about that longer term?

Versus getting in front of any potential supply constraints and I guess really kind of in line.

You should have some efficiency advantages and I guess the second part of that question would be just trying to understand when we start to see that flow through.

The Capex line does that start in 2023 or how to think about that longer term.

Yes so.

Speaker 3: For 2022, we generally expect CapEx as a percent of revenue to be in line with what we've said in the past, that 12 to 14 percent. And what we see driving it is a couple of things. One is, I did talk about, you know, given the supply constraints, you know, we did make some purchases early. I mean, essentially what we did to preserve our supply of hardware was take about 18 months of

For 2022, we generally expect capex as a percent of revenue be in line with what we've said in the past that 12% to 14%.

What we see driving as a couple of things one is I did talk about <unk>.

Given the supply constraints.

We did make some purchases early I mean, essentially what we did to preserve our supply of hardware was take about 18 months of.

Speaker 3: what would normal schedule sort of compress that into nine months. So that means a lot of things will be coming online a little bit quicker than we might have otherwise planned out. And, you know, that is one of the drivers on some of the gross margin outlook that you see for next year. But the, you know, 12 to 14 percent does include or

What would normal schedule sort of compressed that into nine months. So that means a lot of things will be coming online a little bit quicker.

Then we might have otherwise planned out and that is one of the drivers on some of the gross margin outlook that you see for next year, but the.

12% to 14% does include a reflect.

Speaker 3: I think, you know, certainly absent that, you know, we'd be at the lower range of that. I think the efficiency that we start to see as we roll out our next generation architecture is that's largely a rollout in 2022, and we have, you know, as I indicated, some overlap as we make that transition. As we get to the end of the year, some of the older sites will come offline, and we'll start to see, really, the benefit of those new...

That acceleration I think youll, certainly absent that we'd be at the lower range of that I think the efficiency that we start to see as we roll out. Our next generation architecture is that's largely a rollout in 2022.

And we have.

As I indicated some overlap as we make that transition as we get to the end of the year.

Some of the older sites will come offline and we'll start to see really the benefit of those new sites both from.

Speaker 3: both from a prospective CapEx, but also just from a cost of operating the network.

Our prospective capex, but also just from a cost of operating the network.

Speaker 3: which should drive some leverage in our gross margins as you get into 2020.

Which should drive some.

Leverage in our gross margins as you get into 2023.

Speaker 5: Okay, thanks. That's helpful. And maybe it's a second question. Nice to see the launch of your next generation WAF. Maybe just help us crystallize, you know, what really sets it apart versus, you know, competitors in the market and just any early customer feedback, I guess, you might, you know, be able to share as you talk to customers about it.

Okay. Thanks, that's helpful. And then maybe just a second question nice to see the launch of your next generation WAF.

Maybe just help us crystallize, what really sets it apart.

Versus competitors in the market and just any early customer feedback I guess you might.

Be able to share as you as.

As you've talked to customers about it.

Speaker 8: Yeah, so, you know, the culmination of marrying Signal Sciences and Fastly is important. And I think what's important about it is that, you know, Signal Sciences started with the view of trying to find a way to do this differently. These regex-based models were simply not effective. And you see that because many of the WAFs, most of the WAFs out there, in some cases some of the vendors, more than 50% aren't actually in blocking mode. The WAFs are out there, and they're just logging.

Yes.

The culmination of marrying signal Sciences, and Fastly is important and I think what's important about it is that.

<unk> started with the view of trying to find a way to do this differently. These regex based models were simply not effective and you see that because many of the west most of the west out there in some cases some of the vendors more than 50% aren't actually in blocking mode. So last are out there and theyre, just logging bad actors and they're not actually.

<unk> and the reason and a blocking them is because we do not historically this market has had so many false positives.

Speaker 8: i.e. identifying a really good client and either blocking them or somehow obscuring their process. And if you're a retailer, an e-commerce customer of ours, you don't want your good customers blocked at the door and frisked and searched, etc. So what signal sciences did and what continues to be leading is...

Identifying a really good.

Client and other blocking them or somehow obscuring their process and if you're a retailer and e-commerce customer customer of ours, you don't want your good customers blocked at the door and frisk and searched and et cetera. So what signal sciences did in what continues to be.

Leading is the fact that the wap or in blocking mode. Because they do not have this false positive problem that everything else does so that's a huge difference. So this isn't just a check box to go get PCI compliance. This is real protection in the real world.

Speaker 8: The thing about the launch of the next generation WAF powered by Signal Sciences that's unique is our ability to have a WAF everywhere.

Thing about the launch of the next generation WAF powered by signal Sciences. This unique is our ability to have a WAF everywhere. So what we talked about was the ability to now have the WAF at our edge, but that marries with having an agent in a data center or any other form of deployment. So the flexibility of deployment as I talked about.

Speaker 8: So what we talked about was the ability to now have the WAF at our edge, but that marries with having an agent in a data center or any other.

Speaker 8: So the flexibility of deployment, as I talked about, one of our customers, the flexibility of deployment is critical. With a lot of these vendors, they're going to come and tell you, you can either have it in the data center, or you can have it in the cloud, you can't have both, and these are different products that are all cobbled together. So that is a really significant difference. What we're hearing from customers is that the value proposition of actually being effective

One of our customers the flexibility of deployment is critical with a lot of these vendors they're going to come in telling you can either have it in the data center or you can have it in the cloud you can have both and these are different products that are all cobbled together. So that is a really significant difference what we're hearing from customers is that the value proposition of actually being effective.

Speaker 8: The flexibility of deployment, the performance, because that's absolutely critical. What you don't want to have is all this security functionality slowing down your website. All of those things with now the new scalability options are edge, which makes deployment incredibly easy.

Deflexed ability of deployment the performance because thats absolutely critical what you don't want to have is all of the security functionality slowing down your website all of those things with now the new scalability options, our edge, which makes deployment incredibly easy all of that is unique and I think that we're hearing from our customers and you.

Speaker 8: All of that is unique and I think that we're hearing from our customers and you can see from the revenue, continued revenue growth in that segment, just how strong that value proposition is.

From the revenue continued revenue growth in that segment, just how strong that value proposition is.

That's helpful. Thank you.

Thank you.

Speaker 1: And as a reminder, just star 1 if you would like to ask a question, and our next question will come from Jeff Van Reen with Craig Hallam.

And as a reminder, it is star one if you would like to ask a question and our next question will come from Jeff Van <unk> with Craig Hallum.

Speaker 8: Please go ahead. Great. Great. Thanks for taking my questions. A couple for me. I think maybe just to start on the revenue front and the, you know, the expected sequential progression. Obviously, you've strong outperformance here in the quarter. Any puts and takes in terms of one-timers you'd call out either are benefiting Q4 or dragging on Q1?

Please go ahead, great great. Thanks for taking my questions. A couple for me I think maybe just to start on the on the revenue front end.

The expected sequential progression, obviously strong outperformance here in the quarter any puts and takes in terms of one timers you'd call out either benefiting Q4 or dragging on Q1.

Speaker 3: Yeah, nothing that I would really call out. I think Q4 progressed really in line with kind of what we expected. I think one of the things we talked about, if you look at kind of even the impact of the outage, we've seen all the customers come back.

Yes, nothing that I would really call out I think Q4 progress really in line with kind of what we expected I think one of the things we've talked about if you look at kind of the even the impact of the outage, we've seen all of the customers come back.

Speaker 3: They're at, you know, significant levels of their previous traffic. We're very happy with kind of where they are. And so I would say it was progressed really through kind of broad.

They are at significant levels of their previous traffic, we're very happy with kind of where they are and so I would say it was the progress really through kind of a broad.

Speaker 3: increase in traffic by some of our largest customers, a lot of traction in the security business through the quarter, and I would say generally in line with kind of how we would expect Q1 to be driven by the same dynamics.

Increase in traffic by some of our largest customers.

A lot of traction in the security business through the quarter and I would say generally in line with kind of how we would expect Q1 to be driven by the same dynamics.

Speaker 8: Okay, fair. And I think on the gross margin, if I caught it, I think you said 200 basis points headwind for 22. Just correct me if I'm wrong there. But you've called out the timing of investments around CapEx, jamming 18 months into nine. But the other two items you touched on, mix of revenue utilization, you know, what have you seen there? And what are you assuming?

Okay sure and I think on the gross margin if I caught it and I think you said 200 basis points.

A headwind for 'twenty, two just correct me, if I'm wrong, there, but you've called out the timing of investments around capex.

Jim in 18 months and the nine but the other two items you touched on mix of revenue utilization what have you.

Are you seeing there and what are you assuming there.

Speaker 3: Yeah, so specifically we set a couple hundred basis points, you know, you can, you know.

Yes, so specifically, we said a couple of hundred basis points you can.

Speaker 3: interpret that how you'd like. I think the big driver really is less around what you see kind of on the top line in 2022, but more around a little bit of the CapEx, but more about this investment into our next generation architecture.

Interpret that.

How you'd like I think the big driver really is less around what you see kind of on the top line in 2022, but more around a little bit of a capex, but more about this investment into our next generation architecture.

Speaker 3: you know, as we expand and roll out these new sites.

As we expand and rollout these new sites, we continue to incur costs on our existing sites as we run in parallel until the transition is complete.

Speaker 3: We continue to incur costs on our existing sites as we run in parallel until the transition is complete. That rollout of the new sites, the sort of decommissioning of the other sites, you know, happens largely during 2022.

That rollout of the new sites.

The decommissioning of the other sites you'll happens largely during 2022.

Speaker 3: So once we've fully transitioned to these and these old sites are decommissioned, we will start to see reduced costs and gross margin accretion.

Once we have fully transitioned to these in these old sites or decommissioned.

We'll start to see reduced costs and gross margin accretion.

Speaker 3: that likely shows up in 2023. And that's really the dynamic that's driving the gross margins. I think if you look at the normal things that drive it around utilization.

That likely shows up in 2023.

And that's really the dynamic that's driving the gross margins I think if you look at the normal things that drive it around the utilization.

Speaker 3: You know, certainly the new sites give us additional capacity, but we would expect the drivers really be...

Certainly the new sites give us additional capacity.

But we would expect.

The drivers really be on the cost side.

Speaker 8: Helpful. Two other real quick questions on the numbers side. Sales and sales capacity additions for 22. How do you think about it from a heads or sales capacity additions? And then with the accelerated CapEx, where does that leave network capacity by the end of 22?

Hmm.

Helpful to two other real quick questions on the numbers side sales and sales capacity additions for 'twenty. Two how do you think about it from our heads of sales capacity additions and then with the accelerated Capex, where does that leave network capacity by the end of 'twenty two.

Speaker 3: So two things, I think, you know, broadly speaking, as I mentioned earlier, we are looking to invest in sales, particularly really around enterprise sales, you know, we don't have a specific number that we share, but we will be.

So two things I think broadly speaking as I mentioned earlier.

We are looking to invest in sales, particularly really around enterprise sales. We don't have a specific number that we share, but we will be.

Speaker 3: you know, growing that sales team. And we believe that it's really part of that strategy of, you know, growing the enterprise customers along with launch of products that make it easier to adopt. And so those two things go together to really drive leverage. On network capacity, I'll let Josh.

Growing that sales team and we believe that it's really part of that strategy of growing the enterprise customers along with launch of products that make it easier to adopt and so those two things go together to really drive leverage.

Our network capacity I'll, let Joshua answer that one yes, so Jeff I think on the network capacity side. This is an interesting question because if you look at it we talked about nearly a 200 terabits per second network, which which sets us up.

Speaker 9: interesting question because if you look at it, we talked about nearly a 200 terabit per second network, which sets us up in this upper echelon, as I said, which is allowing us to get customers that smaller networks can't. I think that this is more about network utilization than it is about the total number, because really what we want to drive up is utilization. And so what you're seeing today, if you go and look, and Fastly publishes this on our network page, you'll see how much traffic is on our network today. At any given moment, it's not 200 terabits per second, right? I mean, on a really busy day, you might see us at 50. And so I think what you're going to see with the investment sheet

In this upper echelon as I said, which is allowing us to get customers. The smaller networks can't I think that this is more about network utilization than it is about the total number because really what we want to drive up is utilization.

And so what youre seeing today, if you go and look in fact, we published this on a network page Youll see how much traffic is on our network today at any given moment. It is not 200 terabits per second right.

A really busy day, you might see us at 50, and so I think what youre going to see with the investment here is less and expansion of that number although that number will expand as we go into different geographies, but what youre going to see is our ability to use more of it and I think that's really the most important measure and thats hopefully what we're.

Speaker 9: And so I think what you're going to see with the investment here is less.

Speaker 9: an expansion of that number, although that number will expand as we go into different geographies. But what you're going to see is our ability to use more of it, and I think that's really the most important measure, and that's hopefully what we're going to see when we see this new architecture come online. One of the things that we're seeing, and Fastly started with this mentality, is that we can catch the long tail, right? One of the big differences between us and every other vendor in the market is that when a customer comes to us, they're...

To see when we when we we see this new architecture come online one of the things that we're seeing in fact, we started with this mentality is that we can cash the long tail right one of the big differences between us and every other vendor in the market is that when a customer comes to us their cost to go back to their central cloud or their central data Center goes down.

Speaker 9: cost to go back to their central cloud or their central data center goes down because we're just so much better at the basic job of caching. When you look at what we're doing with these implementations.

We are just so much better at the basic job of caching. When you look at what we're doing with these implementations in this new software defined architecture, we're calling core flex what you see is actually how powerful that is and how it dramatically increases our utilization. So I'd look more at utilization, we don't forecast a number but thats really.

Speaker 9: in this new software-defined architecture we're calling Corflex. What you see is actually how powerful that is and how it dramatically increases our utilization. So I'd look more at utilization. We don't forecast a number, but that's really where I think you're going to see the biggest bang for the buck. That's helpful.

I think youre going to see the biggest bang for the Buck.

That's helpful. Thanks for taking the questions.

Thank you.

Speaker 1: And our next question will come from Fatima Boulani with Citibank.

And our next question will come from <unk> with Citibank.

Please go ahead Anthony.

Speaker 10: Good evening. Thank you for taking my question. Joshua, maybe I'll start with you just with respect to the enterprise sales organization, build out and refine.

Good evening. Thank you for taking my question.

Hey, Josh maybe I'll start.

Just with respect to the enterprise sales organization.

Sales out and refinement.

Speaker 10: um, gets at a very high level. What are you doing differently? Um, and what exactly doing differently under Brett's leadership now that he's had a, you know, a couple months under his belt, uh, and how should that

Very high level, what are you doing differently.

What exactly doing differently under Brad's leadership now that you've got a couple of months under his belt.

<unk> said that.

Speaker 10: any changes that you're making in terms of strategy manifest in the metrics we watch.

Any changes that youre, making in terms of strategy manifest in the metrics, we watch and then I have a follow up.

Speaker 9: Great, yeah, thank you for the question. I think that there are a few really important dynamics. I think the first dynamic is that what we see is that Fastly historically has not been a partner or channel-based organization. We are changing that. Bread is making a dramatic shift. So one of the things that you're going to see is a significant leverage of the channel. So that's really important.

Great yes. Thank.

Thank you for the question I think that there are a few really important dynamics I think the first dynamic is that is that what we see is that firstly historically has not been a partner our channel based organization we we.

We are changing that Brett is making a dramatic shift so one of the things that youre going to see is a significant leverage of the channels. So that that's really important when we look at how historically security has been sold its been sold through the channel. What we acquired with signal Sciences was incredible depth in the channel and we're going to really bring that to bear.

Speaker 9: When we look at how historically security has been sold, it's been sold through the channel, what we acquired with Signal Science was incredible debt.

Speaker 9: in the channel and we're going to really bring that to bear not just on the security but on that ability to sell delivery security and compute so that's that's one pretty significant change i think the other change that we we went through and we're going to really see roll out is how we organize our territories and the types of sellers that we have

Not just on the security, but on that ability to sell delivery security and compute so that's one pretty significant change I think the other change that we went through and we're going to really see rollout is how we organize our territories and the types of sellers that we have because it takes in order to sell.

Speaker 9: Because it takes, you know, in order to sell the full edge network, the delivery and the compute and the security, that takes a lot of...

The full edge network.

The delivery and the compute and the security.

That takes a lot of.

Speaker 9: It takes a different skill set. So you're going to see those are two really important dynamics. And I think how you'll see that translated is into enterprise customer account. I mean, that's one that we've always focused on, that I think is important, and that we're looking to execute more effectively on in 22.

It takes a different skill set so youre going to see.

Those are two really important dynamics and I think what youll see how youll see that translated into enterprise customer count I mean, thats. One that we have we are always focused on that I think is important and that we're looking to execute more effectively on in 'twenty two.

Okay.

Speaker 10: Fair enough. I appreciate that. Rod, maybe as a segue to you, you know, with respect to some of these changes bearing fruit over the course.

Fair enough I appreciate that.

Rob maybe as a segue to you with respect to some of these changes are bearing fruit over the course of 2020, Q or how should we triangulate between.

Speaker 10: A, how should we triangulate between some of your retention metrics that you shared this quarter and how those retention metrics, or rather what retention levels are embedded in your guidance for 2022? And that's it for me.

Some of your retention metrics that you can share this quarter.

How those retention metrics.

Or rather what retention levels are embedded in your guidance for 2002. Thank you.

Thank you okay.

Speaker 9: Yeah, so as we spoke about, our customer retention rates are very high and with a churn rate of less than 1%. And we've seen very good customer retention and very low churn rates.

Yes.

As we spoke about our customer retention rates are very high.

And with our churn rate of less than 1%.

And we've seen very good customer retention and very low churn rates.

Speaker 3: historically. So as we look to 2022, we look to continue to have.

Historically, so as we look to 2022, we look to continue to have.

Speaker 3: you know, really good retention of our customers. And I think the last thing I would say as you look at customers is the other pieces as we have, you know, acquired customers. You know, we've seen their revenue grow over time as they move more traffic onto us, as they realize, you know, how efficient our network is, how fast our network is.

Really good retention of our customers and I think the last thing I would say as you look at customers is the other pieces as we have.

Acquired customers, we've seen their revenue grow over time as they move more traffic on to us as they realize how efficient our network is how fast our network is and particularly the opportunity to sell in securities. So I think if you look at the dynamics, we're going to continue to see very low churn I think we're going to continue to see an opportunity to.

Speaker 3: and particularly the opportunity to sell in security. So I think if you look at the dynamics, you know, we're going to continue to see very low churn. I think we're going to continue to see an

Speaker 3: grow business within existing customers, and then a lot of the efforts that Joshua spoke about with the sales team are all about adding new customers into that pipeline. And so those would be the dynamics that are reflected in our outlook for 2022.

Grow business within existing customers.

And then a lot of the efforts that Joshua spoke about with the sales team are all about adding new customers into that pipeline and so those would be the dynamics that are reflected in our outlook for 2022.

Yes.

I appreciate that thank you.

Thank you.

Speaker 1: And our final question will come from Rudy Keschinger with BA Davidson.

And our final question will come from Rudy passenger with D. A Davidson.

Please go ahead, hey, guys. Thanks.

Speaker 7: Yes, thanks for taking my questions. On gross margins, I guess in Q4, just how many sites did you have running with those duplicate costs in Q4? I guess I'm just a bit surprised to see, given the seasonal traffic boost, now this is the revenue upside, the gross margin still came down as much as they did Q3 to Q4. So how many of those duplicate sites did you have running in Q4? Well, I think a couple of things.

Hey, guys. Thanks for taking my questions.

On gross margins I guess in Q4, just how many sites did you have running.

With those duplicate costs in Q4, I guess I'm, just a bit surprised to see given the seasonal traffic business on the revenue upside the gross margin still came down as much as they did in Q3 Q4, how many of those duplicate Jeb running in Q4.

Well I think a couple of things I would mentioned.

Speaker 3: One of the things in terms of overall sites contributing to our cost is some of the international expansion where, as we've talked about before, we actually bring those online ahead of time. It requires us bringing in bandwidth.

One of the things in terms of overall sites contributing to our cost as some of the international expansion, whereas we've talked about before we actually bring those online ahead of time.

Acquired us bringing in bandwidth.

Speaker 3: and servers and various, that network ahead of when traffic comes. And secondly, your traffic, as we talked about earlier, the typical pattern is traffic ramps over time. And so you have that investment as driving a lot of that investment. I think secondly, relative to the investment, I would characterize it, a handful of sites where we have duplication over the course of the years, we're making this transition to new sites. And thirdly, we're making this transition to new sites where we have duplication over

And servers and various that network ahead of what traffic trends and then secondly, your traffic as we talked about earlier the typical pattern is.

Traffic ramps over time, and so you have that investment.

Is driving a lot of that investment I think secondly relative to the investment I would just characterize it as a handful of sites, where we have duplication over the course of the year as we're making this transition to new sites.

Okay.

Got it and then.

Speaker 7: You know, last quarter you gave, uh, you know, these longer term targets. I think it was a billion in revenue by 25.

Last quarter you gave.

Longer term targets I think it was a 1 billion in revenue by 25.

Speaker 7: You know, while understanding, and I won't be the dead horse in the guide for this year, certainly seems like there's an increased level of embedded conservatism, but going off the 405 midpoint.

While understanding and I wont beat the dead horse in the guide for this year certainly it seems like there's an increased level of embedded conservatism, but going after four or five midpoint.

Speaker 7: it would take a 35% CAGR from 22 to 25 to hit that billion-dollar revenue target. So do you still feel confident in that statement you gave last quarter? And what would you say to investors who are

We'll take a 35% CAGR from 'twenty two to 'twenty five.

Revenue target. So do you still feel confident in that you gave last quarter and what would you say to investors who are.

Speaker 7: you know, a bit skeptical on your ability to reaccelerate growth that much in the out

A bit skeptical on your ability to reaccelerate growth that much in the out years.

Speaker 9: Yeah, I mean, I think we remain confident. I think we certainly didn't imply that it was going to happen in a linear fashion.

Yes, I mean, I think we remain confident I think we certainly didn't imply that it was going to happen in a linear fashion.

We continue to see.

And believe that our best path forward to here is to is to guide what we see and our.

Speaker 9: And, you know, our hope is that we're on this conference call next year, speaking about a really successful year and people see that path. I think we're at a point in our business where we'd really like to just point to the scoreboard after it's, you know, after the game's over to see what the score is. Right now, we continue to feel confident and we believe with the underlying dynamics in the security business, in the compute business and our continued growth like we saw in the last quarter, we think that all adds. The other piece here is we have new executives who are all coming in who are extremely experienced.

Our hope is that we're on this conference call next year speaking about a really successful year and people see that path I think were at a point in our business, where we'd really like to just point to the scoreboard. After it's after the games over to see what the score is right now we continue to feel confident and.

And we believe with the underlying dynamics in the security business in the compute business and our continued growth like we saw in the last quarter. We think that all adds the other piece here is we have new executives who are all coming in who are extremely experienced who were also mirroring that confidence. So that's our confidence I have.

Speaker 9: The other piece here is we have new executives who are all coming in who are extremely experienced who are also mirroring that confidence. So that's a confidence I have, Ron has, and so does a new team. So I guess I would sort of say I think our best plan is to wait and see how that plays out. We remain confident.

Ron has and so does the new teams. So I guess I would sort of say I think I think our best plan is to wait and.

And see how that plays out we remain confident.

Okay.

Thank you.

Speaker 1: And that will conclude today's question-and-answer session. I would now like to turn the call over to CEO Joshua Bixby.

And that will conclude today's question and answer session I would now like to turn the call over to CEO Joshua equal.

Speaker 9: Thank you. Before we sign off, I want to thank our employees, our customers, our partners, and our investors.

Thank you.

Before we sign off I want to thank our employees, our customers our partners and our investors.

Speaker 9: We remain as committed as ever to fueling and securing digital experiences and moving forward we remain focused on execution, bringing lasting growth to our business and delivering value to our shareholders. We look forward to connecting with many of you and hope to see many of you at the upcoming Morgan Stanley Conference and our Analyst Day in May. Thank you.

We remain as committed as ever to fueling and securing digital experiences and moving forward, we remain focused on execution, bringing lasting growth to our business and delivering value to our shareholders well.

We look forward to connecting with many of you and hope to see many of you at the upcoming Morgan Stanley Conference at our Analyst day in May Thank you.

Speaker 1: And this will conclude today's conference. Thank you for your participation, and you may now disconnect.

And this will conclude today's conference. Thank you for your participation and you may now disconnect.

Speaker 11: And.

Okay.

[music].

Sure.

Okay.

[music].

Sure.