Business context and reporting period
Fastly, Inc. filed this Form 10-K for the fiscal year ended December 31, 2022. The company provides a usage-based edge cloud platform spanning content delivery, security, compute, and observability. Results below compare full fiscal years; the filing does not provide a clear standalone fourth-quarter income statement summary.
Key financial metrics
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $432.7 million | $354.3 million |
| Gross profit / gross margin | $209.8 million / 48% | $187.3 million / 53% |
| Operating loss | $246.2 million | $219.0 million |
| Net loss | $190.8 million | $222.7 million |
| Cash used in operating activities | $69.6 million | $38.5 million |
- Revenue grew 22%. Cost of revenue rose 33%, outpacing growth and reducing gross margin by about 4 percentage points.
- Operating expenses increased 12% to $456.0 million. R&D rose 22% and sales and marketing rose 18%; general and administrative expense declined 5%.
- Net loss improved by $31.9 million, principally reflecting a $54.4 million gain from repurchasing convertible notes below par; operating loss increased.
- Stock-based compensation was $145.8 million. Net loss per share was $1.57, versus $1.92 in 2021.
- Cash, cash equivalents, and marketable securities totaled $683.1 million at year-end, down from $1.06 billion. Current assets were $636.5 million and current liabilities $152.3 million.
- Cash used in investing activities was $235.8 million, including net marketable-security transactions, acquisition spending, and network investment. Cash used in financing was $189.1 million, primarily the note repurchase and finance-lease repayments.
- Remaining convertible notes had $713.8 million principal due March 2026; balance-sheet carrying value was $704.7 million. The $100 million revolving credit facility had no borrowings outstanding; Fastly reported covenant compliance at year-end.
Material changes and operating indicators
- Revenue increased $78.4 million, including $17.4 million from Signal Sciences security products. Approximately 94% of revenue was usage-driven, primarily from existing customers.
- Customers increased 5% to 2,958; enterprise customers increased 11% to 493. Average enterprise customer spend rose to $782,000 from $704,000.
- DBNER improved to 122.7% from 120.9%; NRR to 110.7% from 106.6%; and LTM NRR to 119.1% from 117.6%. The top 10 customers generated 35% of revenue, versus 33%; the top five generated 26%, versus 22%.
- Fastly acquired developer-tool company Glitch in May 2022 for $34.9 million in cash consideration, including an $8.0 million holdback.
Outlook, commentary, risks, and unusual items
- The filing gives no formal quantified revenue or earnings guidance. Management expects operating losses to continue in the foreseeable future and expects operating expenses to rise as it invests in sales, product development, and network capacity. Management believes available liquidity and expected resources are sufficient for anticipated working capital and capital expenditure needs for at least 12 months.
- Management attributed lower gross margin to higher bandwidth, colocation, hosting, depreciation, personnel, and travel costs as it expanded infrastructure ahead of future demand.
- Key risks include service outages and cyberattacks, customer usage volatility and concentration, intense competition and pricing pressure, hardware supply constraints, and uncertain macroeconomic and IT spending conditions. Many customer contracts are short-term and usage commitments may be low relative to actual usage.
- The $54.4 million debt-extinguishment gain followed the cash repurchase of approximately $235 million principal amount of notes for $176.4 million. This one-time gain materially reduced the reported net loss.
- Fastly disclosed $7.6 million of estimated sales and use tax liabilities. It reported no legal proceedings expected to have a material effect and no significant accrual for legal loss contingencies.
- The auditor issued unqualified opinions on the financial statements and internal controls. Previously reported material weaknesses in financial reporting controls were reported as remediated. The audit identified manually processed revenue as a critical audit matter.
- CEO Todd Nightingale succeeded Joshua Bixby effective September 1, 2022. The filing also highlights regulatory, privacy, cross-border data-transfer, and debt-repayment risks.
Important facts for investors to verify
- Whether revenue growth and customer expansion persist, particularly among enterprise customers and concentrated media and streaming accounts.
- Whether usage growth and pricing can outpace network and infrastructure costs enough to recover gross margin.
- How much of the improved net loss reflects recurring operating progress versus the nonrecurring debt-repurchase gain.
- Liquidity trends, operating cash burn, contractual commitments, and the ability to repay or refinance the $713.8 million notes at maturity.
- Progress on revenue-processing controls and any subsequent service outages, cybersecurity incidents, or related customer and regulatory consequences.