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What changed in Fastly, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Fastly, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+470 added−389 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-27)

Top changes in Fastly, Inc.'s 2023 10-K

470 paragraphs added · 389 removed · 339 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

76 edited+21 added−12 removed84 unchanged
Biggest changeThe principle competitive factors in our market include: • Ability to support modern application development processes; • Brand awareness, reputation, and trust; • Credibility with developers; • Ease of integration and programmability; • Global network coverage; • Platform reliability and security; • Platform scalability and performance; • Price and network cost savings; • Strength of the sales and marketing efforts; and • Quality of customer support.
Biggest changeThe principle competitive factors in our market include: • platform functionality, scalability, performance, ease of use, ease of integration and programmability, reliability, security availability, and cost effectiveness; 17 • global network coverage and availability; • ability to support modern application development processes and utilize new and proprietary technologies to offer services and features previously not available in the marketplace; • ability to identify new markets, applications, and technologies; • ability to attract and retain customers; • brand, reputation, and trustworthiness; • credibility with developers; • quality of customer support; • ability to recruit software engineers and sales and marketing personnel; • ability to protect intellectual property; and • ability to identify opportunities for acquisitions and strategic relationships and successfully execute on them.
Compute@Edge supports a multitude of use cases, including: • Enhancing Search Engine Optimization ranking by managing redirects at the edge to improve site performance and gain real-time visibility; • Lowering infrastructure costs and offering faster personalized experiences by generating unique user tokens for authentication; and • Enabling low latency ad personalization by allowing our customers to serve ads quickly from the edge based on user data.
Compute supports a multitude of use cases, including: • Enhancing Search Engine Optimization ranking by managing redirects at the edge to improve site performance and gain real-time visibility; • Lowering infrastructure costs and offering faster personalized experiences by generating unique user tokens for authentication; and • Enabling low latency ad personalization by allowing our customers to serve ads quickly from the edge based on user data.
Support for languages that developers already know and want to code in is key for adoption and we will continue to add more over time. • Data. Compute@Edge has a number of features that makes it easier and faster to access data at the edge instead of having to go back to the central cloud.
Support for languages that developers already know and want to code in is key for adoption and we will continue to add more over time. • Data . Compute has a number of features that makes it easier and faster to access data at the edge instead of having to go back to the central cloud.
In addition, we seek to protect our intellectual property rights by requiring our employees and independent contractors involved in development of intellectual property on our behalf to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including 20 intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.
In addition, we seek to protect our intellectual property rights by requiring our employees and independent contractors involved in development of intellectual property on our behalf to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.
Combined with comprehensive APIs, VCL allows our customers to build, test and deploy custom logic, using their own development, test and deployment environment, for even the most complex digital experiences. • Content compression. Compresses content with technologies like Gzip and Brotli, providing direct performance improvements and a more responsive web experience for end users. • Reliability .
Combined with comprehensive APIs, VCL allows our customers to build, test and deploy custom logic, using their own development, test and deployment environment, for even the most complex digital experiences. • Content Compression. Compresses content with technologies like Gzip and Brotli, providing direct performance improvements and a more responsive web experience for end users. • Reliability Features .
The Developer Relations team guides developers through training materials, events, and tooling aimed at building a deep understanding of our products. By maintaining code samples published to Fastly Developer Hub and building testing tools like Fastly Fiddle, we engage developers with our products, such as Compute@Edge, that integrate directly into DevOps tools and internal developer platforms.
The Developer Relations team guides developers through training materials, events, and tooling aimed at building a deep understanding of our products. By maintaining code samples published to Fastly Developer Hub and building testing tools like Fastly Fiddle, we engage developers with our products, such as Compute, that integrate directly into DevOps tools and internal developer platforms.
With real-time monitoring, streaming delivery, request collapsing, capacity planning, and flexible deployment, Fastly Live Event Monitoring gives customers insights into their live streaming performance and the ability to troubleshoot immediately–all while reducing costs. 13 • Logging Insights. Logging Insights provides actionable intelligence that can be used to diagnose and troubleshoot issues for optimal performance and user experience.
With real-time monitoring, streaming delivery, request collapsing, capacity planning, and flexible deployment, Fastly Live Event Monitoring gives customers insights into their live streaming performance and the ability to troubleshoot immediately–all while reducing costs. • Logging Insights. Logging Insights provides actionable intelligence that can be used to diagnose and troubleshoot issues for optimal performance and user experience.
Further, companies in the communications and technology industries own large numbers of patents, copyrights, and trademarks and frequently threaten litigation, or file suit based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and expect to face in the future, allegations that we have infringed the intellectual property rights of third parties.
Further, companies in the communications and technology industries own large numbers of patents, copyrights, and trademarks and frequently threaten litigation, or file suit based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and 21 expect to face in the future, allegations that we have infringed the intellectual property rights of third parties.
We help customers stop API abuse by enabling them to monitor for unexpected values and parameters submitted to API endpoints, and block unauthorized requests. • ATO Protection. Account takeover ("ATO") occurs when attackers use authentication credentials to take over legitimate user accounts.
We help customers stop API abuse by enabling them to monitor for unexpected values and parameters submitted to API endpoints, and block unauthorized requests. • ATO Protection. Account takeover (“ATO”) occurs when attackers use authentication credentials to take over legitimate user accounts.
Fastly is also certified to the ISO/IEC 27001:2013 standard for its Information Security Management System (ISMS). Our Assurance Services offering includes support for additional documentation and audit procedures for customers with these needs. Compute Compute@Edge allows app developers to build high performance, personalized apps on Fastly's programmable edge without the cost and complexity of managing the underlying infrastructure.
Fastly is also certified to the ISO/IEC 27001:2013 standard for its Information Security Management System. Our Assurance Services offering includes support for additional documentation and audit procedures for customers with these needs. 12 Compute Fastly Compute allows app developers to build high performance, personalized apps on Fastly's programmable edge without the cost and complexity of managing the underlying infrastructure.
However, many of our competitors have substantially greater financial and technical resources in addition to larger sales and marketing budgets, broader market distribution, and more mature intellectual property portfolios. 17 Our Culture and Human Capital Resources Our Values Technology has the potential to make a radically positive impact on the world, and we aspire to improve human lives through our work.
However, many of our competitors have substantially greater financial and technical resources in addition to larger sales and marketing budgets, broader market distribution, and more mature intellectual property portfolios. 18 Our Culture and Human Capital Resources Our Values Technology has the potential to make a radically positive impact on the world, and we aspire to improve human lives through our work.
We speed up the caching and delivery of sensitive content at the edge, helping customers meet data compliance and privacy regulations such as the Health Insurance Portability and Accountability Act (“HIPAA”), the European Union's General Data Protection Regulation ("EU GDPR") and the United Kingdom’s GDPR (“U.K. GDPR”), in addition to industry standards such as PCI Data Security Standard and SOC.
We speed up the caching and delivery of sensitive content at the edge, helping customers meet data compliance and privacy regulations such as the Health Insurance Portability and Accountability Act (“HIPAA”), the European Union's General Data Protection Regulation (“EU GDPR”) and the United Kingdom’s GDPR (“U.K. GDPR”), in addition to industry standards such as PCI Data Security Standard and SOC.
Infrastructure Our infrastructure team is responsible for the design, deployment, and maintenance of the servers and network hardware that form the foundation of our mission critical edge cloud environment in 79 markets as of December 31, 2022. We invest in research into global Internet geography to identify optimal colocation site selection, network partner identification, and network-to-network interconnection opportunities.
Infrastructure Our infrastructure team is responsible for the design, deployment, and maintenance of the servers and network hardware that form the foundation of our mission critical edge cloud environment in 79 markets as of December 31, 2023. We invest in research into global Internet geography to identify optimal colocation site selection, network partner identification, and network-to-network interconnection opportunities.
As customers consume more cloud and software as a service (“SaaS") offerings, we can create additional value and grow with these partners. • International expansion. As our customer base grows, we plan to scale our network to bring edge computing closer to where our customers are. We believe significant opportunities exist for international growth.
As customers consume more cloud and software as a service (“SaaS”) offerings, we can create additional value and grow with these partners. • International expansion. As our customer base grows, we plan to scale our network to bring edge computing closer to where our customers are. We believe significant opportunities exist for international growth.
Copies of our reports on Forms 10-K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically through our investor relations website at www.fastly.com/investors as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC. 21
Copies of our reports on Forms 10-K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically through our investor relations website at www.fastly.com/investors as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC. 22
Our WAF can be installed in any infrastructure: cloud, container, on-premise data center or hybrid environments or at the edge. Key features include: • Bot Protection. Bad bots can perform content scraping, tie up system resources, perform account brute forcing and other harmful actions.
Our WAF can be installed in any infrastructure: cloud, container, on-premise data center or hybrid environments or at the edge. Key features include: • Bot Management. Bad bots can perform content scraping, tie up system resources, perform account brute forcing and other harmful actions.
From this trend, we realized that there was a need for a more general compute environment versus one that was primarily designed for caching and content delivery. To address this need, we built a powerful compute environment on top of our programmable platform. We give customers access to our serverless compute environment through our compute offering, Compute@Edge.
From this trend, we realized that there was a need for a more general compute environment versus one that was primarily designed for caching and content delivery. To address this need, we built a powerful compute environment on top of our programmable platform. We give customers access to our serverless compute environment through our compute offering, Fastly Compute.
We are focused on optimizing the return on our marketing investment to drive top-of-funnel demand across our portfolio and regions. Our sales and marketing organizations work together closely to cultivate customer relationships with developers and business leaders at enterprises and technology-savvy organizations to drive revenue growth. We have geographically-based sales teams that continue to enhance our value-based selling methodology.
We are focused on optimizing the return on our marketing investment to drive demand across our portfolio and regions. Our sales and marketing organizations work together closely to cultivate customer relationships with developers and business leaders at enterprises and technology-savvy organizations to drive revenue growth. We have geographically-based sales teams that continue to enhance our value-based selling methodology.
We integrate with major cloud providers to enhance their services and create solutions that are powerful, scalable, and secure. We have exclusive Private Network Interconnects (PNIs) and peering arrangements with key cloud providers such as Google Cloud Platform, Microsoft Azure, AWS, and others to eliminate or minimize egress fees, enhance security, and improve overall performance.
We integrate with major cloud providers to enhance their services and create solutions that are powerful, scalable, and secure. We have exclusive Private Network Interconnects (PNIs) and peering arrangements with key cloud providers such as Google Cloud Platform, AWS, and others to eliminate or minimize egress fees, 16 enhance security, and improve overall performance.
Like all our offerings, Compute@Edge is built to be secure, performant and scalable.
Like all our offerings, Compute is built to be secure, performant and scalable.
With a focus on performance and flexibility, Fastly enables businesses to safeguard their digital experiences. Next-Gen WAF . Our next-generation Web Application Firewall (“WAF”) (powered by Signal Sciences) protects applications from malicious attacks that seek to compromise apps and APIs. Our solution requires no tuning, and is more accurate than the traditional rule or signature-based approaches.
With a focus on performance and flexibility, Fastly enables businesses to safeguard their digital experiences. Next-Gen WAF . Our next-generation Web Application Firewall (“WAF”) protects applications from malicious attacks that seek to compromise apps and APIs. Our solution requires no tuning, and is more accurate than the traditional rule or signature-based approaches.
Manages HTTP/HTTPS requests to a customer’s origin using granular content-aware routing decisions. We allow customers to manage traffic across multiple IaaS providers, data centers, and hybrid clouds. We also provide improved performance and cost savings over Application Delivery Controllers, especially during a spike or surge in traffic. Image Optimization • Image Optimizer.
Manages HTTP/HTTPS requests to a customer’s origin using granular content-aware routing decisions. We allow customers to manage traffic across multiple IaaS providers, data centers, and hybrid clouds. We also provide improved performance and cost savings over ADCs, especially during a spike or surge in traffic. Image Optimization • Image Optimizer.
Fastly provides a range of security solutions for businesses that focus on protecting websites, apps, and APIs from various threats, including DDoS attacks and application layer attacks. These solutions are designed to be real-time, scalable, and customizable, offering businesses the ability to tailor their security to their specific needs.
Fastly provides a range of security solutions for businesses that focus on protecting websites, apps, and APIs from various threats, including DDoS attacks, application layer attacks and abusive behavior from automated software. These solutions are designed to be real-time, scalable, and customizable, offering businesses the ability to tailor their security to their specific needs.
Fastly’s Managed CDN provides maximum control and flexibility. We deploy our edge cloud network on dedicated POPs within a customer’s private network at locations of their choosing. Our service can be used exclusively, or as part of a hybrid, multi-CDN strategy. Support Plans. Fastly offers three levels of support plans.
Managed CDN. Fastly’s Managed CDN provides maximum control and flexibility. We deploy our edge cloud network on dedicated POPs within a customer’s private network at locations of their choosing. Our service can be used exclusively, or as part of a hybrid, multi-CDN strategy. Support Plans.
Our expert consultants implement a guided customization of preconfigured dashboards tailored to a customer’s specific goals. • Metrics. We offer customers a variety of ways to report on the performance and activity of their services. Our metrics, APIs and dashboards provide real-time, per-second visibility and historical reporting. • Stats Page.
Our expert consultants implement a guided customization of preconfigured dashboards tailored to a customer’s specific goals. • Metrics. We offer customers a variety of ways to report on the performance and activity of their services. Our metrics, APIs and dashboards provide real-time, per-second visibility and historical reporting. • Origin Inspector.
We continue to invest in our business and had a net loss of $190.8 million, $222.7 million and $95.9 million for the fiscal years ended December 31, 2022, 2021 and 2020, respectively. 7 We measure the revenue growth from existing customers attributable to increased usage of our platform and features, and purchase of additional products and services with our Dollar-Based Net Expansion Rate ("DBNER"), Net Retention Rate ("NRR") and Last-Twelve Months Net Retention Rate ("LTM NRR") metrics.
We continue to invest in our business and had a net loss of $133.1 million, $190.8 million and $222.7 million for the fiscal years ended December 31, 2023, 2022 and 2021, respectively. 7 We measure the revenue growth from existing customers attributable to increased usage of our platform and features, and purchase of additional products and services with our Dollar-Based Net Expansion Rate ("DBNER"), Net Retention Rate ("NRR") and Last-Twelve Months Net Retention Rate ("LTM NRR") metrics.
Examples include: DataDog, Looker, SumoLogic, Logentries, Google Cloud, Microsoft, and more. • Compute: We work with a growing ecosystem of partners who are tapping into our powerful Compute@Edge serverless technology to extend their solutions across a variety of different use-cases. • Media & Entertainment: We have partnerships across a number of technology providers in the media & entertainment industry to use our enhanced performance features, modern security offerings, and real-time metrics.
Examples include: DataDog, Looker (Google Cloud), SumoLogic, Logentries, Google Cloud Platform, Microsoft (Azure Blob Storage), and more. • Compute: We work with a growing ecosystem of partners who are tapping into our powerful Compute serverless technology to extend their solutions across a variety of different use-cases. • Media & Entertainment: We have partnerships across a number of technology providers in the media & entertainment industry to enhance our edge platform’s performance features, modern security offerings, and real-time metrics.
We operate between and complement the "big 3" origin cloud platforms, Amazon Web Services ("AWS"), Microsoft (Azure), and Google Cloud Platform, and a growing community of companies that provide big data, machine learning, and security solutions. In this sense, we act as the unifying layer for a growing number of cloud services.
We operate between and complement the “big 3” origin cloud platforms, Amazon Web Services (“AWS”), Microsoft (Azure), and Google Cloud Platform, and a growing community of companies that provide big data, machine learning, and security solutions. In this sense, we act as the unifying layer for a growing number of cloud services.
Our product managers regularly engage with customers and developers, DevOps and site reliability engineering communities, as well as our internal stakeholders and subject matter experts, in order to understand customer needs. Our engineering team is comprised of experts with deep experience who intimately understand customers’ technical challenges and build solutions accordingly.
Our product managers regularly engage with customers and developers, DevOps and site reliability engineering communities, as well as our internal stakeholders and subject 20 matter experts, in order to understand customer needs. Our engineering team includes experts with deep experience who intimately understand customers’ technical challenges and build solutions accordingly.
And because big ideas often start small, we love it when developers experiment and iterate on our platform, coming up with exciting new ways to solve today’s complex problems. For the fiscal years ended December 31, 2022, 2021 and 2020, our revenue was $432.7 million, $354.3 million, and $290.9 million, respectively.
And because big ideas often start small, we love it when developers experiment and iterate on our platform, coming up with exciting new ways to solve today’s complex problems. For the fiscal years ended December 31, 2023, 2022 and 2021, our revenue was $506.0 million, $432.7 million, and $354.3 million, respectively.
Resellers work with Fastly’s sales and presales teams to scale sales cycle support. This helps expand our worldwide network of partners dedicated to protecting and delivering customers’ content. We have recently expanded the reach and breadth of these partners to include cross-selling delivery and security products to 15 increase our program’s global expansion.
Resellers work with Fastly’s sales and presales teams to scale sales cycle support. This helps expand our worldwide network of partners dedicated to protecting and delivering customers’ content. We have expanded the reach and breadth of these partners to include cross-selling delivery and security products.
Trust We uphold transparency and trustworthiness as company values. Our security, compliance and data governance teams, as well as other departments across the company, continually iterate on our trust programs to better meet growing customer needs, updated regulatory requirements, and the evolving security threat landscape.
Trust Our security, compliance and data governance teams, as well as other departments across the company, continually iterate on our trust programs to better meet growing customer needs, updated regulatory requirements, and the evolving security threat landscape.
Our solution monitors web application and API traffic for automated bot activity, allowing customers to automatically block malicious bot-generated web requests. 11 • API Protection. Attackers often target sensitive APIs, attempting to validate stolen credit cards, perform ecommerce gift card fraud or obtain patient healthcare records.
Our solution monitors web application and API traffic for automated bot activity, allowing customers to automatically block malicious bot-generated web requests, while providing access for wanted or verified bots. • API Protection. Attackers often target sensitive APIs, attempting to validate stolen credit cards, perform ecommerce gift card fraud or obtain patient healthcare records.
The edge cloud is an emerging category of Infrastructure as a Service ("IaaS") that enables developers to build, secure, and deliver digital experiences, at the edge of the Internet.
The edge cloud is a category of Infrastructure as a Service (“IaaS”) that enables developers to build, secure, and deliver digital experiences, at the edge of the Internet.
Whether customers are looking to move apps to the cloud or scale their DevOps practices, our Network Services provide the speed, security and engaging experiences that users demand. 9 Content Delivery Network • Dynamic Site Acceleration.
Whether customers are looking to deliver engaging web and streaming experiences to their users, move apps to the cloud or scale their DevOps practices, our Network Services provide the speed, security and flexibility needed. 9 Content Delivery Network • Dynamic Site Acceleration.
Our support model is global, with 24/7 coverage and support offices located in the United States, EMEA, and Japan. 19 Research & Development Our research and development team members are responsible for the design, development, and reliability of all aspects of our edge cloud platform.
Our support model is global, with 24/7 coverage and support offices located in North America, EMEA, and APAC. Research & Development Our research and development team members are responsible for the design, development, and reliability of all aspects of our edge cloud platform.
This service represents the convergence of the Content Delivery Network ("CDN") with functionality that has been traditionally delivered by hardware-centric appliances such as Application Delivery Controllers ("ADC"), Web Application Firewalls ("WAF"), Bot Detection, Distributed Denial of Service ("DDoS"), and observability solutions.
This service represents the convergence of the Content Delivery Network (“CDN”) with functionality that has been traditionally delivered by hardware-centric appliances such as Application Delivery Controllers (“ADC”), Web Application Firewalls (“WAF”), Bot Detection, Distributed Denial of Service (“DDoS”), and observability solutions.
This helps avoid difficult third party log management and debugging challenges. ◦ Tracing. For customers building apps with Compute@Edge, we tag individual end-user requests with unique identifiers and maintain request tracing parameters by tracking when users enter and exit our serverless platform. This feature allows developers to more easily track the performance of application functions post-deployment. • Developer Experience.
For customers building apps with Compute, we tag individual end-user requests with unique identifiers and maintain request tracing parameters by tracking when users enter and exit our serverless platform. This feature allows developers to more easily track the performance of application functions post-deployment. 13 • Developer Experience.
That allows us to retrieve the new content from the customer’s origin server only once, and then serve it to all end users who requested it. This approach reduces costs for our customers, while improving performance for their end users. • Instant Purge .
That allows us to retrieve the new content from the customer’s origin server only once, and then serve it to all end users who requested it. This approach reduces costs for our customers, while improving performance for their end users. • Instant Purge . Allows customers to clear the cached copy of their content globally in milliseconds, not seconds.
Customers can respond to attacks in real time, filtering malicious requests at the network edge, before they reach their origin. Compliance.
Customers can respond to attacks in real time, filtering and rate limiting malicious requests at the network edge, before they reach the customers' origin. Compliance.
Fastly launched Fast Forward: a set of programs designed to empower and support developers, open source projects, and nonprofits that share our vision of an internet that is free, open, and safe for all. As of November 2022, any eligible open source project can apply to receive free Fastly products.
Our Fast Forward program is designed to empower and support developers, open source projects, and nonprofits that share our vision of an internet that is free, open, and safe for all. Any eligible open source project can apply to receive free Fastly products.
Our differentiated high performance and low latency delivery network and edge compute platform, as well as enhanced security capabilities, allows us to serve the needs of our existing customers and continue to add customers from a diverse set of industries. • Expand existing customer relationships. Over time, our customers have expanded their use of our platform.
Our platform offers a broad range of capabilities. Our differentiated high performance and low-latency delivery network and edge compute platform, as well as enhanced security capabilities, allows us to serve the needs of our existing customers and continue to add customers from a diverse set of industries. • Expand existing customer relationships.
As of such date, we also had 23 issued patents and 12 patent applications pending for examination in foreign jurisdictions and 3 Patent Cooperation Treaty patent applications pending for examination, all of which are related to U.S. patents and patent applications.
As of such date, we also had 24 issued patents and 10 patent applications pending for examination in foreign jurisdictions and one Patent Cooperation Treaty patent application pending for examination, all of which are related to U.S. patents and patent applications.
Features and technologies that support the availability of customer content include origin health checks, a ‘grace mode’ feature that will continue serving content even when customer origin(s) fail, Multipath TCP, and real time error dashboards and API feeds that are backed by a 100% uptime Service Level Agreement ("SLA"). • Modern protocols and performance.
Support the availability of customer content with features including origin health checks, a ‘grace mode’ feature that will continue serving content even when customer origin(s) fail, Multipath TCP, and real time error dashboards and API feeds that are backed by a 100% uptime Service Level Agreement ( “ SLA”). • Fanout .
We segment the competitive landscape into six key categories: • Application and API security vendors like Akamai, AWS, Cloudflare, F5 and Imperva; • CDN providers, which now offer serverless edge compute functionality like Akamai (Linode), AWS, and Cloudflare; • Cloud hosting providers that have added CDN & WAF capabilities like Alphabet (Google Cloud Platform), AWS, and Microsoft (Azure); • Legacy CDNs like Akamai, Edgio, and Lumen; • Niche CDN players like Section.io and StackPath; and 16 • Traditional on-premise, data center appliance vendors for load balancing, WAF, and DDoS like Citrix, F5, Imperva, and Radware.
We segment the competitive landscape into six key categories: • Legacy CDNs like Akamai and Edgio; • Application and API security vendors like Akamai, AWS, Cloudflare, F5, and Thales (Imperva); • Point CDN players like Bunny CDN, CDNetworks, and CDN77; • CDN providers, which now offer serverless edge compute functionality like Akamai (Linode), and Cloudflare; • Cloud hosting providers (or public cloud providers) that have added CDN & WAF capabilities like AWS, Google Cloud Platform, and Microsoft (Azure); and • Traditional on-premise, data center appliance vendors for load balancing, WAF, and DDoS like F5, Thales (Imperva), NetScaler, and Radware.
As of December 31, 2022, in the United States, we had 91 issued or allowed patents, which expire between August 2033 and February 2041, 33 patent applications pending for examination, as well as 3 pending provisional applications.
As of December 31, 2023, in the United States, we had 103 issued or allowed patents, which expire between August 2033 and February 2042, and 19 patent applications pending for examination.
We also facilitate testing on our platform with rapid global deploy times and live logs, in addition to debugging. • Glitch. In order to expand our product offerings to more developers, we acquired Glitch, Inc. (“Glitch”) in May of 2022. Glitch is a popular tool for web-based development with over 2M registered developers as of December 31, 2022.
We also facilitate testing on our platform with rapid global deploy times and live logs, in addition to debugging. • Glitch. In order to expand our product offerings to more developers, we acquired Glitch, Inc. (“Glitch”) in May of 2022.
Helps our customers, and the Internet in general, receive the best possible performance regardless of user device, connectivity or location though supporting the development of next generation web technologies and protocols such as HTTP/3, QUIC, client hints and HTTP prioritization. Video / Streaming • Live Streaming. Delivers millions of concurrent high-quality live streams.
Helps our customers, and the Internet in general, receive the best possible performance regardless of user device, connectivity or location though supporting the development of next generation web technologies and protocols such as HTTP/3, QUIC, client hints and HTTP prioritization. 10 • Privacy . Fastly offers several privacy enablement capabilities.
In addition, as of December 31, 2022, we had 17 registered trademarks and 2 pending trademarks in the United States.
In addition, as of December 31, 2023, we had 19 registered trademarks and one pending trademark in the United States.
As of December 31, 2022, we had 374 employees in our research and development group. Our research and development expenses were $155.3 million in the year ended December 31, 2022.
As of December 31, 2023, we had 422 employees in our research and development group. Our research and development expenses were $152.2 million for the year ended December 31, 2023.
Reduces the load on origin servers and accelerates time-to-first-frame by caching and rapidly delivering Video on Demand content. Our on-the-fly-packaging feature optimizes streaming media on demand and facilitates immediate playback, thus enhancing viewer experiences across regions, devices, and platforms. 10 • Media Shield. Large streaming customers typically use multiple CDNs for media delivery for redundancy and protection.
Our on-the-fly-packaging feature optimizes streaming media on demand and facilitates immediate playback, thus enhancing viewer experiences across regions, devices, and platforms. • Media Shield. Large streaming customers typically use multiple CDNs for media delivery for redundancy and protection.
We plan to continue to invest in application security with the goal of making it easier for developers to seamlessly protect their apps and APIs wherever they are without impacting performance. • Expansion into additional vertical markets. Our platform offers a broad range of capabilities.
This enables us to protect customers’ applications and APIs on premise, in the cloud and on the edge. We plan to continue to invest in application security with the goal of making it easier for developers to seamlessly protect their apps and APIs wherever they are without impacting performance. 15 • Expansion into additional vertical markets.
In more technically savvy organizations, developers have championed our solution, paving the way for us to engage with business decision makers. For more traditional organizations, we are often brought in to initially help facilitate a move to the cloud and from there we extend our product to support many other use cases.
For more traditional organizations, we are often brought in to initially help facilitate a move to the cloud and from there we extend our product to support many other use cases.
All of our product lines have been built on top of this single, programmable platform, and therefore they all benefit from the same granular control, real-time visibility, and immediate scalability. 8 As developers gained awareness of the power of our programmable platform, they have tapped into it to build complex performance-based use cases on top of it, from paywall authentication at the edge to A/B testing and edge redirects.
As developers gained awareness of the power of our programmable platform, they have tapped into it to build complex performance-based use cases on top of it, from paywall authentication at the edge to A/B testing and edge redirects.
As a result, our customers have been able to enhance end user experiences by speeding up software and feature releases, without their CDN getting in the way. For example, we have seen customers release new code to production multiple times a day instead of once a month.
As a result, our customers have been able to enhance end user experiences by speeding up software and feature releases, without their CDN getting in the way.
They can account for every domain request, byte, and status code or quickly determine edge or origin issues with our combined edge and aggregated origin metrics, all without needing to send log data to a third-party data collector. Services Professional Services. Fastly offers the following professional services: • Network Services.
They can account for every domain request, byte, and status code or quickly determine edge or origin issues with our combined edge and aggregated origin metrics, all without needing to send log data to a third-party data collector. • Edge Observer : Provides per-second visibility and historical reporting on the performance and activity of multiple Fastly services in a single pane of glass.
Our Platform TLS offering is designed to allow customers with multiple web properties to manage TLS certificates at scale, while enabling a fast, secure experience for their end-users. It supports delivery and management of hundreds of thousands of certificates, supported by our worldwide TLS termination and acceleration solution. Origin Connect • Origin Connect.
Our Platform TLS offering is designed to allow customers with multiple web properties to manage TLS certificates at scale, while enabling a fast, secure experience for their end-users.
We have made significant investments in this area by adding additional channel sales and marketing resources, enhancing our pricing and packaging offerings, and building an enhanced partner program to offer partners even more benefits. In 2022, we announced a strategic partnership with HUMAN Security, Inc.
We have made significant investments in this area by adding additional channel sales and marketing resources, technical training and enablement, a new partner portal, enhanced pricing and packaging offerings, and an elevated partner program to offer partners even more benefits. Cloud Partners .
Here are some examples of our integration partners: • Security: Our Next-Gen WAF seamlessly integrates with third-party tools to help customers enhance their workflows, empower DevOps processes, increase their security visibility, and drive operational efficiencies.
These partners help expand our reach into new markets by offering customers a solution that seamlessly integrates with their existing technology stack making our technology even stickier. Here are some examples: • Security: Our Next-Gen WAF seamlessly integrates with third-party tools to help customers enhance their workflows, empower DevOps processes, increase their security visibility, and drive operational efficiencies.
Employees As of December 31, 2022, we had a total of 1,112 employees worldwide and 230 employees located outside of the United States; 44% of our employees resided within 50 miles of a Fastly office and 56% of o ur employees worldwide were considered remote, which means they resided more than 50 miles from a Fastly office or in locations where we do not have a Fastly office presence.
We also use employee engagement surveys to collect employee feedback and assess the effectiveness of our culture, our strategy, and various health and well-being programs. 19 Employees As of December 31, 2023, we had a total of 1,207 employees worldwide and 250 employees located outside of the United States; 46% of our employees resided within 50 miles of a Fastly office and 54% of o ur employees worldwide were considered remote, which means they resided more than 50 miles from a Fastly office or in locations where we do not have a Fastly office presence.
We have located these POPs near major cloud providers and peered with Internet exchange points around the world, so that we can deliver content as close to end users as possible. Because our POPs are powerful and well-connected to the Internet, we are able to operate fewer units and still achieve optimal performance relative to traditional POPs. • Software-defined network.
We have located these POPs near major cloud providers and peered with Internet exchange points around the world, so that we can deliver content as close to end users as possible.
Config Store supports this by allowing them to store multiple common code configurations at the edge, which they can then deploy instantly, instead of having to push new code for every single configuration change. • Visibility.
Config Store supports this by allowing them to store multiple common code configurations at the edge, which they can then deploy instantly, instead of having to push new code for every single configuration change. ◦ Secret Store: Secret Store is a secure and performant storage system for Compute customers' most sensitive data like API keys, passwords, certificates, and other credentials.
Provides direct programmatic control of edge delivery services to our customers via VCL, allowing them to precisely control what content is cached, for how long and when it should be refreshed.
For example, they could purge any images and content related to discontinued sale items, discounted products, or outdated news across their site all at once. • Programmatic Control. Provides direct programmatic control of edge delivery services to our customers via VCL, allowing them to precisely control what content is cached, for how long and when it should be refreshed.
They can report on egress data within the Fastly web interface with interactive dashboards. Customers can also verify the success of their Fastly services, especially with shielding or multi-CDN environments. • Domain Inspector. Customers can easily monitor traffic for a single fully qualified domain name or multiple domains within a Fastly service.
Customers can simplify their data pipeline and easily monitor every origin response, byte, status code, and more without needing a third party data collector. They can report on egress data within the Fastly web interface with interactive dashboards. Customers can also verify the success of their Fastly services, especially with shielding or multi-CDN environments. • Domain Inspector.
We are now working on integrating Compute@Edge with Glitch’s easy-to-use interface, so Glitch’s community of developers can seamlessly deploy code to Fastly’s serverless compute environment. • Open Source Support.
Glitch is a popular tool for web-based development with a total lifetime user count of over 2.6M registered developers as of December, 2023. We are now working on integrating Compute with Glitch’s easy-to-use interface, so Glitch’s community of developers can seamlessly deploy code to Fastly’s serverless compute environment. • Open Source Support.
Key features of Compute@Edge include: • Language support. Compute@Edge works with any WASM-supported languages, including JavaScript, Rust, Go, Ruby and more. Customers also have the ability to create their own language Software Development Kits.
Compute also exposes the power of Fastly’s global infrastructure via a set of powerful developer API’s for fine grained programmatic control (e.g. Cache API’s). • Language support. Compute works with any WASM-supported languages, including JavaScript, Rust, Go, Ruby and more. Customers also have the ability to create their own language Software Development Kits.
Distributed systems can be complex, but regardless of a customer’s skill level, Fastly technical experts are available to guide and optimize the customer's cloud strategy. We offer various levels of engagements, from a light helping hand, to acting as an extension of developer teams, with global support and flexible professional services hours. • Security.
We offer various levels of engagements, from a light helping hand, to acting as an extension of developer teams, with global support and flexible professional services hours. • Managed Security Service.
Rapidly changing content like shopping cart items, flight search results, sports scores, or current weather conditions in any given location can all be served faster from the network edge. • Surrogate Keys. Allows customers to fine-tune purging by tagging related objects across their site with a key name and description, then purging by that key.
This feature enables our customers to serve highly dynamic content at the edge more quickly and allows for delightful application experiences. Rapidly changing content like shopping cart items, flight search results, sports scores, or current weather conditions in any given location can all be served faster from the network edge. • Surrogate Keys.
We will simplify customer onboarding and service usage, through easy access to self-training information from within the Fastly app, and more code samples and support.
We will simplify customer onboarding and service usage, through easy access to self-training information from within the Fastly app, and more code samples and support. In 2023, we simplified our pricing and packaging in order to make it easier for customers to buy and renew our services. We launched our Next-Gen WAF in Q1 of 2022.
It can deliver online content using major HTTP streaming formats while providing real-time feedback to optimize viewer experiences. In addition, we partner with multiple video platform vendors to improve the flexibility and scale of live-streaming workflows and reduce the total cost of ownership. • Video on Demand.
In addition, we partner with multiple video platform vendors to improve the flexibility and scale of live-streaming workflows and reduce the total cost of ownership. • Video on Demand. Reduces the load on origin servers and accelerates time-to-first-frame by caching and rapidly delivering Video on Demand content.
In addition to real-time logs and metrics, which all our products benefit from, Compute@Edge also features log tailing and tracing to improve developer visibility. ◦ Log Tailing. We give customers visibility into log messages from their applications so they can quickly identify bugs all within their terminal of choice with Fastly Command Line Interface.
We give customers visibility into log messages from their applications so they can quickly identify bugs all within their terminal of choice with Fastly Command Line Interface. This helps avoid difficult third party log management and debugging challenges. ◦ Tracing.
Lets customers clear the cached copy of their content globally in an average of 150 milliseconds or less. We allow customers to send a command to our platform that invalidates an old version of their content throughout our global edge infrastructure.
We allow customers to send a command to our platform that invalidates an old version of their content throughout our global edge infrastructure. This causes a new version of content to be retrieved from the application server the next time it is requested.
We have built a smarter network using fast switches and routing intelligence at the server layer. This has allowed us to provide real-time responses by ensuring our customers’ traffic is routed in the most optimal manner on our network. • Fully programmable.
This has allowed us to provide real-time responses by ensuring our customers’ traffic is routed in the most optimal manner on our network. • Network Resilience . Our network is built to withstand common performance degradation or connectivity issues with internet transit providers. With fast path failover we automatically detect and re-route underperforming edge connections at the transport layer.
They can purge their entire site of a given object or set of objects at once, without impacting performance. For example, they could purge any images and content related to discontinued sale items, discounted products, or outdated news across their site all at once. • Programmatic Control.
Allows customers to fine-tune purging by tagging related objects across their site with a key name and description, then purging by that key. They can purge their entire site of a given object or set of objects at once, without impacting performance.
Our land and expand sales strategy for enterprise customers has successfully demonstrated our platform’s capabilities, and our customer support enables broad adoption of our technology within an organization. The majority of our revenue is derived from customers who enter into negotiated contracts with us. These contracts typically include specific pricing and a minimum monthly commitment.
Our land and expand sales strategy for enterprise customers has successfully demonstrated our platform’s capabilities, and our customer support enables broad adoption of our technology within an organization. Customer Support We have designed our products and platform to be self-service and require minimal customer support.
Examples include: VMware (Tanzu), Palo Alto Networks, Cisco, Datadog, Citrix, PagerDuty, Okta, and more. • Logging & Analytics: Our real-time logging feature integrates with more than 30 logging endpoint partners to allow customers to customize and visualize their edge data for better monitoring of performance and security anomalies.
The A10-Fastly partnership gives us access to new customers, many of whom use their own data centers, have less of a public cloud footprint, and are located in different geographic areas than Fastly's traditional customer base. • Logging & Analytics: Our real-time logging feature integrates with more than 20 logging endpoint partners to allow customers to customize and visualize their edge data for better monitoring of performance and security anomalies.
Removed
This causes a new version of content to be retrieved from the application server the next time it is requested. This feature enables our customers to serve highly dynamic content at the edge more quickly and allows for delightful application experiences.
Added
Because our POPs are powerful and well-connected to the Internet, we are able to operate fewer of them and still achieve optimal performance relative to traditional POPs. • Software-defined network. We have built a smarter network using fast switches and routing intelligence at the server layer.
Removed
This helps developers innovate faster and unlocks more latency-sensitive use cases at the edge. ◦ Device Detection and Geolocation. App developers can access data on end-user devices being used to interact with their apps and the location of these devices.
Added
Precision Path detects underperforming origin connections and automatically reroutes the connection to the best alternative in real-time. AutoPilot is an automated egress traffic engineering solution which enables us to reliably deliver high traffic events without manual intervention. • Fully programmable.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny failure or perceived failure by us or third parties upon whom we rely to comply with obligations, relating to privacy and data security may result in significant consequences including but not limited to governmental investigations and enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar), litigation (including class-action claims), additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy or not use personal information. 46 Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations; inability to process personal information or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
Biggest changeAny failure or perceived failure by us or third parties upon whom we rely to comply with obligations, relating to privacy and data security may result in significant consequences including but not limited to governmental investigations and enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar), litigation (including class-action claims), additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy or not use personal information.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Class A common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; 57 • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of the holders of a majority of our outstanding shares of common stock; and • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Class A common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of the holders of a majority of our outstanding shares of common stock; and • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.
Specifically, the following issues, among others, must be addressed in combining any company’s operations with ours in order to realize the anticipated benefits of the acquisition so the combined company performs as the parties hope: • combining the companies’ corporate functions; • combining their business with our business in a manner that permits us to achieve the synergies anticipated to result from the acquisition, the failure of which would result in the anticipated benefits of the acquisition not being realized in the time frame currently anticipated or at all; • maintaining existing and new agreements with customers, service providers, and vendors; • determining whether and how to address possible differences in corporate cultures, management philosophies and strategies relating to channels, resellers, and partners; • integrating the companies’ administrative and information technology infrastructure; • developing products and technology that allow value to be unlocked in the future; and • evaluating and forecasting the financial impact of the acquisition transaction, including accounting impacts.
Specifically, the following issues, among others, must be addressed in combining any company’s operations with ours in order to realize the anticipated benefits of the acquisition so the combined company performs as the parties hope: 31 • combining the companies’ corporate functions; • combining their business with our business in a manner that permits us to achieve the synergies anticipated to result from the acquisition, the failure of which would result in the anticipated benefits of the acquisition not being realized in the time frame currently anticipated or at all; • maintaining existing and new agreements with customers, service providers, and vendors; • determining whether and how to address possible differences in corporate cultures, management philosophies and strategies relating to channels, resellers, and partners; • integrating the companies’ administrative and information technology infrastructure; • developing products and technology that allow value to be unlocked in the future; and • evaluating and forecasting the financial impact of the acquisition transaction, including accounting impacts.
Our effective tax rate could be adversely impacted by several factors, including: • Changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • Changes in tax laws, tax treaties, and regulations or the interpretation of them; • Changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • The outcome of current and future tax audits, examinations, or administrative appeals; and • Limitations or adverse findings regarding our ability to do business in some jurisdictions.
Our effective tax rate could be adversely impacted by several factors, including: 50 • Changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • Changes in tax laws, tax treaties, and regulations or the interpretation of them; • Changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • The outcome of current and future tax audits, examinations, or administrative appeals; and • Limitations or adverse findings regarding our ability to do business in some jurisdictions.
Additional factors that may influence the length and variability of our sales cycle include: • the effectiveness of our sales force, particularly new salespeople and sales leadership, as we increase the size of our sales force and train our new salespeople to sell to enterprise customers; • the discretionary nature of customers’ purchasing decisions and budget cycles; • customers’ procurement processes, including their evaluation of competing products; • economic conditions and other factors affecting customer budgets; • the regulatory environment in which our customers operate; • integration complexity for a customer deployment; • the customer’s familiarity with edge cloud computing platforms; 35 • evolving customer demands; • selling new products to enterprise customers; and • competitive conditions.
Additional factors that may influence the length and variability of our sales cycle include: • the effectiveness of our sales force, particularly new salespeople and sales leadership, as we increase the size of our sales force and train our new salespeople to sell to enterprise customers; • the discretionary nature of customers’ purchasing decisions and budget cycles; • customers’ procurement processes, including their evaluation of competing products; • economic conditions and other factors affecting customer budgets; • the regulatory environment in which our customers operate; • integration complexity for a customer deployment; • the customer’s familiarity with edge cloud computing platforms; • evolving customer demands; • selling new products to enterprise customers; and • competitive conditions.
Our new products or enhancements and changes to our existing products could fail to attain sufficient market acceptance for many reasons, including: • failure to predict market demand accurately in terms of functionality and a failure to supply products that meet this demand in a timely fashion; • defects, errors, or failures; • negative publicity about our platform’s performance or effectiveness; • changes in the legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our platform; • emergence of a competitor that achieves market acceptance before we do; • delays in releasing enhancements to our platform to the market; and • introduction or anticipated introduction of competing products by our competitors.
Our new products or enhancements and changes to our existing products could fail to attain sufficient market acceptance for many reasons, including: • failure to predict market demand accurately in terms of functionality and a failure to supply products that meet this demand in a timely fashion; 37 • defects, errors, or failures; • negative publicity about our platform’s performance or effectiveness; • changes in the legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our platform; • emergence of a competitor that achieves market acceptance before we do; • delays in releasing enhancements to our platform to the market; and • introduction or anticipated introduction of competing products by our competitors.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the amount of revenue and 42 expenses that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the amount of revenue and expenses that are not readily apparent from other sources.
While the 58 Delaware courts have determined that such choice of forum provisions are facially valid, and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions.
While the Delaware courts have determined that such choice of forum provisions are facially valid, and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions.
If new technologies emerge that enable large internet platform companies to utilize their own data centers and implement delivery approaches that limit or eliminate reliance on third-party providers like us, or that enable our competitors to deliver competitive products and applications at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete.
If new technologies emerge that enable large Internet platform 28 companies to utilize their own data centers and implement delivery approaches that limit or eliminate reliance on third-party providers like us, or that enable our competitors to deliver competitive products and applications at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete.
Investors should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Annual Report on Form 10-K, including the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes, before deciding to invest in our Class A common stock.
Investors should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Annual Report on Form 10-K, including the section titled “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” and our consolidated financial statements and related notes, before deciding to invest in our Class A common stock.
For example, certain members of our management team and other personnel spent significant time on the acquisition and integration of Signal Sciences. 30 We have previously been and may in the future be involved in class-action lawsuits and other litigation matters that are expensive and time-consuming. If resolved adversely, lawsuits and other litigation matters could seriously harm our business.
For example, certain members of our management team and other personnel spent significant time on the acquisition and integration of Signal Sciences. We have previously been and may in the future be involved in class-action lawsuits and other litigation matters that are expensive and time-consuming. If resolved adversely, lawsuits and other litigation matters could seriously harm our business.
The EU GDPR also provides for private litigation related to the processing of personal information, which can be brought by classes of data subjects or consumer protection organizations authorized by law to represent the interests of such classes. European legislative proposals and existing laws and regulations also apply to cookies and similar tracking technologies, electronic communications, and marketing.
The GDPR also provides for private litigation related to the processing of personal information, which can be brought by classes of data subjects or consumer protection organizations authorized by law to represent the interests of such classes. European legislative proposals and existing laws and regulations also apply to cookies and similar tracking technologies, electronic communications, and marketing.
We cannot be sure that the expansion and improvements to our cloud infrastructure will be effectively implemented on a timely basis, if at all, and such failures would harm our business. We may have insufficient transmission bandwidth and colocation space, which could result in disruptions to our platform and loss of revenue.
We cannot be sure that the expansion and improvements to our cloud infrastructure will be effectively implemented on a timely basis, if at all, and such failures would harm our business. 32 We may have insufficient transmission bandwidth and colocation space, which could result in disruptions to our platform and loss of revenue.
Any service level failures could harm our business. If we fail to offer high quality support, our business may be harmed. Our customers rely on our support team to assist them in deploying our products effectively and resolve technical and operational issues. High-quality support is important for the renewal and expansion of our agreements with existing customers.
Any service level failures could harm our business. 38 If we fail to offer high quality support, our business may be harmed. Our customers rely on our support team to assist them in deploying our products effectively and resolve technical and operational issues. High-quality support is important for the renewal and expansion of our agreements with existing customers.
The variables that go into the calculation of our market 32 opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of addressable companies or end-users covered by our market opportunity estimates will purchase our products at all or generate any particular level of revenues for us.
The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of addressable companies or end-users covered by our market opportunity estimates will purchase our products at all or generate any particular level of revenues for us.
The length of our sales cycle for these customers, from initial evaluation to payment, can range from several months to well over a year and can vary substantially from customer to customer. Similarly, the onboarding and ramping process with new enterprise customers, or with existing customers that are moving additional traffic onto our platform, can take several months.
The length of our sales cycle for these customers, from initial evaluation to payment, can range from several months to well over a year and can vary substantially from customer to customer. Similarly, the onboarding and ramping process with new enterprise customers, or with existing customers that are 36 moving additional traffic onto our platform, can take several months.
During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable 25 to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell, and distribute our services.
During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell, and distribute our services.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized , unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized , unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access 27 to our sensitive information or our information technology systems, or those of the third parties upon whom we rely.
We believe that there is significant competition for sales personnel, including sales representatives, sales managers, and sales engineers, with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training, incentivizing, and retaining sufficient numbers of sales personnel to support our growth.
We believe that there is significant competition for sales personnel, including sales representatives, sales managers, and sales engineers, with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training, incentivizing, and retaining sufficient numbers of sales personnel to 29 support our growth.
Such actions could limit or reduce the quality of internet access services and have an adverse impact on the quality of the services we provide to our customers. 47 We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.
Such actions could limit or reduce the quality of Internet access services and have an adverse impact on the quality of the services we provide to our customers. We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.
In particular, the European Economic Area (“EEA”) and the United Kingdom (“UK”) have significantly restricted the transfer of personal information to the United States and other countries whose privacy and data security laws are believed to be inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border personal information transfer laws.
In particular, the European Economic Area (“EEA”) and the United Kingdom (“UK”) have significantly restricted the transfer of personal information to the United States and other countries whose privacy and data security laws are generally believed to be inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border personal information transfer laws.
Any decreased use of our products or limitation on our ability to export or sell our products would harm our business. 50 We are exposed to fluctuations in currency exchange rates. Our sales contracts are primarily denominated in U.S. dollars, and therefore a majority of our revenue is not subject to foreign currency revaluation.
Any decreased use of our products or limitation on our ability to export or sell our products would harm our business. We are exposed to fluctuations in currency exchange rates. Our sales contracts are primarily denominated in U.S. dollars, and therefore a majority of our revenue is not subject to foreign currency revaluation.
Any inability to license third-party technology in the 52 future would have an adverse effect on our business and operating results, and would adversely affect our ability to compete. We may also be contractually obligated to indemnify our customers in the event of infringement of a third party’s intellectual property rights.
Any inability to license third-party technology in the future would have an adverse effect on our business and operating results, and would adversely affect our ability to compete. We may also be contractually obligated to indemnify our customers in the event of infringement of a third party’s intellectual property rights.
We take steps to detect and remediate vulnerabilities, but we may not be able to detect and 26 remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.
We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.
These developers often make design decisions and influence the product and vendor processes within our customers. If we fail to gain or maintain their acceptance of our platform, our business would be harmed. 36 We rely on third-party hosting providers that may be difficult to replace.
These developers often make design decisions and influence the product and vendor processes within our customers. If we fail to gain or maintain their acceptance of our platform, our business would be harmed. We rely on third-party hosting providers that may be difficult to replace.
Any debt financing we secure may have higher interest rates and could involve additional restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, 40 including potential acquisitions.
Any debt financing we secure may have higher interest rates and could involve additional restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
We may also be bound by contractual obligations related to privacy and data security, and our efforts to comply with such obligations may not be successful. For example, certain privacy and data security laws, such as the EU GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers.
We may also be bound by contractual obligations related to privacy and data security, and our efforts to comply with such obligations may not be successful. For example, certain privacy and data security laws, such as the EU GDPR and the CCPA, require our customers 47 to impose specific contractual restrictions on their service providers.
Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our Class A common stock to decline. Certain provisions in the indenture governing the Notes may make it more difficult or expensive for a third party to acquire us.
Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our Class A common stock to decline. 60 Certain provisions in the indenture governing the Notes may make it more difficult or expensive for a third party to acquire us.
Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable products that continue to meet the needs of 29 our customers at competitive prices, our ability to maintain our customers’ trust, our ability to continue to develop new functionality and products, and our ability to successfully differentiate our platform from competitive products and services.
Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable products that continue to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to continue to develop new functionality and products, and our ability to successfully differentiate our platform from competitive products and services.
Our current and future international business and operations involve a variety of risks, including: • changes in a specific country’s or region’s political or economic conditions; • longer payment cycles; • greater difficulty collecting accounts receivable; • potential or unexpected changes in trade relations, regulations, or laws; • increased regulatory inquiry or oversight; • more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe; • differing labor regulations, especially in Europe and Japan, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these 41 locations, and where potential labor organizing and works council negotiations in certain of those countries could contribute to increased operational costs or otherwise disrupt our business; • challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs; • challenges to our corporate culture resulting from a dispersed workforce; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future; • challenges related to providing support and developing products in foreign languages; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • potential tariffs and trade barriers; • limited or insufficient intellectual property protection or difficulties enforcing our intellectual property rights; • political instability, economic sanctions, terrorist activities, or international conflicts, including the ongoing conflict between Russia and Ukraine, which may impact the operations of our business or the businesses of our customers; • inflationary pressures, such as those the global market is currently experiencing, labor shortages and supply chain disruptions, which may increase costs for certain services; • exposure to liabilities under anti-corruption and anti-money laundering laws, and similar laws and regulations in other jurisdictions; and • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
Our current and future international business and operations involve a variety of risks, including: • changes in a specific country’s or region’s political or economic conditions; 42 • longer payment cycles; • greater difficulty collecting accounts receivable; • potential or unexpected changes in trade relations, regulations, or laws; • increased regulatory inquiry or oversight; • more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe; • differing labor regulations, especially in Europe and Japan, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations, and where potential labor organizing and works council negotiations in certain of those countries could contribute to increased operational costs or otherwise disrupt our business; • challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs; • challenges to our corporate culture resulting from a dispersed workforce; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future; • challenges related to providing support and developing products in foreign languages; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • potential tariffs and trade barriers; • limited or insufficient intellectual property protection or difficulties enforcing our intellectual property rights; • political instability, economic sanctions, terrorist activities, or international conflicts, including ongoing conflicts between Russia and Ukraine and Hamas and Israel, which may impact the operations of our business or the businesses of our customers; • inflationary pressures, such as those the global market is currently experiencing, labor shortages and supply chain disruptions, which may increase costs for certain services; • exposure to liabilities under anti-corruption and anti-money laundering laws, and similar laws and regulations in other jurisdictions; and 43 • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
The occurrence of any defects, errors, disruptions in service, failures involving redundant data centers, or other performance problems, interruptions, or delays with our platform, whether in connection with the day-to-day operations or otherwise, could result in: 22 • loss of customers; • reduced customer usage of our platforms; • lost or delayed market acceptance and sales of our products, or the failure to launch products or features on anticipated timelines; • delays in payment to us by our customers; • injury to our reputation and brand; • governmental inquiry or oversight; • legal claims, including warranty and service level agreement claims, against us; or • diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
The occurrence of any defects, errors, disruptions in service, failures involving redundant data centers, or other performance problems, interruptions, or delays with our platform, whether in connection with the day-to-day operations or otherwise, could result in: 23 • loss of customers; • reduced customer usage of our platforms; • lost or delayed market acceptance and sales of our products, or the failure to launch products or features on anticipated timelines; • delays in payment to us by our customers; • injury to our reputation and brand; • governmental inquiry or oversight; • legal claims, including warranty and service level agreement claims, against us; or • diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
Any governmental or regulatory action that restricts the ability of investors in, or potential purchasers of, the Notes to effect short sales of our Class A common stock, borrow our Class A 55 common stock or enter into swaps on our Class A common stock could adversely affect the trading price and the liquidity of the Notes.
Any governmental or regulatory action that restricts the ability of investors in, or potential purchasers of, the Notes to effect short sales of our Class A common stock, borrow our Class A common stock or enter into swaps on our Class A common stock could adversely affect the trading price and the liquidity of the Notes.
Such changes in our executive management team may be disruptive to our business. 38 Some of our executive officers and members of our management team have been with us for a short period of time and we continue to develop key functions within various aspects of our business.
Such changes in our executive management team may be disruptive to our business. Some of our executive officers and members of our management team have been with us for a short period of time and we continue to develop key functions within various aspects of our business.
We continue to evaluate and take actions to improve our internal control over financial reporting. However, we cannot assure you that the measures we have taken to date will be sufficient to avoid the identification of material weaknesses in the future.
We continue to evaluate and take actions to improve our internal control over financial reporting. However, we 44 cannot assure you that the measures we have taken to date will be sufficient to avoid the identification of material weaknesses in the future.
Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including threat actors, “hacktivists,” personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
Such threats are prevalent and continue to rise, are difficult to detect, and come from a variety of sources, including threat actors, “hacktivists,” personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our Class A common stock could depress the price of our Class A common stock.
In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the 57 Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our Class A common stock could depress the price of our Class A common stock.
In addition to the other risks described herein, factors that may affect our operating results include the following: • fluctuations in demand for or pricing of our platform; • our ability to attract new customers; • our ability to retain our existing customers; • fluctuations in the usage of our platform by our customers, which is directly related to the amount of revenue that we recognize from our customers; 33 • fluctuations in customer delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors; • changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions; • the timing of customer payments and any difficulty in collecting accounts receivable from customers; • timing of new functionality of our existing platform; • our ability to control costs, including our operating expenses; • the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions; • the amount and timing of costs associated with recruiting, training, and integrating new employees; • the effects of acquisitions or other strategic transactions; • expenses in connection with acquisitions or other strategic transactions; • our ability to successfully deploy POPs in new regions; • general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; • the ability to maintain our partnerships; • the impact of new accounting pronouncements; • changes in the competitive dynamics of our market, including consolidation among competitors or customers; • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform; and • awareness of our brand and our reputation in our target markets.
In addition to the other risks described herein, factors that may affect our operating results include the following: • fluctuations in demand for or pricing of our platform; • our ability to attract new customers; • our ability to retain our existing customers; • fluctuations in the usage of our platform by our customers, which is directly related to the amount of revenue that we recognize from our customers; • fluctuations in customer delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors; • changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions; • the timing of customer payments and any difficulty in collecting accounts receivable from customers; • timing of new functionality of our existing platform; • our ability to control costs, including our operating expenses and transmission bandwidth pricing; • the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions; • the amount and timing of costs associated with recruiting, training, and integrating new employees; • the effects of acquisitions or other strategic transactions; • expenses in connection with acquisitions or other strategic transactions; • our ability to successfully deploy POPs in new regions; • general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; 35 • the ability to maintain our partnerships; • the impact of new accounting pronouncements; • changes in the competitive dynamics of our market, including consolidation among competitors or customers; • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform; and • awareness of our brand and our reputation in our target markets.
A detailed analysis was performed for the period March 1, 2014 to October 1, 2020 49 for Signal Sciences to determine whether an ownership change under Section 382 of the Code has occurred and an ownership change was identified in 2020.
A detailed analysis was performed for the period March 1, 2014 to October 1, 2020 for Signal Sciences to determine whether an ownership change under Section 382 of the Code has occurred and an ownership change was identified in 2020.
If we sell any such securities in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences, and privileges senior to those of holders of our Class A common stock.
If we sell 58 any such securities in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences, and privileges senior to those of holders of our Class A common stock.
We believe that our success has depended, and continues to depend, on the efforts and talents of senior management and key employees, including Artur Bergman, our Chief Architect and Executive Chairman and Todd Nightingale, our Chief Executive Officer.
We believe that our success has depended, and continues to depend, on the efforts and talents of senior management and key employees, including Artur Bergman, our Chief Architect and Todd Nightingale, our Chief Executive Officer.
The CCPA also allows for statutory fines for noncompliance (up to $7,500 per violation), as well as a private right of action for individuals affected by certain data breaches to recover significant statutory damages.
The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation), as well as a private right of action for individuals affected by certain data breaches to recover significant statutory damages.
If our stock price is lower than the conversion 54 price of the Notes on maturity, the holders of our Notes will likely not convert and we will have to repay those Notes in cash.
If our stock price is lower than the conversion price of the Notes on maturity, the holders of our Notes will likely not convert and we will have to repay those Notes in cash.
For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais or “LGPD”) (Law No. 13,709/2018), Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) and Canada’s Anti-Spam Legislation (“CASL”), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing the personal information of individuals.
For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), (collectively “GDPR”) Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais or “LGPD”) (Law No. 13,709/2018), Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) and Canada’s Anti-Spam Legislation (“CASL”), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing the personal information of individuals.
If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business. 59 Item 1B. Unresolved Staff Comments None.
If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business. 61 Item 1B. Unresolved Staff Comments None.
If the number of analysts that cover 56 us declines, demand for our Class A common stock could decrease and our Class A common stock price and trading volume may decline.
If the number of analysts that cover us declines, demand for our Class A common stock could decrease and our Class A common stock price and trading volume may decline.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines penalties, audits, and inspections); additional reporting requirements and/or oversight, restrictions on processing sensitive information (including personal data); litigation (including class action claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions or degradation of performance in our services (including availability of data); financial loss; and other similar harms.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines penalties, audits, and inspections); additional reporting requirements and/or oversight, restrictions on processing sensitive information (including personal data); litigation (including class action claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions or degradation of performance in our services (including availability of data); financial loss; and other similar harms.
Our Credit Agreement with SVB contains, and any future indebtedness would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to incur additional indebtedness, grant liens, pay dividends and make distributions, transfer property, make investments, and take other actions that may otherwise be in our best interests.
Our Credit Agreement contains, and any future indebtedness would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to incur additional indebtedness, grant liens, pay dividends and make distributions, transfer property, make investments, and take other actions that may otherwise be in our best interests.
Our net operating loss ("NOL") carryforwards could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under United States tax law. For U.S. federal income tax purposes, our NOLs generated in tax years beginning before January 1, 2018 are permitted to be carried forward for 20 years.
Our net operating loss (“NOL”) carryforwards could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under United States tax law. For U.S. federal income tax purposes, our NOLs generated in tax years beginning before January 1, 2018 are permitted to be carried forward for 20 years.
In addition, existing and potential customers have transitioned, and may in the future transition, off of our platform, or may limit their use, because they pursue a “do-it-yourself” approach to develop their own CDN by putting in place equipment, software, and other technology products for content and application delivery within their internal systems; enter into relationships directly with network providers instead of relying on an overlay network like ours; or implement multi-vendor policies to reduce reliance on external providers like us.
In addition, existing customers have transitioned or notified us of their intent to transition, and existing and potential customers may in the future transition, off of our platform, or may limit their use, because they pursue a “do-it-yourself” approach to develop their own CDN by putting in place equipment, software, and other technology products 30 for content and application delivery within their internal systems; enter into relationships directly with network providers instead of relying on an overlay network like ours; or implement multi-vendor policies to reduce reliance on external providers like us.
We rely on third-party hosting services such as Amazon Web Services ("AWS"), Google, Microsoft Azure, and other cloud providers that facilitate the offering of our platform. Some of these third-party hosting services offer competing products to ours and therefore may not continue to be available on commercially reasonable terms, or at all.
We rely on third-party hosting services such as AWS, Google Cloud Platform, Microsoft (Azure), and other cloud providers that facilitate the offering of our platform. Some of these third-party hosting services offer competing products to ours and therefore may not continue to be available on commercially reasonable terms, or at all.
Moreover, our global platform outage in June 2021 has increased our public profile and resulted in more frequent interest in our company by regulators. This outage, or any additional outages, may draw additional scrutiny or focused legislation from regulators. In addition, the United States or foreign jurisdictions may establish new laws or regulations regarding the internet or online services.
Moreover, our global platform outage in June 2021 increased our public profile and resulted in more frequent interest in our company by regulators. Any additional outages may draw additional scrutiny or focused legislation from regulators. In addition, the United States or foreign jurisdictions may establish new laws or regulations regarding the Internet or online services.
In addition, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, fines or penalties, and interest for past amounts. The additional tax obligations could relate to our taxes or obligations to report or withhold on customer taxes.
In addition, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, modified, or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, fines or penalties, and interest for past amounts. The additional tax obligations could relate to our taxes or obligations to report or withhold on 51 customer taxes.
Global economic conditions have impacted, and will likely continue to impact, businesses around the world, including ours. Inflation and other macroeconomic pressures in the U.S. and the global economy such as rising interest rates and recession fears are creating a complex and challenging environment for us and our customers.
Global economic conditions have impacted, and will likely continue to impact, businesses around the world, including ours. Inflation and other macroeconomic pressures in the U.S. and the global economy such as rising interest rates, banking instability and recession fears are creating a complex and challenging environment for us and our customers.
Our U.S. federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but for tax years beginning after December 31, 2020, our use of such federal NOLs generally is limited to 80% of such year's taxable income, computed without regard to the NOL deduction and certain other deductions.
Our U.S. federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but our use of such U.S. federal NOLs generally is limited to 80% of such year’s taxable income, computed without regard to the NOL deduction and certain other deductions.
We expect to continue to expend substantial financial and other resources on: • sales and marketing, including a significant expansion of our sales organization; • our infrastructure, including POP deployments, systems architecture, management tools, scalability, availability, performance, and security, as well as disaster recovery measures; 39 • product development, including investments in our product development team and the development of new products and new functionality for our existing products; • acquisitions or strategic investments; • international expansion; and • general administration, including increased legal and accounting expenses associated with being a public company.
We expect to continue to expend substantial financial and other resources on: 40 • sales and marketing, including a significant expansion of our sales organization; • our infrastructure, including POP deployments, systems architecture, management tools, scalability, availability, performance, and security, as well as disaster recovery measures; • product development, including investments in our product development team and the development of new products and new functionality for our existing products; • acquisitions or strategic investments; • international expansion; and • general administration, including legal and accounting expenses associated with being a public company.
Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. For example, we may issue approximately 7.3 million shares of our Class A common stock if the Notes convert, subject to customary anti-dilution adjustments.
Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. For example, we may issue approximately 3.4 million shares of our Class A common stock if the Notes convert, subject to customary anti-dilution adjustments.
We continue to adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect. As of December 31, 2022, approximately 21% of our full-time employees were located outside of the United States.
We continue to adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect. As of December 31, 2023, approximately 21% of our full-time employees were located outside of the United States.
These encryption products and the underlying technology may be exported outside of the United States only with the required export authorizations.
These encryption products and the underlying technology may be exported outside of the United States only with the required export 52 authorizations.
For example, we have experienced DDoS attacks of increased size and severity that caused us to invest resources into improving our systems, and we expect to continue to be subject to DDoS and other forms of attacks in the future, particularly as they have become more prevalent in our industry.
For example, we have experienced DDoS attacks of significant size and severity that caused us to invest resources into improving our systems, and we expect to continue to be subject to DDoS and other forms of attacks in the future, particularly as they have become more prevalent in our industry.
Legislation in 2017 informally titled the “Tax Act” significantly revised the Internal Revenue Code of 1986, as amended (the “Code”).
Legislation enacted in 2017 informally titled the “Tax Act” significantly revised the Internal Revenue Code of 1986, as amended (the “Code”).
The market price of our Class A common stock may continue to be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control or are related in complex ways, including: • actual or anticipated fluctuations in our financial condition and operating results; • decreased usage by one or more of our customers; 53 • variance in our financial performance from expectations of securities analysts or investors; • changes in the pricing we offer our customers; • changes in our projected operating and financial results; • changes in laws or regulations applicable to our platform or related products; • announcements by us or our competitors of significant business developments, acquisitions, or new offerings; • publicity associated with network outages and problems; • our involvement in litigation; • changes in senior management or key personnel; • the trading volume of our Class A common stock; • potential equity or debt financings; • changes in the anticipated future size and growth rate of our market; and • general political, social, economic, regulatory, and market conditions, in both domestic and our foreign markets, including the effects of global events like the war in Ukraine on the global economy, labor shortages, supply chain disruptions, inflation, increased interest rates and slow or negative growth of our markets.
The market price of our Class A common stock may continue to be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control or are related in complex ways, including: • actual or anticipated fluctuations in our financial condition and operating results; • decreased usage by one or more of our customers; • variance in our financial performance from expectations of securities analysts or investors; • changes in the pricing we offer our customers; • changes in our projected operating and financial results; • changes in laws or regulations applicable to our platform or related products; • announcements by us or our competitors of significant business developments, acquisitions, or new offerings; • publicity associated with network outages and problems; • our involvement in litigation; • changes in senior management or key personnel; • the trading volume of our Class A common stock; • potential equity or debt financings; • changes in the anticipated future size and growth rate of our market; and • general political, social, economic, regulatory, and market conditions, in both domestic and our foreign markets, including the effects of global events like the war in Ukraine and the more recent hostilities in Israel on the global 56 economy, labor shortages, supply chain disruptions, inflation, increased interest rates, banking instability and slow or negative growth of our markets.
Any disruption or delay in the supply of our hardware components has in the past and may in the future 24 limit capacity expansion or replacement of defective or obsolete equipment, or cause other constraints on our operations that could damage our customer relationships and harm our business.
Any disruption or delay in the supply of our hardware components has in the past and may in the future limit capacity expansion or replacement of 25 defective or obsolete equipment, or cause other constraints on our operations that could damage our customer relationships and harm our business.
For example, we are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act 9 ("Section 404").
For example, we are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act 9 (“Section 404”).
Because many of our largest customers’ minimum usage commitments for our platform are relatively low compared to their expected usage, it can be easy for certain customers to quickly reallocate usage or switch from our platform to an 23 alternative platform altogether.
Because many of our largest customers’ minimum usage commitments for our platform are relatively low compared to their expected usage, it can be easy for certain customers to quickly reallocate usage or switch from our platform to an 24 alternative platform altogether.
For example, under the EU GDPR and UK GDPR, government regulators may impose restrictions or injunctions on data processing, and fines of up to 20 million euros (£17.5 million for the UK GDPR) or 4% of annual global revenue, whichever is greater.
For example, under the GDPR, government regulators may impose restrictions or injunctions on data processing, and fines of up to 20 million euros (£17.5 million) or 4% of annual global revenue, whichever is greater.
Our products are subject to United States export controls, including the Export Administration Regulations administered by the United States Commerce Department, and economic sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department ("OFAC"). We incorporate encryption technology into certain of our products.
Our products are subject to United States export controls, including the Export Administration Regulations administered by the United States Commerce Department, and economic sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department (“OFAC”). We incorporate encryption technology into certain of our products.
Our financial results may be adversely affected by changes in accounting principles applicable to us. U.S. GAAP are subject to interpretation by the Financial Accounting Standards Board, the SEC and other various bodies formed to promulgate and interpret appropriate accounting principles.
Our financial results may be adversely affected by changes in accounting principles applicable to us. GAAP are subject to interpretation by the Financial Accounting Standards Board, the SEC and other various bodies formed to promulgate and interpret appropriate accounting principles.
Since our customers share our multi-tenant architecture, cyber-attacks on any one of our customers could have a negative effect on other customers. These attacks have significantly increased the bandwidth used on our platform and have strained our network.
Since our customers share our multi-tenant architecture, cyber-attacks on any one of our customers could have a negative effect on other customers. These attacks have in the past significantly increased the bandwidth used on our platform and have strained our network.
In addition, we could become subject to investigations by the New York Stock Exchange (the "NYSE"), the SEC, and other regulatory authorities, which could require additional financial and management resources. 43 We may not be able to successfully manage the growth of our business if we are unable to improve our internal systems, processes and controls.
In addition, we could become subject to investigations by the New York Stock Exchange (the “NYSE”), the SEC, and other regulatory authorities, which could require additional financial and management resources. We may not be able to successfully manage the growth of our business if we are unable to improve our internal systems, processes and controls.
On July 27, 2017, the Financial Conduct Authority (the "FCA"), the authority that regulates LIBOR, announced that after December 31, 2021, it would no longer compel banks to submit the rates required to calculate LIBOR.
On July 27, 2017, the Financial Conduct Authority (the “FCA”), the authority that regulates LIBOR, announced that after December 31, 2021, it would no longer compel banks to submit the rates required to calculate LIBOR.
Moreover, our platform is highly technical and complex and, for example, our delivery products rely on knowledge of the Varnish Configuration Language ("VCL") to utilize many features of this platform. Potential developers may be unfamiliar or opposed to working with VCL and therefore decide to not adopt our platform, which may harm our business.
Moreover, our platform is highly technical and complex. For example, our delivery products rely on knowledge of the VCL to utilize many features of this platform. Potential developers may be unfamiliar or opposed to working with VCL and therefore decide to not adopt our platform, which may harm our business.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our growth rate, market acceptance of our platform, the expansion of sales and marketing activities, strategic transactions, as well as overall economic conditions.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our growth rate, our operating cash flow, market acceptance of our platform, the expansion of sales and marketing activities, strategic transactions, as well as overall economic conditions.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, currency and interest rate fluctuations, political turmoil, natural catastrophes, warfare, public health issues, such as the COVID-19 pandemic, and terrorist attacks on the United States, Europe, the Asia Pacific region, or elsewhere, could cause a downturn or recession and a decrease in business investments, including spending on information technology, which would harm our business.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, currency and interest rate fluctuations, political turmoil, natural catastrophes, warfare, public health issues, and terrorist attacks on the United States, Europe, the Asia Pacific region, or elsewhere, could cause a downturn or recession and a decrease in business investments, including spending on information technology, which would harm our business.
We compete on the basis of a number of factors, including: 28 • our platform’s functionality, scalability, performance, ease of use, reliability, security availability, and cost effectiveness relative to that of our competitors’ products and services; • our global network coverage and availability; • our ability to utilize new and proprietary technologies to offer services and features previously not available in the marketplace; • our ability to identify new markets, applications, and technologies; • our ability to attract and retain customers; • our brand, reputation, and trustworthiness; • our credibility with developers; • the quality of our customer support; • our ability to recruit software engineers and sales and marketing personnel; • our ability to protect our intellectual property; and • our ability to identify opportunities for acquisitions and strategic relationships and successfully execute on them.
We compete on the basis of a number of factors, including: • our platform’s functionality, scalability, performance, ease of use, ease of integration and programmability, reliability, security availability, and cost effectiveness relative to that of our competitors’ products and services; • our global network coverage and availability; • our ability to support modern application development processes and utilize new and proprietary technologies to offer services and features previously not available in the marketplace; • our ability to identify new markets, applications, and technologies; • our ability to attract and retain customers; • our brand, reputation, and trustworthiness; • our credibility with developers; • the quality of our customer support; • our ability to recruit software engineers and sales and marketing personnel; • our ability to protect our intellectual property; and • our ability to identify opportunities for acquisitions and strategic relationships and successfully execute on them.
Accordingly, we may be 27 unable to accurately forecast our revenues.
Accordingly, we may be unable to accurately forecast our revenues.
Obligations relating to privacy and data security are evolving, increasingly stringent, creating regulatory uncertainty, and may result in increasing scrutiny. Such obligations may be subject to different applications and interpretations, and which may be inconsistent and conflicting among different jurisdictions.
Obligations relating to privacy and data security (and customers’ data privacy expectations) are evolving, increasingly stringent, creating uncertainty, and may result in increasing scrutiny. Such obligations may be subject to different applications and interpretations, and which may be inconsistent and conflicting among different jurisdictions.
Further, due to political uncertainty and military actions involving Russia, Ukraine, and surrounding regions, we and the third parties upon which we rely may be vulnerable to a heightened risk of security breaches, computer malware, social-engineering attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, and other cyber-attacks, including attacks that could materially disrupt our systems and operations, supply chain, and ability to do business .
Further, due to political uncertainty and international military actions, we and the third parties upon which we rely may be vulnerable to a heightened risk of security breaches, computer malware, social-engineering attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, and other cyber-attacks, including attacks that could materially disrupt our systems and operations, supply chain, and ability to do business .
For the year ended December 31, 2022, the percentage of revenue generated from customers outside the United States was 29% of our total revenue. As of December 31, 2022, our edge network spans across 58 markets and 34 countries that are outside of the United States. Additionally, we have employees located throughout the world.
For the year ended December 31, 2023, the percentage of revenue generated from customers outside the United States was 27% of our total revenue. As of December 31, 2023, our edge network spans across 58 markets and 34 countries that are outside of the United States. Additionally, we have employees located throughout the world.
It is uncertain if, and to what extent, various states will conform to these limitations on the use of federal NOLs. In addition, under Section 382 of the Code, a corporation that undergoes an "ownership change" may be subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income.
It is uncertain if, and to what extent, various states will conform to these limitations on the use of U.S. federal NOLs. In addition, under Section 382 of the Code, a corporation that undergoes an “ownership change” may be subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income.
While our ability to do business has not been materially affected, the Russian invasion of Ukraine and the global restrictive measures that have been taken, and could be taken in the future, have created significant global economic uncertainty that could prolong and escalate tensions and expand the geopolitical conflict, which could have a lasting impact on regional and global economies, any of which could harm our business and operating results.
While our ability to do business has not been materially affected, and the global restrictive measures that have been taken in response to such events, and could be taken in the future, have created significant global economic uncertainty that could prolong and escalate tensions and expand the geopolitical conflict, which could have a lasting impact on regional and global economies, any of which could harm our business and operating results.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our facilities are sufficient to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operation s . Item 3. Legal Proceedings Please refer to Note 10—Commitments and Contingencies for discussion around our legal proceedings. Item 4.
Biggest changeWe believe that our facilities are sufficient to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operation s .
Removed
Mine Safety Disclosures Not applicable. 60 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our Class A common stock has traded on The New York Stock Exchange ("NYSE") under the symbol "FSLY" since May 17, 2019. Holders of Record As of December 31, 2022, there were 51 holders of record of our Class A common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our Class A common stock has traded on The New York Stock Exchange (“NYSE”) under the symbol “FSLY” since May 17, 2019. Holders of Record As of December 31, 2023, there were 47 holders of record of our Class A common stock.
We have presented below the cumulative total return to our stockholders between May 17, 2019 (the date our Class A common stock commenced trading on the NYSE) through December 31, 2022 in comparison to the S&P 500 Index and S&P 500 Information Technology Index.
We have presented below the cumulative total return to our stockholders between May 17, 2019 (the date our Class A common stock commenced trading on the NYSE) through December 31, 2023 in comparison to the S&P 500 Index and S&P 500 Information Technology Index.
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A common stock. 61 Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. 62 Item 6. Reserved Not required. 63
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A common stock. 65 Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. 66 Item 6. Reserved Not required. 67

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear ended December 31, 2022 2021 (in thousands) Consolidated Statement of Operations: Revenue $ 432,725 $ 354,330 Cost of revenue (1) 222,944 167,002 Gross profit 209,781 187,328 Operating expenses: Research and development (1) 155,308 126,859 Sales and marketing (1) 179,869 152,645 General and administrative (1) 120,803 126,845 Total operating expenses 455,980 406,349 Loss from operations (246,199) (219,021) Net gain on extinguishment of debt 54,391 — Interest income 7,044 1,282 Interest expense (5,887) (5,245) Other income (expense), net (29) 356 Loss before income tax expense (benefit) (190,680) (222,628) Income tax expense (benefit) 94 69 Net loss attributable to common stockholders $ (190,774) $ (222,697) Year ended December 31, 2022 2021 Consolidated Statements of Operations, as a percentage of revenue:* Revenue 100 % 100 % Cost of revenue 52 47 Gross profit 48 53 Operating expenses: Research and development 36 36 Sales and marketing 42 43 General and administrative 28 36 Total operating expenses 105 115 Loss from operations (57) (62) Net gain on extinguishment of debt 13 — Interest income 2 — Interest expense (1) (1) Other income (expense), net — — Loss before income taxes (43) (63) Income tax expense (benefit) — — Net loss attributable to common stockholders (43) % (63) % __________ * Columns may not add up to 100% due to rounding. 73 Revenue Year ended December 31, Change 2022 2021 $ Change % Change (in thousands) Revenue $ 432,725 $ 354,330 $ 78,395 22 % Revenue was $432.7 million for the year ended December 31, 2022 compared to $354.3 million for the year ended December 31, 2021, an increase of $78.4 million, or 22%.
Biggest changeYear ended December 31, 2023 2022 (in thousands) Consolidated Statement of Operations: Revenue $ 505,988 $ 432,725 Cost of revenue 239,660 222,944 Gross profit 266,328 209,781 Operating expenses: Research and development 152,190 155,308 Sales and marketing 191,773 179,869 General and administrative 116,077 120,803 Impairment expense 4,316 — Total operating expenses 464,356 455,980 Loss from operations (198,028) (246,199) Net gain on extinguishment of debt 52,416 54,391 Interest income 18,186 7,044 Interest expense (4,051) (5,887) Other expense, net (1,832) (29) Loss before income tax expense (133,309) (190,680) Income tax expense (benefit) (221) 94 Net loss attributable to common stockholders $ (133,088) $ (190,774) 78 The following tables set forth our results of operations for the period presented as a percentage of our revenue: Year ended December 31, 2023 2022 Consolidated Statements of Operations, as a percentage of revenue:* Revenue 100 % 100 % Cost of revenue 47 52 Gross profit 53 48 Operating expenses: Research and development 30 36 Sales and marketing 38 42 General and administrative 23 28 Impairment expense 1 — Total operating expenses 92 105 Loss from operations (39) (57) Net gain on extinguishment of debt 10 13 Interest income 4 2 Interest expense (1) (1) Other income (expense), net — — Loss before income tax expense (26) (43) Income tax expense (benefit) — — Net loss attributable to common stockholders (26) % (43) % __________ * Columns may not add up to 100% due to rounding.
In the event that there are errors in software, failures of hardware, damages to a facility or misconfigurations of any of our services—whether caused by our own error, security breaches, third-party error, or natural disasters—we could experience lengthy interruptions in our platform as well as delays and additional expenses in arranging new facilities and services.
In the event that there are errors in software, failures of hardware, damages to a facility or misconfigurations of any of our services, whether caused by our own error, security breaches, third-party error, or natural disasters, we could experience lengthy interruptions in our platform availability as well as delays and additional expenses in arranging new facilities and services.
During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber- 71 attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
For the year ended December 31, 2021, cash used in investing activities was $794.5 million, primarily consisting of $928.2 million in purchases of marketable securities, $34.8 million of payments related to purchases of property and equipment 78 to expand our network, and $13.5 million of additions to capitalized internal-use software.
For the year ended December 31, 2021, cash used in investing activities was $794.5 million, primarily consisting of $928.2 million in purchases of marketable securities, $34.8 million of payments related to purchases of property and equipment to expand our network, and $13.5 million of additions to capitalized internal-use software.
Over the long term we expect gross margin to increase as we continue to drive efficiencies in our operations. However, our gross margin may fluctuate from period to period. Research and Development Research and development expenses consist primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation.
Over the long term we expect gross margin to increase as we continue to drive efficiencies in our operations and increase in revenue. However, our gross margin may fluctuate from period to period. Research and Development Research and development expenses consist primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation.
Factors Affecting Our Performance Winning New Customers We are focused on continuing to attract new customers, including those in new vertical markets, and expanding our relationship with existing customers, by enhancing our product experience, investing in technology,, and leveraging our partner ecosystem.
Factors Affecting Our Performance Winning New Customers We are focused on continuing to attract new customers, including those in diverse vertical markets, and expanding our relationship with existing customers, by enhancing our product experience, investing in technology, and leveraging our partner ecosystem.
In addition, there can be no assurance that we are adequately prepared for unexpected increases in bandwidth demands by our customers, particularly when customers experience cyber-attacks.
In addition, there can be no assurance that we are adequately prepared for unexpected increases in bandwidth demands by our customers, particularly when we or our customers experience cyber-attacks.
We will continue to invest in our products and features and developer outreach, leveraging it as a cost-efficient approach to attracting new customers, and our sales and marketing programs, including various online marketing activities as well as targeted account-based advertising. 66 We are continuing to bring a durable, consistent, and predictable pipeline of new innovations to our edge cloud platform and software-defined modern network architecture, and are seeing interest from customers in our existing product lines like Network Services and Security, and newer product lines like Compute and Observability.
We will continue to invest in our products and features and developer outreach, leveraging it as a cost-efficient approach to attracting new customers, and our sales and marketing programs, including various online marketing activities as well as targeted account-based marketing. 70 We are continuing to bring a durable, consistent, and predictable pipeline of new innovations to our edge cloud platform and software-defined modern network architecture, and are seeing interest from customers in our existing product lines like Network Services and Security, and newer product lines like Compute and Observability.
Even if our customers expand their usage of our platform, we cannot guarantee that they will maintain those usage levels for any meaningful period of time or that they will renew their commitments. The data localization and cross-border data transfer issues described above also impact current customers' usage of our products and services.
Even if our customers expand their usage of our platform, we cannot guarantee that they will maintain those usage levels for any meaningful period of time or that they will renew their commitments. The data localization and cross-border data transfer issues described above also impact current customers ’ usage of our products and services.
Content streaming organizations leverage Fastly's platform to deliver content to 64 users around the world and those that livestream gain easy access to enormous edge compute resources for even greater reliability. The range of applications that developers build with our edge cloud platform continues to expand rapidly.
Content streaming organizations leverage Fastly’s platform to deliver content 68 to users around the world and those that livestream gain easy access to enormous edge compute resources for even greater reliability. The range of applications that developers build with our edge cloud platform continues to expand rapidly.
For example, to calculate our DBNER for the trailing 12 months ended December 31, 2022, we divide (i) revenue, for the trailing 12 months ended December 31, 2022, from customers that entered into a customer agreement on or before December 31, 2022, and that remained customers as of December 31, 2022, by (ii) revenue for the trailing 12 months ended December 31, 2021 from the same set of customers.
For example, to calculate our DBNER for the trailing 12 months ended December 31, 2023, we divide (i) revenue, for the trailing 12 months ended December 31, 2023, from customers that entered into a customer agreement on or before December 31, 2023, and that remained customers as of December 31, 2023, by (ii) revenue for the trailing 12 months ended December 31, 2022, from the same set of customers.
For contracts with multiple performance obligations that are delivered over different time periods, we allocate the contract transaction price to each performance obligation using the estimated standalone selling price ("SSP") of each distinct good or service in the contract. Judgment is required to determine the SSP for each distinct performance obligation.
For contracts with multiple performance obligations that are delivered over different time periods, we allocate the contract transaction price to each performance obligation using the estimated standalone selling price ( “ SSP”) of each distinct good or service in the contract. Judgment is required to determine the SSP for each distinct performance obligation.
An identifiable operating entity is defined as a company, a government entity, or a distinct business unit of a larger company that has a relationship with us through direct sale or through one of our reseller partners where charges are identified on an end-customer basis.
An identifiable operating entity is defined as a company, a government entity, or a distinct business unit of a larger company that has a relationship with us through direct sales or through one of our reseller partners where charges are identified on an end-customer basis.
These commitments will generally be settled with existing cash on hand, cash generated from operations and our current or any future financing arrangements. 79 Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP.
These commitments will generally be settled with existing cash on hand, cash generated from operations and our current or any future financing arrangements. 85 Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP.
Our ability to retain customers and expand their usage could be impaired for a variety of reasons, including a customer moving to another provider or reducing usage within the term of their contract to their minimum usage commitment.
Our ability to retain customers and expand their usage could be impaired for a variety of reasons, including a customer moving to another provider or reducing usage within the term of their contract.
Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may 80 differ from estimates.
Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may 86 differ from estimates.
For the year ended December 31, 2021, cash provided by financing activities was $936.6 million, primarily consisting of $930.8 million of proceeds from the issuance of the Notes, net of issuance costs, $8.1 million in proceeds from the employee stock purchase plan ("ESPP") and $12.6 million in proceeds from stock option exercises by our employees and directors.
For the year ended December 31, 2021, cash provided by financing activities was $936.6 million, primarily consisting of $930.8 million of proceeds from the issuance of the Notes, net of issuance costs, $8.1 million in proceeds from the ESPP and $12.6 million in proceeds from stock option exercises by our employees and directors.
The proportion of the revenue contribution between new and existing customers is consistent with prior periods and typical customer behavior as customers tend to contribute more revenue over time as their use of the platform increases. The remainder of our revenue was generated by other products and services.
The proportion of the revenue contribution between new and existing customers is consistent with prior periods and typical customer behavior as customers tend to contribute more revenue over time as their use of the platform increases. The remainder of our revenue was generated by our other products and services, including support and professional services.
Our cash, cash equivalents, and marketable securities primarily consisted of bank deposits, money market funds, investment-grade commercial paper, corporate notes and bonds, U.S. treasury securities, municipal securities, foreign government and supranational securities and asset-backed securities held at major financial institutions. As of December 31, 2022, our marketable securities balance includes $165.1 million of marketable securities that were classified as non-current.
Our cash, cash equivalents, and marketable securities primarily consisted of bank deposits, money market funds, investment-grade commercial paper, corporate notes and bonds, U.S. treasury securities, municipal securities, foreign government and supranational securities and asset-backed securities held at major financial institutions. As of December 31, 2023, our marketable securities balance includes $6.1 million of marketable securities that were classified as non-current.
Utilizing our direct sales force, we have multiple selling points within organizations to acquire new customers and increase usage from our existing customers. We will continue to increase our discretionary marketing spend, including account-based and brand spend, to drive the effectiveness of our sales teams.
Utilizing our direct sales force, we have multiple selling points within organizations to acquire new customers and increase usage from our existing customers. We will continue to increase our discretionary marketing spend, including account-based, targeted demand generation and brand spend, to drive the effectiveness of our sales teams.
For additional details, refer to the section titled "Risk Factors." Expanding into New Vertical Markets and within Our Existing Customer Base We aim to continue to add customers from a diverse set of industry verticals through our differentiated platform that offers a broad range of capabilities.
For additional details, refer to the section titled “Risk Factors.” Expanding into New Markets and within Our Existing Customer Base We aim to continue to add customers from a diverse set of industry verticals through our differentiated platform that offers a broad range of capabilities.
Our NRR measures the net change in monthly revenue from existing customers in the last month of the period (the “current" period month) compared to the last month of the same period one year prior (the “prior" period month) and includes revenue contraction due to billing decreases or customer churn, revenue expansion due to billing increases, but excludes revenue from new customers.
Our NRR measures the net change in monthly revenue from existing customers in the last month of the period (the “current” period month) compared to the last month of the same period one year prior (the “prior” period month) and includes revenue contraction due to billing decreases or customer churn and revenue expansion due to billing increases, but excludes revenue from new customers.
Customer accounts acquired in 2018, 2019, 2020, 2021 and 2022 are referred to as the 2018 Cohort, 2019 Cohort, 2020 Cohort, 2021 Cohort and 2022 Cohort, respectively.
Customer accounts acquired in 2019, 2020, 2021, 2022 and 2023 are referred to as the 2019 Cohort, 2020 Cohort, 2021 Cohort, 2022 Cohort and 2023 Cohort, respectively.
We separately monitor customer retention and churn on an annual basis by measuring our annual revenue retention rate, which we calculate by multiplying the final full month of revenue from a customer that terminated its contract with us (a "Churned Customer") by the number of months remaining in the same calendar year ("Annual Revenue Churn").
Annual Revenue Retention Rate (“ARR”) We separately monitor customer retention and churn on an annual basis by measuring our annual revenue retention rate, which we calculate by first multiplying the final full month of revenue from a customer that terminated its contract with us (a “ Churned Customer ” ) by the number of months remaining in the same calendar year to get our “ Annual Revenue Churn ” .
As of December 31, 2022, our global network is located in 79 markets across 35 countries.
As of December 31, 2023, our global network is located in 79 markets across 35 countries.
This increase is due to an increase in interest rates on our cash balances and investments portfolio.
This increase was due to an increase in interest rates on our cash balances and investments portfolio.
This was partially offset by $4.8 million in proceeds from the employee stock purchase plan ("ESPP") and $5.7 million in proceeds from stock option exercises by our employees and directors.
This was partially offset by $4.8 million in proceeds from the ESPP and $5.7 million in proceeds from stock option exercises by our employees and directors.
However, our cost of revenue may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
However, our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
We calculate Net Retention Rate by dividing the revenue from the current period month by the revenue in the prior period month. For the last month of the years ended December 31, 2022 and 2021 our NRR was 110.7% and 106.6%, respectively.
We calculate Net Retention Rate by dividing the revenue from the current period month by the revenue in the prior period month. For the last month of the years ended December 31, 2023 and 2022 our NRR was 110.1% and 110.7%, respectively.
During the year ended December 31, 2022and 2021, no amounts were drawn down on the Credit Agreement. 77 Convertible Senior Notes In March 2021, we issued approximately $948.8 million aggregate principal amount of 0% convertible senior unsecured notes due in 2026 (the "Notes") in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act.
During the year ended December 31, 2023 and 2022, no amounts were drawn down on the Credit Agreement. 83 Convertible Senior Notes In March 2021, we issued $948.8 million aggregate principal amount of 0% convertible senior unsecured notes due in 2026 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act.
And because big ideas often start small, we love it when developers experiment and iterate on our platform, coming up with exciting new ways to solve today’s complex problems. For the years ended December 31, 2022 and 2021, our revenue was $432.7 million and $354.3 million, respectively, an increase of 22%.
And because big ideas often start small, we love it when developers experiment and iterate on our platform, coming up with exciting new ways to solve today’s complex problems. For the years ended December 31, 2023 and 2022, our revenue was $506.0 million and $432.7 million, respectively, an increase of 17%.
For the trailing 12 months ended December 31, 2022 and 2021 our DBNER was 122.7% and 120.9%, respectively. DBNER may fluctuate from quarter to quarter based on, among other things, the timing associated with new customer accounts.
For the trailing 12 months ended December 31, 2023 and 2022 our DBNER was 119.0% and 122.7%, respectively. DBNER may fluctuate from quarter to quarter based on, among other things, the timing associated with new customer accounts.
The expected volatility was a blended volatility rate which incorporated both our observed equity volatility and the relevant guideline company volatility.
The expected volatility was a blended volatility rate which incorporated both our observed equity volatility and our relevant guideline companies’ volatilities.
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
We calculate DBNER by dividing the revenue for a given period from customers who remained customers as of the last day of the given period ("current period") by the revenue from the same customers for the same period measured one year prior ("base period").
We calculate DBNER by dividing the revenue for a given period from customers who remained customers as of the last day of the given period (“current period”) by the revenue from the same customers for the same period measured one year prior (“base period”).
As of December 31, 2021, our edge network spanned across 51 markets and 31 countries that are outside of the United States. Our international expansion, including our global sales efforts, continues to add increased complexity and cost to our business.
As of both December 31, 2023 and 2022, our edge network spanned across 58 markets and 34 countries that are outside of the United States. Our international expansion, including our global sales efforts, continues to add increased complexity and cost to our business.
These teams work with technical and business leaders to help our customers’ end-users receive the best possible digital experience, while also lowering our customers’ total cost of ownership. These direct selling efforts are reflected by our 493 enterprise customers as of December 31, 2022.
These teams work with technical and business leaders to help our customers’ end-users receive the best possible digital experience, while also lowering our customers’ total cost of ownership. These direct selling efforts are reflected by the revenue generated from our enterprise customers.
This requires us to expand our sales and marketing capabilities outside of the United States, as well as increase the number of markets we have a presence in around the world to support our customers. Managing the administrative aspects of a global organization places a strain on our business and culture.
This requires us to expand our sales and marketing capabilities outside of the United States, increase the number of markets we have a presence in around the world to support our customers, and manage the administrative aspects of a global organization, each of which place a strain on our business and culture.
Other Income and Expenses Our interest income consists primarily of interest earned on our cash, cash equivalents and investments. Our interest expense consists primarily of the interest expense on our finance leases and amortization of discount and debt issuance costs associated with our debt obligations.
Other Income and Expenses Our interest income consists primarily of interest earned on our cash, cash equivalents and investments. Our interest expense consists primarily of the interest expense on our finance leases and amortization of discount and debt issuance costs associated with our debt obligations. Our other income (expense), net, consists primarily of foreign currency transaction gains and losses.
As of December 31, 2022, we were in compliance with the covenant and we expect to continue to be in compliance for at least the next 12 months.
As of December 31, 2023, we were in compliance with these covenants and we expect to continue to be in compliance for at least the next 12 months.
This service represents the convergence of the Content Delivery Network ("CDN") with functionality that has been traditionally delivered by hardware-centric appliances such as Application Delivery Controllers ("ADC"), Web Application Firewalls ("WAF"), Bot Detection, Distributed Denial of Service ("DDoS") and observability solutions.
This service represents the convergence of the Content Delivery Network (“CDN”) with functionality that has been traditionally delivered by hardware-centric appliances such as Application Delivery Controllers (“ADC”), Web Application Firewalls (“WAF”), Bot Detection, Distributed Denial of Service (“DDoS”) and observability solutions.
We calculate the Compound Annual Growth Rate (“CAGR”), which represents the rate of revenue return of our revenue cohorts, over a five year history from when they were first customers. 65 Summary of Revenue Generated by Customer Cohorts Over Time (in millions): Our 2018 Cohort increased its revenue 3.1 times in fiscal 2019 and has grown at approximately a 60% CAGR over the next four years from fiscal 2019 to fiscal 2022.
We calculate the Compound Annual Growth Rate (“CAGR”), which represents the rate of revenue return of our revenue cohorts, over a five year history from when they were first customers. 69 Summary of Revenue Generated by Customer Cohorts Over Time (in millions): Our 2019 Cohort increased its revenue 5.5 times in fiscal 2021 and has grown at approximately a 88% CAGR over the next four years from fiscal 2020 to fiscal 2023.
Our DBNER increases when customers increase their usage of our platform or purchase additional products, and declines when they reduce their usage, benefit from lower pricing on their existing usage, or curtail their purchases of additional products.
We track our growth, in part, by measuring DBNER. Our DBNER increases when customers increase their usage of our platform or purchase additional products, and declines when they reduce their usage, benefit from lower pricing on their existing usage, or curtail their purchases of additional products.
Our gross margin has been and will continue to be affected by a number of factors, including utilization of our network, the timing of our investments in the expansion of our network, which can increase depreciation and colocation costs in advance of expected demand, our ability to manage our network service providers and cloud infrastructure-related fees, the timing of amortization of capitalized software development costs, changes in personnel costs to provide customer support and operate the network, and customer pricing.
However, our cost of revenue may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. 76 Our gross margin has been and will continue to be affected by a number of factors, including utilization of our network, the timing of our investments in the expansion of our network, which can increase depreciation and colocation costs in advance of expected demand, our ability to manage our network service providers and cloud infrastructure-related fees, the timing of amortization of capitalized software development costs, changes in personnel costs to provide customer support and operate the network, and customer pricing.
Our Dollar-Based Net Expansion Rate ("DBNER"), Net Retention Rate ("NRR") and Last-Twelve Months Net Retention Rate ("LTM NRR") metrics measure the revenue growth from existing customers attributable to increased usage of our platform and features, and purchase of additional products and services. For additional details on our key metrics, refer to the "Key Business Metrics" section.
Our Dollar-Based Net Expansion Rate (“DBNER”), Net Retention Rate (“NRR”) and Last-Twelve Months Net Retention Rate (“LTM NRR”) metrics also measure the revenue growth from existing customers attributable to increased usage of our platform and features, and purchase of additional products and services. For additional details on our key metrics, refer to the “Key Business Metrics” section.
The Credit Agreement bears interest at a rate per annum equal to the sum of LIBOR for the applicable interest period plus 1.75% to 2.00%, depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement. Interest payments on outstanding borrowings are due on the last day of each interest period.
The Credit Agreement originally bore interest at a rate per annum equal to the sum of LIBOR for the applicable interest period plus 1.75% to 2.00%, depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement.
If the Russia-Ukraine conflict continues or worsens, leading to greater global economic disruptions and uncertainty, our business 67 and results of operations could be materially impacted. Our customers in Russia represented an immaterial portion of our net assets and total consolidated revenue as of December 31, 2022 and 2021.
If either conflict continues or worsens, leading to greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted. Our customers operating in Russia, Ukraine, and Israel represented an immaterial portion of our consolidated revenue as of December 31, 2023 and 2022, respectively.
This was offset by $232.0 million of maturities and sales of marketable securities. Cash Flows from Financing Activities For the year ended December 31, 2022, cash used in financing activities was $189.1 million, primarily consisting of $177.1 million used for the partial repurchase of our convertible debt and $22.5 million of finance lease liabilities repayments.
For the year ended December 31, 2022, cash used in financing activities was $189.1 million, primarily consisting of $177.1 million used for the partial repurchase of our convertible debt and $22.5 million of finance lease liabilities repayments.
We expect that these expenses will decline in future years as we continue to implement our sales tax collection mechanisms and start collecting these taxes from our customers.
Historically, we have not collected such taxes from our customers and have therefore recorded such taxes as general and administrative expenses. We expect that these expenses will decline in future years as we continue to implement our sales tax collection mechanisms and start collecting these taxes from our customers.
The Company continues to maintain a full valuation allowance and the tax expense for the periods were primarily due to foreign tax expense. Liquidity and Capital Resources As of December 31, 2022, we had cash, cash equivalents, and marketable securities and restricted cash totaling $683.1 million.
The Company continues to maintain a full valuation allowance in the U.S. and the tax expense (benefit) for the periods were primarily due to foreign tax expense. 82 Liquidity and Capital Resources As of December 31, 2023, we had cash, cash equivalents, and marketable securities totaling $328.8 million.
Affiliated customers that are business units of a single company in the streaming entertainment space generated an aggregate of 11% of our revenue in both the trailing 12 months ended December 31, 2022 and 2021. We incurred a net loss of $190.8 million and $222.7 million in the years ended December 31, 2022 and 2021, respectively.
Affiliated customers that are business units of a single company in the streaming entertainment space generated an aggregate of 12% and 11% of the Company ’ s revenue for the years ended December 31, 2023 and 2022, respectively. We incurred a net loss of $133.1 million and $190.8 million in the years ended December 31, 2023 and 2022, respectively.
Sales and marketing expenses also include expenditures related to advertising, marketing, our brand awareness activities, bandwidth and co-location costs for free trial users, costs related to our customer conferences, including our Altitude conference, professional services fees and amortization of our intangible assets, and an allocation of our general overhead expenses. 71 We focus our sales and marketing efforts on generating awareness of our platform and products, creating sales leads, and establishing and promoting our brand, both domestically and internationally.
Sales and marketing expenses also include expenditures related to advertising, marketing, our brand awareness activities, bandwidth and co-location costs for free trial users, costs related to our customer conferences, including our Altitude conference, professional services fees, amortization of our intangible assets, and an allocation of our general overhead expenses.
Cash Flows The following table summarizes our cash flows for the period indicated: Year ended December 31, 2022 2021 2020 (in thousands) Cash used in operating activities $ (69,632) $ (38,482) $ (19,916) Cash provided by (used in) investing activities 235,751 (794,511) (275,023) Cash provided by (used in) financing activities (189,149) 936,551 272,739 Cash Flows from Operating Activities For the year ended December 31, 2022, cash used in operating activities consisted primarily of our net loss of $190.8 million, adjusted for non-cash items of $207.3 million, and net cash flows used in operating assets and liabilities of $86.2 million.
Cash Flows The following table summarizes our cash flows for the period indicated: Year ended December 31, 2023 2022 2021 (in thousands) Net cash (used in) provided by operating activities $ 362 $ (69,632) $ (38,482) Net cash (used in) provided by investing activities 294,940 235,751 (794,511) Net cash (used in) provided by financing activities (331,380) (189,149) 936,551 Cash Flows from Operating Activities For the year ended December 31, 2023, cash provided by operating activities consisted primarily of our net loss of $133.1 million, adjusted for non-cash items of $203.3 million, and net cash flows used in operating assets and liabilities of $69.9 million.
Cash Flows from Investing Activities For the year ended December 31, 2022, cash provided by investing activities was $235.8 million, primarily consisting of $697.0 million of maturities and sales of marketable securities.
Cash Flows from Investing Activities For the year ended December 31, 2023, cash provided by investing activities was $294.9 million, primarily consisting of $459.4 million of maturities and sales of marketable securities.
There was also a $8.9 million increase in personnel related costs due to an increase in headcount and equity awards granted to employees supporting the growth of our business. There was also a one-time charge of $2.0 million related to cancellation of a commitment.
There was also a $1.3 million increase in personnel-related costs due to an increase in headcount and equity awards granted to employees supporting the growth of our business.
International Expansion We intend to continue expanding our efforts to attract customers outside of the United States by augmenting our sales teams and strategically increasing our presence in the number of markets in select international locations. As of December 31, 2022, our edge network spanned across 58 markets and 34 countries that are outside of the United States.
International Expansion We intend to continue expanding our efforts to attract customers outside of the United States by augmenting our sales teams and strategically increasing our presence in the number of markets in select international locations.
Our platform includes a variety of offerings across Network Services, Security, Compute and Observability product lines. As our customers mature, we assist them in expanding their use of our platform, including the use of additional offerings beyond edge cloud delivery or security.
Customers often begin with smaller deployments of one of our products and then expand their usage over time. Our platform includes a variety of offerings across Network Services, Security, Compute and Observability product lines. As our customers mature, we assist them in expanding their use of our platform, including the use of additional offerings beyond content delivery or security.
By focusing on performance and security, we have the opportunity to continue to add customers from a diverse set of industries. We emphasize retaining our customers and expanding their usage of our platform and adoption of our other products. Customers often begin with smaller deployments of one of our products and then expand their usage over time.
By focusing on our key differentiators, including performance and security, we have an opportunity to continue to add customers from a diverse set of industries. We emphasize retaining our customers and expanding their usage of our platform and adoption of our other products.
Other Income and Expense Interest Income Year ended December 31, Change 2022 2021 $ Change % Change (in thousands) Interest income $ 7,044 $ 1,282 $ 5,762 449 % Interest income was $7.0 million for the year ended December 31, 2022 compared to $1.3 million for the year ended December 31, 2021, an increase of $5.8 million, or 449%.
Other Income and Expense Interest income Year ended December 31, Change 2023 2022 $ Change % Change (in thousands) Interest income $ 18,186 $ 7,044 $ 11,142 158 % Interest income was $18.2 million for the year ended December 31, 2023 compared to $7.0 million for the year ended December 31, 2022, an increase of $11.1 million, or 158%.
We also had $18.3 million of operating lease payments. This was partially offset by an increase of $22.0 million in accounts payable, accrued expenses, and other liabilities due to timing of payments.
We also had $26.4 million of operating lease payments. This was partially offset by increases of $4.3 million in accrued expenses and $8.9 million in other liabilities due to timing of payments.
As used herein, "Fastly," "we," "our," "the Company" and similar terms include Fastly, Inc. and its subsidiaries, unless the context indicates otherwise. Overview Organizations around the world are more dependent on the quality of digital experiences they provide than ever before. At Fastly, we deliver an edge cloud platform capable of delivering fast, safe, and engaging digital experiences.
As used herein, “Fastly, ” “we, ” “our, ” “the Company ” and similar terms include Fastly, Inc. and its subsidiaries, unless the context indicates otherwise. Overview Organizations around the world are more dependent on the quality of digital experiences they provide than ever before.
Gross margin was 48% for the year ended December 31, 2022 compared to 53% for the year ended December 31, 2021, a decrease of 4%.
Gross margin was 53% for the year ended December 31, 2023 compared to 48% for the year ended December 31, 2022, an increase of 5%.
We expect our DBNER for individual cohorts to decrease once customers in that cohort have used our platform for more than two years and become a larger portion of both our overall customer base and the revenue that we use to calculate DBNER.
We expect our DBNER for individual cohorts to decrease once customers in that cohort have used our platform for more than two years and become a larger portion of both our overall customer base and the revenue that we use to calculate DBNER. 75 Net Retention Rate (“NRR”) and Last-Twelve Months Net Retention Rate (“LTM NRR”) Our ability to generate and increase our revenue is also dependent upon our ability to retain our existing customers.
Senior Secured Credit Facilities Agreement On February 16, 2021, we entered into a Senior Secured Credit Facilities Agreement ("Credit Agreement") with Silicon Valley Bank for an aggregate commitment amount of $100.0 million, with a maturity date of February 16, 2024.
Senior Secured Credit Facilities Agreement On February 16, 2021, we entered into a Senior Secured Credit Facilities Agreement (“Credit Agreement”) with the lenders from time to time party thereto (the “Lenders”) and Silicon Valley Bank, as a lender and as administrative agent and collateral agent for the Lenders for an aggregate commitment amount of $100.0 million, with a maturity date of February 16, 2024.
Cost of Revenue Year ended December 31, Change 2022 2021 $ Change % Change (in thousands) Cost of revenue $ 222,944 $ 167,002 $ 55,942 33 % Cost of revenue was $222.9 million for the year ended December 31, 2022 compared to $167.0 million for the year ended December 31, 2021, an increase of $55.9 million, or 33%.
Cost of Revenue Year ended December 31, Change 2023 2022 $ Change % Change (in thousands) Cost of revenue $ 239,660 $ 222,944 $ 16,716 7 % Cost of revenue was $239.7 million for the year ended December 31, 2023 compared to $222.9 million for the year ended December 31, 2022, an increase of $16.7 million, or 7%.
International revenue was $116.6 million and 27% of revenue for the year ended December 31, 2022, and $93.9 million and 27% of revenue for the year ended December 31, 2021. This represents an increase of $22.6 million, or 24%.
International revenue was $135.6 million and 27% of revenue for the year ended December 31, 2023, compared to $116.6 million and 27% of revenue for the year ended December 31, 2022. This represents an increase of $19.0 million, or 16%.
By comparing this amount to actual revenue for the period, we are able to assess our ability to replace terminated revenue by generating revenue from new and continuing customers. Our annual revenue retention rate for both of the years ended December 31, 2022 and 2021 was 99.2%.
By comparing this amount to actual revenue for the period, we are able to assess our ability to replace terminated revenue by generating revenue from new and continuing customers.
Net Retention Rate ("NRR") and Last-Twelve Months Net Retention Rate ("LTM NRR") Our ability to generate and increase our revenue is also dependent upon our ability to retain our existing customers. In addition to measuring expansion using DBNER, NRR and LTM NRR also allow us to track customer retention which demonstrates the stickiness of our edge cloud platform.
In addition to measuring expansion using DBNER, NRR and LTM NRR also allow us to track customer retention which demonstrates the stickiness of our edge cloud platform.
At the conclusion of the measurement period, or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are reflected in the consolidated statements of operations. Goodwill Impairment Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and identifiable intangible assets acquired.
At the conclusion of the measurement period, or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are reflected in the consolidated statements of operations.
Other income(expense), net Year ended December 31, Change 2022 2021 $ Change % Change (in thousands) Other income (expense), net $ (29) $ 356 $ (385) (108) % Other expense, net was $0.0 million for the year ended December 31, 2022 compared to other income, net, of $0.4 million for the year ended December 31, 2021, a decrease of $0.4 million, or (108)%.
Other income (expense), net Year ended December 31, Change 2023 2022 $ Change % Change (in thousands) Other expense, net $ (1,832) $ (29) $ (1,803) 6,217 % Other expense, net was $1.8 million for the year ended December 31, 2023 compared to other expense, net, of less than $0.1 million for the year ended December 31, 2022, a decrease of $1.8 million, or 6217%.
The bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including service outages, payment disputes, network providers going out of business, natural disasters, networks imposing traffic limits, or governments adopting regulations that impact network operations. 68 Key Business Metrics We use the following key metrics presented in the table below, to evaluate our business, measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions.
The bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including service outages, payment disputes, network providers 72 going out of business, natural disasters, networks imposing traffic limits, or governments adopting regulations that impact network operations.
Average enterprise customer spend is calculated by taking the sum of the trailing 12-month revenue contributed by enterprise customers existing as of December 31, 2022, and dividing that by the number of enterprise customers as of December 31, 2022.
Under the prior methodology, our average enterprise customer spend is calculated by taking the sum of the trailing 12-month revenue contributed by enterprise customers, as defined under our prior methodology as customers with revenue in excess of $100,000 over the trailing 12-month period, existing as of December 31, 2023, and dividing that by that same number 74 of enterprise customers as of December 31, 2023.
Our 10 largest customers generated an aggregate of 35% and 33% of our revenue in the trailing 12 months ended December 31, 2022 and 2021, respectively. Our 5 largest customers generated an aggregate of 26% and 22% of our revenue in the trailing 12 months ended December 31, 2022 and 2021, respectively.
Our 10 largest customers generated an aggregate of 37% and 35% of our revenue in the trailing 12 months ended December 31, 2023 and 2022, respectively. No customer accounted for more than 10% of revenue for the years ended December 31, 2023 and 2022.
This represents an increase of 154, or 5%, in customers and 48, or 11%, in enterprise customers from December 31, 2021. Approximately 94% of our revenue in the year ended December 31, 2022 was driven by usage on our platform, primarily from existing customers, as revenue from new customers contributed less than 10% of our revenue.
For the years ended December 31, 2023 and 2022, approximately 95% and 94% of our revenue was driven by usage on our platform, respectively. Revenue was primarily from existing customers, as revenue from new customers contributed less than 10% of our revenue.
U.S. revenue was $316.1 million and 73% of revenue for the year ended December 31, 2022, and $260.4 million and 73% of revenue for the year ended December 31, 2021. This represents an increase of $55.8 million, or 21%.
This represents an increase of 181, or 6% in customers and 45, or 8%, in enterprise customers from December 31, 2022. U.S. revenue was $370.4 million and 73% of revenue for the year ended December 31, 2023, and $316.1 million and 73% of revenue for the year ended December 31, 2022. This represents an increase of $54.3 million, or 17%.
Our definition of a customer consists of identifiable operating entities with which we have a billing relationship in good standing, from which we recognized revenue during the period.
Total Customer Count We believe that our total number of customers is an important indicator of the adoption of our platform. Our definition of a customer consists of identifiable operating entities with which we have a billing relationship in good standing and which we have recognized revenue from.
As of December 31, 2022, our average enterprise customer spend was $782 thousand, as compared to $704 thousand as of December 31, 2021. The continued retention and growth of our enterprise customer spend is key to our long-term growth strategy.
The continued retention and growth of our enterprise customer spend is key to our long-term growth strategy.
The increase in cost of revenue is a result of an increase in bandwidth costs of $17.4 million, colocation costs of $8.5 million, hosting services of $4.9 million and other network costs of $2.0 million. Depreciation and amortization expense increased by $10.8 million as a result of increased investments in our platform.
The increase in cost of revenue is a result of an increase in bandwidth costs of $10.1 million, $7.9 million increase in depreciation expense as a result of increased investments in our platform as well as an increase in repair and maintenance cost of $1.2 million.
To test for goodwill impairment, we compare the carrying value of our reporting unit with its fair value. If the carrying value of the goodwill is considered impaired, a loss is measured as the excess of the reporting unit’s carrying value over the fair value.
If the carrying value of the goodwill is considered impaired, a loss is measured as the excess of the reporting unit’s carrying value over the fair value. As of December 31, 2023, we believe the estimated fair value of our one single reporting unit has substantially exceeded its carrying value.
We had 2,074 domestic customers and 884 international customers as of December 31, 2022, and 2,111 domestic customers and 691 international customer as of December 31, 2021. There was a decrease in domestic customers of 37, or 2%, and an increase in international customers of 193, or 28%, compared to December 31, 2021.
Under the prior methodology, we had 2,028 domestic customers and 1,069 international customers as of December 31, 2023, and 2,074 domestic customers and 884 international customers as of December 31, 2022. There was a decrease in domestic customers of 46, or 2%, and an increase in international customers of 185, or 21%, compared to December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.
Biggest changeThe primary objective of our investment activities is to preserve principal while generating income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future. A hypothetical 10% change in foreign exchange rates during the period presented would not have had a material impact on our consolidated financial statements. 82
We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future. A hypothetical 10% change in foreign exchange rates during the period presented would not have had a material impact on our consolidated financial statements. 88
These risks primarily include interest rate and currency exchange risks as follows: Interest Rate Risk We had cash, cash equivalents, and marketable securities of $683.1 million, as of December 31, 2022 which primarily consisted of bank deposits, money market funds, investment-grade commercial paper, corporate notes and bonds, U.S. treasury securities, foreign government and supranational securities and asset-backed securities held at major financial institutions.
These risks primarily include interest rate and currency exchange risks as follows: Interest Rate Risk We had cash, cash equivalents, and marketable securities of $328.8 million, as of December 31, 2023 which primarily consisted of bank deposits, money market funds, investment-grade commercial paper, corporate notes and bonds, U.S. treasury securities, agency bonds, foreign government and supranational securities and asset-backed securities held at major financial institutions.
If there is a change in foreign currency exchange rates, the conversion of our foreign subsidiaries’ financial statements into U.S. dollars would result in a realized gain or loss which is recorded in our consolidated statements of operations.
Revenue and expense accounts are remeasured at the average exchange rate in effect during the period. If there is a change in foreign currency exchange rates, the conversion of our foreign subsidiaries’ financial statements into U.S. dollars would result in a realized gain or loss which is recorded in our consolidated statements of operations.
The cash and cash equivalents are held for working capital purposes. The restricted cash is held as cash collateral in connection with our existing lease arrangements. To date, fluctuations in interest income have not been significant. The primary objective of our investment activities is to preserve principal while generating income without significantly increasing risk.
The cash and cash equivalents are held for working capital purposes. The restricted cash is held as cash collateral in connection with our existing lease arrangements. Our cash equivalents and our investment portfolio are subject to market risk due to fluctuations in interest rates.
A hypothetical 10% change in interest rates during the period presented would not have had a material impact on our consolidated financial statements. Currency Exchange Risks The functional currency of our foreign subsidiaries is the U.S. dollar. Therefore, we are exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars.
Currency Exchange Risks The functional currency of our foreign subsidiaries is the U.S. dollar. Therefore, we are exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars. Our foreign subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates.
Removed
Our foreign subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at the average exchange rate in effect during the period.
Added
Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during the period presented would not have had a material impact on our consolidated financial statements.

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