10q10k10q10k.net

What changed in Fastly, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Fastly, Inc.'s 2023 and 2024 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 2024 report.

+474 added−466 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-22)

Top changes in Fastly, Inc.'s 2024 10-K

474 paragraphs added · 466 removed · 369 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

63 edited+15 added−8 removed110 unchanged
Biggest changeInfrastructure 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.
Biggest changeAs of December 31, 2024, we had 389 employees in our research and development group. Our research and development expenses were $138.0 million for the year ended December 31, 2024. 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.
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.
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. 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.
The Fastly Managed Security Service is a full-service offering for our Next-Gen WAF, DDoS and Edge Rate Limiting customers who require comprehensive monitoring over their environments. • Response Security Service. Fastly’s Response Security Service provides Next-Gen WAF customers with priority, direct access to Fastly’s Customer Security Operations Center 24/7/365 along with regular configuration maintenance and an industry-leading response SLA.
The Fastly Managed Security Service is a full-service offering for our Next-Gen WAF, DDoS and Edge Rate Limiting customers who require comprehensive monitoring over their environments. 15 • Response Security Service. Fastly’s Response Security Service provides Next-Gen WAF customers with priority, direct access to Fastly’s Customer Security Operations Center 24/7/365 along with regular configuration maintenance and an industry-leading response SLA.
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.
These partners help expand our reach into new markets by offering 17 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.
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.
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. 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.
Metrics and logs along with every part of the request path are available for consumption in real-time without adding latency. 14 Services Professional Services. Fastly offers the following professional services: • Network Services. 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.
Metrics and logs along with every part of the request path are available for consumption in real-time without adding latency. Services Professional Services. Fastly offers the following professional services: • Network Services. 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.
The information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K. We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a), 14 and 15(d) of the Exchange Act.
The information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K. 22 We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a), 14 and 15(d) of the Exchange Act.
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.
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. 13 • 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.
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.
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. • Expansion into additional vertical markets.
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.
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.
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.
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, enhance security, and improve overall performance.
Our customers are able to make their own configuration changes versu s waiting on a professional services engagement. This translates into faster end-user experiences and cost savings. • DevOps-friendly. We have made it easy for our customers to integrate Fastly into their existing DevOps toolchains and workflows.
Our customers are able to make their own configuration changes versu s waiting on a professional services engagement. This translates into faster end-user experiences and cost savings. 8 • DevOps-friendly. We have made it easy for our customers to integrate Fastly into their existing DevOps toolchains and workflows.
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.
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 includes experts with deep experience who intimately understand customers’ technical challenges and build solutions accordingly.
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.
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. 20 Customer Support We have designed our products and platform to be self-service and require minimal customer support.
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.
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. Content Delivery Network • Dynamic Site Acceleration.
We plan to continually increase wallet-share over time for existing customers as we build out new products and features, and as customers continue to fully recognize the value of our platform. • Grow our technology partner ecosystem.
We plan to continually increase wallet-share over time for existing customers as we build out new products and features, and as customers continue to fully recognize the value of our platform. 16 • Grow our technology partner ecosystem.
Enables customers to push data in real time to many users, such as synchronous communication of messages in a chatroom, server updates to IoT devices and other types of data between devices. Realtime messaging is used in a wide range of data streaming applications, including IoT, live commenting, end user notifications, chat and more. • Domainr .
Enables customers to push data in real time to many users, such as synchronous communication of messages in a chatroom, server updates to IoT devices and other types of data between devices. Real-time messaging is used in a wide range of data streaming applications, including IoT, live commenting, end-user notifications, chat and more. 10 • Domainr .
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
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. 23
The 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.
The principal competitive factors in our market include: • platform functionality, scalability, performance, ease of use, ease of integration and programmability, reliability, security availability, and cost effectiveness; • 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; 18 • 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.
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.
We segment the competitive landscape into six key categories: • Legacy CDNs like Akamai; • Application and API security vendors like Akamai, Cloudflare, F5, and Thales (Imperva); • Point CDN players like Bunny CDN, CDNetworks, CDN77, and Qwilt; • CDN providers, which now offer serverless edge compute functionality like Akamai (Linode) and Cloudflare; • Public cloud providers that have added CDN and WAF capabilities like AWS, Google Cloud Platform, and Microsoft (Azure); and • Traditional on-premise, data center appliance vendors for load balancing, WAF, and/or DDoS like F5, Thales (Imperva), and Radware.
We are building a global, healthy, safe, and diverse workforce and an inclusive culture that empowers and supports our employees and customers. We onboard all new employees with training programs on our values, certain aspects of our business, and important policies, including our Safe, Welcoming, and Productive Work Environment Policy.
We are building a global, healthy, and safe workforce and an inclusive culture that empowers and supports our employees and customers, regardless of background. We onboard all new employees with training programs on our values, certain aspects of our business, and important policies, including our Safe, Welcoming, and Productive Work Environment Policy.
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.
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, 2024, 2023 and 2022, our revenue was $543.7 million, $506.0 million and $432.7 million, respectively.
Our eight core values define who we are and how we choose to grow, hire, train, work, communicate, make decisions, support each other, and serve our customers. Our Hiring Strategy We are dedicated to building a diverse workforce and leadership team that reflects our values and the unique needs of our global customer base.
Our eight core values define who we are and how we choose to grow, hire, train, work, communicate, make decisions, support each other, and serve our customers. 19 Our Hiring Strategy We are dedicated to building an inclusive workforce and leadership team that reflects our values and the unique needs of our global customer base.
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.
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. • Log Explorer & Insights.
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.
Our solution (available as part of our Next-Gen WAF) 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.
Legacy CDNs also failed to provide real-time visibility. Traffic logs were provided in batch format, meaning the data could be anywhere from 15 minutes to several hours old, making it impossible to monitor performance and get instant feedback. With a view to addressing these challenges, we have taken a fundamentally different approach to architecting our platform. • Powerful POPs.
Traffic logs were provided in batch format, meaning the data could be anywhere from 15 minutes to several hours old, making it impossible to monitor performance and get instant feedback. With a view to addressing these challenges, we have taken a fundamentally different approach to architecting our platform. • Powerful POPs.
Intellectual Property We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology. We also rely on a number of registered and unregistered trademarks to protect our brand.
Intellectual Property We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology.
Attackers test stolen credentials in an automated manner called “credential stuffing.” Our Account Takeover Protection empowers customers to automatically block and alert on credential stuffing attacks. Advanced Rate Limiting .
Attackers test stolen credentials in an automated manner called “credential stuffing.” Our Account Takeover Protection empowers customers to automatically block and alert on credential stuffing attacks. Bot Management.
This gives us the ability to create and destroy an isolated sandbox for each user request that comes through, enabling code to be run in a safe, fast execution environment at scale. • WASM compiler and runtime. To make this code run even faster, we built our own WASM compiler and runtime.
This gives us the ability to create and destroy an isolated sandbox for each user request that comes through, enabling code to be run in a safe, fast execution environment at scale. • WASM compiler and runtime.
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.
This helps avoid difficult third party log management and debugging challenges. ◦ Tracing. 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. • Developer Experience.
Advanced Rate Limiting enables customers to stop malicious and anomalous high volume web requests and reduce resource consumption while allowing legitimate traffic through to application and API endpoints—doing so means companies can provide a superior customer experience that scales to meet increasing demand. DDoS.
Advanced Rate Limiting enables customers to stop malicious and anomalous high volume web requests and reduce resource consumption while allowing legitimate traffic through to application and API endpoints—doing so means companies can provide a superior customer experience that scales to meet increasing demand. DDoS. Customers using Fastly’s CDN automatically get access to our always-on DDoS protection capabilities.
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.
Our solution requires no tuning, and is more accurate than the traditional rule or signature-based approaches. 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.
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 .
We have expanded the reach and breadth of these partners to include cross-selling delivery and security products. 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 .
The two primary channel partner types we work with are: • Referral partners: Recommend Fastly products to their customers for a commission and include partners like agencies and consultants; and • Reseller partners: Act as a reseller to offer additional value on top of Fastly’s products and services and include partners like value-added resellers, managed service providers, managed security service providers, system integrators, and more.
The three primary channel partner types we work with are: • Referral partners: Recommend Fastly products to their customers for a commission and include partners like agencies and consultants; and • Reseller partners: Act as a reseller to offer additional value on top of Fastly’s products and services and include partners like value-added resellers, system integrators, and more. • MSP and MSSP partners: Utilize Fastly technology to enhance and optimize the offerings to their customer base.
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 provide a number of different certificate procurement and hosting options. • Platform TLS. 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.
Content streaming organizations leverage Fastly's platform to deliver content 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.
Content streaming organizations leverage Fastly's platform to deliver content to users around the world and those that livestream gain easy access to enormous edge compute resources for even greater reliability.
Our mission is to make the Internet a better place where all experiences are fast, safe, and engaging. We want all developers to have the ability to deliver the next transformative digital experience on a global scale.
The range of applications that developers build with our edge cloud platform continues to expand rapidly. 7 Our mission is to make the Internet a better place where all experiences are fast, safe, and engaging. We want all developers to have the ability to deliver the next transformative digital experience on a global scale.
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.
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.
Ideal for companies moving more than one gigabyte of data per second, such as media, video, and streaming companies, Origin Connect provides a direct private network connection between an organization’s origin server and an Origin Shield POP. It is an effective way to lower transit costs, reduce engineering complexity, and improve reliability for high-volume streaming content.
Origin Connect • Origin Connect. Ideal for companies moving more than one gigabyte of data per second, such as media, video, and streaming companies, Origin Connect provides a direct private network connection between an organization’s origin server and an Origin Shield POP.
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.
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.
Through our observability offerings, we also provide real-time insights to inform continuous performance improvements and facilitate faster debugging during development. S ee Compute and Observability sections below for more details. Network Services Fastly is an extension of our customers’ infrastructure.
To make this code run even faster, we built our own WASM compiler and runtime. 9 Through our observability offerings, we also provide real-time insights to inform continuous performance improvements and facilitate faster debugging during development. See “ Compute” and “Observability” secti ons below for more details. Network Services Fastly is an extension of our customers’ infrastructure.
For example, we have seen customers release new code to production multiple times a day instead of once a month. 8 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.
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.
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.
Employees As of December 31, 2024, we had a total of 1,100 employees worldwide and 240 employees located outside of the United States; 45% of our employees resided within 50 miles of a Fastly office and 55% 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.
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.
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.
TLS Encryption • Transport Layer Security (“TLS”). As part of our standard product, our platform terminates HTTPS connections at our network edge, offloading encrypted traffic from our customers’ web servers for better performance. We provide a number of different certificate procurement and hosting options. • Platform TLS.
Fastly DDoS Protection offers a zero attack fee billing model ensuring customers are not billed for attack traffic. 12 TLS Encryption • Transport Layer Security (“TLS”). As part of our standard product, our platform terminates HTTPS connections at our network edge, offloading encrypted traffic from our customers’ web servers for better performance.
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 rely on a number of registered and unregistered trademarks to protect our brand. 21 As of December 31, 2024, in the United States, we had 105 issued or allowed patents, which expire between August 2033 and March 2042, and three patent applications pending for examination.
In our process, we evaluate commodity server and network platforms to avoid vendor lock-in, while optimizing the mix of components in an effort to improve efficiency and optimize our capital expenditures. We intend to grow the number of data center colocation sites as traffic on our network grows and as demands for new markets justify investment.
We intend to grow the number of data center colocation sites as traffic on our network grows and as demands for new markets justify investment.
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.
Our modern approach to application security provides the accuracy, flexibility, and ease-of-use that our customers have come to know and expect. 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.
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.
As of such date, we also had 25 issued patents and nine patent applications published or pending for examination in foreign jurisdictions, all of which are related to U.S. patents and patent applications. In addition, as of December 31, 2024, we had 20 registered trademarks and two pending trademarks in the United States.
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.
These solutions are designed to be real-time, scalable, and customizable, offering businesses the ability to tailor their security to their specific needs. With a focus on performance and flexibility, Fastly enables businesses to safeguard their digital experiences. Next-Gen WAF . Our next-generation Web Application Firewall protects applications from malicious attacks that seek to compromise apps and APIs.
Legacy CDNs could not cache highly dynamic content at the edge–they had to continuously go back to origin to fetch this content, driving up egress costs. Deploying changes meant, at best, hours-long waits for configurations to propagate. At worst, it meant being forced to engage professional services at a cost of hundreds of dollars an hour.
Deploying changes meant, at best, hours-long waits for configurations to propagate. At worst, it meant being forced to engage professional services at a cost of hundreds of dollars an hour. Legacy CDNs also failed to provide real-time visibility.
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.
In addition to real-time logs and metrics, which all our products benefit from, Compute 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.
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.
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. • Video on Demand. Reduces the load on origin servers and accelerates time-to-first-frame by caching and rapidly delivering Video on Demand content.
We support a number of protocols that allow our customers to stream logs to a variety of locations, including third-party services, for storage and analysis. • Live Event Monitoring.
We support a number of protocols that allow our customers to stream logs to a variety of locations, including third-party services, for storage and analysis. • Logging Insights. Fastly Logging Insights is a professional services package that provides actionable intelligence that can be used to diagnose and troubleshoot issues for optimal performance and user experience.
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.
Fastly works with a broad range of the service provider community, entities such as Managed Service Providers (MSP) and Managed Security Service Providers (MSSP). Partners 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 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.
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 Last-Twelve Months Net Retention Rate ("LTM NRR") metrics. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics" for further discussion of LTM NRR.
It supports delivery and management of hundreds of thousands of certificates, supported by our worldwide TLS termination and acceleration solution. • Certainly : In August 2023, we launched Certainly, our own publicly-trusted TLS Certification Authority (“CA”).
It supports delivery and management of hundreds of thousands of certificates, supported by our worldwide TLS termination and acceleration solution. • Certainly. Certainly is our own publicly-trusted TLS Certification Authority (“CA”). Fastly customers can use a certificate issued by Certainly to secure any website or API endpoint served by our CDN. Privacy. Fastly offers several privacy enablement capabilities.
We sit between our customers’ end users and their origin–whether that’s in the cloud, on premise or a hybrid environment–and power online experiences that are fast, safe, and engaging. Fastly was founded in an era where legacy CDNs were failing to keep up with the explosive growth of user-generated content and demands for faster, more personalized websites and apps.
Products & Services Programmable Edge Platform Fastly’s programmable edge platform was built to support modern digital experiences. We sit between our customers’ end users and their origin—whether that’s in the cloud, on premise or a hybrid environment—and power online experiences that are fast, safe, and engaging.
These activities allow us to connect in close proximity to core Internet backbones and Internet service providers, thereby enhancing network performance. We carefully evaluate and test hardware from leading server, network, and component manufacturers to assess their compliance with our workload performance, system efficiency, and mean time-to-repair standards.
We carefully evaluate and test hardware from leading server, network, and component manufacturers to assess their compliance with our workload performance, system efficiency, and mean time-to-repair standards. In our process, we evaluate commodity server and network platforms to avoid vendor lock-in, while optimizing the mix of components in an effort to improve efficiency and optimize our capital expenditures.
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.
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. • Live Event Monitoring.
As an alternative to CAPTCHAs, Privacy Access Tokens provide better user privacy by helping ensure there is no leakage of non-essential data. Video / Streaming • Live Streaming. Delivers millions of concurrent high-quality live streams. It can deliver online content using major HTTP streaming formats while providing real-time feedback to optimize viewer experiences.
As an alternative to CAPTCHAs, Privacy Access Tokens provide better user privacy by helping ensure there is no leakage of non-essential data. Compliance.
Security Security is an essential part of every online business, and customers rely on Fastly to help rapidly secure their business-critical websites, apps, and APIs. Our modern approach to application security provides the accuracy, flexibility, and ease-of-use that our customers have come to know and expect.
It is an effective way to lower transit costs, reduce engineering complexity, and improve reliability for high-volume streaming content. 11 Security Security is an essential part of every online business, and customers rely on Fastly to help rapidly secure their business-critical websites, apps, and APIs.
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.
Glitch is a popular tool for web-based development with a total lifetime user count of over 3.1 million registered developers as of December 2024. Glitch has become a cornerstone for Fastly’s developer community, supporting learning initiatives, code samples, and demos created by developers from all corners of the internet. 14 • Open Source Support.
Removed
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics" for further discussion of DBNER, NRR and LTM NRR. Products & Services Programmable Edge Platform Fastly’s programmable edge platform was built to support modern digital experiences.
Added
We continue to invest in our business and had a net loss of $158.1 million, $133.1 million and $190.8 million for the fiscal years ended December 31, 2024, 2023 and 2022, respectively.
Removed
Fastly customers can use a certificate issued by Certainly to secure any website or API endpoint served by our CDN. 11 Origin Connect • Origin Connect.
Added
Fastly was founded in an era where legacy CDNs were failing to keep up with the explosive growth of user-generated content and demands for faster, more personalized websites and apps. Legacy CDNs could not cache highly dynamic content at the edge—they had to continuously go back to origin to fetch this content, driving up egress costs.
Removed
Our DDoS protection is an always-on service that provides immediate protection from network and application layer attacks, so web apps and APIs are always available and performant. Our high-bandwidth, globally distributed network is built to absorb DDoS attacks without impacting performance.
Added
Fastly's Bot Management is an add-on service that provides customers with visibility into bot traffic, allowing them to differentiate between good and bad bots at the network edge, closer to where requests arrive and further from their origin.
Removed
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.
Added
They can then enforce rulesets and policies in the Fastly Next-Gen WAF control panel as part of their web asset and application protection measures. Advanced Rate Limiting .
Removed
It leverages the Hashicorp vault to centrally store, access, and manage secrets across Fastly's cloud infrastructure. • Visibility. In addition to real-time logs and metrics, which all our products benefit from, Compute also features log tailing and tracing to improve developer visibility. ◦ Log Tailing.
Added
These capabilities provide immediate protection from Layer 3 and 4 DDoS attacks which can target network infrastructure by flooding systems with large volumes of traffic.Our high-bandwidth, globally distributed network is built to absorb these network layer DDoS attacks, helping to ensure websites and services stay up and running despite attacks.
Removed
Customers can easily monitor traffic for a single fully qualified domain name or multiple domains within a Fastly service.
Added
Fastly DDoS Protection is an add-on service which provides extra application layer protection against DDoS attacks. Fastly DDoS Protection blocks application DDoS attacks without requiring any upfront tuning.
Removed
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.
Added
When unexpected volumetric attack events arise, our proprietary attribute unmasking techniques validate their legitimacy, and if malicious, begin scanning a comprehensive list of characters to find the attacker and quickly mitigate their attacks, even if they rotate IPs.
Removed
In addition, as of December 31, 2023, we had 19 registered trademarks and one pending trademark in the United States.
Added
It leverages the Hashicorp vault to centrally store, access, and manage secrets across Fastly's cloud infrastructure. • Storage. Fastly Object Storage is an Amazon S3-compatible large object storage solution that works seamlessly with Fastly’s Compute service. Customers can store large file sizes with Fastly, improving latency, increasing cache hit ratios, and reducing egress charges.
Added
Objects stored in Fastly Object Storage are accessible via an S3 - compatible interface. • AI Accelerator . AI Accelerator is a semantic caching solution designed to enhance performance and reduce costs for Large Language Model (LLM) generative AI applications.

… 6 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

195 edited+53 added−34 removed381 unchanged
Biggest changeEven if our Class A common stock is actively covered by analysts, we do not have any control over the analysts or the measures that analysts or investors may rely upon to forecast our future results. Over-reliance by analysts or investors on any particular metric to forecast our future results may result in forecasts that differ significantly from our own.
Biggest changeIf the number of analysts that cover us declines, demand for our common stock could decrease and our common stock price and trading volume may decline. Even if our common stock is actively covered by analysts, we do not have any control over the analysts or the measures that analysts or investors may rely upon to forecast our future results.
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.
Since our customers share our multi-tenant architecture, cyber-attacks on any one of our customers could have a negative effect on our other customers. In the past, these attacks have significantly increased the bandwidth used on our platform and have strained our network.
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.
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 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.
Overall growth of our business depends on a number of factors, including our ability to: • address new and developing markets, such as large enterprise customers outside the United States; • recruit, hire, train, and manage additional qualified engineers and product managers; • recruit, hire, train, and manage additional sales and marketing personnel; • maintain and enhance our corporate culture; • expand our international operations; • establish more mature organizational designs and structures, with more skill, technical and leadership depth with experience scaling and expanding global businesses; • implement and improve our administrative, financial and operational systems, procedures, and controls; • attract new customers and increase our existing customers’ usage on our platform; • expand the functionality and use cases for the products we offer on our platform; • provide our customers with customer support that meets their needs; • successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our products; and • recruit experienced leaders and strategists to facilitate successful acquisitions and integrations.
Overall growth of our business depends on a number of factors, including our ability to: • address new and developing markets, such as large enterprise customers outside the United States; • recruit, hire, train, and manage additional qualified engineers and product managers; 41 • recruit, hire, train, and manage additional sales and marketing personnel; • maintain and enhance our corporate culture; • expand our international operations; • establish more mature organizational designs and structures, with more skill, technical and leadership depth with experience scaling and expanding global businesses; • implement and improve our administrative, financial and operational systems, procedures, and controls; • attract new customers and increase our existing customers’ usage on our platform; • expand the functionality and use cases for the products we offer on our platform; • provide our customers with customer support that meets their needs; • successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our products; and • recruit experienced leaders and strategists to facilitate successful acquisitions and integrations.
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.
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.
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.
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 31 • our ability to identify opportunities for acquisitions and strategic relationships and successfully execute on them.
If there is no lawful manner for us to transfer personal information from the EEA, the UK or other jurisdictions to the United States or elsewhere, or if the requirements for a legally-compliant transfer are too onerous, we may face significant adverse consequences, such as the interruption or degradation of our operations, increased exposure to regulatory actions, substantial fines, injunctions against processing or transferring personal information, determinations by customers not to use our services, limited ability to collaborate with parties that are subject to cross-border data transfer or localization laws, and the need to increase or relocate our personal information processing capabilities and infrastructure in foreign jurisdictions at significant expense.
If there is no lawful manner for us to transfer personal information from the EEA, the UK or other jurisdictions to the United States or elsewhere, or if the requirements for a legally-compliant transfer are too onerous, we may face significant adverse consequences, such as the interruption or degradation of our operations, increased exposure to regulatory actions, substantial fines, injunctions against processing or transferring personal information, determinations by customers not to use our services, limited ability to collaborate with parties that are subject to cross-border data transfer or localization laws, and the 49 need to increase or relocate our personal information processing capabilities and infrastructure in foreign jurisdictions at significant expense.
We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code , malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, account takeover attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, attacks facilitated or enhanced by artificial intelligence (“AI”), loss of data or other information technology assets, adware, telecommunications failures, natural disasters, and other similar threats.
We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code, malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (“DDoS”), account takeover attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, attacks facilitated or enhanced by artificial intelligence (“AI”), loss of data or other information technology assets, adware, telecommunications failures, natural disasters, and other similar threats.
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.
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.
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.
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 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.
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.
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.
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.
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; 36 • 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.
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.
The market price of our 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 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 economy, labor shortages, supply chain disruptions, inflation, increased interest rates, banking instability and slow or negative growth of our markets.
Moreover, any failure to identify new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements that may continue undetected and cause us to fail to meet our reporting and financial obligations or incur significant additional costs to remediate new material weaknesses, each of which could harm our ability to raise capital on favorable terms in the future or otherwise have a negative impact on our financial condition.
Moreover, any failure to identify new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements that may continue undetected and cause us 46 to fail to meet our reporting and financial obligations or incur significant additional costs to remediate new material weaknesses, each of which could harm our ability to raise capital on favorable terms in the future or otherwise have a negative impact on our financial condition.
Several U.S. federal statutes may apply to us with respect to various activities of our customers, including the Digital Millennium Copyright Act (“DMCA”), which provides recourse for owners of copyrighted material who believe their rights 48 under U.S. copyright law have been infringed on the Internet; and section 230, enacted in the Communications Decency Act (“CDA”), which addresses blocking and screening of content on the Internet.
Several U.S. federal statutes may apply to us with respect to various activities of our customers, including the Digital Millennium Copyright Act (“DMCA”), which provides recourse for owners of copyrighted material who believe their rights under U.S. copyright law have been infringed on the Internet; and section 230, enacted in the Communications Decency Act (“CDA”), which addresses blocking and screening of content on the Internet.
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.
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.
Pricing decisions may also impact the mix of adoption among our customers and negatively impact our overall revenue. Moreover, larger organizations may demand substantial price concessions. As a result, in the future we may be required to reduce our prices or develop new pricing models, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow.
Pricing decisions may also impact the mix of adoption among our customers and negatively impact our overall revenue. Moreover, larger organizations may demand substantial price concessions. As a result, in the future we may be 37 required to reduce our prices or develop new pricing models, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow.
If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
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.
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.
Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market is essential. If we are unable to develop products internally due to inadequate or ineffective research and development resources, we may not be able to address our customers’ needs on a timely basis or at all.
Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market is essential. If we are unable to develop products internally due to inadequate or ineffective research and 38 development resources, we may not be able to address our customers’ needs on a timely basis or at all.
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.
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.
In order to manage attrition, including as a result of recent stock price decreases and market volatility on the perceived value of our equity awards, we have issued, and may continue to issue, additional equity awards and increased cash compensation to attract and retain employees, which may impact our results of operations or be dilutive to stockholders.
In order to manage attrition, including as a result of stock price decreases and market volatility on the perceived value of our equity awards, we have issued, and may continue to issue, additional equity awards and increased cash compensation to attract and retain employees, which may impact our results of operations or be dilutive to stockholders.
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.
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.
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.
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.
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.
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.
To the extent we experience this seasonality, it may cause fluctuations in our operating results and financial metrics, and make forecasting our future operating results and financial metrics difficult. Additionally, we do not have sufficient experience in selling certain of our products to determine if demand for these products is, or will be, subject to material seasonality.
To the extent we 43 experience this seasonality, it may cause fluctuations in our operating results and financial metrics, and make forecasting our future operating results and financial metrics difficult. Additionally, we do not have sufficient experience in selling certain of our products to determine if demand for these products is, or will be, subject to material seasonality.
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.
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 customer taxes.
If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.
If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax 54 charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.
However, these developers may not perceive value in the additional benefits and services we offer beyond the free trial versions of our platform and may choose not to pay for those additional benefits. Moreover, some existing paying customers may choose not to renew their commitment with us in favor of relying on the free version of our platform.
However, these developers may not perceive value in the additional benefits and services we offer beyond the free trial versions of our platform and may choose not to pay for those additional benefits. Moreover, some 30 existing paying customers may choose not to renew their commitment with us in favor of relying on the free version of our platform.
In addition, we will need to appropriately scale our processes and procedures that support our growing customer base, including increasing our number of POPs around the world and investments in systems, training, and customer support. Any failure of or delay in these efforts could cause impaired system performance and reduced customer satisfaction.
In addition, we will need to appropriately scale our processes and procedures that 33 support our growing customer base, including increasing our number of POPs around the world and investments in systems, training, and customer support. Any failure of or delay in these efforts could cause impaired system performance and reduced customer satisfaction.
A takeover of us may trigger the requirement that we repurchase the Notes, increase the conversion rate, or both, which could make it costlier for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.
A takeover of us may trigger the requirement that 62 we repurchase the Notes, increase the conversion rate, or both, which could make it costlier for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.
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.
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.
Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers. Current or future economic uncertainties or downturns could adversely affect our business and results of operations. The U.S. capital markets experienced and continue to experience extreme volatility.
Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers. Current or future economic uncertainties or downturns could adversely affect our business and results of operations. 55 The U.S. capital markets experienced and continue to experience extreme volatility.
In addition, we may need to secure additional funds for our existing debt obligations, including repayment of the Notes. We may sell Class A common stock, convertible securities, and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time.
In addition, we may need to secure additional funds for our existing debt obligations, including repayment of the Notes. We may sell common stock, convertible securities, and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time.
Like many other companies, our ability to monitor third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences.
Like many other companies, our ability to monitor third parties’ information security practices is limited, and these third parties may not have adequate information 28 security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences.
Our customers host certain large-scale events, such as sporting events or coverage of major elections, increasing their usage on a seasonal or one-time basis which can cause revenue to fluctuate between the periods in which these events occur and subsequent periods.
Some of our customers host certain large-scale events, such as sporting events or coverage of major elections, increasing their usage on a seasonal or one-time basis which can cause revenue to fluctuate between the periods in which these events occur and subsequent periods.
In addition, these governmental agencies may be required to publish the rates we negotiate with them, which could harm our negotiating leverage with other potential customers and in turn harm our business. The success of our business depends on customers’ continued and unimpeded access to our platform on the Internet.
In addition, these 51 governmental agencies may be required to publish the rates we negotiate with them, which could harm our negotiating leverage with other potential customers and in turn harm our business. The success of our business depends on customers’ continued and unimpeded access to our platform on the Internet.
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.
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: 24 • 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.
Our limited operating history and our history of operating losses makes it difficult to evaluate our current business and prospects and may increase the risks associated with your investment. We were founded in 2011 and have experienced net losses and negative cash flows from operations since inception.
Our history of operating losses makes it difficult to evaluate our current business and prospects and may increase the risks associated with your investment. We were founded in 2011 and have experienced net losses and negative cash flows from operations since inception.
If we fail to achieve the necessary level of efficiency in our company as it grows, or if we are not able to accurately forecast future growth, our business would be negatively impacted. If we cannot maintain our company culture as we grow, our success and our business may be harmed.
If we fail to achieve the necessary level of efficiency in our company as it grows, or if we are not able to accurately forecast future growth, our business would be negatively impacted. 42 If we cannot maintain our company culture as we grow, our success and our business may be harmed.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.
The 2018 decision was largely affirmed by the United States Court 49 of Appeals for the District of Columbia Circuit, subject to a remand to consider several issues raised by parties that supported network neutrality, and in November 2020 the FCC affirmed its decision to repeal the rules.
The 2018 decision was largely affirmed by the United States Court of Appeals for the District of Columbia Circuit, subject to a remand to consider several issues raised by parties that supported network neutrality, and in November 2020 the FCC affirmed its decision to repeal the rules.
In addition, changes to our customers’ business may contribute to further customer concentration, including any impact from acquisition activities, internal business reorganizations leading to operational and decision making changes, and corporate structure changes such as subsidiary consolidation and reorganization that may arise in the future.
In addition, changes to our customers’ businesses may contribute to further customer concentration, including any impact from acquisition activities, internal business reorganizations leading to operational and decision making changes, and corporate structure changes such as subsidiary consolidation and reorganization that may arise in the future.
These proposals, recommendations and enactments include changes to the existing framework in respect of income taxes, as well as new types of non-income taxes (such as taxes based on a percentage of revenue or taxes applicable to digital services), which could apply to our business.
These proposals, recommendations and enactments include changes to the existing 53 framework in respect of income taxes, as well as new types of non-income taxes (such as taxes based on a percentage of revenue or taxes applicable to digital services), which could apply to 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.
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 defective or obsolete equipment, or cause other constraints on our operations that could damage our customer relationships and harm our business.
If we are unable to develop and sell new products that satisfy and are adopted by our customers and provide enhancements, new features, and capabilities to our platform that keep pace with rapid technological and industry change, our revenue and operating results could be adversely affected.
If we are unable to develop 29 and sell new products that satisfy and are adopted by our customers and provide enhancements, new features, and capabilities to our platform that keep pace with rapid technological and industry change, our revenue and operating results could be adversely affected.
We also plan to continue to dedicate significant resources to sales, marketing, and demand-generation programs, including various online marketing activities as well as targeted account-based advertising. The effectiveness of our targeted account-based advertising has varied over time and may vary in the future.
We also plan to continue to dedicate significant resources to sales, marketing, and demand-generation programs, including various online marketing activities as well as targeted account-based marketing. The effectiveness of our targeted account-based marketing has varied over time and may vary in the future.
Our operating results, including revenue, gross margin and net income, as well as our key metrics, including our DBNER, NRR and LTM NRR, have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control.
Our operating results, including revenue, gross margin and net income, as well as our key metrics, including our LTM NRR, have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control.
During the year ended December 31, 2022, we entered into separate, privately negotiated transactions with certain holders of the Notes to repurchase approximately $235.0 million aggregate outstanding principal amount of the Notes for an aggregate cash repurchase price of approximately $176.4 million.
During the year ended December 31, 2022, we entered into separate, privately negotiated transactions with certain holders of the Notes to repurchase approximately $235.0 million aggregate outstanding principal amount of the 2026 Notes for an aggregate cash repurchase price of approximately $176.4 million.
Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.
Some of these agreements provide for uncapped liability for which we would be responsible, and some provisions survive termination or expiration of the applicable agreement. Large liability payments could harm our business, results of operations, and financial condition.
Some of these agreements provide for uncapped liability for which we would be responsible, and some 57 provisions survive termination or expiration of the applicable agreement. Large liability payments could harm our business, results of operations, and financial condition.
As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our Class A common stock and diluting their interests. Seasonality may cause fluctuations in our sales and operating results.
As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests. Seasonality may cause fluctuations in our sales and operating results.
The conversion of some or all of the Notes will dilute the ownership interests of our stockholders. Upon conversion of the Notes, we have the option to pay or deliver, as the case may be, cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock.
The conversion of some or all of the Notes will dilute the ownership interests of our stockholders. Upon conversion of the Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock.
If we elect to settle our conversion obligation in shares of our Class A common stock or a combination of cash and shares of our Class A common stock, any sales in the public market of our Class A common stock issuable upon such conversion could adversely affect prevailing market prices of our Class A common stock.
If we elect to settle our conversion obligation in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
In a bankruptcy, the holders of the Notes would have a claim to our assets that is senior to the claims of our equity holders. Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our Class A common stock.
In a bankruptcy, the holders of the Notes would have a claim to our assets that is senior to the claims of our equity holders. Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.
If these customers do not maintain and increase their usage of our platform, our revenue may decline and our results of operations will likely be harmed. For some of our products, we charge our customers based on the usage of our platform.
If these customers do not maintain and increase their usage of our platform, our revenue may decline and our results of operations will likely be harmed. For some of our products, we charge our customers based on their usage of our platform.
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 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. 63 Item 1B. Unresolved Staff Comments None.
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 common stock.
Our actual or perceived failure to comply with such obligations could harm our business, by resulting in regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, adverse publicity and reputational damage, loss of revenue or profits, loss of customers or sales and other adverse consequences that may negatively affect the value of our business and decrease the price of our Class A common stock.
Our actual or perceived failure to comply with such obligations could harm our business, by resulting in regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, adverse publicity and reputational damage, loss of revenue or profits, loss of customers or sales and other adverse consequences that may negatively affect the value of our business and decrease the price of our common stock.
For example, we may not be able to effectively monitor certain extraordinary contract requirements or provisions that are individually negotiated by our sales force as the number of transactions continues to grow. Moreover, as we continue to improve our pricing structure, we will need to implement corresponding improvements to our systems around payment of sales commissions.
For example, we may not be able to effectively monitor certain extraordinary contract requirements or provisions that are individually negotiated by our sales force as the number of transactions continues to grow. Moreover, as we continue to improve our pricing structure, we will need to implement and maintain corresponding improvements to our systems around payment of sales commissions.
Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, customer growth, results of operations, financial condition, or prospects. Any of these events could cause the trading price of our Class A common stock to decline, which would cause our stockholders to lose all or part of their investment.
Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, customer growth, results of operations, financial condition, or prospects. Any of these events could cause the trading price of our common stock to decline, which would cause our stockholders to lose all or part of their investment.
We depend, in part, on our third-party facility providers’ ability to protect these facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts, armed conflict, public health issues, such as a pandemic or epidemic, and similar events.
We depend, in part, on our third-party facility providers’ ability to protect these facilities against damage or interruption from natural disasters, extreme weather events, power or telecommunications failures, criminal acts, armed conflict, public health issues, such as a pandemic or epidemic, and similar events.
In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted as described in the indenture governing the Notes.
In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted as described in the indenture governing the Notes.
We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our Class A common stock. Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock. Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them, and in case of an intellectual property infringement indemnification claim, we may be required to cease use of certain functions of our platform as a result of any such claims.
Although we often contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them, and in case of an intellectual property infringement indemnification claim, we may be required to cease use of certain functions of our platform as a result of any such claims.
Anti-takeover provisions in our charter documents, the indenture governing the Notes, and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current board of directors or management and limit the market price of our Class A common stock.
Anti-takeover provisions in our charter documents, the indenture governing the Notes, and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current board of directors or management and limit the market price of our common stock.
These encryption products and the underlying technology may be exported outside of the United States only with the required export 52 authorizations.
These encryption products and the underlying technology may be exported outside of the United States only with the required export authorizations.
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.
Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our 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.
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.
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, including as a result of tariffs imposed by the current administration; • 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; 44 • 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 scope, strength and enforcement of 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 • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
For additional information regarding the conditional conversion feature of the Notes, see Note 9, Debt Instruments. Future sales and issuances of our capital stock or rights to purchase capital stock could result in dilution of the percentage ownership of our stockholders and could cause the price of our Class A common stock to decline.
For additional information regarding the conditional conversion feature of the Notes, see Note 9, Debt Instruments. Future sales and issuances of our capital stock or rights to purchase capital stock could result in dilution of the percentage ownership of our stockholders and could cause the price of our common stock to decline.
Risks Related to Our Financial Position and Need for Additional Capital Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all, and debt or equity issued to raise additional capital may reduce the value of our Class A common stock.
Risks Related to Our Financial Position and Need for Additional Capital Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all, and debt or equity issued to raise additional capital may reduce the value of our common stock.
In the EU and the UK, regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising ecosystem. It is anticipated that the ePrivacy Regulation and national implementing laws will replace the current national laws that implement the ePrivacy Directive that governs electronic communications.
In the EU and the United Kingdom ("UK"), regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising ecosystem. It is anticipated that the ePrivacy Regulation and national implementing laws will replace the current national laws that implement the ePrivacy Directive that governs electronic communications.
In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention.
In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We are currently and may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention.
In January 2018, the Federal Communications Commission, or the FCC, repealed the “network neutrality” rules adopted during the Obama Administration, which barred Internet service providers from blocking or slowing down access to online content, protecting services like ours from such interference.
In January 2018, the Federal Communications Commission (the “FCC”), repealed the “network neutrality” rules adopted during the Obama Administration, which barred Internet service providers from blocking or slowing down access to online content, protecting services like ours from such interference.
If we fail to meaningfully protect our intellectual property and proprietary rights, our business may be harmed. We may in the future be subject to legal proceedings and litigation relating to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business.
If we fail to meaningfully protect our intellectual property and proprietary rights, our business and competitive advantage may be harmed. We may in the future be subject to legal proceedings and litigation relating to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business.
Additionally, the shares of Class A common stock subject to outstanding options and restricted stock unit awards under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans will become eligible for sale in the public market upon issuance, subject to applicable insider trading policies.
Additionally, the shares of common stock subject to outstanding options and restricted stock unit awards under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans will become eligible for sale in the public market upon issuance, subject to applicable insider trading policies.
We may incur charges in future periods related to server management or incorrectly forecast our network capacity needs in future periods. If we have excess server capacity, we have in the past and may need to continue to write-down or write-off server assets, which may materially harm our operating results.
We may incur charges in future periods related to server management or incorrectly forecast our network capacity needs in future periods. If we have excess server capacity, we have in the past needed to, and may in the future need to, write-down or write-off server assets, which may materially harm our operating results.
The SEC and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our Class A common stock).
The SEC and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our common stock).
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.
Any governmental or regulatory action that restricts the ability of investors in, or potential purchasers of, the Notes to effect short sales of our common stock, borrow our common stock or enter into swaps on our common stock could adversely affect the trading price and the liquidity of the Notes.
Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. 59 We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. 61 We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

… 202 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+1 added−0 removed12 unchanged
Biggest changeRisk Factors in this Annual Report on Form 10-K, including “If our information technology systems or data, or those of third parties upon which we rely, are compromised now, or in the future, or the security, confidentiality, integrity or availability of our information technology, software, services, networks, communications or data is compromised, limited or fails, our business could experience materially adverse consequences, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, loss of revenue or profits, loss of customers or sales, reputational harm, and other adverse consequences.” Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
Biggest changeRisk Factors in this Annual Report on Form 10-K, including “If we or our third-party providers fail to protect our IT Systems or Confidential Information, and/or experience a data security incident our business could experience materially adverse consequences, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, loss of revenue or profits, loss of customers or sales, reputational harm, and other adverse consequences.” Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general risk oversight function.
Cybersecurity Risk management and strategy We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, trade secrets, personal information, and data of our customers (including their end-users) (“Information Systems and Data”).
Cybersecurity Risk management and strategy We have implemented and maintain various cybersecurity processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, trade secrets, personal information, and data of our customers (including their end-users) (“Information Systems and Data”).
We use third-party service providers to perform a variety of functions throughout our business, such as providing cloud-based infrastructure, hosting third party applications, and delivering content to customers, as well as data center hosting. We have a formal vendor management program to manage cybersecurity risks associated with our use of these providers.
We use third-party service providers to perform a variety of functions throughout our business, such as providing cloud-based infrastructure, hosting third party applications, and delivering content to customers, as well as data center hosting. We have a formal vendor management program designed to manage cybersecurity risks associated with our use of these providers.
Depending on the criticality of the vendor–which is based on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the identity of the provider–our vendor security review process involves different levels of assessment designed to identify cybersecurity risks associated with a provider prior to onboarding and on a periodic basis, including, for example: (1) a vendor security questionnaire; (2) results of audit reports and certifications; and (3) policies and standards detailing the third-party’s security program.
Depending on the criticality of the vendor–which is based on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the identity of the provider–our security organization conducts our vendor security review process, which involves different levels of assessment designed to identify cybersecurity risks associated with a provider prior to onboarding and on a periodic basis, including, for example: (1) a vendor security questionnaire; (2) results of audit reports and certifications; and (3) policies and standards detailing the third-party’s security program.
Depending on the environment, system, and data, we implement and maintain various technical, physical, and organizational measures, processes, standards, and/or policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: an incident response plan; incident detection and response; vulnerability management policy; disaster recovery plans; risk assessments; implementation of security standards and certifications; encryption of data; network security protocols; data segregation; access controls; physical security; asset management, tracking and disposal; systems monitoring, vendor risk management program; employee training; penetration testing; cybersecurity insurance; and a dedicated CISO and security organization.
Depending on the environment, system, and data, we implement and maintain various technical, physical, and organizational measures, processes, standards, and/or policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: an incident response plan; incident detection and response; vulnerability management policy; business continuity plan; risk assessments; implementation of security standards and certifications; encryption of data; network security protocols; data segregation; access controls; physical security; asset management, tracking and disposal; systems monitoring, vendor risk management program; employee training; penetration testing; cybersecurity insurance; and a dedicated CISO and security organization.
Based on the results of the vendor security review, a decision is made on whether the third-party can be engaged. We review our most critical providers' audit reports and certifications on an annual basis to reassess whether or not they have experienced any material changes or degradations to their security programs since our initial 62 review that may warrant re-evaluation.
Based on the results of the vendor security review, a decision is made on whether the third-party can be engaged. We review our most critical providers' audit reports and certifications on a regular basis to reassess whether or not they have experienced any material changes or degradations to their security programs since our initial review that may warrant re-evaluation.
The security organization conducts a risk assessment to determine the criticality of the vendor prior to onboarding.
The procurement organization conducts an initial risk assessment to determine the criticality of the vendor prior to onboarding.
The Company generally engages reputable third-party service providers and when appropriate, imposes contractual obligations related to cybersecurity on its providers. For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A.
We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A.
Added
The Company 64 generally attempts to engage reputable third-party service providers and when appropriate, imposes contractual obligations related to cybersecurity on its providers. We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeItem 2. Properties Our corporate headquarters is located in San Francisco, California and consists of approximately 71,343 square feet of space under a lease that expires on July 31, 2027. We also maintain offices in Culver City, Denver, Pleasanton, New York, London and Tokyo. We lease all of our facilities and do not own any real property.
Biggest changeItem 2. Properties Our corporate headquarters is located in San Francisco, California and consists of approximately 71,343 square feet of space under a lease that expires on July 31, 2027. We also maintain offices in Denver, Pleasanton, New York, London and Tokyo. We lease all of our facilities and do not own any real property.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−1 removed5 unchanged
Biggest changeWe 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.
Biggest changeWe have presented below the cumulative total return to our stockholders between December 31, 2019 through December 31, 2024 in comparison to the S&P 500 Index and S&P 500 Information Technology Index. The graph assumes a $100 initial investment at the market close on December 31, 2019.
Item 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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our 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, 2024, there were 41 holders of record of our common stock.
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
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common stock. 67 Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. 68 Item 6. Reserved Not required. 69
Removed
The graph assumes a $100 initial investment at the market close on May 17, 2019 which was the initial trading day of our Class A common stock, and the reinvestment of dividends.

Item 7. Management's Discussion & Analysis

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

93 edited+35 added−53 removed106 unchanged
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.
Biggest changeYear ended December 31, 2024 2023 (in thousands) Consolidated Statement of Operations: Revenue $ 543,676 $ 505,988 Cost of revenue 247,738 239,660 Gross profit 295,938 266,328 Operating expenses: Research and development 137,980 152,190 Sales and marketing 198,610 191,773 General and administrative 113,399 116,077 Impairment expense 4,144 4,316 Restructuring charges 9,720 — Total operating expenses 463,853 464,356 Loss from operations (167,915) (198,028) Net gain on extinguishment of debt 1,365 52,416 Interest income 14,871 18,186 Interest expense (2,747) (4,051) Other expense, net (1,028) (1,832) Loss before income tax expense (benefit) (155,454) (133,309) Income tax expense (benefit) 2,604 (221) Net loss attributable to common stockholders $ (158,058) $ (133,088) 79 The following tables set forth our results of operations for the period presented as a percentage of our revenue: Year ended December 31, 2024 2023 Consolidated Statements of Operations, as a percentage of revenue:* Revenue 100 % 100 % Cost of revenue 46 47 Gross profit 54 53 Operating expenses: Research and development 25 30 Sales and marketing 36 38 General and administrative 21 23 Impairment expense 1 1 Restructuring charges 2 — Total operating expenses 85 92 Loss from operations (31) (39) Net gain on extinguishment of debt — 10 Interest income 3 4 Interest expense (1) (1) Other expense, net — — Loss before income tax expense (benefit) (29) (26) Income tax expense (benefit) — — Net loss attributable to common stockholders (29) % (26) % __________ * Columns may not add up to 100% due to rounding.
At Fastly, we deliver an edge cloud platform capable of delivering fast, safe, and engaging digital experiences. By focusing holistically on edge cloud from developer inspiration to end-user experience, we have the opportunity to differentiate with our global footprint, dynamic infrastructure, and security solution.
At Fastly, we deliver an edge cloud platform capable of delivering fast, safe, and engaging digital experiences. By focusing holistically on the edge cloud from developer inspiration to end-user experience, we have the opportunity to differentiate with our global footprint, dynamic infrastructure, and security solution.
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.
Over the long term we expect gross margin to increase as we continue to drive efficiencies in our operations and increase our 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.
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.
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.
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.
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.
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.
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 by our enterprise customers.
However, our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. Sales and Marketing Sales and marketing expenses consist primarily of personnel costs, including commissions for our sales employees, salaries, benefits, bonuses, and stock-based compensation.
However, our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. 77 Sales and Marketing Sales and marketing expenses consist primarily of personnel costs, including commissions for our sales employees, salaries, benefits, bonuses, and stock-based compensation.
The main drivers of the changes in operating assets and liabilities were an increase in accounts receivable of $32.9 million, primarily due to an increase in revenue and the timing of cash receipts, an increase in other assets of $23.1 million related to deferred contract costs as well as $22.1 million of operating lease payments.
The main drivers of the changes in operating assets and liabilities were an increase in accounts receivable of 85 $32.9 million, primarily due to an increase in revenue and the timing of cash receipts, an increase in other assets of $23.1 million related to deferred contract costs as well as $22.1 million of operating lease payments.
Conversely, if we underestimate network capacity needs, we may in future periods be unable to meet demand and be required to incur higher costs to secure necessary parts and components of our servers.
Conversely, if we underestimate network 74 capacity needs, we may in future periods be unable to meet demand and be required to incur higher costs to secure necessary parts and components of our servers.
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.
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 differ from estimates.
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.
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, 2024 and 2023, respectively.
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.
This requires us to continue 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 73 a global organization, each of which place a strain on our business and culture.
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.
Content streaming organizations leverage Fastly’s platform to deliver content 70 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.
During the year ended December 31, 2023, we entered into several separate, privately negotiated transactions with certain holders of the Notes to repurchase $367.3 million aggregate principal amount of the Notes for an aggregate repurchase price of $309.1 million and aggregate transaction costs of $2.0 million.
During the year ended December 31, 2023, we entered into several separate privately negotiated transactions with certain holders of the 2026 Notes to repurchase $367.3 million aggregate principal amount of the 2026 Notes for an aggregate cash repurchase price of $309.1 million and aggregate transaction costs of $2.0 million.
Cash Flows from Financing Activities For the year ended December 31, 2023, cash used in financing activities was $331.4 million, primarily consisting of $310.5 million used for the partial repurchase of our convertible debt, $27.2 million of finance lease liabilities repayments and $4.4 million in payments for deferred consideration for business acquisitions.
For the year ended December 31, 2023, cash used in financing activities was $331.4 million, primarily consisting of $310.5 million used for the partial repurchase of our convertible debt, $27.2 million of finance lease liabilities repayments and $4.4 million in payments for deferred consideration for business acquisitions.
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.
For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, 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, 2023.
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.
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.
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.
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 events, including our customer conferences, professional services fees, amortization of our intangible assets, and an allocation of our general overhead expenses.
This decrease was primarily due to the repurchases that occurred during the years ended December 31, 2022 and December 31, 2023 which reduced the principal amount of our notes.
This decrease was primarily due to the repurchases that occurred during the years ended December 31, 2023 and December 31, 2024, which reduced the principal amount of our notes.
Under the new methodology, our ARR rate is calculated by subtracting the quotient of the Annual Revenue Churn from all of our Churned Customers from which we recognized revenue during the last quarter of the prior year divided by our annual revenue of the same calendar year from 100%.
Our ARR rate is calculated by subtracting the quotient of the Annual Revenue Churn from all of our Churned Customers from which we recognized revenue during the last quarter of the prior year divided by our annual revenue of the same calendar year from 100%.
Recent Accounting Pronouncements Please refer to Note 2—Summary of Significant Accounting Policies included in the Notes to consolidated financial statements. 87
Recent Accounting Pronouncements Please refer to Note 2—Summary of Significant Accounting Policies included in the Notes to consolidated financial statements. 89
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%.
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, 2024 and 2023, our revenue was $543.7 million and $506.0 million, respectively, an increase of 7%.
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.
Customer accounts acquired in 2020, 2021, 2022, 2023 and 2024 are referred to as the 2020 Cohort, 2021 Cohort, 2022 Cohort, 2023 Cohort, and 2024 Cohort, respectively.
While the conflicts are still evolving and the outcomes remain highly uncertain, we do not believe the Russia-Ukraine or Israel-Hamas conflicts will have a material impact on our business and results of operations. We do not have POPs or operations in Russia, Ukraine, or Israel.
While the conflicts are still evolving and the outcomes remain highly uncertain, we do not believe the Russia-Ukraine or Israel-Hamas conflicts will have a material impact on our business and results of operations. We do not have Points of Presence (“POPs”) in Russia, Ukraine, or Israel.
For the years ended December 31, 2023 and 2022, our research and development expenses as a percentage of revenue were 30% and 36%, respectively. Our research and development expenses each period is impacted by the amount of software development costs that meet the criteria for capitalization.
For the years ended December 31, 2024 and 2023, our research and development expenses as a percentage of revenue were 25% and 30%, respectively. Our research and development expenses each period is impacted by the amount of software development costs that meet the criteria for capitalization.
For the trailing twelve months ended December 31, 2023 and 2022 our LTM NRR was 113.4% and 119.1%, respectively. Remaining Performance Obligations (“RPO”) RPO represent future committed revenue for periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied.
For the trailing twelve months ended December 31, 2024 and 2023 our LTM NRR was 102.3% and 113.4%, respectively. Remaining Performance Obligations (“RPO”) RPO represent future committed revenue for periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied.
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.
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.
This is calculated by taking the revenue we recognized for each customer in the current quarter and multiplying it by four. As of December 31, 2023, we had 578 of such enterprise customers which generated 92% of the total annualized current quarter revenue for our total customers for the period ended December 31, 2023.
This is calculated by taking the revenue we recognized for each customer in the current quarter and multiplying it by four. As of December 31, 2024, we had 596 of such enterprise customers which generated 93% of the total annualized current quarter revenue for our total customers for the period ended December 31, 2024.
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.
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. Liquidity and Capital Resources As of December 31, 2024, we had cash, cash equivalents, and marketable securities totaling $295.9 million.
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.
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. 71 Summary of Revenue Generated by Customer Cohorts Over Time (in millions): Our 2020 Cohort increased its revenue 2.4 times in fiscal 2021 and has grown at approximately a 27% CAGR over the next four years from fiscal 2021 to fiscal 2024.
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.
Our Last-Twelve Months Net Retention Rate (“LTM NRR”) metric also measures 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.
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 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.
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.
The increase in cost of revenue is a result of an increase in bandwidth costs of $6.3 million, a $2.4 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 $1.8 million.
The preparation of our consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, expenses, and related disclosures. Actual results and outcomes could differ significantly from our estimates, judgments, and assumptions.
Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, expenses, and related disclosures. Actual results and outcomes could differ significantly from our estimates, judgments, and assumptions.
Sales and marketing Sales and marketing expenses were $191.8 million for the year ended December 31, 2023 compared to $179.9 million for the year ended December 31, 2022, an increase of $11.9 million, or 7%. This increase was primarily due to a $15.0 million increase in personnel related costs, such as salaries, sales commissions, and benefits.
Sales and marketing Sales and marketing expenses were $198.6 million for the year ended December 31, 2024 compared to $191.8 million for the year ended December 31, 2023, an increase of $6.8 million, or 4%. This increase was primarily due to a $14.4 million increase in personnel related costs, such as salaries, sales commissions and benefits.
Income Taxes Our income tax expense (benefit) consists primarily of income taxes in certain foreign jurisdictions where we conduct business. The Company currently maintains a full valuation allowance on the Company’s U.S. Federal and state net deferred tax assets. We expect to maintain this valuation allowance for the foreseeable future.
Income Taxes Our income tax expense (benefit) consists primarily of income taxes in certain foreign jurisdictions where we conduct business and state minimum income taxes in the United States. We currently maintain a full valuation allowance on our U.S. Federal and state net deferred tax assets.
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%.
Gross margin was 54% for the year ended December 31, 2024 compared to 53% for the year ended December 31, 2023, an increase of 2%.
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%.
International revenue was $136.4 million and 25% of revenue for the year ended December 31, 2024, compared to $135.6 million and 27% of revenue for the year ended December 31, 2023. This represents an increase of $0.8 million, or 1%.
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 The following table summarizes our cash flows for the period indicated: Year ended December 31, 2024 2023 2022 (in thousands) Net cash (used in) provided by operating activities $ 16,406 $ 362 $ (69,632) Net cash provided by investing activities $ 178,900 $ 294,940 $ 235,751 Net cash used in financing activities $ (17,099) $ (331,380) $ (189,149) Cash Flows from Operating Activities For the year ended December 31, 2024, cash provided by operating activities consisted primarily of our net loss of $158.1 million, adjusted for non-cash items of $228.6 million, and net cash flows used in operating assets and liabilities of $54.1 million.
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.
As of December 31, 2024, we were in compliance with these covenants and we expect to continue to be in compliance for at least the next 12 months. During the year ended December 31, 2024 and 2023, no amounts were drawn down on the Credit Agreement.
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%.
Other income (expense), net Year ended December 31, Change 2024 2023 $ Change % Change (in thousands) Other expense, net $ 1,028 $ 1,832 $ (804) (44) % Other expense, net was $1.0 million for the year ended December 31, 2024 compared to $1.8 million for the year ended December 31, 2023, a decrease of $0.8 million, or 44%.
On February 16, 2024, we entered into the Second Amendment to Credit Agreement with the Lenders and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as a lender and as administrative agent and collateral agent for the Lenders, which, among other things, extended the maturity date of the loans under the Credit Agreement to June 14, 2024.
On February 16, 2024, we entered into the Second Amendment to Credit Agreement with the Lenders and SVB First-Citizens, which, among other things, extended the maturity date of the loans under the Credit Agreement to June 14, 2024.
(3) Operating lease obligations represent total future minimum rent payments under non-cancelable operating lease agreements, such as our facilities and colocation (i.e. data center) leases. (4) Finance lease obligations represents principal and interest payments under our networking equipment leases. (5) Debt obligation aggregate principal amount of our 0% convertible senior notes due on March 15, 2026.
(3) Operating lease obligations represent total future minimum rent payments under non-cancelable operating lease agreements, such as our facilities and colocation (i.e. data center) leases. (4) Finance lease obligations represents principal and interest payments under our networking equipment leases.
Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We expect to maintain this valuation allowance for the foreseeable future. 78 Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Key Components of Statement of Operations Revenue We derive our revenue primarily from usage-based fees earned from customers using our platform. We also earn fixed-rate recurring revenue from security and other products and services. Our usage-based fees earned from customers using our platform are generally billed in arrears. Our security products are primarily annual subscriptions that are billed in advance.
We also earn fixed-rate recurring revenue from security and other products and services. Our usage-based fees earned from customers using our platform are generally billed in arrears. Our security products are primarily annual subscriptions that are billed in advance. Many customers have tiered usage pricing which reflects discounted rates as usage increases.
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.
Revenue was primarily from existing customers, as revenue from new customers contributed less than 10% of our revenue. 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 80 increases.
We focus our direct selling efforts on expanding our customer’s use of our platform, which includes companies that are exhibiting significant growth. We engage with and support these customers with our field sales representatives, account managers, and technical account managers who focus on customer satisfaction and drive expansion of their usage of our platform and products.
We engage with and support these customers with our field sales representatives, account managers, and technical account managers who focus on customer satisfaction and drive expansion of their usage of our platform and products.
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.
We do not know whether or how ByteDance might restructure its business and how that may impact our traffic levels. 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.
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%.
Cost of Revenue Year ended December 31, Change 2024 2023 $ Change % Change (in thousands) Cost of revenue $ 247,738 $ 239,660 $ 8,078 3 % Cost of revenue was $247.7 million for the year ended December 31, 2024 compared to $239.7 million for the year ended December 31, 2023, an increase of $8.1 million, or 3%.
Interest expense Year ended December 31, Change 2023 2022 $ Change % Change (in thousands) Interest expense $ (4,051) $ (5,887) $ 1,836 (31) % Interest expense was $4.1 million for the year ended December 31, 2023 compared to $5.9 million for the year ended December 31, 2022, a decrease of $1.8 million, or 31%.
Interest expense Year ended December 31, Change 2024 2023 $ Change % Change (in thousands) Interest expense $ 2,747 $ 4,051 $ (1,304) (32) % Interest expense was $2.7 million for the year ended December 31, 2024 compared to $4.1 million for the year ended December 31, 2023, a decrease of $1.3 million, or 32%.
In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances.
In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs.
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.
Senior Secured Credit Facilities Agreement On February 16, 2021, we entered into a Senior Secured Credit Facilities Agreement (as amended by that certain First Amendment to Credit Agreement, the “Credit Agreement”) with the lenders from time to time party thereto (the “Lenders”) and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as administrative agent, issuing lender and swingline lender (“SVB First-Citizens”), which provides for a $100.0 million senior secured revolving credit facility , with a maturity date of February 16, 2024.
In these instances, we may use information, such as geographic region and distribution channel, in determining the SSP. Stock-based Compensation Fair Value determination We recognize compensation expense related to stock options based on the fair value of stock-based awards on the date of grant. We determine the grant date fair value of the awards using the Black-Scholes option-pricing model.
Stock-based Compensation Fair Value determination We recognize compensation expense related to stock options based on the fair value of stock-based awards on the date of grant. We determine the grant date fair value of the awards using the Black-Scholes option-pricing model.
General and administrative expenses also include costs related to legal and other professional services fees, SaaS costs, an allocation of our general overhead expenses, credit losses and acquisition-related costs. Our general and administrative expenses also include sales and other tax expenses to which we are subject to based on the manner in which we sell and deliver our products.
General and administrative expenses also include costs related to legal and other professional services fees, SaaS costs, an allocation of our general overhead expenses, credit losses and acquisition-related costs.
Loans based on SOFR bear interest at a rate per annum equal to SOFR, plus an adjustment of 0.10%, plus 1.75% to 2.00%, depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement.
Loans under the Credit Agreement bear interest at a rate per annum equal to at our option, the ABR (as defined in the Credit Agreement) or the Adjusted Term SOFR (as defined in the Credit Agreement), in each case, plus a margin based on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement and ranging from 0.75% to 1.00%, in the case of loans bearing interest at ABR, and 1.75% to 2.00%, in the case of loans bearing interest at Adjusted Term SOFR..
This was offset by $132.2 million in purchases of marketable securities, $21.3 million of additions to capitalized internal-use software, and $11.0 million of payments related to purchases of property and equipment to expand our network. 84 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.
This was offset by $132.2 million in purchases of marketable securities, $21.3 million of additions to capitalized internal-use software, and $11.0 million of payments related to purchases of property and equipment to expand our network.
This decrease was partially offset by a $6.9 million increase in stock-based compensation expenses primarily due to new awards granted, a $3.1 million increase in personnel related costs, as well as a $1.1 million increase in travel and entertainment expenses.
There was also a $1.2 million increase in colocation costs, and a $1.1 million increase in personnel-related costs due to an increase in headcount. This increase was partially offset by a decrease of $3.0 million in stock-based compensation expenses, a decrease of $1.3 million in software costs and a $0.6 million decrease in travel and entertainment expenses.
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.
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 during the reporting period.
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.
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 “2026 Notes”) in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act.
We have in the past needed to, and may need to continue to, write-down or write-off server assets if we have server asset levels in excess of forecasted network capacity needs. For example, in the year ended December 31, 2023, we recognized computer and networking equipment related write-off charges of $4.3 million.
If we have server asset levels in excess of forecasted network capacity needs, we have in the past and may need to continue to write-down or write-off server assets.
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.
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.
This decrease was partially offset by an increase of $10.4 million of personnel-related costs, such as salaries and benefits due to an increase in headcount as well as a $2.8 million increase in costs associated with the transition and separation of a former executive.
This decrease was partially offset by an increase of $5.8 million of personnel-related costs, such as salaries and benefits as well as a $1.5 million increase in software costs.
For the year ended December 31, 2021, cash used in operating activities consisted primarily of our net loss of $222.7 million adjusted for non-cash items of $227.3 million.
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.
Gross Profit and Gross Margin Year ended December 31, Change 2023 2022 $ Change % Change (in thousands) Gross profit $ 266,328 $ 209,781 $ 56,547 27 % Gross margin 53 % 48 % 5 % Gross profit was $266.3 million for the year ended December 31, 2023 compared to $209.8 million for the year ended December 31, 2022, an increase of $56.5 million, or 27%.
Gross Profit and Gross Margin Year ended December 31, Change 2024 2023 $ Change % Change (in thousands) Gross profit $ 295,938 $ 266,328 $ 29,610 11 % Gross margin 54 % 53 % 2 % Gross profit was $295.9 million for the year ended December 31, 2024 compared to $266.3 million for the year ended December 31, 2023, an increase of $29.6 million, or 11%.
There were no such impairment charges recognized during the year ended December 31, 2022. 81 Net Gain on Extinguishment of Debt Year ended December 31, Change 2023 2022 $ Change % Change (in thousands) Net gain on extinguishment of debt $ 52,416 $ 54,391 $ (1,975) (4) % Net gain on extinguishment of debt was $52.4 million for the year ended December 31, 2023 compared to $54.4 million for the year ended December 31, 2022, a decrease of $2.0 million, or 4%.
Net Gain on Extinguishment of Debt Year ended December 31, Change 2024 2023 $ Change % Change (in thousands) Net gain on extinguishment of debt $ 1,365 $ 52,416 $ (51,051) (97) % Net gain on extinguishment of debt was $1.4 million for the year ended December 31, 2024 compared to $52.4 million for the year ended December 31, 2023, a decrease of $51.1 million, or 97%.
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%.
Other Income and Expense Interest income Year ended December 31, Change 2024 2023 $ Change % Change (in thousands) Interest income $ 14,871 $ 18,186 $ (3,315) (18) % Interest income was $14.9 million for the year ended December 31, 2024 compared to $18.2 million for the year ended December 31, 2023, a decrease of $3.3 million, or 18%.
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.
This was partially offset by $6.2 million in proceeds from the employee stock purchase plan ( “ ESPP”) and $1.1 million in proceeds from stock option exercises by our employees and directors.
Our revenue growth during the year ended December 31, 2023 outpaced the increases in the costs incurred to support the growth of our network. 80 Operating Expenses Year ended December 31, Change 2023 2022 $ Change % Change (in thousands) Research and development $ 152,190 $ 155,308 $ (3,118) (2) % Sales and marketing 191,773 179,869 $ 11,904 7 % General and administrative 116,077 120,803 $ (4,726) (4) % Impairment expense 4,316 — $ 4,316 100 % Total operating expenses $ 464,356 $ 455,980 $ 8,376 2 % Percentage of revenue: Research and development 30 % 36 % (6) % Sales and marketing 38 % 42 % (4) % General and administrative 23 % 28 % (5) % Impairment expense 1 % — % 1 % Research and development Research and development expenses were $152.2 million for the year ended December 31, 2023 compared to $155.3 million for the year ended December 31, 2022, a decrease of $3.1 million, or 2%.
The increase in gross margin was driven by revenue growth during the year ended December 31, 2024 outpacing the increases in the costs incurred to support the growth of our network. 81 Operating Expenses Year ended December 31, Change 2024 2023 $ Change % Change (in thousands) Research and development $ 137,980 $ 152,190 $ (14,210) (9) % Sales and marketing 198,610 191,773 6,837 4 % General and administrative 113,399 116,077 (2,678) (2) % Impairment expense 4,144 4,316 (172) (4) % Restructuring charges 9,720 — 9,720 100 % Total operating expenses $ 463,853 $ 464,356 $ (503) — % Percentage of revenue: Research and development 25 % 30 % (5) % Sales and marketing 36 % 38 % (2) % General and administrative 21 % 23 % (2) % Impairment expense 1 % 1 % — % Restructuring charges 2 % — % 2 % Research and development Research and development expenses were $138.0 million for the year ended December 31, 2024 compared to $152.2 million for the year ended December 31, 2023, a decrease of $14.2 million, or 9%.
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.
We incurred a net loss of $158.1 million and $133.1 million in the years ended December 31, 2024 and 2023, respectively. Our 10 largest customers generated an aggregate of 33% and 37% of our revenue in the trailing 12 months ended December 31, 2024 and 2023, respectively.
As of December 31, 2022, we had 533 of such enterprise customers which generated 92% of the total annualized current quarter revenue for our total customers for the period ended December 31, 2022. Average Enterprise Customer Spend Our enterprise customers continue to leverage our platform, increasing their spend on our platform and driving our revenue growth year over year.
As of December 31, 2023, we had 578 of such enterprise customers which generated 92% of the total annualized current quarter revenue for our total customers for the period ended December 31, 2023.
General and administrative General and administrative costs were $116.1 million for the year ended December 31, 2023 compared to $120.8 million for the year ended December 31, 2022, a decrease of $4.7 million, or 4%.
General and administrative General and administrative costs were $113.4 million for the year ended December 31, 2024 compared to $116.1 million for the year ended December 31, 2023, a decrease of $2.7 million, or 2%. The decrease was primarily due a $6.5 million decrease in stock-based compensation expenses as well as a $1.6 million decrease in professional fees.
Many customers have tiered usage pricing which reflects discounted rates as usage increases. For most contracts, usage charges are determined on a monthly basis based on actual usage within the month and do not impact usage charges within any other month.
For most contracts, usage charges are determined on a monthly basis based on actual usage within the month and do not impact usage charges within any other month. Our larger customers often enter into contracts that contain minimum billing commitments and reflect discounted pricing associated with such usage levels.
In addition to our paying customers, we also have trial, developer, nonprofit and open source programs, and other non-paying accounts that are excluded from our customer count metric. We operate globally and as a result, the success of our ability to retain our customers is also affected by general economic and market conditions around the world.
Due to the immateriality, we have not revised prior periods. 75 In addition to our paying customers, we also have trial, developer, nonprofit and open source programs, and other non-paying accounts that are excluded from our customer count metric.
The increase was also due to a $4.4 million increase in marketing spend associated with brand campaign and advertising, as well as $1.0 million increase in travel and entertainment expenses. The increase was partially offset by a $5.4 million decrease in stock-based compensation expenses primarily due to restricted stock awards that fully vested in 2022.
The increase was partially offset by a $4.6 million decrease in stock-based compensation expenses, a $4.4 million decrease in marketing expenses, a $0.8 million decrease in amortization expense as well as a $0.6 million decrease in travel and entertainment expenses.
Our larger customers often enter into contracts that contain minimum billing commitments and reflect discounted pricing associated with such usage levels. We define United States revenue as revenue from customers that have a billing address in the United States, and we define international revenue as revenue from customers that have a billing address outside of the United States.
We define United States revenue (“U.S. revenue”) as revenue from customers that have a billing address in the United States, and we define international revenue as revenue from customers that have a billing address outside of the United States.
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%.
The increase in Other revenue was primarily driven by further adoption of Compute solutions. U.S. revenue was $407.3 million and 75% of revenue for the year ended December 31, 2024, and $370.4 million and 73% of revenue for the year ended December 31, 2023. This represents an increase of $36.9 million, or 10%.
Income Taxes Year ended December 31, Change 2023 2022 $ Change % Change (in thousands) Income tax expense (benefit) $ (221) $ 94 $ (315) (335) % Income tax benefit was $0.2 million for the year ended December 31, 2023 and income tax expense of $0.1 million for the year ended December 31, 2022.
The decrease was mainly driven by our foreign currency transaction gains between the periods. 83 Income Taxes Year ended December 31, Change 2024 2023 $ Change % Change (in thousands) Income tax expense (benefit) $ 2,604 $ (221) $ 2,825 1,278 % Income tax expense was $2.6 million for the year ended December 31, 2024 compared to income tax benefit of $0.2 million for the year ended December 31, 2023.
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.
Affiliated customers that are business units of a single company in the streaming entertainment space generated an aggregate of 12% of the Company’s revenue for the year ended December 31, 2023. We focus our direct selling efforts on expanding our customers ’ use of our platform, which includes companies that are exhibiting significant growth.
This decrease was primarily due to a decrease of $12.9 million in stock-based compensation expense primarily related to restricted stock awards that fully vested in 2022. The decrease was also due to a $3.1 million increase in capitalized software from headcount growth as well as a $1.6 million decrease in professional fees related to temporary agency costs.
This decrease was primarily due to a decrease of $12.2 million in stock-based compensation expense, a $6.0 million increase in capitalized software costs, a $2.8 million decrease in executive transition costs, as well as a $0.5 million decrease in colocation costs.
Revenue growth was driven by a $58.1 million increase in revenue related to further adoption of our modern edge platform and products, as well as a $14.7 million increase in revenue related to products acquired from the acquisition of Signal Sciences.
Revenue growth was driven by a $24.9 million increase in revenue related to further adoption of our modern edge platform and products. For the years ended December 31, 2024 and 2023, approximately 95% and 95% of our revenue was driven by usage on our platform, respectively.

… 101 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−1 removed1 unchanged
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.
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.
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
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. 90
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.
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.
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.
These risks primarily include interest rate and currency exchange risks as follows: Interest Rate Risk We had cash, cash equivalents, and marketable securities of $295.9 million, as of December 31, 2024 which primarily consisted of bank deposits, money market funds, investment-grade commercial paper and corporate notes and bonds. The cash and cash equivalents are held for working capital purposes.
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.
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.
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.
Our cash equivalents and our investment portfolio are subject to market risk due to fluctuations in interest rates. The primary objective of our investment activities is to preserve principal while generating income without significantly increasing risk.
Removed
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.
Added
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.

Other FSLY 10-K year-over-year comparisons