0001517413-21-000149

8-K

0001517413-21-000149;, ;, 8-K

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of
Report
(Date
of
earliest
event
reported):
August
4,
2021




Delaware (State or other jurisdiction of incorporation or organization)

FASTLY, INC.
(Exact
name
of
Registrant
as
Specified
in
Its
Charter)
001-38897 (Commission File Number)

27-5411834
(I.R.S. Employer Identification Number)

475 Brannan Street, Suite 300 San Francisco, CA 94107
(Address of principal executive offices) (Zip code)

(844) 432-7859 (Registrant's Telephone Number, Including Area Code)

Not Applicable (Former Name or Former Address, if Changed Since Last Report)


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



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



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



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



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

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

Title of each class




Class A Common Stock, $0.00002 par value




Trading Symbol(s)
"FSLY"

Name of each exchange




on which registered




New York Stock Exchange

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

Emerging
growth
company



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



Item 2.02

Results of Operations and Financial Condition.

On
August
4,
2021,
Fastly,
Inc.
(the
"Company")
announced
its
financial
results
for
the
quarter
ended
June
30,
2021
by
issuing
a
press
release
and
a shareholder
letter.
A
copy
of
the
Company's
letter
to
its
shareholders
and
a
copy
of
the
press
release
are
attached
hereto
as
Exhibits
99.1
and
99.2,
respectively,
and are
incorporated
herein
by
reference.

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

Item 9.01


(d) Exhibits

Financial Statements and Exhibits.

Exhibit

No.





99.1
 

 99.2




Exhibit Description
Letter
to
Shareholders
dated
August
4,
2021 Press
Release
dated
August
4,
2021

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


FASTLY, INC.

Dated:

August
4,
2021 
 





By:








 /s/
Adriel
Lares 
 Adriel
Lares 
 Chief
Financial
Officer

Exhibit 99.1

Exhibit 99.1
Continued Growth and Security Acceleration
Q2 2021 Key Highlights1
· Top-line growth of 14% year-over-year with revenue of $85 million, net of a $1.2 million deferred revenue write-down related to purchase accounting adjustments from the Signal Sciences acquisition
· GAAP gross margin of 52.6%, down from 60.2% in Q2 2020; non-GAAP gross margin2 of 57.6%, which excludes stock-based compensation and amortization of acquired intangible assets, down from 61.7% in Q2 2020
· GAAP operating loss of $57 million, compared to GAAP operating loss of $14 million for Q2 2020; non-GAAP operating loss2 of $18 million, which excludes stock-based compensation, amortization of acquired intangible assets and acquisition-related costs, compared to non-GAAP operating income2 of $2 million for Q2 2020
· GAAP basic and diluted net loss per share of $0.51, compared to GAAP basic and diluted net loss per share of $0.14 for Q2 2020; non-GAAP basic and diluted net loss per share2 of $0.15, compared to non-GAAP basic and diluted net income per share2 of $0.02 for Q2 2020
· Capital expenditures3 of $5 million, or 5% of revenue
Key Metrics1
· Continued enterprise customer growth and expansion:  Dollar-Based Net Expansion Rate (DBNER)4 of 126%, compared to 141%5 in Q1 2021  Net Retention Rate (NRR)6 of 93%, compared to 110%5 in Q1 2021  Last-twelve-month (LTM) NRR7 of 121%, compared to 135%5 in Q1 2021  Total customer count increased to 2,581 from 2,4585 in Q1 2021  Enterprise customer count8 of 408, up from 3955 in Q1 2021  Average enterprise customer spend9 of approximately $702,000, essentially flat from $705,0005 in Q1 2021  Enterprise customers8 generated 89% of our trailing twelve-month total revenue, in both Q15 and Q2 2021







____________________________________________

1 The contribution of Signal Sciences, following our acquisition of them, has been consolidated into our second quarter 2021 financial information.

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

3 Capital Expenditures are defined as cash used for purchases of property and equipment and capitalized internal-use software, as reflected in our statement of cash flows.

4 We calculate Dollar-Based Net Expansion Rate by dividing the revenue for a given period from customers who remained customers as of the last day of the given period (the "current" period) by the revenue from the same customers for the same period

measured one year prior (the "base" period). The revenue included in the current period excludes revenue from (i) customers that churned after the end of the base period and (ii) new customers that entered into a customer agreement after the end of the base

period.
5 This metric has been updated to reflect the inclusion of legacy Signal Sciences customers in the calculation. 6 Net Retention Rate measures the net change in monthly revenue from existing customers in the last month of the period (the "current" period month) compared to the last month of the same period one year prior (the "prior" period month). The revenue included in the current period month includes revenue from (i) revenue contraction due to billing decreases or customer churn, (ii) revenue expansion due to billing increases, but excludes revenue from new customers. We calculate Net Retention Rate by dividing the revenue from the current period month by the revenue in the prior period month. 7 Our LTM Net Retention Rate, intended to be supplemental to our Net Retention Rate, was 137% for the period ended December 31, 2020. We calculate LTM Net Retention Rate by dividing the total customer revenue for the prior twelve-month period ("prior 12-month period") ending at the beginning of the last twelve-month period ("LTM period") minus revenue contraction due to billing decreases or customer churn, plus revenue expansion due to billing increases during the LTM period from the same customers by the total prior 12-month period revenue. We believe the LTM Net Retention Rate is supplemental as it removes some of the volatility that is inherent in a usage-based business model. 8 Enterprise customers are defined as those spending $100,000 or more in a twelve-month period. Includes Signal Sciences customers (who were not previously Fastly customers) that are counted as enterprise customers if they have had revenue in excess of $75,000 during the previous 9-month period since the acquisition. 9 Calculated based on trailing twelve-months.

Exhibit 99.1
To Our Shareholders
During the second quarter, we managed through a significant outage that impacted our Q2 results. We have a couple of customers, one of them being a top 10 customer, that have yet to return their traffic to the platform. We also had several customers delay their launch of new projects, which will delay the timing of traffic coming onto our platform. The outage and these delays will have an impact on our Q3 and full year outlook.
Global Outage
On June 8, our network experienced a global outage affecting nearly all customers. The outage resulted from an undiscovered software bug that was triggered by a valid customer configuration change. We detected the bug within one minute and returned 95% of our network to normal within 49 minutes, but our customers were negatively impacted. As a result, we saw traffic volumes decrease and issued credits to customers following the incident. Given the usage-based nature of our business model, this resulted in an impact to our Q2 results, and we expect to see a downstream impact on revenue from the outage in the near-to mediumterm as we work with our customers to bring back their traffic to normal levels. We continue to implement significant measures to ensure increased resiliency for our customers and their users, and we continue to engage with our customers to regain their confidence in Fastly.
Timing Uncertainties
Separately, several customers delayed the deployment of new traffic onto our platform. We believe that this traffic will come onto the network in 2021, but later than we had originally forecasted. We are confident in our ability to address issues related to the outage and customer timing in the near-term, but these factors have impacted our outlook for the second half of 2021.
The Path Forward
On the operations front, we have two new seasoned executives to drive our sales and finance organizations. Brett Shirk joined as our Chief Revenue Officer in Q1 and is growing Fastly's global sales organization into a scalable and repeatable sales machine, while strengthening customer and partner relationships. Ron Kisling is joining as our Chief Financial Officer, later this month, bringing experience in scaling public companies through rapid growth.

Exhibit 99.1
Despite the challenges we experienced in the last quarter, our mission of fueling and securing the modern digital experience remains strong and relevant. We are confident that our operational rigor, a security-led GTM motion, and expansion of our Compute@Edge capabilities will drive value for our customers and shareholders. In particular, our integrated security offerings are gaining traction in the market, resulting in a strong pipeline with new customers and expansion of our sales engagements with existing customers. Our customers and our own engineering teams are revealing the expansive power and potential of Compute@Edge, tapping into functionality that goes well beyond improving website performance and experiences. Businesses like Launch Darkly and GraphCDN, as well as Fastly's own engineering teams are building and rearchitecting products. By adopting Compute@Edge technology, companies like this will have the ability to develop entire businesses at high velocity to continue fueling the modern digital experience.
Securing the Edge
As our partnerships evolve we will continue to broaden our product availability through various channels. Our next-generation WAF (formerly Signal Sciences) became available for customers to purchase via the Amazon AWS Marketplace, representing an important new route to market through channel partnerships. This is a great example of how our refreshed go-to-market strategy is creating growth opportunities. We also recently announced the achievement of a significant integration milestone with the Signal Sciences agent entering beta on the Fastly edge cloud. The combined precision of the Signal Sciences technology with the scale of the Fastly edge cloud gives customers a powerful solution to detect and defend against attacks, and is a compelling differentiator for Fastly in the market. Finally, we also introduced our first managed security offering -- Fastly Response Security Service. This offering gives customers 24/7 access to experts in our Customer Security Operations Center, and an industry-leading, 15-minute response time for critical security incidents. Providing this security expertise and assistance will help our customers better prepare for and respond to attacks and other malicious activity keeping their business and users secure.

Exhibit 99.1
Unleashing the Power of Edge Computing
We continue to progress against our Compute@Edge roadmap, adding features and capabilities to further support our customers, including support for JavaScript and local testing. We have also leveraged Compute@Edge to bring Nearline Cache to the cloud market more quickly to build a stronger feature set. As a result, we will continue to leverage Compute@Edge to drive highly differentiated and high-velocity product development.
Building a Dominant Global Edge Platform
As of Q2 2021, we reached over 145 Tbps of global capacity. This quarter, we entered three new markets -- in Lima, Munich, and Ghana -- now totaling 61 global markets. We aim to continue our expansion globally in 2021 while remaining focused on the safety of our employees and vendors.







Exhibit 99.1
Securing Customer Wins Globally
This quarter, as a result of cross-sell and up-sell opportunities in Compute@Edge and Security, we saw new business wins and our customers across multiple verticals continue to expand their usage. Key customer highlights include: · Gaming ­ A large gaming platform leveraged Fastly's Nearline Cache feature as an elegant solution to virtually eliminate S3
origin egress costs while fitting seamlessly into its established workflow. Due to this, Fastly was able to capture a greater share of wallet within this customer's multi CDN approach. · Education ­ An edtech customer, OpenSesame, required API security and a stronger WAF solution. Given our strong relationship and the ability to purchase through a single unified contract, they were excited to replace their incumbent provider with our next-gen WAF. · Financial Services ­ Paychex, an innovative software-as-a-service technology and mobility provider for payroll, benefits, human resources, and insurance, chose Fastly's next-gen WAF when they saw how easy it was to manage, deploy, and how well it protected them. Additionally, Zopa, a UK-based neobank, having been a Fastly customer since 2019 added Compute@Edge to its engagement with us leveraging it to drive new initiatives. · Ecommerce ­ An Ecommerce online platform that is transforming accessibility to high fashion has chosen to leverage our security portfolio while replacing their incumbent legacy providers. They chose Fastly to quickly scale and improve their overall digital experience while keeping their ecommerce payments platform secure. · Travel ­ A multinational online travel booking service, which operates in 40 countries and is based in Europe, chose Fastly's VCL edge logic to replace their legacy configurations during their digital transformation to GCP. As a newly minted GCP partner they instantly fell in love with our terraform integration, real-time logging, CDN management through API, and instant deployment.

Exhibit 99.1
Combined Customer Growth and While Driving our Land and Expand Strategy
Going forward, we will report all of our customer metrics on a combined basis, including both Fastly and Signal Sciences. We have included the new combined metrics, for all quarters since the acquisition, below. Our customer count grew from 2,4581 in Q1 2021 to 2,581 in Q2 2021. We also saw increased engagement and further expansion of our enterprise customer base2 (defined as those spending $100,000 or more in a twelve-month period). Enterprise customer count2 grew to 408 from 3951 in the previous quarter. While our average enterprise customer spend2 of $702,000 was essentially flat from $705,0001 in the last quarter, it now reflects the combined Fastly and Signal Sciences enterprise customer spend. As Signal Sciences enterprise customers' average spend is lower than that of Fastly, the inclusion of Signal Sciences in the calculation reflects a lower combined average. Additionally, our Dollar-Based Net Expansion Rate (DBNER)3 which measures the change in revenue from existing customers over a twelve-month period remains solid at 126%. Our DBNER highlights the continued strength of our platform and relationships with our enterprise customers2, generating 89% of our trailing twelve-month total revenue, in both Q11 and Q2 2021.
We delivered a Net Retention Rate4 (NRR) of 93% in Q2 2021 (121%5 on a last-twelve-month (LTM) basis). We believe the LTM NRR removes some of the volatility that is inherent in a usage-based business model. We measure NRR in addition to DBNER in an effort to provide insight into our customer base in a similar fashion to what is commonly found with traditional SaaS companies. DBNER differs from NRR in that DBNER only includes existing customers that have been on the platform at least 13 months, and excludes churn.







____________________________________________ 1 This metric has been updated to reflect the inclusion of legacy Signal Sciences customers in the calculation. 2 Enterprise customers are defined as those spending $100,000 or more in a twelve-month period. Includes Signal Sciences customers (who were not previously Fastly customers) that are counted as enterprise customers if they have had revenue in excess of $75,000 during the previous 9-month period since the acquisition. 3 We calculate Dollar-Based Net Expansion Rate by dividing the revenue for a given period from customers who remained customers as of the last day of the given period (the "current" period) by the revenue from the same customers for the same period measured one year prior (the "base" period). The revenue included in the current period excludes revenue from (i) customers that churned after the end of the base period and (ii) new customers that entered into a customer agreement after the end of the base period. 4 Net Retention Rate measures the net change in monthly revenue from existing customers in the last month of the period (the "current" period month) compared to the last month of the same period one year prior (the "prior" period month). The revenue included in the current period month includes revenue from (i) revenue contraction due to billing decreases or customer churn, (ii) revenue expansion due to billing increases, but excludes revenue from new customers. We calculate Net Retention Rate by dividing the revenue from the current period month by the revenue in the prior period month. 5 Our LTM Net Retention Rate, intended to be supplemental to our Net Retention Rate, was 137% for the period ended December 31, 2020. We calculate LTM Net Retention Rate by dividing the total customer revenue for the prior twelve-month period ("prior 12-month period") ending at the beginning of the last twelve-month period ("LTM period") minus revenue contraction due to billing decreases or customer churn, plus revenue expansion due to billing increases during the LTM period from the same customers by the total prior 12-month period revenue. We believe the LTM Net Retention Rate is supplemental as it removes some of the volatility that is inherent in a usage-based business model.

Exhibit 99.1
Financial Discussion
Q2 2021 Performance Revenue Total revenue for Q2 2021 increased 14% year-over-year to $85 million, net of a $1.2 million deferred revenue write-down associated with the acquisition of Signal Sciences. As noted above, revenue growth was driven by the acquisition of Signal Sciences and the further adoption of our modern edge platform and products.
Customer Count As of June 30, 2021, 4081 of our 2,581 customers were enterprise customers1, which accounted for 89% of our trailing twelvemonth total revenue.
Gross Margin GAAP gross margin was 52.6% for Q2 2021, down from 60.2% in the same quarter a year ago. Excluding stock-based compensation and amortization of acquired intangible assets, our non-GAAP gross margin2 was 57.6% for Q2 2021, compared to 61.7% in the same quarter a year ago. The decrease in gross margin reflects our continued investment in infrastructure and capacity in anticipation of customer demand. Additionally, our GAAP gross margin also reflects the amortization of acquired intangibles from our acquisition of Signal Sciences in the fourth quarter of 2020.
____________________________________________ 1 Enterprise customers are defined as those spending $100,000 or more in a twelve-month period. Includes Signal Sciences customers (who were not previously Fastly customers) that are counted as enterprise customers if they have had revenue in excess of $75,000 during the previous 9-month period since the acquisition. 2 For a reconciliation of non-GAAP financial measures to their corresponding GAAP measures, please refer to the reconciliation table at the end of this letter.

Exhibit 99.1
Expenses
Our total operating expenses were $102 million in Q2 2021, or 120% of revenue, up from $59 million, or 80% in Q2 2020. The increase in expense can primarily be attributed to the personnel added as a result of the Signal Sciences acquisition, as well as other acquisition related costs. Additional personnel related investments were also made to support continued growth and innovation.
Research and development expenses were $30 million in Q2 2021, or 36% of revenue, up from $17 million, or 22% of revenue in Q2 2020. Sales and marketing expenses were $36 million in Q2 2021, representing 43% of revenue, up from $25 million, or 33% of revenue in Q2 2020. General and administrative expenses were $35 million in Q2 2021, or 42% of revenue, up from $18 million, or 24% of revenue in Q2 2020.
We generated a GAAP operating loss for Q2 2021 of $57 million, or 68% of revenue, compared to GAAP operating loss of $14 million, or 19% of revenue in Q2 2020. Excluding stock-based compensation, amortization of acquired intangible assets, and acquisition-related expenses, our non-GAAP operating loss1 for Q2 2021 was $18 million, or 21% of revenue, compared to nonGAAP operating income1 of $2 million, or 2% of revenue in Q2 2020.
Net Loss Net loss for Q2 2021 was $58 million, or a $0.51 loss per basic and diluted shares, compared to $14 million or a $0.14 loss per basic and diluted shares in Q2 2020. Non-GAAP net loss1 for Q2 2021 was $17 million, or a $0.15 loss per basic and diluted shares1, compared to $2 million or a $0.02 income per basic and diluted shares1 in Q2 2020. For a reconciliation of non-GAAP financial measures to their corresponding GAAP measures, please refer to the reconciliation table at the end of this letter.
Balance Sheet, Capital Expenditures, and Cash Flow We ended Q2 2021 with $1.1 billion in cash, restricted cash, and investments, including those classified as long-term. Cash used in operations was $17 million in the quarter, compared to $9 million last year. Capital expenditures, or cash used for purchases of property and equipment and capitalized internal-use software, were $5 million in Q2 2021, representing 5% of total revenue in Q2 2021. Free Cash Flow was ($22) million in Q2 2021. For additional Information, please refer to the free cash flow table at the end of this letter.
____________________________________________ 1 For a reconciliation of non-GAAP financial measures to their corresponding GAAP measures, please refer to the reconciliation table at the end of this letter.

Exhibit 99.1

Q3 and Full-Year 2021 Business Outlook

Our 2021 outlook reflects revenue impacts from the outage in June, the timing of customer traffic ramping on our platform, and anticipated renewals. Our expected operating profile reflects our continued investment for future growth, along with the impact of the Signal Sciences acquisition. Similar to last year's approach, our revenue guidance is based on the visibility that we have today, and given our usage-based business model, we expect to gain additional visibility as the year progresses.

Total Revenue Non-GAAP Operating Loss Non-GAAP Net Loss Per Share 1,2

Q3 2021 $82 - $85 million
($23) - ($19) million ($0.21) - ($0.18)

Full Year 2021 $340 - $350 million
($75) - ($65) million ($0.65) - ($0.57)

____________________________________________
1 Assumes weighted average basic shares outstanding of 116.9 million in Q3 2021 and 115.5 million for the full year 2021. 2 Non-GAAP Net Loss per share calculation is full-year Non-GAAP Net Loss divided by weighted average basic shares for the full-year.

We believe we have a tremendous opportunity to invest in our edge cloud mission this year and plan to do so to position Fastly for future growth. As we have said before, we will continue to invest in our network in a disciplined manner, keeping long-term profitability in mind. We continue to expect capital expenditures as a percentage of revenue to be approximately 12% to 14% of revenue  similar to full-year 2020. Long-term, we expect capital expenditures to approach 10% of revenue on a calendar year basis.
A reconciliation of non-GAAP guidance measures to corresponding GAAP measures for our Q3 and Full Year 2021 Business Outlook is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of many of these costs and expenses that may be incurred in the future. We have provided a reconciliation of GAAP to non-GAAP financial measures for Q2 2021 in the reconciliation table at the end of this letter.

Exhibit 99.1

Combined Customer Stats Appendix

The following prior period metrics have been revised to reflect the inclusion of Signal Sciences in the calculation of these metrics, since the acquisition on October 1, 2020.

Q4 2020

Q1 2021

Q2 2021

Dollar-Based Net Expansion Rate (DBNER)

144%

141%

126%

Net Retention Rate (NRR)

116%

110%

93%

Last-twelve-month (LTM) NRR

137%

135%

121%

Total Customer Count

2,326

2,458

2,581

Enterprise Customer Count

378

395

408

Average Enterprise Customer Spend

$681,000

$705,000

$702,000

Quarterly Conference Call
We will host a live Q&A session at 2:00 p.m. PT / 5:00 p.m. ET on Wednesday, August 4, 2021 to discuss these financial results. To participate in the live call, please dial (833) 968-2077 (U.S. / Canada) or (236) 714-2139 (international) and provide conference ID 3096376. A live webcast of the call will be available at https://investors.fastly.com and will be archived on our site following the call.
In closing, I want to thank all of our stakeholders -- specifically our investors, customers and employees -- for their commitment to the edge cloud we've built and will continue to iterate on. On the heels of an outage is never a place we want to be at Fastly, but I'm incredibly proud of our team's enduring dedication to our customer-first mindset and desire to build and deliver a more trustworthy Internet for all. While reflecting on our response to the outage, I feel confident when I say Fastly has never been so committed to supporting the most important content on the Internet.

We look forward to your questions on our call this afternoon.

Sincerely,
Joshua Bixby CEO

Exhibit 99.1
Forward-Looking Statements
This letter to shareholders contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, about us and our industry that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or Fastly's future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "going to," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of these words or other similar terms or expressions that concern Fastly's expectations, strategy, priorities, plans, or intentions. Forward-looking statements in this letter to shareholders include, but are not limited to, statements regarding Fastly's future financial and operating performance, including its outlook and guidance; the impact of the outage and delayed deployment of new traffic onto Fastly's platform; Fastly's strategies, product and business plans, including its ability to scale and further invest in the business to expand its edge cloud platform; the abilities of Fastly's personnel; statements regarding the integration and success of Signal Sciences; statements regarding Fastly's investments in revenue, marketing and demand generation, and the impact of such investments on its business; statements regarding the performance of Fastly's platform, including its ability to augment capacity safely, drive efficiency, and support continued growth; statements regarding Fastly's expectations regarding the expansion of its customer base, including anticipated enterprise customer deals, the growth and usage of its customers, and continued demand for future products from the combined Signal Sciences portfolio. Fastly's expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that: Fastly is unable to attract and retain customers; Fastly's existing customers and partners do not maintain or increase usage of Fastly's platform; Fastly's platform and product features do not meet expectations, including due to defects, interruptions, security breaches, delays in performance or other similar problems; Fastly is unable to adapt to meet evolving market and customer demands and rapid technological change; Fastly is unable to comply with modified or new industry standards, laws and regulations; Fastly is unable to generate sufficient revenues to achieve or sustain profitability; Fastly's limited operating history makes it difficult to evaluate its prospects and future operating results; Fastly is unable to effectively manage its growth; and Fastly is unable to compete effectively. The forward-looking statements contained in this shareholder letter are also subject to other risks and uncertainties, including those more fully described in Fastly's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, and additional information that will be set forth on Fastly's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 and other filings and reports that we may file from time to time with the SEC. The forward-looking statements in this letter to shareholders are based on information available to Fastly as of the date hereof, and Fastly disclaims any obligation to update any forward-looking statements, except as required by law.

Exhibit 99.1
Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses the following non-GAAP measures of financial performance: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP basic and diluted net loss per common share, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, free cash flow and adjusted EBITDA. The presentation of this additional financial information is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. These non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In addition, these non-GAAP financial measures may be different from the non-GAAP financial measures used by other companies. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. Management compensates for these limitations by reconciling these non-GAAP financial measures to the most comparable GAAP financial measures within our earnings releases.
Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, Non-GAAP net loss and non-GAAP basic and diluted net loss per common share differ from GAAP, non-GAAP research and development, non-GAAP sales and marketing, and non-GAAP general and administrative differ from GAAP in that they exclude stock-based compensation expense, amortization of acquired intangibles assets, acquisition-related expenses and amortization of debt discount and issuance costs.
Adjusted EBITDA: excludes stock-based compensation expense, depreciation and other amortization expenses, amortization of acquired intangibles assets, amortization of debt discount and issuance costs, acquisition-related expenses, interest income, interest expense, other expense, (net), and income taxes.
Acquisition-related Expense: consists of one-time expenses related to the acquisition related activities. Management considers its operating results without the one-time acquisition-related expense when evaluating its ongoing non-GAAP performance and its ongoing adjusted EBITDA performance because these charges are one-time and may not be reflective of our core business, ongoing operating results, or future outlook.

Exhibit 99.1
Amortization of Acquired Intangible Assets: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases and acquisitions. Amortization of acquired intangible assets is included in the following cost and expense line items of our GAAP presentation: cost of revenue and sales and marketing. Management considers its operating results without the amortization expense of our acquired intangible assets when evaluating its ongoing non-GAAP performance and its ongoing adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of asset purchases and acquisitions and may not be reflective of our core business, ongoing operating results, or future outlook.
Amortization of Debt Discount and Issuance Costs: consists primarily of amortization expense related to our debt obligations. Management considers its adjusted EBITDA results without this activity when evaluating its ongoing performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.
Capital Expenditures: cash used for purchases of property and equipment and capitalized internal-use software, as reflected in our statement of cash flows. Depreciation and Other Amortization Expense: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases. Depreciation and amortization expense is included in the following cost and expense line items of our GAAP presentation: cost of revenue, research and development, sales and marketing, and general and administrative. Management considers its operating results without the depreciation and other amortization expense when evaluating its ongoing adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of asset purchases and may not be reflective of our core business, ongoing operating results, or future outlook.
Free Cash Flow: calculated as net cash used in operating activities less capital expenditures.
Interest Expense: consists primarily of interest expense related to our debt instruments. Management considers its operating results without total interest expense when evaluating its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.
Interest Income: consists primarily of interest income related to our marketable securities. Management considers its adjusted EBITDA results without this activity when evaluating its ongoing performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Exhibit 99.1
Income Taxes: consists of expenses recognized related to state and foreign income taxes. Management considers its adjusted EBITDA results without these charges when evaluating its ongoing performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.
Non-GAAP Operating Loss: calculated as GAAP revenue less non-GAAP cost of revenue and non-GAAP operating expenses.
Other Expense (Income), Net: consists primarily of foreign currency transaction gains and losses. Management considers its operating results without other expense, net when evaluating its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.
Stock-based Compensation Expense: consists of expenses for stock options, restricted stock units, performance awards, restricted stock awards and Employee Stock Purchase Plan ("ESPP") under our equity incentive plans. Stock-based compensation is included in the following cost and expense line items of our GAAP presentation: cost of revenue, research and development, sales and marketing, and general and administrative.
Although stock-based compensation is an expense for the Company and is viewed as a form of compensation, management excludes stock-based compensation from our non-GAAP measures and adjusted EBITDA results for purposes of evaluating our continuing operating performance primarily because it is a non-cash expense not believed by management to be reflective of our core business, ongoing operating results, or future outlook. In addition, the value of some stock-based instruments is determined using formulas that incorporate variables, such as market volatility, that are beyond our control.
Management believes these non-GAAP financial measures and adjusted EBITDA serve as useful metrics for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods and to those of peer companies, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors' overall understanding of our current financial performance.
In the financial tables below, the Company provides a reconciliation of the most comparable GAAP financial measure to the historical non-GAAP financial measures used in this shareholder letter.

Exhibit 99.1

Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
Revenue Cost of revenue Gross profit Operating expenses:
Research and development Sales and marketing General and administrative Total operating expenses Loss from operations Interest income Interest expense Other income (expense), net Loss before income taxes Income tax expense (benefit) Net loss Net loss per share attributable to common stockholders, basic and diluted Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted __________

Three months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

$

85,026 $

74,663 $ 169,878 $ 137,587

40,320

29,697

77,814

56,962

44,706

44,966

92,064

80,625

30,346 36,334 35,494 102,174 (57,468)
276 (1,436)
178 (58,450)
(155) $ (58,295) $

$

(0.51) $

16,655 24,680 18,069 59,404 (14,438)
378 (371)
(53) (14,484)
(24) (14,460) $
(0.14) $

59,334 71,206 68,955 199,495 (107,431)
450 (2,097)
114 (108,964)
14 (108,978) $
(0.95) $

30,953 43,848 32,238 107,039 (26,414)
1,097 (687) 349 (25,655) 795 (26,450)
(0.27)

115,326

99,835

114,733

97,618

(1) Includes stock-based compensation expense as follows:
Cost of revenue Research and development Sales and marketing General and administrative
Total

Three months ended June 30

Six months ended June 30,

2021

2020

2021

2020

$

1,828 $

1,090 $

3,014 $

1,705

8,634

4,053

16,592

5,724

5,631

7,076

10,639

8,559

17,333

4,062

34,019

6,622

$

33,426 $

16,281 $

64,264 $

22,610

Condensed Consolidated Balance Sheets
(in thousands)
ASSETS Current assets:
Cash and cash equivalents Marketable securities, current Accounts receivable, net of allowance for credit losses Restricted cash Prepaid expenses and other current assets Total current assets Marketable securities, non current Property and equipment, net Operating right-of-use assets Goodwill Intangible assets, net Other assets Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable Accrued expenses Finance lease liabilities, current Operating lease liabilities, current Other current liabilities Total current liabilities Long-term debt Finance lease liabilities, noncurrent Operating lease liabilities, noncurrent Other long-term liabilities Total liabilities Stockholders' equity: Class A and Class B common stock Additional paid-in capital Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders' equity Total liabilities and stockholders' equity

Exhibit 99.1

As of June 30, 2021 (unaudited)

As of December 31, 2020 (audited)

$

687,986 $

241,744

56,065

87

22,222

1,008,104

173,227

116,471

62,630

635,646

113,215

27,578

$

2,136,871 $

62,900 131,283
50,258 87
16,728 261,256
20,448 95,979 60,019 635,590 121,742 24,917 1,219,951

$

10,202 $

28,609

14,773

19,713

29,735

103,032

931,385

19,685

47,177

6,502

1,107,781

2

1,426,520

(261)

(397,171)

1,029,090

$

2,136,871 $

9,150 34,334 11,033 19,895 19,677 94,089
-- 14,707 44,890
4,400 158,086
2 1,350,050
6 (288,193) 1,061,865 1,219,951

Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense Amortization of intangible assets Amortization of right-of-use assets and other Amortization of debt discount and issuance costs Amortization of deferred contract costs Stock-based compensation Provision for credit losses Interest paid on finance leases Loss on disposals of property and equipment Other adjustments Changes in operating assets and liabilities:
Accounts receivable Prepaid expenses and other current assets Other assets Accounts payable Accrued expenses Operating lease liabilities Other liabilities Net cash used in operating activities Cash flows from investing activities: Purchases of marketable securities Sales of marketable securities Maturities of marketable securities Purchases of property and equipment Capitalized internal-use software Purchases of intangible assets Net cash used in investing activities Cash flows from financing activities: Proceeds from follow-on public offering, net of underwriting fees Payments of costs related to initial public offering Issuance of convertible note, net of issuance costs Refunds (Payments) of other debt issuance costs Repayments of finance lease liabilities Proceeds from employee stock purchase plan Proceeds from exercise of vested stock options Net cash provided by financing activities Effects of exchange rate changes on cash, cash equivalents, and restricted cash Net increase (decrease) in cash, cash equivalents, and restricted cash Cash, cash equivalents, and restricted cash at beginning of period Cash, cash equivalents, and restricted cash at end of period Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows: Cash and cash equivalents Restricted cash Restricted cash included in other assets Total cash, cash equivalents, and restricted cash

Exhibit 99.1

Three months ended June 30,

2021

2020

Six months ended June 30,

2021

2020

$

(58,295) $

(14,460) $ (108,978) $ (26,450)

6,927 5,257 6,303
937 1,535 33,426
225 (405)
-- 749

4,693 36
5,239 19
788 16,281
866 (149)
-- 208

13,346 10,620 12,660
1,269 2,946 64,264 (195) (735)
27 813

9,372 72
10,188 38
1,481 22,610
1,016 (268)
-- (304)

(3,927) (3,814) (2,137) (1,957) (3,080) (6,491) 7,733 (17,014)

(16,180) (835)
(2,676) (1,748) 4,121 (4,141)
(843) (8,781)

(5,612) (5,494) (5,089)
162 (3,835) (12,856) 8,804 (27,883)

(22,211) (1,983) (4,769) 1,364 2,626 (8,413) (336)
(15,967)

(269,537) --
31,750 (2,934) (1,691) (2,093) (244,505)

(56,187) --
23,501 (2,072)
(744) (1,811) (37,313)

(333,868) 12,497 57,253 (11,013) (2,680) (2,093)
(279,904)

(56,187) --
44,901 (12,241)
(2,181) (1,811) (27,519)

--

274,896

--

274,896

--

(173)

--

(173)

--

--

930,775

--

--

--

(1,351)

--

(3,628)

(1,307)

(6,579)

(2,900)

1,493

2,031

4,564

4,164

2,886

5,657

5,605

8,831

751

281,104

933,014

284,818

(29)

(93)

(141)

(56)

(260,797)

234,917

625,086

241,276

949,763

92,588

63,880

86,229

$

688,966 $

327,505 $

688,966 $ 327,505

687,986

257,418

687,986

257,418

87

70,087

87

70,087

893

--

893

--

$

688,966 $

327,505 $

688,966 $ 327,505

Exhibit 99.1

Free Cash Flow
(in thousands, unaudited)
Cash flow provided by (used in) operations Capital expenditures(1),(2) Free Cash Flow(2)

Q1 2020

Quarter ended

Q2 2020

Q3 2020

Q4 2020

Year ended FY2020

Quarter ended

Q1 2021

Q2 2021

$ (7,186) $ (8,781) $ 27,200 $ (31,149) $

(11,606)

(2,816)

(13,262)

(8,016)

$ (18,792) $ (11,597) $ 13,938 $ (39,165) $

(19,916) $ (35,700) (55,616) $

(10,869) $ (9,068)
(19,937) $

(17,014) (4,625)
(21,639)

__________ (1) Capital Expenditures are defined as cash used for purchases of property and equipment and capitalized internal-use software, as reflected in our statement of cash flows.
(2) As disclosed in our form 10-K filed on March 1, 2021, we reduced our capital expenditures previously reported by $1.7 million for the year ended December 31, 2020. The quarterly and year-to-date capital expenditure and free cash flow amounts in the table for fiscal year 2020 have been adjusted for this change which was not previously reflected in our quarterly filings on Form 10-Q.

Exhibit 99.1

Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, unaudited)

Gross Profit GAAP gross profit
Stock-based compensation--Cost of revenue Amortization of acquired intangible assets
Non-GAAP gross profit GAAP gross margin Non-GAAP gross margin

Three months ended June 30,

2021

2020

$

44,706 $

44,966 $

1,828

1,090

2,475

--

$

49,009 $

46,056 $

52.6 % 57.6 %

60.2 % 61.7 %

Research and development GAAP research and development
Stock-based compensation
Non-GAAP research and development

$

30,346 $

16,655 $

(8,634)

(4,053)

$

21,712 $

12,602 $

Sales and marketing GAAP sales and marketing
Stock-based compensation Amortization of acquired intangible assets
Non-GAAP sales and marketing

$

36,334 $

24,680 $

(5,631)

(7,076)

(2,709)

--

$

27,994 $

17,604 $

General and administrative GAAP general and administrative
Stock-based compensation Acquisition-related expenses
Non-GAAP general and administrative

$

35,494 $

18,069 $

(17,333)

(4,062)

(1,298)

--

$

16,863 $

14,007 $

Operating loss GAAP operating loss
Stock-based compensation Amortization of acquired intangible assets Acquisition-related expenses
Non-GAAP operating loss

$

(57,468) $ (14,438) $

33,426

16,281

5,184

--

1,298

--

$

(17,560) $

1,843 $

Net loss GAAP net loss
Stock-based compensation Amortization of acquired intangible assets Amortization of debt discount and issuance costs Acquisition-related expenses
Non-GAAP net income (loss)

$

(58,295) $ (14,460) $

33,426

16,281

5,184

--

993

--

1,298

--

$

(17,394) $

1,821 $

Non-GAAP net income (loss) per common share--basic and diluted Weighted average basic and diluted common shares

$

(0.15) $

0.02 $

115,326

99,835

Six months ended June 30,

2021

2020

92,064 $ 3,014 4,950
100,028 $
54.2 % 58.9 %

80,625 1,705 --
82,330
60.2 % 59.8 %

59,334 $ (16,592) 42,742 $

30,953 (5,724) 25,229

71,206 $ (10,639)
(5,525) 55,042 $

43,848 (8,559)
-- 35,289

68,955 $ (34,019)
(2,227) 32,709 $

32,238 (6,622)
-- 25,616

(107,431) $ (26,414)

64,264

22,610

10,475

--

2,227

--

(30,465) $ (3,804)

(108,978) $ (26,450)

64,264

22,610

10,475

--

993

--

2,227

--

(31,019) $ (3,840)

(0.27) $ 114,733

(0.04) 97,618

Adjusted EBITDA GAAP net loss
Stock-based compensation Depreciation and other amortization Amortization of acquired intangible assets Amortization of debt discount and issuance costs Interest income Interest expense Other expense (income), net Income tax expense (income) Acquisition-related expenses
Adjusted EBITDA

Exhibit 99.1

Three months ended June 30,

2021

2020

Six months ended June 30,

2021

2020

$ (58,295) $ (14,460) $ (108,978) $ (26,450)

33,426

16,281

64,264

22,610

7,000

4,729

13,491

9,444

5,184

--

10,475

--

993

--

993

--

(276)

(378)

(450)

(1,097)

1,436

371

2,097

687

(178)

53

(114)

(349)

(155)

(24)

14

795

1,298

--

2,227

--

$

(9,567) $

6,572 $

(15,981) $ 5,640

Exhibit 99.2
Fastly Announces Second Quarter 2021 Financial Results
SAN FRANCISCO, August 4, 2021 -- Fastly, Inc. (NYSE: FSLY), provider of an edge cloud platform, today posted its financial results for the second quarter 2021 in its shareholder letter on the Investor Relations section of its website at https://investors.fastly.com.
"In our second quarter, we made great strides with key components of our strategy, with important additions to our Compute@Edge and security offerings. Additionally, we made significant operational changes that better position us to manage through challenges and drive long-term growth," said Joshua Bixby, CEO of Fastly. "During the second quarter, we also managed through a significant outage that impacted our Q2 results and will have an impact on our Q3 and full year outlook. We have a couple of customers, one of them being a top 10 customer, that have yet to return their traffic to the platform. We also had several customers delay the launch of certain projects, which delayed the timing of traffic coming onto our platform."
Fastly management will host a live Q&A session today at 2:00 p.m. PT / 5:00 p.m. ET to discuss financial results and outlook.
Fastly Second Quarter 2021 Q&A Session When: Wednesday, August 4, 2021 Time: 2:00 p.m. PT / 5:00 pm ET Conference ID: 3096376 Live Call: (833) 968-2077 (US/Canada) or (236) 714-2139 (International) Webcast: https://investors.fastly.com
The webcast will be archived on the investor relations site following the call.
About Fastly Fastly helps people stay better connected with the things they love. Fastly's edge cloud platform enables customers to create great digital experiences quickly, securely, and reliably by processing, serving, and securing our customers' applications as close to their end-users as possible -- at the edge of the internet. Fastly's platform is designed to take advantage of the modern internet, to be programmable, and to support agile software development with unmatched visibility and minimal latency, empowering developers to innovate with both performance and security. Fastly's customers include many of the world's most prominent companies, including Pinterest, The New York Times, and GitHub.
This press release contains "forward-looking" statements that are based on our beliefs and assumptions and on information currently available to us on the date of this press release. Forward-looking statements may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements include, but are not limited to, statements regarding our future financial and operating performance, including our outlook and guidance, the demand for our platform, the timing of customers bringing traffic onto our platform, our ability to invest in our platform for future growth, and our ability to deliver on our long-term strategy. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Important factors that could cause our actual results to differ materially are detailed from time to time in the reports Fastly files with the Securities and Exchange Commission (SEC), including in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. Copies of reports filed with the SEC are posted on Fastly's website and are available from Fastly without charge.
Source: Fastly, Inc.
Investor Contact: ir@fastly.com
Media Contact: press@fastly.com