•Support for Mutual TLS two-way authentication released providing a higher security posture, requiring both the client and server to present trusted digital certificates, saving time and resources for our customers.
•Released Dynamic Backends, enabling customers to create new backend server definitions seamlessly.
•Introduced Core Cache API, enabling developers building on our Edge Compute platform to have access to our powerful, globally distributed cache network.
•Premier Edge Deployment of our Next-Gen WAF released, bringing Advanced Rate Limiting and the Site Flagged IP signal for the Next-Gen WAF to the edge.
•Limited availability of Certainly released, providing domain validated TLS certificates that are fully automated in our Fastly managed TLS services and enabling trusted identification of websites, improving security and reliability.
Customer and Partner Highlights
•Expanded market reach with new packaging and pricing for our core services, including flat-rate pricing and tiered packages, making it easy for companies of all sizes to try, buy, and use the powerful Fastly platform.
•Bonnier News, Sweden’s leading news provider and the Nordic region’s largest media conglomerate, selected Fastly’s full solution suite over an incumbent competitor.
•Tango, a leading global live streaming platform that empowers content creation, social connections, and fan monetization in real-time selected Fastly’s network services over an incumbent cloud provider.
•Bugcrowd, a multi-solution crowdsourced cybersecurity platform, selected Fastly’s delivery and security, including our edge rate limiting functionality for DDoS mitigation, over an incumbent competitor.
•Rockler, a world-renowned woodworking & hardware branded retailer selected Fastly’s delivery and NGWAF to improve website speed and security.
Calculations of Key and Other Selected Metrics – Quarterly (unaudited)
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Total Customer Count(3)
2,848
2,929
2,965
3,025
3,039
3,062
3,100
3,072
Enterprise Customer Count(3)
457
467
488
499
511
533
540
551
Average Enterprise Customer Spend (in thousands)(7)
$
676
$
751
$
758
$
742
$
771
$
822
$
795
$
818
Enterprise Customer Revenue %
89
%
90
%
90
%
90
%
91
%
92
%
91
%
92
%
Total Customer Count (prior methodology)(3)
2,748
2,804
2,880
2,894
2,925
2,958
3,001
2,965
Enterprise Customer Count (prior methodology)(3)
430
445
457
471
482
493
514
520
Average Enterprise Customer Spend (in thousands; prior methodology)(7)
$
698
$
704
$
722
$
730
$
759
$
782
$
778
$
809
Enterprise Customer Revenue % (prior methodology)
88
%
88
%
89
%
88
%
89
%
89
%
89
%
90
%
Net Retention Rate (NRR) Quarter(8)
112
%
107
%
114
%
128
%
115
%
111
%
105
%
106
%
Net Retention Rate (NRR) LTM(1)
114
%
118
%
115
%
117
%
118
%
119
%
116
%
116
%
Dollar-Based Net Expansion Rate (DBNER)(2)
118
%
121
%
118
%
120
%
122
%
123
%
121
%
123
%
Annual Revenue Retention Rate (ARR)(9)
—
%
99.2
%
—
%
—
%
—
%
99.2
%
—
%
—
%
Global Network Capacity
167 TB/sec
184 TB/sec
198 TB/sec
215 TB/sec
233 TB/sec
252 TB/sec
265 TB/sec
277 TB/sec
Countries
31
32
34
34
35
35
35
35
Markets
68
71
75
78
79
79
79
79
*Note: The reporting of the dual key metrics with respect to Total Customer and Enterprise Customer counts and associated key metrics will be disclosed through the fourth quarter of fiscal year 2023, ending December 31, 2023.
Exhibit 99.2
Corporate Highlights
•Expanded market reach with new packaging and pricing for our core services, including flat-rate pricing and tiered packages, making it easy for companies of all sizes to try, buy, and use the powerful Fastly platform.
•Repurchased $236.4 million in aggregate principal amount of convertible debt for $195.7 million, reflecting a 17% discount to par, and resulted in a $36.8 million net gain.
•Peter Alexander joined Fastly as CMO, bringing his experience from Check Point as CMO in addition to CMO of Harmonic and marketing roles at Cisco.
•Marshal Erwin joined Fastly as CISO, bringing his experience from Mozilla as Chief Security Officer in addition to roles in the US intelligence community.
•Karen Greenstein was promoted to General Counsel, joining Fastly in 2019 and serving as interim GC in addition to legal roles in digital media and entertainment.
Key Metrics Highlights
•Trailing 12 month net retention rate (LTM NRR)1 remained flat at 116% in the second quarter compared to the first quarter.
•Dollar-Based Net Expansion Rate (DBNER)2 increased to 123% in the second quarter from 121% in the first quarter.
•Total customer count was 3,072 in the second quarter, down 28 from the first quarter; 551 were enterprise customers3 in the second quarter, up 11 from the first quarter.
•Average enterprise customer spend7 of $818 thousand in the second quarter, up 3% quarter-over-quarter.
Third Quarter and Full Year 2023 Guidance:
Q3 2023
Full Year 2023
Total Revenue (millions)
$125 - $128
$500 - $510
Non-GAAP Operating Loss (millions)(4)
($15.0) - ($13.0)
($49.0) - ($43.0)
Non-GAAP Net Loss per share (5) (6)
($0.09) - ($0.07)
($0.27) - ($0.21)
Key Metrics
1.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.
2.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.
3.Under our new methodology, our number of customers are calculated based on the number of separate identifiable operating entities with which we have a billing relationship in good standing, from which we recognized revenue during the current quarter. Under our prior methodology, our number of customers are calculated based on the number of separate identifiable operating entities with which we have a billing relationship in good standing, from which we recognized revenue during the last month of the quarter. Under our new methodology, our enterprise customers are defined as those with annualized current quarter revenue in excess of $100,000. This is calculated by taking the revenue for each customer within the quarter and multiplying it by four. Under our prior methodology, our enterprise customers are defined as those with revenue in excess of $100,000 in the trailing 12-month period. Under our prior methodology, our total customer count was 2,965 in the second quarter, down 36 from the first quarter of 2023; 520 were enterprise customers in the second quarter, up 6 from the first quarter of 2023.
4.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.
5.Assumes weighted average basic shares outstanding of 129.9 million in Q3 2023 and 128.6 million for the full year 2023.
6.Non-GAAP Net Loss per share is calculated as Non-GAAP Net Loss divided by weighted average basic shares for 2023.
7.Under our new methodology, our average enterprise customer spend is calculated by taking the annualized current quarter revenue contributed by enterprise customers existing as of the current period, and dividing that by the number of enterprise customers as of the current period. Under our prior methodology, our average enterprise customer spend is calculated by taking the sum of the trailing 12-month revenue contributed by enterprise customers existing as of the current period, and dividing that by the number of enterprise customers as of the current period. Under our prior methodology, our average enterprise customer spend was $809 thousand in the second quarter, up 4% quarter-over-quarter.
8.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 and (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.
9.Annual revenue retention rate is calculated by subtracting the quotient of the Annual Revenue Churn from all of our Churned Customers divided by our annual revenue of the same calendar year from 100%. Our “Annual Revenue Churn” is calculated by multiplying the final full month of revenue from a customer that terminated its contract with us (a “Churned Customer”) by the number of months remaining in the same calendar year.
Forward-Looking Statements
This investor supplement 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," "continue," “would,” or the negative of these words or other similar terms or expressions that concern Fastly's expectations, goals, strategy, priorities, plans, projections, or intentions. Forward-looking statements in this investor supplement include, but are not limited to, statements regarding Fastly’s future financial and operating performance, including its outlook and guidance; the performance of our products; the growth and success of Fastly's partner program; and Fastly's strategies, product and business plans. 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 investor supplement are also subject to other risks and uncertainties, including those more fully described in Fastly’s Annual Report on Form 10-K for the year ended December 31, 2022, and Fastly’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, and other filings and reports that we may file from time to time with the SEC. The forward-looking statements in this investor supplement 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.
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, 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 intangible assets, acquisition-related expenses, executive transition costs, net gain on extinguishment of debt and amortization of debt discount and issuance costs.
Adjusted EBITDA: excludes stock-based compensation expense, depreciation and other amortization expenses, amortization of acquired intangible assets, acquisition-related expenses, executive transition costs, interest income, interest expense, including amortization of debt discount and issuance costs, net gain on extinguishment of debt, other income (expense), net, and income taxes.
Acquisition-related Expenses: consists of acquisition-related charges that are not related to ongoing operations. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance because these charges may not be reflective of our core business, ongoing operating results, or future outlook.
Amortization of Acquired Intangible Assets: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases and acquisitions. Management considers its operating results without this activity when evaluating its ongoing non-GAAP performance and its 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 operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. These are included in our total interest expense.
Capital Expenditures: consists of cash used for purchases of property and equipment, net of proceeds from sale of property and equipment, capitalized internal-use software and payments on finance lease obligations, 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. Management considers its operating results without this activity 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.
Executive Transition costs: consists of one-time cash and non-cash charges recognized with respect to changes in our executive’s employment status. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.
Free Cash Flow: calculated as net cash used in operating activities less purchases of property and equipment, net of proceeds from sale of property and equipment, principal payments of finance lease liabilities, capitalized internal-use software costs and advance payments made related to capital expenditures. Management specifically identifies adjusting items in the reconciliation of GAAP to non-GAAP financial measures. Management considers non-GAAP free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in Fastly's business and strengthening its balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures. The presentation of non-GAAP free cash flow is also not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.
Income Taxes: consists primarily of expenses recognized related to state and foreign income taxes. Management considers its operating results without this activity 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 Expense: consists primarily of interest expense related to our debt instruments, including amortization of debt discount and issuance costs. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its 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 operating results without this activity when evaluating its ongoing non-GAAP net loss performance and adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.
Net Gain on Debt Extinguishment: relates to net gain on the partial repurchase of our outstanding convertible debt. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.
Other Income (Expense), Net: consists primarily of foreign currency transaction gains and losses. Management considers its operating results without this activity 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. Although stock-based compensation is an expense for the Company and is viewed as a form of compensation, management considers its operating results without this activity when evaluating its ongoing non-GAAP net loss performance and its adjusted EBITDA 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 investor supplement.
Consolidated Statements of Operations – Quarterly
(unaudited, in thousands, except per share amounts)
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Revenue
$
86,735
$
97,717
$
102,382
$
102,518
$
108,504
$
119,321
$
117,564
$
122,831
Cost of revenue(1)
41,244
47,944
53,915
56,466
55,825
56,738
57,310
58,617
Gross profit
45,491
49,773
48,467
46,052
52,679
62,583
60,254
64,214
Operating expenses:
Research and development(1)
32,528
34,997
40,437
38,717
38,957
37,197
37,431
37,421
Sales and marketing(1)
39,288
42,151
41,480
46,760
47,006
44,623
44,271
47,797
General and administrative (1)
28,609
29,281
29,554
29,543
32,481
29,225
25,827
28,823
Total operating expenses
100,425
106,429
111,471
115,020
118,444
111,045
107,529
114,041
Loss from operations
(54,934)
(56,656)
(63,004)
(68,968)
(65,765)
(48,462)
(47,275)
(49,827)
Net gain on extinguishment of debt
—
—
—
54,391
—
—
—
36,760
Interest income
280
552
681
1,502
1,967
2,894
4,186
4,508
Interest expense
(1,555)
(1,593)
(1,622)
(1,530)
(1,381)
(1,354)
(1,213)
(1,232)
Other income (expense)
41
201
(279)
(1,673)
1,877
46
(250)
(803)
Loss before income taxes
(56,168)
(57,496)
(64,224)
(16,278)
(63,302)
(46,876)
(44,552)
(10,594)
Income tax expense (benefit)
30
25
40
159
118
(223)
135
110
Net loss
$
(56,198)
$
(57,521)
$
(64,264)
$
(16,437)
$
(63,420)
$
(46,653)
$
(44,687)
$
(10,704)
Net loss per share attributable to common stockholders, basic and diluted
$
(0.48)
$
(0.49)
$
(0.54)
$
(0.14)
$
(0.52)
$
(0.38)
$
(0.36)
$
(0.08)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
116,475
118,161
119,673
121,242
122,339
123,587
125,418
127,863
__________
(1)Includes stock-based compensation expense as follows:
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Cost of revenue
$
1,897
$
2,316
$
2,946
$
3,188
$
2,978
$
2,938
$
2,681
$
2,837
Research and development
14,752
15,675
18,589
13,889
14,488
11,469
11,481
12,205
Sales and marketing
9,121
11,399
10,094
10,184
10,920
7,885
6,705
9,877
General and administrative
10,866
10,198
8,393
7,717
10,992
9,126
7,284
12,073
Total
$
36,636
$
39,588
$
40,022
$
34,978
$
39,378
$
31,418
$
28,151
$
36,992
Reconciliation of GAAP to Non-GAAP Financial Measures - Quarterly
(unaudited, in thousands, except per share amounts)
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Gross Profit
GAAP gross Profit
$
45,491
$
49,773
$
48,467
$
46,052
$
52,679
$
62,583
$
60,254
$
64,214
Stock-based compensation
1,897
2,316
2,946
3,188
2,978
2,938
2,681
2,837
Amortization of acquired intangible assets
2,475
2,475
2,475
2,475
2,475
2,475
2,475
2,475
Non-GAAP gross profit
49,863
54,564
53,888
51,715
58,132
67,996
65,410
69,526
GAAP gross margin
52.4
%
50.9
%
47.3
%
44.9
%
48.6
%
52.4
%
51.3
%
52.3
%
Non-GAAP gross margin
57.5
%
55.8
%
52.6
%
50.4
%
53.6
%
57.0
%
55.6
%
56.6
%
Research and development
GAAP research and development
32,528
34,997
40,437
38,717
38,957
37,197
37,431
37,421
Stock-based compensation
(14,752)
(15,675)
(18,589)
(13,889)
(14,488)
(11,469)
(11,481)
(12,205)
Non-GAAP research and development
17,776
19,322
21,848
24,828
24,469
25,728
25,950
25,216
Sales and marketing
GAAP sales and marketing
39,288
42,151
41,480
46,760
47,006
44,623
44,271
47,797
Stock-based compensation
(9,121)
(11,399)
(10,094)
(10,184)
(10,920)
(7,885)
(6,705)
(9,877)
Amortization of acquired intangible assets
(2,709)
(2,710)
(2,709)
(2,710)
(2,897)
(2,575)
(2,575)
(2,575)
Non-GAAP sales and marketing
27,458
28,042
28,677
33,866
33,189
34,163
34,991
35,345
General and administrative
GAAP general and administrative
28,609
29,281
29,554
29,543
32,481
29,225
25,827
28,823
Stock-based compensation
(10,866)
(10,198)
(8,393)
(7,717)
(7,959)
(9,126)
(7,284)
(12,073)
Executive transition costs
—
—
—
—
(4,207)
—
—
—
Acquisition-related expenses
(179)
(149)
(58)
(1,912)
—
—
—
—
Non-GAAP general and administrative
17,564
18,934
21,103
19,914
20,315
20,099
18,543
16,750
Operating loss
GAAP operating loss
(54,934)
(56,656)
(63,004)
(68,968)
(65,765)
(48,462)
(47,275)
(49,827)
Stock-based compensation
36,636
39,588
40,022
34,978
36,345
31,418
28,151
36,992
Executive transition costs
—
—
—
—
4,207
—
—
—
Amortization of acquired intangible assets
5,184
5,185
5,184
5,185
5,372
5,050
5,050
5,050
Acquisition-related expenses
179
149
58
1,912
—
—
—
—
Non-GAAP operating loss
(12,935)
(11,734)
(17,740)
(26,893)
(19,841)
(11,994)
(14,074)
(7,785)
Net loss
GAAP net loss
(56,198)
(57,521)
(64,264)
(16,437)
(63,420)
(46,653)
(44,687)
(10,704)
Stock-based compensation
36,636
39,588
40,022
34,978
36,345
31,418
28,151
36,992
Executive transition costs
—
—
—
—
4,207
—
—
—
Amortization of acquired intangible assets
5,184
5,185
5,184
5,185
5,372
5,050
5,050
5,050
Acquisition-related expenses
179
149
58
1,912
—
—
—
—
Net gain on extinguishment of debt
—
—
—
(54,391)
—
—
—
(36,760)
Amortization of debt issuance costs
967
947
963
776
714
716
716
803
Non-GAAP net loss
$
(13,232)
$
(11,652)
$
(18,037)
$
(27,977)
$
(16,782)
$
(9,469)
$
(10,770)
$
(4,619)
GAAP net loss per common share—basic and diluted
$
(0.48)
$
(0.49)
$
(0.54)
$
(0.14)
$
(0.52)
$
(0.38)
$
(0.36)
$
(0.08)
Non-GAAP net loss per common share—basic and diluted
$
(0.11)
$
(0.10)
$
(0.15)
$
(0.23)
$
(0.14)
$
(0.08)
$
(0.09)
$
(0.04)
Weighted average basic common shares
116,475
118,161
119,673
121,242
122,339
123,587
125,418
127,863
Reconciliation of GAAP to Non-GAAP Financial Measures - Quarterly (Continued)
(unaudited, in thousands, except per share amounts)
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Adjusted EBITDA
GAAP net loss
$
(56,198)
$
(57,521)
$
(64,264)
$
(16,437)
$
(63,420)
$
(46,653)
$
(44,687)
$
(10,704)
Stock-based compensation
36,636
39,588
40,022
34,978
36,345
31,418
28,151
36,992
Executive transition costs
—
—
—
—
4,207
—
—
—
Depreciation and other amortization
7,489
8,228
9,975
10,860
10,786
11,903
12,179
13,030
Amortization of acquired intangible assets
5,184
5,185
5,184
5,185
5,372
5,050
5,050
5,050
Acquisition-related expenses
179
149
58
1,912
—
—
—
—
Interest income
(280)
(552)
(681)
(1,502)
(1,967)
(2,894)
(4,186)
(4,508)
Interest expense
588
646
—
754
667
638
497
429
Amortization of debt discount and issuance costs
967
947
963
776
714
716
716
803
Net gain on extinguishment of debt
—
—
—
(54,391)
—
—
—
(36,760)
Other (income) expense, net
(41)
(201)
279
1,673
(1,877)
(46)
250
803
Income tax (benefit) expense
30
25
40
159
118
(223)
135
110
Adjusted EBITDA
$
(5,446)
$
(3,506)
$
(7,765)
$
(16,033)
$
(9,055)
$
(91)
$
(1,895)
$
5,245
Non-GAAP Consolidated Statements of Operations - Quarterly
(unaudited, in thousands, except per share amounts)
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Revenue
$
86,735
$
97,717
$
102,382
$
102,518
$
108,504
$
119,321
$
117,564
$
122,831
Cost of revenue (1)(2)
36,872
43,153
48,494
50,803
50,372
51,325
52,154
53,305
Gross profit
49,863
54,564
53,888
51,715
58,132
67,996
65,410
69,526
Operating expenses:
Research and development(1)
17,776
19,322
21,848
24,828
24,469
25,728
25,950
25,216
Sales and marketing(1)(2)
27,458
28,042
28,677
33,866
33,189
34,163
34,991
35,345
General and administrative (1)(3)(7)
17,564
18,934
21,103
19,914
20,315
20,099
18,543
16,750
Total operating expenses
62,798
66,298
71,628
78,608
77,973
79,990
79,484
77,311
Loss from operations(1)(2)(3)(7)
(12,935)
(11,734)
(17,740)
(26,893)
(19,841)
(11,994)
(14,074)
(7,785)
Interest income
280
552
681
1,502
1,967
2,894
4,186
4,508
Interest expense(4)
(588)
(646)
(659)
(754)
(667)
(638)
(497)
(429)
Other income (expense), net
41
201
(279)
(1,673)
1,877
46
(250)
(803)
Loss before income tax expense (benefit)(5)
(13,202)
(11,627)
(17,997)
(27,818)
(16,664)
(9,692)
(10,635)
(4,509)
Income tax expense (benefit)(6)
30
25
40
159
118
(223)
135
110
Net loss(1)(2)(3)(4)(5)(6)(7)
$
(13,232)
$
(11,652)
$
(18,037)
$
(27,977)
$
(16,782)
$
(9,469)
$
(10,770)
$
(4,619)
Net loss per share attributable to common stockholders, basic and diluted
$
(0.11)
$
(0.10)
$
(0.15)
$
(0.23)
$
(0.14)
$
(0.08)
$
(0.09)
$
(0.04)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
116,475
118,161
119,673
121,242
122,339
123,587
125,418
127,863
(1) Excludes stock-based compensation. See GAAP to Non-GAAP reconciliations.
(2) Excludes amortization of acquired intangible assets. See GAAP to Non-GAAP reconciliations.
(3) Excludes acquisition-related and other expenses. See GAAP to Non-GAAP reconciliations.
(4) Excludes amortization of debt discount and issuance costs. See GAAP to Non-GAAP reconciliations.
(5) Excludes net gain on extinguishment of debt. See GAAP to Non-GAAP reconciliations.
(6) Excludes acquisition-related tax benefit. See GAAP to Non-GAAP reconciliations.
(7) Excludes executive transition costs. See GAAP to Non-GAAP reconciliations.
Consolidated Balance Sheets - Quarterly
(unaudited, in thousands)
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Assets
Current assets:
Cash and cash equivalents
$
282,131
$
166,068
$
245,794
$
62,510
$
87,897
$
143,391
$
348,463
$
273,742
Marketable securities
361,290
361,795
393,950
419,905
445,048
374,581
198,116
123,605
Accounts receivable, net
54,234
64,625
73,717
68,218
72,914
89,578
85,344
78,295
Prepaid expenses and other current assets
22,230
32,160
23,616
29,037
31,321
28,933
29,717
29,500
Total current assets
719,885
624,648
737,077
579,670
637,180
636,483
661,640
505,142
Property and equipment, net
147,729
166,961
174,550
173,950
179,080
180,378
179,922
179,045
Operating lease right-of-use assets, net
70,149
69,631
63,455
69,861
72,374
68,440
60,615
56,733
Goodwill
635,635
636,805
637,570
670,186
670,158
670,185
670,192
670,356
Intangible assets, net
107,905
102,596
97,287
93,978
88,482
82,900
77,725
72,550
Marketable securities, non-current
429,489
528,911
394,464
284,951
186,066
165,105
117,518
78,042
Other assets
28,142
29,468
30,020
60,199
73,258
92,622
94,798
95,550
Total assets
$
2,138,934
$
2,159,020
$
2,134,423
$
1,932,795
$
1,906,598
$
1,896,113
$
1,862,410
$
1,657,418
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
7,766
$
9,257
$
8,248
$
10,011
$
8,265
$
4,786
$
4,668
$
5,561
Accrued expenses
36,063
36,112
49,902
49,943
54,186
61,161
42,311
47,001
Finance lease liabilities
18,675
21,125
26,766
28,088
27,807
28,954
24,763
22,233
Operating lease liabilities
20,007
20,271
18,688
19,243
20,919
23,026
20,516
20,575
Other current liabilities
24,758
45,107
36,569
33,705
33,422
34,394
32,942
36,234
Total current liabilities
107,269
131,872
140,173
140,990
144,599
152,321
125,200
131,604
Long-term debt, less current portion
932,305
933,205
934,121
703,375
704,042
704,710
705,378
472,369
Finance lease liabilities, noncurrent
24,659
22,293
28,867
26,479
21,027
15,507
10,858
7,026
Operating lease liabilities, noncurrent
54,066
55,114
52,334
60,657
62,750
61,341
56,275
51,448
Other long-term liabilities
5,056
2,583
2,205
7,556
7,201
7,076
6,144
7,217
Total liabilities
1,123,355
1,145,067
1,157,700
939,057
939,619
940,955
903,855
669,664
Stockholders’ equity:
Class A and Class B common stock
2
2
2
2
2
2
2
2
Additional paid-in capital
1,469,366
1,527,468
1,561,371
1,597,869
1,634,666
1,666,106
1,710,498
1,747,959
Accumulated other comprehensive loss
(420)
(2,627)
(9,496)
(12,542)
(12,678)
(9,286)
(5,594)
(3,152)
Accumulated deficit
(453,369)
(510,890)
(575,154)
(591,591)
(655,011)
(701,664)
(746,351)
(757,055)
Total stockholders’ equity
1,015,579
1,013,953
976,723
993,738
966,979
955,158
958,555
987,754
Total liabilities and stockholders’ equity
$
2,138,934
$
2,159,020
$
2,134,423
$
1,932,795
$
1,906,598
$
1,896,113
$
1,862,410
$
1,657,418
Consolidated Statements of Cash Flows – Quarterly
(unaudited, in thousands)
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Cash flows from operating activities:
Net loss
$
(56,198)
$
(57,521)
$
(64,264)
$
(16,437)
$
(63,420)
$
(46,653)
$
(44,687)
$
(10,704)
Adjustments to reconcile net loss to net cash used in operating activities:
—
—
Depreciation expense
7,364
8,089
9,850
10,736
10,662
11,371
12,040
12,920
Amortization of intangible assets
5,309
5,309
5,309
5,309
5,496
5,582
5,175
5,175
Non-cash lease expense
6,176
6,085
5,914
5,608
8,133
5,793
6,115
5,648
Amortization of debt discount and issuance costs
966
950
964
775
715
715
716
803
Amortization of deferred contract costs
1,621
1,727
1,851
2,138
2,031
2,896
3,425
3,746
Stock-based compensation
36,636
39,588
40,022
34,978
39,378
31,418
28,151
36,992
Provision for credit losses
236
155
127
402
1,253
624
533
567
(Gain) loss on disposals of property and equipment
(204)
(123)
268
586
—
—
251
296
Amortization and accretion of discounts and premiums on investments
—
—
957
894
771
515
449
298
Impairment of operating lease right-of-use assets
—
—
—
—
—
2,083
—
187
Net gain on extinguishment of debt
—
—
—
(54,391)
—
—
—
(36,760)
Other adjustments
683
729
128
(67)
(353)
3,980
(243)
(85)
Changes in operating assets and liabilities:
—
—
Accounts receivable
1,595
(10,546)
(9,219)
5,097
(5,949)
(17,288)
3,701
6,482
Prepaid expenses and other current assets
(8)
725
(2,111)
(2,701)
(975)
(971)
(634)
217
Other assets
(2,231)
(3,103)
(2,451)
(3,948)
(13,505)
(15,492)
(7,212)
(4,771)
Accounts payable
(1,815)
1,799
(2,492)
3,336
(4,301)
(1,267)
(175)
1,119
Accrued expenses
6,548
1,548
4,891
(3,729)
3,328
3,799
(6,827)
234
Operating lease liabilities
(5,897)
(5,732)
(5,632)
(5,349)
(7,462)
(4,335)
(5,750)
(6,682)
Other liabilities
(3,472)
2,413
2,698
83
(3,436)
5,102
(3,889)
9,308
Net cash provided by (used in) operating activities
(2,691)
(7,908)
(13,190)
(16,680)
(27,634)
(12,128)
(8,861)
24,990
Cash flows from investing activities:
Purchases of marketable securities
(443,701)
(150,586)
(148,193)
(207,286)
—
—
—
—
Sales of marketable securities
51,739
2,291
2,301
159,552
—
65
—
774
Maturities of marketable securities
15,600
45,232
240,547
127,333
72,857
94,303
227,211
114,884
Business acquisitions, net of cash acquired
—
(1,169)
(775)
(25,224)
(1,746)
1,843
—
—
Advance payment for purchase of property and equipment
—
—
—
(29,310)
(1,964)
(10,923)
—
—
Purchases of property and equipment(1)
(20,254)
(3,549)
(2,387)
(6,428)
(2,631)
(8,529)
(3,494)
(4,464)
Proceeds from sale of property and equipment
291
297
—
241
125
126
22
14
Capitalized internal-use software
(7,619)
(3,180)
(3,810)
(4,926)
(5,120)
(4,290)
(4,209)
(6,230)
Purchases of intangible assets
1
—
—
—
—
—
—
—
Net cash provided by (used in) investing activities(1)
(403,943)
(110,664)
87,683
13,952
61,521
72,595
219,530
104,978
Cash flows from financing activities:
Cash paid for debt extinguishment
—
—
—
(177,082)
—
—
—
(196,934)
Repayments of finance lease liabilities(1)
(3,985)
(3,004)
(7,159)
(3,870)
(7,076)
(4,427)
(8,645)
(6,557)
Cash received for restricted stock sold in advance of vesting conditions
—
—
10,655
—
—
—
—
—
Cash paid for early sale of restricted shares
—
—
(3,498)
(3,539)
(3,618)
—
—
—
Payment of deferred consideration for business acquisitions
—
—
—
—
—
—
—
(4,393)
Proceeds from exercise of vested stock options
3,489
3,532
3,048
1,721
555
364
336
535
Proceeds from employee stock purchase plan
1,430
2,075
2,406
1,571
1,749
(949)
2,596
2,191
Net cash provided by (used in) financing activities(1)
934
2,603
5,452
(181,199)
(8,390)
(5,012)
(5,713)
(205,158)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash
(242)
(94)
(219)
(100)
(110)
39
116
469
Net increase (decrease) in cash, cash equivalents, and restricted cash
(405,942)
(116,063)
79,726
(184,027)
25,387
55,494
205,072
(74,721)
Cash, cash equivalents, and restricted cash at beginning of period
688,966
283,024
166,961
246,687
62,660
88,047
143,541
348,613
Cash, cash equivalents, and restricted cash at end of period
$
283,024
$
166,961
$
246,687
$
62,660
$
88,047
$
143,541
$
348,613
$
273,892
__________
(1)Amounts disclosed for Q1 2022 and Q2 2022 have been revised from the amounts disclosed in our previous investor supplements to match amounts reported in the applicable Quarterly Reports on Form 10-Q.
Free Cash Flow
(in thousands, unaudited)
Quarter ended
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Cash flow provided by (used in) operations
$
(2,691)
$
(7,908)
$
(13,190)
$
(16,680)
$
(27,634)
$
(12,128)
$
(8,861)
$
24,990
Capital expenditures(1):
Purchases of property and equipment
(20,254)
(3,549)
(2,387)
(6,428)
(2,631)
(8,529)
(3,494)
(4,464)
Proceeds from sale of property and equipment
291
297
—
241
125
126
22
14
Capitalized internal-use software
(7,619)
(3,180)
(3,810)
(4,926)
(5,120)
(4,290)
(4,209)
(6,230)
Repayments of finance lease liabilities
(3,985)
(3,004)
(7,159)
(3,870)
(7,076)
(4,427)
(8,645)
(6,557)
Advance payment for purchase of property and equipment (2)
—
—
—
(29,310)
(1,964)
(10,923)
—
—
Free Cash Flow
$
(34,258)
$
(17,344)
$
(26,546)
$
(60,973)
$
(44,300)
$
(40,171)
$
(25,187)
$
7,753
__________
(1)Capital expenditures are defined as cash used for purchases of property and equipment, net of proceeds from sale of property and equipment, and capitalized internal-use software and payments on finance lease obligations, as reflected in our statement of cash flows.
(2)As reflected in our statement of cash flows. In the six months ended June 30, 2023, we received $1.6 million of capital equipment that was prepaid prior to the current quarter.
