•KV Store which enables more powerful edge applications through high performance reads and writes from both the edge and API across Fastly’s network.
•GraphQL Inspection which expands Fastly’s API protections to the NGWAF product to support GraphQL.
•Established a Fastly-owned certificate authority with the GA of Certainly, providing domain-validated TLS certificates in our managed TLS services and helping enable trusted identification of websites to improve security and reliability.
•Released Go compiler SDK which provides developers with key capabilities for their application development.
•Deployed Fastly Fanout at the edge, enabling developers to build and scale real-time applications that push data instantly to end user app environments.
Customer and Partner Highlights
•Channel partner deal registration has more than tripled in 2023 year-to-date compared to all of 2022, with almost 90% growth in partner engagement and channel revenue growth of more than 50%.
•Transacted packaging deals with twice as many customers quarter-over-quarter, almost half of those deals since program inception included Compute.
•Wendy’s, an American international restaurant chain with over 7,000 locations, replaced its multi-CDN architecture with Fastly’s network services due to our ease of use and potential security functionality.
•Digital Turbine, a provider of end-to-end solutions for mobile app advertisers to run digital ad campaigns, selected Fastly’s network services offering to replace an incumbent winding down its CDN support.
•Mozilla, the non-profit backed technology company championing privacy, people and an open internet, adopted Fastly as an Oblivious HTTP (OHTTP) Relay in order to build server-backed features while maintaining Firefox's high standard for user privacy.
Calculations of Key and Other Selected Metrics – Quarterly (unaudited)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Total Customer Count(2)
2,929
2,965
3,025
3,039
3,062
3,100
3,072
3,102
Enterprise Customer Count(2)
467
488
499
511
533
540
551
547
Average Enterprise Customer Spend (in thousands)(3)
$
751
$
758
$
742
$
771
$
822
$
795
$
818
$
858
Enterprise Customer Revenue %
90
%
90
%
90
%
91
%
92
%
91
%
92
%
92
%
Total Customer Count (prior methodology)(2)
2,804
2,880
2,894
2,925
2,958
3,001
2,965
3,019
Enterprise Customer Count (prior methodology)(2)
445
457
471
482
493
514
520
530
Average Enterprise Customer Spend (in thousands; prior methodology)(3)
$
704
$
722
$
730
$
759
$
782
$
778
$
809
$
832
Enterprise Customer Revenue % (prior methodology)
88
%
89
%
88
%
89
%
89
%
89
%
90
%
90
%
Net Retention Rate (NRR) Quarter(9)
107
%
114
%
128
%
115
%
111
%
105
%
106
%
110
%
Net Retention Rate (NRR) LTM(1)
118
%
115
%
117
%
118
%
119
%
116
%
116
%
114
%
Dollar-Based Net Expansion Rate (DBNER)(5)
121
%
118
%
120
%
122
%
123
%
121
%
123
%
120
%
Annual Revenue Retention Rate (ARR)(10)
99.2
%
—
%
—
%
—
%
99.2
%
—
%
—
%
—
%
Global Network Capacity
184 TB/sec
198 TB/sec
215 TB/sec
233 TB/sec
252 TB/sec
265 TB/sec
277 TB/sec
291 TB/sec
Countries
32
34
34
35
35
35
35
35
Markets
71
75
78
79
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 domain API capabilities with Domainr acquisition to enhance simplification and security; coupled with the GA of Certainly, Fastly’s TLS Certification Authority, Fastly significantly advanced its edge cloud platform.
•Hosted Altitude, our user conference in New York, and demoed Simplified Service Creation showcasing the ability to provision a global website in less than 90 seconds; a new level of simplicity for the CDN market.
•Publication of Fastly’s first threat intelligence report, the “Network Effect Threat Report,” featuring data and insights from Fastly’s Network Learning Exchange (NLX).
Key Metrics Highlights
•Trailing 12 month net retention rate (LTM NRR)1 decreased to 114% in the third quarter from 116% in the second quarter.
•Total customer count2 was 3,102 in the third quarter, up 30 from the second quarter; 547 were enterprise customers2 in the third quarter, down 4 from the second quarter.
•Average enterprise customer spend3 of $858 thousand in the third quarter, up 5% quarter-over-quarter.
•Remaining performance obligations (RPO)4 was $248 million up 7% from $231 million in the second quarter of 2023 and up 43% from $173 million in the third quarter of 2022.
•Dollar-Based Net Expansion Rate (DBNER)5 decreased to 120% in the third quarter from 123% in the second quarter.
Fourth Quarter and Full Year 2023 Guidance:
Q4 2023
Full Year 2023
Total Revenue (millions)
$137 - $141
$505 - $509
Non-GAAP Operating Loss (millions)(6)
($10.0) - ($6.0)
($44.0) - ($40.0)
Non-GAAP Net Loss per share (7)(8)
($0.05) - ($0.01)
($0.23) - ($0.19)
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.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 3,019 in the third quarter, up 54 from the second quarter of 2023; 530 were enterprise customers in the third quarter, up 10 from the second quarter of 2023.
3.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 $832 thousand in the third quarter, up 3% quarter-over-quarter.
4.Remaining performance obligations include future committed revenue for periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied.
5.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.
6.For a reconciliation of non-GAAP financial measures to their corresponding GAAP measures, please refer to the reconciliation table at the end of this supplement.
7.Assumes weighted average basic shares outstanding of 132.0 million in Q4 2023 and 128.8 million for the full year 2023.
8.Non-GAAP Net Loss per share is calculated as Non-GAAP Net Loss divided by weighted average basic shares for 2023.
9.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.
10.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 September 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, impairment expense 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, impairment expense, 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.
Impairment Expense: consists of impairment charge related to our computer and networking equipment, including software, we expect to not be used. 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.
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)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Revenue
$
97,717
$
102,382
$
102,518
$
108,504
$
119,321
$
117,564
$
122,831
$
127,816
Cost of revenue(1)
47,944
53,915
56,466
55,825
56,738
57,310
58,617
61,730
Gross profit
49,773
48,467
46,052
52,679
62,583
60,254
64,214
66,086
Operating expenses:
Research and development(1)
34,997
40,437
38,717
38,957
37,197
37,431
37,421
39,068
Sales and marketing(1)
42,151
41,480
46,760
47,006
44,623
44,271
47,797
51,043
General and administrative (1)
29,281
29,554
29,543
32,481
29,225
25,827
28,823
30,001
Impairment expense
—
—
—
—
—
—
—
4,316
Total operating expenses
106,429
111,471
115,020
118,444
111,045
107,529
114,041
124,428
Loss from operations
(56,656)
(63,004)
(68,968)
(65,765)
(48,462)
(47,275)
(49,827)
(58,342)
Net gain on extinguishment of debt
—
—
54,391
—
—
—
36,760
—
Interest income
552
681
1,502
1,967
2,894
4,186
4,508
4,908
Interest expense
(1,593)
(1,622)
(1,530)
(1,381)
(1,354)
(1,213)
(1,232)
(862)
Other income (expense)
201
(279)
(1,673)
1,877
46
(250)
(803)
(16)
Loss before income taxes
(57,496)
(64,224)
(16,278)
(63,302)
(46,876)
(44,552)
(10,594)
(54,312)
Income tax expense (benefit)
25
40
159
118
(223)
135
110
(1)
Net loss
$
(57,521)
$
(64,264)
$
(16,437)
$
(63,420)
$
(46,653)
$
(44,687)
$
(10,704)
$
(54,311)
Net loss per share attributable to common stockholders, basic and diluted
$
(0.49)
$
(0.54)
$
(0.14)
$
(0.52)
$
(0.38)
$
(0.36)
$
(0.08)
$
(0.42)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
118,161
119,673
121,242
122,339
123,587
125,418
127,863
129,873
__________
(1)Includes stock-based compensation expense as follows:
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Cost of revenue
$
2,316
$
2,946
$
3,188
$
2,978
$
2,938
$
2,681
$
2,837
$
2,860
Research and development
15,675
18,589
13,889
14,488
11,469
11,481
12,205
12,122
Sales and marketing
11,399
10,094
10,184
10,920
7,885
6,705
9,877
9,061
General and administrative
10,198
8,393
7,717
10,992
9,126
7,284
12,073
11,670
Total
$
39,588
$
40,022
$
34,978
$
39,378
$
31,418
$
28,151
$
36,992
$
35,713
Reconciliation of GAAP to Non-GAAP Financial Measures - Quarterly
(unaudited, in thousands, except per share amounts)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Gross Profit
GAAP gross Profit
$
49,773
$
48,467
$
46,052
$
52,679
$
62,583
$
60,254
$
64,214
$
66,086
Stock-based compensation
2,316
2,946
3,188
2,978
2,938
2,681
2,837
2,860
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
54,564
53,888
51,715
58,132
67,996
65,410
69,526
71,421
GAAP gross margin
50.9
%
47.3
%
44.9
%
48.6
%
52.4
%
51.3
%
52.3
%
51.7
%
Non-GAAP gross margin
55.8
%
52.6
%
50.4
%
53.6
%
57.0
%
55.6
%
56.6
%
55.9
%
Research and development
GAAP research and development
34,997
40,437
38,717
38,957
37,197
37,431
37,421
39,068
Stock-based compensation
(15,675)
(18,589)
(13,889)
(14,488)
(11,469)
(11,481)
(12,205)
(10,426)
Executive transition costs
—
—
—
—
—
—
—
(2,406)
Non-GAAP research and development
19,322
21,848
24,828
24,469
25,728
25,950
25,216
26,236
Sales and marketing
GAAP sales and marketing
42,151
41,480
46,760
47,006
44,623
44,271
47,797
51,043
Stock-based compensation
(11,399)
(10,094)
(10,184)
(10,920)
(7,885)
(6,705)
(9,877)
(9,061)
Amortization of acquired intangible assets
(2,710)
(2,709)
(2,710)
(2,897)
(2,575)
(2,575)
(2,575)
(2,576)
Non-GAAP sales and marketing
28,042
28,677
33,866
33,189
34,163
34,991
35,345
39,406
General and administrative
GAAP general and administrative
29,281
29,554
29,543
32,481
29,225
25,827
28,823
30,001
Stock-based compensation
(10,198)
(8,393)
(7,717)
(7,959)
(9,126)
(7,284)
(12,073)
(11,670)
Executive transition costs
—
—
—
(4,207)
—
—
—
—
Acquisition-related expenses
(149)
(58)
(1,912)
—
—
—
—
—
Non-GAAP general and administrative
18,934
21,103
19,914
20,315
20,099
18,543
16,750
18,331
Operating loss
GAAP operating loss
(56,656)
(63,004)
(68,968)
(65,765)
(48,462)
(47,275)
(49,827)
(58,342)
Stock-based compensation
39,588
40,022
34,978
36,345
31,418
28,151
36,992
34,017
Executive transition costs
—
—
—
4,207
—
—
—
2,406
Amortization of acquired intangible assets
5,185
5,184
5,185
5,372
5,050
5,050
5,050
5,051
Impairment expense
—
—
—
—
—
—
—
4,316
Acquisition-related expenses
149
58
1,912
—
—
—
—
—
Non-GAAP operating loss
(11,734)
(17,740)
(26,893)
(19,841)
(11,994)
(14,074)
(7,785)
(12,552)
Net loss
GAAP net loss
(57,521)
(64,264)
(16,437)
(63,420)
(46,653)
(44,687)
(10,704)
(54,311)
Stock-based compensation
39,588
40,022
34,978
36,345
31,418
28,151
36,992
34,017
Executive transition costs
—
—
—
4,207
—
—
—
2,406
Amortization of acquired intangible assets
5,185
5,184
5,185
5,372
5,050
5,050
5,050
5,051
Acquisition-related expenses
149
58
1,912
—
—
—
—
—
Net gain on extinguishment of debt
—
—
(54,391)
—
—
—
(36,760)
—
Impairment expense
—
—
—
—
—
—
4,316
Amortization of debt issuance costs
947
963
776
714
716
716
803
502
Non-GAAP net loss
$
(11,652)
$
(18,037)
$
(27,977)
$
(16,782)
$
(9,469)
$
(10,770)
$
(4,619)
$
(8,019)
GAAP net loss per common share—basic and diluted
$
(0.49)
$
(0.54)
$
(0.14)
$
(0.52)
$
(0.38)
$
(0.36)
$
(0.08)
$
(0.42)
Non-GAAP net loss per common share—basic and diluted
$
(0.10)
$
(0.15)
$
(0.23)
$
(0.14)
$
(0.08)
$
(0.09)
$
(0.04)
$
(0.06)
Weighted average basic common shares
118,161
119,673
121,242
122,339
123,587
125,418
127,863
129,873
Reconciliation of GAAP to Non-GAAP Financial Measures - Quarterly (Continued)
(unaudited, in thousands, except per share amounts)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Adjusted EBITDA
GAAP net loss
$
(57,521)
$
(64,264)
$
(16,437)
$
(63,420)
$
(46,653)
$
(44,687)
$
(10,704)
$
(54,311)
Stock-based compensation
39,588
40,022
34,978
36,345
31,418
28,151
36,992
34,017
Executive transition costs
—
—
—
4,207
—
—
—
2,406
Net gain on extinguishment of debt
—
—
(54,391)
—
—
—
(36,760)
—
Impairment expense
—
—
—
—
—
—
—
4,316
Acquisition-related expenses
149
58
1,912
—
—
—
—
—
Depreciation and other amortization
8,228
9,975
10,860
10,786
11,903
12,179
13,030
13,202
Amortization of acquired intangible assets
5,185
5,184
5,185
5,372
5,050
5,050
5,050
5,051
Amortization of debt discount and issuance costs
947
963
776
714
716
716
803
502
Interest income
(552)
(681)
(1,502)
(1,967)
(2,894)
(4,186)
(4,508)
(4,908)
Interest expense
646
659
754
667
638
497
429
360
Other (income) expense, net
(201)
279
1,673
(1,877)
(46)
250
803
16
Income tax (benefit) expense
25
40
159
118
(223)
135
110
(1)
Adjusted EBITDA
$
(3,506)
$
(7,765)
$
(16,033)
$
(9,055)
$
(91)
$
(1,895)
$
5,245
$
650
Non-GAAP Consolidated Statements of Operations - Quarterly
(unaudited, in thousands, except per share amounts)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Revenue
$
97,717
$
102,382
$
102,518
$
108,504
$
119,321
$
117,564
$
122,831
$
127,816
Cost of revenue (1)(2)
43,153
48,494
50,803
50,372
51,325
52,154
53,305
56,395
Gross profit
54,564
53,888
51,715
58,132
67,996
65,410
69,526
71,421
Operating expenses:
Research and development(1)(7)
19,322
21,848
24,828
24,469
25,728
25,950
25,216
26,236
Sales and marketing(1)(2)
28,042
28,677
33,866
33,189
34,163
34,991
35,345
39,406
General and administrative (1)(3)(7)
18,934
21,103
19,914
20,315
20,099
18,543
16,750
18,331
Total operating expenses(8)
66,298
71,628
78,608
77,973
79,990
79,484
77,311
83,973
Loss from operations(1)(2)(3)(7)
(11,734)
(17,740)
(26,893)
(19,841)
(11,994)
(14,074)
(7,785)
(12,552)
Interest income
552
681
1,502
1,967
2,894
4,186
4,508
4,908
Interest expense(4)
(646)
(659)
(754)
(667)
(638)
(497)
(429)
(360)
Other income (expense), net
201
(279)
(1,673)
1,877
46
(250)
(803)
(16)
Loss before income tax expense (benefit)(5)
(11,627)
(17,997)
(27,818)
(16,664)
(9,692)
(10,635)
(4,509)
(8,020)
Income tax expense (benefit)(6)
25
40
159
118
(223)
135
110
(1)
Net loss(1)(2)(3)(4)(5)(6)(7)(8)
$
(11,652)
$
(18,037)
$
(27,977)
$
(16,782)
$
(9,469)
$
(10,770)
$
(4,619)
$
(8,019)
Net loss per share attributable to common stockholders, basic and diluted
$
(0.10)
$
(0.15)
$
(0.23)
$
(0.14)
$
(0.08)
$
(0.09)
$
(0.04)
$
(0.06)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
118,161
119,673
121,242
122,339
123,587
125,418
127,863
129,873
(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.
(8) Excludes impairment expense. See GAAP to Non-GAAP reconciliations.
Consolidated Balance Sheets - Quarterly
(unaudited, in thousands)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Assets
Current assets:
Cash and cash equivalents
$
166,068
$
245,794
$
62,510
$
87,897
$
143,391
$
348,463
$
273,742
$
270,300
Marketable securities
361,795
393,950
419,905
445,048
374,581
198,116
123,605
158,055
Accounts receivable, net
64,625
73,717
68,218
72,914
89,578
85,344
78,295
98,622
Prepaid expenses and other current assets
32,160
23,616
29,037
31,321
28,933
29,717
29,500
24,481
Total current assets
624,648
737,077
579,670
637,180
636,483
661,640
505,142
551,458
Property and equipment, net
166,961
174,550
173,950
179,080
180,378
179,922
179,045
171,914
Operating lease right-of-use assets, net
69,631
63,455
69,861
72,374
68,440
60,615
56,733
52,927
Goodwill
636,805
637,570
670,186
670,158
670,185
670,192
670,356
670,356
Intangible assets, net
102,596
97,287
93,978
88,482
82,900
77,725
72,550
67,375
Marketable securities, non-current
528,911
394,464
284,951
186,066
165,105
117,518
78,042
32,280
Other assets
29,468
30,020
60,199
73,258
92,622
94,798
95,550
94,353
Total assets
$
2,159,020
$
2,134,423
$
1,932,795
$
1,906,598
$
1,896,113
$
1,862,410
$
1,657,418
$
1,640,663
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
9,257
$
8,248
$
10,011
$
8,265
$
4,786
$
4,668
$
5,561
$
5,723
Accrued expenses
36,112
49,902
49,943
54,186
61,161
42,311
47,001
56,595
Finance lease liabilities
21,125
26,766
28,088
27,807
28,954
24,763
22,233
19,250
Operating lease liabilities
20,271
18,688
19,243
20,919
23,026
20,516
20,575
21,533
Other current liabilities
45,107
36,569
33,705
33,422
34,394
32,942
36,234
40,234
Total current liabilities
131,872
140,173
140,990
144,599
152,321
125,200
131,604
143,335
Long-term debt, less current portion
933,205
934,121
703,375
704,042
704,710
705,378
472,369
472,823
Finance lease liabilities, noncurrent
22,293
28,867
26,479
21,027
15,507
10,858
7,026
3,860
Operating lease liabilities, noncurrent
55,114
52,334
60,657
62,750
61,341
56,275
51,448
47,775
Other long-term liabilities
2,583
2,205
7,556
7,201
7,076
6,144
7,217
4,298
Total liabilities
1,145,067
1,157,700
939,057
939,619
940,955
903,855
669,664
672,091
Stockholders’ equity:
Class A and Class B common stock
2
2
2
2
2
2
2
2
Additional paid-in capital
1,527,468
1,561,371
1,597,869
1,634,666
1,666,106
1,710,498
1,747,959
1,781,870
Accumulated other comprehensive loss
(2,627)
(9,496)
(12,542)
(12,678)
(9,286)
(5,594)
(3,152)
(1,934)
Accumulated deficit
(510,890)
(575,154)
(591,591)
(655,011)
(701,664)
(746,351)
(757,055)
(811,366)
Total stockholders’ equity
1,013,953
976,723
993,738
966,979
955,158
958,555
987,754
968,572
Total liabilities and stockholders’ equity
$
2,159,020
$
2,134,423
$
1,932,795
$
1,906,598
$
1,896,113
$
1,862,410
$
1,657,418
$
1,640,663
Consolidated Statements of Cash Flows – Quarterly
(unaudited, in thousands)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Cash flows from operating activities:
Net loss
$
(57,521)
$
(64,264)
$
(16,437)
$
(63,420)
$
(46,653)
$
(44,687)
$
(10,704)
$
(54,311)
Adjustments to reconcile net loss to net cash used in operating activities:
—
Depreciation expense
8,089
9,850
10,736
10,662
11,371
12,040
12,920
13,055
Amortization of intangible assets
5,309
5,309
5,309
5,496
5,582
5,175
5,175
5,175
Non-cash lease expense
6,085
5,914
5,608
8,133
5,793
6,115
5,648
5,464
Amortization of debt discount and issuance costs
950
964
775
715
715
716
803
501
Amortization of deferred contract costs
1,727
1,851
2,138
2,031
2,896
3,425
3,746
4,082
Stock-based compensation
39,588
40,022
34,978
39,378
31,418
28,151
36,992
35,713
Provision for credit losses
155
127
402
1,253
624
533
567
211
(Gain) loss on disposals of property and equipment
(123)
268
586
—
—
251
296
(42)
Amortization and accretion of discounts and premiums on investments
—
957
894
771
515
449
298
(403)
Impairment of operating lease right-of-use assets
—
—
—
—
2,083
—
187
401
Impairment expense
—
—
—
—
—
—
—
4,316
Net gain on extinguishment of debt
—
—
(54,391)
—
—
—
(36,760)
—
Other adjustments
729
128
(67)
(353)
3,980
(243)
(85)
71
Changes in operating assets and liabilities:
—
Accounts receivable
(10,546)
(9,219)
5,097
(5,949)
(17,288)
3,701
6,482
(20,538)
Prepaid expenses and other current assets
725
(2,111)
(2,701)
(975)
(971)
(634)
217
5,019
Other assets
(3,103)
(2,451)
(3,948)
(13,505)
(15,492)
(7,212)
(4,771)
(4,286)
Accounts payable
1,799
(2,492)
3,336
(4,301)
(1,267)
(175)
1,119
314
Accrued expenses
1,548
4,891
(3,729)
3,328
3,799
(6,827)
234
340
Operating lease liabilities
(5,732)
(5,632)
(5,349)
(7,462)
(4,335)
(5,750)
(6,682)
(4,505)
Other liabilities
2,413
2,698
83
(3,436)
5,102
(3,889)
9,308
1,033
Net cash provided by (used in) operating activities
(7,908)
(13,190)
(16,680)
(27,634)
(12,128)
(8,861)
24,990
(8,390)
Cash flows from investing activities:
Purchases of marketable securities
(150,586)
(148,193)
(207,286)
—
—
—
—
(73,091)
Sales of marketable securities
2,291
2,301
159,552
—
65
—
774
1
Maturities of marketable securities
45,232
240,547
127,333
72,857
94,303
227,211
114,884
86,030
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)
(3,549)
(2,387)
(6,428)
(2,631)
(8,529)
(3,494)
(4,464)
(325)
Proceeds from sale of property and equipment
297
—
241
125
126
22
14
13
Capitalized internal-use software
(3,180)
(3,810)
(4,926)
(5,120)
(4,290)
(4,209)
(6,230)
(4,951)
Purchases of intangible assets
—
—
—
—
—
—
—
—
Net cash provided by (used in) investing activities(1)
(110,664)
87,683
13,952
61,521
72,595
219,530
104,978
7,677
Cash flows from financing activities:
Cash paid for debt extinguishment
—
—
(177,082)
—
—
—
(196,934)
—
Repayments of finance lease liabilities(1)
(3,004)
(7,159)
(3,870)
(7,076)
(4,427)
(8,645)
(6,557)
(6,041)
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
3,532
3,048
1,721
555
364
336
535
1,137
Proceeds from employee stock purchase plan
2,075
2,406
1,571
1,749
(949)
2,596
2,191
2,222
Net cash provided by (used in) financing activities(1)
2,603
5,452
(181,199)
(8,390)
(5,012)
(5,713)
(205,158)
(2,682)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash
(94)
(219)
(100)
(110)
39
116
469
(47)
Net increase (decrease) in cash, cash equivalents, and restricted cash
(116,063)
79,726
(184,027)
25,387
55,494
205,072
(74,721)
(3,442)
Cash, cash equivalents, and restricted cash at beginning of period
283,024
166,961
246,687
62,660
88,047
143,541
348,613
273,892
Cash, cash equivalents, and restricted cash at end of period
$
166,961
$
246,687
$
62,660
$
88,047
$
143,541
$
348,613
$
273,892
$
270,450
__________
(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
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Cash flow provided by (used in) operations
$
(7,908)
$
(13,190)
$
(16,680)
$
(27,634)
$
(12,128)
$
(8,861)
$
24,990
$
(8,390)
Capital expenditures(1):
Purchases of property and equipment
(3,549)
(2,387)
(6,428)
(2,631)
(8,529)
(3,494)
(4,464)
(325)
Proceeds from sale of property and equipment
297
—
241
125
126
22
14
13
Capitalized internal-use software
(3,180)
(3,810)
(4,926)
(5,120)
(4,290)
(4,209)
(6,230)
(4,951)
Repayments of finance lease liabilities
(3,004)
(7,159)
(3,870)
(7,076)
(4,427)
(8,645)
(6,557)
(6,041)
Advance payment for purchase of property and equipment (2)
—
—
(29,310)
(1,964)
(10,923)
—
—
—
Free Cash Flow
$
(17,344)
$
(26,546)
$
(60,973)
$
(44,300)
$
(40,171)
$
(25,187)
$
7,753
$
(19,694)
__________
(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 nine months ended September 30, 2023, we received $1.7 million of capital equipment that was prepaid prior to the current quarter.
