Summary
The second quarter of fiscal 2021 at Fastly showed revenue growth alongside a much wider loss. Revenue was $85.03 million for the quarter ended June 30, 2021, up 13.9% from $74.66 million in the prior-year quarter. Year-to-date revenue was $169.88 million, up 23.5% from $137.59 million. Usage-based fees accounted for roughly 93% of quarterly revenue, and new customers contributed less than 10% of it. Geographic mix tilted toward the United States, which produced 70% of revenue against 62% a year earlier, while international revenue slipped to 30% of the total from 38%.
Profitability moved the other way. Gross profit was $44.71 million, down 0.6% from $44.97 million, and gross margin fell to 52.6% from 60.2%. The company pointed to continued infrastructure spending, a return to traditional seasonal usage patterns after the prior year's pandemic-driven traffic surge, amortization of intangibles from the Signal Sciences acquisition, and customer credits tied to the June outage.
The operating loss widened to $57.47 million from $14.44 million, and operating margin dropped to -67.6% from -19.3%. Net loss widened to $58.30 million from $14.46 million. Diluted loss per share widened to -$0.51 from -$0.14.
Cash flow followed the same path. Operating cash flow was an outflow of $17.01 million for the quarter, compared with an outflow of $8.78 million in the prior-year quarter, and the year-to-date operating cash outflow reached $27.88 million versus $15.97 million. Capital expenditures were $2.93 million in the quarter, up from $2.07 million, while year-to-date capital expenditures of $11.01 million were down from $12.24 million.
Customer counts kept climbing even as retention softened. Fastly ended the quarter with 2,581 customers, up from 1,951 a year earlier, and 408 enterprise customers, up from 304. Those enterprise accounts generated 89% of revenue over the trailing 12 months ended June 30, 2021. DBNER was 126.2% versus 137.4%, NRR was 93.2% versus 137.8%, and LTM NRR was 120.7% versus 135.6%. The NRR reading sits below 100%. Backlog grew faster than revenue, with remaining performance obligations of $134.70 million, up 75.6% from $76.70 million, and deferred revenue of $27.24 million against $0.05 million a year earlier.
The June 8, 2021 global outage hangs over the story. An undiscovered software bug, triggered by a valid customer configuration change, disrupted the platform, though the company said 95% of its network was operating normally within 49 minutes. The fallout has included customers reducing or removing traffic and filing service level agreement claims. Management also flagged that its largest customer during the year ended December 31, 2020, which has strong business ties to China, significantly reduced usage in the later part of 2020, and further reductions from that account or others could hurt results. The invalidated EU-US Privacy Shield framework has added friction too, with more privacy-related requests and some prospects declining to do business. COVID-19 remains a wildcard for demand, travel and component supply.
Governance is shifting. Adriel Lares will step down as chief financial officer, and Ronald W. Kisling was appointed to the role effective August 9, 2021. The dual-class structure ended when Class B shares converted into Class A shares on July 12, 2021. Management expects to keep incurring operating losses for the foreseeable future and warns that gross margin can be squeezed by continued investment in network capacity and platform development.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $85.0M | $84.9M | +0.2% | $74.7M | +13.9% |
| Gross profit | $44.7M | $47.4M | -5.6% | $45.0M | -0.6% |
| Gross margin | 52.6% | 55.8% | -3.2 pp | 60.2% | -7.6 pp |
| Research & development | $30.3M | $29.0M | +4.7% | $16.7M | +82.2% |
| Sales & marketing | $36.3M | $34.9M | +4.2% | $24.7M | +47.2% |
| General & administrative | $35.5M | $33.5M | +6.1% | $18.1M | +96.4% |
| Total operating expenses | $102.2M | $97.3M | +5.0% | $59.4M | +72.0% |
| Operating income (loss) | -$57.5M | -$50.0M | -15.0% | -$14.4M | -298.0% |
| Operating margin | -67.6% | -58.9% | -8.7 pp | -19.3% | -48.3 pp |
| Net income (loss) | -$58.3M | -$50.7M | -15.0% | -$14.5M | -303.1% |
| Net margin | -68.6% | -59.7% | -8.8 pp | -19.4% | -49.2 pp |
| Diluted EPS | -$0.51 | — | — | — | — |
| Net retention rate | 137.0% | 137.0% | ±0.0 pp | 138.0% | -1.0 pp |
Risks
The June 8, 2021 global platform outage, caused by an undiscovered software bug from human error and triggered by a valid customer configuration change, has resulted in customers including some of Fastly's largest reducing or removing traffic from the platform and service level agreement claims. MD&A states the outage could influence potential customers' buying decisions.
For the trailing 12 months ended June 30, 2021, top ten customers accounted for approximately 35% of revenue and top five for approximately 23%. The largest customer during 2020 has strong business ties to China and significantly reduced usage in later 2020, and the June 2021 outage caused some of the largest customers to reduce or remove traffic.
For the trailing 12 months ended June 30, 2021, DBNER was 126.2% versus 137.4% for 2020, NRR was 93.2% versus 137.8%, and LTM NRR was 120.7% versus 135.6%. Most customers have no long-term financial commitments and a majority of contracts are one year, so customers can reduce or cease usage without penalty.
Fastly relies on a limited number of suppliers for server components, and a global microchip shortage during the first quarter of 2021 created supply constraints. COVID-19 has disrupted and may continue to delay component availability and installation, potentially interrupting server construction and capacity expansion.
Gross margin was 52.6% for FY2021 Q2 versus 60.2% for FY2020 Q2, down 7.6 percentage points, due to infrastructure investment, seasonal usage patterns, Signal Sciences purchase accounting amortization, and outage-related revenue reductions. Operating margin was -67.6% for FY2021 Q2 versus -19.3% for FY2020 Q2, down 48.3 percentage points.
A material weakness in internal control over financial reporting identified for 2018 and 2019 remained partially unremediated for the year ended December 31, 2020, related to insufficient qualified accounting resources to assess complex transaction accounting. Failure to remediate could harm investor confidence and the market price of Class A common stock.
The ongoing COVID-19 pandemic has adversely impacted and may continue to impact customer technology spending, live-event-related usage, supplier availability, network buildouts in South Asia, and forecasting accuracy. Fastly cannot predict usage levels as the pandemic tapers or ends.
The invalidation of the EU-US Privacy Shield framework has led to heightened privacy concerns from European customers and potential customers, more requests relating to EU privacy requirements that impact sales negotiations, and some potential customers declining to do business with Fastly.
Fastly issued approximately $948.8 million aggregate principal amount of 0% convertible senior notes due 2026. Servicing the debt requires significant cash, conversion could dilute stockholders, and approximately 9.2 million shares of Class A common stock may be issued upon conversion, subject to anti-dilution adjustments.
Fastly is defending consolidated putative securities class actions and consolidated shareholder derivative actions. Even if resolved favorably, defending these claims is costly and can impose a significant burden on management and employees.
SaaS KPIs
All quarters →Net Retention Rate (NRR)
Summary, forecast, risks and KPIs are extracted from Fastly, Inc.'s SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.