Summary
Fastly reported second quarter revenue of $102.5 million, up 20.6% from the prior-year quarter. That was a record quarter. Gross profit was $46.1 million, up 3.0%. Gross margin was 44.9%, down 7.7 percentage points. The gross margin decline came from higher bandwidth, colocation, and other network costs, plus increased depreciation and personnel costs. Operating loss widened to $69.0 million. Net loss narrowed to $16.4 million, an improvement of 71.8%. Diluted EPS was -$0.14, up 72.5%. On a year-to-date basis, revenue was $204.9 million, up 20.6%, and net loss was $80.7 million, narrowed 25.9%. Non-GAAP gross margin was 50.4%. Non-GAAP operating loss was $26.9 million. Non-GAAP net loss was $28.0 million, or -$0.23 per share. Adjusted EBITDA was negative $16.0 million.
Operating cash flow was negative $16.7 million, up 2.0% from the prior-year quarter. Year-to-date operating cash flow was negative $29.9 million, down 7.1%. Capital expenditures were $6.4 million, up 119.1%. Year-to-date capital expenditures were $8.8 million, down 20.0%. Free cash flow was negative $61.0 million. Deferred revenue was $29.1 million, up 6.7%. Remaining performance obligations were $173.2 million, up 28.6%. The company repurchased convertible debt at a discount to par during the quarter, which reduced its debt balance. The company believes its cash and available borrowing capacity will satisfy anticipated cash needs for at least the next 12 months.
Key metrics showed expansion. Trailing 12-month net retention rate was 117%, up from 115% in the first quarter of 2022. Dollar-based net expansion rate was 120%, up from 118%. Total customers were 2,894, including 471 enterprise customers. Average enterprise spend was $730K, up 1% quarter over quarter. The network reached 215 TB/sec across 78 markets and 34 countries. Fastly acquired Glitch, a platform of 1.8 million developers. It introduced Fastly Security Labs, Object Store, and made HTTP/3 and QUIC available. It received a 4.8 out of 5 stars rating and 97% willingness to recommend in the 2022 Gartner Peer Insights Voice of the Customer Global CDN. Customer expansions included a top Fortune 500 CRM company, Parrot Analytics, Taboola, and Commerce Layer. Todd Nightingale will become CEO effective September 1, 2022, succeeding Joshua Bixby.
For the third quarter of 2022, Fastly guided revenue to $102 million to $105 million. For the full year 2022, it guided revenue to $415 million to $425 million. Non-GAAP operating loss guidance is $21.5 million to $18.5 million for the third quarter and $78 million to $72 million for the full year. Non-GAAP net loss per share guidance is $0.18 to $0.15 for the third quarter and $0.68 to $0.63 for the full year. Risks include an uncertain economic environment, the COVID-19 pandemic, data localization and cross-border data transfer laws, competition, network interruptions, and reliance on the largest customers. The 10 largest customers generated 33% of revenue in the trailing 12 months ended June 30, 2022, and the 5 largest generated 24%. Usage-based revenue can be volatile. International expansion adds complexity. The Russia-Ukraine conflict could disrupt the global economy. The company also faces risks from its limited operating history, the need to manage growth, and the possibility that its platform and product features do not meet expectations. The company expects to continue to incur operating losses for the foreseeable future due to investments in its business. It also expects research and development and sales and marketing expenses to decrease as a percentage of revenue over the long term, but they may fluctuate period to period. The company had 2,894 customers and 471 enterprise customers as of June 30, 2022, compared with 2,581 customers and 408 enterprise customers as of June 30, 2021. The company's DBNER for the trailing 12 months ended June 30, 2022 was 120.0%, compared with 126.2% for the trailing 12 months ended June 30, 2021. The company's LTM NRR was 117.3% for the trailing twelve months ended June 30, 2022, compared with 120.7% for the trailing twelve months ended June 30, 2021. The company's NRR was 127.5% for the month ended June 30, 2022, compared with 93.2% for the month ended June 30, 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $102.5M | $102.4M | +0.1% | $85.0M | +20.6% |
| Gross profit | $46.1M | $48.5M | -5.0% | $44.7M | +3.0% |
| Gross margin | 44.9% | 47.3% | -2.4 pp | 52.6% | -7.7 pp |
| Research & development | $38.7M | $40.4M | -4.3% | $30.3M | +27.6% |
| Sales & marketing | $46.8M | $41.5M | +12.7% | $36.3M | +28.7% |
| General & administrative | $29.5M | $29.6M | -0.0% | $35.5M | -16.8% |
| Total operating expenses | $115.0M | $111.5M | +3.2% | $102.2M | +12.6% |
| Operating income (loss) | -$69.0M | -$63.0M | -9.5% | -$57.5M | -20.0% |
| Operating margin | -67.3% | -61.5% | -5.7 pp | -67.6% | +0.3 pp |
| Net income (loss) | -$16.4M | -$64.3M | +74.4% | -$58.3M | +71.8% |
| Net margin | -16.0% | -62.8% | +46.7 pp | -68.6% | +52.5 pp |
| Diluted EPS | -$0.14 | -$0.54 | +$0.40 | -$0.51 | +$0.37 |
| Net retention rate | 117.0% | 115.0% | +2.0 pp | 137.0% | -20.0 pp |
Risks
The June 8, 2021 global platform outage caused by an undiscovered software bug and human error led customers, including some of the largest, to reduce or remove traffic and triggered service level agreement claims. Not all customer traffic has returned to pre-outage levels, and future defects or interruptions could cause lost customers and revenue decreases.
Fastly has identified three material weaknesses in its internal control over financial reporting. If unable to remediate and maintain effective controls, investors may lose confidence in the accuracy and completeness of financial reports, and the market price of Class A common stock may be seriously harmed.
The 10 largest customers generated 33% and 35% of revenue in the trailing 12 months ended June 30, 2022 and 2021, respectively, and the 5 largest generated 24% and 23%. Loss of or reduced usage by one or more major customers would lower revenues.
Most customers, including large enterprise customers, have no long-term contractual financial commitments and most contracts are only one year in duration. Enterprise sales involve longer cycles and customers can reduce or cease usage at any time without penalty, making revenue difficult to predict.
Gross margin was 45% for the three months ended June 30, 2022 compared to 53% for the three months ended June 30, 2021, a decrease of 8%, driven by increases in bandwidth, colocation costs, depreciation, and personnel costs. Gross margin was 46% for the six months ended June 30, 2022 compared to 54% for the six months ended June 30, 2021, a decrease of 8%.
Fastly experienced DDoS attacks of increased size and severity during 2021 and expects continued attacks. It also faces Log4j vulnerabilities, ransomware, phishing, supply chain attacks, and attacks from government actors, any of which could disrupt the platform and harm customer trust.
Component delays, shortages, or price increases could interrupt server construction. The global microchip shortage throughout 2021 and inflationary pressures have constrained supply, and COVID-19 has caused disruptions and delays for components and installation at colocation facilities.
Evolving data localization and cross-border data transfer laws create uncertainty. Fastly has received a higher number of EU privacy requests impacting sales negotiations, and potential customers have declined to do business due to privacy concerns about transfers of personal information to the United States.
Fastly acquired Glitch in May 2022 and has limited experience acquiring and integrating businesses. Acquisitions may divert management attention, disrupt operations, result in dilutive equity issuances or debt, and fail to generate sufficient financial returns.
Failure to attract and retain qualified personnel could prevent execution of the business strategy. There is significant competition for sales personnel with required skills, and new hires require significant training before reaching full productivity.
Fastly repurchased approximately $235.0 million principal amount of its 0% convertible senior notes due 2026 for about $176.4 million in May 2022. Servicing remaining debt requires significant cash, and conversion of the notes may dilute stockholders or depress the stock price.
The stock price ranged from $36.61 to $9.50 per share from January 1, 2022 to August 3, 2022, after trading as high as $122.75 and as low as $33.55 in 2021. Volatility may continue due to financial results, customer usage changes, and general market conditions.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Non-GAAP Operating Loss
Average Enterprise Customer Spend
Summary, forecast, risks and KPIs are extracted from Fastly, Inc.'s SEC filings for Q2 FY2022 (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 1, 2026.