Fastly, Inc.

Thank you. I would now like to turn the conference over to Vern Essie, Investor Relations at Fastly. Vern, please go ahead.

Thank you, and welcome everyone to our fourth quarter 2023 earnings conference call. We have Fastly's CEO, Todd Nightingale, and CFO, Ron Kisling, with us today. The webcast of this call can be accessed through our website, fastly.com. It will be archived for one year. Also, a replay will be available by dialing 800-770-2030 and referencing conference ID number 754-3239 shortly after the conclusion of today's call. A copy of today's earnings press release, related financial tables, and investor supplement, all of which are furnished in our 8K filing today, can be found in the investor relations portion of FASI's website. During this call, we will make forward-looking statements. including statements related to the expected performance of our business, future financial results, product sales, strategy, long-term growth, and overall future prospects. These statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected or implied during the call. For further information regarding risk factors for our business, Please refer to our filings with the SEC, including our most recent quarterly report filed in Form 10-Q, filed with the SEC, and our fourth quarter 2023 earnings release and supplement for discussion of the factors that could cause our results to differ. Please refer, in particular, to the sections entitled Risk Factors. We encourage you to read these documents. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We undertake no obligation to update any forward-looking statements except as required by law. Also during this call, we will discuss certain non-GAAP financial measures. Unless otherwise noted, all numbers we discuss today, other than revenue, will be on an adjusted non-GAAP basis. Reconciliations and the most directly comparable GAAP financial measures are provided in the earnings release and supplement on our investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Before we begin our prepared comments, please note that we will be attending two conferences in the first quarter. the 2024 Raymond James Institutional Investor Conference in Orlando on March 4th, and the Morgan Stanley Technology, Media, and Telecom Conference in San Francisco on March 6th.

With that, I'll turn the call over to Todd. Todd? Thanks, Vern. Hi, everyone, and thanks so much for joining us today. First, I will give a quick summary of our financial results and fourth quarter highlights. I will then provide an update on our go-to-market efforts, customer acquisition, and product developments before I hand the call over to Ron to discuss our fourth quarter financial results and guidance in detail. I'm pleased to report that we closed out 2023 with revenue of $506 million, representing 17% year-over-year growth, and coming in above the original $495 to $505 million range we guided to one year ago. We reported record fourth quarter revenue of $137.8 million, which grew 15% year over year and 8% quarter over quarter. This result came in at the lower end of our fourth quarter guidance range, driven by weaker than anticipated international traffic, offset by seasonally strong live streaming and gaming activity. Most quarters, we set a new traffic milestone at Fastly, but this quarter was special. For the first time, the Fastly platform handled more than 100 terabits per second on November 8th. As part of the celebration of creating this milestone, we've decided to retire the live traffic gauge on our website. Its original intent was to prove the viability of the Fastly platform to prospective customers, as Fastly was just starting out. Obviously, we've outgrown the need for this tool, and we'll celebrate its retirement. Our customer retention efforts were stable in the fourth quarter, with our LTM NRR at 113%, down slightly from Q3's 114%. Our total customer count in the fourth quarter was 3,243, which increased by 141 customers compared to Q3 and increased by 181 customers year over year. Enterprise customers totaled 578 in the quarter, an increase of 31 from Q3, representing the highest level of sequential growth since we acquired Signal Sciences back in 2020. Our new packaging channel program and a renewed demand gen focus are driving a change in the velocity of customer acquisition at Fastly, and this is finally starting to show up in these disclosed customer accounts. As these customers grow with Fastly, they will fuel our revenue growth for years to come. This customer growth is also diversifying our revenue among verticals, which helps us optimize traffic across our fleet, yielding higher profitability. Our sales team has been energized. by our recent success with large customer wins. Of the 31 new enterprise customers this quarter, 19 were net new to Fastly. In addition, our average enterprise customer spend was $880,000, up 7% on a year-over-year basis. While these results demonstrate success in expanding wallet share with existing customers and driving customer acquisition, our journey towards expanding these efforts with a focus on product, on marketing and go-to-marketing initiatives has just begun. Our marketing team is elevating Fasting's brand with an eye towards efficient spend. This involved clever marketing campaigns at trade shows as well as digital ad campaigns to drive demand gen. We're closer than ever to delivering complete platform unification for our customers, allowing a far smoother cross-sell and onboarding with the simplicity of a single click. This will dramatically improve the customer journey in 2024, and we expect to see gains in our customer retention and expansion efforts. In the fourth quarter, we continued our momentum in landing key new logo wins in strategic expansion verticals. Our sales teams are winning new logos in these expansion verticals with pre-built use cases. One great example of this is in social media, where we serve some of the largest players in the space and have recently won a handful of follow-on logos in this area. This is highlighted most recently by Be Real and their new authentic approach to social media. Be Real chose Fastly due to the power of our platform and its unique ability to quickly scale for their low latency traffic patterns. Members of my senior staff love this platform. We're happy to have them on board. This has also led to the winning of a social media-based shopping application that is rapidly growing, leveraging our expertise in that space as well. Alongside social media, we added to our list of logos with one of the premier dating apps. and are excited to pursue other dynamic traffic opportunities in similar mobile applications. We continue to penetrate new sub-verticals in e-commerce. For example, in live auctions, we recently won Phillips Auctioneers, which was a follow-on win to Sotheby's, making us a strong partner for live auctioning and its unique e-commerce website content requirements. In the travel and leisure space, we continue to penetrate the gaming sub-vertical. In addition to Bally's, we added another major player in this space. And these newer verticals serve more than just grow our top line. They diversify our traffic load and provide faculty with a smoother network and compute demand. This leads to higher infrastructure utilization and ultimately gross margin improvement. We continue to see a tailwind from vendors who exited the space. Moxieworks, a tech platform for real estate agents and brokers, is a great example of how we capitalize on this disruptive environment. We recently published our new annual global cybersecurity report, The Race to Adapt, uncovering the impacts of cyber attacks on leading businesses across the globe and how 76% of businesses surveyed are planning to increase their cybersecurity budget in 2024. We continue to expand our security offerings to help customers counter these new threats and meet this growing demand. Fastly was also named a leader in the Forrester Wave Edge Development Platform's Q4 2023 report, highlighted by Fastly's compute platform receiving the highest possible of five out of five in 22 criteria, including vision, innovation, roadmap, pricing flexibility, and transparency. It warms my heart that Forrester stayed in its report Fastly is an excellent fit for enterprises seeking to extend their capabilities from the public cloud with a highly performant and secure edge platform. This is exactly what Fastly can deliver. And if any enterprises out there are listening and want to extend their capabilities to the edge, please give us a call. We continue to make strong improvements in our gross margins, which was 56.9% in 2023, up 330 basis points over 2022. In the fourth quarter, our gross margin was 59.2%, a 220 basis point increase year-over-year. And note that we recognized a one-time $2.8 million true-up payment that benefited the quarter. Ron will share more details with you in a minute, but I'm extremely pleased that there's this result, as our gross margin with or without the true-up payment hasn't been this high in almost three years. And while we were within striking distance of 60% in the quarter, We do hope to produce direct hits above 60% in 2024. Our team executed on controlling our variable cost of revenue, especially with lower bandwidth costs compared to the third quarter on a relatively healthy traffic mix. Our operating loss was $37 million in 2023, less than half of the $76 million operating loss in 2022, and better than the original $53 to $47 million operating loss guidance provided a year ago. In the fourth quarter, our operating loss was only $2.3 million, coming in better than our guidance of $10 to $6 million. Additionally, we posted positive net income in the fourth quarter for the first time since Q2 2020. Financial discipline and rigor continues at Fastly, and this quarter showcases what is possible as we stay focused on this. Ron will explain our outlook and guidance in more detail, but as you can tell from our OPEC spend, we are readying our model to leverage revenue growth and improve our cash flow in 2024. At the end of the fourth quarter, we brought on Kip Compton, our new Chief Product Officer. Kip brings to pass the 25 years of senior leadership experience driving innovation, most recently as the SVP of Strategy at Cisco Networking. In his various roles, Kip has directed strategy, technology, and investment, and has even at a prior company built a CBN for a large media organization. Under KIPP's leadership, we will continue to move our product roadmap towards a more complete platform strategy, focusing on unifying, strengthening, simplifying, and always expanding Fastly's edge platform. In the fourth quarter, we introduced multiple new features on our WAF, including agent auto-update, a simulator for debugging and testing, an anomaly signal to detect out-of-band domain requests, and simplified attack signal thresholds. One feature I want to highlight is our plugin for HashiCorp Vault. Specifically, the plugin allows customers to seamlessly access HashiCorp's vault to store keys for customers' sites and rotate or replace from vault when needed. We released our observability page. which allows customers to monitor Fastly delivery and compute services via collections of metrics and logs. All of this can be viewed in customizable dashboard to give our customers more insight into their inventory of products and features with Fastly and those that are available for them to buy. We introduced our bot mitigation solution and limited availability to select customers, and we were very encouraged by the response and the potential. We'll discuss this further with the investment community next quarter. Our new packaging motion gained momentum in 2023 and sets us up well for customer acquisition in 2024. I'm pleased to share with you that more customers purchased packages from Fastly in the fourth quarter than the first nine months of 2023 combined. The success of packages gives customers reliable billing and shows their confidence in Fastly by signing up for longer-term commitments. Moving on to our channel partner development, our growth continues. In 2023, deal registration more than tripled that of 2022, and we grew our partner engagement by over 65%. These partners include WWT, Presidio, GuidePoint Security, and FHI. I'm very pleased with the 2023 results and even more excited about the opportunities in 2024. We established our annual guidance of 16% growth to incorporate macro uncertainties that are, of course, targeting to outperform that guidance with continued financial rigor, strong innovation velocity, strategically lowering the friction of our go-to-market efforts, and streamlining both our employee experience and our customer experience. Organizations around the world invest incredible amounts of time and resources building best-in-class digital experiences only to see the value of them lost by having to compromise between performance, safety, and personalization. The solution to this has to be built on the edge, and it has to leverage all of the benefits that a best-in-class edge cloud platform brings. At Fastly, we deliver that platform. We partner with our customers to deliver the best possible end user experience, fast, safe, and engaging without compromise. And now to discuss the financial details of the quarter and guidance, I will turn the call over to Ron. Ron?