Fastly, Inc.

Good afternoon. My name is Mary and I will be your conference operator today. At this time, I would like to welcome everyone to the FASLI second quarter 2021 earnings conference call. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the conference over to Stephanie Fligo, Investor Relations at Fastly. Please go ahead.

Hello, everyone. Thank you for joining our second quarter 2021 earnings call. We have Fastly CEO Joshua Bixby and CFO Adria Oladas on with us today. Before we start, I want to remind everyone about the usual format of our call. We published a shareholder letter on our investor relations website and with the SEC about an hour ago. Since the letter provides a lot of detail, we will make some brief opening remarks and reserve the rest of the time for your questions. During this call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, 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. Please review our filing with the SEC and our Q2 2021 shareholder letter for discussion of the factors that could cause our results to differ. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statement except as required by law. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call is being webcast and will be archived on our website shortly afterwards. With that, I turn this call over to Joshua.

Thanks, Stephanie. Hi, everyone, and thanks for joining us today. In our second quarter, we managed through a significant outage that impacted our Q2 results and saw several customers delay their launch of new products, which will delay the timing of traffic coming onto our platform. The outage and these delays will also have an impact on our Q3 and full year outlook. Despite these challenges, our mission of fueling and securing the modern digital experience remains strong and relevant. We are confident that our operational rigor, security-led go-to-market motion, and expansion of computed edge capabilities will continue to drive long-term value for our customers and shareholders. Before we further discuss our strategy, I'd like to discuss the outage and customer delays. In early June, we had a significant outage that impact our Q2 results and will have an impact on our Q3 and full year outlook. The outage resulted from an undiscovered software bug that was triggered by a valid customer configuration change. We detected the bug within one minute and returned 95% of our network to normal within 49 minutes. That being said, our customers were negatively impacted. As a result, we saw traffic volumes decrease and subsequently issued credits to select customers following the incident. given the usage-based nature of our business model that's resulted in impact to our Q2 results, and we expect to see some downstream impact on revenue from the outage in the near to medium term as we work with our customers to bring back their traffic to normal levels. We also have a couple of customers, one of them a top 10 customer, that have not yet returned traffic back to the platform post-outage. We also have some additional uncertainty with the timing of several customers ramping additional traffic onto the platform in the second half of the year. We continue to believe that this traffic will come onto the network in 2021, but later than we originally expected, thus impacting our outlook for the second half of the year. We have implemented and will continue to implement significant measures to ensure increased resiliency for our customers and their users. As I mentioned at the beginning of the call, we believe we have a solid strategy to deliver incredible value to our customers and are optimizing the organization to execute against this strategy. We now have two new seasoned executives to drive our sales and finance organizations. Brett Shirk, who joined as our Chief Revenue Officer in Q1, and Ron Kisling, who will be joining as Chief Financial Officer later this month. Both bring significant experience in building and managing organizations through high growth. Turning now to products and go-to-market execution, we are seeing very strong growth in security sales driven by our next generation WAF. Our WAF is now available for customers to purchase by the Amazon AWS Marketplace, representing an important new route to market through channel partnerships. This is a great example of how our refreshed go-to-market strategy is creating growth opportunities. We recently announced the achievement of a significant integration milestone with the introduction of a beta version of SignalScience's agent on the Fastly Edge cloud. We also introduced our first managed security offering, Fastly Response Security Service. We continue to execute against our computer edge roadmap, having recently added support for the popular JavaScript programming language and local testing. I'd also like to highlight how our customers and our engineering teams are revealing the expansive power and potential of Computed Edge. We're tapping into functionality that goes well beyond improving website performance and experiences. Businesses like LaunchDarkly and GraphCDN, as well as Fastly's own engineering teams, are building and re-architecting products on Computed Edge. By adopting Computed Edge technology, companies like this will have the ability to develop entire businesses at high velocity to continue fueling the modern digital experience. This quarter, we saw new business and cross-sell and up-sell wins with customers across multiple verticals, including gaming, ad tech, financial services, and e-commerce. Our wins represented both replacements of incumbent providers and capturing additional wallet share from existing customers. Both segments attributed the wins to the strength of solution, our ease of use, and new capabilities resulting from continued innovation at the edge. An important note that all of our customer metrics will combine signal sciences and fastly customers moving forward. We also included the new combined metrics for all quarters since the acquisition at the bottom of our shareholder letter. Our customer count grew from 2,458 in Q1 to 2,581 in Q2 2021. In addition to growing our core customer base, we also saw increased engagement and further expansion of our enterprise customer base. We increased our enterprise customer count, including Signal Sciences, to 408 from 395 in the previous quarter. Our second quarter average enterprise customer spend of $702,000 was similar to $705,000 in the first quarter and now reflects the combined Fastly and SignalScience's average enterprise customer spend. Additionally, our dollar-based net expansion rate remains strong at 126%. Our DBNER highlights the continued strength of our platform and relationships with our enterprise customers. We delivered a net retention rate of 93% in Q2 2021 and last 12-month net retention rate of 121%. We believe the last 12-month NRR removes much of the volatility that is inherent in a usage-based business model. Now I'll turn it over to Adriel to go over the financials.

Thank you, Joshua, and good afternoon, everyone. Before I get into the numbers, I want to note that the contribution of Signal Sciences has been included in our second quarter financial results. as well as our key metrics. Turning to the quarterly results, aside from the outage, the business performed as expected. This quarter, we generated $85 million in revenue, net of a $1.2 million deferred revenue write-down associated with the acquisition of Signal Sciences, representing 14% year-over-year growth. While acknowledging the tough year-over-year comparison to Q2 2020, we are pleased with the ongoing demand and long-term growth potential of the platform, Turning to gross margin, our GAAP gross margin was 52.6% for the quarter, compared to 60.2% in the same quarter a year ago. Please note that this includes accounting adjustments related to the acquisition of Signal Sciences. Our non-GAAP gross margin, which excludes stock-based compensation and intangible amortization expenses, was 57.6% for the quarter, compared to 61.7% in the same quarter last year. The decrease in gross margin reflects our continued investment in infrastructure and capacity in anticipation of cuts or demand. We believe we have a tremendous opportunity to invest in our Edge Cloud mission this year and plan to do so to position Fastly for future growth. As we have said before, we will continue to invest in our network in a disciplined manner, keeping long-term profitability in mind. Turning to the balance sheet, we ended the quarter with $1.1 billion in cash, restricted cash, and investments. we remain well capitalized to invest in the future growth of Fastly. As we discuss our Q3 and full year 2021 guidance, I want to remind everyone that we have a usage-based model, meaning our revenue can be impacted by unforeseen changes in the timing of customers coming onto our platform and anticipated renewals. As explained by Joshua, we are revising our guidance in the near to medium term to reflect this. As always, we base our revenue guidance on the visibility that we have today. and we expect to gain additional visibility as the year progresses. As Joshua outlined earlier, the outage, along with the uncertainty related to the timing of returning traffic, new initiatives, and new customers ramping traffic have had an impact on our third quarter and full year guidance. For the third quarter, we expect revenue in the range of $82 to $85 million, non-GAAP operating loss in the range of negative $23 to negative $19 million, Non-GAAP net loss per share in the range of negative 21 cents to negative 18 cents. For the full year 2021, we've revised our revenue guidance in the range of 340 million to 350 million, from 380 million to 390 million. Non-GAAP operating loss in the range of negative 75 to negative 65 million, from negative 50 to negative 40 million. and non-GAAP net loss per share in the range of negative 65 cents to negative 57 cents from negative 21 cents to negative 18 cents. Despite the recent challenges we've experienced, our mission of fueling and securing the modern digital experience remains strong and relevant. We are confident that our operational rigor and security-led go-to-market motion and the expansion of our compute at edge capabilities will continue to deliver value for our customers and shareholders. As Joshua said, we are confident in our ability to execute, and we believe we are well positioned for long-term success. With that, I'll turn it back over to the operator to take your questions.

At this time, I would like to remind people in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Will Power. From there, your line is open.

Thanks for taking the question. So I'm going to just drill into kind of the confidence level that you have and the visibility you have right now in the expected customer ramp that you mentioned in the back half of the year. If you could just talk a little bit more about the confidence level around that, that'd be great. Sure. Hey, well, it's Joshua.

You know, our confidence remains high. These are customers who moved based on their own timelines. This is not directly related to us. And those, you know, seem strong. So right now we see, you know, it's only a handful of customers. Again, these are timelines that are based on, you know, situations that are either regulatory or licensing, for example, there are a few of them. And in those cases, what we see is those timelines more or less locked in, but again, later than what we had anticipated. I think that the important thing in these situations is to know that our relationships are made strong with these customers, and we continue to work closely with them. As you know, in our usage-based business, we don't always get a chance to time exactly when large initiatives come. What's really great is these are new and large initiatives, and we remain confident in that. But we also, at least when we look at our guidance, want to be very careful given the history. And so we are only going with what we see. And we expect material impact and revenue in 2022 from the deals that have pushed out.

Gotcha. Thanks, Joshua. And then one for Adriel. Adriel, how should we think about gross margins for the rest of this year and beyond as well?

Yeah, I think from a gross margin standpoint, as you know, seasonally Q2 from a revenue standpoint was relatively flat. Clearly, 2020 was a tough compare because Q2 wasn't seasonally strong based on the pandemic. And so as a result, you saw, in some respects, unexpected leverage last year. So this year was sort of more normalized from a revenue standpoint. Now, the adage did have an impact from that standpoint because when you think about gross margin, it's really much more about deutilization and whatnot. So the way that I think about it is it kind of goes along with revenue. Normally what you see is revenue should drive into the second half of the year, into Q3 and ultimately into Q4, which is where you drive your leverage. But when I think about sort of the longer term, I still feel confident about sort of the longer term. I just think this year, given sort of the recent impact of the outage, I think that's what impacted Q2 sort of more and usually than normal.

Got you. Thanks, guys. Thanks, Will.

Next question comes from the line of Jonathan Ho from William Blair. Your line is open.

Hi, good afternoon. Can you give us a little bit more color on maybe the actions that you're taking to restore confidence in maybe some of the customers that haven't fully returned their traffic? Or just maybe give us a sense of also what gives you the confidence that some of these customers that have delayed will come back as well. Sure. Sure.

Yeah, absolutely. And I think we should separate those two things. You know, as we talked about, the customers that have delayed that we called out specifically are really unrelated to the outage. I think if you specifically focus on the outage, you know, as we talked about, we've got one top 10 customer. I think if you flip this around, what you see is 99% of the enterprise customers or more came back and continue to, you know, continue to grow with us. We are lucky. Our customers are technologists like us in many cases. They understand that outages occur. And that's not to downplay the outages, just to acknowledge that it happened. We own it. It's our responsibility. But I've got a chance, as has Archer and others, to get on the phone with these executives. And what you hear is, you know, one, an understanding. Two, a real understanding. appreciation for how transparent we were during that process and after. We talked about, we put a blog post out, we talked about what happened in the outage, and we talked about what we're going to do. I think it's also important to remember that although we won't tell you who those customers are, if you did, I think it wouldn't be surprising because these are the most stringent high performance and technologically advanced companies in the world. So they have very high requirements and a very high bar. And when we had the outage, I think all of us noticed. That's not the case for every other outage. And it's because of the type of customers we have. So specifically in the short term, there was a lot of questions about the remediation. There were a lot of questions about the actions that we took and how we could make sure that those actions couldn't be taken again and we've been able to remediate that. I think the next layer of remediation is really about the future that we had set in place four, four and a half years ago, which is that when we built Computed Edge, we talked about this a lot with two mindsets. The first mindset, which we absolutely wanted our customers to have more flexibility and more safety in what they're doing, but we also wanted that for ourselves. The outage has really pushed forward a uh a drive that we've had for a long time which is to move all of our own delivery and security products to the computed edge platform which mitigates these types of challenges in a multi-tenant environment you've already seen some real progress on that we announced some real progress with the signal sciences acquisition and having that available and you will continue to see us pushing very aggressively in that direction and that's That's a long-term mitigation. Our customers have told us they are not going to wait for that, that they understand that the mitigations we have in place, which we have now completed, are, we hope, sufficient. We hope to be in this position a quarter from now talking about the fact that all of them are back, not just 99% plus.

That's helpful. And one for you, Adriel, just in terms of the actual credits and the actual costs associated with the outage, is there a way for you to maybe quantify for us either revenue lost or credits that had to be applied and maybe what that impact was on the quarter and what you're expected to be for the full year? Thank you.

Yeah, Jonathan, there's sort of two impacts. There's clearly one, which is the impact of the outage. And for those customers at the time that had not yet ramped or brought back traffic, clearly, you know, when it occurred, it occurred in June. So you'd imagine that the impact for lost revenue, lost traffic occurred in June. The other impact are the actual credits that we actually ended up giving out. all that stuff is reflected in our june quarter so that's uh those are all complete um and from my standpoint you know the fact that it occurred in june um you know it would have clearly had we not had this occurred we probably would have been a bit higher than that the fact that we were sort of within the range as a result even within as a result of despite the credits i think uh you know all things being equal was a thankful outcome just given that the average of it wasn't even wasn't longer and that we were able to run so quickly to it but um just maybe sort of keeping it uh sort of the tldr that credits already included in the june quarter relatively immaterial uh but certainly impacted the month of june and i think it's really much more of what could we have uh generated had the traffic kept on as it wasn't a bit of an unknown

Thank you.

Thanks, Sheldon.

Next question comes from the line of Rudy Kessinger from DA Davidson. Your line is open.

Hey, guys. Thanks for taking my question. Josh, I missed just the first couple minutes of your piece, so I apologize if these were already addressed. I'm curious on the step-down annual guide, the $40 million reduction, is there any way you can break that out between the customers that had delays and launching ramping traffic and then also the customers and particularly the top 10 that hasn't returned to the platform yet. Just what's the split in the reduction?

Yeah, you know, if you think about it, they both have a pretty significant impact to that number. You know, you know our top customers, you know, have large dollar figures associated to their monthly spend. So if you think about, you know, a few of those and you think about either an unknown, which is the case with the top 10 customer we're talking about in terms of when they come back and, you know, we want to be cautious and really put into guidelines. into what we see, and then you talk about what we do know, which is the delay in a few customers. You know, they're sort of, you know, roughly 60-40, I would say, in terms of how that plays out, or 50-50. They both have a significant impact.

Got it. And then I'm curious, you know, that on the computer edge, the announcement of JavaScript, you know, now being able to be compiled to Woz and just how meaningful and important is that for the longer term prospects of computer edge for your customers?

It's incredibly meaningful. I mean, this is the number one thing our customers have been asking for. It's not just JavaScript. They want to program in the language of their choice. And what we know is that JavaScript is a language of choice for many. So it really helps democratize the platform, bring it into a number of developers who may not have been as comfortable. What we know with developers is these ecosystems, be it Ruby, be it be it JavaScript, all of these ecosystems have their own cultures, their own communities around them. And this is, you know, Computed Edge is about going into those communities and about meeting people where they're at. That's really the goal of it. So it really allows us to assemble a really large group of developers. And we're already seeing that momentum. I mean, we talked in the script about some amazing projects which are being built on Computed Edge. So companies who are relying on Computed Edge, who have looked, for example, like the GraphCDN folks, who have looked at the entire industry, looked at all of the solutions out there, there were a fantastic blog post about this, about why our Computed Edge solution was the right thing to build their business on. And we're seeing more and more of that. It's very exciting. It's becoming a much larger part of the calls, for example, that I'm on when I talk to customers. This is a true differentiator for us.

I got it helpful. Thanks. Thanks.

Your next question comes from the line of Tyler Radke from CD. Your line is open.

Hey, good afternoon. Thanks for taking my question. I wanted to ask you about the customers related to the outage that have left the platform. I guess first, do you have visibility on where they're going? Are they going to a competitor? Are they taking this in-house? And secondly, just kind of what's your confidence level, you know, in terms of the new customer conversations you have that, you know, the recent outage is not impacting the ability to land new customers. Thank you.

Sure. You know, I think on the outage, first of all, we have not seen any significant change in our churn yet in terms of that. As I said, we do have a couple customers, but if you look at churn, it certainly continues to look and act like it historically has, which is very low. So we are looking at customers who have, at least in the top 10, the ability to pull it in-house. But one of the reasons customers like this work with us even though they have in-house capabilities, is because of the incredible advanced capabilities that we bring. And so if you actually, you know, if I think back to the conversations that I've been having with customers, and this one in particular, it is a drive to get back onto the platform because they know how important speed is. So I would say, you know, this is – This is about the advancements we bring, and, yes, it's nice to have a stopgap and something you can bring in-house, but there's a reason that customers pick us. So I think that's what we see. I think on the large customers and large projects, as we've indicated in guidance, those are delayed for things unrelated to the work that we're doing internally and unrelated to the outage for the most part. This is just not a churn issue.

Great. And if I could sneak in one more for Adriel, is there a way to quantify kind of the performance of Signal Science in the quarter and just trying to understand kind of as you look at your outlook, kind of the assumptions embedded in there? I know you talked about a strong performance, but if there's any metrics you could give so we can kind of look at the performance on a revenue basis.

Sure. So, you know, I think As I spoke about earlier this year, when we initially gave sort of annual guidance for the year, at the beginning of the year, we talked about them being about 10% of revenue. I think in Q1, that was, you know, closer to sort of the high nines. Q2, I was expected to be in sort of the 10% level. So I think in this case, you know, the outage clearly impacted sort of the heritage facility revenue. Signal Science has continued to deliver where they were doing and where they were growing. In fact, a lot of our new customer wins actually occurred after the outage, and it was specifically led by a lot of the Signal Science's products that came in through the acquisition. So I think from that standpoint, that still remains the case. I would imagine that given that the revenue came in a little bit on the lower end as a result of the impacts of the credits, it probably was typically a bit higher than 10%. But generally, they're still sort of progressing as we expected.

Great. Thank you. Thank you.

Your next question comes from the line of James Fish from Piper Sandler. Your line is open.

Hey, guys. Thanks for the questions. Just want to go off of Tyler's a little bit there. You know, six eye checks on our end have been really strong in the demand itself. I guess first, what are you seeing for demand with Signal Sciences that you can get a little bit more color on than you just did? And how should we think about the mix of new business for them versus expansionary at this point? And what amount of the business is coming from the self-hosted term license products versus the cloud-based SaaS web application firewall and DDoS solutions?

Sure. Hey, Jim, it's Joshua. Let me start at the high end. The demand, as you said, is very high. I mean, when you look at every metric from the pipeline to deals that are closed, we're seeing continued momentum through that and through the entire quarter and the start of this quarter. So from our perspective, It's a great story, and I think as that gains momentum and continues to increase in size, it's going to be incredibly helpful. It's a really important wedge. It helps us get into accounts. Overall, we continue to see the ratio be, as we've historically seen, about 90% SaaS, 10% licensing in that range. And from a mix of business perspective, one of the initiatives that Brett is driving in his transformation of the go-to-market engine is a real sales shift with the security being at the forefront. And so it should be no surprise as we fill up that pipe with this security-led motion that we're going to see more and more of that. We're also innovating on the product side. As I talked about, we brought out SigSci capabilities at the edge, and we're going to continue to drive for that. All of that further drives margin and performance. There's a real virtuous cycle there. So overall, we're seeing a really nice mix of business, and a lot of this is actually new business, which I think is the most exciting part. And as we see that roll through the business, it gives us a lot of confidence about 2020.

Gosh, that's helpful. But, you know, we're up to 145 terabit per second network, you know, really of size at this point. And you're typically, you know, 30 terabits a second at various stages in a day. Does it make sense to actually continue to focus on building out more capacity at this point, especially when the supply chain shortages are out there? Or does it make more sense to actually focus and refocus the business on execution and go to market? And really, Adriel, if the credits are super material here, Can you actually quantify the impact in the quarter? Because it does sound like it was material. And I think it would be helpful to all of us here to understand how much it was material. And we can have an understanding of this thing can happen. So, you know, how much was it in the quarter? And then also, if it's a downstream impact, how much is it impacting your Q3 guide? Thanks, guys.

Sure. Yeah. Let me start on the network side. You know, the macro number on the network side doesn't always tell the story because what we're really looking at is building out strategically in locations. And you have to think of our business as, you know, if we have a lot of capacity in a certain region, but the demand is in one place or in one area, that global number is not as applicable. So we're constantly looking at where can we build out, where do we build out capacity, where do our customers need us? And as you know, we have to build ahead of our customers. So although we have some delays, as we talked about, you know, two, three, four month delays still warrant us continuing to be thoughtful about where we build. But it's something that we're certainly always thinking about. And if you think of this time last year, right, we were in a position where the network was extremely hot. and we're in a position this year where we built out for some demand that's pushed out a few months but it's you know we still have the confidence to come in so i would spend sort of less time on the aggregate number if you look at the capex spending that we did in this quarter and that we're doing over the year i think it's very much in line with the demand that we're expecting you do point out an important issue you know the the the chips uh are uh a challenge And for all vendors, I think we've been really lucky about how we've managed our relationships. And that's not a, that's not a, it's a risk, but it's not a risk that has impacted us in the quarter. You know, I think, you know, on the credit side, Adriel, do you want to answer that?

I do. I just needed to find my new book. My apologies. You know, from from a credit standpoint, you know, Jim is about is about a percent. So hopefully that gives you some some perspective about sort of magnitude. I think from us, it's really more of a question about we were trying to bring traffic clearly back, which we think we would have done better had we not had the attitude would have been more on track and more importantly, as this impacts the rest of the year in terms of where that traffic would have been had all had all that been sort of normal.

Thank you, guys. Thanks, sir.

Your next question comes from the line of Rishi Jaluria from RBC. Your line is open.

Hey, Joshua and Adriel. Thanks for taking my questions. First, I want to go back to the discussion around churn. And I guess in this case, thinking about churn as well as customers maybe downgrading their spend with Fastly. If I look at the NRR in the quarter itself, it's the first time I've ever seen this number increase. dropped below 100%. And that's kind of a little bit of a scary number to see. Can you maybe walk me through why was NRR, you know, so low this quarter at 93%? What does that, you know, when you have customers that are shrinking their footprint, is it, you know, bringing more to competitors? Is it bringing more in-house? Maybe walk us through that number and how we should be thinking about that metric going forward in that follow-up. Sure. Angel, you want to take that one?

Hey, Rishi. Yeah, happy to walk through this one. As you know, the net retention rate metric compares two months in solitude as opposed to the last 12 months takes an acrylic 12 months, which takes a lot of volatility. In this particular case, you're basically comparing June of 2021 to June of 2020. And as you know, June of 2020 was a great month for a lot of unexpected reasons as a result of the pandemic. And then consequently, June 2021 was also the month also that we actually pulled all the credits. So all of the credits hit that month as opposed to spread through the quarter, as well as not spread over sort of a 12-month period. So I think you're comparing two months that sort of impacted that particular metric much more forcefully than it would have otherwise.

Okay, got it, got it. And then maybe something a little bit more philosophical as you think about the longer-term trajectory, right? I understand there's some kind of one-time issues, and obviously the compares are really tough, especially in Q2, but even for the remainder of the year. But if we look at the print, I mean, this is low single-digit organic growth and kind of looking at that for the back half of the year as well. You know, maybe getting out of this year and when some of these investments really start to show dividends, the integration of signal sciences starts to pay off. I guess, how should we be thinking about the growth profile of this company longer term? You know, is this a double-digit type grower? Is this a 20% type grower, which is the story kind of that we're told at IPO time? Just philosophically, how should we think about the growth profile of this business over the next three, five years, putting aside these current issues and the tough comparison from last year? Thanks.

Yeah, absolutely. I mean, I think from my perspective, you know, we still see, you know, the next three to five years holding the growth pattern that we had assumed. The market has only grown. If you look at our tagger over since IPO, it's in that range. We've had some ups and downs. But if you just fundamentally step back, and I like the idea of looking at this philosophically, we've got so many trends which are driving towards a complete rethink of how security looks today. for almost every organization in the world. We've got a complete change to how applications are built with the edge now being a critical part of that. We have technology trends like 5G and others pushing more and more content and more and more interactive capabilities. And if you just look at that and then you look at the huge budgets that are associated with these areas, many of them still remain in appliances and legacy enterprise companies who are not servicing the need. So if you think about our business, we've got 400-odd enterprise customers. If you think of the businesses who came before us, they have 100,000 or 120,000 enterprise customers. So we look at this and say we are in the early innings. This is an early story. So absolutely, when it's early, some of the larger accounts may have a larger influence as our base is smaller. But the reality of this story for us is, is that the entire world is changing with this digital transformation that has only been accelerated by the pandemic. And we look at that and we see opportunity. So we are certainly, you know, notwithstanding the pushouts in the year, our optimism remains high. We think we are on the right side of history here.

Got it. Simple. Thank you so much.

Again, if you would like to ask a question, please press star and the number one on your telephone keypad. Your next question comes from the line of Team Haren from Oppenheimer. Your line is open.

Thanks, guys. Did you say the top 10 customer that left wants to come back because the performance is substantially better? And what's it going to take to get him back on? Thanks.

Yes. I mean, we aren't going to count our chickens before they hatch. But as I said, I've been in meetings with them. Archer has. This is what we are being told at this point. It's a temporary checkpoint to make sure that the remediations are in place as expected. And our hope certainly is that the customer comes back. and continues, which is the expectation of the team, or the hope, I should say, of the team working on the project. So relationships are strong. Dialogue is great. And I hope, you know, if I said to be in this call in a few months and talk about the fact that that traffic is back, and larger than ever.

And do you think that customer and others are going to maybe increase their multi-source traffic? you know, basically relationships and how easy would it be, you know, for customers, you know, to switch from you to a competitor? I guess if there is an outage, is there a way to kind of make that easier to make people, you know, more confident that, look, if there is an outage, we won't, you know, totally go down at this point?

Fastly is not the only one that's had outages in the last few months. Others have as well. And I think what that speaks to is that that's something everyone has to look at in terms of their resiliency planning. I think when you look at the resiliency planning that our customers want, they want to take advantage of the benefits and the unique benefits that the platform brings. And so when we're exploring resiliency with our customers, it's actually about exploring resilience. different ways to have resiliency on the Fastly platform. And there are a number of really innovative ideas and ways that we can do that. So imagine you could have your own copies of things in case we went down. And other ideas like that are being talked about a lot so that we aren't You have the benefit of the technology, but you have multiple capabilities upon which to deliver and scale it. So I would say that's the thrust of the conversation that we're having. And because everyone has seen that all vendors are not immune to this. it sort of sparks a different conversation, which is if this risk lies everywhere, why would you go to the lowest common denominator where you actually don't bring the performance and the security that you want? Are there other ways to achieve this? I think we're going to see some real novel and interesting ways. We already see this in our customers. As you know, we have a managed or private offering. Some of our customers use the managed or private offering in order to be redundant. So we're redundant with ourselves. And I think we're going to see a lot more of that.

Got it. Interesting. And then just computed edge, can you give us a certain sense of what kind of revenues you're getting there or maybe what it's growing at or when it can start to be material? Thanks.

Sure. I mean, we've talked about this and I think we're well on track. We said that 22 is going to be the year where we really see material benefit. On the revenue side, we are already seeing, we talked about some examples about the growth that we've seen and the examples that we have. So it's out there in the wild and providing significant value today. But we really see 22 as the year where it hits that inflection point and where revenue will be more meaningful. Thank you. Thank you.

Next question comes from the line of Brad Rebeck from Stiefel. Your line is open.

Great. Thanks very much. Joshua, you have over a billion dollars of cash in the balance sheet, clearly a lot of dry powder. Do you need to fix the business before you do additional deals, or can you do those concurrently?

I look at the success of the Signal Sciences deal and what we're seeing there, and it gives me a tremendous optimism about our ability to do deals. I think we're undergoing a transformation, but it was very much aided by a transaction like that. So I think for us, We don't see anything broken right now. We certainly see that the transformation that our customers are asking us to bring to the table, which is more security, more compute, is absolutely underway. But I think the lesson that we can take, so far at least, is that we can do that and do that successfully. Great. Thanks very much. Thank you.

There are no further questions at this time. Mr. Joshua Bixby, I turn the call over back to you.

Thank you, operator. I'm inspired by how our team responded and the incredible resilience and commitment every Fastly employee has shown for our customers around the world. I can honestly say that I've never been more motivated and committed to providing a fast, secure, reliable, and trustworthy internet for all. I am confident that in the future of Fastly, and I hope you took that from our call today. We look forward to regaining any of the trust we have lost throughout the year. Turning to leadership changes, I want to welcome Ron Kifling as our new chief financial officer, who will join us later this month. Ron brings strong leadership principles to Fastly as an excellent and excellent addition to the executive team. His experience in leading sophisticated financial organizations in high-growth environments will make an immediate and, I believe, a very positive impact on Fastly as we continue to grow and scale our business. Also, on behalf of all Fastly, I'd like to extend our gratitude to Adriel for his tremendous effort in getting us to where we are today. We wish him the best of luck in his new endeavor. Before we sign off, I want to sincerely thank you, the entire FAFSA community, for your continued support. Thank you.

This concludes today's conference call. You may now disconnect.