• Fourth-Quarter Revenue: $140.6 million, exceeding guidance range of $136 million to $140 million, with 2% growth year over year and quarter over quarter.
• Annual Revenue 2024: $544 million, representing 7% growth year over year.
• Operating Loss: $4.2 million in the fourth quarter, within guidance range of $1 million to $5 million.
• Cash from Operations: Increased to $16 million in 2024 from $400,000 in 2023.
• Cash Flow Burn: Reduced to $36 million in 2024 from $59 million in 2023.
• Enterprise Customers: 596 at the end of Q4, growing 3% year over year and quarter over quarter.
• Gross Margin: 56.5% in Q4, down from 59.2% in Q4 2023.
• Adjusted EBITDA: $9.7 million in Q4, compared to $11.5 million in Q4 2023.
• Net Loss: $3.8 million or $0.03 loss per diluted share in Q4.
• Cash and Equivalents: Approximately $296 million at the end of the quarter.
• Convertible Debt: Refinanced a portion, raising $150 million of 7.75% convertible notes due in 2028.
• Free Cash Flow: Improved to negative $36 million in 2024 from negative $59 million in 2023.
• 2025 Revenue Guidance: $575 million to $585 million, reflecting 7% annual growth at the midpoint.

• Warning! GuruFocus has detected 7 Warning Signs with FSLY.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fastly Inc (NYSE:FSLY) reported record fourth-quarter revenue of $140.6 million, exceeding their guidance range and showing 2% growth year over year and quarter over quarter.
• The company achieved a 7% year-over-year revenue growth for 2024, reaching $544 million, despite facing demand headwinds from some of its largest customers.
• Fastly Inc (NYSE:FSLY) successfully diversified its revenue base, with the top 10 customers' revenue contribution dropping from 40% at the end of 2023 to 32% in the fourth quarter of 2024.
• The company saw a 16% year-over-year growth in revenue outside of its top 10 customers in the fourth quarter, indicating successful expansion in its broader customer base.
• Fastly Inc (NYSE:FSLY) improved its cash from operations significantly, increasing from $400,000 in 2023 to $16 million in 2024, and reduced its cash flow burn from $59 million in 2023 to $36 million in 2024.

Negative Points

• Fastly Inc (NYSE:FSLY) reported an operating loss of $4.2 million in the fourth quarter, within the guidance range but still a loss.
• The company's gross margin declined to 56.5% in the fourth quarter, down from 59.2% in the same quarter of the previous year.
• The trailing 12-month net retention rate decreased to 102%, down from 105% in the prior quarter and 113% in the year-ago quarter.
• Fastly Inc (NYSE:FSLY) experienced a decrease in its total customer count, with a net decrease of 182 year over year and 577 quarter over quarter, due to a one-time correction.
• The company provided a conservative 7% annual revenue growth guidance for 2025, reflecting potential risks and uncertainties, including the impact of legislation affecting TikTok, one of its larger customers.

Q & A Highlights

Q: Can you give us an idea of what sort of investments in capital and people you'll need for the Asia expansion and when can we expect some of the changes to start impacting the top line trajectory? A: Ronald Kisling, CFO: From a capital investment perspective, it's fairly nominal, with little on the capital side. Our build-out reflects global traffic rates. We largely have the team in place, and this is about adding a leader. Todd Nightingale, CEO: This move is to make our system more efficient. We have the infrastructure in place, and by adding a dedicated APAC sales leader, we can drive more local business in that market.

Q: How is the new sales team focusing on new logos going to change the current sales structure, and when will it hit its stride? A: Todd Nightingale, CEO: We've largely done this through refocusing existing resources. The team is mostly in place, with a focus on security specialization. Our new sales leadership has a strong security background, and we feel good about where we are.

Q: Can you explain why the business mix hasn't shifted more visibly despite traction on bundle initiatives? A: Todd Nightingale, CEO: We've seen a shift in revenue diversification, especially in the mid-market and Enterprise accounts outside the top 10. Our top 10 customer revenue concentration dropped from 40% to 32%. We also see diversification towards security, compute, and observability, but we can do better, especially in security growth.

Q: What gives you confidence in the stabilization of the top 10 customer mix and improvements seen this quarter? A: Todd Nightingale, CEO: We've moved to a higher touch customer engagement with better analytics and executive engagement. We've brought on new workloads for many customers, and as they ramp, we can project revenue for 2025. The decline in the customer cohort in early 2024 is stabilizing, improving year-over-year growth rates.

Q: What drove the decision to evolve sales incentives, and does it impact your 2025 guidance philosophy? A: Todd Nightingale, CEO: We're incentivizing cross-sell revenue to build a more diversified revenue base. Ronald Kisling, CFO: Philosophically, our guidance hasn't changed. We've addressed volatility with our largest customers and TikTok, providing guidance based on current visibility.

Q: How are you addressing the growth challenges in the Security segment, and what are your expectations for 2025? A: Todd Nightingale, CEO: We can do better than the 17% growth rate. Our focus is on Edge-delivered security technology for web applications. The biggest lever for growth in 2025 will be go-to-market focus and leadership. We feel comfortable with our portfolio and will lean into go-to-market efforts.

Q: What impact did Edgio's network shutdown have on Fastly, and what is expected in 2025? A: Todd Nightingale, CEO: We saw new logos and are working to bring Edgio traffic onto Fastly's platform. We're managing capacity build with careful capital spend and gross margins. The pricing environment looks better for 2025, providing upside.

Q: How are you balancing adoption and monetization of the Fastly compute platform, especially with AI workloads? A: Todd Nightingale, CEO: We feel bullish about compute, especially with AI accelerator and AI workloads. The focus in 2025 will be on security, but we're seeing increased workloads and interesting use cases in compute.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.