Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fastly Inc (FSLY, Financial) reported third-quarter revenue of $137.2 million, exceeding the high end of their guidance range.
- The company achieved a net profit of $2.4 million and a positive adjusted EBITDA of $13.3 million, both record levels.
- Revenue from customers outside of the top 10 grew 20% year over year, indicating successful diversification efforts.
- Fastly Inc (FSLY) has seen strong growth in its security revenue, which increased by 12% year over year.
- The company has successfully reduced its operating expenses by 5% year over year and 12% sequentially, contributing to improved financial performance.
Negative Points
- Fastly Inc (FSLY) experienced a decline in its trailing 12-month net retention rate, dropping to 105% from 110% in the prior quarter.
- The enterprise customer count decreased by 4% quarter over quarter, indicating challenges in maintaining or growing this segment.
- Gross margins are expected to decrease by approximately 150 basis points in the fourth quarter due to increased bandwidth and colocation costs.
- The company anticipates flat to modest sequential growth in Q4 revenues, reflecting ongoing challenges with some of its largest customers.
- Free cash flow for the year is projected to be negative, with guidance indicating a range of negative $40 to $30 million.
Q & A Highlights
Q: With a competitor going bankrupt, what opportunities do you see, especially with overlapping customers?
A: Todd Nightingale, CEO: We've seen some accounts shift traffic towards Fastly, particularly overlapping accounts where the transition is straightforward. We view this as a significant opportunity for 2025, emphasizing our platform strategy that includes network services, security, compute, and observability.
Q: Can you discuss the penetration of security services among your customers, especially web delivery customers?
A: Todd Nightingale, CEO: Our cross-sell penetration is still low, presenting a significant opportunity. We've focused on security innovation, emphasizing ease of deployment to drive cross-sell opportunities. We believe there's far too little penetration currently.
Q: What drove the unexpected strength in Q3, and are these trends sustainable?
A: Ronald Kisling, CFO: We saw better-than-expected results from live sporting events and gaming, along with share gains outside the top 10 customers. The acceleration in growth outside the top 10 was stronger than anticipated, indicating sustainable long-term growth.
Q: How do you view the mix between top 10 and non-top 10 customers in terms of growth?
A: Todd Nightingale, CEO: We expect growth to be increasingly driven by the longer tail of customers. Reducing concentration in the top 10 will lead to a healthier growth rate. We aim for a significant moment when top 10 concentration reaches 30%.
Q: Can you provide more color on the security business and where you're seeing success?
A: Todd Nightingale, CEO: We've seen success with our security portfolio, particularly with our WAF and DDOS protection. The unification of our platform is driving confidence, with significant upside potential outside of media in sectors like e-commerce, hospitality, and fintech.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
