Fastly, Inc. (FSLY) Bundle
Understanding Fastly, Inc. (FSLY) Revenue Streams
Understanding Fastly, Inc.’s Revenue Streams
The financial performance of Fastly, Inc. (FSLY) is largely driven by its diverse revenue streams. The breakdown of these streams is crucial for investors seeking to understand the company's financial health.
Breakdown of Primary Revenue Sources
Fastly generates revenue through three main segments:
- Network Services
- Security
- Other Services
| Revenue Source | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | % Change |
|---|---|---|---|
| Network Services | $107.4 | $102.5 | 5% |
| Security | $26.2 | $23.3 | 12% |
| Other Services | $3.6 | $1.9 | 85% |
Year-over-Year Revenue Growth Rate
Fastly's revenue has shown consistent growth:
- Q3 2024 Revenue: $137.2 million
- Q3 2023 Revenue: $127.8 million
- Year-over-Year Growth: 7%
For the nine months ended September 30, 2024, the revenue was $403.1 million, compared to $368.2 million for the same period in 2023, representing a 9% increase.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution of revenue by segment was as follows:
| Segment | Revenue (in millions) | % of Total Revenue |
|---|---|---|
| Network Services | $317.6 | 79% |
| Security | $76.2 | 19% |
| Other Services | $9.4 | 2% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Network Services experienced an 8% increase from $295.3 million in 2023 to $317.6 million in 2024.
- Security revenue rose by 14%, driven by Next-Gen WAF revenue.
- Other revenue surged by 61%, highlighting increased adoption of Compute solutions.
Fastly's reliance on existing customers is evident, as approximately 95% of revenue was driven by usage on the platform during both Q3 2024 and Q3 2023.
In summary, understanding Fastly's revenue streams reveals a company that is navigating growth effectively, with a strong emphasis on its Network Services and Security segments while also expanding its offerings in other areas.
A Deep Dive into Fastly, Inc. (FSLY) Profitability
Profitability Metrics
Gross profit for the nine months ended September 30, 2024, was $220.9 million, compared to $190.6 million for the same period in 2023, reflecting an increase of 16%. The gross margin improved to 55% in 2024 from 52% in 2023, driven by revenue growth outpacing cost increases.
For the three months ended September 30, 2024, gross profit was $74.7 million, up from $66.1 million in 2023, marking a 13% increase. The gross margin for this period was 54%, compared to 52% in 2023.
| Period | Gross Profit (in millions) | Gross Margin (%) |
|---|---|---|
| Three Months Ended September 30, 2024 | $74.7 | 54% |
| Three Months Ended September 30, 2023 | $66.1 | 52% |
| Nine Months Ended September 30, 2024 | $220.9 | 55% |
| Nine Months Ended September 30, 2023 | $190.6 | 52% |
Operating profit for the nine months ended September 30, 2024, showed a loss of $133.6 million, compared to a loss of $155.4 million in the same period of 2023. For the three months ended September 30, 2024, the loss from operations was $40.6 million, improved from a loss of $58.3 million in 2023.
Net profit for the nine months ended September 30, 2024, was a loss of $125.2 million, compared to a loss of $109.7 million in 2023. For the three months ended September 30, 2024, the net loss was $38.0 million, an improvement from a loss of $54.3 million in 2023.
| Period | Net Loss (in millions) |
|---|---|
| Three Months Ended September 30, 2024 | $38.0 |
| Three Months Ended September 30, 2023 | $54.3 |
| Nine Months Ended September 30, 2024 | $125.2 |
| Nine Months Ended September 30, 2023 | $109.7 |
The operating expenses for the nine months ended September 30, 2024, totaled $354.5 million, up from $346.0 million in 2023, reflecting a 2% increase. The breakdown includes:
- Research and Development: $105.2 million (2024) vs. $113.9 million (2023)
- Sales and Marketing: $148.6 million (2024) vs. $143.1 million (2023)
- General and Administrative: $87.2 million (2024) vs. $84.7 million (2023)
The Last-Twelve Months Net Retention Rate (LTM NRR) decreased to 105.3% in 2024 from 113.6% in 2023, indicating a decline in the revenue growth from existing customers.
Comparatively, the industry average gross margin for similar companies typically ranges between 60% and 70%, suggesting that the company operates below industry benchmarks in terms of gross profitability.
Overall operational efficiency is indicated by the gross margin trends and the management of operating expenses, which have shown some improvements amidst increasing revenues. However, the company continues to incur significant losses, necessitating a focus on cost management and operational efficiency to improve profitability metrics moving forward.
Debt vs. Equity: How Fastly, Inc. (FSLY) Finances Its Growth
Debt vs. Equity: How Fastly, Inc. Finances Its Growth
As of September 30, 2024, Fastly, Inc. reported total long-term debt of $344.5 million and total current liabilities amounting to $114.2 million. The company's short-term debt primarily consists of operating lease liabilities and other current liabilities.
The debt-to-equity ratio stands at approximately 0.36, which is significantly lower than the industry average of about 1.2. This indicates a conservative approach to leverage compared to its peers in the technology sector.
Recently, Fastly executed several debt repurchases, including $367.3 million of convertible senior notes at a cash repurchase price of $309.1 million during the year ended December 31, 2023. The effective interest rate on these notes is 0.38%, reflecting favorable borrowing terms. The company incurred interest expenses of $1.5 million for the nine months ended September 30, 2024.
In balancing its financing, Fastly has relied heavily on equity financing, with additional paid-in capital totaling $1.93 billion as of September 30, 2024. The company’s accumulated deficit stands at $(959.9 million), emphasizing its ongoing investment strategy that prioritizes growth over immediate profitability.
| Financial Metric | Amount |
|---|---|
| Total Long-term Debt | $344.5 million |
| Total Current Liabilities | $114.2 million |
| Debt-to-Equity Ratio | 0.36 |
| Industry Average Debt-to-Equity Ratio | 1.2 |
| Total Additional Paid-in Capital | $1.93 billion |
| Accumulated Deficit | $(959.9 million) |
| Interest Expense (9 months ended Sep 30, 2024) | $1.5 million |
| Convertible Senior Notes Repurchased (2023) | $367.3 million |
| Cash Repurchase Price for Notes | $309.1 million |
Fastly's strategy demonstrates a careful balance between utilizing debt and equity to finance growth, with a focus on maintaining a stable financial structure while pursuing long-term objectives.
Assessing Fastly, Inc. (FSLY) Liquidity
Assessing Fastly, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 3.96, calculated using current assets of $453.1 million and current liabilities of $114.2 million.
Quick Ratio: The quick ratio is 3.96, indicating a robust liquidity position, as it excludes inventory from current assets.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, is $338.9 million, reflecting a decrease from $315.9 million as of December 31, 2023. This change is attributed primarily to fluctuations in current liabilities.
| Period | Current Assets | Current Liabilities | Working Capital |
|---|---|---|---|
| September 30, 2024 | $453.1 million | $114.2 million | $338.9 million |
| December 31, 2023 | $463.7 million | $147.7 million | $315.9 million |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flows from different activities are as follows:
- Net Cash Provided by Operating Activities: $11.2 million
- Net Cash Provided by Investing Activities: $108.0 million
- Net Cash Used in Financing Activities: ($9.8 million)
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $11,186 | $7,739 |
| Investing Activities | $107,991 | $332,185 |
| Financing Activities | ($9,782) | ($213,553) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds cash, cash equivalents, and marketable securities totaling $308.2 million. This strong liquidity position is bolstered by the absence of non-current marketable securities, allowing for immediate access to funds.
Despite the robust cash position, potential liquidity concerns arise from ongoing operating losses, with a net loss of $125.2 million for the nine months ended September 30, 2024. This trend necessitates careful management of cash flow and operational expenditures to ensure sustained liquidity.
Furthermore, the company has significant long-term obligations, including $344.5 million in long-term debt, which may impact future liquidity if cash flows do not improve.
Overall, while the company maintains a strong liquidity position, continuing operating losses and substantial long-term obligations require vigilant financial management.
Is Fastly, Inc. (FSLY) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the company's stock is assessed through various valuation metrics to determine whether it is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The price-to-earnings (P/E) ratio is a critical metric for evaluating the company's stock price relative to its earnings. As of September 30, 2024, the P/E ratio was calculated based on the trailing twelve months (TTM) earnings:
- Stock Price: $7.54
- Net Loss for TTM: $125.2 million
- Shares Outstanding: 139.2 million
- Earnings Per Share (EPS): $(0.90)
- P/E Ratio: Not applicable due to negative earnings.
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into the valuation of the company's stock relative to its book value:
- Total Assets: $1.47 billion
- Total Liabilities: $502.3 million
- Book Value: $969.5 million
- P/B Ratio: $7.54 / ($969.5 million / 139.2 million) = 1.09
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
This ratio assesses the company's overall valuation compared to its earnings before interest, taxes, depreciation, and amortization:
- Enterprise Value (EV): Market Cap + Total Debt - Cash
- Market Cap: $7.54 139.2 million = $1.05 billion
- Total Debt: $344.5 million
- Cash and Cash Equivalents: $308.2 million
- EV: $1.05 billion + $344.5 million - $308.2 million = $1.08 billion
- EBITDA (TTM): Not applicable due to net loss.
Stock Price Trends
The stock price trends over the last 12 months indicate volatility:
- 12-Month High: $12.50
- 12-Month Low: $5.20
- Current Price: $7.54
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, thus the dividend yield and payout ratios are:
- Dividend Yield: 0%
- Payout Ratio: Not applicable.
Analyst Consensus on Stock Valuation
Analyst consensus on stock valuation reflects varied perspectives:
- Buy: 5 analysts
- Hold: 12 analysts
- Sell: 3 analysts
| Metric | Value |
|---|---|
| P/E Ratio | Not applicable |
| P/B Ratio | 1.09 |
| EV/EBITDA Ratio | Not applicable |
| 12-Month High | $12.50 |
| 12-Month Low | $5.20 |
| Current Stock Price | $7.54 |
| Dividend Yield | 0% |
| Analyst Consensus (Buy) | 5 |
| Analyst Consensus (Hold) | 12 |
| Analyst Consensus (Sell) | 3 |
Key Risks Facing Fastly, Inc. (FSLY)
Key Risks Facing Fastly, Inc.
Fastly, Inc. faces several key risks that could significantly impact its financial health in 2024. These risks range from internal operational challenges to external market conditions. Here is a breakdown of these risk factors:
1. Competitive Landscape
The company operates in a highly competitive environment. Key competitors include Cloudflare, Akamai, and Amazon Web Services. As of September 30, 2024, Fastly's revenue was $137.2 million for the quarter, reflecting a 7% increase year-over-year. However, competition continues to intensify, potentially impacting market share and pricing strategies.
2. Regulatory Changes
Fastly must comply with various regulations in multiple jurisdictions. Changes in data privacy laws, such as the GDPR in Europe and CCPA in California, could lead to increased compliance costs and operational adjustments. The company has incurred compliance costs associated with growth, which have increased year-on-year. For example, the accumulated deficit as of September 30, 2024, was $959.9 million, necessitating robust compliance measures to mitigate potential fines.
3. Operational Risks
Operational risks include potential disruptions in service delivery due to technological failures or cyber-attacks. The company reported a net loss of $38.0 million for the three months ended September 30, 2024, highlighting the financial impact of operational inefficiencies. Cybersecurity remains a critical concern, as attacks on infrastructure could lead to significant financial and reputational damage.
4. Financial Risks
Fastly's financial health is under pressure due to ongoing losses and the need for continued investment in technology and infrastructure. For the nine months ended September 30, 2024, the total operating expenses were $354.5 million, compared to $346.0 million in the previous year, indicating a 2% increase. The company may need to raise additional capital to sustain operations and fund growth initiatives, which could dilute existing shareholders.
5. Market Conditions
Broader economic conditions can also affect Fastly's business. Economic downturns could result in reduced IT spending by customers, impacting revenue growth. The company's revenue for the nine months ended September 30, 2024, was $403.1 million, up 9% from $368.2 million in the previous year, but the sustainability of this growth in a fluctuating market is uncertain.
6. Strategic Risks
Fastly's strategy to expand its customer base and enhance its product offerings involves significant risks. The company relies heavily on existing customers for revenue, with approximately 95% of revenue driven by usage on its platform. Any failure to innovate or meet customer expectations could result in revenue loss and increased churn rates.
7. Mitigation Strategies
Fastly has initiated several strategies to mitigate these risks. The company is investing in enhanced cybersecurity measures, compliance initiatives, and operational efficiencies. Additionally, restructuring charges of $9.7 million were recognized in the latest quarter to streamline operations and improve financial performance.
| Risk Factor | Description | Financial Impact (Q3 2024) |
|---|---|---|
| Competitive Landscape | Intensifying competition from major players. | Revenue: $137.2 million (7% increase) |
| Regulatory Changes | Compliance with evolving data privacy laws. | Accumulated Deficit: $959.9 million |
| Operational Risks | Service disruptions and potential cyber-attacks. | Net Loss: $38.0 million |
| Financial Risks | Ongoing losses necessitating additional capital. | Total Operating Expenses: $354.5 million |
| Market Conditions | Economic downturns impacting IT spending. | Revenue: $403.1 million (9% increase) |
| Strategic Risks | Dependence on existing customers for revenue. | Revenue from existing customers: 95% |
| Mitigation Strategies | Investments in cybersecurity and operational efficiency. | Restructuring Charges: $9.7 million |
Future Growth Prospects for Fastly, Inc. (FSLY)
Future Growth Prospects for Fastly, Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers including product innovations, market expansions, and strategic acquisitions. As of September 30, 2024, the total revenue reached $137.2 million, reflecting a 7% increase from $127.8 million in the same period of 2023. For the nine months ended September 30, 2024, total revenue was $403.1 million, a growth of 9% from $368.2 million in the prior year.
Future Revenue Growth Projections and Earnings Estimates
Looking ahead, revenue growth is projected to continue as the company enhances its product offerings and expands its customer base. The revenue from Network Services for the nine months ended September 30, 2024, was $317.6 million, up 8% from $295.3 million in the same period of 2023. Security revenue also showed strong growth, increasing to $76.2 million, which is a 14% rise from $67.1 million year-over-year.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company continues to engage in strategic partnerships aimed at enhancing its technology stack and expanding its market reach. As of September 30, 2024, the Last-Twelve Months Net Retention Rate (LTM NRR) was 105.3%, indicating a strong ability to retain and grow revenue from existing customers.
Competitive Advantages That Position the Company for Growth
Competitive advantages include a robust edge cloud platform that provides real-time content management and low-latency experiences for customers. The company reported that approximately 95% of its revenue was driven by usage on its platform for both the three and nine months ended September 30, 2024. This high utilization rate emphasizes customer reliance on the platform, creating a favorable environment for upselling and cross-selling additional services.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $137.2 million | $127.8 million | 7% |
| Network Services Revenue | $107.4 million | $102.5 million | 5% |
| Security Revenue | $26.2 million | $23.3 million | 12% |
| Other Revenue | $3.6 million | $1.9 million | 85% |
| Gross Profit | $74.7 million | $66.1 million | 13% |
| Gross Margin | 54% | 52% | 2% |
As of September 30, 2024, the company had a total customer count of 3,638, up from 3,102 in 2023, indicating a growing adoption of its services. The enterprise customer count stood at 576, which generated 92% of the total annualized current quarter revenue.
In summary, the company's strategic initiatives, strong retention rates, and competitive advantages position it well for continued growth in the coming years.
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Resources:
- Fastly, Inc. (FSLY) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Fastly, Inc. (FSLY)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Fastly, Inc. (FSLY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.