Fastly, Inc. Q2 FY2021 Earnings Call

Good afternoon. My name is Mary and I will be your conference operator today. I would like to welcome everyone to the Fastly Second Quarter 2021 Earnings Conference Call. All lines have been muted to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the conference over to Stefany Flegel, 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, Adriel Lares, 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 details, 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 filings 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 statements, 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 the call over to Joshua.

Thanks Stefany. 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 impacted 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, this 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 our top 10 customers, 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 had 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 through 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've recently announced the achievement of a significant integration milestone with the introduction of a beta version of Signal Sciences agent on the Fastly Edge Cloud. We also introduced our first managed security offering, Fastly Response Security Service. We continue to execute against our Compute@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 Compute@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 Compute@Edge. By adopting Compute@Edge technology, companies 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 is 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 Signal Sciences average enterprise customer spend. Additionally, our dollar-based net expansion rate remained 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 the 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 customer 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 million to $85 million. Non-GAAP operating loss in the range of negative $23 million to negative $19 million; non-GAAP net loss per share in the range of negative $0.21 to negative $0.18. 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 million to negative $65 million from negative $50 million to negative $40 million, and non-GAAP net loss per share in the range of negative $0.65 to negative $0.57 from negative $0.21 to negative $0.18. 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, security-led go-to-market motion, and the expansion of our Compute@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.

Your first question comes from the line of Will Power from Baird. Your line is open.

Thanks for taking the question. Hoping to just drill into the 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 would be great.

Sure. Our confidence remains high. Customers are moving based on their own timelines, which are not directly related to us, and those timelines appear strong. Currently, this impacts only a small number of customers, and their timelines are influenced by various situational factors, such as regulatory or licensing issues. In most cases, these timelines are fairly fixed, although they are later than we originally expected. The key point here is that we have strong relationships with these customers and are working closely with them. In our usage-based business, we can't always predict when large initiatives will occur. The good news is these initiatives are new and significant, which keeps us confident. However, when considering our guidance, we need to proceed cautiously based on historical data. Therefore, we are only accounting for what we can see, and we anticipate a notable revenue impact in 2022 from the deals that have been delayed.

Got you. 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?

Yes. From a gross margin perspective, Q2 revenue was relatively flat, and 2020 was a challenging comparison since Q2 was not seasonally strong due to the pandemic. As a result, last year showed some unexpected leverage. This year feels more normalized in terms of revenue. However, the outage affected this because gross margin is more closely tied to utilization. Typically, revenue would trend upwards into the second half of the year, through Q3 and into Q4, which is when you see leverage. Overall, I remain confident about the long term, but this year's unusual impacts from the outage have influenced Q2 more significantly than usual.

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. Yeah, absolutely, and I think we should separate those two things. As we talk to 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 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 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 of Artur and others to get it on the phone with these executives. And what you hear is, one, an understanding, two, a real 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 we 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 were 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 have set in place four, four and half years ago, which is that when we built Compute@Edge, we built it – 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. And so the outage has really pushed forward a drive that we've had for a long time, which is to move all of our own delivery and security products to the Compute@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 a long-term mitigation. Our customers have told us they are not going to wait for that, but 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 it had to be applied? And maybe what that impact was on the quarter and what you expect it to be for the full year? Thank you.

There are two impacts to consider. First, there was the effect of the outage on customers who had not yet ramped up their traffic at the time, which occurred in June. Therefore, the revenue loss and reduced traffic are tied to that month. The second impact relates to the credits we issued, which are reflected in our June quarter results. Given that the outage happened in June, we likely would have reported slightly higher numbers had it not occurred. Considering that we managed to stay within our range despite the credits, I view that as a positive outcome, especially since the issue was resolved quickly. In summary, the credit is already included in the June quarter, it was relatively minor, yet it did affect June. The key question remains what additional revenue we could have generated had the traffic continued as usual, which is uncertain.

Thank you.

Thanks, Jonathan.

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

Hey, guys. Thanks for taking my question. Joshua, I missed just the first couple of minutes of your piece, so I apologize if these were already addressed. I'm curious on the step down in the annual guide, the $40 million reduction. Is there any way you could break that out between the customers that had delays and launch and 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?

Yes. If you think about it, they both have a pretty significant impact on that number. Our top customers have large dollar figures associated with their monthly. So if you think about a few of those and you think about either an unknown, which is the case with our top 10 customer we're talking about in terms of when they come back and we want to be cautious and really put into guidance what we see. And then, you talk about what we do know, which is the delay in a few customers. There's sort of 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 to know that on the Compute@Edge, the announcement of JavaScript now being able to be compared to Weather. Just how meaningful and important is that for the longer-term prospects of Compute@Edge for your customers?

It's incredibly meaningful. This is the top request from our customers. They want to program in the language of their choice, and we know that JavaScript is a preferred option for many. This truly helps democratize the platform, making it accessible to a wider range of developers who may not have felt as comfortable before. Each developer ecosystem, whether it’s Ruby or JavaScript, has its own unique culture and community. Compute@Edge aims to engage those communities and connect with developers where they are. This approach allows us to bring together a substantial number of developers, and we are already witnessing that momentum. We mentioned some exciting projects being developed on Compute@Edge, including companies that are embracing it, such as the Graph CDN team, who have highlighted in a compelling blog post why Compute@Edge is the right foundation for their business. We’re seeing more examples of this, which is very exciting. It’s becoming a significant topic of discussion during my conversations with customers, and it’s a true differentiator for us.

Got it. Helpful. Thanks.

Thanks.

Your next question comes from the line of Tyler Radke from Citi. 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 in terms of the new customer conversations you have that the recent outage is not impacting the ability to land new customers? Thank you.

Sure. Regarding the outage, we haven't observed any significant change in our churn rate. We do have a few customers affected, but overall, churn remains historically low. Some of our top customers might consider bringing services in-house, but they choose to work with us because of the advanced capabilities we offer. From my discussions with customers, particularly one in focus, there is a strong desire to return to our platform due to the importance of speed. While having a temporary solution in-house is nice, customers have a clear reason for selecting us. As for larger customers and projects, as we mentioned in our guidance, these delays are unrelated to our internal efforts or the outage. This situation isn't primarily 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 your outlook kind of the assumptions embedded in there? I know you talked about 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 I think as I spoke about earlier this year, when we initially gave sort of annual guidance for the year, we talked about them being about 10% of revenue. I think in Q1 that was closer to sort of the high 9s. Q2 is expected to be in sort of the 10% level. So I think in this case, the outage clearly impacted sort of the heritage facility revenue. So Signal Sciences continues to sort of 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 Sciences products that sort of 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 impact of the credit, it probably was sort of technically 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.

Thank you for the questions. I want to add to what Tyler mentioned. The demand has been really strong. Can you provide more details on the demand for Signal Sciences compared to what you just shared? How should we view the balance between new business and expansion at this time? Additionally, what percentage of the business comes from self-hosted term license products versus the cloud-based SaaS web application firewall and DDoS solutions?

Sure. Hey, Jim, it's Josh. Let me start by saying that demand is very high. We're seeing continued momentum across every metric from the pipeline to closed deals throughout the entire quarter and at the start of this quarter. From our perspective, it's a great story. As this momentum builds and continues to grow in size, it will be incredibly helpful. It's an important way for us to enter accounts. Overall, we continue to see a ratio similar to what we have historically, around 90% SaaS and 10% license. One of the initiatives that Brett is leading in transforming our go-to-market strategy is a significant focus on security. Given that we're filling our pipeline with security-led efforts, it makes sense that we will see more of this. We are also innovating on the product side, having introduced SigSci capabilities at the edge, which we will continue to develop. All of this contributes to improving our margins and performance. There’s a positive cycle at play here. Overall, we're seeing a strong mix of business, much of which is actually new business, which is the most exciting part. As this continues to develop, it gives us a lot of confidence for 2022.

Got you. That's helpful. But we're up to 145 terabits per second network really of size at this point and you're typically 30 terabits a second at various stages in a day, so 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 this thing can happen. So 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. Let me start on the network side. The overall numbers for the network don't always tell the full story because we are really focused on strategically building in certain locations. We have substantial capacity in specific regions, but demand may be concentrated elsewhere, making the global numbers less relevant. We're constantly assessing where to expand and enhance our capacity based on customer needs. We must anticipate our customers' requirements, so even though we've encountered some delays—two to four months—we remain thoughtful about our expansion plans. This time last year, the network was extremely active, and while we've built out for some demand that has now shifted out a few months, we are still confident that it will materialize. Therefore, I would suggest focusing less on the aggregate number. The capital expenditures we incurred this quarter and plan for the year align closely with the demand we expect. You noted an important issue regarding chips being a challenge for all vendors. We've been fortunate in managing our relationships; although it poses a risk, it hasn't affected us this quarter. On the credit side, Adriel, do you want to address that?

I do. I just needed to find my new button my apologies. From a credit standpoint, Jim is about 1%. So hopefully that gives you some perspective about the magnitude. I think from us it's really it's 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 outage we 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 that been, sort of, normal.

Thank you, guys.

Thank you.

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

Hi, Joshua and Adriel. Thank you for taking my question. I want to revisit the topic of churn, particularly regarding customers possibly reducing their spending with Fastly. Notably, I noticed that the net revenue retention for this quarter dropped below 100% for the first time, which is concerning to see. Could you explain why the net revenue retention was so low at 93% this quarter? When customers are downsizing their engagement, are they shifting more to competitors or handling it internally? Please help me understand this figure and how we should interpret this metric moving forward. I have a follow-up question as well.

Sure. Adriel, do you want to take that one?

Hi, Rishi. Yes, happy to walk through this one. As, you know, the net retention rate metric compares two months in to solicit as opposed to the last 12 months takes a clearly 12 months, which takes out a lot of volatility. In this particular case, you're basically comparing June of 2021 to June of 2020. And as 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 credit. So all of the credits hit that month as opposed to being spread through the quarter as well as not being spread over, sort of, a 12-month period. So I think you're comparing two months 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 onetime 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. Maybe getting out of this year and when some of these investments 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? Is this a double-digit type grower? Is this a 20% type grower which is the story kind of that were told at IPO time. Just philosophically how should we think about the growth profile of this business over the next three years, five years putting aside these current issues and the tough comparison last year? Thanks.

Yes, absolutely. From my perspective, we anticipate that the next three to five years will maintain the growth pattern we've projected for the market. Our compound annual growth rate since our IPO reflects this trend, despite some fluctuations. If you step back and consider the broader picture, there are numerous trends prompting a comprehensive reevaluation of security for almost every organization globally. The shift in how applications are developed, with the edge becoming increasingly important, plays a crucial role. Emerging technologies like 5G are driving a surge in content and interactive features. Additionally, significant budgets are tied to these developments, yet many still reside with legacy enterprise companies and appliances that are not meeting current needs. With about 400 enterprise customers, we know that predecessors have had as many as 100,000 or 120,000 customers. We view this as just the beginning of our journey. It's early in our story, and while larger accounts may have more influence now due to our smaller base, the overarching message for us is that the world is evolving through this digital transformation, a trend that has only gained momentum due to the pandemic. We recognize this as a major opportunity, and despite some delays this year, our optimism remains strong. We believe we are positioned well for the future.

Got it. Its helpful. Thank you so much.

Your next question comes from the line of Tim Horan 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?

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 is 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 whole I should say of the team working on the project. So relationships are strong. Dialogue is great. And I hope as 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 multisource basically relationships? And how easy would it be for customers 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 more confident that look at there is an outage we will totally go down at this point.

Fastly is not the only company that has experienced outages in recent months; others have faced similar challenges. This situation highlights the importance for everyone to consider their resiliency planning. Our customers are interested in maximizing the benefits that our platform offers while also enhancing their resiliency strategies. When we discuss resiliency with our clients, we explore various approaches to build resilience within Fastly. There are many innovative ideas and methods we can implement, such as creating local copies of content for backup purposes. This conversation focuses on leveraging our technology with multiple capabilities for delivery and scalability. Given that all vendors are vulnerable to outages, this prompts a reevaluation of why one would settle for the lowest option that may compromise performance and security. We're likely to discover new and interesting solutions. For instance, some of our customers have opted for managed or private offerings to ensure redundancy. I anticipate seeing much more of this approach in the future.

Got it. Interesting. And then on just Compute@Edge can you give us a certain sense of what kind of revenues are 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 2022 is going to be the year where we really see material benefit. On the revenue side, we are already seeing and 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 2022 as the year where it hits is that inflection point where revenue will be more meaningful.

Thank you.

Thank you.

Your next question comes from the line of Brad Reback from Stifel. Your line is open.

Great. Thanks very much. Josh you have over $1 billion of cash on 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 are 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 has responded and the incredible resilience and commitment that 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 in the future of Fastly, and I hope that you got that from our call today. We look forward to regaining any trust we have lost throughout the year. Turning to leadership changes, I want to welcome Ron Kisling as our new Chief Financial Officer, who will join us later this month. Ron brings strong leadership principles to Fastly and is an excellent addition to the executive team. His experience in leading sophisticated financial organizations in high-growth environments will have an immediate and I believe very positive impact on SaaS as we continue to grow and scale our business. Also, on behalf of everyone at 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 with his new endeavor. Before we sign off, I want to sincerely thank the entire Fastly community for your continued support. Thank you.

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