$FSLY: An Edge Over the Competition

Fastly, Inc. ($FSLY) is a leading developer-focused edge cloud platform (“Infrastructure-as-a-Service” or “IaaS”).

It's programmable edge network optimizes secure content delivery.

The stock fell 21% after Q2 ER; LT is strong

A thread

1/ The Basics

Capabilities:

- Edge cloud platform
- Edge compute technology
- CDN
- Image optimization / video & streaming
- Cloud security
- Load Balancing

Leader because:
- Fastest solution
- High demand offerings
- Developer-focused
- Forward thinking

More resources

2/ Competitive Market
Main Competitors: $AKAM $NET $LLNW

Cloud provider (AWS, Azure, Google, IBM) solutions not dynamic
- Multi-cloud trend favors independents

$AKAM leads CDN market, but antiquated solution

$FSLY & $NET have superior edge network architecture
- Room for both

3/ Expanding TAM (2019-2022)

Edge Computing: $2.7B to $6.7B (35.4% CAGR)

Content Delivery & Streaming: $7.3B to $16.7B (31.8%)

Cloud Security: $5.1B to $8.7B (19.5%)

ADC: $2.9B to $3.7B (8.1%)

Total: $18.8B to $35.8B (23.9%)

Key: $FSLY is NOT just a CDN

4/ Strong Fundamentals (Q2 2020)

Total Rev: $74.7MM (+61.7%, +4.6% Beat)
- 38% Growth in Q1

Non-GAAP GM: 61.7% (+600 Bps) – leverage of SDN

Enterprise Rev: $67MM (+71%), 88% of Total Rev

T12 DBNER: 137.4% (+500 Bps)

NRR: 137.8% (vs. 110.9% Q2’19) – increased "stickiness"

5/ Accelerating Metrics

Revenue growth accelerated in Q2 despite COVID headwinds
- Improvement from impacted customers is a tailwind

Margin expansion result of operating leverage from SDN architecture
- Revenue / Employee: $468K

FY 2020 Revenue Guidance: $290-300MM (+47.1%)

6/ Customer Profile

304 Enterprise Customers (88% of Total Revenue)

Avg Enterprise Customer Spend: $716K (+29% YoY, +11.5% QoQ)

Best in class DBNER: 137% (up from 133% in Q2) result of scaling customer usage

Large customer focus --> efficiencies (i.e. higher POP utilization)

7/ Compute@Edge – The Future

Leading edge compute solution (beta concept); 64% of beta customers have “project in mind” for this solution

Use Cases: Auth & Personalization, API Response Stitching, Localized Microservices, Entry Mgt, ML, IoT, 5G, etc.

Expanding network capacity

8/ Management

Founder Artur Bergman stepped down as CEO, now Chief Architect & Exec Chairman

Bergman “understands the internet at the protocol level.”

Former President Joshua Bixby now CEO, beat consensus both Qs

Excellent partnership: Bergman as Developer, Bixby as Leader

9/ Key Risks

- Quality competition into serverless compute space

- Commoditized CDN space

- Delayed adoption of edge compute use cases

- Slow down in digital transformation

- Difficulty attracting enterprise customers from incumbents

- Short-term technical stock damage

10/ Conclusion

$FSLY has an exciting future with leading tech solution

Many tailwinds in high growth market segments

There is good competition in the space, but $FSLY seems to be one of the leaders

Recent technical damage to the stock may dampen ST prospects

Long-term buy