Thanks, AthinkingFool, for a very thoughtful analysis. And let me again make clear that if things change for Fastly, I’d be glad to get back in, even at a higher price than the one I exited at.
Some thoughts of my own:
Point 1 – You wrote that Therefore 20 ‘Enterprise’ customers in the travel or hospitality industries could have dropped out of this bracket in Q2.
But Runner Guy points out that:
Fastly defines an enterprise customers as Enterprise customers (defined as spending $100,000 or more in a twelve-month period) while
Cloudflare defines an enterprise customers as customers with Annualized Revenue greater than $100,000… To measure Annualized Revenue, we take the sum of revenue for each customer in the quarter and multiply that amount by four.
Do you realize that this turns our excuse for Fastly’s lack of growth of customers upside down. In the that Covid quarter it would have been Cloudflare that would lose total Enterprise customer count, not Fastly.
Here’s what I mean: Say Fastly had an established $50,000 per quarter travel company, spending $200,000 per year. Then in the June quarter, because their travel business collapsed, they only spent $10,000 with Fastly instead of $50,000! However, they still had $160,000 over the last year and still count as a $100,000 customer. Even if they were a $40,000 a quarter customer, and dropped to $8,000 in that quarter, they’d be at $128,000 and still count. They’d have to be just at the border to actually drop out of their count. The chance of more than one or two travel, etc, companies dropping out seems very remote, and certainly nowhere near twenty.
But if they were a Cloudflare customer, Cloudflare multiplies the quarter revenue by four to get their annualized revenue, so if they gave their $50,000 per quarter travel customer a reduced $10,000 rate, they logically might not count them.
Point 2 – You state if you are to compare their relative DBNER’s, Cloudfare had 115% (down from 122% YoY) last quarter while Fastly had 137% (up from 133% QoQ
That makes perfect sense. Cloudflare’s DBNER was down because because their customers were reluctant to take on new modules in the middle of the Covid panic. Fastly’s was up because of the one time usage blip.
Point 3 - You state So how much new business did Fastly generate? In Q2 a record number of new customers were added with total customers growing from 1,837 to 1,951 quarter on quarter.
That’s just a 6% sequential gain. And it’s almost all companies that just contribute peanuts. There was only a 2% gain in the companies that count.
For comparison with another of our high confidence companies, Crowdstrike grew total customers by 15.5% sequentially and by 91% over a year ago. And Cloudflare added over 7000 paying customers in the quarter, to Fastly’s 114. … I’m sorry, Fastly is simply not blasting along like a true winner. They are just making excuses.