Fastly generated $75 million in revenue, up 62% year-over-year,
grew total customer count to 1,951 from 1,837 in the previous quarter — the largest quarterly increase since IPO.
Increased enterprise customer count to 304 from 297 in the previous quarter.
Saul called 60% growth.
https://investors.fastly.com/files/doc_financials/2020/q2/2Q…
Profit taking, algorithms all kinds of reasons. But seems like a good story and they raised guidance. Which is probably a low ball
I bought 33% more in the post-market around 100. Outside of normal market hours the pricing is always funky…real price discovery starts tomorrow at 9:30.
I don’t see anything I didn’t like, and a lot that I did like, in their earnings report.
Plus I had to put my proceeds from selling LVGO somewhere…
Rob
Because the market was pricing in insane growth expectations. I think we are going to see this type of reaction in a lot of the companies discussed here this Q. Same thing happened to TWLO yesterday and LVGO today (although that wasn’t related to their outstanding earnings) That doesn’t mean they aren’t still good companies to own.
bnh
This (after hours tank and perhaps tomorrow) could be a great example of what Saul describes when a company misses the (often arbitrarily derived) earnings consensus, a dynamic which is often an immaterial and irrelevant input on the health of the business operations. FSLY missed their GAAP EPS estimate by $0.07…
Q2 Non-GAAP EPS of $0.02 beats by $0.03; GAAP EPS of -$0.14 misses by $0.07.
We all know that GAAP often doesn’t paint an accurate picture of the reality. I wonder if investors had their after market sell orders all lined up, and mouse hovering over the “confirm” button, and when they saw …FSLY missed their GAAP EPS estimate by $0.07…", clicked, but didn’t look to see they actually beat non GAAP EPS. I want to believe the average investor understands this dynamic better, but this might suggest they don’t. Or that investors were expecting a bigger raise to the outlook. Or investors just wanted to take some profit. At any rate, the market is often fickle, and does not reflect the strength of the company. Bottom line: I don’t see anything to suggest the “story” changed materially.
this
Because the market was pricing in insane growth expectations. -bnh
I mentioned the other day in my GH post that I couldn’t rationalize buying FSLY on monday, even when plugging in a +90% growth rate. The valuation was so high they would have needed something really incredible to move the stock further upward.
-mekong
Adaking,
I also own Paycom. In after hour yesterday, after it reported a great quarter, the stock tanked more than $8/share. Today it was up more than $15. If I an convince you to sell cheaper, it is more money in my pocket.
Gordon
This (after hours tank and perhaps tomorrow) could be a great example of what Saul describes when a company misses the earnings consensus. FSLY missed their GAAP EPS estimate by $0.07
Hi Gary,
I see that Fastly is down to $97 in the aftermarket. Wow, that’s almost back to where they were… let’s see… Friday! How terrible! 
I think that some people even hoped for more of a revenue beat. But everything seems good in the report as far as I can see. (I don’t think ANYONE cares about a Gaap earnings miss).
Best,
Saul
I have been observing the board’s obsession with Fastly, and to me it seems more of a story stock (edge computing) than a company with real long term potential on par with some of the other companies discussed on this board. Fastly is valued like it’s going to grow 100%+, but revenue is usage based, which means the recent boosts could be temporary. If Q2 revenue was up 100%, then I can see a case being made that more and more customers are adopting FSLY as a primary solution. But 60% with tailwinds doesn’t seem very impressive given how much other SAAS companies have grown. It’s weird to see respected members of this board call out LVGO and TDOC boosts as temporary due to COVID but then miss the parallel with FSLY.
At the end of the day FSLY is still an infrastructure play (commoditized), where companies will use multiple CDN providers (Akamai, Cloudflare), as opposed to say CRWD, DDOG, or ZM which provides a distinguished and best in market B2B service. That being said, I have been wrong so far since I’ve stay away in favor of CRWD and LVGO, while LVGO has matched or beat FSLY in performance depending on the entry point, CRWD is lagging a bit behind - in the end I still have much more confidence in long term potential of CRWD.
Fastly Sees Q3 Adj. EPS ~$(0.01) vs $(0.03) Estimate, Sales $73.5M-$75.5M vs $71.95M Est.
So, that’s 51% growth at the top end of the range (against the comparable $50M Q3 FY19 revenue).
Even a Q3 beat that is on-par with the beat just reported for Q2 would mean a sequential slowdown in growth.
Eric
The only fly in the ointment that I see is the big increase in SBC. The SBC this past quarter was $16.281M. I suppose part of that can be explained by the big increase in share price.
The fully diluted share count increased from 95.4M shares to 109.9M shares (in one quarter). I can’t recall if they did a secondary offering?
Chris
The stock really moved in after hours when he announced that TIC TOK was the largest customer and that account status is unknown for now.
TikTok being the biggest customer was a big driver of the move here - stock was up massively just the other day when MSFT acquiring TikTok broke.
Think that was very widely known already.
The fully diluted share count increased from 95.4M shares to 109.9M shares (in one quarter). I can’t recall if they did a secondary offering?
Chris
Yes Chris, they did a mount of SPO @41.5
FSLY did a secondary offering of 6M shares in May but this is only partially reflected in Q2 average shares outstanding due to the timing. The main driver of the diluted share count increase Q/Q is that they were positive non-gaap EPS this quarter which results in inclusion of dilutive securities in their calculation. For periods with a net loss companies do not include the effect of dilutive securities, in this case 10M dilutive shares.
I took some random notes while listening to the earnings call with some of my observations below, though some of these have been covered by others already…
FSLY Q2 Earnings Call:
As anticipated, FSLY just released fantastic results for the quarter today. On the top line, they announce $75m in Revenues, which represents 62% revenue growth q/q, an increase from around 38% growth prior to this quarter. Nice acceleration, but again, anticipated.
Additionally, they announced increased Gross margins to 61% from 55%, increased Net Customer Retention Rate to 138% (up from 130% which is simply incredible and I believe among the very best of any company we own), positive EBITDA, and $454m in cash with very still very little debt.
So what was NOT to like and why is FSLY trading down significantly in after-hours trading today? Well, they had already announced in the prior quarter’s release and guided to much higher revenues (they had guided to 56% growth last quarter already) due to the positive effects and “tailwinds” of Covid-19; In response, the stock price was already up +50% in the last 5 days (yep…you read that right, but read it again for good effect) and up +420% in the last 6 months. Naturally some traders are taking profits off the table and others just were not satisfied with the relatively small beat. I also have to admit I was expecting more like 70-80% revenue growth with the “tailwinds” they had claimed, and would not have been surprised by a bigger beat.
On the unknown side, they also shared that they have one very large customer who is getting hamstrung right now by the US government: A little company called TikToc (with whom I’m sure your teenager is very well acquainted) that makes up 12%+ of their revenues and who the current Presidential administration is threatening to ban in the US. Investors don’t like uncertainty.
In spite of the uncertainty around Covid and TikToc, FSLY raised their annual guidance again and appeared very confident in the bright future of the company, in the trends and in the tailwinds they are seeing. The only other possible negative I noted was a very large increase in total shares outstanding from 95m to 110m, or around a 16% increase, but we already knew that in May they had done a secondary public offering which partially explains it, and which also explains why their cash position is up so significantly (6.9m shares issued at $41.50/share).
Personally, I am still very happy with the company’s release and its hard to find a reason to sell my core position, though I struggle to add to it either. At 62% revenue growth, they are now catapulted ahead of all but the fastest growing companies (by revenue) that I own right now (ZM, DDOG, CRWD are all much higher of course…well…and then there used to be this company called Livongo…;). I won’t go there right now…grrrrr…
FSLY stock is trading down about 14% after-hours today, but my guess is that it will not be down that much tomorrow when the regular market re-opens. They set themselves such a high bar and the stock price was already up so much that a drop is not unexpected…though I (and many) would of course have loved to see it scream higher! One (1) company down…9 to go! Four (4) more of them tomorrow!!
While Hollywood is canceling all their premier movies in the theatre this summer, at least we still have our company blockbuster features!! Pick a company and listen to the call tomorrow…well worth it and can’t imagine owning one of these companies and NOT doing so!?? Cheers!
The only other possible negative I noted was a very large increase in total shares outstanding from 95m to 110m, or around a 16% increase, but we already knew that in May they had done a secondary public offering which partially explains it, and which also explains why their cash position is up so significantly (6.9m shares issued at $41.50/share).
Hi Poleeko,
The biggest reason for the increased share is because of an accounting rule:
When a company reports negative earnings they use basic shares, as using dilutive shares would make loss per share look smaller.
When a company reports positive earnings they use diluted shares, as using basic shares would make earnings per share look larger.
They hit positive earnings this quarter, so they used diluted shares which accounted for most of the increased shares. The rest was the secondary.
Best,
Saul