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Fastly (FSLY) Q3 Earnings Miss, Revenues Match Estimates
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Fastly (FSLY - Free Report) reported third-quarter 2020 non-GAAP loss of 4 cents per share that missed the Zacks Consensus Estimate by 300%. The company had reported loss of 9 cents per share in the year-ago quarter.
Revenues of $70.6 million matched the consensus mark and jumped 41.9% year over year.
Fastly stated that lower traffic from its largest customer - TikTok (10.8% of revenues for nine months ended Sep 30) - due to the U.S.-imposed ban negatively impacted growth. The company expects traffic reduction to continue in the fourth quarter of 2020.
Fastly’s third-quarter results also suffered from lowered traffic from a few existing customers.
Nevertheless, customer count increased to 2,047, up from 1,951 at the end of the previous quarter. Moreover, total-enterprise customer count increased from 304 in the second quarter to 313 in the reported quarter.
Average-enterprise customer spending was roughly $753K, up from $716K in the previous quarter. Markedly, enterprise customers generated 88% of Fastly’s trailing twelve-month total revenues.
Quarterly Details
Dollar-based net expansion rate was 147% in the quarter under review, up from 137% reported in the previous quarter. However, net retention rate was 122%, down from 138% reported in the previous quarter.
As of third-quarter 2020, Fastly was operating in 55 markets, providing access to 106 Tb/sec of global network capacity.
Gross margin in fiscal third quarter expanded 370 basis points (bps) year over year to 59.8%.
Adjusted EBITDA was $0.8 million against adjusted EBITDA loss of $4.9 million.
Research & development expenses as percentage of revenues decreased 270 bps year over year to 19.7%.
Sales & marketing expenses as percentage of revenues was 27.4%, down from 33.4% in the year-ago quarter.
General & administrative expenses as percentage of revenues expanded 40 bps to 18.6%.
Operating loss was $4.2 million compared with $8.9million reported in the year-ago quarter.
Balance Sheet and Cash Flow
Fastly had cash and cash equivalents of $472 as of Sep 30, compared with $384 million as of Jun 30.
Cash flow from operating activities was $27 million against $3.1 million of cash flow used in operating activities reported in the year-ago quarter.
Free cash flow was $13.4 million against free cash outflow of $8.9 million in the year-ago quarter.
Guidance
For the fourth quarter of 2020, revenues are expected to be $80-$84 million. Adjusted loss is projected between 8 cents and 12 cents per share.
The Zacks Consensus Estimate for fourth-quarter revenues stands at $83.1 million, indicating 41.1% growth from the figure reported in the year-ago quarter. The consensus mark for loss is pegged at 2 cents per share compared with loss of 10 cents reported in the year-ago quarter.
Fastly expects fiscal 2020 revenues of $288.2-$292.2 million (down from previous range of $290-$300 million). Non-GAAP operating loss is expected to be $19.1-$23.1 million (down from previous guidance of $2-$12 million).
Adjusted loss is estimated to be 17-21 cents (down from previous guidance of 1-6 cents per share).
The Zacks Consensus Estimate for 2020 revenues stands at $290.5 million, indicating 44.9% growth from the figure reported in the year-ago quarter. The consensus mark for loss is pegged at 6 cents per share compared with loss of 52 cents reported in 2019.
Fastly continues to expect annual capital expenditures as a percentage of revenues to be roughly 13-14% of revenues. In the long term, the company expects capital expenditures to approach 10% of revenues on a calendar-year basis.
CDW, Qorvo and Himax are scheduled to report their quarterly earnings on Nov 2, 4 and 12, respectively.
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Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Fastly (FSLY) Q3 Earnings Miss, Revenues Match Estimates
Fastly (FSLY - Free Report) reported third-quarter 2020 non-GAAP loss of 4 cents per share that missed the Zacks Consensus Estimate by 300%. The company had reported loss of 9 cents per share in the year-ago quarter.
Revenues of $70.6 million matched the consensus mark and jumped 41.9% year over year.
Fastly stated that lower traffic from its largest customer - TikTok (10.8% of revenues for nine months ended Sep 30) - due to the U.S.-imposed ban negatively impacted growth. The company expects traffic reduction to continue in the fourth quarter of 2020.
Fastly’s third-quarter results also suffered from lowered traffic from a few existing customers.
Nevertheless, customer count increased to 2,047, up from 1,951 at the end of the previous quarter. Moreover, total-enterprise customer count increased from 304 in the second quarter to 313 in the reported quarter.
Fastly, Inc. Price, Consensus and EPS Surprise
Fastly, Inc. price-consensus-eps-surprise-chart | Fastly, Inc. Quote
Average-enterprise customer spending was roughly $753K, up from $716K in the previous quarter. Markedly, enterprise customers generated 88% of Fastly’s trailing twelve-month total revenues.
Quarterly Details
Dollar-based net expansion rate was 147% in the quarter under review, up from 137% reported in the previous quarter. However, net retention rate was 122%, down from 138% reported in the previous quarter.
As of third-quarter 2020, Fastly was operating in 55 markets, providing access to 106 Tb/sec of global network capacity.
Gross margin in fiscal third quarter expanded 370 basis points (bps) year over year to 59.8%.
Adjusted EBITDA was $0.8 million against adjusted EBITDA loss of $4.9 million.
Research & development expenses as percentage of revenues decreased 270 bps year over year to 19.7%.
Sales & marketing expenses as percentage of revenues was 27.4%, down from 33.4% in the year-ago quarter.
General & administrative expenses as percentage of revenues expanded 40 bps to 18.6%.
Operating loss was $4.2 million compared with $8.9million reported in the year-ago quarter.
Balance Sheet and Cash Flow
Fastly had cash and cash equivalents of $472 as of Sep 30, compared with $384 million as of Jun 30.
Cash flow from operating activities was $27 million against $3.1 million of cash flow used in operating activities reported in the year-ago quarter.
Free cash flow was $13.4 million against free cash outflow of $8.9 million in the year-ago quarter.
Guidance
For the fourth quarter of 2020, revenues are expected to be $80-$84 million. Adjusted loss is projected between 8 cents and 12 cents per share.
The Zacks Consensus Estimate for fourth-quarter revenues stands at $83.1 million, indicating 41.1% growth from the figure reported in the year-ago quarter. The consensus mark for loss is pegged at 2 cents per share compared with loss of 10 cents reported in the year-ago quarter.
Fastly expects fiscal 2020 revenues of $288.2-$292.2 million (down from previous range of $290-$300 million). Non-GAAP operating loss is expected to be $19.1-$23.1 million (down from previous guidance of $2-$12 million).
Adjusted loss is estimated to be 17-21 cents (down from previous guidance of 1-6 cents per share).
The Zacks Consensus Estimate for 2020 revenues stands at $290.5 million, indicating 44.9% growth from the figure reported in the year-ago quarter. The consensus mark for loss is pegged at 6 cents per share compared with loss of 52 cents reported in 2019.
Fastly continues to expect annual capital expenditures as a percentage of revenues to be roughly 13-14% of revenues. In the long term, the company expects capital expenditures to approach 10% of revenues on a calendar-year basis.
Zacks Rank & Stocks to Consider
Fastly currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are CDW Corporation (CDW - Free Report) , Qorvo (QRVO - Free Report) and Himax Technologies (HIMX - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CDW, Qorvo and Himax are scheduled to report their quarterly earnings on Nov 2, 4 and 12, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>