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Fastly (FSLY) Q4 Earnings Beat Estimates, Revenues Rise Y/Y

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Fastly (FSLY - Free Report) reported fourth-quarter 2020 non-GAAP loss of 9 cents per share, which was narrower than the Zacks Consensus Estimate of loss by a penny. The company had reported a loss of 10 cents per share in the year-ago quarter.

Revenues of $82.6 million beat the consensus mark by 0.7% and jumped 40.2% year over year. This growth was driven by continued demand for Fastly’s edge platform by both new and existing customers across multiple verticals, such as gaming, financial services, ecommerce, and telecommunications/media.

Markedly, customer count increased to 2,084 from 2,047 at the end of the previous quarter. Moreover, total-enterprise customer count increased from 313 in the third quarter to 324 in the reported quarter.

Signal Sciences had a total of 280 customers, including 78 enterprise customers, of which approximately 25% overlap with Fastly enterprise customers.

Average-enterprise customer spending was roughly $782K, up from $753K in the previous quarter. Markedly, enterprise customers generated 89% of Fastly’s trailing twelve-month total revenues.

Fastly, Inc. Price, Consensus and EPS Surprise

Fastly, Inc. Price, Consensus and EPS Surprise

Fastly, Inc. price-consensus-eps-surprise-chart | Fastly, Inc. Quote

Quarterly Details

Dollar-based net expansion rate was 143% in the quarter under review, down from 147% reported in the previous quarter. Moreover, net retention rate was 115%, down from 122% reported in the previous quarter.

In fourth-quarter 2020, Fastly entered one new market in France and now has a presence in 56 markets, providing access to 117 Tb/sec. of global network capacity.

Gross margin in the reported quarter expanded 610 basis points (bps) year over year to 63.7%.

Adjusted EBITDA loss was $3.4 million compared with adjusted EBITDA loss of $4.6 million.

Non-GAAP research & development expenses as a percentage of revenues expanded 190 bps year over year to 22.5%. The increase was primarily driven by personnel-related costs from additional headcount, including the Signal Sciences acquisition, and other personnel-related investments in order to further develop new products and features for next-generation edge computing solutions.

General & administrative expenses as a percentage of revenues expanded 40 bps to 19.5%.

Meanwhile, sales & marketing expenses as a percentage of revenues contracted 140 bps to 32.5% in the year-ago quarter.

Operating loss was $8.9 million, down from $9.4 million reported in the year-ago quarter.

Balance Sheet and Cash Flow

Fastly had cash and cash equivalents (including marketable securities and restricted cash) of $194.2 million as of Dec 31, compared with $472.3 million as of Sep 30.

Cash flow used in operating activities was $31.1 million compared with $3.1 million in the year-ago quarter.

Free cash outflow was $39.9 million compared with free cash outflow of $8.9 million in the year-ago quarter.

Guidance

For the first quarter of 2021, revenues are expected to be in the range of $83-$86 million. Adjusted loss is projected between 9 cents and 13 cents per share.

Fastly expects full-year 2021 revenues in the range of $375-$385 million. Non-GAAP operating loss is expected to be in the range of $40-$50 million.

Adjusted loss is estimated to be in the 35-44 cents per share range.

Fastly expects annual capital expenditures as a percentage of revenues to be roughly 13-14% of revenues — similar to full-year 2020. 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 #5 (Strong Sell).

Zoom Video Communications, Inc. (ZM - Free Report) , CrowdStrike (CRWD - Free Report) and Workday (WDAY - Free Report) are some better-ranked stocks in the broader computer and technology sector. While Zoom Video sports a Zanks Rank #1 (Strong Buy), CrowdStrike and Workday carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Workday, Zoom Video and CrowdStrike are scheduled to release earnings on Feb 25, Mar 1 and Mar 16, respectively.

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