Good afternoon. My name is Lisa, and I will be your conference operator today. At this time, I would like to Welcome everyone to the Fastly first quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to Mr. Vern Essi, Investor Relations at Fastly. Please go ahead, sir. Thank you, and welcome everyone to our first quarter 2022 earnings conference call. We have Fastly CEO, Joshua Bixby, and CFO, Ron Kisling, with us today. The webcast of this call can be accessed through our website, fastly.com, and will be archived for one year. Also, a replay will be available by dialing 800-770-2030 and referencing conference ID number 754-3239 shortly after the conclusion of today's call. A copy of today's earnings press release, related financial tables and investor supplements, all of which are furnished in our 8-K filing today, can be found in the investor relations portion of Fastly's website. During this call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth, and overall future prospects. These statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected or implied during the call. For further information regarding risk factors for our business, please refer to our most recent quarterly report 10-Q filed with the SEC and our first quarter 2022 earnings release and supplement for a discussion of the factors that could cause our results to differ. Please refer in particular to the sections entitled Risk Factors. We encourage you to read these documents. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We undertake no obligation to update any forward-looking statements except as required by law. Also, during this call, we will discuss certain non-GAAP financial measures. Unless otherwise noted, all numbers we discuss today other than revenue will be on an adjusted non-GAAP basis. Reconciliations to the most directly comparable GAAP financial measures are provided in the earnings release and supplement on our investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Before we begin our prepared comments, please note that we will be hosting our Investor Day next week at New York Stock Exchange on Thursday, May 12. We'll also be attending three conferences in the second quarter, the virtual Craig-Hallum and Institutional Investor Conference on June 1, the Bank of America 2022 Global Technology Conference in San Francisco on June 7, and the William Blair Growth Stock Conference in Chicago on June 8. We will be releasing further details regarding these events in the coming weeks. With that, I'll turn the call over to Joshua. Joshua? Thank you, Vern. Hi, everyone, and thanks for joining us today. Before we jump into the quarter, I want to address another announcement we made this afternoon. As you may have seen, I will be stepping down from my role as CEO and from the board after a successor is appointed. The board has begun a search for my successor, and I will do whatever I can to ensure a smooth transition. I'm extremely proud of everything that we have accomplished, including enabling the best of the web, taking Fastly public, executing our acquisition of Signal Sciences, and positioning ourselves for long-term success. It has been an incredible journey, but I know that there is much more to come and much more to be achieved in the next phase of the business. As I reflect on this time and where we are in Fastly's history, as well as my own journey and desires, and through my discussions with my fellow board members about where we want to take Fastly in the future, it became clear that now is the natural time for me to step back and let someone else take the reins. Someone that can lead the company through the next phase of the business. Fastly has a large enterprise customer base, a world-class experienced leadership team, and a robust product roadmap. We are differentiated by a delivery business that is one of the fastest in the world, an award-winning security business, and an edge cloud platform with unrivaled flexibility and programmability. It sounds simple to say, but in reality, Fastly is where it is because of our differentiated programmable, agile, secure, and fast, empowering our developers to innovate with ease and scalability. This in turn translates to performance, a critical indicator for our customers. As the board searches for Fastly's next leader, a process that, as I mentioned, has begun, we are committed to finding a candidate that can help build upon this solid foundation. As you may have seen from the press release we issued this afternoon, I will remain in my role until my successor has been brought in to ensure a smooth transition. Positioning Fastly for long-term success is my number one goal throughout this process. With that, I will move on to talk about the quarter, and then we'll invite Ron to provide some more color on this quarter's results. We will take some questions, which, due to the limited time we have, we ask that you focus on the results and the outlook. In the first quarter of 2022, we reported record revenue of $102.3 million, representing a 5% quarter-over-quarter organic growth. Not only did this exceed the top end of our guidance range of $97 million-$100 million, but was also our first quarter revenue in excess of $100 million. I'd like to congratulate the Fastly team on this exciting milestone. Our customer retention and growth engine remains strong. Our LTM NRR was 115%, and our DBNER was 118% in the first quarter. Our average enterprise customer spend was $722,000, representing a 3% quarter-over-quarter increase. Our total customer count in the first quarter was 2,800, of which 457 were enterprise customers. We made good progress on our total customer count, adding 76 customers in Q1, up from 56 customers in Q4. One of the key initiatives we have undertaken in 2022 is the deployment of our new architecture for key metro regions. As previously discussed, this will greatly increase our storage capabilities by merging entire regions into one storage unit, thus cutting duplication. This does require the duplication of new sites with new architecture over the year. One of the areas where we can gain gross margin leverage is doubling down our efforts on server efficiency with this new architecture. We have always prided ourselves on how closely we have tied hardware and software together, and we believe it is a key differentiator for us. Artur Bergman, our founder and chief architect, will speak more to our plans at our Investor Day scheduled next week. It is important to note that the pandemic has altered the landscape for hardware procurement and the availability of the types of data centers we rely on. It is not uncommon to have lead times in excess of 80 weeks for key components, to have orders cut or canceled, and to have long wait times to get into the most connected data centers in the world. We made the decision to get ahead of these constraints by pre-buying and deploying capacity in key markets. This has left us with some underutilized capacity in some markets, and as we have discussed previously, this has had a drag on gross margin. With no end in sight to constraints on the hardware and data center side, we feel we are prudent to take these steps, and we're trying to minimize the short-term impacts they are having by redeploying assets where possible. The team at Fastly remains united in our common mission, which is to fuel the next modern digital experience by providing developers with a programmable, secure, and reliable edge cloud network that they adopt as their own. Central to this common mission is the key role developers play in our journey and the new and expanding power of distributed edge compute and security. As they use our trusted platform, they become more interested in its features, and that keeps them engaged and retained as customers as they scale. To reinforce this effort, we've acquired Fanout, announced in late Q1, a platform that creates a frictionless environment to build and scale real-time and streaming APIs. We will be integrating the Fanout technology into our computed edge platform and launching a beta soon. Computed edge allows us to acquire technology and rapidly release it. Our delivery products, which are part of our network services portfolio, also received strong analyst validation. Fastly was recognized as a leader in the first quarter by IDC MarketScape for the worldwide content delivery network services. We earned recognition due to our network size and scale, our comprehensive product portfolio, excellent customer service, and our modern network offerings. Reinforcing these efforts in the first quarter, we announced our new computed edge partner ecosystem designed to help customers build a variety of edge computing use cases. Partnerships include marquee integrations with the top three cloud providers. Margaret Arakawa, our Chief Marketing Officer, will be sharing more details at our Investor Day. We are accelerating Fastly's product delivery. In the first quarter, we had 11 releases in total compared to three in the fourth quarter of 2021. We launched our new global persistent Object Storage for compute functions with fast reads and writes from both the edge or via API. Developers can store, control, and cache data to reduce origin dependency and unlock new use cases. Also in the quarter, we deployed HTTP/3 and QUIC, which are now available to our customer base. QUIC, the technology behind HTTP/3, is a new low latency reducing, reliable, and secure internet transport protocol. It offers modern web performance with low latency, built-in encryption, and seamless developer platform integration. We also launched the Observability Dashboard, which will bring delivery, security, and application metrics into one interactive window. The dashboard provides per second visibility and historical reporting on the performance and activity of our customer services and applications in a single customizable dashboard. Each of these releases also represents another touch point with our developer base and another opportunity for revenue growth. Lakshmi Sharma, our Chief Product and Strategy Officer, will be providing you more details on our product roadmap next week at our Investor Day. All of these new features would never reach our enterprise developers without our network services business fueled by our lightning-fast delivery network. Since the beginning of the year, our worldwide network remains consistently faster in the U.S. and Europe than our largest competitor in most countries and regions as measured by independent real user data. Our significant advantage in performance validates our unique architecture. Performance paired with security is one of the most critical decision-making metrics for our customers. That is why you will see us winning business with highly regulated customers like a digital lending platform for Fortune 100 financial institutions. They needed configurability at a per endpoint basis for highly regulated multi-tenant customers who demand speed while maintaining stringent security requirements. The size of our network matters as it opens up opportunities to us that are closed to others. In the first quarter, we signed a Fortune 1000 multinational mass media and entertainment conglomerate by working closely with our partners at Google Cloud. They ultimately chose Fastly for our token authentication while further improving their performance across Latin America. The first quarter also brought strong analyst validation for our security product portfolio. For the fourth consecutive year, Fastly was recognized as the only vendor named by Gartner's Peer Insights Customers' Choice for web application and API protection. Fastly's Next-Gen WAF received an overall exceptional rating for web application firewall solutions among customers that have purchased, implemented, and used a WAF. Last quarter, we deployed the industry's first and only unified WAF built on the Compute@Edge platform. This quarter, we are thrilled to continue our momentum in security. We announced the support for Arm-based environments at scale. We are the first and only WAF that enables customers to quickly secure their apps and APIs using any combination of Arm and other processors. This is a major step forward in securing multi-cloud environments. We have also introduced GraphQL inspection. With API attacks becoming the most frequent attack vectors, we wanted to provide a customized and out-of-the-box GraphQL inspection that will detect, inspect, and block attacks that can target GraphQL APIs. Developers can now customize this tool or choose a simple out-of-the-box option with no additional configuration on their part. Our security business continues to shine. A publicly traded identity and access management application with a global presence adopted our Next-Gen WAF for its ability to offer isolated environments. They wanted to provide customized security for both their platform and their customers. The team is excited about the opportunity that lies ahead of us in 2022. We look forward to sharing with you further updates on our success at our investor day. To discuss the financial details of the quarter and guidance, I will now turn the call over to Ron. Ron? Thank you, Joshua, and thanks everyone for joining us. Today, I'll discuss our financial results and business metrics and then review our forward guidance. Note that unless otherwise stated, all financial results in my discussion are non-GAAP based. Total revenue for the first quarter increased 21% year-over-year to $102.4 million, exceeding the top end of our guidance of $97 million-$100 million. In the first quarter, revenue from Signal Sciences product was 12% of revenue, a 59% year-over-year increase, or a 39% increase after purchase price adjustments related to deferred revenue are reflected. Our dollar-based net expansion rate for DBNER was 118%, down slightly from 121% in Q4 2021, and our trailing twelve-month net retention rate was 115%, down slightly from 118% in the prior quarter. The majority of this decline was driven by last year's outage related to impacts from a single customer, which we have previously discussed. As you can see, from a very low churn of less than 1%, our customer retention dynamics remain strong. As of March 31, 2022, we had 2,880 customers, of which 457 were classified as enterprise. Those customers with an excess of $100,000 of revenue over the previous 12 months. Our total customer count grew 17% over the year-ago quarter, and in the first quarter, we added 76 net new customers and 12 net new enterprise customers, compared to 56 and 15 new customers, respectively, in the prior quarter. Accelerating our customer acquisition is one of our key goals as the sales team continues to ramp and we increase our marketing activities around lead generation and brand awareness. Brett Shirk, our Chief Revenue Officer, and Margaret Arakawa, our Chief Marketing Officer, will share more of our plans at our Investor Day. Enterprise customers accounted for 89% of total revenue on a trailing twelve-month basis, in line with their contribution in Q4, and increased their average spend to $722,000 from $704,000 in the previous quarter, representing sequential growth of 3%. This also demonstrated our strong customer retention. Our top ten customers comprised 33% of our total revenues in the first quarter of 2022, in line with the contribution in Q4 2021. Turning now to gross margin. Our gross margin was 52.6% in the first quarter, compared to 55.8% in the fourth quarter of 2021. As we discussed on our Q4 earnings call, we anticipated our gross margin would decline a couple hundred basis points for the full year 2022 due to the rollout of our next-generation architecture, the continued investment in our network to support growth, and accelerated investments to proactively address supply chain constraints n ew sites. We will continue to incur costs on the existing sites until the transition is complete. In the first quarter, we transitioned several sites and will transition more sites in the second quarter. We expect the older duplicate sites to be fully decommissioned by the end of the year. As Joshua described, we de-risked our network expansion plans by accelerating the purchase and deployment of equipment. Given the volatile dynamics occurring in the semiconductor industry and the supply chain at large, we believe this was a prudent decision. We continue to invest in infrastructure and capacity and expand into new markets to support growth and new customers. In some locations, this has resulted in underutilized capacity. In the quarter, we did not see any acceleration in price compression, and we continue to expect the mix of our product offering in security and compute to be a strong gross margin tailwind in 2023 and beyond. We are very focused on gross margins and the opportunities to drive leverage in our network. We look forward to providing more details on these dynamics and the changes we are making to improve the efficiency of our network investments during our Investor Day. Lastly, looking at full year 2022, we still expect gross margins to be down a couple hundred basis points, with Q2 gross margins relatively flat with those in the first quarter and to improve by year-end. Our operating loss and net loss per basic and diluted share for the first quarter of 2022 were in line with our guidance. Operating expenses were $71.6 million in the first quarter, up 12% over Q1 2021 due to increased headcount across the organization. While attracting talent has been difficult, we are pleased with our success in attracting high quality talent. With new leadership in place, we expect expense growth in 2022 will be higher in the first half, and growth in operating expenses will be lower in the second half of the year. Our operating loss for the quarter was $17.7 million, and our net loss was $18 million, or a $0.15 loss for basic and diluted share, compared to $11.7 million and a $0.10 loss for basic and diluted share in Q4 2021. Turning to the balance sheet. We ended the quarter with $1 billion in cash equivalents, marketable securities, investments, including those classified as long-term. Our cash capital expenditures were 6% of revenue in the first quarter. Our capital expenditures include capitalized software. This, along with our foundational technology, drives efficiency and leverage in our network, which is a competitive differentiator. Despite our transition to our next generation network architecture and acceleration of some investments due to supply chain constraints, we expect our capital expenditures in 2022 to remain at 12%-14% of revenue. I will now turn to discuss our outlook for the second quarter and the full year 2022. I'd like to remind everyone again that the following statements are based on current expectations as of today and include forward-looking statements. Actual results may differ materially. We undertake no obligation to update these forward-looking statements in the future, except as required by law. Our second quarter and full year 2022 outlook reflects our continued ability to deliver strong top line growth via improved customer acquisition and expansion within our enterprise customers, driven in part by new and enhanced products. Our revenue guidance is based on the visibility that we have today, and given our usage-based business model, we expect to gain additional visibility to our annual guidance as the year progresses. Historically, our first and second quarter revenues are generally flat, with revenues increasing in the second half of the year. As a result, for the second quarter, we expect revenue in the range of $99 million-$102 million, representing 18% annual growth at the midpoint. We expect a non-GAAP operating loss of $21.5 million-$18.5 million, and a non-GAAP loss per share of 18-15 cents per share. For the full year 2022, we are increasing our prior guidance by $5 million to a range of $405 million-$415 million. We expect a non-GAAP operating loss of $70 million-$60 million and a non-GAAP net loss of 60-50 cents per share, unchanged from our prior guidance. Before we open the line for questions, we would like to thank you for your interest and your support in Fastly and look forward to seeing you at our Investor Day. Operator? Once again, everyone, it is star one, if you would like to ask a question today. We will take our first question from Frank Louthan, Raymond James. Great. Thank you. Maybe just walk us through a couple of the puts and takes in the gross margins and how we should expect that to progress to only be down 200 basis points for the year. Secondly, you had a competitor stated recently that the rate of growth and traffic growth has slowed that they're seeing. Are you seeing anything like that? What are sort of the traffic trends that you're seeing? Thanks. Hey, Frank Louthan, it's Joshua Bixby here. Let me take the traffic question. I'll hand it over to Ron Kisling for the gross margin side. You know, I think, like we are seeing across the prints that are happening on the Street, we are definitely seeing a change in growth rates. For some industries, it's going up, for some, it's going down. I think that, you know, thankfully for us, we're exposed to both sides of it. In general, the industries that we're hearing our competitors talk about slowing down are industries we don't have a lot of exposure to. You know, on the streaming side, as you know, we've talked about this many times, we don't take the commodity streaming business. In the areas of streaming that we do work in, those are the high growth areas, the high value areas, and we don't have a lot of exposure. You're rarely gonna see us as sort of the number one or number two provider. There are some exceptions, but in general, we have a tremendous amount of room to grow in that because we've been picky, we've been selective about who we work with, and we don't work across the board. You know, in general, I wouldn't see Fastly as a good proxy for some of the overall trends in the industry because of how selective we've been in some of those industries. Unquestionably, in industries, for example, like travel, we're absolutely seeing an uptick. I would say we are seeing both sides of the coin, but we have much less exposure, I think, to the generally commoditized side of the business, which is what a lot of the other vendors are speaking to. Ron, why don't you take the gross margin question? Yeah. I think let me start with kinda how we see the year, and then I'll talk about the dynamics driving it. I think you know as we said you know we expect you know for the full year still to be on 200 basis points. That plays out over the course of the year, with Q2 being relatively flat with those in the first quarter. Then we see improvement in gross margins in the second half toward the end of the year. The biggest driver to the change in dynamics really is that rollout of the next generation architecture. You know as we talked about in the past, as part of this rollout, we continue to incur costs on the existing sites. In the first quarter, we transitioned several sites. We'll transition a few more in the second quarter, and then as you get into the second half, we expect the older duplicate sites to be fully decommissioned by the end of the year. That's gonna drive some reduction in our cost of revenues in that second half. The other driver, if you just look at historically kind of how our revenue plays out, we typically see an acceleration in revenue in the second half that drives an increase in utilization. We typically see an increase in network utilization, and that also drives an improvement in gross margins. Those are the two biggest drivers. I think the other drivers that we've seen is we haven't seen, you know, as Joshua said, any acceleration in price compression. You know, our mix product didn't really change, you know, materially from quarter to quarter. Then we continue to see strength in our security product, which, you know, is a positive or a tailwind to our gross margins. Thanks, Frank. Great. Thank you very much. Next, we'll take a question from Sanjit Singh, Morgan Stanley. Thank you for taking the questions. I wanted to revisit the gross margin topic once more if I could. I just in some sense I'm trying to understand maybe just the magnitude of the sequential decline in the sense that if I look at sort of the second derivative growth on the network capacity, it seems like that's slowing or starting to improve on the network capacity side. On the expansion rate side, in the quarter, net revenue retention improved decently versus the prior quarter. Your sequential revenue growth improved versus last year. Your year-over-year growth improved versus last quarter. It would seem to me that, like, there'd be more sort of utilization or more absorption of some of the sort of scale capacity. I'm just trying to understand, like, the magnitude on the gross margins of this quarter versus prior. Yeah. Sure. Let me take the first section. I'll hand that off to Ron. I think in general, you're, you know, as you're pointing out, the growth in the customer base is good. The growth in the network expansion is good. We're also growing the network. Ron can kind of speak to those two things racing ahead. As I talked about in my comments, you know, the general sense that we have in the industry is that we're in a lucky position to have the excess that we have. We think that's gonna come into good, really good use in the latter half of the year. I think you're just sort of seeing two things race ahead, and one's racing ahead a little bit higher or faster than the other. You know, if we saw a difference in the pricing environment or a difference in the mix, that would be different, but that's really the main driver. Ron, why don't you expand on that? Yeah. The only thing I would expand on that, you know, thanks Joshua, is, you know, in addition to, you know, what we saw around the new architecture is, you know, we did accelerate, you know, some of the purchase and some deployment of equipment, given kind of the volatile dynamics we saw, you know, in the supply chain at large. Some of that, you know, deployment that we did actually increased capacity ahead of the demand. We did see in some locations some underutilized capacity, as a result of accelerating some of the deployment, in response to the supply chain. That's probably the additional factor on top of the other drivers that we spoke about earlier. Understood. On the comment on pricing, on sort of being in line with historical trends or no sort of incremental pricing headwind. If I were to think about quantifying that pricing impact, in some sense you have the customer base expanding sort of 15%. The customer base overall is growing 70%, sort of implies kind of low 30% growth. You're posting about 21% growth, which implies kind of a high single digit, low double digit sort of pricing headwind. Is that sort of the right way to think about what you're seeing on the pricing side? Yeah. I mean, from a pricing dynamic perspective, we're in a number of different markets, and I think it's important to sort of carve those out. When you look at the security enterprise compute side of our business, I mean, that's not a price compressing market in a meaningful way. I think, you know, where price compression has traditionally sat is on the streaming side for the most part. You know, in that market, it's interesting. Things are changing. You know, the large companies that we work with are also buying hardware there. They buy data centers. They understand the inflationary costs inherent in all of those components and the environment in their own. I was in a recent conversation with a large customer who said, "You know, normally we would come back and ask for, you know, a little bit of discount for some more, if we brought you more capacity this year, but we understand the pressures you're under. We understand that, and we think we're gonna hold off till next year." You know, I would say in general the math is in line. Overall, we're actually seeing with the kinds of partners we work with, and I think that's important because the kinds of partners we work with are the ones whose, you know, revenues are also going up, whose viewership is going up, who has high value content, the organizations who, you know, really care about quality. These are very strong partnerships, and they wanna see us be successful. I mean, they really value what we do. I think the dynamics are similar to what you've described. Overall, I'm seeing the environment change even in the last few weeks, where people are really understanding the pressure that everyone's under trying to get these components out into the field and the inflationary costs around them. As I said, I think we've been very prudent in getting ahead of this. I think, you know, a lot of the calls that you're on and others are on are hearing about, you know, chip shortages. We're not saying that at all. I would say we're sort of in the opposite category, but we're confident we'll get utilization. Super helpful, Joshua, and best of luck on your next endeavor. Thank you very much. Next up, we'll take a question from James Fish, Piper Sandler. Hey, guys. Thanks for the questions here. Wanted to inquire about the non-top ten enterprise customers. You know, really good strength with top ten, but it looks like the non-top ten only grew, like, 3% year-on-year. I get it was a tough compare, but what's going on with that lower-end kind of customer base that aren't growing as fast? You know, underneath your guide, Ron, it looks like it implies a relatively flat net retention rate compared to what we saw in Q1, despite easier compares coming. You know, just being conservative and prudent given some of the macro stuff going on, or how should we think about, you know, net retention for the rest of the year? Sure. Ron, why don't you take the top 10 and the guide question? Okay. Yeah. I think you know, as you point out, you know, on the overall customers, you know, we saw about a 3.4%, 3% increase in customer count. We did see an increase over the previous quarter was relatively low. I think when we look at overall customer acquisition, I think accelerating that overall number you know both across enterprise and sort of that below enterprise category is a key priority. There's a number of things that we're doing around increasing market activities and lead gen and brand awareness. At the Investor Day, Brett Shirk, our Chief Revenue Officer, and Margaret will share a little bit of the specific plans we're doing around customer acquisition to accelerate that as we move into the second half. I think on the second point with regard to guidance, I think what if you look at either LTM NRR or DBNER, you know, those are 12-month metrics, and it continues to reflect, you know, some impact from the outage we saw on June 21. We'll continue to see, you know, some impact of that reduced traffic until that outage impact is no longer within the metric. I think for a number of those customers, most of them came back within a week or two. We have talked about one large customer who, you know, took a couple quarters to really come back to kind of their pre-outage levels, and we've seen good increase in that. That'll continue to be somewhat of a drag on these LTM metrics until that outage impact drops out of the calculation. Okay. Have you know, we've seen the hyperscalers trying to promote their own CDN services more recently to get, you know, real workloads into their own public cloud. Now, you know, Akamai acquired Linode for public cloud capabilities. I guess, how are you guys thinking about the need to have your own cloud environment to be that host as well as delivery mechanism versus just partnering with the hyperscalers like you did with that, you know, Fortune 1000 media conglomerate? Thanks, guys. Yeah. Thanks, James. I mean, we continue to see the world through the same lens as we've seen it for a long time, which is we think the hyperscalers and the edge cloud coexist together. Our customers are multi-cloud. They want to be multi-cloud, and one of the things that they're asking us is to allow them to load balance between clouds, have one security perimeter approach to all of the clouds. In so doing, what we have seen is a lot of cooperation. We are absolutely seeing that for certain types of workloads, the hyperscalers are looking at putting some edge caching capabilities, and we think that's great. Our customers are looking for other things from us, from security to compute as well as caching. Right now, it's this multi-cloud personalized edge world that is really driving the decision-making. We see it as cooperative, unlike some of the other competitors who I think are seeing you know, themselves as competitors to the hyperscalers. We don't see that, and we think so far that has played well. We have very cooperative relationships and great partnerships in that regard. Thanks, guys. Thanks, James. Next up, we'll have a question from Jim Breen, William Blair. That's a good question. Can you just talk a little bit about the capital spending you need to get you where you wanna go in terms of top line growth? You know, it was fairly low this quarter from a CapEx perspective. Capitalized software was up a little bit. How should we think about that going forward and as a percentage of revenue? Thanks. Ron, why don't you take that one? Yeah. Our, you know, as you pointed out, our cash CapEx in the quarter was a little bit on the low side. I think broadly for the year, we expect to be, you know, in line kind of our historical guidance of somewhere between 12% and 14%. I think despite, you know, the transition to the architecture and some of the acceleration investment, we'll still be within that historical 12%-14% of revenue for CapEx for the year. That would imply some increase over what we saw in Q1 in terms of CapEx investment. Great. Thanks. Thanks, Jim. Once again, everyone, it is star one if you have a question. Up next is Will Power, Baird. Hey guys, this is Charlie Erlikh on for Will. Thanks for taking the question. Just first I wanted to ask about the Fanout acquisition and maybe just get a little bit more detail on what that gives you and, you know, the path forward on that. Sure. This is an exciting one for us. Our customers have been asking for this for a long time. It's something that you know is. It requires for our customers a lot of work you know unlocking this real-time app development and all of what is built into this. Think about a live chat support or gaming examples of this. This is what our customers do all the time, and in most cases, they've got to do it themselves. With the acquisition, it really positions us to support these use cases. They can migrate away from really complex existing in-house WebSocket stacks and they don't have to engineer it themselves. This has been a long time coming, on the top of the priority list, and something that we thought, you know, when we saw what Fanout was doing and how they were being viewed in the market, it just was a natural acquisition for us and very exciting. Great. If I can just squeeze one more in. Are you guys thinking about profitability timing in the future, balancing, you know, a lot of, growth initiatives you want to invest in, but also keep an eye on profitability, of course? How should we think about just the timing around that? Sure. I mean, we're certainly going to talk more about that at our Investor Day, but Ron, I don't know what you want to share before that. Ron, you there? Sorry about that. Yeah, I think we're, you know, certainly starting to spend more time thinking about it, and I think, you know, there is an opportunity to drive growth. We've talked about growth and increased investment business to grow both security and edge computing platform. Those, you know, are accretive to gross margin, and we believe that drives long-term margin, as we see that growth play out and the accretion we see in gross margins. In terms of the long-term model and getting to profitability, we plan to share kind of our view on what that long-term model looks like at our Investor Day. Yeah. Charlie, what I can tell you is it's a high priority for us. We believe that there's a tremendous amount of leverage, as we talked about just briefly on the gross margin side in the call, and in the script, and we believe that across the business. It's a priority, and it's something that you'll hear a lot more from us about at Investor Day. Great. Thanks, guys. Our next question is from Philip Rigby, RBC Capital Markets. Hey, thanks for taking the question. Just one for me following up on the idea of traffic growth and streaming. Can you just remind us sort of what those higher quality streaming businesses you're in that you have a higher mix to? Like, is that all just capacity and increases? Is there potential to sort of go into the lower quality, more commoditized streaming business to kind of maintain utilization? You talked before about how important video is to kind of max out utilization over time. Yeah. Any color there would be really helpful. Sure. Thanks, Phil. It's a great question. I think it's a misunderstood part of our story, which is how important video is, we feel, to the long-term success of our business. You know, I think to answer the second part of the question, we have no intention of going into the commoditized side of this market in any meaningful way. You know, we are interested just to sort of segue off the last comment in building a profitable business and, you know, it's extremely difficult. It's not impossible, I think, to build a profitable business off the lowest end of this market. So that won't be interesting to us. I think coming to the first part of the question, you know, for us, it's always been who cares about quality, who is able to monetize their content? Traditionally, that sort of started as you recall with live events, right? If you're a live event, you're streaming important, you know, Tiger Woods is walking down the eighteenth green in the Masters or the Super Bowl is on, those events are so high-profile, the advertising revenue is significant in those. You care deeply about quality. What we saw transition over, you know, the last three years is that video on demand has actually had similar characteristics. When Game of Thrones is on and launches all at the same day or some other, you know, show of that magnitude and that gets that much attention, when something isn't high-quality, it actually has the same reaction within the consumer environment as it would if it was live. Twitter blows up, everyone starts talking about it, people get egg on their face. Those huge shows, the ones that really matter, be it a Netflix show or a Disney show or whatever the case may be, are the drivers for new signups. We've seen that. The dynamics have really shifted where we have those whose quality deeply matters, who can monetize those users, and those who don't. You're not gonna see a shift away from those who don't, but as I say, our exposure to those who do remains very limited, and therefore, there's a lot of upside, a lot more traffic that we can get in the high value area of this. Why this is so important is because video is critical. Our goal has always been, and I talked about it earlier, efficiency. When we are deeply efficient, we're using all parts of our network, all parts of our servers, and also it allows us to change the dynamics on the bandwidth side to the eyeball users when we serve the content that they need. When I think about the future, you know, content being served, you know, in different ways, it's gonna matter who has the majority of the content 'cause those are gonna be the suppliers that are invited into satellites. Those are gonna be the suppliers that are invited into cruise ships. Those are gonna be the suppliers that are at these critical junctions where content is being consumed. We see it as critical. We think it's strategic to our story, but no plans right now, and I don't think ever, to go into the commodities part of this business. Got it. Thanks so much. Thanks, Philip. Our next question is from D.A. Davidson's Rudy Kessinger. Hi, guys. This is Nima on for Rudy. I just had a question on an update. You guys said last quarter that you had 40 sign-ups for the free credit program on Compute@Edge. I was just wondering where you guys are at on this quarter and how many you guys have converted to paying customers at this point. Hey, Nima. It's Joshua here. You know, one of the things that we're gonna be sharing is a comprehensive view of this at Investor Day. I can tell you that we've had growth, we've had conversion, but we're gonna share that in sort of when we have a little bit more time to walk through the nuances of that. I have been very happy with those programs, including how many enterprise developers are on the platform. So, a little wait and see on that 'cause I'd like to give you all the context all at the same time. I, we've seen progress and it's Compute@Edge remains, I think, the most exciting, you know, if not one of the most exciting opportunities that we have here for really significant growth. Got it. That's it for me. Thanks, guys. Thanks, Nima. Now we'll hear from Fatima Boolani, Citi. Good afternoon. Thanks for taking my questions. Josh, it was nice working with you, and best of luck on your next ventures. The question is just around your security momentum. I know you sort of spoke to it at a high level, but I'm curious about how that business is trending, if you can sort of quantify for us some of the year-over-year and quarter-on-quarter momentum within that, you know, specific side of the house in your portfolio. As an extension, Josh, you had talked about security and compute being pricing accretive, right? You have a lot more pricing power. These are very important challenges you're helping solve customers. I'm curious if you can help reconcile that with the average enterprise customer spend only up 3%. Hoping you can sort of bridge some of that gap for me, vis-a-vis the pricing power on the security side and, maybe a lighter, wallet share growth on some of your larger enterprise customers. Thank you. Sure. Let me take a couple of those. I'm gonna hand a few of those off to Ron. I think in general, if we zoom way out, you know, we have discussed the contribution of sort of the legacy SigSci product line. We have not yet sort of collected together and published what our entire security portfolio is 'cause it extends well beyond that. You know, before we bought Signal Sciences Fastly, we had a WAF, we have a DDoS business, we have a TLS business, we have an emerging bot business. You know, Ron will speak to that and already did on the SigSci side business, but that's not the entirety. I think in general, I'd give you color on the entirety of that portfolio, which as I think continues to drive tremendous growth. As we have talked about in the past, we do have, you know, a great margin profile on that business as well as the compute business. Ron, why don't you sort of give some of the stats on it? Yeah. I think coming back to the wallet share and growth question, you can also address that, if you could. Yeah. Just to give you a couple stats. In Q4, Signal Sciences revenue was 11.9% up from 10.9%, reflecting about a 15% growth rate. As I mentioned on the call, on a year-over-year basis, Signal Sciences revenues increased about 59%. If you take into account the purchase price adjustments, it was about a 38% growth on a year-over-year basis. We're seeing really strong growth there. As Joshua points out, the Signal Sciences is only a portion of our security business, does not include some of the Fastly products, which is DDoS, TLS. I think over time, as we add more security products and launch more products, you know, we expect to see more growth in security in the overall portfolio. I think this goes back to, you know, if you go back earlier, we talked about, you know, substantial growth in terms of our long-term goals of, you know, sort of 10x growth on security. We see it as an important part. Every sort of conversation around delivery includes security. As we build that portfolio out, you know, we see opportunities to grow that. I think in terms of margin opportunity, you know, the gross margins on the security business are substantially higher than on the delivery side. You know, they don't use less bandwidth. Secondly, you know, predominantly most of the Signal Sciences products today are sold on sort of a SaaS basis. They're also a little bit less volatile. They're not, you know, traffic or volume-based sales. That's the other sort of differentiation in terms of the security business versus, you know, the delivery side of that product. Fair enough. If I may ask you a follow-up on the delivery side of the house. You know, I think you sort of characterized the quality of the traffic on the network as not being commodity, right? I'm hoping if we can take a step back, if you can help us appreciate the composition of the state in terms of your traffic and traffic volumes on the network, whether that's across very premium high-end video streaming, VOD, gaming, software downloads, social media, anything to help us sort of think about that pie of traffic on your platform, to give us a maybe more crisper understanding of, you know, why it isn't necessarily the commoditized trends that some of your peers maybe are seeing. Sure. I mean, I think, you know, we've spoken in the past about that being an equal balance between, you know, video and non-video, and it changes. It remains about the same. As Ron said, nothing changed quarter to quarter. The mix has remained relatively stable over the last, you know, 18-24 months. I think we've, you know, one of our goals is to keep that stable. We think that that's really important, and as I say, not go down into the commoditized side of it. I would say a lot of stability. We see growth, and all of it is important for us to make money and to get a great margin, because it all has different impacts in the sort of line of our business. It's hard to break it out and just sort of say, well, the pricing is this or that in some ways, because if you think about, you know, a large, really high-value streamer who then gets us into an eyeball network that we otherwise would have had to pay for, some of that math is very valuable to our business and something that we are constantly looking at. I think in general, not a significant change in the quarter or over the course of the last couple of years. Thanks, Fatima. As a reminder, everyone, it is star one if you have a question today. Next up is Tom Blakey, KeyBanc Capital Markets. Hey, good evening, gentlemen. I have a couple questions, starting with Ron on the gross margin side. It seems like things are pretty identifiable in terms of duplicative costs. Have you ever, I mean, done the calculations, Ron, to say, you know, what as we go into 2023 with those costs alleviated from a basis point perspective, what type of release that would be in terms of gross margin? Similarly, with regard to utilization, impossible to probably track the level of demand, but, you know, for like every, you know, 10 points of utilization in terms of increase, what kind of basis point expansion that could have on gross margin to give us like some sort of flavor for the longer term. Speaking in that term about longer term, what about this new improved network? What's it gonna look like? Is it gonna be more in line with peers of yours, which have, you know, significantly higher gross margins, or should we expect something, you know, some other number? I have a follow-up. Yeah. A couple of data points. I think as we look to 2023, you know, the headwinds from the, you know, the new architecture transition sort of fall away, and we expect to continue to drive toward higher utilization across our network. You know, there's a number of other things that we're doing internally in terms of our traffic forecasting and investment process to try to drive even tighter alignment around those investments and traffic expectations, that we'll talk more about on Investor Day, which should also drive better utilization and higher gross margin. We haven't quantified kind of the gross margin for 2023 other than to say that we expect to see, you know, further accretion and improvement in gross margins in 2023 from, you know, efficiencies in our cost of revenue, from the completion of the transition of the architecture, driving, you know, better utilization across our network, and also as we see the higher growth in the security products, those become a bigger mix of the products, and those are also contributors. We've got a lot of tailwinds going into 2023 that will drive gross margin accretion over what we've seen this year. And that should play out as, you know, accretion off of kind of what that exit rate is as we get to the end of the year, but we haven't explicitly quantified that. That's fair. Just maybe one more try then. It sounds like, if I'm hearing you correctly, Ron, it's more going into 2023, 2024, 2025, it's more utilization in terms of what the expansion of the gross margin will be, you know, towards back to those, you know, 60%+ rates versus some sort of identifiable duplicative cost overhang being meaningful. Yeah. I think the way I would look at that is I think we did have a headwind in 2022 from this transition. That sort of falls away. As you get into, you know, 2023, 2024, 2025, it's really gonna be driven by utilization and efficiency on the network as we build more efficiency, you know, leveraging, you know, the new architectures and driving efficiency there and product mix. So sort of the fundamentals of the business that will be driving ongoing accretion and growth margin. Great. You know, that's helpful, and we'll see going into 2023 what that looks like. My second question is around security obviously and related kind of, you know, longer term strategic vision on adding functionality that's less bandwidth-intensive and more kind of SaaS-like on your platform, especially given, you know, the questions about, you know, we'll see about the profitability going forward. Kind of a all-in-one question about capital structure and, you know, CAs usage and what the long-term strategic vision of Fastly is in terms of long-term growth on these non-delivery related businesses. Will that be more organic or inorganic in your, you know, your kind of intermediate term vision for the company? Thank you. That's it. Yeah. Thanks, Tom. You know, I think we said this in the past. I think we feel like security will continue to grow, and we haven't even scratched the surface of that market if you look at the scale that we are at. There are a few places in the portfolio that we're beefing up, particularly on the bot side. But you know, in terms of sort of large scale inorganic growth, that's not how we feel we are gonna hit the long-term goals that we've set out. So right now we have teams working on, you know, diligently working on the bot portfolio and continuing to improve that. The rest of the portfolio is strong. It's world-class. It's something that we go up every day against our competitors and win with. As you can see the growth in that market, and the trajectory is strong. Right now we're really confident in the portfolio, and we're confident in the team. You know, there may be small things here and there, but that would be more on the talent side than it would be on the revenue side. That'd be excellent to see from an organic basis, Joshua. I agree. You know, you've anniversaried SigSci here with solid growth. Congratulations, and look forward to keeping in touch with you in the next endeavor. Thanks. Thank you. Yeah, it's been a great success. That does conclude our question and answer session. At this time, I would like to hand things back to Mr. Joshua Bixby for any additional or closing remarks. Great. Thank you. Before we sign off, I wanna thank our employees, our customers, our partners, and our investors. We remain as committed as ever to fueling and securing digital experiences, and moving forward, remain focused on execution, bringing lasting growth to our business and delivering value to our shareholders. I will remain in my role until my successor has been brought in to ensure that we have a smooth transition. I want to assure you that positioning Fastly for a long-term success is my number one goal throughout this process. We look forward to connecting with many of you at our Investor Day on May 12. Thank you. That does conclude today's conference. Thank you all for your participation. You may now disconnect.