Good morning. Thanks, everybody, for being here. My name's Frank Louthan. I'm the senior analyst here covering Fastly. Very glad to have them back here again at the conference. We've got Ron Kisling, Chief Financial Officer, and Vernon Essi, who runs Investor Relations. Ron, maybe just start out a little bit. Give us a few minutes on kind of your positioning, tell us who Fastly is, you know, what you do, and how you fit into the market. Yeah. So, Fastly has a, you know, edge cloud network. We deliver dynamic, you know, content to users on the web, with very low latency, with the security means you ensure that it's delivered safely, with compute that allows us to personalize that experience. If you stream any of the major networks, if you bought stuff with, you know, online from e-commerce or watched live sports, you may have been watching stuff that streamed through Fastly's edge network. Our differentiation in that space really is that we have a software-defined network that is extremely good at handling dynamic content with significantly lower latency than any of our competitors in the space. Okay. Great. So let's talk about kind of the most recent quarter, you know, kind of something that everyone probably was on the call thinking about here. You posted a good quarter. It was a little bit light on revenue. You know, guidance, everything else seemed good to me, but stock's off 40%. So, an opportunity, as they say. But, kind of, tell us, in your words, kind of what happened in the quarter and since then. Yeah. I think there were a lot of dynamics both internally in the company and externally. I think we could have done a better job, I think, of more simply articulating kind of what those dynamics were than we did in hindsight. I think first and foremost, you know, we've established a track record of coming in, you know, at or above the midpoint consistently across our guidance. And in Q4 we were within the guidance range but below the midpoint. Secondly, I think when you, when we talked about kind of some of that driver, I think we over-indexed a little bit on some of the international impact. We had, you know, a single global customer that in one of their markets there's a handful of markets in the world where our pricing, as well as our cost, are orders of magnitude higher than what we see across the rest of the world, think, you know, north of 10x, where really small changes in traffic can drive a big impact on revenue. You know, in Q3, this customer launched some content that was wildly popular. It drove an increase in traffic and revenue, also some headwinds to gross margin. And we got into late Q4, you know, that traffic and the popularity dropped on that content. And it had a sort of an outsized impact on revenue relative to our expectations. So that, that variability, particularly in some of these markets, you know, as we scale, some of that goes away. You know, when we looked to give our guidance going forward, you know, we wanted to make sure we would be conservative. Our outlook for Q1 was at the midpoint of 13% growth rate. Our view toward the full year was 16%, which is below what we had shared in Investor Day of 2017 to 2021. We certainly, from the strength we saw in new customer adds in the fourth quarter, expect to see an acceleration across the year. I think we've taken a conservative view. You know, that is below what our targets were, certainly below what our internal goals are. Then I think lastly, when you look at the macro, leading up to earnings, you know, our stock took about a 30% appreciation, kind of on no news. When we did the earnings, I mean, we saw north of 40% decline, you know, basically giving back all of that 30+ then some that, I think, made for a bigger impact than you might have seen in a less volatile market. All right. So you mentioned the international traffic. Digging that a little bit further, how should we think about that from a profitability standpoint relative to your other traffic? And then how should we think about, you mentioned the longer-term guidance, and you've kind of changed how you've approached that. Is it safe to say some of that might have been you sort of some assumptions for that in that longer-term guidance as well? Yeah. So two things. We talked a little bit of this on the Q3 call when we saw some headwinds. You know, there's a handful of markets that have these, you know, much higher costs. Our scale in many of these markets is relatively low. And so, our costs are relatively high. Pricing is similarly high. And so that traffic variability does create an increase in sort of variability in our revenue in those areas. You know, since Q3, though, as we've added traffic, we've been able to go back to those markets and negotiate improvements in those rates, which we're able to deploy across all of those. And over the course of Q4, we were able to reduce our rates in both, you know, APAC region and Latin America. We talked about those as two regions driving it. I think as we look forward, certainly scale gives us the ability to further improve our margin profile in these small markets. It also reduces some of the variability we see in revenue in these markets, going forward. And then, when you think about guidance, I think given what we saw in terms of this variability, we took a very conservative view looking forward and sort of assumed that, you know, traffic was gonna stay kind of at these lower levels. And so if we do see popularity increase, that's gonna be upside to the guidance we provided for the year. Okay. Great. So one of the questions you always get from investors kind of compare you to some of your peers, you know, particularly Akamai. Maybe talk to us about some of the advantages of, of Akamai and using a more SDN-type network versus what, what they built, and, and how you've fit up with the with the peers. Yeah. Yeah. I mean, advantages that we have versus Akamai. No, yeah. Sorry. That's all right. Yeah, so I. The other way. The other way. We can answer both of them. So, you know, Fastly was built on a compute resource from its initial like onset. So the big difference that I would say we have versus Akamai is we are a modern software-defined network built on compute resources and software-defined switches. That allows us to do a lot of very dynamic management from a single point, if you will. So we can go in and do an entire fleet upgrade of our network on the fly with software. Some of the other competitors that are out there, particularly Akamai, has what I would characterize as sort of an older network, was great when it was first built 20-some years ago. And it has some shortcomings relative to ours. However, they have scale, and they've done a great job, obviously building a successful business around their scale. We look at ourselves as sort of a next-generation version of that. What, what this really means, though, in terms of a, kind of a more simplistic approach to what the end product is, is it allows us to have much more dynamic content delivery. It allows us to purge cached content on the edge much faster. And that in turn saves our customers money because they have to pay egress fees to go in and out of the central cloud to deliver content. So anytime you see, for instance, a television show that's streaming, that object has to be stored on the edge to be delivered to you quickly. If you're constantly going back to the central cloud to get to it, you're gonna pay higher egress fees. So the whole idea here is our system's actually very effective at doing that cost-effectively for our customers. And there's other features too that we can add on to that 'cause it's compute-based, such as security, which runs on our compute layer, observability, which runs on the compute layer as well. And those features are easy to roll out. We don't have to buy new equipment. We don't have to put new hardware in place. It's just ready to go on the fly. So maybe to put that in some more practical terms, what are some applications and things that people would think about that you're well-suited for your network? And then maybe what are some that, you know, just are not? That's not something that you would necessarily go after. Yeah. I think any application where kind of edge presence intersects performance and dynamic content. So where you have dynamic content and performance matters, you know, Fastly is really well-suited to delivering that. It's easy to deploy and configure. You know, the instances where maybe that performance differential doesn't matter as much is if you do have a site where your content is very static and maybe performance doesn't matter. There are, you know, a handful of those. I think more and more businesses, though, are looking for sites that drive quick response, timely personalization, and deep interaction with the user. That's the perfect application where our performance really matters, and differentiates us from the competition. For those of us that aren't as technologically savvy, maybe give us an example of what a dynamic application is and what kind of those applications are doing. Yeah. This This is a good example of a dynamic application would be, say, you're on an e-commerce website. You're in the checkout. You've got your cart. And suddenly you're getting suggestions thrown at you rather quickly that relate to what you've shopped at before. You'd think that's a cookie-related thing, but it's actually algorithms that are running at the edge to give you better shopping choices on the fly. Obviously, anything that has to do with mobile apps that are throwing at you selections that seem to be almost prescient in the way they're coming at you, across social media apps, that's another example of where that's running on the edge. Static content would be something like a website for your restaurant down the street that's a mom-and-pop. It looks like the same. It looks since 1998. There's no, you know, these just static images that are sitting there. They're probably getting pulled from AWS 4,000 miles away, and it takes forever to load. That's an example of an application we wouldn't be running. Okay. Great. And so with that, how do you win in the marketplace? What are customers coming to you, and why are they giving you business versus your competitors? Yeah. I think what we see is a couple of things when customers come to us. They're, they're wanting to improve their web experience. Also they're looking to reduce their costs and make it simpler for them. So we're easy to deploy. You know, the content is automatically cached. You don't have, like, static content. We have a common we're building, you know, this year, a lot of progress in 2023 on kind of a common management console. And so it's the ease of ownership and the cost to run the application are high. The efficient caching reduces the customer's ingress and egress costs. And so they're coming to us for performance, efficiency, and a reliable network. Okay. Great. All right. So, you know, we saw some consolidation in the industry last year. A couple of the, you know, lower-end, price spoilers out there, you know, gave it up, which is probably good. How does how does that impact you? How does that does that help you? Do you see them in the marketplace, or, or what do you how do we think the outlook is this year with that competition gone? I think there's two sort of outcomes from that. I think one, what you are seeing is a number of the point solutions, whether you, you know, call them low-end but those that are only offering delivery. I think you're seeing the market moving to a platform where you have a solution that offers delivery, the security needed around that delivery and compute on a single platform. And so I think that's why you're seeing a lot of the point solution players, you know, selling their contracts or getting out of that business. It does take some of those players who may have been, you know, sort of maybe low-cost leaders out of the market, and I think drive some rationalization in terms of pricing in the market. More importantly, one of the things it does is as they leave the market, particularly in the case of those that were where the contracts were acquired, is, you know, those customers are going to have to migrate from their existing legacy StackPath networks to the Akamai network. That is a migration. And if you have to do a migration, you're gonna evaluate, you know, who's the best player out there, how, how easy is that migration. We offer an easier migration with better performance. I think we stand a chance to win a significant number of those customers when their contracts come up. We've already won a number of them. We've announced two of them, with Digital Turbine and Moxi Works, a real estate company that, you know, were formerly customers of StackPath that worked under the Fastly, you know. Okay. So and so with that, kind of touching on your sales organization, recently had your head of sales leave. Walk us through, you know, what the process is there to replace that, and how that affects the sales organization. Yeah. You know, we are actively recruiting. We have, you know, an agency focused on bringing in a new Chief Revenue Officer. You know, the good news is Brett, our former Chief Revenue Officer, built a really strong team with a really experienced leader over North America, and an experienced international leader. And so we're able, you know, to manage and Todd's able to lead kind of these two leaders across the sales organization with no disruption. So it really gives us the time to make sure that we hire, you know, the best candidate and the right candidate, you know, without any disruption while we take the time to do that. I think it's worth noting too, Brett got a very nice opportunity to go to CrowdStrike. So it was a good path for his career, by the way. It wasn't. Yeah. Yeah. We'd like to credit Brett on that. Yeah. You know, so, you know, new role. Yeah. All right. That's always better than the alternative, for that. All right. So walk us through on the guidance. We touched on it a little earlier. What does it take to kind of hit the high end of the guidance? And if we're sitting here a year from now and it's more of the low end, what would have happened for that? Yeah. You know, I think the single biggest driver to our revenue growth really is new customer acquisitions. One of the things we saw in the fourth quarter, for enterprise customers, those that generate over $100,000 or more per year, was 31 new enterprise customers. That was the highest number of new customers in over three years. It really represents, I think, the results from a lot of the efforts, programs, and development that's been put in place really over the last 18 months since Todd joined. We reorganized the sales team at the beginning of the year. We brought in a head of marketing to really drive demand generation focused directly on new customer acquisition. We launched a way to buy our product on a package that includes everything you need, which reduced a lot of the friction in the sales organization. I think the outcome of these programs that we launched at the beginning of the year are starting to show up in new customer acquisition. Those new customers typically ramp over time. We don't get all that revenue, you know, day one. We share that in our 10-K. In the first year, typically new customers contribute less than 10% of our revenue. But their first year to second year revenue growth is over 100%. And they continue to grow meaningfully in year two and year three. The things that are gonna likely to drive upside is, if those customers ramp more quickly than we've done in the past, then we've implemented a number of programs to accelerate customer ramping. Customers who purchase a package, you know, start paying, as soon as they, their pro their contract starts. So that accelerates some of that revenue So if we see rapid adoption and implementation, that's an opportunity for revenue growth to exceed or come in at the height of our range. Alternatively, if, you know, if there are delays in, you know, customers onboarding, that's probably the biggest risk because in terms of the upsides around traffic or events in 2022, we've sort of excluded those from our outlook. All right. Great. Well, we don't wanna disappoint anybody doing a word search on AI in the transcripts, so I'll ask about that. So between the different, you know, where does Fastly fit in with AI as far between, you know, teaching modules and at the edge and inferences and so forth? How is generative AI and so forth gonna impact Fastly? Yeah. I think, you know, a lot of people believe I think we believe that, the edge is a great place for inferential AI, that the generative AI, the building of the models are gonna take place at the central cloud. You're gonna deploy them with the interaction with the users and run those models at the edge to drive, you know, personalization, customization, meaning activities. And so that is where we see AI playing at the edge. And I think importantly for Fastly, we see those use cases as really driving use of compute, as a deployment. And if we look at what customers are doing today, we're seeing a lot of experimentation, a lot of evaluation. And I think that will start to turn into sort of meaningful deployments beginning in 2025 and 2026, and driving an acceleration in revenue in our compute platform. Okay. And the compute platform, you know, you mentioned kind of a lot of your roots as a company is with the developers. You know, talk to us about what you're doing with the compute platform, how we should think about that, enhancing your business and your growth going forward. Yeah. So, I mean, the compute platform, which, you know, as Vern mentioned, earlier in terms of our overall architecture, is kind of, you know, built in. It's what we run our security offerings and everything else. But it is the ability to run applications at the edge, to run these algorithms today, to run inferential AI in the future, to customize, to create more immersive experiences. I think there's opportunities in gaming. You know, there's a number of opportunities to really drive that immersive experience. And I think that's one thing we've learned on the web is that the more personalized, the more valuable that can be. And so the deployment of that, I think, is really going to accelerate as these opportunities people learn how to use it. One of the cases, I think, that developer relationship is a lot of what I talked about earlier in terms of developers experimenting with, you know, different applications at the edge to see, you know, what sort of applications really, move the needle, which ones are possible at the edge. And I think we're going through that experiment and evaluation phase right now. Yeah. It's worth noting too. We've made a lot of initiatives with the developer community. We acquired a company called Glitch a couple of years ago. It's one of the largest developer sites in the world. We run a lot of interesting activity on there that helps serve as like a feeder mechanism, if you will, into our platform with the development community, so. Is there a lot of CapEx investment required to do the compute function, or is it in R&D, or how should we invest in that? And when do we start to see that hit the top line? I think two things. I think one, first and foremost, from a, you know, capital intensity. I don't think it changes materially. I think we, you know, our compute, as is our security and delivery run on the same platform, you know, they use different parts. Compute is more CPU intensive, you know, traffic and delivery is more bandwidth intensive. So we, we have meaningful capacity today. Being a software-led network, we can continue to increase the efficiency of that network with software updates, which we do from time to time. You know, in early 2023, we deployed an update, a software update. You know, we increased the capacity of our network by 30%, without deploying a single piece of hardware. So while the actual composition of what we use may change over time in terms of, as AI becomes more important in the edge, you know, we believe that capital intensity doesn't change materially from where it is today, which, you know, it runs about 60%-80% of revenue. All right. So switching gears a little bit to the security part of the business, you know, how do you see the security platform today? Are there any other different capabilities and things you need to bolt on to have a more complete package? Or how do you see that as, as, you know, where that fits your needs right now? Yeah. I think from a maturity perspective, I think we entered 2023 probably in the early innings. You know, we, Fastly, acquired Signal Sciences' next-generation WAF product in 2020. It's the industry-leading WAF product. And really over the last year, we've completed the integration of that into our platform. We've had a strong DDoS protection built into our delivery platform from the beginning. We haven't had really the dashboarding and the reporting that more and more companies are wanting to see. And so we put work into productizing that. And then lastly, over the course of the year on bot detection, which is really the third leg of kind of the key web application security, we've built out our technology and productized it and released that in limited release at the end of the year with a couple of customers. It's going into general release, early in Q2. That builds out the platform. So I think that kind of puts us in the middle innings with a complete security platform today. I think, you know, as that platform evolves, I think some of the emerging pieces of security that you may start to see or API security is probably kind of the next thing on the radar for the security market. Okay. Great. One of the things I think is kind of interesting that you talked about last year is you're getting at your sales team's ability to sell, really integrate and sell both platform, both security and delivery, you know, same pane of glass and so forth. Walk us through what has gotten you to that point and what the outlook is for the sales team being able to push those products in a more bundled fashion. Yeah. I think two things. If you go back even to sort of late 2022, 2023, a lot of it was built in terms of really making sure the sales team was educated on selling the security platform. You know, from the beginning, we sort of integrated the sales teams between, you know, the Signal Sciences and Fastly sales teams. And so from a training perspective, you know, that was really important. Secondly, from a product perspective, we've been working on completing really the integration, which while it was running on the Fastly platform, it was still two separate control panels. And so we've in the process of integrating those into one control panel. You can now log in once, click one button, then manage your delivery. You can click another button and manage, you know, your security portfolio. and so that makes it a lot easier to sell. It's a lot easier for customers to cross-sell or add that to the platform. Okay. Great. And then, you know, one thing that I've focused on a little bit is your channel sales program. I've seen that be very successful with a lot of other companies that I've had that and you introduced that last year or got it kind of going. Tell us where you are with channel sales going forward and how you think that can make a difference in your ability to sell in the market. Yeah. You know, we've always had a really strong channel motion around our security products. We've inherited that from Signal Sciences. It's continued to be very strong in security. We haven't, and most of them don't have a strong channel motion around our delivery. We typically sold that on a consumption basis. It's a, you know, kind of a contract, you know, a year ago. Very difficult for the channel to sell. So one of the things with the packages, creating a recurring revenue stream, created a selling vehicle that was very channel-friendly. And then over that period of time, we've been training the channel on the delivery motion. We've implemented a deal reg program, and we've seen a dramatic increase in deal regs, which really extends our reach, particularly into kind of the mid-market, you know, in smaller space where the channel plays very strongly. I think from a revenue perspective, I think we will start to see sort of meaningful revenue contributions this year and see that continue to grow in 2025 from the foundational work we put in place last year. All right. Great. Let me see if we got any questions from the audience. Yep. With the Super Bowl just finished, NCAA basketball tournament coming, also some NBAs, do you guys participate in that space? Repeat the question. Yeah. So the question was with some of the playoff games, you know, NBA playoffs coming on, we just had, you know, some other games and more and more sports streaming content. Are you guys gonna participate in that? How does that affect you? Yeah. So generally, we participate heavily in live sporting events, some of the largest ones. I'm, well, we can't directly talk about which ones. But, you know, we do participate in a number of the live sporting events. It's one of the areas where we probably have even greater differentiation in terms of being able to deliver extremely low latency on live events, which is even more important because if you're watching a sporting event, the last thing you wanna do is get an alert on your phone about a touchdown and see it, you know, 30 seconds later. So we're a heavy participant. It's one of the areas where we continue to see opportunities to grow our share, particularly as live events become more, and you're seeing, you know, even outside of sports, you know, more and more networks moving to sort of live events. And so I think that creates additional opportunity. And for some of those of you who paid attention, you know, it's challenging. Sometimes I found it, you know, challenging to do that. We have a great solution if you're looking to do a live event. Yeah. Give us a call. All right. Any others? All right. Let's talk about on the security side, talk about pricing, you know, what's going on there, in the pricing environment for security and how are you guys positioned there? Yeah. So I think broadly speaking, certainly at the high end, I think we're seeing very stable pricing. You know, security is very important. And as I mentioned earlier, a lot of the larger companies, particularly looking for web application security, are really looking for a platform. You know, they make a decision on delivery and security, which plays well to, to our strengths. I think in the at the lower end of the market, we are starting to see, you know, a little maybe a little more price pressure, as companies are really looking to sort of manage their costs, at the low end. But at the high end, we, we haven't seen any real change in the pricing, strength or trajectory. Okay. Great. Any other questions? All right. So maybe on the security side, how do you win with security? And this is a question I get, you know, kind of across the board, from folks, since security wasn't your main product, not kind of where you started. Of course, there's a lot of other pure-play security-type companies out there. So I have investors say, "How could they possibly compete with so-and-so?" So when you win in security, what's sort of driving that, and how should we think about that? Yeah. I mean, I'll start with kind of our strength in security. I think if you and it, it kind of differs a little bit by product in terms of kind of the competitive landscape. If you look at our next-gen WAF, I think we had the industry-leading product. I think most people would agree it is the best product out there. Signal Sciences did a great job in that product, and we've continued to evolve it. Most of the deployments, you know, run in full blocking mode. I think that's unique for our firewall. We have extremely strong DDoS technology. We had a customer who was having a lot of challenges with attacks, you know, in Asia. It was a multinational. They deployed, they replaced our existing technology, deployed our security, and said, "You've got the best firewall out there." We haven't productized it, so I think there hasn't been awareness. DDoS, sorry. Best DDoS out there. Best DDoS. We have really strong DDoS. We haven't really productized it, so I think there's an awareness issue. I think the gap was really on bot detection. You know, we have launched a product. We think the product is very competitive. We've gotten very good feedback. But I think we start with, you know, some very good strength within our security platform. And some of those, you know, we deploy our next-gen WAF to customers who aren't running Fastly in delivery. And then secondly is the market evolves more to a platform building off of clearly differentiated performance on delivery, and a security platform with extremely strong performance, particularly around demonstrated performance around, you know, WAF and DDoS. I think we compete very well both from a security perspective, as well, even though it may not be our initial DNA. Yeah. Let me make a point. Just for this audience, if you're more of a generalist, this is definitely we're talking about web application security. We do sometimes get thrown in the mix with Zero Trust, Endpoint, other markets such as those. Despite a couple of weeks ago, one of the major players in that space had a pretty rough quarter. To use your bingo buzzword, platformization, I think was what they were calling it. It was sort of a term that was used quite widely. But we're a little bit removed from that, just so everyone's aware. And I think a lot of investors often assume that, you know, it's a delivery content that then is getting sold on security but may not also be always be the case. How should we think about, you know, your ability and maybe with some of the sales changes, your ability to lead with one or the other? And how does that tend to go? I think with the largest, you know, companies, we clearly see, you know, the delivery capability, the reliability, the efficiency of the caching. It's one of the metrics that some people use to allocate traffic between customers. Reliability, the low latency and the efficiency, the performance of delivery, is really what drives the sale and the differentiation. That's what mostly impacts the end-user experience. And when you pair that up with security, which is really important to delivering it, you know, we have really strong security to provide safe delivery of content to users. All right. Well, great. Hey, guys, this is really helpful. Appreciate it. We got a breakout session after this if anybody wants to join but thank you very much for being here. Thanks, Frank. Thank you.