Item 1. Business
Item 1. Business
Overview
Developers are reinventing the way we live, work, and play online. Yet they repeatedly encounter innovation barriers when delivering modern digital experiences. Expectations for digital experiences are at an all-time high; they must be fast, secure, and highly personalized. If they aren’t reliable, end-users simply take their business elsewhere. The challenge today is enabling developers to deliver a modern digital experience while simultaneously providing scale, security, and performance. We built our edge cloud platform to solve this problem.
The edge cloud is an emerging category of Infrastructure as a Service ("IaaS") that enables developers to build, secure, and deliver digital experiences, at the edge of the internet. This service represents the convergence of the Content Delivery Network ("CDN") with functionality that has been traditionally delivered by hardware-centric appliances such as Application Delivery Controllers ("ADC"), Web Application Firewalls ("WAF"), Bot Detection, Distributed Denial of Service ("DDoS") and observability solutions. It also includes the emergence of a new, but growing, edge computing market which aims to move compute power and logic as close to the end-user as possible. The edge cloud uses the emerging cloud computing, serverless paradigm in which the cloud provider runs the server and dynamically manages the allocation of machine resources while offering flexibility and control to developers. When milliseconds matter, processing at the edge is an ideal way to handle highly dynamic and time-sensitive data. This has led to its acceptance and adoption by organizations who monetize or grow their user base with every millisecond saved. Organizations that want their websites to load faster for every user can benefit from processing at the edge. The edge cloud complements data center, central cloud, and hybrid solutions.
Our mission is to fuel the next modern digital experience by providing developers with a programmable and reliable edge cloud platform that they adopt as their own.
Organizations must keep up with complex and ever-evolving end-user requirements. We help them surpass their end-users’ expectations by powering fast, secure, and scalable digital experiences. We built a powerful edge cloud platform, designed from the ground up to be programmable and support agile software development. We believe our platform gives our customers a significant competitive advantage, whether they were born into the digital age or are just embarking on their digital transformation journey. Our platform consists of four key components: a programmable edge, a software-defined modern network, safety in depth, and a philosophy of customer empowerment. Our programmable edge provides developers with real-time visibility and granular control, where they can write and deploy code in a serverless environment and to push application logic to the edge. It provides tooling and templates to deploy some of the most commonly used workflows and leverages modern application delivery processes, thus freeing developers to innovate without constraints. Our software-defined modern network is built for the software-defined future. It is powerful, efficient, and flexible, designed to enable us to rapidly scale to meet the needs of the most demanding customers and never be a barrier to their growth. Our 184 terabit software-centric network is located across 71 markets as of December 31, 2021.We define markets as unique metropolitan areas where we have one or more Points of Presence ("POPs"). Our safety in depth approach integrates security into multiple layers of development: architecture, engineering, and operations. That's why we invest in building security into the fabric of our platform, alongside performance. We provide developers and security operations teams with a fast, safe environment to create, build, and run modern applications.
Our platform provides developers and security operations teams with solutions that foster innovation without impacting performance. Finally, being developers ourselves, we empower customers to build great things while supporting their efforts through frictionless tools and a deeply technical support team that facilitates ongoing collaboration.
We serve both established enterprises, mid-market companies and technology-savvy organizations. Our customers represent a diverse set of organizations across many industries with one thing in common: they are competing by using the power of software to build differentiation at the edge. With our edge cloud platform, our customers are disrupting existing industries and creating new ones. For example, several of our customers have reinvented digital publishing by connecting readers through subscription models to indispensable content, helping people understand the world through deeply reported independent journalism. Our customers’ software applications use our edge cloud platform to deliver consistently excellent
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online shopping experiences, fast and more secure financial transactions, and broadcast quality live streaming on any device. The range of applications that developers build with our edge cloud platform continues to expand rapidly.
So where do we go from here? Our vision is to create a trustworthy internet, where good thrives. We want all developers to have the ability to deliver the next transformative digital experience on a global scale. And because big ideas often start small, we love it when developers experiment and iterate on our edge cloud platform, coming up with exciting new ways to solve today’s complex problems.
Our Dollar-Based Net Expansion Rate ("DBNER"), Net Retention Rate ("NRR") and Last-Twelve Months Net Retention Rate ("LTM NRR") metrics measure the revenue growth from existing customers attributable to increased usage of our platform and features, and purchase of additional products and services. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics" for further discussion of DBNER, NRR and LTM NRR.
The financial results of Signal Sciences have been consolidated into our financial results and key metrics since October 1, 2020, the date of acquisition. Our DBNER was 120.9% and 143.6% for the years ended December 31, 2021 and December 31, 2020, respectively. Our NRR was 106.6% and 116.3% for the years ended December 31, 2021 and December 31, 2020, respectively. Our LTM NRR was 117.6% and 137.4% for the years ended December 31, 2021 and December 31, 2020, respectively. We believe the LTM NRR is supplemental as it removes some of the volatility inherent in a usage-based business model from the measurement of the NRR metric.
For the years ended December 31, 2021, December 31, 2020, and December 31, 2019, our revenue was $354.3 million, $290.9 million, and $200.5 million, respectively. We incurred a net loss of $222.7 million, $95.9 million and $51.6 million for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, respectively.
Our Solution: Fastly's Edge Cloud Platform
We have built a powerful, serverless edge cloud platform, designed from the ground up to be programmable and support agile software development. We process, serve, and secure our customers’ applications as close to their end-users as possible, at the edge of the internet for enhanced performance and protection. We believe our platform gives our customers a significant competitive advantage whether they are just embarking on their digital transformation journey or natively born into the new digital age.
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Our edge cloud platform is based on several core tenets:
• Developers must be empowered to innovate;
• Platforms must innovate ahead of market demands while still being reliable, scalable, and secure;
• Security should be developer-friendly, easy-to-use and available wherever you need it; and
• Vendors must provide exceptional flexibility and support.
With this in mind, our platform consists of four key components: a programmable edge, a software-defined modern network, safety in depth, and a philosophy of customer empowerment.
Programmable Edge
Our programmable edge sits in an extremely privileged position, between our customers’ applications and their end-users, placing our services closer to those users. It is composed of our highly configurable cache layer, our Varnish-based development environment, and our new serverless compute products. It is designed to create a space for developers to innovate at their own pace, by providing:
• Full programmability . Our powerful platform allows developers to write and deploy their custom code to push application logic to the edge. We believe that logic like API routing and responses, A/B testing, URL redirects, paywall authentication, and location/language customization can all be delivered faster and more efficiently at the edge;
• Reusable modules . Our platform includes reusable modules based on commonly deployed custom code examples. We package and add these reusable modules to our platform, which enables developers to accelerate customer onboarding and reduces implementation difficulty;
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• Real-time visibility and control . Our edge cloud platform is designed with instant visibility and control as a core tenet. We stream log data from our network edge in real time so developers can instantly see the impact of new code in production, troubleshoot issues as they occur and rapidly identify suspicious traffic. We also empower developers with distributed, real-time control of their application code and configurations;
• Agile development . Developers can build Fastly into their technology stack to power continuous integration and continuous deployment (“CI/CD”) efforts. They can use our edge cloud platform to iterate and innovate rapidly by deploying their new code to production multiple times a day as they test new features, fix bugs, or enhance existing offerings. Fastly also supports DevSecOps efforts, allowing developers to introduce automated security controls early in the application development cycle, thus minimizing vulnerabilities and eliminating costly rework further down the line; and
• Serverless compute environment. With our serverless compute environment, developers can build even more complex use cases on our edge cloud platform, without having to worry about the underlying infrastructure. Built on WebAssembly, a new type of code that can be run in modern web browsers and extends the web platform to support compiled languages like C, C++, Rust Go and more, rather than existing technologies like re-usable containers, it empowers developers to write code in their preferred language and run it anywhere at near-native speeds.
Edge Use Cases
Below are some examples of use cases our customers have solved for using Fastly’s programmable edge:
• API acceleration. Accelerate and secure critical application programming interface (“API") responses at the edge for delightful application experiences, such as instant hotel lookup based on location and real-time inventory updates between retail stores and their online storefronts;
• Internet of things ("IoT"). Process and secure data from connected devices at the edge for instant results for time-sensitive applications;
• Cloud migration. Seamlessly migrate from data center to cloud, hybrid or multi-cloud environments, enabling customers to take advantage of the functionality and cost savings of one or more cloud providers; and
• Enabling blockchain. Cache and accelerate individual transactions on the blockchain in real time.
Software-Defined Modern Network
Our edge cloud platform is designed to take advantage of the modern internet. Our philosophy has been to differentiate through software by building one powerful software-centric network composed of unique and proprietary components. Our approach is designed to give us the flexibility to innovate and build so we will never be a barrier to our customers’ growth, and consists of the following key elements:
• Software-centric approach at global scale . From the start, we realized that single purpose hardware-based solutions that rely on custom-designed chips are inflexible. Custom hardware, like routers, load balancers, and security appliances, do not have the flexibility to support the dynamic needs of the modern internet. We started with open source software like Varnish and Linux, then rewrote it to support the use cases of a multi-tenant, high-performance edge cloud. We created our own proprietary software-defined networking stack with built-in routing and load balancing, a storage system for optimal storage usage and performance, a massive data pipeline to send customer logs, a cache invalidation system that purges content around the world in an average of 150 milliseconds or less, and a proprietary control panel that allows our customers to update their edge application logic and configurations in seconds around the world. We architected the software to run on custom-designed servers built upon commodity components and network hardware so that we can control every aspect of the network, from request to response and drive as much utilization and scale as possible. Our software-centric approach is designed for better network efficiency and greater flexibility to scale as we add more services;
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• POP design. We built Fastly for the internet of today—meaning fewer POPs, each with massive scale and located at the key interconnection points of the internet. Our POPs are connected directly to the core internet, each connecting directly to core Internet Service Provider ("ISPs") and 100 Internet Exchange Points as of December 31, 2021 to offer high performance in long-tail content caching. We run fewer clusters of more powerful servers that provide superior performance for customers who expect updates to be pushed out to their global end-users nearly instantaneously. Legacy Content Delivery Networks (“Legacy CDNs”) do not offer this benefit, as it is extremely difficult to update hundreds of thousands of servers around the world;
• Server efficiency. We have a highly efficient global server footprint because we combine advanced server and network hardware with our world class software at each of our POPs. Our servers are optimized to handle the complex workloads of compute at the edge by using high-end Central Processing Units and significant amount of Random Access Memory to process Varnish Configuration Language ("VCL"). We use solid-state drives, for fast and constant lookup times, and modern 100 Gigabit Ethernet for robust bandwidth. This, combined with our algorithms and custom software, gives us the flexibility to scale while dramatically reducing operating burden;
• One network. We have built a single powerful, compliant network to support customers’ security and delivery needs:
◦ Our single network is designed to provide the massive scale needed to defend against today’s growing DDoS threats without sacrificing performance. The servers in our platform provide all of the features of our product suite, allowing rapid and predictable scaling;
◦ We help meet customers’ Payment Card Industry ("PCI"), Health Insurance Portability and Accountability Act ("HIPAA"), and Service Organization Control ("SOC") needs without impacting performance. Because of our flexible routing and server architecture, we do not need to send PCI traffic off to a separate sub-optimal network;
◦ Our network is self-healing, with cutting-edge discovery and failover techniques that allow us to select the best performing path for customer’s traffic in order to avoid “internet weather disruptions”, which are temporary, short-lived connectivity or performance degradation issues which are typically experienced by internet transit providers on a daily basis.
Common Use Cases. Our powerful network along with our operational efficiency can easily handle use cases that are traditionally solved by CDNs. Some of these examples include:
• Infrastructure-agnostic traffic distribution . Support enterprise hybrid and multi-cloud strategies by intelligently routing traffic across different cloud providers, or between cloud and on-premise data centers, regardless of location;
• Efficient traffic spike management . Allow enterprises to accommodate traffic spikes by intelligently and rapidly distributing content requests across their network;
• Live streaming at scale . Deliver highly-reliable live streaming experiences with minimal interruptions, even when concurrently streaming to large global audiences;
• Responsive mobile applications . Serve rapidly-changing mobile content from the edge, enabling end-users to instantly access the very latest news updates, weather forecast, hotel availability, or store inventory from their mobile applications;
Safety in Depth
We believe that security should be integrated seamlessly into every layer of development: architecture, programming, and operations. That’s why we built security into the fabric of our platform, alongside performance. We provide developers and security operations teams with a fast, safe environment to create, build, and run modern applications with:
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• Operational agility. Our edge cloud platform minimizes risk through instant visibility and control. Security operation teams can use our real-time data feeds to see threats and exposures to vulnerabilities as they emerge. Our products are designed to make rule changes on the fly and update policies around the globe in seconds based on real-time traffic insights, without having to engage professional services. These features allow our security offerings to integrate into enterprise security software development cycles, thereby supporting modern DevSecOps practices;
• Performance centric. Fastly’s security offerings allow developers to iterate and test code quickly, while providing security teams with tools that reduce risk without impeding performance. Our high-bandwidth, globally distributed network naturally scales to absorb disruptive DDoS attacks. Our WAF and bot detection solutions are built into our edge cloud platform, allowing us to protect web-based applications with minimal latency;
• Serverless security. Fastly’s platform provides a secure, serverless development platform at the edge. It is designed to deploy custom applications, without impacting production traffic or having to worry about patching servers for the latest operating system vulnerabilities. Sandbox environments are instantly created to automatically execute code for customers for a limited period of time and rapidly decommission it, significantly reducing the attack surface; and
• Comprehensive app and API security. With our acquisition of Signal Sciences, we now offer application and API protection wherever it’s needed, not just at the network edge. Our next-generation WAF protects customer’s apps and APIs whether they are on-premises, in the cloud, in containers, or in hybrid environments. Customers get protection against advanced threats, including account takeover (ATO), malicious bots, API abuse and more—all in one integrated solution. With a more modern approach to detecting and blocking attacks, customers don’t need to worry about false positives or dedicate full-time staff to WAF maintenance.
Customer Empowerment Philosophy
Fastly believes in empowering our customers to build great things, while collaborating with them to promote their success. We have a unique understanding of what it takes to deliver a frictionless customer experience by providing:
• Freedom to try. Our free trial allows developers to sign up and start experimenting with our edge cloud platform in a frictionless, self-service manner;
• Flexible support model. Developers are free to program on our edge cloud platform, taking advantage of our rich documentation and expertise of our developer community. For customers who require more guidance, we provide a range of support packages and access to deep technical expertise from front-of-line support staff to technical account managers; and
• Partner friendly. Just as we expose the ability to program at the edge to our customer base, we extend that power and functionality to our partners as well. This allows our partners to build out applications that run at the edge, and provide a feature or service that is complementary to our platform. We enable these integrations with a focus on API-support and a large number of code libraries.
Growth Strategy
Key elements of our growth strategy include the following:
• Invest in our technology platform. We intend to continue to invest in our large-scale, enterprise-grade edge cloud platform which is both developer-friendly and fully programmable and addresses the needs of organizations going through digital transformations. Our Edge Compute platform allows us to dramatically accelerate our pace of innovation, serving as the platform upon which Fastly builds new and differentiated products. For instance, since the end of 2015, our research and development team increased from 41 to 321 people as of December 31, 2021, deepening our talent across multiple functional groups;
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• Increase emphasis on security. In October 2020, we completed our acquisition of Signal Sciences to further bolster our security offerings at a time when data protection has become increasingly critical. We focused on integrating the application security capabilities from Signal Sciences into a unified new product offering called Secure@ Edge. We launched our first Signal Sciences and Fastly edge compute integrated product called Next Gen WAF (powered by Signal Sciences) in Q1 2022 and will continue to add more capabilities to our security offerings. Our continued investments will allow us to fulfill our mission of giving developers more power over the security of their applications and APIs, at the edge of the network.
• Expansion into additional vertical markets. Our platform offers a broad range of capabilities. Our differentiated high performance and low latency delivery network and edge compute platform, as well as enhanced security capabilities with the addition of Signal Sciences technology, allows us to serve the needs of our existing customers and continue to add customers from a diverse set of industries. As we broaden our product portfolio, we intend to leverage our Next Gen WAF to expand beyond our initial verticals of technology, online retail, travel and hospitality, digital publishing, and media and entertainment into more security-conscious verticals such as healthcare and finance.
• Further enable solution partners. Our edge cloud platform is the backend of choice for many of the largest Platform as a Service ("PaaS") vendors serving the developer community. These PaaS vendors aggregate millions of unique web properties under one brand, using Fastly as their edge cloud. We believe that more and more web applications will be built on convenient and powerful out-of-the-box solutions offered by large PaaS vendors. Many of our solution partners are PaaS providers who built us into their platform to offer faster, more secure and scalable experience. Current examples include Brightcove, Shopify, Drupal, Magento, WIX, and Adobe Portfolio. A s our partners expand their customer base, we will grow alongside them, providing us with exposure to millions of developers who will become familiar with us, and potentially become customers themselves.
• Further enable channel partners. With our acquisition of Signal Sciences, we have acquired a channel partner ecosystem that we are investing in to cross-sell to both Fastly and previous Signal Sciences customers while also helping drive international expansion.
• Expand existing customer relationships. Over time, our customers have expanded their use of our platform. In more technically savvy organizations, developers have championed our solution, paving the way for us to engage with business decision makers. For more traditional organizations, we are often brought in to initially help facilitate a move to the cloud and from there we extend our product to support many other use cases. We plan to continually increase wallet-share over time for existing customers as we build out new products and features, and as customers continue to fully recognize the value of our platform. For the years ended December 31, 2021 and December 31, 2020, our DBNER was 120.9% and 143.6%, respectively. Additionally, for the years ended December 31, 2021 and December 31, 2020, our NRR was 106.6% and 116.3%, respectively; and our LTM NRR was 117.6% and 137.4%, respectively. We believe the LTM NRR is supplemental as it removes some of the volatility inherent in a usage-based business model from the measurement of the NRR metric. Many of our largest customers have grown through a "land and expand" strategy. On average, our customers have increased their annual spend by more than 17% year over year since 2015, growing from an average last 12-months revenue of $50,000 to over $126,000 as of December 31, 2021.
• Grow our technology ecosystem. We operate between and complement the "big 3" origin cloud platforms, Amazon Web Services ("AWS"), Microsoft Azure, and Google Cloud Platform, and a growing community of companies that provide big data, machine learning, and security solutions. In this sense, we act as the unifying layer for a growing number of cloud services. As customers consume more cloud and software as a service (“SaaS") offerings, we can create additional value and grow with our partners.
• International Expansion. As our customer base grows, we plan to scale our network to bring edge computing closer to where our customers are. For the years ended December 31, 2021 and December 31, 2020, 27% and 32%, respectively, of our revenue was generated from customers headquartered outside
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of the United States. As of December 31, 2021, we are strategically located in 71 markets, with more additions planned. We believe significant opportunity exists for international growth.
Our Products
Our edge cloud is a globally distributed, programmable platform designed for highly performant and secure web and application delivery. Our platform supports modern software development processes and empowers developers to innovate without constraints, as they lead the charge for their organizations’ digital transformation. We operate a single, software-centric network. Our POPs reside between a customer’s end-users and computing and data storage solutions, whether on-premise, in the cloud or a mixture of both. Our position on the network allows us to move functionality closer to end-users at the network edge for faster, more secure experiences. This includes edge compute, edge delivery, edge security, edge applications like load balancing and image optimization, video on demand, and managed edge delivery. All of our products are designed by developers for developers.
Edge Compute
We enable developers to write their own custom logic and entire applications to solve complex business problems at the network edge.
• Compute@Edge. This next generation serverless offering is intended to provide developers with a powerful new language-agnostic compute environment. Like all our offerings, Compute@Edge is built to be secure, performant and scalable; it offers 100x faster startup times than other solutions on the market.
• Fastly Developer Hub. This is a central place for developers to easily access all the tools they need to build fast, scalable and secure modern applications on our edge cloud platform. The Developer Hub includes:
• Solution Library patterns and recipes: Ready-to-deploy code snippets and deployment instructions to teach developers how to do basically anything on Fastly, with everything they need to implement in their own configurations;
• API and language references and change logs: Robust reference documentation and release notes provide complete access to all of the features available through the Fastly web interface and VCL; and
• Fastly Fiddle: A testing sandbox to experiment with Fastly configurations and debug custom code without impacting developers’ production services.
Many of the initial use cases we saw in our Compute@Edge offering were originally built in our Varnish-based development environment. We also offer a number of reusable modules based on commonly deployed Varnish custom code, including:
• Device Detection and Geolocation . Gives developers the ability to rapidly adjust the content served to end-users based on location, device type, and language detection;
• Edge Dictionaries . Empower developers to make real-time decisions from every server in our network. Edge dictionaries act as a distributed database at the edge, made up of key-value pairs. For example, Edge Dictionaries allow customers to redirect end-users to a specific country site or update large referrer spam blacklists in real time;
• Edge Access Control Lists ("ACLs") . Help mitigate evolving threats from attackers by letting developers make changes at scale. ACLs block bad internet protocol ("IP") addresses from visiting customer sites, and for added security, they can create their own allow-lists; and
• Edge authentication . Developers can add custom Varnish-based code to their app to generate tokens and authenticate users at the edge, avoiding the extra cost and latency associated with going back to origin to verify a user’s identity.
Edge Delivery
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Our edge delivery offerings include full site delivery and streaming for high value media.
Full Site Delivery
• Dynamic Site Acceleration . Speeds up requests and responses between cache nodes in our POPs and customers’ origin servers, so their dynamic web and mobile content is served faster.
• Origin Shield . Allows us to designate a specific POP to serve as a shield for a customer’s origin servers. When web content is refreshed, and multiple end-users request the new content simultaneously, it can lead to a deluge of requests hitting a customer’s origin server. This can result in poor web or application performance. With Origin Shield, we collapse all these content requests into a single request and hold it in queue at the Origin Shield POP. That allows us to go back to the customer’s origin server only once to retrieve the new content, then serve it to all end-users who requested it. This approach reduces costs for our customers, while improving performance for their end-users.
• Instant Purge . Lets customers clear the cached copy of their content globally in an average of 150 milliseconds or less. We allow customers to send a command to our platform that invalidates an old version of their content throughout our global edge infrastructure. This causes a new version of content to be retrieved from the application server the next time it is requested. This feature enables our customers to serve highly dynamic content at the edge more quickly and allows for delightful application experiences. Rapidly changing content like shopping cart items, flight search results, sports scores, or current weather conditions in any given location can all be served faster from the network edge.
• Surrogate Keys . Allow customers to fine-tune purging by tagging related objects across their site with a key name and description, then purging by that key. They can purge their entire site of a given object or set of objects at once, without impacting performance. For example, they could purge any images and content related to discontinued sale items, discounted products, or outdated news across their site all in one go.
• Real-time Logging and Stats . Provide metrics and full visibility into end-user requests in real time from the network edge. Log traffic is encrypted using Transport Layer Security ("TLS") and logs can be streamed to most major logging endpoint solutions.
• Cloud Optimizer. Cloud Optimizer targets eCommerce and high tech organizations who commonly work with multi-cloud or multi-CDN architectures. Cloud Optimizer sits between a customer’s CDNs and cloud providers, delivering intelligent routing capabilities without the need to rearchitect their infrastructure. Like Origin Shield, it also features request collapsing, to reduce origin traffic and costs and empowers customers with greater visibility and control over their network traffic.
• Programmatic Control . Fastly provides direct programmatic control of edge delivery services to our customers via the Varnish Configuration Language (VCL), allowing them to precisely control what content is cached, for how long and when it should be refreshed. Combined with comprehensive APIs, VCL allows our customers to build, test and deploy custom logic, using their own development, test and deployment environment, for even the most complex digital experience.
• Edge databases . As described for our Edge Compute offerings, Full Site Delivery customers also have access to powerful Edge Dictionaries and Access Control Lists to enable secure and personalized digital experiences that are faster when implemented at the edge, closer to end users.
• Content compression. Compressing content with technologies like Gzip and Brotli provides direct performance improvements and a more responsive web experience for end users.
• Reliability . Full Site Delivery services leverage a number of features and technologies that help ensure a customer’s content is highly available including origin health checks, a ‘grace mode’ feature that will continue serving content even when customer origin(s) fail, Multipath TCP, and real time error dashboards and API feeds that are backed by a 100% uptime Availability SLA.
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• Modern protocols and performance. Fastly helps invent, standardize and deploys numerous next generation web technologies and protocols such as HTTP/3, QUIC, client hints and HTTP prioritization which ensure our customers, and the Internet in general, receive the best possible performance regardless user device, connectivity or location.
Streaming
• Live Streaming. Our platform is designed to concurrently deliver millions of near real-time, high-quality live streams to our customers’ viewers. Our edge cloud supports the delivery of all major HTTP video streaming formats, and we partner with multiple online video platform vendors to improve the flexibility and scale of live streaming workflows, while also reducing total cost of ownership;
• Media Shield. Large streaming customers often route traffic across multiple CDNs for redundancy. Our Media Shield solution supports these efforts, while reducing total cost of ownership and improving visibility and performance. It does so by collapsing requests for the same video streaming content across all CDNs into one single request to the customer’s origin server. This reduces requests to origin and allows us to serve streaming content faster; and
• Origin Connect . Ideal for companies moving more than one gigabyte of data per second, such as media, video, and streaming companies, Origin Connect provides a direct private network connection between an organization’s origin server and an Origin Shield POP. It is an effective way to lower transit costs, reduce engineering complexity, and improve reliability for high-volume streaming content.
Edge Security
• DDoS Protection. Our high-bandwidth, globally distributed network is built to absorb DDoS attacks without impacting performance. Customers can respond to attacks in real time, filtering malicious requests at the network edge, before they reach their origin.
• Edge WAF. Our Fastly edge WAF is designed to protect applications from malicious attacks that would otherwise compromise web servers. It is integrated into our edge cloud platform, minimizing the impact on performance, since we only inspect requests going to a customer’s origin. Customers get real-time access to security events and notifications from the edge and can make instant changes to their WAF rules via our API.
• TLS. As part of our standard product, our platform terminates HTTPS connections at our network edge, offloading encrypted traffic from customer’s web servers for better performance. We provide a number of different certificate procurement and hosting options.
• Platform TLS. Our Platform TLS offering is designed to allow customers with multiple web properties to manage TLS certificates at scale, while enabling a fast, secure experience for their end-users. It supports delivery and management of hundreds of thousands of certificates, supported by our worldwide TLS termination and acceleration solution.
• Compliance. We speed up the caching and delivery of sensitive content at the edge, helping customers meet data compliance and privacy regulations such as HIPAA, the European Union's General Data Protection Regulation ("EU GDPR") and the United Kingdom’s GDPR (“U.K. GDPR”), in addition to industry standards such as PCI Data Security Standard and SOC. Our Assurance Services offering includes support for additional documentation and audit procedures for customers with these needs.
Application and API Security
Through our acquisition of Signal Sciences, we added a unified web application and API protection solution that includes Runtime Self-Application protection (RASP), advanced rate limiting, API protection, bot management and next generation WAF.
• Next-gen WAF. Our next-generation Web Application Firewall protects applications from malicious attacks that seek to compromise apps and APIs. Our solution requires no tuning, and is more accurate
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than the traditional rule or signature-based approaches. Our WAF can be installed in any infrastructure; cloud, container, on-premise data center or hybrid environments.
• Runtime Application Self-Protection (RASP). RASP protects from real-time attacks by embedding directly into application source code.
• Bot Protection . Bad bots can perform content scraping, tie up system resources, perform account brute forcing and other harmful actions. Our solution monitors web application and API traffic for automated bot activity, allowing customers to automatically block malicious bot-generated web requests.
• API Protection. Attackers often target sensitive APIs, attempting to validate stolen credit cards, perform e-commerce gift card fraud or obtain patient healthcare records. We help customers stop API abuse by enabling them to monitor for unexpected values and parameters submitted to API endpoints, and block unauthorized requests.
• ATO Protection . Account takeover occurs ("ATO") when attackers use authentication credentials to take over legitimate user accounts. Attackers test stolen credentials in an automated manner called “credential stuffing.” Our Account Takeover Protection empowers customers to automatically block and alert on credential stuffing attacks.
• Cloud DDoS. Our Cloud DDoS protection is an always-on service that provides immediate protection from network and application layer attacks, so web apps and APIs are always available and performant.
• Advanced Rate Limiting. Advanced Rate Limiting enables customers to stop malicious and anomalous high volume web requests and reduce resource consumption while allowing legitimate traffic through to application and API endpoints—doing so means companies can provide a superior customer experience that scales to meet increasing demand.
Edge Applications
• Load Balancer. Our Layer 7 load balancer manages HTTP/HTTPS requests to a customer’s origin using granular content-aware routing decisions. We allow customers to manage traffic across multiple IaaS providers, data centers, and hybrid clouds. We also provide improved performance and cost savings over ADCs, especially during a spike or surge in traffic.
• Image Optimizer. We offer a real-time image manipulation and delivery service and store transformations at the edge. When an image is requested, we resize it, adjust quality, crop/trim, change orientations, convert formats, and more, all on demand. Transforming images at the edge eliminates latency and reduces traffic to a customer’s origin servers, allowing them to save on infrastructure and egress costs.
Video on Demand
• Our edge cloud platform is designed to cache and rapidly deliver both frequently and infrequently requested on-demand videos. We significantly reduce the load on a customer’s origin servers while accelerating time to first frame. Our on-the-fly-packaging feature facilitates immediate playback, enhancing viewer experiences across multiple devices and platforms.
Managed Edge Delivery
• Our managed delivery service provides customers with maximum flexibility and control. We deploy our edge cloud platform on dedicated POPs within a customer’s private network, at locations of their choosing. This service can be used exclusively, or as part of a hybrid, multi-CDN strategy.
Partner Ecosystem
Our partner ecosystem consists of a wide range of companies who sell, service, package and build edge applications to integrate with our platform. Our program provides partners with the flexibility to accommodate different go-to-market models and allows each partner to customize their offerings to provide their own differentiated value. This ecosystem consists of companies who build edge applications to integrate with our platform, enterprise resellers and security integration providers, 5G and IOT platforms, video and streaming providers, cloud service providers, logging and analytics providers, as well as JAMStack and PaaS providers. Our partners are all looking to extend the power of our edge cloud platform to their customers.
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Edge Application Partners
Our edge cloud platform exposes blocks of code that allow trusted partners to develop real-time analysis and enforcement applications. Building out a massive edge presence is beyond the financial and technical capabilities of all but a handful of companies. By opening our platform to third parties, we allow these partners to focus on building new and innovative edge applications, without the capital outlay and complexity of doing it themselves. It opens up new markets and business models for them.
Enterprise Resellers & Security Integration Partners
Our acquisition of Signal Sciences welcomed new enterprise resellers and integration partners into our partner ecosystem. Enterprise resellers work with our sales and presales teams to scale sales cycle support. This helps expand our worldwide network of partners dedicated to protecting customer's business initiatives like DevOps and cloud adoption. We have recently expanded the reach and breadth of these partners to include cross-selling Fastly and security products and will increase our program's global expansion. Signal Sciences also seamlessly integrates with a number of technology partners to help customers enhance their workflows, empower DevOps processes, increase their security visibility, and drive operational efficiencies. Examples of these integration partnerships include VMware (Tanzu), Palo Alto Networks, Cisco, Datadog, Citrix, PagerDuty, Okta and more.
Cloud Service Provider Partners
We integrate with major cloud providers to enhance their services and create solutions that are powerful, scalable, and secure. We have exclusive Private Network Interconnects (PNIs) and peering arrangements with key cloud providers, such as Google Cloud Platform, Microsoft Azure, Amazon Web Services and others, to eliminate or minimize egress fees, enhance security, and improve overall performance. We can help customers on their digital transformation journeys with seamless cloud migrations, meaning zero downtime for their business, or provide a seamless user experience for customers deploying a multi-cloud strategy. Recently, we announced our availability on the Google Cloud Marketplace and AWS Marketplace, which can help eliminate the need for customers to have separate billing arrangements and makes Fastly services eligible for Google Cloud Platform and AWS committed spends.
Logging and Analytics Partners
Logging and analytics partners integrate with our edge cloud platform to deliver enhanced functionality to our joint customers. Our logging feature provides insights into web and mobile requests and response, such as slow or missing URLs, most requested URLs, site performance by region, and much more. Our statistics provide insights into things like percentage of requests per second, request misses, errors, latency, traffic spikes, and global traffic profiles. Both logs and statistics can be streamed in real time to our logging and analytics partners. This empowers our joint customers to monitor performance, troubleshoot issues as they occur, and view this data alongside other metrics in consolidated dashboards. Logging and analytics partners include the following:
• Google. A tight integration with Google Cloud Platform allows real-time logs to be streamed to any Google Cloud Platform big data service, including Google Cloud Storage, BigQuery, and Bigtable;
• Microsoft. Our integration with Microsoft Azure allows real-time logs to be streamed to both Azure Blob Storage and Kusto;
• Datadog. Datadog uses our API to pull in real-time stats and analytics for display in their dashboard;
• Looker. Looker combines log data with other data sources in BigQuery, such as Google Analytics, Google Ads data, or security and firewall data. Customers can then run multiple queries against these data sets and present findings in Looker dashboards;
• Sumo Logic. Sumo Logic integrates with our platform to offer more granular logging data for customers with large-scale analytics. Customers gain real-time insights into slow URLs, missing or most requested URLs, site performance by region, and more; and
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• Logentries. Logentries provides a one-click integration with our platform, making it easy for customers to quickly set up real-time logs.
PaaS Partners
PaaS partners integrate our edge cloud platform into their solutions to make it easier for their developers to scale and secure websites.
• Heroku . Heroku empowers companies to build, deliver, monitor, and scale applications. Our Heroku add-on lets developers seamlessly integrate their Heroku hosted applications with our edge cloud platform through the click of a button;
• Magento Commerce . Magento Commerce, an Adobe company, provides a platform that enables merchants to integrate digital and physical shopping experiences. Our Magento extension lets developers manage their entire content caching strategy from the Magento control panel while maintaining fast, reliable performance; and
• Drupal and Wordpress . Drupal and Wordpress are Content Management Systems ("CMS") partners. They provide self-hosted solutions for customers to create and manage all the content on their websites. Our Drupal and Wordpress extensions allow developers to easily configure and manage their content caching strategy from within these CMS dashboards. Several of the large CMS platforms leverage Fastly’s products and services within their offerings, ensuring their customers have the best user experience on the web.
Our Culture and Human Capital Resources
Our Values
Technology has the potential to make a radically positive impact on the world, and we aspire to improve human lives through our work. We were founded on strong ethical principles, and have intentionally grown values-first, scaling our workforce, services, customer portfolio, and investment partners purposefully. We are only as good as the company we keep, and this guides our hiring practices as well as the ethics we are committed to upholding as we scale. We believe that as a result of our values, we have been able to identify, attract, engage and retain great people. We want to serve the very best of the internet. We choose to work with customers that we believe have integrity, are trustworthy, and do not promote violence or hate. Our eight core values define who we are and how we choose to grow, hire, train, work, communicate, make decisions, support each other, and serve our customers.
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Our Strategy
We are dedicated to building a diverse workforce and leadership team that reflects our values and the unique needs of our global customer base. We strive to be a company full of talented, highly effective, kind, honest, passionate, and high-integrity people. We are dependent on our highly qualified employees and executives, and it is crucial that we continue to attract, engage and retain valuable employees, particularly in light of the increase in employee resignations currently taking place throughout the United States as a result of the COVID-19 pandemic, which is commonly referred to as the “great resignation.” We believe in investing in our people and motivating talented individuals with a strong career path and competitive compensation program. Our U.S. support engineers are often hired from code schools, and many code school graduates transition from support into other organizations within the company, championing the customer voice and infusing our teams with a strong, service-focused mindset. Our engineering staff recruits world-class experts in every part of the technology stack that makes up the internet, which inspires great developers to join us. Our compensation program is designed to attract, retain, and motivate highly qualified employees and executives. We use a mix of competitive base salary, equity compensation awards, and other employee benefits.
We are building a global, healthy, safe, and diverse workforce and an inclusive culture that empowers and supports our employees and customers. We onboard all new employees with training programs on our values, certain aspects of our business, and important policies, including our Safe, Welcoming, and Productive Work Environment Policy. Annually thereafter we provide employees with code of conduct and security awareness training, a learning reimbursement program and performance evaluations. Our employee engagement efforts currently include company-wide newsletters, all-hands meetings, and AMA (“ask me anything”) sessions, through which we aim to keep our employees well-informed and to increase transparency. We also use employee engagement surveys to collect employee feedback and assess the effectiveness of our culture, our strategy, and various health and well-being programs.
During the COVID-19 pandemic, we have taken significant steps to protect the health and safety of our workforce. Our offices have remained temporarily closed since March 1, 2020, and we have taken other precautionary measures, such as instituting protocols and guidelines for Fastly-related travel, intended to facilitate social distancing and help minimize the risk of the virus to our employees, our customers, and the communities in which we participate. Throughout the pandemic we have conducted periodic employee pulse surveys in order to get a deeper understanding of what our employees were experiencing and to inform our policies and priorities. We also instituted monthly employee wellness days, provided a monthly internet stipend, and held virtual workshops on topics such as mental health and leading and supporting remote teams.
Employees
As of December 31, 2021, we had a total of 976 employees worldwide and 188 employees located outside of the United States. We have a reputation as an early adopter of the distributed workforce model and this approach has enabled us to recruit highly skilled professionals around the world. Prior to the COVID-19 pandemic, as of December 31, 2019, nearly 40% of our employees were working in a remote-capacity. As of December 31, 2021, 65.8% of o ur employees worldwide were considered remote, which means they reside in locations where we do not expect to have a Fastly office presence once we reopen. Given our early experience building a distributed workplace culture, we were able to quickly transition to all employees working remotely in response to COVID-19.
Organization
Sales & Marketing
Our go-to-market model initially focused on reaching and serving the needs of developers. We reached developers through working groups, community events, conferences, and word-of-mouth. Our platform was built to empower developers to innovate at their own pace, so our platform is accessible, transparent, and self-service.
The majority of our customers enter into negotiated contracts with us. These contracts typically include specific pricing and a minimum monthly commitment. As developers have expanded their usage of our platform, our relationship has evolved to include business leaders within their organizations. Customers who sign up online can access our self-service pricing matrix which is publicly available.
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Our sales and marketing organizations work together closely to cultivate customer relationships with developers and business leaders at enterprises and technology-savvy organizations to drive revenue growth. We have geographically-based sales teams that continue to enhance our value-based selling methodology. Our land and expand sales strategy for enterprise customers has successfully demonstrated our platform’s capabilities, and our customer support enables broad adoption of our technology within an organization.
We also offer a trial to developers who sign up for testing and experimentation. We do this in order to strengthen our relationship and reputation within the developer community by providing developers with the ability to familiarize themselves with our platform without first becoming a paying customer. Once signed up, developers can easily access our programmable interface, extensive self-service documentation, and customer support team. Our low-friction trial experience allows developers to validate that our edge platform works for them at no cost or risk.
Research & Development
Our research and development team members are responsible for the design, development, and reliability of all aspects of our edge cloud platform. Continuous improvement and innovation are core to our DNA, and these efforts are baked directly into our service life cycle. Scale, performance, security, and reliability are core functional requirements of everything we build into our platform to serve our customers.
Our philosophy of customer empowerment guides our research processes. Our product managers regularly engage with customers and the developer, DevOps and site reliability engineering communities, as well as our internal stakeholders and subject matter experts, in order to understand customer needs. Our engineering team is comprised of experts with deep experience, who intimately understand customers’ technical challenges and build solutions accordingly.
Throughout the strategic, design, and build phases of our product life cycle, our development organization works closely with our product, infrastructure, operations, and compliance teams to design, develop, test, and launch any given solution. We strive for a balance of rapid iteration without compromise on the core functional requirements that our customers expect: scale, performance, security, and reliability.
As of December 31, 2021, we had 321 employees in our research and development group. Our research and development expenses were $126.9 million in the year ended December 31, 2021.
Infrastructure
Our infrastructure team is responsible for the design, deployment, and maintenance of the servers and network hardware that form the foundation of our mission critical environment in 71 markets as of December 31, 2021. We invest in research into global internet geography to identify optimal colocation site selection, network partner identification, and network-to-network interconnection opportunities. These activities allow us to connect in close proximity to core internet backbones and ISPs, thereby enhancing network performance. We carefully evaluate and test hardware from leading server, network, and component manufacturers to ensure they comply with our workload performance, system efficiency, and mean time-to-repair standards. In our process, we evaluate commodity server and network platforms to avoid vendor lock-in, while optimizing the mix of components in an effort to improve efficiency and optimize our capital expenditures. We intend to grow the number of data center colocation sites as traffic on our network grows and as demands for new markets justify investment.
Trust
We uphold transparency and trustworthiness as company values. Our security, compliance and data governance teams, as well as other departments across the company, continually iterate on our trust programs to better meet growing customer needs, updated regulatory requirements, and the evolving security threat landscape. To help validate the controls that safeguard our platform and the data moving through it, we have expanded our portfolio of security and compliance-related assessments and certifications over time.
Customer Support
We have designed our products and platform to be self-service and require minimal customer support. Customers are automatically covered by our standard support plan as soon as they sign up with us. They can file a ticket with the support team,
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access documentation including online FAQs, API references, and configuration guidelines. Our support approach is unique as we have built it with developers in mind. Our first-line support employee typically has an engineering background and is highly technical.
We also provide several options for premier, hands-on support from a team of highly-technical senior support engineers and technical account managers. They act as a single point of contact for our support, product and engineering teams. Our support model is global, with 24/7 coverage and support offices located throughout the United States, EMEA, and Japan.
Partnerships & Strategic Relationships
We believe that building a strong partner ecosystem helps amplify our reach and time-to-market, while providing our customers with enhanced value from our joint offerings. By investing in these partnerships, we hope to cross-sell between the Signal Sciences and Fastly customer bases to increase per customer revenue. In addition, we hope to increase customer satisfaction and retention since developers and decision makers will now get to work with their partner of choice. Our partners and strategic alliances include:
• Integration Partners
• Solutions Partners
• Referral and Reseller Partners
• Central Cloud Partners
Competition
Our platform spans several markets from cloud computing and cloud security to CDNs. We segment the competitive landscape into five key categories:
• Legacy CDNs like Akamai, Limelight, EdgeCast (part of Verizon Digital Media), Level3, and Imperva (for security);
• Small business focused CDNs like Cloudflare, StackPath, and Section.io;
• Application and API security vendors like Akamai, Cloudflare, Imperva, Amazon Web Services and F5 (Shape)
• Cloud providers who are starting to offer compute functionality at the edge like Amazon’s CloudFront, AWS Lambda, and Google Cloud Platform; and
• Traditional data center and appliance vendors like F5, Citrix, A10 Networks, Cisco, Imperva, Radware, and Arbor, as well as networks that offer a range of on-premise solutions for load balancing, WAF, and DDoS.
The principle competitive factors in our market include:
• Platform scalability and performance;
• Global network coverage;
• Platform reliability and security;
• Ease of integration and programmability;
• Credibility with developers;
• Ability to support modern application development processes;
• Brand awareness, reputation, and trust;
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• Strength of our sales and marketing efforts;
• Quality of customer support; and
• Price and network cost savings.
We believe we generally compete favorably with our competitors on the basis of these factors. Our edge cloud platform integrates many of the point products offered by our competitors which is a key differentiator. However, many of our competitors have substantially greater financial and technical resources in addition to larger sales and marketing budgets, broader market distribution, and more mature intellectual property portfolios.
Intellectual Property
We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology. We also rely on a number of registered and unregistered trademarks to protect our brand.
As of December 31, 2021, in the United States, we had 74 issued patents, which expire between August 2033 and February 2040, 39 patent applications pending for examination, as well as 6 pending provisional applications. As of such date, we also had 20 issued patents and 24 patent applications pending for examination in foreign jurisdictions and 29 Patent Cooperation Treaty patent applications pending for examination, all of which are related to U.S. patents and patent applications. In addition, as of December 31, 2021, we had 16 registered trademarks in the United States.
In addition, we seek to protect our intellectual property rights by requiring our employees and independent contractors involved in development of intellectual property on our behalf to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.
Despite our efforts to protect our technology and proprietary rights through intellectual property rights, licenses, and other contractual protections, unauthorized parties may still copy or otherwise obtain and use our software and other technology. In addition, we intend to continue to expand our international operations, and effective intellectual property, copyright, trademark, and trade secret protection may be unavailable or limited in foreign countries. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Further, companies in the communications and technology industries own large numbers of patents, copyrights, and trademarks and frequently threaten litigation, or file suit based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and expect to face in the future, allegations that we have infringed the intellectual property rights of third parties. From time to time, we also receive demands for indemnification from our customers under the terms of our contracts with them for infringement of a third-party’s intellectual property rights.
Legal Proceedings
From time to time, we have been and will continue to be subject to legal proceedings and claims. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material effect on our business, results of operations, financial condition, or cash flows. We have received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners, and our customers by determining the scope, enforceability, and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Please refer to Note 10—Commitments and Contingencies for discussion around our legal proceedings.
Regulatory
We are subject to a number of U.S. federal and state and foreign laws and regulations that involve matters central to our business. These laws and regulations may involve privacy, data protection, intellectual property, competition, consumer
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protection, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolve rapidly, it is possible that we may not be, or may not have been, compliant with each such applicable law or regulation. For a description of the risks we face related to regulatory matters, refer to “Item 1A.—Risk Factors” in this Annual Report on Form 10-K.
Corporate Information
We were initially incorporated under the laws of the State of Delaware in March 2011 under the name SkyCache, Inc. We changed our name to Fastly, Inc. in May 2012. Our principal executive offices are located at 475 Brannan Street, Suite 300, San Francisco, California 94107. Our telephone number is 1-844-432-7859. Our website address is www.fastly.com. The information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K.
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a), 14 and 15(d) of the Exchange Act. The SEC maintains a website at https://www.sec.gov that contains reports, and other information regarding us and other companies that file materials with the SEC electronically. Copies of our reports on Forms 10-K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically through our investor relations website at https://fastly.com/investors as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC.
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