What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-03-01 · 601 added, 806 removed, 716 unchanged (66% of the section changed)

2 unchanged sentences

The following financial statements are filed as part of this Annual Report on form 10-K:

Report of Independent Registered Public Accou nting Firm (PCAOB ID No.

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

1 unchanged sentence

Consolidated Statements of Comprehensive Loss

Consolidated Statements of C o n v e r t i b l e P r e f e r r e d S t o c k a n d Stockholders' Equity ( D e f i c i t )

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of Fastly, Inc.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report date March 1, 2022 expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2023, expressed an unqualified opinion on internal control over financial reporting.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue – Refer to Note 3 to the financial statements

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue – Refer to Notes 2 and 3 to the financial statements

Critical Audit Matter Description

2 unchanged sentences

For the year ended December 31, 2022, total revenue was $432.7 million, which includes the manually processed revenue.

We identified manually processed revenue as a critical audit matter as the Company has a significant volume of manually processed revenue and a complex set of manual procedures to generate complete and accurate data to process and record revenue.

We identified manually processed revenue as a critical audit matter as the manually processed revenue requires a complex set of manual procedures to generate complete and accurate data to process and record revenue.

This required an increased extent of effort to audit these manually processed revenue transactions.

5 unchanged sentences

We compared our recalculation of manually processed revenue transactions to the Company’s recorded revenue and evaluated any differences.

Stock Subject to Revest – Refer to Notes 5, 11 and 15 to the financial statements

Critical Audit Matter Description

On October 1, 2020, the Company completed the acquisition of Signal Sciences.

In connection with the acquisition, a restriction was placed on 896,499 shares belonging to the three co-founders of Signal Sciences to make them subject to revesting on a quarterly basis over a 2-year period.

During the quarter ended September 30, 2021 and the quarter ended December 31, 2021, 186,771 and 149,417 unvested shares were sold prior to vesting, respectively.

As the holders of these shares were not entitled to the benefit of unvested shares, the Company requested the return of the proceeds for the unvested shares as of December 31, 2021.

Subsequent to December 31, 2021, the Company entered into an agreement with the holders of restricted stock which resulted in a modification of the terms of the original awards and received a total of $10.7 million from these founders.

Auditing the Company’s accounting for stock subject to revest required complex auditor judgment.

In particular, judgment was required to evaluate the appropriate accounting for the cash received by founders subsequent to December 31, 2021, as well as to assess the timing and type of modifications.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to stock subject to revest included the following, among others:

• We read the applicable agreements, recalculated the unvested shares sold prior to vesting, and compared the key terms from the agreements to management’s analysis.

• We obtained supporting evidence for legal conclusions reached by the Company.

• With the assistance of professionals in our firm having expertise in accounting for stock compensation, we evaluated the Company’s conclusions regarding the treatment of cash received by founders and the timing and type of modifications in accordance with accounting principles generally accepted in the United States of America.

• We also evaluated the adequacy of the Company’s disclosures included in Notes 5, 11 and 15 in relation to these matters.

/s/ Deloitte & Touche LLP

San Francisco, California

March 1, 2022

February 24, 2023

We have served as the Company's auditor since 2014.

7 unchanged sentences

89,578 64,625

Restricted cash — 87

Prepaid expenses and other current assets 28,933 32,160

16 unchanged sentences

Long-term debt 704,710 933,205

Finance lease liabilities, noncurrent 22,293 14,707

Operating lease liabilities, noncurrent 55,114 44,890

Finance lease liabilities, non-current 15,507 22,293

Operating lease liabilities, non-current 61,341 55,114

Other long-term liabilities 7,076 2,583

2 unchanged sentences

Stockholders’ equity:

Class A and Class B common stock, $ 0.00002 par value;

Class A Common stock, $ 0.00002 par value;

1,000,000,000 and 1,094,129,050 shares authorized as of December 31, 2022 and 2021, respectively;

1 unchanged sentence

Additional paid-in capital 1,666,106 1,527,468

Accumulated other comprehensive income (loss) ( 2,627 ) 6

Accumulated other comprehensive loss ( 9,286 ) ( 2,627 )

Accumulated deficit ( 701,664 ) ( 510,890 )

14 unchanged sentences

Loss from operations ( 246,199 ) ( 219,021 ) ( 107,212 )

Net gain on extinguishment of debt 54,391 — —

Interest income 7,044 1,282 1,628

11 unchanged sentences

Net loss $ ( 190,774 ) $ ( 222,697 ) $ ( 95,932 )

Other comprehensive income (loss);

Other comprehensive loss;

Foreign currency translation adjustment $ ( 255 ) $ ( 286 ) $ ( 135 )

Gain (loss) on investments in available-for-sale-securities

( 2,347 ) ( 55 ) 121

Total other comprehensive income (loss) $ ( 2,633 ) $ ( 190 ) $ 232

Loss on investments in available-for-sale-securities ( 6,404 ) ( 2,347 ) ( 55 )

Total other comprehensive loss $ ( 6,659 ) $ ( 2,633 ) $ ( 190 )

Comprehensive loss $ ( 197,433 ) $ ( 225,330 ) $ ( 96,122 )

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

Convertible Preferred Shares

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Common Stock—Class A Common Stock—Class B Additional

4 unchanged sentences

Stockholders’

Equity (Deficit)

Shares Amount Shares Amount Shares Amount Treasury Stock

Balance as of December 31, 2018

53,630,213 219,584 — — 25,025,836 1 16,403 ( 2,109 ) ( 36 ) ( 146,186 ) ( 131,927 )

Impact of change in accounting policy — — — — — — — — — 5,727 5,727

Conversion of convertible preferred stock to Class B common stock ( 53,630,213 ) ( 219,584 ) — — 53,630,213 1 219,583 — — — 219,584

Conversion of convertible preferred stock warrants to Class B common stock warrants — — — — — — 5,665 — — — 5,665

Conversion of Class B common stock to Class A common stock — — 46,422,400 1 ( 46,422,400 ) ( 1 ) — — — — —

Issuance of Class A common stock in connection with the IPO, net of underwriting discounts — — 12,937,500 — — — 186,912 — — — 186,912

Exercise of stock options — — 1,289,600 — 1,211,230 — 5,579 — — — 5,579

Exercise of common stock warrants — — — — 224,102 — — — — — —

Vesting of early exercised stock options — — — — 162,101 — 620 — — — 620

Issuance of common stock under ESPP — — 305,194 — — — 4,150 — — — 4,150

Stock-based compensation — — — — — — 12,586 — — — 12,586

Repayment of shareholder note — — — — 31,939 — 74 — — — 74

Retirement of treasury stock — — — — — — ( 2,109 ) 2,109 — — —

Net loss — — — — — — — — — ( 51,550 ) ( 51,550 )

Other comprehensive income — — — — — — — — 232 — 232

Shares Amount Shares Amount

Balance as of December 31, 2019 60,955 $ 1 33,863 $ 1 $ 449,463 $ 196 $ ( 192,009 ) $ 257,652

1 unchanged sentence

Issuance of Class A common stock issued in connection with the follow-on public offering, net of underwriting discounts 6,900 — — — 274,177 — — 274,177

Shares issued related to a business combination (Note 5) — — 6,367,709 — — — 622,595 — — — 622,595

Value of equity awards assumed in a business combination (Note 5) — — — — — — 1,129 — — — 1,129

Restriction of stock awards (Note 5) — — ( 896,499 ) — — — ( 87,714 ) — — — ( 87,714 )

Shares issued related to a business combination 6,368 — — — 622,595 — — 622,595

Value of equity awards assumed in a business combination — — — — 1,129 — — 1,129

Restriction of stock awards ( 896 ) — — — ( 87,714 ) — — ( 87,714 )

Vesting of restricted stock awards 112 — — — — — — —

9 unchanged sentences

Balance as of December 31, 2020 103,394 $ 1 10,229 $ 1 $ 1,350,050 $ 6 $ ( 288,193 ) $ 1,061,865

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

(in thousands, except share amounts)

Convertible Preferred Shares

Exercise of vested stock options 2,188 — — — 12,626 — — 12,626

Vesting of early exercised stock options 48 — 43 — 405 — — 405

Vesting of restricted stock units 2,000 — — — — — — —

Proceeds from sale of restricted shares 224 — — — 10,655 — — 10,655

Vesting of restricted stock awards 448 — — — — — — —

Shares issued under ESPP 236 — — — 8,798 — — 8,798

Stock-based compensation — — — — 144,934 — — 144,934

Conversion of Class B to Class A Stock 10,272 1 ( 10,272 ) ( 1 ) — — — —

Net loss — — — — — — ( 222,697 ) ( 222,697 )

Other comprehensive loss — — — — — ( 2,633 ) — ( 2,633 )

Balance at December 31, 2021 118,811 $ 2 — $ — $ 1,527,468 $ ( 2,627 ) $ ( 510,890 ) $ 1,013,953

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(in thousands)

Common Stock—Class A Common Stock—Class B Additional

4 unchanged sentences

Stockholders’

Equity (Deficit)

Shares Amount Shares Amount Shares Amount Treasury Stock

Balance as of December 31, 2020 — — 103,394,496 $ 1 10,228,700 $ 1 $ 1,350,050 — $ 6 $ ( 288,193 ) $ 1,061,865

Shares Amount Shares Amount

Balance at December 31, 2021 118,811 $ 2 — $ — $ 1,527,468 $ ( 2,627 ) $ ( 510,890 ) $ 1,013,953

Exercise of vested stock options 1,778 — — — 5,688 5,688

Vesting of early exercised stock options — — 47,882 $ — 43,095 — 405 — — — 405

Vesting of restricted stock units 3,119 — — — — — — —

Proceeds from sale of restricted shares — — 224,124 $ — — — 10,655 — — — 10,655

Vesting of restricted stock awards 112 — — — — — — —

1 unchanged sentence

Stock-based compensation — — — — 128,285 — — 128,285

Conversion of Class B to Class A Stock — — 10,271,795 $ 1 ( 10,271,795 ) ( 1 ) — — — — —

Net loss — — — — — — ( 190,774 ) ( 190,774 )

Other comprehensive loss — — — — — ( 6,659 ) — ( 6,659 )

Balance at December 31, 2021 — — 118,810,611 $ 2 — $ — $ 1,527,468 — $ ( 2,627 ) $ ( 510,890 ) $ 1,013,953

Balance as of December 31, 2022 124,336 $ 2 — $ — $ 1,666,106 $ ( 9,286 ) $ ( 701,664 ) $ 955,158

CONSOLIDATED STATEMENTS OF CASH FLOWS

4 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 28,799 19,979 16,553

Amortization of acquired intangibles 21,238 5,078 —

Amortization of right-of-use assets and other 26,883 21,765 —

Amortization of deferred rent — — ( 711 )

Amortization of debt issuance costs 3,185 219 1,909

Depreciation expense 42,619 28,799 19,979

Amortization of intangible assets 21,696 21,238 5,078

Non-cash lease expense 29,714 26,883 21,765

Amortization of debt discount and issuance costs 3,169 3,185 219

Amortization of deferred contract costs 8,916 6,294 3,516

Stock-based compensation 145,796 140,488 64,433

Provision for credit losses and doubtful accounts 196 1,719 360

Change in fair value of preferred stock warrant liabilities — — 2,404

Other adjustments 2,225 624 ( 591 )

Interest paid on capital leases ( 1,754 ) ( 688 ) ( 364 )

Provision for credit losses 2,406 196 1,719

Interest paid for finance lease ( 2,381 ) ( 1,754 ) ( 688 )

(Gain) loss on disposals of property and equipment 854 ( 300 ) 653

Amortization and accretion of discounts and premiums on investments 3,137 2,221 345

Impairment of operating lease right-of-use assets 2,083 — —

Tax benefit related to release of valuation allowance — — ( 12,950 )

Net gain on extinguishment of debt ( 54,391 ) — —

Other adjustments 3,688 4 279

Changes in operating assets and liabilities:

11 unchanged sentences

Maturities of marketable securities 535,040 118,085 88,719

Acquisition of business, net of cash acquired ( 1,169 ) ( 200,988 ) —

Proceeds from sale of property and equipment 588 575 —

Business acquisitions, net of cash acquired ( 25,902 ) ( 1,169 ) ( 200,988 )

Advance payment for purchase of property and equipment ( 42,197 ) — —

Purchases of property and equipment ( 19,975 ) ( 34,816 ) ( 29,569 )

Proceeds from sale of property and equipment 492 588 575

Capitalized internal-use software ( 18,146 ) ( 13,479 ) ( 6,131 )

Purchases of intangible assets — ( 2,092 ) ( 1,811 )

Net cash used in investing activities ( 794,511 ) ( 275,023 ) ( 87,678 )

Net cash (used in) provided by investing activities 235,751 ( 794,511 ) ( 275,023 )

Cash flows from financing activities:

Proceeds from initial public offering, net of underwriting fees — — 192,510

Payments of costs related to initial public offering — — ( 5,469 )

Proceeds from follow-on public offering, net of underwriting fees — — 274,896

1 unchanged sentence

Issuance of convertible note, net of issuance costs — 930,775 —

Proceeds from borrowings under notes payable — — 20,300

Payments of debt issuance costs — ( 1,351 ) —

1 unchanged sentence

Repayments of finance lease liabilities ( 22,532 ) ( 13,568 ) ( 5,773 )

Cash received for restricted stock sold in advance of vesting conditions 10,655 — —

Cash paid for early sale of restricted shares ( 10,655 ) — —

Proceeds from employee stock purchase plan 4,777 8,069 9,318

Proceeds from exercise of vested stock options 5,688 12,626 15,273

Proceeds from early exercise of stock options — — 520

Proceeds from payment of stockholder note — — 74

Net cash provided by financing activities 936,551 272,739 168,148

Net cash (used in) provided by financing activities ( 189,149 ) 936,551 272,739

Effects of exchange rate changes on cash, cash equivalents, and restricted cash ( 390 ) ( 477 ) ( 149 )

2 unchanged sentences

Cash, cash equivalents, and restricted cash at end of period $ 143,541 $ 166,961 $ 63,880

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued

6 unchanged sentences

Vesting of early-exercised stock options $ — $ 405 $ 467

Capital lease outstanding from current year addition $ — $ — $ 7,380

Change in other assets from change in accounting principle $ — $ — $ 5,727

Conversion of convertible preferred stock warrants to convertible common stock warrants $ — $ — $ 5,665

Cashless exercise of common stock warrants $ — $ — $ 1,557

Costs related to initial public offering, accrued but not yet paid $ — $ — $ 130

Stock-based compensation capitalized to internal-use software $ 7,997 $ 4,446 $ 2,034

1 unchanged sentence

Assets obtained in exchange for finance lease obligations $ 23,575 $ 31,529 $ 22,541

Net non-cash change in operating lease assets and liabilities associated with modifications and terminations $ 3,126 $ — $ —

Interest paid for finance leases $ 2,381 $ 1,754 $ 688

Purchase consideration associated with business combination, accrued but not paid $ 8,000 $ — $ —

Deployments of prepaid capital equipment $ 5,184 $ — $ —

Value of common stock issued and stock awards assumed in a business combination $ — $ — $ 536,432

9 unchanged sentences

has built an edge cloud platform that can process, serve, and secure its customer’s applications as close to their end users as possible.

As of December 31, 2021, our edge network spans across 71 markets.

We were incorporated in Delaware in 2011 and are headquartered in San Francisco, California.

As used herein, "Fastly," "we," "our," "the Company," and similar terms include Fastly, Inc.

As of December 31, 2022, the Company's edge network spans across 79 markets around the world.

The Company was incorporated in Delaware in 2011 and is headquartered in San Francisco, California.

As used herein, "Fastly," "the Company," "its" and similar terms include Fastly, Inc.

and its subsidiaries, unless the context indicates otherwise.

Initial Public Offering ("IPO")

On May 21, 2019 we completed an IPO in which we sold 12,937,500 shares of our newly authorized Class A common stock, which included 1,687,500 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at the public offering price of $ 16.00 per share.

We received net proceeds of $ 192.5 million, after deducting underwriting discounts and commissions, from sales of our shares in the IPO.

The net proceeds include additional proceeds of $ 25.1 million, net of underwriters' discounts and commissions, from the exercise of the underwriters' option to purchase an additional 1,687,500 shares of our Class A common stock.

Prior to the closing of the IPO, all shares of common stock then outstanding were reclassified as Class B common stock.

Immediately upon the closing of the IPO, all shares of convertible preferred stock then outstanding were converted into 53,630,213 shares of Class B common stock on a one -to-one basis.

Prior to the IPO, we had seven outstanding series of convertible preferred stock each with a par value of $ 0.00002 per share, convertible at the option of the holder, that was classified as temporary equity on our consolidated balance sheet.

On May 17, 2019, immediately upon closing of the IPO, our convertible preferred stock was automatically converted to shares of our Class B common stock.

As of both December 31, 2021 and 2020, we had zero convertible preferred stock issued or outstanding.

Follow-on Public Offering

On May 26, 2020, we completed a follow-on public offering in which we sold 6,900,000 shares of Class A common stock, which included 900,000 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at the public offering price of $ 41.50 per share.

We received net proceeds of $ 274.9 million, after deducting underwriting discounts and commissions, from sales of our shares in the public offering.

Conversion of Dual Class Common Stock Structure

On October 12, 2020, the outstanding shares of our Class B common stock represented less than 10 % of the aggregate number of shares of the then outstanding Class A common stock and Class B common stock.

As a result, all our outstanding shares of Class B common stock automatically converted into the same number of shares of Class A common stock on July 12, 2021, pursuant to the terms of our amended and restated certificate of incorporation (the "Certificate").

Upon the conversion outstanding options denominated in shares of Class B common stock issued under any of our equity incentive plans remained unchanged, except that they now represent the right to receive shares of Class A common stock.

In accordance with the Certificate, the shares of Class B common stock that converted to Class A common stock were retired and will not be reissued by us.

On July 12, 2021, all outstanding shares of Class B common stock automatically converted into the same number of shares of Class A common stock (the "Conversion") pursuant to the terms of the Company's amended and restated certificate of incorporation (the "Certificate").

Upon the Conversion, outstanding options denominated in shares of Class B common stock issued under any of the Company's equity incentive plans remained unchanged, except that such options now represent the right to receive shares of Class A common stock on exercise.

In accordance with the Certificate, the shares of Class B common stock that converted to Class A common stock were retired and will not be reissued by the Company.

Follow-on Public Offering

On May 26, 2020, the Company completed a follow-on public offering in which 6,900,000 shares of Class A common stock were sold, including 900,000 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at the public offering price of $ 41.50 per share.

The Company received net proceeds of $ 274.9 million, after deducting underwriting discounts and commissions, from sales of shares in the public offering.

Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles ("U.S.

Certain changes in presentation have been made to conform the prior period presentation to the current period reporting.

Such reclassifications did not affect total revenues, operating income, or net income.

We have made certain presentation changes, to distinguish and disclose as a separate line item, our non-current marketable securities balance from our other assets

line in the Consolidated Balance Sheets.

We have made certain presentation changes to distinguish and disclose as separate line items, the amortization of intangible assets and depreciation expenses within operating cash flows in the Consolidated Statements of Cash Flows.

Principles of Consolidation

Basis of Presentation and Consolidation

The accompanying consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)".

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

Certain changes in presentation have been made to conform the prior period presentation to the current period reporting.

Such reclassifications did not affect total revenues, operating income, or net income.

Use of Estimates

The preparation of our consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.

Actual results and outcomes could differ significantly from our estimates, judgments, and assumptions.

Significant estimates, judgments, and assumptions used in these financial statements include, but are not limited to, those related to revenue, accounts receivable and related reserves, fair value of assets acquired and liabilities assumed for business combinations, useful lives and realizability of long-lived assets including our goodwill and intangible assets, income tax reserves, and accounting for stock-based compensation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.

Actual results and outcomes could differ significantly from the Company's estimates, judgments, and assumptions.

Significant estimates, judgments, and assumptions used in these financial statements include, but are not limited to, those related to revenue, accounts receivable and related reserves, internal-use software development costs, the incremental borrowing rate related to the Company’s lease liabilities, fair value of assets acquired and liabilities assumed during business combinations, useful lives of acquired intangible assets and property and equipment, fair value of the Company's reporting unit, income tax reserves, and accounting for stock-based compensation.

Estimates are periodically reviewed in light of changes in circumstances, facts, and experience.

The effects of material revisions in estimates are reflected in the consolidated financial statements in the period of change and prospectively from the date of the change in estimate.

The ongoing global COVID-19 pandemic has adversely impacted many operational aspects of our business and may continue to do so in the future.

Since the start of the global pandemic, we have assessed the impact that COVID-19 had on our results of operations, including, but not limited to an assessment of our allowance for credit losses, the carrying value of short-term and long-term marketable securities, the carrying value of goodwill and other long-lived assets, and the impact to revenue recognition and cost of revenues.

The future impacts of the pandemic and any resulting economic impact are largely unknown and continuing to evolve.

We will continue to actively monitor the impact that COVID-19 has on the results of our business operations, and may make decisions required by federal, state or local authorities, or that are determined to be in the best interests of our employees, customers, partners, suppliers and stockholders.

As a result, our estimates and judgments may change materially as new events occur or additional information becomes available to us.

Due to the Coronavirus (“COVID-19”) pandemic, there has been uncertainty and disruption in the global economy and financial markets.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of December 31, 2022.

These estimates may change, as new events occur and additional information is obtained, as well as other factors related to COVID-19 that could result in material impacts to the Company's consolidated financial statements in future reporting periods.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable.

The Company's cash, cash equivalents, and marketable securities primarily consisted of bank deposits, money market funds, investment-grade commercial paper, corporate notes and bonds, U.S.

treasury securities, municipal securities, foreign government and supranational securities and asset-backed securities held at major financial institutions that the Company believes to be of high credit standing.

The primary focus of its investment strategy is to preserve capital and meet liquidity requirements.

The Company's investment policy limits the amount of credit exposure with any one financial institution or commercial issuer.

Concentrations of credit risk with respect to accounts receivable are primarily limited to certain customers to which the Company makes substantial sales.

The Company's customer base consists of a large number of geographically dispersed customers diversified across several industries .

No customer accounted for more than 10% of revenue for the years ended December 31, 2022, 2021 and 2020.

No customer accounted for more than 10% of the total accounts receivable balance as of December 31, 2022 and 2021.

Affiliated customers that are business units of a single company in the streaming entertainment space generated an aggregate of 11 % of the Company's revenue for the years ended December 31, 2022 and 2021.

The same affiliated customers accounted for an aggregate of 15 % of the Company's accounts receivable balance as of December 31, 2022 and 2021.

Cash, Cash Equivalents and Marketable Securities

We invest our excess cash primarily in short-term fixed income securities, including government and investment-grade debt securities and money market funds.

We classify all liquid investments with stated maturities of three months or less from date of purchase as cash equivalents.

Marketable securities with original maturities greater than three months from purchase date and remaining maturities less than one year are classified as short-term marketable securities.

Marketable securities with remaining maturities greater than one year as of the balance sheet date and which we intend to hold for greater than one year, are classified as long-term marketable securities.

The fair market value of cash equivalents at December 31, 2021 and 2020 approximated their carrying value.

Cost of securities sold is based on specific identification.

We determine the appropriate classification of our investments in marketable securities at the time of purchase and reevaluate such designation at each balance sheet date.

We have classified and accounted for our marketable securities as available-for-sale.

After considering our capital preservation objectives, as well as our liquidity requirements, we may sell securities prior to their stated maturities.

We carry our available-for-sale securities at fair value, and report the unrealized gains and losses as a component of other comprehensive loss, except for unrealized losses determined to be other-than-temporary which are recorded as other expense, net.

We determine any realized gains or losses on the sale of marketable securities on a specific identification method and record such gains and losses as a component of other expense, net.

Interest earned on cash, cash equivalents, and marketable securities was approximately $ 1.3 million, $ 1.4 million, and $ 3.1 million during the years ended December 31, 2021, 2020 and 2019, respectively.

These balances are recorded in interest income in the accompanying Consolidated Statement of Operations.

We evaluate the investments periodically for possible other-than-temporary impairment.

A decline in fair value below the amortized costs of debt securities is considered an other-than-temporary impairment if we have the intent to sell the security or it is more likely than not that we will be required to sell the security before recovery of the entire amortized cost basis.

In those instances, an impairment charge equal to the difference between the fair value and the amortized cost basis is recognized in other expense.

Regardless of our intent or requirement to sell a debt security, impairment is considered other-than-temporary if we do not expect to recover the entire amortized cost basis.

Cash and cash equivalents include cash held in banks and highly liquid money market funds, all with original maturities of three months or less when acquired.

The Company’s short-term and long-term marketable securities consists of fixed income U.S.

and foreign government agency securities, corporate bonds, asset-backed securities and commercial paper.

Management determines the appropriate classification of the Company's investments at the time of purchase and reevaluates such designation at each balance sheet date.

The Company classifies its marketable securities as either short-term or long-term based on each instrument's underlying remaining contractual maturity date.

The Company classifies its marketable securities as available-for-sale as it has the ability to sell the marketable securities prior to its maturity.

The Company’s marketable securities are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity.

Cash and cash equivalents are stated at cost, which approximate fair market value.

Short-term and long-term marketable securities are classified as available-for-sale debt securities and are also carried at fair market value.

When the available-for-sale debt securities are sold, cost is based on the specific identification method, and the realized gains and losses are included in other income (expense), net in the consolidated statements of operations.

The Company evaluates its investments periodically for possible other-than-temporary impairment.

A decline in fair value below the amortized costs of its available-for-sale debt securities is considered an other-than-temporary impairment if the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis.

Otherwise, the credit loss component of the impairment is recorded as allowance for credit losses with an offsetting entry charged to other income (expense), net, while the remaining loss is recognized in other comprehensive income (loss).

Restricted Cash

As of December 31, 2021 and 2020, we had restricted cash balance of $ 0.9 million and $ 1.0 million, respectively, of which $ 0.9 million consists of letters of credit related to lease arrangements that are collateralized by restricted cash.

These are included in other assets on our Consolidated Balance Sheets.

As of December 31, 2022 and 2021, the Company had restricted cash balance of $ 0.2 million and $ 0.9 million, respectively, which consists of letters of credits related to lease arrangements that are collateralized by restricted cash.

As of December 31, 2022 and 2021, these amounts are included in prepaid expenses and other current assets and other assets, respectively, on the consolidated balance sheets.

Accounts Receivable, net

Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts.

We determine our trade accounts receivable allowances in line with the current expected credit losses model, based upon the assessment of various factors, such as:

historical experience, credit quality of our customers, age of the accounts receivable balances, geographic related risks, economic conditions, and other factors that may affect a customer's ability to pay.

Increases and decreases in the allowance for credit losses are included as a component of General and administrative expense in the Consolidated Statements of Operations.

We do not have any off-balance sheet credit exposure related to our customers.

Accounts receivable are recorded and carried at the original invoiced amount, net of an allowance for any potential credit losses.

The allowance for credit losses is determined based upon the assessment of various factors, such as historical

experience, credit quality of its customers, age of the accounts receivable balances, geographic related risks, economic conditions, and other factors that may affect a customer's ability to pay.

The Company records these charges as a component of general and administrative expenses in the consolidated statements of operations in the period in which the change occurs.

The Company does not have any off-balance sheet credit exposure related to its customers.

Incremental Costs to Obtain a Contract with a Customer

We capitalize incremental costs associated with obtaining customer contracts, specifically certain commission payments.

We pay commissions based on contract value upon signing a new arrangement with a customer and upon renewal and upgrades of existing contracts with customers only if the renewal and upgrades result in an incremental increase in contract value.

To the extent that renewals and upgrades do not result in an increase in contract value, no additional commissions are paid.

These costs are deferred on our Consolidated Balance Sheets and amortized over the expected period of benefit on a straight-line basis.

We also incur commission expense on an ongoing basis based upon revenue recognized.

The Company capitalizes incremental costs associated with obtaining customer contracts, specifically certain commission payments.

The Company pays commissions based on contract value upon signing a new arrangement with a customer and upon renewal and upgrades of existing contracts with customers only if the renewal and upgrades result in an incremental increase in contract value.

These costs are deferred on the consolidated balance sheets and amortized over the expected period of benefit on a straight-line basis.

The Company also pays commissions on an ongoing basis based upon revenue recognized.

In these cases, no incremental costs are deferred, as the commissions are earned and expensed in the same period for which the associated revenue is recognized.

Based on the nature of our unique technology and services, and the rate at which we continually enhance and update our technology, the expected life of the customer arrangement is determined to be approximately five years .

Based on the nature of the Company's unique technology and services, and the rate at which the Company continually enhances and updates its technology, the expected life of the customer arrangement is determined to be approximately five years .

Commissions for new arrangements and renewals are both amortized over five years .

Amortization is primarily included in sales and marketing

expense in the consolidated statements of operations.

Deferred commission and incentive payments are included in other assets on our Consolidated Balance Sheets.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash, cash equivalents, marketable securities, and accounts receivable.

The primary focus of our investment strategy is to preserve capital and meet liquidity requirements.

Our investment policy addresses the level of credit exposure by limiting the concentration in any one corporate issuer or sector and establishing a minimum allowable credit rating.

To manage the risk exposure, we invest cash equivalents and marketable securities in a variety of fixed income securities, including government and investment-grade debt securities and money market funds.

We place our cash primarily in checking and money market accounts with reputable financial institutions.

Deposits held with these financial institutions may exceed the amount of insurance provided on such deposits, if any.

Concentrations of credit risk with respect to accounts receivable are primarily limited to certain customers from which we generate significant revenue.

Our customer base consists of a large number of geographically dispersed customers diversified across several industries.

To reduce this risk, we routinely assess the financial strength of our customers.

Based on such assessments, we believe that our accounts receivable credit risk exposure is limited.

No customer accounted for more than 10% of revenue for the years ended December 31, 2021 and 2020.

No customer accounted for more than 10% of the total accounts receivable balance as of December 31, 2021, and one customer accounted for 10 % of the total accounts receivable balance as of December 31, 2020.

Amortization is primarily included in sales and marketing expense in the consolidated statements of operations.

Deferred commission and incentive payments are included in other assets on the consolidated balance sheets.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable, accrued expenses and debt.

Cash equivalents, accounts receivable, accounts payable, and accrued expenses are stated at their carrying value, which approximates fair value due to the short time until the expected receipt or payment date.

We measure marketable securities at fair value, using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The carrying amount of our debt approximates fair value as the stated interest rate approximates market rates currently available to us.

The Company's available-for-sale securities are recorded at fair value.

The Company’s cash and cash equivalents and restricted cash are recorded at cost, which approximates fair value.

Additionally, accounts receivable, accounts payable, and accrued expenses approximates fair value due to their short-term nature.

For disclosure purposes, the Company measures the fair value of its outstanding senior convertible notes using a market approach based on actual bids and offers in an over-the-counter market, or Level 2 inputs, on the last trading day of the period.

Property and Equipment

8 unchanged sentences

Internal-use software 3 years

We periodically review the estimated useful lives of property and equipment and any changes to the estimated useful lives are recorded prospectively from the date of the change.

Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in other income (expense), net in the Consolidated Statements of Operations.

The Company periodically reviews the estimated useful lives of property and equipment and any changes to the estimated useful lives are recorded prospectively from the date of the change.

Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the consolidated statements of operations.

Repairs and maintenance costs are expensed as incurred.

Internal-Use Software Development Costs

Labor and related costs associated with internal-use software during the application development stage are capitalized.

Labor and related costs associated with internal-use software incurred during the application development stage are capitalized.

Capitalization of costs begins when the preliminary project stage is completed, management has committed to funding the project, and it is probable that the project will be completed and the software will be used to perform the function intended.

1 unchanged sentence

The capitalized amounts are included in property and equipment, net on the consolidated balance sheets.

We amortize such costs over the estimated useful life of the software.

We amortize completed internal-use software that is used on our network is amortized to cost of revenue over its estimated useful life.

The Company amortizes such costs on a straight-line basis over the estimated useful life of the software, which is generally 3 years.

Completed internal-use software that is related to the Company's network is amortized to cost of revenue over its estimated useful life.

Costs incurred during the planning, training, and post-implementation stages of the software development life-cycle are expensed as incurred.

Business Combinations

We account for our acquisitions using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date.

The Company accounts for its acquisitions using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date.

The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill.

Acquisition costs, such as legal and consulting fees, are expensed as incurred.

Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed.

We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets.

Examples of critical estimates in valuing certain of the intangible assets and goodwill we have acquired include but are not limited to future expected cash flows from acquired developed technologies;

the acquired company’s trade name, existing customer relationships and backlog.

These estimates are inherently uncertain and unpredictable, and if different estimates were used the purchase price for the acquisition could be

allocated to the acquired assets and liabilities differently from the allocation that we have made.

Additionally, unanticipated events and circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.

The authoritative guidance allows a measurement period of up to one year from the date of acquisition to make adjustments to the preliminary allocation of the purchase price.

As a result, during the measurement period we may record adjustments to the fair values of assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation.

Upon conclusion of the measurement period or final determination of the values of the assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to the Consolidated Statement of Operations.

Determining the fair value of assets acquired and liabilities assumed requires significant judgment and estimates including the selection of valuation methodologies, future expected cash flows, discount rates, and useful lives.

The Company’s estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates.

During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date.

At the conclusion of the measurement period, or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are reflected in the consolidated statements of operations.

When the Company issues payments or grants of equity to selling stockholders in connection with an acquisition, the Company evaluates whether the payments or awards are compensatory.

This evaluation includes whether cash payments or stock award vesting is contingent on the continued employment of the selling stockholder beyond the acquisition date.

If continued employment is required for the cash to be paid or stock awards to vest, the award is treated as compensation for post-acquisition services and is recognized as compensation expense.

Transaction costs associated with business combinations are expensed as incurred, and are included in general and administrative expense in the consolidated statements of operations.

The Company considers operating segments to be components of the Company in which separate financial information is available and is evaluated regularly by the Company's Chief Operating Decision Maker ("CODM") in deciding how to allocate resources and in assessing performance.

The CODM is the Chief Executive Officer ("CEO").

The CEO reviews financial information presented on a consolidated basis, accompanied by information about revenue, customer size, and industry vertical for purposes of allocating resources and evaluating financial performance.

The Company has determined that it is organized as a single operating segment with no segment managers who are held accountable for operations, operating results, or plans for levels or components below the consolidated unit level.

Accordingly, the Company has determined that it has a single reportable segment and operating segment.

Goodwill, Intangible Assets and Other Long-Lived Assets

Goodwill is the amount by which the cost of acquired net assets in a business combination exceeds the fair value of the net identifiable assets on the date of purchase and is carried at its historical cost.

We test goodwill for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired.

We determined that we operate as one reporting unit and we perform our annual impairment test of goodwill as of October 31 and whenever events or circumstances indicate that the asset might be impaired.

We did not record any impairment to goodwill during the years ended December 31, 2021, 2020, and 2019.

Intangible assets with determinable economic lives are carried at cost, less accumulated amortization.

Amortization is computed over the estimated useful life of each asset on a straight-line basis.

We determine the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset.

Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions.

Intangible assets without determinable economic lives are carried at cost, not amortized, and reviewed for impairment at least annually.

The useful lives of our intangible assets are as follows:

Customer relationships 8 years

Developed technology 5 years

Trade names 3 years

Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and identifiable intangible assets acquired.

The carrying amount of goodwill is reviewed for impairment at least annually, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

The Company has a single operating segment and reporting unit structure for all of the periods presented.

As part of the annual goodwill impairment test, the Company first performs a qualitative assessment to determine whether further impairment testing is necessary.

If, as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test will be required.

If the Company has determined it necessary to perform a quantitative impairment assessment, the Company will compare the fair value of the reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the total amount of goodwill of the reporting unit.

The Company did not recognize any goodwill impairment charges for any of the periods presented.

The Company's definite lived intangible assets are carried at cost, net of accumulated amortization.

Intangible assets are amortized on a straight-line basis over their estimated useful lives.

The Company estimates the useful life by estimating the expected period of economic benefit.

The useful lives of the intangible assets are as follows:

Customer relationships 3 to 8 years

Developed technology 4 to 5 years

Trade names 3 to 4 years

Backlog 2 years

Domain names 3 years

Internet protocol addresses 10 years

IPR&D Indefinite

Long-lived assets, including property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances, such as service discontinuance, technological obsolescence, significant decreases in our market capitalization, facility closures, or work-force reductions indicate that the carrying amount of the long-lived asset or asset group may not be recoverable.

When such events occur, we compare the carrying amount of the asset or asset group to the undiscounted expected future cash flows related to the asset or asset group.

If this comparison indicates that an impairment is present, the amount of the impairment is calculated as the difference between the carrying amount and the fair value of the asset or asset group.

We lease office space and data centers ("Colocation leases") under non-cancelable operating leases with various expiration dates through 2027.

We also lease server equipment under non-cancelable operating finance leases with various expiration dates through 2024.

We determine if an arrangement contains a lease at inception.

In-process research and development ("IPR&D") Indefinite

Long-lived assets, including property and equipment, definite lived intangible assets, and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances, such as service discontinuance, technological obsolescence, significant decreases in market capitalization, facility closures, or work-force reductions indicate that the carrying amount of the long-lived asset or asset group may not be recoverable.

When such events occur, the Company compares the carrying amount of the asset or asset group to the undiscounted expected future cash flows related to the asset or asset group.

If this comparison indicates that an impairment is present, the amount of impairment is calculate as the difference between the carrying amount and the fair value of the asset or asset group.

The Company's indefinite lived intangibles are assessed annually for impairment.

The Company did not recognize any impairment charges on its long-lived assets and indefinite-lived intangible assets for any of the periods presented other than the operating lease right-of-use asset impairment discussed in Note 7.

The Company leases office space and data centers ("Colocation leases") under non-cancelable operating leases with various expiration dates.

The Company also leases server equipment under non-cancelable finance leases with various expiration dates.

The Company determines if an arrangement contains a lease at inception.

Operating lease right-of-use assets and lease liabilities are recognized at the present value of the future lease payments at commencement date.

The interest rate implicit in our operating leases is not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments.

The interest rate implicit in the Company's operating leases is not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments.

The estimated incremental borrowing rate factors in a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments.

Operating lease right-of-use assets also include any prepaid lease payments and lease incentives.

Certain of the operating lease agreements contain rent concession, rent escalation, and option to renew provisions.

Rent concession and rent escalation provisions are considered in determining the single lease cost to be recorded over the lease term.

Single lease cost is recognized on a straight-line basis over the lease term commencing on the date we have the right to use the leased property.

Operating lease right-of-use assets also include any prepaid lease payments and exclude lease incentives.

Lease expense is recognized on a straight-line basis over the lease term commencing on the date the Company has the right to use the leased property.

The lease terms may include options to extend or terminate the lease.

We generally use the base, non-cancelable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that the option will be exercised.

Our lease agreements may contain variable costs such as common area maintenance, operating expenses or other costs.

The Company generally uses the base, non-cancelable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that the option will be exercised.

The lease agreements may contain variable costs such as common area maintenance, operating expenses or other costs.

Variable lease costs are expensed as incurred on the consolidated statements of operations.

Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.

We lease networking equipment from a third party, through equipment finance leases.

The Company's lease agreements generally do not contain any residual value guarantees or restrictive covenants.

Certain of our operating leases contain both lease and non-lease components.

Non-lease components for our office spaces include fixed payments for maintenance, utilities, real estate taxes, and management fees.

Non-lease components for colocation leases include fixed payments for utilities and other operating costs.

For both office spaces and colocation leases, the Company combines fixed lease and non-lease components and account for them as a single lease component.

The Company leases networking equipment from a third party, through equipment finance leases.

These leases include a bargain purchase option, resulting in a full transfer of ownership at the completion of the lease term.

Operating leases are reflected in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on our consolidated balance sheets.

Finance leases are included in property and equipment, net, finance lease liabilities, and finance lease liabilities, non-current on our consolidated balance sheets.

Operating leases are reflected in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on the consolidated balance sheets.

Finance leases are included in property and equipment, net, finance lease liabilities, and finance lease liabilities, non-current on the consolidated balance sheets.

Convertible Debt

We early adopted ASU 2020-06 as of January 1, 2021, which in effect, allows for the separation models for convertible debt that contain cash conversion features accounted for as a cash conversion or beneficial conversion features to be removed.

We evaluated the terms of our debt in line with ASU 2020-06 and concluded that the instrument does not require separation and that there were no other derivatives that required separation.

We have combined these features with the host contract and we account for our convertible debt as a single liability in long-term debt on our condensed consolidated balance sheet.

The carrying amount of the liability is based on the gross proceeds, net of the unamortized transaction costs incurred related to the issuance of the convertible debt instrument.

This difference represents a debt discount that is amortized to interest expense over the term of the convertible debt instrument using the effective interest rate method.

We apply the if-converted method for calculation of diluted earnings per share for our convertible debt instrument.

The Company early adopted ASU 2020-06 as of January 1, 2021, which in effect, allows for the separation models for convertible debt arrangements that contain cash conversion features, which were accounted for as a cash conversion or beneficial conversion features, to be removed.

The Company evaluated the terms of its debt in line with ASU 2020-06 and concluded that the instrument does not require separation and that there were no other derivatives that required separation.

The Company has combined these features with the host contract and accounted for the convertible debt as a single liability in long-term debt on the consolidated balance sheets.

The carrying amount of the liability is based on the gross proceeds, net of the unamortized transaction costs incurred related to the issuance of the convertible debt instrument, and the partial repurchase made in May 2022.

The debt discount from the net unamortized transaction cost is amortized to interest expense over the term of the convertible debt instrument using the effective interest rate method.

The Company applies the if-converted method for calculation of diluted earnings per share for the convertible debt instrument.

Revenue recognition

Refer to Note 3, "Revenues" in the Notes to Consolidated Financial Statements for our Revenue Recognition policy.

The Company primarily derives revenue from the sale of services to customers executing contracts in which the standard contract term is one year, although terms may vary by contract.

Most of the Company's contracts are non-cancelable over the contractual term.

The majority of the Company's usage based contracts commit the customer to a minimum monthly level of usage and specify the rate at which the customer must pay for actual usage above the monthly minimum.

The Company also offers subscriptions to access a unified security web application and application programming interface at a fixed rate.

The Company recognizes revenue in accordance with ASC 606, where revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.

The processing and recording of certain revenue requires a manual process, which uses a complex set of procedures to generate complete and accurate data to record these revenue transactions.

The Company enters

into contracts that can include various combinations of products and services, each of which are distinct and accounted for as separate performance obligations.

Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

The Company's contracts with customers often include promises to transfer multiple products and services to a customer.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Performance obligations generally represent stand-ready obligations that are satisfied over time as the customer simultaneously receives and consumes the benefits provided by the Company.

These obligations can be network services, security, compute, professional services, support, and other edge cloud platform services.

Accordingly, the Company's revenue is recognized over time, consistent with the pattern of benefit provided to the customer over the term of the agreement.

For contracts with multiple performance obligations that are delivered over different time periods, the Company allocates the contract transaction price to each performance obligation using the estimated standalone selling price ("SSP") of each distinct good or service in the contract.

Judgment is required to determine the SSP for each distinct performance obligation.

The Company analyzes separate sales of its products and services or the discounted list price per management's approved price list as a basis for estimating the SSP of these products and services.

In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances.

In these instances, the Company may use information, such as geographic region and distribution channel, in determining the SSP.

The transaction price in a contract for usage-based services is typically equal to the minimum commit price in the contract plus any variable amounts of usage above the minimum commitment, less any discounts provided.

The transaction price in a contract that does not contain usage-based services is equal to the total contract value.

Because the Company's typical contracts represent distinct services delivered over time with the same pattern of transfer to the customer, usage-based consideration primarily related to actual consumption over the minimum commit levels is allocated to the period to which it relates.

The amount of consideration recognized for usage above the minimum commit price is limited to the amount the Company expects to be entitled to receive in exchange for providing services.

The Company has elected to apply the practical expedient for estimating and disclosing the variable consideration when variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation from its remaining performance obligations under these contracts.

Revenue on the Company's subscription services are recognized ratably over their respective contractual term.

At times, customers may request changes that either amend, replace, or cancel existing contracts.

Judgment is required to determine whether the specific facts and circumstances within the contracts should be accounted for as a separate contract or as a modification.

In contracts where there are timing differences between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service, the Company has determined its contracts do not include a significant financing component.

The Company has also elected the practical expedient to not measure financing components for any contract where the timing difference is less than one year.

Cost of Revenue

Cost of revenue consists primarily of fees paid to network providers for bandwidth and to third-party network data centers for housing servers, also known as colocation costs.

Cost of revenue also includes employee costs for network operation, build-out and support and services delivery, network storage costs, cost of managed services and software-as-a-service, depreciation of network equipment used to deliver our services, and amortization of network-related internal-use software.

We enter into contracts for bandwidth with third-party network providers with terms of typically one year .

These contracts generally commit us to pay minimum monthly fees plus additional fees for bandwidth usage above the committed level.

We enter into contracts for colocation services with third-party providers with terms of typically three years .

Cost of revenue also includes employee costs for network operation, build-out and support and services delivery, network storage costs, cost of managed services and software-as-a-service, depreciation of network equipment used to deliver services, and amortization of network-related internal-use software.

The Company enters into contracts for bandwidth with third-party network providers with terms of typically one year .

These contracts generally commit the Company to pay minimum monthly fees plus additional fees for bandwidth usage above the committed level.

The Company enters into contracts for colocation services with third-party providers with terms typically ranging from one to six years .

Research and Development Costs

Research and development costs consist of primarily payroll and related personnel costs for the design, development, deployment, testing, and enhancement of our edge cloud platform.

Costs incurred in the development of our edge cloud platform are expensed as incurred, excluding those expenses which met the criteria for development of internal-use software.

Research and development costs consist of primarily payroll and related personnel costs for the design, development, testing, and enhancement of the Company's edge cloud platform.

Research and development expenses also include cloud infrastructure fees for development and testing.

Costs incurred in the development of the Company's edge cloud platform are expensed as incurred, excluding those expenses which meet the criteria for development of internal-use software.

Advertising Expense

We recognize advertising expense as incurred.

We recognized total advertising expense of approximately $ 2.3 million, $ 3.8 million and $ 1.4 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The Company recognizes advertising expense as incurred.

The Company recognized total advertising expense of approximately $ 2.5 million, $ 2.3 million and $ 3.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Accounting for Stock-Based Compensation

We account for stock-based employee compensation plans under the fair value recognition and measurement provisions, which require all stock-based payments, including grants of stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance stock awards ("PSUs") and shares issued under our Employee Stock Purchase Plan ("ESPP") to be measured based on the grant-date fair value of the award and recognized as expense over the requisite service period, which is generally the vesting period of the respective award.

We account for forfeitures as they occur.

The fair value of RSUs and RSAs granted to our employees and directors is based on the grant date fair value.

The fair value of PSUs granted to our employees is based on the fair value determined when the performance metrics were set.

The fair value of stock options granted to our employees and directors, and of the shares to be issued under our ESPP are based on the Black-Scholes option-pricing model.

The determination of the fair value of a stock-based award is affected by the deemed fair value of the underlying stock price on the grant date, as well as assumptions regarding a number of other complex and subjective variables.

These variables include the fair value of our common stock, the expected stock price volatility over the expected term of the options, stock option exercise and cancellation behaviors, risk-free interest rates, and expected dividends:

These assumptions and estimates are as follows:

• Fair Value of Common Stock.

We use the market closing price of our Class A common stock, as reported on the New York Stock Exchange, for the fair value.

Prior to our IPO, our board of directors considered numerous objective and subjective factors to determine the fair value of our common stock at each meeting at which awards are approved.

These factors included, but were not limited to (i) contemporaneous third-party valuations of Common Stock;

(ii) the rights and preferences of Series Preferred relative to Common Stock;

(iii) the lack of marketability of Common Stock;

(iv) developments in the business;

and (v) the likelihood of achieving a liquidity event, such as an IPO or sale of the Company, given prevailing market conditions.

• Expected Term.

The expected term represents the period that our stock-based awards are expected to be outstanding.

The expected term assumptions were determined based on the vesting terms, exercise terms, and contractual lives of the options.

The expected term was estimated using the simplified method allowed under Securities and Exchange Commission (SEC) guidance.

• Volatility.

The expected volatility is derived from an average of the historical stock volatilities of the common stock of the Company.

In prior years the expected volatility calculation also included the historical stock volatilities of comparable companies as we did not have a long enough trading history of our common stock .

Comparable companies consist of public companies in our industry, which are similar in size, stage of life cycle, and financial leverage.

• Risk-free Interest Rate.

The risk-free interest rate used in the Black-Scholes option pricing model is the implied yield available on U.S.

Treasury zero-coupon issues with a remaining term equivalent to that of the options for each expected term.

• Dividend Yield.

The expected dividend assumption is based on our current expectations of our anticipated dividend policy.

We have no history of paying any dividends and therefore used an expected dividend yield of zero.

Foreign Currency Translation

The functional currency of our foreign subsidiaries is the U.S.

The local currencies of our foreign subsidiaries are the Australian dollar, British pound, Euros, Japanese yen, and the Swedish Kroner or the Japanese yen as the functional currency.

Our foreign subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates.

Revenue and expenses are remeasured at the average rate in effect during the period.

Resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss, a separate component of stockholders’ equity.

Gains and losses on intercompany and other non-functional currency transactions are recorded in other income (expense), net.

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates for the year in which the differences are expected to reverse.

The Company recognizes stock-based compensation expense based on the grant-date fair value of the awards.

The fair values of the restricted stock units ("RSUs"), restricted stock awards ("RSAs") and performance stock awards ("PSUs") are based on the fair value of the Company’s stock price on the grant date.

The fair values of stock options and ESPP are based on the Black-Scholes option-pricing model.

The fair value of the market-based performance stock awards ("MPSUs") is measured using a Monte Carlo simulation valuation model.

Stock-based compensation expense for awards with service-based vesting only is recognized on a straight-line basis over the requisite service period of the awards, which is generally four years .

In addition to service-based conditions, stock-based compensation expense for awards that have performance-based or market-based conditions are recognized over the requisite service period for each separately-vesting tranche as though each tranche of the award is its own separate grant, which results in an accelerated recognition of compensation cost.

The Company accounts for forfeitures as they occur.

Foreign Currency

The functional currency of the Company's foreign subsidiaries is the U.S.

The monetary assets and liabilities that are denominated in a currency other than the U.S.

dollar of the Company's foreign subsidiaries are remeasured into U.S.

dollars at the exchange rate on the balance sheet date, while non-monetary items are remeasured at historical rates.

Revenue and expenses are remeasured at average exchange rates during the period.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income (expense), net in the consolidated statements of operations.

The aggregate transaction gain or loss for the years ended December 31, 2022, 2021 and 2020 is included in the determination of net income for the period and was not material to the respective periods.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that it believes that these assets are more likely than not to be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

If we determine that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying Consolidated Statement of Operations and Comprehensive Loss.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized.

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

If the Company determines that it would be able to realize its deferred tax assets in the future in excess of

their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations and consolidated statement of comprehensive loss.

Accrued interest and penalties are included in accrued expenses on the consolidated balance sheet.

Comprehensive Loss

Comprehensive loss consists of two components:

net loss and other comprehensive income (loss).

Other comprehensive income (loss) refers to gains and losses that are recorded as an element of stockholders' equity and are excluded from net loss.

Our other comprehensive income (loss) is comprised of foreign currency translation adjustments and gain (loss) on investments in available-for-sale securities.

Net Loss Per Share Attributable to Common Stockholders

Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for multiple classes of common stock and participating securities.

Basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options, restricted stock units, restricted stock awards, shares issuable under its employee stock purchase place and performance stock awards.

The Company also applies the if-converted method for calculation of diluted per share for its convertible debt instruments.

As the Company has reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share.

Prior to the Conversion, the Company's basic and diluted net loss per share attributable to common stockholders was presented in conformity with the two-class method required for multiple classes of common stock and participating securities.

Under the two-class method, net income is attributed to common stockholders and participating securities based on their participation rights.

Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

We do not consider the restricted stock awards and common stock issued upon early exercise of stock options as participating securities.

Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options, restricted stock units, restricted stock awards, shares issuable under our employee stock purchase place and performance stock awards.

We also apply the if-converted method for calculation of diluted per share for our convertible debt instruments.

As we have reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share.

On October 12, 2020, the outstanding shares of our Class B common stock represented less than 10% of the aggregate number of shares of the then outstanding Class A common stock and Class B common stock.

As a result, all outstanding shares of Class B common stock automatically converted into the same number of shares of Class A common stock on July 12, 2021, pursuant to the terms of our amended and restated certificate of incorporation (the "Certificate").

In accordance with the Certificate, the shares of Class B common stock that converted to Class A common stock were retired and will not be reissued by us.

Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU was issued to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Offered Rate or another reference rate expected to be discontinued.

The last expedient is a one-time election to sell or transfer debt securities classified as held to maturity.

The expedients are in effect from March 12, 2020, through December 31, 2022.

In January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):

The amendments in this Update are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

The amendments clarify certain optional expedients and exceptions in Topic 848 for contract modifications apply to derivatives that are affected by the discounting transition.

The amendments are in effect from March 12, 2020, through December 31, 2022.

This ASU does not have a material impact on the Company's consolidated financial statements.

As of December 31, 2021, there was no impact to the Company’s Consolidated Financial Statements related to ASU 2020-04 and/or ASU 2021-01 .

On December 18, 2019, the FASB released ASU 2019-12 which affects general principles within Topic 740, Income Taxes.

The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes.

The FASB has stated that the ASU is being issued as part of its Simplification Initiative, which is meant to reduce complexity in accounting standards by improving certain areas of generally accepted accounting principles ("U.S.

GAAP") without compromising information provided to users of financial statements.

The standard is effective for public companies on the first interim period within the annual period beginning after December 15, 2020.

We adopted this standard on January 1, 2021.

The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40).

The update removes separation models for convertible debt that contain cash conversion features accounted for as a cash conversion or beneficial conversion features.

Under this ASU, these features will be combined with the host contract.

ASU 2020-06 does not impact the accounting

treatment for conversion features that are accounted for as a derivative under Topic 815.

The update also requires the application of the if-converted method to be used for convertible instruments and the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares.

The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

The amendment is to be adopted through either a fully retrospective or modified retrospective method of transition, only at the beginning of an entity's fiscal year.

Early adoption is permitted.

We have elected to early adopt the standard as of January 1, 2021 using the modified retrospective method of transition.

As of the date of adoption, we determined that we had no debt with conversion features or other derivative features that would require separation.

As a result, we recorded our convertible debt as a single liability within long-term debt on our Condensed Consolidated Balance Sheet.

We use the if-converted method for calculation of diluted earnings per share for our convertible debt instruments.

In February 2016, the FASB issued new guidance, Accounting Standard Update No.

2016-02, Leases (Topic 842) ("ASU 2016-02"), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases.

Accordingly, this new standard introduces a lessee model that brings most operating leases on the balance sheet and also aligns certain of the underlying principles of the new lessor model with those in the new revenue recognition standard.

We adopted the standard on December 31, 2020, presenting the initial application of ASC 842 beginning on January 1, 2020 (i.e.

adoption effective date), using the modified retrospective approach and has elected to use the optional transition method which allows us to apply the guidance of ASC 840, including disclosure requirements, in the comparative periods presented.

In addition, we elected the package of practical expedients permitted under the transition guidance within the new

standard, which among other things, allowed us to carry forward the historical lease classification related to agreements entered prior to adoption.

We have also elected the:

(i) short-term lease recognition exemption for all leases that qualify, whereby we will not recognize right-of-use ("ROU" assets or lease liabilities for existing short-term leases of those assets in transition;

(ii) practical expedient to not separate lease and non-lease components for all of our leases;

and (iii) use hindsight in determining the lease term, assessing the likelihood that a lease purchase option will be exercised and in assessing the impairment of right-of-use assets.

Upon adoption of ASC 842, we recognized $ 54.7 million of ROU assets and $ 56.3 million of lease obligations related to operating leases, which represents the present value of the lease payments discounted using our incremental borrowing rate ("IBR").

The accounting for finance leases remained unchanged as compared to ASC 840.

The cumulative impact of transition to retained earnings, recorded as of the adoption date, was not material.

The cumulative effect adjustment recorded to accumulated deficit as of the adoption date was not material.

The adoption of ASC 842 did not materially impact our consolidated statements of operations or cash flows.

In June 2016, FASB issued new guidance, ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities.

The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information.

Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities.

We adopted the standard on December 31, 2020, presenting the initial application beginning on January 1, 2020 (i.e.

adoption effective date).

The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (ASC 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement ("ASU 2018-15").

This guidance provides that implementation costs be evaluated for capitalization using the same criteria as that used for internal-use software development costs, with amortization expense being recorded in the same income statement expense line as the hosted service costs and over the expected term of the hosting arrangement.

We adopted the standard on December 31, 2020, presenting the initial application beginning on January 1, 2020 (i.e.

adoption effective date).

The adoption of this standard did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards

In October 2021, the FASB issued ASU No.

2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) .

This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606.

At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts.

The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

Adoption of the ASU should be applied prospectively.

Early adoption is also permitted, including adoption in an interim period.

If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption.

This ASU is currently not expected to have a material impact on our consolidated financial statements.

Revenue recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.

The processing and recording of certain revenue requires a manual process, which uses a complex set of procedures to generate complete and accurate data to record these revenue transactions.

We enter into contracts that can include various combinations of products and services, each of which are distinct and accounted for as separate performance obligations.

Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account.

Our contracts with customers often include promises to transfer multiple products and services to a customer.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our estimate of the standalone selling price ("SSP") of each distinct good or service in the contract.

Judgment is required to determine the SSP for each distinct performance obligation.

We analyze separate sales of our products and services as a basis for estimating the SSP of our products and services.

We then use the SSP as the basis for allocating the transaction price when our product and services are sold together in a contract with multiple performance obligations.

In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs.

We typically have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances.

In these instances, we may use information, such as geographic region and distribution channel, in determining the SSP.

The transaction price in a contract for usage-based services is typically equal to the minimum commit price in the contract less any discounts provided.

The transaction price in a contract that does not contain usage-based services is equal to the total contract value.

Because our typical contracts represent distinct services delivered over time with the same pattern of transfer to the customer, usage-based consideration primarily related to actual consumption over the minimum commit levels is allocated to the period to which it relates.

The amount of consideration recognized for usage above the minimum commit price is limited to the amount we expect to be entitled to receive in exchange for providing services.

We have elected to apply the practical expedient for estimating and disclosing the variable consideration when variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation from our remaining performance obligations under these contracts.

Performance obligations represent stand-ready obligations that are satisfied over time as the customer simultaneously receives and consumes the benefits provided by us.

These obligations can be content delivery, security, subscription services, professional services, support, edge cloud platform services, and others.

Accordingly, our revenue is recognized over time, consistent with the pattern of benefit provided to the customer over the term of the agreement.

At times, customers may request changes that either amend, replace, or cancel existing contracts.

Judgment is required to determine whether the specific facts and circumstances within the contracts should be accounted for as a separate contract or as a modification.

In contracts where there are timing differences between when we transfer a promised good or service to the customer and when the customer pays for that good or service, we have determined our contracts do not include a significant financing component.

We have also elected the practical expedient to not measure financing components for any contract where the timing difference is less than one year.

Nature of products and services

We primarily derive revenue from the sale of services to customers executing contracts in which the standard contract term is one year, although terms may vary by contract.

Most of our contracts are non-cancelable over the contractual term.

The majority of our usage based contracts commit the customer to a minimum monthly level of usage and specify the rate at which the customer must pay for actual usage above the monthly minimum.

Beginning in the fourth quarter of 2020, we also offer subscriptions to access a unified security web application and application programming interface at a fixed rate.

Recently Issued and Adopted Accounting Pronouncements

The Company has not adopted any new accounting standards in fiscal year ended December 31, 2022.

Other recently issued accounting standards are not expected to have a material impact on the Company's consolidated financial statements.

Please refer to our Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 for the standards adopted in the Company's comparative periods presented.

Revenue by geography is based on the billing address of the customer.

Aside from the United States, no other single country accounted for more than 10% of revenue for the years ended December 31, 2022, 2021 and 2020.

The following table presents our net revenue by geographic region:

The following table presents the Company's net revenue by geographic region:

Year ended December 31,

4 unchanged sentences

Europe 38,469 35,177 32,768

All other countries 19,258 17,508 11,219

All other 20,034 19,258 17,508

Total revenue $ 432,725 $ 354,330 $ 290,874

The majority of our revenue is derived from enterprise customers, which are defined as customers with revenue in excess of $ 100,000 over the previous 12-month period.

The following table presents our net revenue for enterprise and non-enterprise customers:

The majority of the Company's revenue is derived from enterprise customers, which are defined as customers with revenue in excess of $ 100,000 over the previous 12-month period.

The following table presents the Company's net revenue for enterprise and non-enterprise customers:

Year ended December 31,

6 unchanged sentences

The timing of revenue recognition may differ from the timing of invoicing to customers.

We have an unconditional right to consideration when we invoice our customers and record a receivable.

We record a contract asset when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue is recognized subsequent to invoicing.

Deferred revenue includes amounts billed to customers for which revenue has not been recognized and consists of the unearned portions of edge cloud platform usage and billings to customers for our security subscription services.

The Company has an unconditional right to consideration when it invoices its customers and records a receivable.

The Company records a contract asset, or a receivable, when revenue is recognized prior to invoicing.

The Company records a contract liability, or deferred revenue, when revenue is recognized subsequent to invoicing.

Amounts that have been invoiced for annual subscriptions, but not collected, are recorded in accounts receivable and in unearned revenue or in revenue depending on whether services have been delivered to the customer.

Our payment terms and conditions vary by contract type.

Payment terms on invoiced amounts are at an average of 30 days .

The following presents our contract assets and contract liabilities as of and for the years ended December 31, 2021 and 2020:

The Company's payment terms and conditions vary by contract type, and generally range from 30 to 90 days.

The following table presents the Company's contract assets and contract liabilities as of December 31, 2022 and 2021:

As of December 31, 2022 As of December 31, 2021

3 unchanged sentences

The following table presents the revenue recognized during the years ended December 31, 2022 and 2021 from amounts included in the contract liability at the beginning of the period:

Year ended December 31, 2021 Year ended December 31, 2020

Year ended December 31,

(in thousands)

Revenue recognized in the period from:

Amounts included in contract liability at the beginning of the period $ 15,948 $ 310

Revenue recognized in the period from amounts included in contract liability at the beginning of the period $ 26,274 $ 15,948

Remaining performance obligations

As of December 31, 2021, we had $ 152.3 million of remaining performance obligations, which includes deferred revenue and amounts that will be invoiced and recognized in future periods, respectively.

We apply the practical expedient of ASC 606, which gives us the optional exemption from disclosing certain information about our remaining performance obligations for our service contracts for which the original contract duration is one year or less, such as the aggregate transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period.

The typical contract term is one year, although terms may vary by contract.

We expect to recognize 81 % of this balance over the next 12 months and the remainder within the following year.

As of December 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations that are unsatisfied or partially unsatisfied was $ 198.3 million.

This amount includes future committed revenue for periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied.

The Company has elected to not provide certain information about its remaining performance obligations for service contracts with an original contract duration of one year or less.

As of December 31, 2022, the Company expects to recognize approximately 80 % of its remaining performance obligations over the next 12 months.

The Company's typical contractual term with its customers is one year, although terms may vary by contract.

Costs to obtain a contract

As of December 31, 2021 and December 31, 2020, our costs to obtain contracts were as follows:

As of December 31, 2022 and December 31, 2021, the Company's costs to obtain contracts were as follows:

As of December 31, 2022 As of December 31, 2021

1 unchanged sentence

Deferred contract costs, net $ 50,523 $ 23,830

During the years ended December 31, 2021, 2020 and 2019, we recognized $ 6.3 million, $ 3.5 million and $ 2.3 million of amortization related to deferred contract costs, respectively.

These costs are recorded within the sales and marketing line item on the accompanying Consolidated Statements of Operations.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 8.9 million, $ 6.3 million and $ 3.5 million of amortization related to deferred contract costs, respectively.

These costs are recorded within sales and marketing expenses on the accompanying consolidated statements of operations.

Investments and Fair Value Measurements

Our total cash, cash equivalents and marketable securities consisted of the following:

The Company's total cash, cash equivalents and marketable securities consisted of the following:

As of December 31,

3 unchanged sentences

Money market funds 96,875 31,294

Commercial paper — 4,998

Total cash and cash equivalents

143,391 166,068

Marketable securities:

5 unchanged sentences

Foreign government and supranational securities 12,453 17,607

Total short-term marketable securities $ 361,795 $ 131,283

Total marketable securities, current $ 374,581 $ 361,795

Treasury securities — 239,528

3 unchanged sentences

Foreign government and supranational securities — 12,631

Total long-term marketable securities $ 528,911 $ 20,448

Total marketable securities, non-current $ 165,105 $ 528,911

Total marketable securities $ 539,686 $ 890,706

Our long-term marketable securities have remaining maturities that are greater than one year as of the balance sheet date and which we intend to hold for more than one year.

Total cash, cash equivalents and marketable securities $ 683,077 $ 1,056,774

Available-for-Sale Investments

14 unchanged sentences

Treasury securities $ 425,560 $ 1 $ ( 1,086 ) $ 424,475

Commercial paper 41,445 — — 41,445

Corporate notes and bonds 209,550 — ( 925 ) 208,625

Commercial paper 124,098 — ( 9 ) 124,089

Asset-backed securities 98,857 — ( 140 ) 98,717

Municipal securities 4,577 — ( 15 ) 4,562

Foreign government and supranational securities 30,306 — ( 68 ) 30,238

Total available-for-sale investments $ 892,948 $ 1 $ ( 2,243 ) $ 890,706

Cash equivalents include investments with maturity date of three months or less.

The majority of our securities classified as available-for-sale as of December 31, 2021 have contractual maturities of one year or less.

Certain securities held and classified as available-for-sale as of December 31, 2021, have contractual maturities that are greater than one year.

Where we intend to hold the securities for less than 12 months, we classify them as short-term.

Where we intend to hold the securities for more than 12 months, we classify them as long-term.

As of December 31, 2021, all securities classified as available-for-sale had contractual maturities of one year or less.

There were no securities in a continuous loss position for 12 months or longer as of December 31, 2021 and December 31, 2020.

There were no material realized gains or losses from sales of marketable securities that were reclassified out of accumulated other comprehensive income (loss) into other income as of December 31, 2022 and December 31, 2021.

There were 76 securities in a continuous loss position for 12 months or longer as of December 31, 2022.

No securities were in a continuous loss position for 12 months or longer as of December 31, 2021.

Investments are reviewed periodically to identify possible other-than-temporary impairments.

No impairment loss has been recorded on the securities included in the tables above, as we believe that the decrease in fair value of these securities is temporary, and we expect to recover at least up to the initial cost of investment for these securities.

For the years ended December 31, 2022 and 2021, the Company did not record any impairment charges for its marketable debt securities in its consolidated statements of operations.

No impairment loss has been recorded on the securities as the Company does not intend to sell any impaired securities, nor is it more likely than not that the Company would be required to sell impaired securities before recovery of amortized cost basis.

Furthermore, the Company has determined that the decline in fair value of the investment is not due to credit related factors.

Fair Value of Financial Instruments

For certain of our financial instruments, including cash held in banks, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.

For certain of the Company's financial instruments, including cash held in banks, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

3 unchanged sentences

Level 3—Unobservable inputs that are supported by little or no market activity, which require management judgment or estimation.

We measure our cash equivalents and marketable securities at fair value.

We classify our cash equivalents and marketable securities within Level 1 or Level 2 because we value these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The fair value of our Level 1 financial assets is based on quoted market prices of the identical underlying security.

The fair value of our Level 2 financial assets is based on inputs that are directly or indirectly observable in the market, including the readily available pricing sources for the identical underlying security that may not be actively traded.

The Company measures its cash equivalents, marketable securities, and restricted cash at fair value.

The Company classifies its cash equivalents, marketable securities and restricted cash within Level 1 or Level 2 because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The Company classifies its investments, which are comprised of corporate notes and bonds, commercial paper, U.S.

treasury securities, foreign government and supranational securities and asset-backed securities within Level 2 of the fair value hierarchy because the fair value of these securities is priced by using inputs based on non-binding market consensus prices that are primarily corroborated by observable market data or quoted market prices for similar instruments.

Financial assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments:

14 unchanged sentences

Restricted cash:

Money market funds 893 — — 893

Restricted cash, current 150 — — 150

Total restricted cash 150 — — 150

Total financial assets $ 97,025 $ 539,686 $ — $ 636,711

As of December 31, 2021, our remaining restricted cash balance was $ 0.9 million, consisting of letters of credit related to lease arrangements that are collateralized by restricted cash.

These are included in other assets on the Consolidated Balance Sheets.

As of December 31, 2021

3 unchanged sentences

Money market funds $ 31,294 $ — $ — $ 31,294

Treasury securities — 4,998 — 4,998

Total cash equivalents 31,294 — — 31,294

1 unchanged sentence

Treasury securities — 424,475 — 424,475

Commercial paper — 41,445 — 41,445

Corporate notes and bonds — 208,625 — 208,625

Commercial paper — 124,089 — 124,089

Asset-backed securities — 98,717 — 98,717

Municipal securities — 4,562 — 4,562

Foreign government and supranational securities — 30,238 — 30,238

Total marketable securities — 890,706 — 890,706

Restricted cash:

Money market funds 980 — — 980

Restricted cash, non-current 893 — — 893

Total restricted cash 893 — — 893

Total financial assets $ 32,187 $ 890,706 $ — $ 922,893

Restricted cash was $ 0.2 million and $ 0.9 million as of December 31, 2022 and 2021, respectively.

The Company's restricted cash balance consisted of letters of credit related to lease arrangements that were collateralized by its cash.

The amounts as of December 31, 2022 and 2021, were classified as current and non-current, respectively, on the Company's consolidated balance sheets.

There were no transfers of assets and liabilities measured at fair value between Level 1 and Level 2, or between Level 2 and Level 3, during the years ended December 31, 2022 and 2021.

Business Combinations

On May 18, 2022, the Company acquired 100 % of the voting equity interest of Glitch, Inc.

("Glitch"), a software company specializing in developer project management tools, for $ 34.9 million in cash, of which $ 8.0 million has been held back as security for indemnification claims under the terms of the merger agreement ("Holdback").

The Holdback will be distributed to the shareholders of Glitch between 12 and 24 months following acquisition closing date.

The acquisition is expected to expand the Company's brand awareness within the developer community and bolster the Company's existing product offerings by making it easier to innovate at a layer in the Company's software stack.

The Company accounted for the transaction as a business combination.

The purchase price was preliminarily allocated based on the estimated fair value of the identified intangible assets of $ 2.0 million, cash of $ 1.6 million and other net assets of $ 0.6 million, and goodwill of $ 32.6 million.

The goodwill was primarily attributed to the value of synergies created with the acquisition of Glitch's technology offering.

Goodwill is not deductible for income tax purposes.

The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received.

The provisional measurements of fair value for income taxes payable and deferred taxes may be subject to change as additional information is received and certain tax returns are finalized.

The Company expects to finalize the fair value measurements as soon as practicable, but not later than one year from the acquisition date.

Identifiable finite-lived intangible assets were comprised of the following (in thousands):

Total Estimated useful life (in years)

Developed Technology $ 630 4

Customer relationships 760 3

Trade name 610 4

Total intangible assets acquired $ 2,000

For the year ended December 31, 2022, the Company incurred $ 2.0 million in acquisition-related expenses.

The acquired intangible assets have a total weighted average amortization period of 3.6 years.

From the date of the acquisition, the financial results of Glitch have been included in and are not material to the Company’s consolidated financial statements.

Pro forma revenue and results of operations have not been presented because the historical results are not material to the condensed consolidated financial statements in any period presented.

Signal Sciences

On October 1, 2020, we completed the acquisition of Signal Sciences where we acquired 100 % of the voting rights of Signal Sciences and it is now our wholly-owned subsidiary.

The acquisition is expected to expand our security portfolio and bolster our existing security offerings with our web application and API protection solutions.

Under the terms of the Merger Agreement, we acquired Signal Sciences for an aggregate purchase price of $ 759.4 million, consisting of approximately $ 223.0 million in cash and the balance in Class A Common Stock and equity consideration of $ 536.4 million.

On October 1, 2020, the Company completed the acquisition of Signal Sciences where the Company acquired 100 % of the voting rights of Signal Sciences and it is now a wholly-owned subsidiary.

The acquisition expands its security portfolio and bolsters its existing security offerings with its web application and API protection solutions.

Under the terms of the Merger Agreement, the Company acquired Signal Sciences for an aggregate purchase price of $ 759.4 million, consisting of approximately $ 223.0 million in cash and the balance in Class A Common Stock and equity consideration of $ 536.4 million.

A total of 6,367,709 shares were issued of which the fair value of 5,471,210 shares were attributed to purchase price and 896,499 shares, which are restricted as they are subject to revesting conditions, will be included in stock-based compensation as required service is provided.

All of these shares have a par value of $ 0.00002 per share.

As part of the acquisition, we also assumed the Signal Sciences Corp.

As part of the acquisition, the Company also assumed the Signal Sciences Corp.

2014 Stock Option and Grant Plan, as amended (the “Signal Plan”) and the outstanding unvested options to purchase shares of common stock of Signal Sciences Corp.

thereunder, and such options became exercisable to purchase shares of Fastly’s Class A common stock, subject to appropriate adjustments to the number of shares and the exercise price of each such option.").

In connection with the above, we registered 251,754 shares under the Signal Plan.

We assumed the aforementioned unvested options at the completion of the acquisition with an estimated fair value of $ 21.8 million.

In connection with the above, the Company registered 251,754 shares under the Signal Plan.

The Company assumed the aforementioned unvested options at the completion of the acquisition with an estimated fair value of $ 21.8 million.

Of the total consideration, $ 1.1 million was allocated to the purchase price and $ 20.7 million was allocated to future services and will be expensed over the remaining requisite service periods of approximately 2.5 years on a straight-line basis.

The estimated fair value of the stock options we assumed was determined using the Black-Scholes option pricing model.

The estimated fair value of the stock options the Company assumed was determined using the Black-Scholes option pricing model.

The share conversion ratio of 0.1 was applied to convert Signal Sciences’ outstanding stock awards into shares of Fastly's common stock.

2 unchanged sentences

During the year-ended December 31, 2021, 336,188 unvested shares were sold.

Stockholders' Equity for additional information.

We accounted for the transaction as a business combination using the acquisition method of accounting.

We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date.

The Company accounted for the transaction as a business combination using the acquisition method of accounting.

The Company allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date.

The fair values assigned to tangible assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received.

25 unchanged sentences

The acquired intangible assets have a total weighted average amortization period of 6.6 years.

As part of the stock acquisition of Signal Sciences, we allocated a significant value of the acquisition to intangible assets.

As part of the stock acquisition of Signal Sciences, the Company allocated a significant value of the acquisition to intangible assets.

The deferred tax liability provided an additional source of taxable income to support the realization of the pre-existing deferred tax assets.

As a result, a portion of our valuation allowance was released and we recorded a $ 13.0 million tax benefit in the year ended December 31, 2020.

Please refer to Note 12 — Income Taxes for further details.

As a result, a portion of the Company's valuation allowance was released and the Company recorded a $ 13.0 million tax benefit in the year ended December 31, 2020.

During the years ended December 31, 2021 and 2020 , acquisition-related expenses of $ 2.5 million and $ 20.8 million, respectively, were included within general and administrative expenses on the Consolidated Statements of Operations.

The amounts of revenue and net loss of Signal Sciences included in our consolidated statement of operations from the acquisition date of October 1, 2020 to December 31, 2020 are $ 6.7 million and $ 23.0 million, respectively.

The amounts of revenue and net loss of Signal Sciences included in the Company's consolidated statement of operations from the acquisition date of October 1, 2020 to December 31, 2020 are $ 6.7 million and $ 23.0 million, respectively.

Pro Forma Financial Information

The following unaudited pro forma information presents the combined results of operations as if the acquisition of Signal Sciences had been completed as of th e beginning of our fiscal year 2019.

The following unaudited pro forma information presents the combined results of operations as if the acquisition of Signal Sciences had been completed as of th e beginning of the Company's fiscal year 2020.

The unaudited pro forma results include adjustments primarily related to the amortization of intangible assets, share-based compensation expense for shares which are restricted as they are subject to revesting conditions , and the inclusion of acquisition costs as of the earliest period presented.

1 unchanged sentence

The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies, or the effect of the incremental costs incurred from integrating these companies.

For pro forma purposes, 2020 earnings were adjusted to exclude acquisition-related costs, and 2019 earnings were adjusted to include these costs.

For pro forma purposes, 2020 earnings were adjusted to exclude acquisition-related costs.

Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

8 unchanged sentences

As of December 31,

2022 2021 2020

(in thousands)

15 unchanged sentences

Property and equipment, net $ 180,378 $ 166,961

Depreciation and amortization expense on property and equipment for the years ended December 31, 2021, 2020 and 2019 was approximately $ 28.8 million, $ 19.8 million, and $ 16.4 million, respectively.

Depreciation on property and equipment for the years ended December 31, 2022, 2021 and 2020 was approximately $ 42.6 million, $ 28.8 million, and $ 19.8 million, respectively.

Included in these amounts was amortization expense for capitalized internal-use software costs of approximately $ 8.6 million, $ 4.6 million and $ 2.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2021 and December 31, 2020, the unamortized balance of capitalized internal-use software costs on our Consolidated Balance Sheets was approximately $ 27.9 million and $ 14.2 million, respectively.

We lease certain networking equipment from various third parties, through equipment finance leases.

Our networking equipment assets as of December 31, 2021 and 2020, included a total of $ 67.8 million and $ 36.2 million acquired under finance lease agreements, respectively.

As of December 31, 2022 and December 31, 2021, the unamortized balance of capitalized internal-use software costs on the Company's consolidated balance sheets was approximately $ 45.5 million and $ 27.9 million, respectively.

The Company leases certain networking equipment from various third parties through equipment finance leases.

The Company's networking equipment assets as of December 31, 2022 and 2021 , included a total of $ 77.3 million and $ 67.8 million acquired under finance lease agreements, respectively.

These leases are capitalized in property and equipment, and the related amortization of assets under finance leases is included in depreciation and amortization expense.

The accumulated depreciation of the networking equipment assets under finance leases totaled $ 14.4 million and $ 6.7 million as of December 31, 2021 and 2020, respectively.

The accumulated depreciation of the associated networking equipment assets under finance leases totaled $ 28.1 million and $ 14.4 million as of December 31, 2022 and 2021 , respectively.

Other assets consisted of the following:

As of December 31,

(in thousands)

Deferred contract costs, net $ 50,523 $ 23,830

Advance payment for purchase of property and equipment 37,013 —

Other assets 5,086 5,638

Total other assets $ 92,622 $ 29,468

Accrued Expenses

3 unchanged sentences

Accrued compensation and related benefits $ 20,204 $ 13,543

Accrued bonus 15,818 —

Accrued colocation and bandwidth costs 10,448 10,205

Sales and use tax payable 7,498 6,274

Accrued acquisition-related costs — 2,208

Other tax liabilities 8,698 8,070

Other accrued liabilities 5,993 4,294

6 unchanged sentences

Accrued computer and networking equipment 1,467 18,081

Liability for early-exercised stock options (see Note 11) — 255

Holdback payable 4,013 —

Other current liabilities 867 605

4 unchanged sentences

(in thousands)

Balance at January 1, 2019 $ ( 12 ) $ ( 24 ) $ ( 36 )

Balance at December 31, 2019 $ 99 $ 97 $ 196

Other comprehensive income (loss) ( 135 ) ( 55 ) ( 190 )

4 unchanged sentences

Balance at December 31, 2022 $ ( 577 ) $ ( 8,709 ) $ ( 9,286 )

We have operating leases for corporate offices and data centers ("Colocation leases"), and finance leases for networking equipment.

Our leases have remaining lease terms of 0 to 6 years, some of which include options to extend the leases.

We also sublease a portion of our corporate office spaces.

Subleases have remaining lease terms of 2.75 years.

Sublease income was $ 1.0 million, $ 1.3 million, and $ 1.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

There were no material reclassifications out of accumulated other comprehensive (loss) income for the years ended December 31, 2022 and 2021.

Additionally, there was no material tax impact on the amounts presented.

The Company has operating leases for corporate offices and data centers ("colocation leases"), and finance leases for networking equipment.

The Company's operating leases have remaining lease terms ranging from less than one year to 8 years, some of which include options to extend the leases.

The Company's finance leases have remaining lease terms ranging from less than one year to 2 years.

The Company also subleases a portion of its corporate office spaces.

The Company's subleases have remaining lease terms of 1.8 years.

The sublease income was $ 0.9 million, $ 1.0 million, and $ 1.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The components of lease cost were as follows:

As of December 31,

2022 2021 2020

(in thousands)

2 unchanged sentences

Variable lease cost 11,736 6,820 4,363

Total operating lease costs $ 33,536 $ 26,128

Total operating lease cost $ 42,712 $ 33,536 $ 26,128

Finance lease cost:

2 unchanged sentences

Total finance lease cost $ 16,920 $ 8,588 $ 3,546

Other information related to leases was as follows:

As of December 31,

(in thousands)

Supplemental Cash Flow Information

Cash paid for amounts included in the measurement of lease liabilities:

Payments for operating leases included in cash from operating activities $ 26,447 $ 18,264

Payments for finance leases included in cash from financing activities $ 13,568 $ 5,773

Payments for finance leases included in cash from operating activities $ 1,754 $ 688

Assets obtained in exchange for lease obligations:

Operating leases $ 32,458 $ 23,827

Finance leases $ 31,529 $ 22,541

The short term lease costs were not material for the years ended December 31, 2022, 2021 and 2020.

During the year ended December 31, 2022, the Company recognized an impairment on its operating lease right-of-use assets of $ 2.1 million.

The Company did no t recognize any impairment on its operating lease right-of-use assets for the years ended December 31, 2021 and 2020.

As of December 31,

2022 2021 2020

(in thousands)

5 unchanged sentences

Finance leases 4.73 % 4.86 % 5.12 %

As of December 31, 2021, we had undiscounted commitments of $ 5.9 million for operating leases that have not yet commenced, and therefore are not included in the right-of-use asset or operating lease liability.

These operating leases will commence in 2022 with lease terms of 1 years to 5 years.

Future minimum lease payments under non-cancellable leases as of December 31, 2021 were as follows (in thousands):

Year ending December 31, Operating Leases Finance Leases

2022 $ 19,389 $ 22,700

Future minimum lease payments under non-cancellable lease arrangements as of December 31, 2022 were as follows (in thousands):

Operating Leases Finance Leases

(in thousands)

Year ending December 31,

2023 $ 27,410 $ 30,285

6 unchanged sentences

Total liability $ 86,249 $ 44,461

As of December 31, 2022, the Company had undiscounted commitments of $ 1.9 million for operating leases that have not yet commenced, and therefore are not included in the right-of-use asset or operating lease liability.

These operating leases will commence in 2023 with lease terms of 3 years to 5 years.

Goodwill and Intangible Assets

2 unchanged sentences

(in thousands)

Balance, beginning of period $ 635,590 $ 372

Goodwill acquired 1,169 635,204

Beginning balance $ 636,805 $ 635,590

Goodwill acquired from business combinations 33,419 1,169

Foreign currency translation and other adjustments ( 39 ) 46

Balance, end of period $ 636,805 $ 635,590

The goodwill acquired from Signal Sciences is carried in U.S.

dollars, while goodwill from previous acquisitions is denominated in other foreign currencies.

In 2021, we recorded $ 1.2 million of goodwill in connection with a small acquisition.

Goodwill amounts are not amortized but tested for impairment on an annual basis.

There was no impairment of goodwill for the periods ended December 31, 2021, 2020 and 2019.

Ending balance $ 670,185 $ 636,805

The goodwill acquired from business combinations are from the Company's acquisition described in Note 5 — Business Combinations.

The Company did not record an impairment charge on goodwill for the fiscal years ended December 31, 2022, 2021 and 2020.

Intangible Assets, net

As of December 31, 2021 and December 31, 2020, our intangible assets consisted of the following:

As of December 31, 2022 and December 31, 2021, the Company's intangible assets consisted of the following:

As of December 31, 2022 As of December 31, 2021

7 unchanged sentences

Backlog 2,200 ( 2,200 ) — 2,200 ( 1,375 ) 825

In-process research and development ("IPR&D") 368 — 368 368 — 368

IPR&D — — — 368 — 368

— — — 39 — 39

Total intangible assets $ 131,084 $ ( 48,184 ) $ 82,900 $ 129,491 $ ( 26,895 ) $ 102,596

The Company's customer relationships, developed technology, trade names, internet protocol addresses, backlog and domain name intangible assets are subject to amortization.

IPR&D is indefinite-lived and is not subject to amortization.

Amortization expense was $ 21.7 million, $ 21.2 million and $ 5.3 million, for the years ended December 31, 2022, 2021 and 2020, respectively.

We did not record any impairments during the years ended December 31, 2021, 2020 and 2019.

The estimated future amortization expense intangible assets as of December 31, 2021 is as follows:

During the year ended December 31, 2022, the Company added $ 2.0 million of intangible assets from the acquisition of Glitch, which are subject to amortization.

The Company did not record any impairments during the years ended December 31, 2022, 2021 and 2020.

The expected amortization expense of intangible assets subject to amortization as of December 31, 2022 is as follows:

As of December 31, 2022

4 unchanged sentences

Debt Instruments

Cash Collateralized Revolving Credit Agreement ("Revolving Credit Agreement")

In November 2019, we entered into a Revolving Credit Agreement with Citibank, N.A (the "Lender") for an aggregate commitment amount of $ 70.0 million with a maturity date of November 3, 2022 (the "Revolver").

The amount of borrowings available under the Revolving Credit Agreement at any time are collateralized by our cash, which is classified as restricted cash on our balance sheets.

With prior written notice to the Lender, we have the right, at any time prior to the Revolver's maturity date, without premium or penalty, to terminate or reduce the Revolver arrangement.

In event of such termination, the aggregate principal of the then outstanding amounts, including any accrued interest to date, shall be repaid and the restrictions on the associated collateralized cash would be released.

The interest rate associated with each advance under the Revolving Credit Agreement is equal to the sum of LIBOR for the applicable interest period plus 1.50 % which is a per annum rate based on outstanding borrowings.

As such, for the initial interest period ending in November 2020, the interest rate is set at 3.46 %.

The commitment fee is 0.20 % per annum based on the average daily unused amount of the commitment amount.

Interest payments on outstanding borrowings are due on the last day of each interest period and payments for the commitment fee are due at the end of each calendar quarter.

In November 2020, we terminated the Revolving Credit Agreement in accordance with its terms.

In connection with the termination of the Revolving Credit Agreement, we repaid the then outstanding aggregate principal amount of $ 20.3 million, as well as any accrued and unpaid interest, as of the termination date.

The associated restriction on the collateralized cash of $ 70.1 million was also released, accord ingly.

Senior Secured Credit Facilities Agreement

On February 16, 2021, we entered into a Senior Secured Credit Facilities Agreement ("Credit Agreement") with Silicon Valley Bank for an aggregate commitment amount of $ 100.0 million with a maturity date of February 16, 2024.

On February 16, 2021, the Company entered into a Senior Secured Credit Facilities Agreement ("Credit Agreement") with Silicon Valley Bank ("SVB") for an aggregate commitment amount of $ 100.0 million with a maturity date of February 16, 2024.

The Company recorded $ 0.6 million of debt issuance costs associated with the Credit Agreement in other assets on the Company's consolidated balance sheet.

The Credit Agreement bears interest at a rate per annum equal to the sum of LIBOR for the applicable interest period plus 1.75 % - 2.00 %, depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement.

2 unchanged sentences

The agreement allows for an alternative interest rate to be used.

In addition, our Credit Agreement contains a financial covenant that requires us to maintain a consolidated adjusted quick ratio of at least 1:25 to 1:00 tested on a quarterly basis as well as a springing revenue growth covenant for certain periods if our consolidated adjusted quick ratio falls below 1.75 to 1:00 on the last day of any fiscal quarter.

The Credit Agreement requires us to comply with these affirmative and negative covenants and we were in compliance with all covenants as of December 31, 2021.

We recorded $ 0.6 million of debt issuance costs associated with the Credit Agreement in other assets on our condensed consolidated balance sheet.

During the year ended December 31, 2021, no amount was drawn down on our Credit Agreement, and as of December 31, 2021, no amount was outstanding under the Credit Agreement.

In addition, the Company's Credit Agreement contains a financial covenant that requires the Company to maintain a consolidated adjusted quick ratio of at least 1:25 to 1:00 tested on a quarterly basis as well as a springing revenue growth covenant for certain periods if the Company's consolidated adjusted quick ratio falls below 1.75 to 1:00 on the last day of any fiscal quarter.

The Credit Agreement requires the Company to comply with these affirmative and negative covenants.

As of December 31, 2022 and 2021, the Company was in compliance with all of its covenants.

During the years ended December 31, 2022 and 2021, no amounts were drawn down on the Company's Credit Agreement.

As of the years ended December 31, 2022 and 2021, no amounts were outstanding under the Credit Agreement.

Convertible Senior Notes

On March 5, 2021, we issued approximately $ 948.8 million aggregate principal amount of our 0 % convertible senior notes due 2026 (the “Notes”), including the exercise in full by the initial purchasers of their option to purchase up to an additional approximately $ 123.8 million principal amount of the Notes.

On March 5, 2021, the Company issued approximately $ 948.8 million aggregate principal amount of 0 % convertible senior notes due 2026 (the “Notes”), including the exercise in full by the initial purchasers of their option to purchase up to an additional approximately $ 123.8 million principal amount of the Notes.

The Notes were issued in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act.

1 unchanged sentence

The net proceeds from the issuance of the Notes were approximately $ 930.0 million after deducting the initial purchasers’ discounts and transaction costs.

We may not redeem the Notes prior to March 20, 2024.

On or after March 20, 2024, we may redeem for cash, all or any portion of the Notes, at our option, at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date, if the last reported sale price of our common stock has been at least 130 % of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption.

The Company may not redeem the Notes prior to March 20, 2024.

On or after March 20, 2024, the Company may redeem for cash, all or any portion of the Notes, at the Company's option, at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date, if the last reported sale price of the Company's common stock has been at least 130 % of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

No sinking fund is provided for the Notes.

Holders of the Notes may convert their notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2025, only under the following circumstances:

(i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the Notes on each applicable trading day;

(ii) during the five business day period after any ten consecutive trading day period (the “Measurement Period”) in which the trading price, as defined in the indenture agreement governing the Note filed with our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 5, 2021, per $1,000 principal amount of notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price of our Class A common stock and the conversion rate on each such trading day;

(iii) if we call such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the applicable redemption date, but only with respect to the Notes called (or deemed called) for redemption;

(i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Company's Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the Notes on each applicable trading day;

(ii) during the five business day period after any ten consecutive trading day period (the “Measurement Period”) in which the trading price, as defined in the indenture agreement governing the Note filed with the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 5, 2021, per $1,000 principal amount of notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price of the Company's Class A common stock and the conversion rate on each such trading day;

(iii) if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the applicable redemption date, but only with respect to the Notes called (or deemed called) for redemption;

or (iv) upon the occurrence of specified corporate events.

On or after December 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their notes at any time, regardless of the foregoing circumstances.

Upon conversion, we may satisfy our conversion obligation by paying or delivering, as the case may be, cash, shares of our Class A common stock or a combination of cash and shares of our Class A common stock, at our election.

Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of its Class A common stock or a combination of cash and shares of its Class A common stock, at the Company's election.

The initial conversion rate is 9.7272 shares of Class A common stock per $1,000 principal amount of Notes, equivalent to an initial conversion price of approximately $ 102.80 per share of Class A common stock.

The conversion rate is subject to adjustment as described in the indenture governing the Notes but will not be adjusted for any accrued and unpaid special interest.

In addition, following certain corporate events that occur prior to the maturity date of the Notes or if we deliver a notice of redemption in respect of the Notes, we will, in certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes, in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related redemption period, as the case may be.

The indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the Notes become automatically due and payable.

If we undergo a fundamental change, as defined in the indenture agreement governing the Notes, then subject to certain conditions and except as described in the indenture governing the Notes, holders may require us to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

We evaluated the terms of our debt and concluded that the instrument does not require separation and that there were no other derivatives that required separation.

As such, we have combined these features with the host contract and we account for our convertible debt as a single liability in long-term debt on our condensed consolidated balance sheet.

In addition, following certain corporate events that occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, in certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes, in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related redemption period, as the case may be.

The indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable.

If the Company undergoes a fundamental change, as defined in the indenture agreement governing the Notes, then subject to certain conditions and except as described in the indenture governing the Notes, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

The Company evaluated the terms of its debt and concluded that the instrument does not require separation and that there were no other derivatives that required separation.

As such, the Company has combined these features with the host contract and the Company accounts for its convertible debt as a single liability in long-term debt on its condensed consolidated balance sheet.

The initial purchasers' discounts and transaction costs of $ 18.6 million incurred related to the issuance of the Notes were classified as liability and represents the difference between the principal amount of the Notes and the liability component (the “debt discount”), which is amortized to interest expense using the effective interest method over the term of the Notes.

As of December 31, 2022, the conversion conditions have not been met and therefore the Notes are not yet convertible.

For the years ended December 31, 2021 and 2020, total interest expense related to our debt obligations was $ 3.5 million and $ 0.9 million, respectively, which excludes the interest expense related to our finance leases which is separately disclosed in Note 7—Leases.

For the year ended December 31, 2019, total interest expense was $ 5.2 million, of which $ 4.7 million relates to the Revolving Credit Agreement, Credit Facility and Loan and Security Agreement, and $ 0.5 million of which related to finance lease agreements and other costs.

The following table reflects the carrying values of the debt agreements as of December 31, 2021:

As of December 31,

On May 25, 2022, the Company entered into separate, privately negotiated transactions with certain holders of the Notes to repurchase (the “Repurchases”) approximately $ 235.0 million aggregate principal amount of the Notes for an aggregate cash repurchase price of approximately $ 176.4 million.

The Repurchases closed on May 31, 2022.

The Repurchases were accounted for as a debt extinguishment that resulted in a net gain of $ 54.4 million, which was recorded as non-operating income on the Company's Consolidated Statement of Operations for the year ended December 31, 2022.

The following table reflects the carrying values of the debt agreements for th e years ended December 31, 2022 and 2021 are as follows :

Year ended December 31,

(in thousands)

1 unchanged sentence

Convertible Senior notes (effective interest rate of 0.4 %)

$ 713,753 $ 948,750

unamortized debt issuance costs ( 9,043 ) ( 15,545 )

1 unchanged sentence

Long-term debt, less current portion

$ 704,710 $ 933,205

For the years ended December 31, 2022 and 2021, interest expense related to the Company's debt obligations was $ 3.4 million and $ 3.5 million, respectively.

As of December 31, 2022 and 2021, the total estimated fair value of the Notes were $ 517.5 million and $ 775.6 million, respectively.

Commitments and Contingencies

Finance and Operating Lease Commitments

Our commitments include commitments under our non-cancelable facilities and colocation operating leases (i.e.

data center leases), as well as finance leases for networking equipment.

Refer to Note 7—Leases for further details and disclosures around their minimum future purchase commitments as of December 31, 2021.

Purchase Commitments

As of December 31, 2021, we had long-term commitments for cost of revenue related agreements (i.e., bandwidth usage, peering and other managed services with various networks, internet service providers ("ISPs") and other third-party vendors).

We also have long-term commitments for various non-cancelable software as a service ("SaaS") agreements.

Aside from our finance and operating lease commitments, including our colocation operating commitments, which have been disclosed in Note 7—Leases, the minimum future purchase commitments relating to our other cost of revenue arrangements and SaaS commitments as of December 31, 2021 were as follows:

Cost of Revenue Commitments SaaS Agreements Total Purchase Commitments

As of December 31, 2022, the Company had long-term commitments for cost of revenue related agreements (i.e., bandwidth usage, peering and other managed services with various networks, internet service providers and other third-party

The Company also has non-cost of revenue long-term commitments for various non-cancelable software as a service and managed services agreements.

Aside from the Company's finance and operating lease commitments, including its colocation operating commitments, which have been disclosed in Note 7—Leases, the minimum future commitments related to its purchase commitments as of December 31, 2022 were as follows:

Cost of Revenue Commitments Operating Expense Commitments Total Purchase Commitments

(in thousands)

3 unchanged sentences

2026 166 — 166

2026 160 — 160

Thereafter 14 — 14

Total $ 49,270 $ 21,385 $ 70,655

In addition to the commitments disclosed above, as of December 31, 2022, the Company has $ 11.1 million of long-term purchase obligations under contracts for capital expenditures and $ 1.2 million for other long-term contracts.

Sales and Use Tax

We conduct operations in many tax jurisdictions throughout the United States.

In many of these jurisdictions, non-income-based taxes, such as sales and use and telecommunications taxes are assessed on our operations.

We are subject to indirect taxes, and may be subject to certain other taxes, in some of these jurisdictions.

Historically, we have not billed or collected these taxes and, in accordance with U.S.

GAAP, we have recorded a provision for our tax exposure in these jurisdictions when it is both probable that a liability has been incurred and the amount of the exposure can be reasonably estimated.

As a result, we have recorded a liability of $ 7.5 million and $ 6.3 million as of December 31, 2021 and 2020, respectively.

These estimates are based on several key assumptions, including the taxability of our products, the jurisdictions in which we believe we have nexus and the sourcing of revenues to those jurisdictions.

In the event these jurisdictions challenge our assumptions and analysis, our actual exposure could differ materially from our current estimates.

The Company conducts its operations in many tax jurisdictions throughout the United States.

In many of these jurisdictions, non-income-based taxes, such as sales and use and telecommunications taxes are assessed on the Company's operations.

The Company is subject to indirect taxes, and may be subject to certain other taxes, in some of these jurisdictions.

Historically, the Company has not billed or collected these taxes and, in accordance with U.S.

GAAP, the Company has recorded a provision for its tax exposure in these jurisdictions when it is both probable that a liability has been incurred and the amount of the exposure can be reasonably estimated.

As a result, the Company has recorded a liability of $ 7.6 million and $ 7.5 million as of December 31, 2022 and 2021, respectively.

These estimates are based on several key assumptions, including the taxability of the Company's products, the jurisdictions in which the Company believe it has nexus and the sourcing of revenues to those jurisdictions.

In the event these jurisdictions challenge the Company's assumptions and analysis, its actual exposure could differ materially from its current estimates.

Legal Matters

We have in the past been involved in, and may in the future be involved in, various legal proceedings and claims arising from the normal course of business, and an unfavorable resolution of any of these matters could materially affect our future results of operations, cash flows or financial position.

We are also party to various disputes that management considers routine and incidental to its business.

Management does not expect the results of any of these routine actions to have a material effect on our business, results of operations, financial condition, or cash flows.

On August 27, 2020, a purported securities class action lawsuit was filed in the United States District Court for the Northern District of California, captioned Marcos Betancourt v.

Fastly, Inc., et al.

4:20-cv-06024-PJH) naming as defendants us and certain of our officers.

On September 15, 2020, a substantively identical complaint was filed against the same defendants in the same court, captioned Rami Habib v.

Fastly, Inc., et al.

4:20-cv-06454-JST).

On September 27, 2020, the court consolidated the two cases into one putative class action, captioned In re Fastly, Inc.

Securities Litigation.

February 10, 2021, the Court appointed lead plaintiff (“Lead Plaintiff”) and lead counsel.

On April 12, 2021, Lead Plaintiff filed a consolidated complaint (the “Consolidated Complaint”).

The Consolidated Complaint asserts that all defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and SEC Rule 10b-5 by making materially false or misleading statements between May 6, 2020 and October 14, 2020 regarding the Company’s business and financials, including allegations that the Company failed to disclose the identity of one of its largest customers.

The Lead Plaintiff also alleges that certain of the Company’s officers violated Section 20(a) of the Exchange Act.

On June 11, 2021, defendants filed a motion to dismiss the Consolidated Complaint that Lead Plaintiff opposed on July 26, 2021, and defendants filed a reply on September 1, 2021.

On December 21, 2021, the consolidated class action was voluntarily dismissed with prejudice.

On December 28, 2020, certain of our officers and directors were named as defendants in a shareholder derivative action filed in the United States District Court for the District of Delaware, captioned Wei v.

Bixby, et al., Case No.

1:20-cv-01773-MN.

On February 2, 2021, a substantially similar shareholder derivative complaint was filed against the same defendants in the same court, captioned Kristen Gorenberg v.

Bixby et al., Case No.

1:21-cv-00136.

The derivative complaints assert, inter alia, breach of fiduciary duty claims.

On March 15, 2021, the Court consolidated the cases and stayed the consolidated derivative action until after resolution of our motion to dismiss in the above-referenced securities class action, and on January 3, 2022, the consolidated derivative action was voluntarily dismissed without prejudice.

From time to time, the Company has been and may be subject to legal proceedings and claims.

Such matters are subject to many uncertainties and outcomes are not predictable with assurance.

The Company accrues for contingencies when it believes that a loss is probable and that the Company can reasonably estimate the amount of any such loss.

The Company is not presently a party to any legal proceedings that, if determined adversely to it, would individually or taken together have a material effect on the Company's business, results of operations, financial condition, or cash flows.

As of December 31, 2022, the Company has not recorded any significant accruals for loss contingencies associated with such legal proceedings, determined that an unfavorable outcome is probable or reasonably possible, or determined that the amount or range of any possible loss is reasonably estimable.

Indemnification

We enter into standard indemnification agreements in the ordinary course of business.

Pursuant to these agreements, we agree to indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our business partners or customers, in connection with our provision of its services.

Generally, these obligations are limited to claims relating to infringement of a patent, copyright, or other intellectual property right, breach of our security or data protection obligations, or our negligence, willful misconduct, or violation of law.

The Company enters into standard indemnification agreements in the ordinary course of business.

Pursuant to these agreements, the Company agrees to indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company's business partners or customers, in connection with its provision of its services.

Generally, these obligations are limited to claims relating to infringement of a patent, copyright, or other intellectual property right, breach of the Company's security or data protection obligations, or its negligence, willful misconduct, or violation of law.

Subject to applicable statutes of limitation, the term of these indemnification agreements is generally for the duration of the agreement.

The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited;

however, we carry insurance that covers certain third-party claims relating to our services and could limit our exposure in that respect.

We have agreed to indemnify each of our officers and directors during his or her lifetime for certain events or occurrences that happen by reason of the fact that the officer or director is, was, or has agreed to serve as an officer or director of the Company.

We have director and officer insurance policies that may limit our exposure and may enable us to recover a portion of certain future amounts paid.

To date, we have not encountered material costs as a result of such indemnification obligations and have not accrued any related liabilities in our financial statements.

In assessing whether to establish an accrual, we consider such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss.

The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited;

however, the Company carries insurance that covers certain third-party claims relating to the Company's services and could limit its exposure in that respect.

The Company has agreed to indemnify each of its officers and directors during his or her lifetime for certain events or occurrences that happen by reason of the fact that the officer or director is, was, or has agreed to serve as an officer or director of the Company.

The Company has director and officer insurance policies that may limit its exposure and may enable it to recover a portion of certain future amounts paid.

To date, the Company has not encountered material costs as a result of such indemnification obligations and has not accrued any related liabilities in its financial statements.

In assessing whether to establish an accrual, the Company considers such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss.

Stockholders' Equity

Our Amended and Restated Certificate of Incorporation, as amended and restated in May 2019, authorizes the issuance of 1.0 billion shares of Class A common stock and 94.1 million shares of Class B common stock, each at a par value per share of $ 0.00002 .

The Company's Amended and Restated Certificate of Incorporation, as amended and restated in May 2019, authorizes the issuance of 1.0 billion shares of Class A common stock and 94.1 million shares of Class B common stock, each at a par value per share of $ 0.00002 .

Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to 10 votes per share.

In accordance with the Certificate, the shares of Class B common stock that converted to Class A common stock were retired and will not be reissued by the Company.

Accordingly, the Company filed a certificate with the Secretary of State of the State of Delaware effecting the retirement of the shares of Class B common stock that were issued but no longer outstanding following the Conversion.

Upon the effectiveness of the certificate, the Company's total number of authorized shares of capital stock was reduced by the retirement of 94.1 million shares of Class B common stock.

As of December 31, 2022 and 2021, 124.3 million and 118.8 million shares of Class A common stock were issued and outstanding, respectively.

As of December 31, 2021 and 2020, no shares and 10.2 million shares of class B common stock were issued and outstanding, respectively.

Our Certificate includes an automatic conversion provision, which, on the date when the outstanding shares of our Class B common stock represent less than 10 % of the aggregate number of shares of the then outstanding Class A common stock and Class B common stock (the “Sunset Trigger Date”), all our outstanding shares of Class B common stock will automatically convert into the same number of shares of Class A common stock under the terms of our Certificate on the trading day falling nine months after the Sunset Trigger Date ("the Conversion").

No additional Class B shares may be issued following the Conversion.

On October 12, 2020, the outstanding shares of our Class B common stock represented less than 10 % of the

aggregate number of shares of the then outstanding Class A common stock and Class B common stock.

As a result, all our outstanding shares of Class B common stock automatically converted into the same number of shares of Class A common stock on July 12, 2021 (the "Conversion"), pursuant to the terms of our Certificate.

Upon the conversion, outstanding options denominated in shares of Class B common stock issued under any of the Company’s equity incentive plans remained unchanged, except that they now represent the right to receive shares of Class A common stock.

In accordance with our Certificate, the shares of Class B common stock that converted to Class A common stock were retired and will not be reissued by us.

On July 12, 2021, we filed a certificate with the Secretary of State of the State of Delaware effecting the retirement of the shares of Class B common stock that were issued but no longer outstanding following the Conversion.

Upon the effectiveness of the certificate, our total number of authorized shares of capital stock was reduced by the retirement of 90.0 million shares of Class B common stock.

Preferred Stock

Our Amended and Restated Certificate of Incorporation, as amended and restated in May 2019, also authorizes the issuance of 10.0 million shares of preferred stock, at a par value per share of $ 0.00002 , with rights and preferences, including voting rights, designated from time to time by the Board of Directors (the "Board").

As of both December 31, 2021 and 2020, no shares of preferred stock were issued and outstanding.

As of both December 31, 2022 and 2021, no shares of Class B common stock were issued and outstanding.

Equity Incentive Plans

In March 2011, our stockholders approved our 2011 Equity Incentive Plan ("2011 Plan"), which allows for the issuance of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, and restricted stock unit awards ("RSUs") to employees, directors, and consultants of the Company.

Options granted under our 2011 Plan were originally exercisable for shares of our Class B common stock but due to the Conversion, these awards are now exercisable for shares or our Class A common stock.

As of both December 31, 2021 and 2020, there were 23.6 million shares of Class B common stock reserved for issuance pursuant to outstanding stock options under the 2011 Plan.

As of both December 31, 2021 and 2020, there were no shares of Class B common stock available for issuance for future grants under the 2011 Plan.

All such shares of Class B common stock were converted to Class A common stock in July 2021 pursuant to the Conversion.

As of December 31, 2021 there were no shares of Class A common stock available for issuance for future grants under the 2011 Plan.

In May 2019, in conjunction with our IPO, our Board and stockholders approved our 2019 Equity Incentive Plan (the "2019 Plan") which allows for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, RSUs, performance-based stock awards, and other forms of equity compensation, which are collectively referred to as stock awards.

Additionally, the 2019 Plan provides for the grant of performance cash awards.

Options are exercisable for shares of our Class A common stock.

No further awards will be issued under the 2011 Plan.

In October 2020, we assumed the Signal Sciences Corp.

2014 Stock Option and Grant Plan, as amended (the “Signal Plan”) and registered 251,754 shares under the Signal Plan, which were the outstanding unvested options to purchase shares of common stock of Signal Sciences.

Such options became exercisable to purchase shares of our Class A common stock, subject to appropriate adjustments to the number of shares and the exercise price of each such option.

As of December 31, 2021 and 2020, an aggregate of 21.4 million shares and 19.4 million shares of Class A common stock have been reserved for issuance under the 2019 Plan, respectively.

The Company maintains four equity incentive plans:

the 2019 Equity Incentive Plan (the "2019 Plan"), 2011 Equity Incentive Plan ("2011 Plan"), Employee Stock Purchase Plan ("ESPP") and the Signal Sciences Corp.

2014 Stock Option and Grant Plan, as amended (the “Signal Plan”).

The 2019 Plan became effective in May 2019 and replaced the 2011 Plan.

The Company's 2019 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units ("RSUs"), restricted stock awards, performance-based stock awards ("PSUs"), and other forms of equity compensation, which are collectively referred to as stock awards to its employees, directors, and consultants.

The Signal Plan includes 251,754 registered shares which can be exercised to purchase shares of Fastly’s Class A common stock.

As of December 31, 2022 and 2021, there were 24.2 million and 21.4 million Class A common stock reserved for issuance under the 2019 Plan, respectively.

As of December 31, 2022 and 2021, there were 9.6 million and 15.9 million Class A common stock available for issuance under the 2019 Plan, respectively.

In May 2019, in conjunction with our IPO, our Board and stockholders approved the Employee Stock Purchase Plan ("ESPP").

The ESPP allows eligible employees to purchase shares of our Class A common stock through payroll deductions of up to 15 % of their eligible compensation, subject to a maximum of $ 25,000 per calendar year.

As of December 31, 2022 and 2021, an aggregate of 5.8 million shares and 4.6 million shares of Class A common stock have been reserved for issuance under the ESPP, respectively.

As of December 31, 2021 and 2020, there we re 3.7 million shares and 2.8 million shares of Class A common stock available for future issuance under the ESPP, respectively.

As of December 31, 2022 and 2021, there were 4.4 million shares and 3.7 million shares of Class A common stock available for future issuance under the ESPP, respectively.

Stock Options

Options granted under the 2011 Plan are exercisable for Class B common stock and generally expire within 10 years from the date of grant and generally vest over four years , at the rate of 25 % on the first anniversary of the date of grant and ratably on a monthly basis over the remaining 36-month period thereafter based on continued service.

Options granted under the 2019 Plan are exercisable for Class A common stock and generally expire within 10 years from the date of grant and generally vest over four years , at the rate of 25 % on the first anniversary of the date of grant and ratably on a monthly basis over the remaining 36-month period thereafter based on continued service.

Forfeitures are recognized as they occur.

Options granted under the Signal Sciences 2014 Equity Stock Options Plan that was assumed through the acquisition are included as part of the option rollforward activity in year e nded December 31, 2020.

The vesting of these options follow their original grant date terms ("Original grant date") prior to the acquisition of Signal Sciences and generally expire within 10 years from the original grant date and generally vest over four years , at the rate of 25 % on the first anniversary of the date of grant and ratably on a monthly basis over the remaining 36-month period thereafter.

Subsequent to the acquisition, these options are exercisable for Class A common stock and are recognized ratably over the remaining period based on continued service from the grant date.

Options granted under the 2011 Plan and 2019 Plan are exercisable for Class A common stock and generally expire within 10 years from the date of grant and generally vest over four years , at the rate of 25 % on the first anniversary of the date of grant and ratably on a monthly basis over the remaining 36-month period thereafter based on continued service.

Due to the Conversion on July 12, 2021, options granted under the 2011 Plan are now exercisable for Class A common stock.

Forfeitures are recognized as they occur.

The following table summarizes stock option activity during the years ended December 31, 2021, 2020 and 2019:

The following table summarizes stock option activity during the year ended December 31, 2022:

Number of Shares Weighted-Average

3 unchanged sentences

(in thousands) (in years) (in thousands)

Outstanding at January 1, 2019 12,210 $ 2.96 7.8 $ 64,590

Granted 2,516 10.87

Exercised ( 2,650 ) 2.45

Cancelled/forfeited ( 807 ) 5.10

Outstanding at December 31, 2021 4,369 $ 5.07 5.1 $ 132,721

Granted 252 12.96

Exercised ( 1,778 ) 3.20

Cancelled/forfeited ( 198 ) 8.79

Outstanding at December 31, 2020 6,963 5.63 6.7 $ 569,094

Exercised ( 2,188 ) 5.77

Cancelled/forfeited ( 406 ) 11.10

Forfeited ( 148 ) 12.10

Outstanding at December 31, 2022 2,443 $ 6.01 4.7 $ 7,674

3 unchanged sentences

The total grant date fair value of employee options vested for the years ended December 31, 2022, 2021, 2020 was $ 5.6 million, $ 6.9 million, and $ 10.3 million, respectively.

The weighted-average grant date fair value for options granted to employees during the years ended December 31, 2021, 2020, and 2019 was $ 0.00 , $ 86.77 , and $ 5.77 , respectively.

We estimate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model.

The weighted-average grant date fair value for options granted to employees during the year ended December 31, 2020 was $ 86.77 .

The Company did not grant any options for the years ended December 31, 2022 and 2021.

The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model.

Each of the Black-Scholes inputs is subjective and generally requires significant judgments to determine.

We estimated the fair value of

stock option awards during the years ended December 31, 2021, 2020, and 2019 on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

estimated the fair value of stock option awards during the year ended December 31, 2020 on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

Year ended December 31,

2021 2020 2019

Fair value of common stock $ 85.26 - $ 96.43

$ 8.24 - $ 22.70

Expected term (in years) 5.38 - 9.75

Risk-free interest rate 0.31 %- 0.67 %

1.55 % - 2.5 %

Expected volatility 43.9 % - 46.5 %

39.1 % - 42.7 %

Dividend yield — %

During the years ended December 31, 2021 and 2020, and 2019, we recognized stock-based compensation expense from stock options of approximately $ 18.7 million, $ 10.1 million, and $ 7.9 million, respectively.

During the years ended December 31, 2021, 2020 and 2019, we modified the terms options awarded to certain employees to allow for the remaining unvested awards to be fully vested upon their change in employment status.

As a result, we recorded incremental stock-based compensation expense in relation to these modifications of $ 6.2 million, $ 0.9 million and $ 0.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

During the years ended December 31, 2022 and 2021, and 2020, the Company recognized stock-based compensation expense from stock options of approximately $ 6.1 million, $ 24.9 million, and $ 11.0 million, respectively.

During the years ended December 31, 2022 and 2021, and 2020, the Company modified the terms of options awarded to certain employees to allow for the remaining unvested awards to be fully vested upon their change in employment status.

As a result, included in the total stock-based compensation expense, the Company recorded stock-based compensation expense in relation to these modifications of $ 0.8 million, $ 6.2 million and $ 0.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.

As of December 31, 2022, total unrecognized stock-based compensation cost related to outstanding unvested stock options that are expected to vest was $ 1.9 million.

This unrecognized stock-based compensation cost is expected to be recognized over a weighted-average period of approximately 1.5 years.

This unrecognized stock-based compensation cost is expected to be recognized over a weighted-average period of approximately 1 year.

Early Exercise of Stock Options

Certain stock options granted by us are exercisable at the date of grant, with unvested shares subject to repurchase by us in the event of voluntary or involuntary termination of employment of the stockholder.

Certain stock options granted by the Company are exercisable at the date of grant, with unvested shares subject to repurchase by the Company in the event of voluntary or involuntary termination of employment of the stockholder.

Such exercises are recorded as a liability on the accompanying consolidated balance sheets and reclassified into equity as the options vest.

During the year ended December 31, 2021, we modified the terms of 47,882 unvested options subject to repurchase, with an exercise value of approximately $ 0.2 million, to become fully vested upon change in service status.

As of December 31, 2021, December 31, 2020, a total of 0 and 90,977 shares of Class B Common Stock were subject to repurchase by us at the lower of (i) the fair market value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of approximately $ 0.0 million and $ 0.4 million as of December 31, 2021 and December 31, 2020, respectively, is recorded in other current liabilities and other liabilities on the accompanying Consolidated Balance Sheets.

The activity of non-vested shares as a result of early exercise of options granted to employees and non-employees, is as follows:

Year ended December 31,

2021 2020 2019

(in thousands)

Beginning balance 91 200 245

Early exercise of options — — 117

Vested ( 91 ) ( 109 ) ( 162 )

Repurchased — — —

Ending balance — 91 200

During the year ended December 31, 2021, the Company modified the terms of 47,882 unvested options subject to repurchase, with an exercise value of approximately $ 0.2 million, to become fully vested upon change in service status.

As of December 31, 2021, a total of 90,977 shares of Class B Common Stock were subject to repurchase by the Company at the lower of (i) the fair market value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of approximately $ 0.4 million as of December 31, 2021, is recorded in other current liabilities and other liabilities on the accompanying consolidated balance sheets.

The Company did not have any early exercise awards for the year ended December 31, 2022.

Restricted Stock Units ("RSUs")

The Company began granting RSUs under the 2019 Plan during the fiscal year ended December 31, 2019.

The fair value of RSUs is based on the grant date fair value and is expensed on a straight-line basis over the applicable vesting period.

RSUs grant for new hires typically vest over four years , at the rate of 25 % on the first anniversary of the vest commencement date and ratably on a quarterly basis over the remaining 36-month period thereafter, based on continued service.

Other RSU awards typically vest quarterly over terms of 36 to 48 months.

RSUs granted to new hires typically vest over four years , at the rate of 25 % on the first anniversary of the vest date and ratably on a quarterly basis over the remaining 36-month period thereafter.

RSUs granted to existing employees typically vest in equal quarterly installments over a four-year service period.

All vesting is contingent on continued service.

Forfeitures are recognized as they occur.

The following table summarizes RSU activity during the years ended December 31, 2021, 2020and 2019:

The following table summarizes RSU activity during the years ended December 31, 2022:

Number of Shares Weighted-Average Grant Date Fair Value Per Share

(in thousands)

Nonvested RSUs as of January 1, 2019 — —

Granted 1,644 20.07

Cancelled/forfeited ( 3 )

Nonvested RSUs as of December 31, 2021 5,285 $ 42.80

1 unchanged sentence

Vested ( 3,119 ) 31.40

Cancelled/forfeited ( 142 ) 22.58

Nonvested RSUs as of December 31, 2020 4,520 30.01

Granted 3,584 54.92

Vested ( 1,924 ) 35.18

Cancelled/forfeited ( 895 ) 42.91

Forfeited ( 2,037 ) 29.90

Nonvested RSUs as of December 31, 2022 11,990 $ 20.10

During the years ended December 31, 2021, 2020 and 2019, we recognized stock-based compensation expense related to RSUs of $ 75.5 million , $ 40.5 million and $ 2.2 million, respectively.

During the years ended December 31, 2021 and 2020, we modified the terms of RSUs awarded to certain employees to allow for the remaining unvested awards to be fully vested upon their change in employment status.

As a result, we recorded incremental stock-based compensation expense in relation to these modifications of $ 2.8 million and $ 4.8 million for the year ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2019, there were no RSU award modifications that resulted in incremental expense being recorded.

During the years ended December 31, 2022, 2021 and 2020, the weighted-average grant date fair value for RSUs granted was $ 14.63 , $ 54.92 and $ 31.22 per share, respectively.

During the years ended December 31, 2022, 2021 and 2020, the total grant date fair value of RSUs vested was $ 97.9 million, $ 67.7 million and $ 31.6 million, respectively.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized stock-based compensation expense related to RSUs of $ 98.5 million, $ 78.3 million and $ 45.3 million, respectively.

During the years ended December 31, 2022, and 2021, the Company modified the terms of RSUs awarded to certain employees to allow for the remaining unvested awards to be fully vested upon their change in employment status.

As a result, included in the total stock-based compensation expense, the Company recorded stock-based compensation expense in relation to these modifications of $ 1.9 million and $ 2.8 million, and $ 4.8 million for the years ended December 31, 2022 and 2021, and 2020, respectively.

As of December 31, 2022, total unrecognized stock-based compensation cost related to non-vested RSUs was $ 224.7 million.

1 unchanged sentence

Stock subject to revest ("Revest shares")

In conjunction with the acquisition of Signal Sciences, a restriction was placed on 896,499 shares belonging to the three co-founders of Signal Sciences to make them subject to revesting on a quarterly basis over a 2 year period.

Refer to Note 5—Business Combinations for further details.

In conjunction with a prior acquisition in fiscal 2020, a restriction was placed on 896,499 shares belonging to the three co-founders of the target which are subject to revesting on a quarterly basis over a 2-year period.

The activity of revest shares granted to these employees is as follows:

6 unchanged sentences

Nonvested revest shares as of December 31, 2022 — $ —

Restricted — $ —

Vested ( 448 ) $ 97.84

Cancelled/forfeited —

Nonvested revest shares as of December 31, 2021 336 $ 97.84

As of December 31, 2021 and 2020, we recognized stock-based compensation expense related to revest shares of $ 43.8 million and $ 11.1 million, respectively.

As of December 31, 2021, total unrecognized stock-based compensation cost related to revest shares was $ 32.9 million.

This unrecognized stock-based compensation cost is expected to be recognized over a weighted-average period of approximately 0.70 years.

During the quarter ended September 30, 2021 and the quarter ended December 31 2021, 186,771 and 149,417 unvested shares were sold prior to vesting, respectively.

These shares were sold for an average price of $ 47.54 .

As the holders of these shares are not entitled to the benefit of unvested shares, we requested the return of proceeds for the unvested shares as of December 31, 2021.

Subsequent to December 31, 2021, we received a total of $ 10.7 million from these founders attributed to the 224,124 shares that were sold prior to vesting and remain unvested as of December 31, 2021.

In connection with the return of these proceeds, we modified the terms of the restricted share agreements for these founders.

These proceeds will be returned to these founders in accordance with the original vesting schedule of these awards.

Refer to Note -15 Subsequent Events.

As of December 31, 2022 and 2021, the Company recognized stock-based compensation expense related to revest shares of $ 27.6 million and $ 43.8 million, respectively.

As of December 31, 2022, there is no unrecognized stock-based compensation cost related to revest shares.

On January 24, 2022, the Company entered into an agreement with certain holders of restricted stock, who had sold their awards in advance of their vesting conditions, in order to return the proceeds associated with the remaining 224,124 unvested shares as of December 31, 2021.

These stockholders are eligible to continue vesting under the original agreements as long as they have continued service as either an employee or consultant.

On January 31, 2022, the Company received $ 10.7 million from these stockholders related to the settlement of the matter, which the Company classified as unrestricted cash on its condensed consolidated balance sheets.

This amount will similarly be returned to the holders in accordance with the vesting

under the original agreements.

Correspondingly, the Company reclassified the award from equity to liability as the award will now be settled for the fixed monetary amount received, rather than a release of the restrictions on shares.

The modification did not result in any incremental expense to be recognized.

In February 2022, one of the stockholders had a change in employment status and the Company accelerated the remaining stock-based compensation associated with his awards on his last day of service as an employee as his services under the modified arrangement were not substantive.

For the year ended December 31, 2022, the Company recognized stock-based compensation expense of $ 5.6 million associated with the modification of these awards, which is included in the total stock-based compensation expense.

For the year ended December 31, 2021, the Company did no t recognize any stock-based compensation expense associated with the modification of these awards.

Performance-Based Restricted Stock Units ("PSUs")

In March 2020, we granted a maximum total of 87,918 shares of PSUs to certain employees of the company, pursuant to our 2019 Equity Incentive Plan.

Performance stock awards for executive officers ("Executive PSUs")

In March 2020, the Company granted a maximum total of 87,918 shares of PSUs to certain employees of the company, pursuant to our 2019 Equity Incentive Plan.

The PSUs granted reflect a maximum of 200 % of target performance and represent the right of the employees to be issued on a future date, one ( 1 ) share of Class A common stock for each RSU received that will vest on the applicable vesting date.

On November 2, 2020, the Compensation Committee of the Board set the performance conditions related to the previously granted PSUs ("2020 PSU awards").

The performance conditions are based on the level of achievement of certain Company and individual targets related to Fastly's operating plan for the fiscal year 2020 ("2020 operating plan").

The PSUs will vest at 50 % of the target if the Company achieves 90 % performance under the 2020 operating plan, 100 % of the target if the Company achieves 100 % performance under the 2020 operating plan and 200 % of the target if the Company achieves 110 % performance or greater under the 2020 operating plan.

These awards will be eligible to vest linearly within those parameters.

Subject to employees’ continuous service with the Company through each vesting date, 25 % of the number of RSUs credited to them upon certification of achievement will vest on February 15, 2021, May 15, 2021, August 15, 2021, and November 15,

2021, respectively.

On November 2, 2020, the Compensation Committee of the Board set the performance conditions related to the previously granted PSUs ("2020 PSU awards") which are based on the level of achievement of certain Company and individual targets related to the Company's operating plan for the fiscal year 2020 ("2020 operating plan").

Based on the results of the 2020 operating plan, the actual award was reduced to 75,828 shares which represents attainment of 172 %.

As a result, 12,090 shares were cancelled.

In February 2021, we granted a maximum total of 70,680 shares ("2021 PSU awards") of PSUs to certain employees of the Company, pursuant to the Company’s 2019 Equity Incentive Plan.

The PSUs granted reflect a maximum of 150 % of target performance and represent the right of the employees to be issued on a future date, one ( 1 ) share of Class A common stock for each RSU received that will vest on the applicable vesting date.

The performance conditions were set and approved on the date of grant and are based on the level of achievement of certain Company and individual targets related to Fastly's operating plan for the fiscal year 2021 ("2021 operating plan").

The PSUs will vest at 50 % of the target if the Company achieves 90 % performance under the 2021 operating plan, 100 % of the target if the Company achieves 100 % performance under the 2021 operating plan and 150 % of the target if the Company achieves 110 % performance or greater under the 2021 operating plan.

These awards will be eligible to vest linearly within those parameters.

Subject to employees’ continuous service with the Company through each vesting date, based on the expected extent of such targets achieved, 25 % of the total RSUs on February 15, 2022 and thereafter in 12 equal quarterly installments (i.e.

6.25 % of the total RSUs will vest per quarter) on May 15, August 15, November 15, and February 15.

Based on the results of the 2021 operating plan, the performance conditions were not met in order to achieve the minimum award.

As a result, 70,680 shares were cancelled subsequent to year-end.

The activity of PSUs granted to employees is as follows:

In February 2021, pursuant to the Company’s 2019 Equity Incentive Plan, the Company granted shares of PSUs to certain employees of the Company, which are to vest based on the level of achievement of certain Company and individual targets related to the Company's operating plan for the fiscal year 2021 ("2021 Operating Plan").

In February 2022, the Company concluded that the minimum target performance to be eligible for vesting under the 2021 Operating Plan was not attained, and as such, none of the 2021 PSUs were eligible to vest and the awards were cancelled.

In February 2022, pursuant to the Company's 2019 Equity Incentive Plan, the Company granted certain employees shares of PSUs, which are to vest based on the level of achievement of certain Company-wide targets related to the Company's operating plan for the fiscal year 2022.

The Company has accounted for these awards as equity-based awards and will recognize stock-based compensation expense over the employees' requisite service period based on the expected attainment of the Company-wide targets as of the end of each reporting period.

Number of Shares Weighted-Average Grant Date Fair Value Per Share

4 unchanged sentences

Nonvested PSUs as of December 31, 2022 267 $ 28.16

For the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 1.4 million, $ 3.4 million, and $ 1.6 million of stock-based compensation expense associated with these awards, respectively.

For the year ended December 31, 2022, we modified the terms of PSUs awarded to an employee upon their change in employment status.

As a result, included in the total stock-based compensation expense, the Company recorded stock-based

compensation expense in relation to the modification of $ 0.4 million for the year ended December 31, 2022.

There were no PSU modifications for the years ended December 31, 2021 and 2020.

2022 Bonus Program ("Bonus PSUs")

On February 11, 2022, the Compensation Committee approved a company-wide bonus program ("2022 Bonus Program"), including performance targets, for the current fiscal year to most of the Company's employees on active payroll in fiscal year 2022.

Shares awarded under the program will be in fully vested RSUs ("Payout") and will be based on the final attainment of Company-wide performance targets which are tied to its operating plan for fiscal year 2022.

Payout will vary linearly between 50 %, 100 % and 150 % based on the achievement of these targets.

Employees are required to be employed through the Payout date to earn the awards.

In addition, certain employees were granted dollar bonus amounts, which are to be paid out in RSUs.

The Company has accounted for these awards as liability-based awards, since the monetary value of the obligation associated with the award is based predominantly on a fixed monetary amount known at inception, and it has an unconditional obligation that it must or may settle by issuing a variable number of its equity shares.

The Company is recognizing the stock-based compensation expense over the employees requisite service period, based on the expected attainment of the Company-wide targets as of the end of each reporting period.

During the year ended December 31, 2022, the Company recognized $ 14.9 million of stock-based compensation expense associated with the 2022 Bonus Program.

Market-Based Performance Stock Awards ("MPSUs")

In September 2022, pursuant to the Company's 2019 Equity Incentive Plan, the Company granted certain employees shares of MPSUs, which are to vest upon the satisfaction of the Company’s achievement of specified Fastly Class A common stock price targets during the applicable performance period.

In addition, the awards are subject to each recipient’s continuous service through each applicable vest dates.

The Company measured the fair value of the MPSUs using a Monte Carlo simulation valuation model.

The risk-free interest rates used were 3.37 % - 3.68 %, which were based on five-year US treasury yield, adjusted to a continuous time basis.

The expected volatility was a blended volatility rate of 80 %, which incorporated both the Company's observed equity volatility and the relevant guideline company volatility.

Number of Shares Weighted-Average Grant Date Fair Value Per Share

(in thousands)

Nonvested MPSUs as of December 31, 2021 — $ —

Granted 2,174 6.80

Vested ( 76 ) $ 65.11

Cancelled/forfeited — —

Nonvested PSUs as of December 31, 2021 71 $ 102.06

As of December 31, 2021, the performance conditions associated with the 2020 PSU awards were met and we recorded $ 3.4 million in stock-based compensation expense.

As of December 31, 2021, the performance conditions for the 2021 PSU awards were not met and $ 0 of stock-based compensation expense was recorded.

Subsequent to year-end the 2021 awards were cancelled due to non-performance.

As such there is no remaining stock-based compensation to be recognized.

The ESPP allows eligible employees to purchase shares of our common stock through payroll deductions of up to 15 % of their eligible compensation.

The ESPP provides for six-month offering periods, commencing in May and November of each year.

At the end of each offering period employees are able to purchase shares at 85 % of the lower of the fair market value of our Class A common stock on the first trading day of the offering period or on the last day of the offering period.

We estimate the fair value of shares to be issued under the ESPP on the first day of the offering period using the Black-Scholes valuation model.

The inputs to the Black-Scholes option pricing model are our stock price on the first date of the offering period, the risk-free interest rate, the estimated volatility of our stock price over the term of the offering period, the expected term of the offering period and the expected dividend rate.

Nonvested MPSUs as of December 31, 2022 2,174 $ 6.80

Stock-based compensation expense relating to the MPSUs are recognized using the accelerated attribution method over the derived service period.

For the year ended December 31, 2022, the Company recognized $ 2.1 million of stock-based compensation expense associated with these awards.

Total unrecognized stock-based compensation expense related to the unvested portion of the MPSUs was $ 12.7 million as of December 31, 2022.

This expense is expected to be amortized over a weighted-average vesting period of 4 years.

Employee Share Purchase Program ("ESPP")

The ESPP allows eligible employees to purchase shares of the Company's common stock through payroll deductions of up to 15 % of their eligible compensation.

The ESPP provides for six-month offering periods, commencing in May and

November of each year.

At the end of each offering period employees are able to purchase shares at 85 % of the lower of the fair market value of the Company's common stock on the first trading day of the offering period or on the date of purchase.

The Company estimates the fair value of shares to be issued under the ESPP on the first day of the offering period using the Black-Scholes valuation model.

The inputs to the Black-Scholes option pricing model are the Company's stock price on the first date of the offering period, the risk-free interest rate, the estimated volatility of the Company's stock price over the term of the offering period, the expected term of the offering period and the expected dividend rate.

Stock-based compensation expense related to the ESPP is recognized on a straight-line basis over the offering period.

Forfeitures are recognized as they occur.

We estimated the fair value of shares granted under the ESPP on the first date of the offering period using the Black-Scholes option pricing model with the following assumptions:

The Company estimated the fair value of shares granted under the ESPP on the first date of the offering period using the Black-Scholes option pricing model with the following assumptions:

Year ended December 31,

9 unchanged sentences

Dividend yield — % — % — %

During the years ended December 31, 2021, 2020 and 2019, we withheld $ 8.1 million, $ 9.6 million and $ 5.5 million ff rom employees, respectively, and recognized $ 3.5 million, $ 3.2 million, and $ 2.5 million in stock-based compensation expense related to the ESPP, respectively.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 3.2 million, $ 3.5 million, and $ 3.2 million in stock-based compensation expense related to the ESPP, respectively.

As of December 31, 2022, total unrecognized stock-based compensation cost related to ESPP was $ 2.0 million.

This unrecognized stock-based compensation cost is expected to be recognized over a weighted-average period of approximately 0.4 years.

During the years ended December 31, 2021, 2020 and 2019, an aggregate of 0.2 million and 0.3 million and 0.3 million shares of our Class A common stock was purchased under the ESPP, respectively.

During the years ended December 31, 2022, 2021 and 2020, an aggregate of 0.5 million and 0.2 million and 0.3 million shares of the Company's Class A common stock was purchased under the ESPP, respectively.

Stock-based Compensation Expense

3 unchanged sentences

(in thousands)

Stock-based compensation expense by caption:

Cost of revenue $ 12,050 $ 7,227 $ 3,889

3 unchanged sentences

Total $ 145,796 $ 140,488 $ 64,433

For the years ended December 31, 2021, 2020 and 2019, we capitalized $ 4.4 million, $ 2.0 million, and $ 0.4 million of stock-based compensation expense, respectively.

Common Stock Warrant Liabilities

Prior to the IPO, we issued convertible preferred stock warrants in conjunction with the issuances of debt.

We recorded these warrants to purchase convertible preferred stock as a liability on the consolidated balance sheets at fair value upon issuance as the warrants were exercisable for contingently redeemable preferred stock which was classified outside of stockholders' equity (deficit).

The liability associated with these warrants were subject to remeasurement at each balance sheet date, with changes in fair value recorded in the consolidated statement of operations and comprehensive loss as other expense, net.

On May 17, 2019, immediately upon closing of the IPO, our warrants to purchase convertible preferred stock were automatically converted to warrants to purchase an equal number of shares of our Class B common stock.

As a result, the warrants were remeasured a final time, immediately prior to the closing of the IPO, and reclassified to additional paid-in capital within stockholders' equity.

Changes in the fair value were recorded within other expense, net on the consolidated statement of

As of December 31, 2019, the warrants were classified and recorded as additional paid-in capital on the condensed consolidated balance sheets.

During the year ended December 31, 2020, the remaining Class B common stock warrants related to the previously outstanding subordinated debt and loan agreements were fully exercised under the cashless exercise method pursuant to the corresponding warrant agreements.

As a result of such exercises, we issued 144,635 shares of our Class B common stock.

There were no remaining outstanding common stock warrant liabilities as of December 31, 2020.

For the years ended December 31, 2022, 2021 and 2020, the Company capitalized $ 8.0 million, $ 4.4 million, and $ 2.0 million of stock-based compensation expense, respectively.

For the year ended December 31, 2022, the Company recognized $ 25.5 million of stock-based compensation expense associated with liability classified awards related to the 2022 Bonus Program and certain of the Company's Revest Shares that were modified, respectively.

The Company did not recognize any stock-based compensation expense associated with liability classified awards for the years ended December 31, 2021 and 2020.

Net Loss Per Share Attributable to Common Stockholders

We compute net loss per share using the two-class method required for multiple classes of common stock and participating securities.

Basic net loss per share is computed by dividing net loss by basic weighted-average shares outstanding during the period.

Diluted net loss per share is computed by dividing net loss by diluted weighted-average shares outstanding, including potentially dilutive securities.

On July 12, 2021, the shares of Class B common stock that converted to Class A common stock were retired and will not be reissued by the Company.

Prior to that date, the Company computed net loss per share using the two-class method required for multiple classes of common stock and participating securities.

The rights of the holders of the Class A common stock and Class B common stock are identical, except with respect to voting and conversion.

Accordingly, the Class A common stock and Class B common stock share equally in our net losses.

On July 12, 2021, the shares of Class B common stock that converted to Class A common stock were retired and will not be reissued by us.

The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented.

The shares issued in the IPO, the shares issued pursuant to the exercise by the underwriters of an option to purchase additional shares, and the shares of Class A and Class B common stock issued upon conversion of the outstanding shares of convertible preferred stock in the IPO are included in the table below weighted for the period outstanding:

Accordingly, the Class A common stock and Class B common stock share equally in the Company's net losses.

The following table presents the computation of basic and diluted net loss per share of common stock (in millions, except per share data):

Year ended December 31,

2022 2021 2020

Class A (1), (3)

Class A Class B (2)

(in thousands, except per share amounts)

2 unchanged sentences

Net loss per share attributable to common stockholders, basic and diluted $ ( 1.57 ) $ — $ ( 1.92 ) $ ( 1.92 ) ( 0.93 ) $ ( 0.93 )

(1) Class A common stock includes the issuance of 12.9 million shares of Class A common stock issued by us in connection with our IPO and the shares issued in connection with our follow-on offering on May 26, 2020.

It also includes shares issued upon the exercise of options and vesting of RSUs granted subsequent to our IPO, shares issued as part of our prior acquisitions, and converted Common B shares.

(2) Class B common stock includes, for all periods presented, common stock issued prior to the IPO and the conversion of all of our preferred stock into an aggregate of 53.6 million shares of our Class B common stock upon closing of the IPO.

(1) Class A common stock includes the issuance of 12.9 million shares of Class A common stock issued by the Company in connection with the IPO and the shares issued in connection with the follow-on offering on May 26, 2020.

It also includes shares issued upon the exercise of options and vesting of RSUs granted subsequent to the IPO, shares issued as part of the prior acquisitions, and converted Common B shares.

(2) Class B common stock includes, for all periods presented, common stock issued prior to the IPO and the conversion of all of the Company's preferred stock into an aggregate of 53.6 million shares of the Company's Class B common stock upon closing of the IPO.

Some of these shares were previously converted into shares of Class A common stock.

On July 12, 2021, all shares of Class B common stock were converted into shares of Class A common stock.

Since we were in a loss position for the periods presented, basic net loss per share is the same as diluted net loss per share, as the inclusion of all potential common shares outstanding would have been anti-dilutive.

The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive are as follows:

The following securities were excluded from the computation of diluted net loss per share of common stock for the periods presented as their effect would have been antidilutive (in millions):

Number of Shares

3 unchanged sentences

Stock options 2,443 4,369 6,963

RSUs 5,285 4,520 1,641

Early exercised stock options — — 91

Convertible common stock warrants — — 183

RSAs 336 784 —

RSUs 11,990 5,285 4,520

Revest shares — 336 784

PSUs 267 71 88

MPSUs 2,174 — —

Bonus PSUs 1,777 — —

Shares issuable pursuant to the ESPP 186 51 25

18 unchanged sentences

Total tax expense (benefit) $ 94 $ 69 $ ( 11,480 )

Reconciliation between our effective tax rate on income from continuing operations and the U.S.

Reconciliation between the Company's effective tax rate on income from continuing operations and the U.S.

federal statutory rate is as follows:

9 unchanged sentences

Restructuring — 2 —

Other — — ( 2 )

Effective tax rate — % — % 11 %

We recorded tax expense of $ 0.1 million for the year ended December 31, 2021.

Our income tax expense is primarily due to income taxes from certain foreign jurisdictions where we conduct business and state minimum income taxes in the United States.

Our deferred tax assets and liabilities were as follows:

The Company recorded tax expense of $ 0.1 million, $ 0.1 million, and an income tax benefit of $ 11.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The Company's income tax expense is primarily due to income taxes from certain foreign jurisdictions where the Company conducts business and state minimum income taxes in the United States.

The Company's deferred tax assets and liabilities were as follows:

Year ended December 31,

(in thousands)

Reserves and accruals $ 3,149 $ 941

Lease liability 20,415 17,481

Stock-based compensation 6,000 3,969

Deferred Tax Assets:

Net operating losses $ 183,306 $ 162,260

Payroll taxes 454 —

Depreciation of property, plant and equipment 1,958 576

Lease Liability 23,245 20,415

Research and development credits 21,383 16,636

Capitalized research and development 21,032 4,558

Stock-based compensation 10,429 6,000

Deferred revenue 2,811 7,821

Reserves and accruals 4,648 3,149

Other 4,179 2,761

Deferred tax assets 271,033 223,600

Deferred Revenue — ( 673 )

Intangible asset amortization ( 21,713 ) ( 26,493 )

Right-of-use Asset ( 18,847 ) ( 19,073 )

Amortization of intangible assets ( 21,935 ) ( 31,188 )

State Taxes ( 10,732 ) ( 8,969 )

Other ( 4,724 ) ( 133 )

Prepaid Commissions ( 11,526 ) ( 5,073 )

Deferred tax liabilities ( 62,818 ) ( 59,608 )

1 unchanged sentence

Net deferred tax (liabilities) assets $ — $ —

As of December 31, 2021 and 2020, we had net operating loss carryforwards for U.S.

As of December 31, 2022 and 2021 , t he Company had NOL carryforwards for U.S.

federal income tax purposes of approximately $ 658.8 million and $ 586.3 million, respectively;

and for state income tax purposes of approximately $ 528.9 million and $ 482.5 million, respectively.

The federal net operating loss carryforwards, if not utilized, will begin to expire in 2031.

The state net operating loss carryforward, if not utilized, will begin to expire on various dates starting in 2022.

The Company also has federal and California research and development credit carryforwards totaling $ 17.8 million and $ 6.6 million at December 31, 2021, respectively.

The federal NOL carryforwards, if not utilized, will begin to expire in 2031.

The state NOL carryforward, if not utilized, will begin to expire on various dates starting in 2023.

The Company also has federal and California research and development credit carryforwards totaling $ 22.8 million and $ 8.2 million as of December 31, 2022 , respectively.

The federal research and development credit carryforwards will begin to expire in 2034, unless previously utilized.

The California research credits do not expire.

Based on all available evidence on a jurisdictional basis we believe that it is more likely than not that our deferred tax assets will not be utilized and have recorded a full valuation allowance against its net deferred tax assets.

We assess on a periodic basis the likelihood that we will be able to recover its deferred tax assets.

We consider all available evidence, both positive and negative, including historical losses, we determined that it is more likely than not that the net deferred tax assets will not be fully realizable for the years ended December 31, 2021 and 2020.

We have a valuation allowance for deferred tax assets, including net operating loss carryforwards.

We expect to maintain this valuation allowance for the foreseeable future.

As of December 31, 2022, the Company has NOL carryforwards for United Kingdom purposes of approximately $ 32.3 million.

The UK NOL carryforwards do not expire.

Based on all available evidence on a jurisdictional basis t he Company believes that it is more likely than not that the Company's deferred tax assets will not be utilized and have recorded a full valuation allowance against its net deferred tax assets.

The Company assesses on a periodic basis the likelihood that it will be able to recover its deferred tax assets.

The Company considers all available evidence, both positive and negative, including historical losses.

The Company determined that it is more likely than not that the net deferred tax assets will not be fully realizable for the years ended December 31, 2022 and 2021.

T he Company has a valuation allowance for deferred tax assets, including NOL carryforwards.

The Company expects to maintain this valuation allowance for the foreseeable future.

During the year ended December 31, 2022, the valuation allowance related to the Company's deferred tax assets increased by $ 44.2 million.

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (the "Code") and similar state provisions.

A detailed analysis was performed through June 30, 2020 for Fastly to determine whether an ownership change under Section 382 of the Code has occurred has been performed and as a result there is no limitation on the use of net operating loss carryforwards attributable to periods before the change.

A detailed analysis was performed for the period March 1, 2014 to October 1, 2020 for Signal Sciences to determine whether an ownership change under Section 382 of the Code has occurred has been performed and as a result there is a limitation on the use of net operating loss carryforwards acquired from Signal Sciences.

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations under the Code and similar state provisions.

Under Section 382 of the Code, a corporation that undergoes an "ownership change" may be subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income.

A detailed analysis was performed through December 31, 2021 for the Company to determine whether an ownership change under Section 382 of the Code has occurred, and ownership changes were identified in 2013 and 2020.

As a result of this analysis, the Company concluded that there is no longer any limitation on the utilization of such NOLs.

As a result of this analysis, the Company concluded that there is no longer any limitation on its utilization of the NOLs of Signal Sciences.

No provision for U.S.

3 unchanged sentences

Balance at beginning of year

$ 7,808 $ 3,186

Increases related to prior year tax positions

Decreases related to prior year tax positions

( 751 ) ( 31 )

Increases related to current year tax positions

3 unchanged sentences

The unrecognized tax benefits, if recognized and in absence of full valuation allowance, would impact the income tax provision by $ 17.3 million and $ 7.8 million at December 31, 2022 and 2021, respectively.

It would not impact the tax provision for year ended December 31, 2019.

As of December 31, 2022, the Company does not believe that it is reasonably possible that its unrecognized tax benefits would significantly change in the following 12 months.

Our policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on its consolidated balance sheet.

To date, we have not recognized any interest and penalties in its consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.

The Company's policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on its consolidated balance sheet.

To date, t he Company has not recognized any interest and penalties in its consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.

Generally, in the U.S.

federal and state taxing jurisdictions, tax periods in which certain loss and credit carryovers are generated remain open for audit until such time as the limitation period ends for the year in which such losses or credits are utilized.

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law (the "CARES Act").

The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

Since the second quarter of 2020, we utilized the provision to defer payment of certain of our payroll taxes.

Any deferred payments will be accrued for as a liability and included in our condensed consolidated balance sheet for the applicable period.

As of December 31, 2021, we have accrued for $ 1.7 million in payroll tax deferrals related to the CARES Act.

Information About Revenue and Geographic Areas

We consider operating segments to be components of the Company in which separate financial information is available and is evaluated regularly by our Chief Operating Decision Maker ("CODM") in deciding how to allocate resources and in assessing performance.

Our CODM is the Chief Executive Officer ("CEO").

We have determined that we operate our business as one reportable segment, and there are no segment managers who are held accountable for operations, operating results, or plans for levels or components below the consolidated unit level.

Accordingly, we have determined that we have a single reporting segment and operating unit structure.

Revenue by geography is based on the billing address of the customer.

Refer to Note 3—Revenue for more information on net revenue by geographic region.

Refer to Note 3, "Revenue" for more information on net revenue by geographic area.

Long-Lived Assets

The following table presents long-lived assets by geographic region:

As of December 31, As of December 31,

The Company’s property and equipment and operating lease right-of-use assets, each net, by geographic area were as follows:

As of December 31,

(in thousands)

2 unchanged sentences

Total long-lived assets $ 248,818 $ 236,592

Subsequent Events

On January 24, 2022 we entered into an agreement with the holders of restricted stock that had been sold in advance of vesting conditions to return the proceeds associated with the remaining 224,124 unvested shares as of December 31, 2021.

On January 31, we received $ 10.7 million from these stockholders.

We have recorded a receivable of $ 10.7 million as of December 31, 2021.

These funds will be remitted in accordance with the original vesting schedule.

The modification to the original award will be reflected subsequent to December 31, 2021.

In February, one of the stockholders had a change in service as he converted from an employee to a contractor.

Under the terms of his agreement, he is entitled to continued vesting of these awards as long as he provides continued service as a contractor.

We have entered into a separate Consulting agreement with him.

Due to the reduction in duties to be performed as a contractor, we will accelerate the remaining stock based compensation associated with his award to be recorded on his last day of service as an employee.

Stockholders' Equity for additional information.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data