What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-27 · 272 added, 310 removed, 1007 unchanged (37% of the section changed)

10 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Fastly, Inc.

To the stockholders and the Board of Directors of Fastly, Inc.

Opinion on the Financial Statements

2 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 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.

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, 2023, 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 21, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

16 unchanged sentences

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

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 manually processed revenue requires a complex set of manual procedures to generate complete and accurate data to process and record revenue.

4 unchanged sentences

• We obtained an understanding of the nature of the manually processed revenue through inquiry with the Company personnel responsible for the invoice as well as review of the contract with the customer.

• For a sample of manually processed revenue transactions, we recalculated the manually processed revenue and evaluated the accuracy of the data used in our recalculation of manually processed revenue by comparing key attributes utilized in our recalculation to source information and documents, including usage, bandwidth, and other services provided.

• For a sample of manually processed revenue transactions, we recalculated the manually processed revenue by comparing key attributes utilized in our recalculation to source information and documents, including usage, bandwidth, and other services provided.

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

36 unchanged sentences

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;

1,000,000,000 shares authorized as of both December 31, 2023 and 2022;

132,992,126 and 124,336,171 shares issued and outstanding at December 31, 2023 and 2022, respectively

7 unchanged sentences

(in thousands, except per share data)

Year ended December 31,

2023 2022 2021

6 unchanged sentences

General and administrative 116,077 120,803 126,845

Impairment expense

Total operating expenses 464,356 455,980 406,349

4 unchanged sentences

Other income (expense), net ( 1,832 ) ( 29 ) 356

Loss before income tax expense (benefit) ( 190,680 ) ( 222,628 ) ( 107,412 )

Loss before income tax expense

( 133,309 ) ( 190,680 ) ( 222,628 )

Income tax expense (benefit)

( 221 ) 94 69

Net loss $ ( 133,088 ) $ ( 190,774 ) $ ( 222,697 )

4 unchanged sentences

(in thousands)

Year ended December 31,

2023 2022 2021

2 unchanged sentences

Foreign currency translation adjustment $ 565 $ ( 255 ) $ ( 286 )

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

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

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

7,713 ( 6,404 ) ( 2,347 )

Total other comprehensive gain (loss)

$ 8,278 $ ( 6,659 ) $ ( 2,633 )

Comprehensive loss $ ( 124,810 ) $ ( 197,433 ) $ ( 225,330 )

10 unchanged sentences

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

Change in accounting policy — — — — — — ( 252 ) ( 252 )

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 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 — — — — — — —

Exercise of stock options 4,360 — — — 15,273 — — 15,273

Exercise of common stock warrants — — 145 — — — — —

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 — — — — — — —

Issuance of common stock under ESPP 331 — — — 8,193 — — 8,193

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

Issuance of restricted stock awards 448 — — — — — — —

Shares issued under employee stock purchase program

236 — — — 8,798 — — 8,798

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

4 unchanged sentences

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

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

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

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

Issuance of restricted stock awards 112 — — — — — — —

Shares issued under employee stock purchase program

516 — — — 4,665 — — 4,665

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

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

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

1 unchanged sentence

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(in thousands)

Common Stock—Class A Common Stock—Class B Additional

Capital Accumulated

Comprehensive

Income (Loss) Accumulated

Deficit Total

Stockholders’

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 291 — — — 2,169 — — 2,169

Vesting of restricted stock units 6,150 1 — — — — — 1

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

Shares issued under ESPP 516 — — — 4,665 — — 4,665

Shares issued under bonus program 1,193 — — — 16,599 — — 16,599

Shares issued under employee stock purchase program 1,022 — — — 8,692 — — 8,692

Stock-based compensation — — — — 121,679 — — 121,679

Net loss — — — — — — ( 133,088 ) ( 133,088 )

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

Other comprehensive income — — — — — 8,278 — 8,278

Balance as of December 31, 2023 132,992 $ 3 — $ — $ 1,815,245 $ ( 1,008 ) $ ( 834,752 ) $ 979,488

1 unchanged sentence

(in thousands)

Year ended December 31,

2023 2022 2021

8 unchanged sentences

Stock-based compensation 136,303 145,796 140,488

Deferred income taxes

Provision for credit losses 2,025 2,406 196

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

(Gain) loss on disposals of property and equipment 505 854 ( 300 )

1 unchanged sentence

Impairment of operating lease right-of-use assets 744 2,083 —

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

Impairment expense 4,316 — —

Net gain on extinguishment of debt ( 52,416 ) ( 54,391 ) —

8 unchanged sentences

Other liabilities 7,064 4,447 7,010

Net cash used in operating activities ( 69,632 ) ( 38,482 ) ( 19,916 )

Net cash (used in) provided by operating activities

362 ( 69,632 ) ( 38,482 )

Cash flows from investing activities:

10 unchanged sentences

Cash flows from financing activities:

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

Payments of costs related to follow-on public offering — — ( 675 )

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

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

Repayments of notes payable ( 177,082 ) — ( 20,300 )

Cash paid for debt extinguishment

( 310,540 ) ( 177,082 ) —

Repayments of finance lease liabilities ( 27,175 ) ( 22,532 ) ( 13,568 )

1 unchanged sentence

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

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

Payment of deferred consideration for business acquisitions ( 4,393 ) — —

Proceeds from exercise of vested stock options 2,169 5,688 12,626

Proceeds from employee stock purchase plan 8,559 4,777 8,069

Net cash (used in) provided by financing activities ( 331,380 ) ( 189,149 ) 936,551

5 unchanged sentences

(in thousands)

Year ended December 31,

2023 2022 2021

2 unchanged sentences

Cash paid for income taxes, net of refunds received $ 331 $ 250 $ 267

Noncash investing and financing activities:

Property and equipment additions not yet paid in cash or financed $ 640 $ 1,492 $ 18,275

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

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

Stock-based compensation capitalized to internal-use software $ 9,975 $ 7,997 $ 4,446

5 unchanged sentences

Deployments of prepaid capital equipment $ 8,665 $ 5,184 $ —

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

Receivable related to shares of restricted stock $ — $ — $ 10,655

16 unchanged sentences

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

3 unchanged sentences

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.

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

The Company has made certain presentation changes to consolidate the interest paid on finance lease line into other liabilities working capital changes and components of the non-cash lease expense related to operating lease liability changes into operating lease liability working capital changes within operating cash flows in the consolidated statements of cash flows.

Such reclassifications did not affect the consolidated balance sheets, total revenues, operating income, net income, or cash flows from operating, investing or financing activities.

Use of Estimates

1 unchanged sentence

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.

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 long-lived assets as well as 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.

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

1 unchanged sentence

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.

treasury securities, agency bonds, 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.

The Company maintains deposits in federally insured financial institutions in excess of federally insured limits.

The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash equivalents to the extent recorded in the balance sheets.

While the Company has not experienced any losses in such accounts and the Company has historically maintained its cash in multiple financial institutions, the failure of Silicon Valley Bank (“SVB”) in March 2023, at which the Company held cash and cash equivalents in multiple accounts, exposed the Company to limited credit risk prior to the completion by the Federal Deposit Insurance Corporation (“FDIC”) of the resolution of SVB in a manner that fully protected all depositors.

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.

No customer accounted for more than 10% of revenue for both the years ended December 31, 2023, 2022 and 2021.

One customer accounted for more than 10% of the total accounts receivable balance as of December 31, 2023, whereas no customers accounted for more than 10% of the total accounts receivable balance as of December 31, 2022.

Affiliated customers that are business units of a single company in the streaming entertainment space generated an aggregate of 12 %, 11 % and 11 % of the Company’s revenue for the years ended December 31, 2023, 2022 and 2021, respectively.

The same affiliated customers accounted for an aggregate of 23 % and 15 % of the Company’s accounts receivable balance as of December 31, 2023 and 2022, respectively.

Cash, Cash Equivalents and Marketable Securities

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.

Cash and cash equivalents include cash held in banks, highly liquid money market funds, U.S.

treasury securities and commercial paper, 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.

and foreign government agency securities, corporate bonds, agency 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.

9 unchanged sentences

Restricted Cash

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.

As of both December 31, 2023 and 2022, the Company had a restricted cash balance of $ 0.2 million, which consists of a letter of credit related to a lease arrangement that is collateralized by restricted cash.

As of December 31, 2023 and 2022, these amounts are included in prepaid expenses and other current assets on the consolidated balance sheets.

Accounts Receivable, net

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 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.

6 unchanged sentences

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 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 .

Based on the nature of the Company’s technology and services, and the duration of its relationships with its customers, the expected period of benefit is determined to be five years .

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

3 unchanged sentences

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.

Additionally, accounts receivable, accounts payable, and accrued expenses approximate 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.

3 unchanged sentences

The estimated useful life of each asset category is as follows:

Computer and networking equipment 3 - 5 years

Computer and networking equipment 3 to 5 years

Leasehold improvements

2 unchanged sentences

Office equipment 3 years

Internal-use software 3 years

Internal-use software 3 to 5 years

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.

4 unchanged sentences

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.

Capitalization ceases at the point when the project is fully tested and substantially complete and is ready for its intended purpose.

Capitalization ceases at the point when the project is fully tested, is substantially completed and is ready for its intended purpose.

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

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.

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

6 unchanged sentences

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.

21 unchanged sentences

Internet protocol addresses 10 years

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

In-process research and development (“IPR&D”)

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.

2 unchanged sentences

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.

In addition to the recoverability assessment, the Company periodically reviews the remaining estimated useful lives of long-lived assets.

If the estimated useful life assumption for any asset is changed due to new information, the remaining unamortized balance would be depreciated or amortized over the revised estimated useful life, on a prospective basis.

Refer to Note 6 — Balance Sheet Information and Note 7 — Leases for discussion of impairment of property and equipment and impairment of operating lease right-of-use asset, respectively.

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

5 unchanged sentences

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.

Operating 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.

12 unchanged sentences

Convertible Debt

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 evaluated the terms of its debt in line with Accounting Standards Update (“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

3 unchanged sentences

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 Company recognizes revenue in accordance with Accounting Standards Codification (“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.

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.

15 unchanged sentences

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.

For contracts to which such practical expedient cannot be applied, consideration is estimated.

For custom arrangements, other methods may be used as a measure of progress towards satisfying the performance obligations.

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.

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 prospective 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.

9 unchanged sentences

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.

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

Advertising Expense

7 unchanged sentences

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, including expected term and stock price volatility of the awards.

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 .

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 three or 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.

28 unchanged sentences

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.

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting - Improvements to Reportable Segment Disclosures”, which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

The guidance is effective for the Company's annual periods beginning in 2024 and interim periods beginning in the first quarter of fiscal year 2025.

The Company is currently evaluating the impact of the new guidance and intends to adopt the guidance retrospectively when it becomes effective in 2024.

In December, 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S.

and foreign jurisdictions.

The guidance is effective for the Company's annual periods beginning in 2025.

The Company is currently evaluating the impact of the new guidance and intends to adopt the guidance prospectively when it becomes effective in 2025 .

Disaggregation of revenue

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

9 unchanged sentences

Total revenue $ 505,988 $ 432,725 $ 354,330

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:

The majority of the Company’s revenue is derived from enterprise customers.

In the first quarter of 2023, the Company updated its methodology (“new methodology”) by which it calculates its customer count metrics, including Total Customer Count, Enterprise Customer Count and associated metrics.

Under the prior methodology, enterprise customers is defined as customers with revenue in excess of $ 100,000 over the trailing 12-month period.

The following table presents the Company’s net revenue for enterprise and non-enterprise customers based on the prior methodology:

Year ended December 31,

4 unchanged sentences

Total revenue $ 505,988 $ 432,725 $ 354,330

Under the new methodology, enterprise customers is defined as customers with annualized current quarter revenue in excess of $ 100,000 .

This is calculated by taking the sum of revenue for each customer within the quarter and multiplying it by four.

The following table presents the Company’s net revenue for enterprise and non-enterprise customers based on the new methodology:

Year ended December 31,

2023 2022 2021

(in thousands)

Enterprise customers $ 464,452 $ 393,152 $ 315,918

Non-enterprise customers 41,536 39,573 38,412

Total revenue $ 505,988 $ 432,725 $ 354,330

Contract balances

11 unchanged sentences

Contract liabilities $ 38,150 $ 30,544

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:

The following table presents revenue recognized during the years ended December 31, 2023 and 2022 from amounts included in the contract liability at the beginning of the period:

Year ended December 31,

2 unchanged sentences

Remaining performance obligations

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.

As of December 31, 2023, the aggregate amount of the transaction price in the Company's contracts allocated to remaining performance obligations that were unsatisfied or partially unsatisfied was $ 235.7 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.

15 unchanged sentences

Cash $ 21,269 $ 46,516

Treasury securities 52,830 —

Money market funds 21,166 96,875

Commercial paper 12,656 —

Total cash and cash equivalents

8 unchanged sentences

Total marketable securities, current $ 214,799 $ 374,581

Treasury securities — 239,528

Corporate notes and bonds 5,999 140,949

Asset-backed securities 89 24,156

Municipal securities — 2,312

Foreign government and supranational securities — 12,631

Total marketable securities, non-current $ 6,088 $ 165,105

1 unchanged sentence

Total cash, cash equivalents and marketable securities $ 328,808 $ 683,077

Available-for-Sale Investments

The following table summarizes adjusted cost, gross unrealized gains and losses, and fair value related to available-for-sale securities classified as marketable securities on the accompanying consolidated balance sheets as of December 31, 2022 and December 31, 2021:

The following table summarizes adjusted cost, gross unrealized gains and losses, and fair value related to cash and cash equivalents and available-for-sale securities on the accompanying consolidated balance sheets as of December 31, 2023 and December 31, 2022:

As of December 31, 2023

(in thousands)

Cash and cash equivalents:

Treasury securities $ 52,824 $ 6 $ — $ 52,830

Commercial paper $ 12,663 $ — $ ( 7 ) $ 12,656

Marketable securities:

Treasury securities $ 73,444 $ 8 $ ( 4 ) $ 73,448

Corporate notes and bonds 112,487 9 ( 931 ) 111,565

1 unchanged sentence

Asset-backed securities 89 — — 89

Municipal securities 2,322 — ( 101 ) 2,221

Foreign government and supranational securities 12,522 — ( 69 ) 12,453

9,854 — ( 3 ) 9,851

Total available-for-sale investments $ 287,307 $ 23 $ ( 957 ) $ 286,373

3 unchanged sentences

(in thousands)

Marketable securities:

Treasury securities $ 291,685 $ — $ ( 3,697 ) $ 287,988

Corporate notes and bonds 217,187 — ( 4,494 ) 212,693

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

Asset-backed securities 24,617 — ( 286 ) 24,331

2 unchanged sentences

Total available-for-sale investments $ 548,333 $ — $ ( 8,647 ) $ 539,686

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.

There were 28 and 76 securities in a continuous loss position for 12 months or longer as of December 31, 2023, and 2022, respectively.

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

12 unchanged sentences

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.

treasury securities, agency bonds, 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:

4 unchanged sentences

Money market funds $ 21,166 $ — $ — $ 21,166

Treasury securities — 52,830 — 52,830

Commercial paper — 12,656 — 12,656

Total cash equivalents 21,166 65,486 — 86,652

3 unchanged sentences

Commercial paper

— 25,934 — 25,934

Asset-backed securities — 89 — 89

Municipal securities — 2,221 — 2,221

Foreign government and supranational securities — 12,453 — 12,453

— 9,851 — 9,851

Total marketable securities — 220,887 — 220,887

12 unchanged sentences

Corporate notes and bonds — 212,693 — 212,693

Commercial paper — 124,089 — 124,089

Asset-backed securities — 24,331 — 24,331

3 unchanged sentences

Restricted cash:

Restricted cash, non-current 893 — — 893

Restricted cash, current

Total restricted cash 150 — — 150

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

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.

Restricted cash was $ 0.2 million as of both December 31, 2023 and 2022.

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

The amounts as of December 31, 2023 and 2022, were both classified as current 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, 2023 and 2022.

1 unchanged sentence

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.

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

During the year ended December 31, 2023, $ 4.1 million of the Holdback was distributed to certain shareholders of Glitch and the remaining Holdback will be distributed 24 months following the acquisition closing date.

The acquisition expands the Company’s brand awareness within the developer community and bolsters 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.

2 unchanged sentences

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):

4 unchanged sentences

Total intangible assets acquired $ 2,000

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

For the year ended December 31, 2022, we 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, 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, 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, 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 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.

Of the 6,367,709 shares issued 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.

Since they are subject to service conditions, they will be accounted for as a post-acquisition compensation expense over the requisite service period, which is also the vesting period of the award.

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

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.

The determination of the fair value of the intangible assets acquired required management to make significant estimates and assumptions related to forecasted future revenues and selection of the royalty rate and discount rate.

Excess purchase price consideration was recorded as goodwill which includes value attributable to the assembled workforce.

The purchase consideration was allocated to the tangible and intangible assets and liabilities acquired as of the acquisition date, with the excess recorded to goodwill as shown below.

Assets acquired

Cash and cash equivalents $ 21,501

Other current assets 6,419

Intangible assets, net 124,100

Other non-current assets 8,094

Total assets acquired $ 160,114

Liabilities assumed

Current liabilities ( 14,755 )

Non-current liabilities ( 21,170 )

Total liabilities assumed $ ( 35,925 )

Net assets acquired 124,189

Total acquisition consideration 759,393

Goodwill transferred $ 635,204

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

Total Estimated useful life (in years)

Customer relationships $ 69,100 8.0

Developed Technology $ 49,500 5.0

Trade name $ 3,300 3.0

Backlog $ 2,200 2.0

Total intangible assets acquired $ 124,100

The fair values of the acquired developed technology and trade name intangible assets were determined using the relief from royalty method.

The fair values of the acquired customer relationships and backlog intangible assets were determined using the multi-period excess earnings method.

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

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 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 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 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.

There were no material transactions between Fastly and Signal Sciences during the periods presented that would need to be eliminated.

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.

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.

The unaudited pro forma financial information was as follows (in thousands):

As of December 31,

(in thousands)

Revenue $ 313,665

Net loss $ ( 159,248 )

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

Balance Sheet Information

20 unchanged sentences

Property and equipment, net $ 176,608 $ 180,378

During the year ended December 31, 2023, the Company recognized an impairment charge of $ 4.3 million, of which $ 3.0 million related to property and equipment, net and $ 1.3 million related to advance payments for the purchase of property and equipment.

The write-off was primarily related to excess computer and networking equipment including software the Company does not expect to use and therefore abandoned.

Impairment charges are included within impairment expense in the consolidated statements of operations.

There were no impairments during the years ended December 31, 2022 and 2021.

Depreciation on property and equipment for the years ended December 31, 2023, 2022 and 2021 was approximately $ 51.6 million, $ 42.6 million, and $ 28.8 million, respectively.

Included in these amounts was amortization expense for capitalized internal-use software costs of approximately $ 14.0 million, $ 8.6 million and $ 4.6 million for the years ended December 31, 2023, 2022 and 2021, 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.

As of December 31, 2023 and 2022, the unamortized balance of capitalized internal-use software costs on the Company’s consolidated balance sheets was approximately $ 62.6 million and $ 45.5 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, 2023 and 2022 , included a total of $ 74.7 million and $ 77.3 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.

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 associated networking equipment assets under finance leases totaled $ 40.1 million and $ 28.1 million as of December 31, 2023 and 2022 , respectively.

14 unchanged sentences

Other tax liabilities 4,344 8,698

Other accrued liabilities 5,993 4,294

Other accrued expenses

Total accrued expenses $ 61,818 $ 61,161

8 unchanged sentences

Total other current liabilities $ 40,539 $ 34,394

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated other comprehensive loss, which is reported as a component of stockholders’ equity:

Foreign Currency Translation Available-for-sale investments Accumulated Other Comprehensive Income (Loss)

Foreign Currency Translation Unrealized gain/(loss) for available-for-sale investments

Accumulated Other Comprehensive Income (Loss)

(in thousands)

Balance at December 31, 2020

Other comprehensive income (loss) ( 135 ) ( 55 ) ( 190 )

$ ( 36 ) $ 42 $ 6

Other comprehensive loss

( 286 ) ( 2,347 ) ( 2,633 )

Balance at December 31, 2021

Other comprehensive income (loss) ( 286 ) ( 2,347 ) ( 2,633 )

( 322 ) ( 2,305 ) ( 2,627 )

Other comprehensive loss

( 255 ) ( 6,404 ) ( 6,659 )

Balance at December 31, 2022

Other comprehensive income (loss) ( 255 ) ( 6,404 ) ( 6,659 )

$ ( 577 ) $ ( 8,709 ) $ ( 9,286 )

Other comprehensive income

565 7,713 8,278

Balance at December 31, 2023

There were no material reclassifications out of accumulated other comprehensive (loss) income for the years ended December 31, 2022 and 2021.

$ ( 12 ) $ ( 996 ) $ ( 1,008 )

There were no material reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2023 and 2022.

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’s operating leases have remaining lease terms ranging from less than 1 year to 7 years, some of which include options to extend the leases.

The Company’s finance leases have remaining lease terms up to 1 year.

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 Company’s subleases have remaining lease terms ranging from 1 year to 7 years.

Sublease income was $ 1.2 million, $ 0.9 million, and $ 1.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The components of lease cost were as follows:

11 unchanged sentences

The short-term lease costs were not material for the years ended December 31, 2023, 2022 and 2021.

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.

During the years ended December 31, 2023 and 2022, the Company recognized impairment on its operating lease right-of-use assets of $ 0.7 million and $ 2.1 million, respectively.

The Company did no t recognize any material impairment on its operating lease right-of-use assets for the year ended December 31, 2021.

As of December 31,

7 unchanged sentences

Finance leases 4.67 % 4.73 % 4.86 %

Future minimum lease payments under non-cancellable lease arrangements as of December 31, 2022 were as follows (in thousands):

Future minimum lease payments under non-cancellable leases as of December 31, 2023 were as follows:

Operating Leases Finance Leases

9 unchanged sentences

Total liability $ 74,805 $ 17,286

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.

As of December 31, 2023, the Company has undiscounted commitments of $ 2.3 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 2024 with lease terms of 3 years.

Goodwill and Intangible Assets

10 unchanged sentences

As of December 31, 2023 and December 31, 2022, the Company’s intangible assets consisted of the following:

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

As of December 31, 2023

As of December 31, 2022

Gross carrying value Accumulated amortization Net carrying value Gross carrying value Accumulated amortization Net carrying value

6 unchanged sentences

Backlog — — — 2,200 ( 2,200 ) —

IPR&D — — — 368 — 368

— — — 39 — 39

Total intangible assets $ 128,884 $ ( 66,409 ) $ 62,475 $ 131,084 $ ( 48,184 ) $ 82,900

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.

The Company’s customer relationships, developed technology, trade names, backlog and Internet protocol addresses represent intangible assets subject to amortization.

Amortization expense was $ 20.4 million, $ 21.7 million and $ 21.2 million, for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company did not purchase any intangible assets during the year ended December 31, 2023.

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.

During the year ended December 31, 2021, the Company purchased $ 2.1 million of intangible assets.

The Company did not record any impairments during the years ended December 31, 2023, 2022 and 2021.

7 unchanged sentences

Senior Secured Credit Facilities Agreement

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.

On February 16, 2021, the Company entered into a Senior Secured Credit Facilities Agreement (“Credit Agreement”) with the lenders from time to time party thereto (the “Lenders”) and Silicon Valley Bank, as a lender and as administrative agent and collateral agent for the Lenders, 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.

The Credit Agreement originally bore interest at a rate per annum equal to the sum of LIBOR for the applicable interest period plus 1.75 % to 2.00 %, depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement.

On June 28, 2023, the Company entered into the First Amendment to Credit Agreement with the Lenders and First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A.

(as successor to Silicon Valley Bank)), as a lender and as administrative agent and collateral agent for the Lenders, which, among other things, amended the interest rate provisions of the Credit Agreement to replace LIBOR with the Secured Overnight Finance Rate (“SOFR”) as the interest rate benchmark.

On February 16, 2024, the Company entered into the Second Amendment to Credit Agreement with the Lenders and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as a lender and as administrative agent and collateral agent for the Lenders, which, among other things, extended the maturity date of the loans under the Credit Agreement to June 14, 2024.

As amended, the revolving loans bear interest, at the Company’s election, at an annual rate based on SOFR or a base rate.

Loans based on SOFR bear interest at a rate per annum equal to SOFR, plus an adjustment of 0.10 %, plus 1.75 % to 2.00 %, depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement.

Loans based on the base rate bear interest at a rate per annum equal to the base rate plus 0.75 % to 1.00 %, depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement.

Interest payments on outstanding borrowings are due on the last day of each interest period.

The Credit Agreement has a commitment fee on the unused portion of the borrowing commitment, which is payable on the last day of each calendar quarter at a rate per annum of 0.20 % - 0.25 % depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement.

The agreement allows for an alternative interest rate to be used.

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.

The Credit Agreement has a commitment fee on the unused portion of the borrowing commitment, which is payable on the last day of each calendar quarter at a rate per annum of 0.20 % to 0.25 % depending on the average daily outstanding balance of all loans and letters of credit 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 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 on the last day of any fiscal quarter.

The Credit Agreement requires the Company to comply with various affirmative and negative covenants, and contains customary events of default.

As of December 31, 2023 and 2022, the Company was in compliance with all of the Credit Agreement’s covenants.

During the years ended December 31, 2023 and 2022, no amounts were drawn down on the Company’s Credit Agreement.

6 unchanged sentences

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.

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 Class A 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.

1 unchanged sentence

(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;

(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;

8 unchanged sentences

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.

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 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.

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.

As of December 31, 2023, the conversion conditions had not been met and therefore the Notes were not yet convertible.

On May 25, 2022, the Company entered into separate, privately negotiated transactions with certain holders of the Notes to repurchase (the “Repurchases”) $ 235.0 million aggregate principal amount of the Notes for an aggregate cash repurchase price of $ 176.4 million and aggregate transaction costs of $ 0.7 million.

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 :

During the year ended December 31, 2023, the Company entered into several separate privately negotiated transactions with certain holders of the Notes to repurchase $ 367.3 million aggregate principal amount of the Notes for an aggregate cash repurchase price of $ 309.1 million and aggregate transaction costs of $ 2.0 million.

The Repurchases were accounted for as a

debt extinguishment that resulted in a net gain of $ 52.4 million, which was recorded as non-operating income on the Company’s consolidated statement of operations for the year ended December 31, 2023.

The following table reflects the carrying values of the debt agreements as of December 31, 2023 and 2022 as follows :

Year ended December 31,

(in thousands)

Liability component:

Convertible Senior notes (effective interest rate of 0.4 %)

Convertible Senior notes (effective interest rate of 0.38 % and 0.40 % as of December 31, 2023 and 2022, respectively)

Principal amount

$ 346,489 $ 713,753

3 unchanged sentences

$ 343,507 $ 704,710

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.

For the years ended December 31, 2023, 2022 and 2021, interest expense related to the Company’s debt obligations was $ 2.7 million, $ 3.4 million, and $ 3.5 million respectively.

As of December 31, 2023 and 2022, the total estimated fair value of the Notes were $ 301.4 million and $ 517.5 million, respectively.

1 unchanged sentence

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:

As of December 31, 2023, the Company had long-term commitments for cost of revenue related agreements (i.e., bandwidth usage, peering and other managed services with various networks, fixed asset vendors, Internet service providers and other third-party vendors).

The Company also has non-cost of revenue long-term commitments for various non-cancelable 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 the Company’s purchase commitments as of December 31, 2023 were as follows:

Cost of Revenue Commitments Operating Expense Commitments Total Purchase Commitments

6 unchanged sentences

Total $ 63,066 $ 16,374 $ 79,440

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

2 unchanged sentences

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.

Historically, the Company has not billed or collected these taxes and, in accordance with 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 $ 4.3 million and $ 7.6 million as of December 31, 2023 and 2022, 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.

These estimates are based on several key assumptions, including the taxability of the Company’s products, the jurisdictions in which the Company believes 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.

24 unchanged sentences

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 both December 31, 2022 and 2021, no shares of Class B common stock were issued and outstanding.

Equity Incentive Plans

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.

the 2019 Equity Incentive Plan (the “2019 Plan”), 2011 Equity Incentive Plan (“2011 Plan”), Employee Stock Purchase Plan and the Signal Sciences Corp.

2014 Stock Option and Grant Plan, as amended (the “Signal Plan”).

1 unchanged sentence

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.

The Signal Plan includes 251,754 registered shares which can be exercised to purchase shares of Fastly’s common stock.

As of December 31, 2023 and 2022, there were 8.9 million and 9.6 million Class A common stock available for issuance under the 2019 Plan, respectively.

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, 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.

As of December 31, 2023 and 2022, 133.0 million and 124.3 million shares of Class A common stock were issued and outstanding, respectively.

As of both December 31, 2023 and 2022, no shares of Class B common stock were issued and outstanding.

Stock Options

9 unchanged sentences

Outstanding at December 31, 2022

2,443 $ 6.01 4.7 $ 7,674

Granted 602 16.47

Exercised ( 291 ) 7.45

1 unchanged sentence

Outstanding at December 31, 2023

2,710 $ 8.14 5.1 $ 26,383

Vested and exercisable at December 31, 2023

Unvested and exercisable at December 31, 2022 — $ — 0.0 $ —

2,142 $ 5.94 3.8 $ 25,620

The total pre-tax intrinsic value of options exercised during the years ended December 31, 2023, 2022, and 2021 was $ 3.1 million, $ 8.9 million, and $ 64.9 million, respectively.

4 unchanged sentences

Each of the Black-Scholes inputs is subjective and generally requires significant judgments to determine.

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:

The Company estimated the fair value of stock option awards during the year ended December 31, 2023 on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

Year ended December 31,

5 unchanged sentences

During the years ended December 31, 2023 and 2022, and 2021, the Company recognized stock-based compensation expense from stock options of approximately $ 2.1 million, $ 6.1 million, and $ 24.9 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, 2023, total unrecognized stock-based compensation cost related to outstanding unvested stock options that are expected to vest was $ 6.2 million.

This unrecognized stock-based compensation cost is expected to be recognized over a weighted-average period of approximately 1 year.

This unrecognized stock-based compensation cost is expected to be recognized over a weighted-average period of approximately 3.6 years.

Early Exercise of Stock Options

3 unchanged sentences

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.

The corresponding exercise value of approximately $ 0.4 million as of December 31, 2021, was recorded in other current liabilities and other liabilities on the related consolidated balance sheets.

The Company did not have any early exercise awards for the year ended December 31, 2023 and 2022.

Restricted Stock Units (“RSUs”)

1 unchanged sentence

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 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.

RSUs granted to new hires typically vest over three or four years , at the rate of 33 % or 25 %, respectively, on the first anniversary of the vesting start date and ratably on a quarterly basis over the remaining 24-month or 36-month period thereafter, respectively.

RSUs granted to existing employees typically vest in equal quarterly installments over a three or four-year service period.

All vesting is contingent on continued service.

4 unchanged sentences

Nonvested RSUs as of December 31, 2022

11,990 $ 20.10

Granted 7,667 15.80

Vested ( 3,119 ) 31.40

Forfeited ( 2,037 ) 29.90

( 6,719 ) 18.94

Cancelled/forfeited ( 1,694 ) 22.80

Nonvested RSUs as of December 31, 2023

11,244 $ 17.46

During the years ended December 31, 2023, 2022 and 2021, the weighted-average grant date fair value for RSUs granted was $ 15.80 , $ 14.63 and $ 54.92 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, 2023, 2022 and 2021, the total weighted-average grant date fair value of RSUs vested was $ 127.3 million, $ 97.9 million and $ 67.7 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized stock-based compensation expense related to RSUs of $ 105.2 million, $ 98.5 million and $ 78.3 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, 2023, total unrecognized stock-based compensation cost related to non-vested RSUs was $ 177.1 million.

2 unchanged sentences

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:

Number of Shares Weighted-Average Grant Date Fair Value Per Share

(in thousands)

Nonvested revest shares as of December 31, 2021 336 $ 97.84

Restricted ( 224 ) 97.84

Vested ( 112 ) 97.84

Cancelled/forfeited — —

Nonvested revest shares as of December 31, 2022 — $ —

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.

The Company did no t recognize any stock-based compensation expense related to revest shares for the year ended December 31, 2023.

For the year ended December 31, 2022, the Company recognized stock-based compensation expense related to revest shares of $ 27.6 million.

As of December 31, 2023, there is no unrecognized stock-based compensation cost related to revest shares.

1 unchanged sentence

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.

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.

5 unchanged sentences

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") 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, 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.

In February 2021, pursuant to the Company’s 2019 Equity Incentive Plan, the Company granted shares of executive 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 executive 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 executive 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.

On March 29, 2023, May 4, 2023, and May 30, 2023, pursuant to the Company’s 2019 Equity Incentive Plan, the Company granted certain employees shares of executive 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 2023.

Number of Shares Weighted-Average Grant Date Fair Value Per Share

(in thousands)

Nonvested PSUs as of December 31, 2021 71 $ 102.06

Nonvested executive PSUs as of December 31, 2022

Granted 762 15.88

Vested ( 84 ) 28.16

Cancelled/forfeited ( 213 ) 24.35

Nonvested PSUs as of December 31, 2022 267 $ 28.16

Nonvested executive PSUs as of December 31, 2023

For the years ended December 31, 2023, 2022 and 2021, the Company recognized $ 4.3 million, $ 1.4 million, and $ 3.4 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.

Company-wide Bonus Program (“Bonus Program”)

On February 11, 2022, the Compensation Committee approved a company-wide bonus program, including performance targets, to most of the Company’s employees on active payroll in fiscal year 2022.

Shares awarded under the program were paid out in February 2023 in fully vested RSUs and based on the final attainment of Company-wide performance targets which were tied to its operating plan for fiscal year 2022.

The Company recognized stock-based compensation expense over the employees requisite service period, based on the final attainment of the Company-wide targets.

In February 2023, the Company paid out the bonus liability associated with the 2022 Bonus Program in 1.2 million of restricted stock units, and correspondingly recorded a charge to additional paid-in-capital of $ 16.6 million.

On March 29, 2023, the Compensation Committee approved a company-wide bonus program, including performance targets, to most of the Company’s employees on active payroll in fiscal year 2023.

Shares awarded under the program will be in fully vested RSUs and will be based on the final attainment of Company-wide performance targets which are tied to its operating plan for fiscal year 2023.

The payout of the 2023 Company-wide bonus program 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.

During the years ended December 31, 2023, and 2022, the Company recognized $ 24.7 million and $ 14.9 million of stock-based compensation expense associated with the Bonus Programs, respectively.

The Company did no t recognize any stock-based compensation expense associated with the Bonus Program for the year ended December 31, 2021.

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 September 2022 and January 2023, 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.

6 unchanged sentences

Granted 87 7.25

Vested ( 540 ) 7.84

Cancelled/forfeited ( 250 ) 6.69

4 unchanged sentences

This expense is expected to be amortized over a weighted-average vesting period of 3.9 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.

Employee Stock Purchase Program (“ESPP”)

The ESPP allows eligible employees to purchase shares of the Company’s Class A 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 Class A 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.

18 unchanged sentences

During the years ended December 31, 2023, 2022 and 2021, an aggregate of 1.0 million and 0.5 million and 0.2 million shares of the Company’s Class A common stock was purchased under the ESPP, respectively.

Equity Awards Modification

In September 2023, as part of one employee's separation and transition plan, the Company modified this employee’s outstanding equity awards in an amount that would have vested if this individual had remained an employee for an additional period of time.

As a result of the modification, the Company recognized stock-based compensation expense of $ 2.0 million for the year ended December 31, 2023.

In September 2022, as part of one employee's separation and transition plan, the Company modified this employee’s outstanding equity awards in an amount that would have vested if this individual had remained an employee for an additional period of time.

As a result of the modification, the Company recognized stock-based compensation expense of $ 3.1 million for the year ended December 31, 2022.

Stock-based Compensation Expense

9 unchanged sentences

For the years ended December 31, 2023, 2022 and 2021, the Company capitalized $ 10.1 million, $ 8.0 million, and $ 4.4 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.

For the year ended December 31, 2023, the Company recognized $ 24.7 million of stock-based compensation expense associated with liability classified awards related to the company-wide Bonus Program.

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 company-wide Bonus Program and certain of the Company’s Revest Shares that were modified.

The Company did not recognize any stock-based compensation expense associated with liability classified awards for the year ended December 31, 2021.

Net Loss Per Share Attributable to Common Stockholders

17 unchanged sentences

On July 12, 2021, all shares of Class B common stock were converted into shares of Class A common stock.

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):

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:

Number of Shares

3 unchanged sentences

Stock options 2,710 2,443 4,369

Early exercised stock options — — 91

RSUs 11,244 11,990 5,285

6 unchanged sentences

Total 21,509 26,175 19,341

Loss before income taxes includes the following components:

Loss before income ta xes includes the following components:

Year ended December 31,

9 unchanged sentences

Current tax provision (benefit):

173 322 1,050

Deferred tax provision (benefit):

— ( 253 ) ( 10,631 )

— — ( 2,319 )

Deferred tax benefit:

Total tax expense (benefit) $ ( 221 ) $ 94 $ 69

4 unchanged sentences

Provision at federal statutory tax rate 21 % 21 % 21 %

State taxes, net of federal tax impact — — 2

Change in valuation allowance ( 25 ) ( 14 ) ( 30 )

Foreign tax rate differential 1 — —

Acquisition related expenses — — ( 2 )

Stock-based compensation ( 4 ) ( 9 ) 2

Research and development credits 10 2 5

Disallowed executive compensation

Restructuring — — 2

Effective tax rate — % — % — %

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 recorded tax benefit of $ 0.2 million for the year ended December 31, 2023 and recorded tax expense of $ 0.1 million for both the years ended December 31, 2022 and 2021.

The Company’s income tax expense (benefit) 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:

4 unchanged sentences

Lease liability

20,137 23,245

Research and development credits 38,280 21,383

7 unchanged sentences

Right-of-use asset

State Taxes ( 10,732 ) ( 8,969 )

( 15,322 ) ( 18,847 )

( 13,032 ) ( 10,732 )

Prepaid commissions

( 13,868 ) ( 11,526 )

Deferred tax liabilities ( 58,532 ) ( 62,818 )

Valuation allowance

( 245,476 ) ( 208,215 )

Net deferred tax (liabilities) assets $ 900 $ —

9 unchanged sentences

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.

Based on all available evidence on a jurisdictional basis t he Company believes that it is more likely than not that the Company’s U.S.

deferred tax assets will not be utilized and have recorded a full valuation allowance against its U.S.

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 determined that it is more likely than not that the U.S.

net deferred tax assets will not be fully realizable for the years ended December 31, 2023 and 2022.

T he Company has a valuation allowance for U.S.

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.

During the year ended December 31, 2023, the valuation allowance related to the Company’s U.S.

deferred tax assets increased by $ 37.3 million.

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.

12 unchanged sentences

Decreases related to prior year tax positions

( 751 ) ( 31 )

Increases related to current year tax positions

18 unchanged sentences

Total long-lived assets $ 231,820 $ 248,818

Subsequent Event

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