Fastly, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, due to the material weakness described below, our disclosure controls and procedures were not effective as of December 31, 2024. Management's Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer and oversight of the board of directors, our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of its assessment, due to the material weakness described below, management concluded that our disclosure controls and procedures were not effective. The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report. Material Weakness We identified a material weakness in our internal control over financial reporting for the year ended December 31, 2024. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. We identified deficiencies in the design and operating effectiveness of controls within the revenue process. These deficiencies are related to certain business process controls primarily caused by a lack of sufficiently qualified personnel due to turnover, information technology general controls, including the failure to receive a service auditor’s report for our billing system hosted by a third-party, and insufficient monitoring controls over such third-party service provider. In the aggregate, these deficiencies created a reasonable possibility that a material misstatement to the consolidated financial statements might not be prevented or detected on a timely basis, and represent a material weakness. The material weakness did not result in a misstatement, but could result in misstatements to our financial statements in the future, if not remediated. Management has concluded that the financial statements included elsewhere in this Annual Report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with U.S. GAAP. The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in Part II, Item 8—Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Remediation Efforts with Respect to the Material Weakness The process of implementing an effective system of internal control over financial reporting is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. 135 We have taken and will continue to take action to remediate this material weakness, including: • Hiring and training sufficiently qualified personnel with appropriate technical expertise within the revenue process; • Enhancing the effectiveness of our change management and user access controls over systems within the revenue process by strengthening policies, procedures, review processes, and documentation; • Enhancing our controls over the ongoing monitoring of third-party service providers to confirm their service auditor reports are timely provided to evidence design, implementation, and operating effectiveness of controls within the service organization’s framework of internal controls; and • Reassessing the design and effectiveness of controls over the timely input of complete and accurate customer contract information that is used for the processing and recording of billing and revenue transactions in our systems. As we continue to evaluate and work to improve our internal control over financial reporting, we may decide to take additional measures to address control deficiencies or modify the remediation plans described above. We believe that these actions will remediate the material weakness, however the weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Management believes the foregoing plans will effectively remediate the deficiencies constituting the material weakness. Changes in Internal Control over Financial Reporting Other than as described above, there have been no changes in our internal control over financial reporting in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Annual Report on Form 10-K that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Fastly, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Fastly, Inc. and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 25, 2025, expressed an unqualified opinion on those financial statements. Basis for Opinion 136 The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting . Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Material Weakness A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment: The Company identified deficiencies in the design and operating effectiveness of controls within the revenue process. These deficiencies are related to certain business process controls primarily caused by a lack of sufficiently qualified personnel due to turnover, information technology general controls, including the failure to receive a service auditor’s report for our billing system hosted by a third-party, and insufficient monitoring controls over such third-party service provider. In the aggregate, these deficiencies created a reasonable possibility that a material misstatement to the consolidated financial statements might not be prevented or detected on a timely basis, and represent a material weakness. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2024, of the Company, and this report does not affect our report on such financial statements. /s/ Deloitte & Touche LLP San Francisco, California February 25, 2025 137 Item 9B. Other Information Trading Arrangements During the Company’s last fiscal quarter, none of the Company’s directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated contracts, instructions or written plans for the purchase or sale of the Company’s securities. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 138 PART III Item 10. Directors, Executive Officers, and Corporate Governance Information required by this Item is incorporated by reference to the sections of our proxy statement to be filed with the SEC no later than 120 days after December 31, 2024 in connection with our 2025 Annual Meeting of Stockholders (the “Proxy Statement”). We have adopted a Code of Business Conduct and Ethics for our directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees. Our Code of Business Conduct and Ethics is available on our website at www.fastly.com/investors under the “Governance” tab. Within the time period required by the SEC and the NYSE, we will post on our website at www.fastly.com/investors under the “Governance” tab any amendment to our Code of Business Conduct and Ethics or any waivers of such provisions granted to executive officers and directors. We have adopted insider trading policies and procedures governing the purchase, sale, and other dispositions of our securities by directors, officers and employees that are designed to promote compliance with insider trading laws, rules and regulations, and applicable NYSE listing standards, as well as procedures designed to further the foregoing purposes. A copy of our insider trading policy is filed with this Annual Report on Form 10-K as Exhibit 19.1. Item 11. Executive Compensation Information required by this Item is incorporated by reference to our Proxy Statement. Item 12. S ecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this Item is incorporated by reference to our Proxy Statement. Item 13. Certain Relationships and Related Transactions and Director Independence Information required by this Item is incorporated by reference to our Proxy Statement. Item 14. Principal Accountant Fees and Services Information required by this Item is incorporated by reference to our Proxy Statement. 139 PART IV Item 15. Exhibits (a)(1) Financial statements The information concerning the Company’s financial statements and the Report of Independent Registered Public Accounting Firm required by this Item 15(a)(1) is incorporated by reference herein to the section of this Annual Report on Form 10-K in Part II, Item 8, “Financial Statements and Supplementary Data.” (a)(2) Financial statement schedules All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable or because the information required is already included in the financial statements or the notes to those financial statements. (a)(3) Exhibits We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanying Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K. Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Herewith 3.1 Amended and Restated Certificate of Incorporation . 8-K 001-38897 3.1 May 21, 2019 3.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation. 8-K 001-38897 3.1 June 10, 2020 3.3 Certificate of Retirement. 8-K 001-38897 3.1 July 13, 2021 3.4 Amended and Restated Bylaws . 8-K 001-38897 3.1 August 15, 2024 4.1 Form of Class A common stock certificate of Fastly, Inc. S-1/A 333-230953 4.1 May 6, 2019 4.2 Reference is made to Exhibits 3.1 through 3.3. 4.3 Indenture, dated as of March 5, 2021, by and between Fastly, Inc. and U.S. Bank National Association, as Trustee. 8-K 001-38897 4.1 March 5, 2021 4.4 Form of Note, representing Fastly, Inc.’s 0% Convertible Senior Notes due 2026 (included as Exhibit A to the Indenture filed as Exhibit 4.3). 8-K 001-38897 4.2 March 5, 2021 4.5 Indenture, dated as of December 5, 2024, between Fastly, Inc. and U.S. Bank Trust Company, National Association, as trustee. 8-K 001-38897 4.1 December 5, 2024 4.6 Form of Certificate representing the 7.75% Convertible Senior Notes due 2028 (included as Exhibit A to the Indenture filed as Exhibit 4.1) 8-K 001-38897 4.2 December 5, 2024 4.7 Description of Securities. 10-K 001-38897 4.5 March 1, 2022 10.1+ 2011 Equity Incentive Plan, as amended to date. S-1 333-230953 10.2 April 19, 2019 10.2+ Forms of Option Agreement, Notice of Stock Option Grant, and Exercise Notice under 2011 Equity Incentive Plan. S-1 333-230953 10.3 April 19, 2019 10.3+ 2019 Equity Incentive Plan. S-1/A 333-230953 10.4 May 6, 2019 10.4+ Forms of Option Agreement, Notice of Stock Option Grant, and Exercise Notice under 2019 Equity Incentive Plan. S-1/A 333-230953 10.5 May 6, 2019 10.5+ Form of Restricted Stock Unit Award Agreement under 2019 Equity Incentive Plan . 10-Q 001-38897 10.3 August 9, 2019 140 Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Herewith 10.6+ 2019 Employee Stock Purchase Plan. S-1/A 333-230953 10.7 May 6, 2019 10.7 Form of Indemnification Agreement by and between Fastly, Inc. and each of its directors and executive officers . S-1/A 333-230953 10.8 May 6, 2019 10.8+ Cash Incentive Bonus Plan. S-1/A 333-230953 10.9 May 6, 2019 10.9+ Employment Terms by and between Fastly, Inc. and Artur Bergman, dated May 3, 2019. S-1/A 333-230953 10.10 May 6, 2019 10.10 Office Lease Agreement, by and between Fastly, Inc. and CLPF-475 Brannan Street, L.P., dated August 22, 2014. S-1 333-230953 10.17 April 19, 2019 10.11 First Amendment to Lease Agreement, by and between Fastly, Inc. and CLPF-475 Brannan Street, L.P., dated May 27, 2015. S-1 333-230953 10.18 April 19, 2019 10.12 Second Amendment to Lease Agreement, by and between Fastly, Inc. and CLPF-475 Brannan Street, L.P., dated March 11, 2019. S-1 333-230953 10.32 April 19, 2019 10.13+ Executive Change in Control and Severance Benefit Plan. S-1/A 333-230953 10.31 May 6, 2019 10.14 2022 Change in Control and Severance Plan and form of participation agreement thereunder. 10-Q 001-38897 10.2 August 7, 2024 10.15+ Non-Employee Director Compensation Policy, as amended. 10-K 001-38897 10.14 February 21, 2024 10.16 Stock Ownership Guidelines. S-1/A 333-230953 10.33 May 6, 2019 10.17+ Employment Terms by and between Fastly, Inc. and Artur Bergman, dated May 3, 2019, as modified through November 2, 2023 . 8-K 001-38897 10.1 November 6, 2023 10.18+ Signal Sciences Corp. 2014 Stock Option and Grant Plan. S-8 333-249504 99.1 October 10, 2020 10.19 Senior Secured Credit Facilities Credit Agreement, among Fastly, Inc., the several lenders from time to time party thereto, and Silicon Valley Bank, dated as of February 16, 2021. 10-K 001-38897 10.23 March 1, 2021 10.20 First Amendment to the Senior Secured Credit Facilities Credit Agreement dated as of February 16, 2021, among Fastly, Inc., the several lenders from time to time party thereto, and Silicon Valley Bank, dated as of June 28, 2023. 10-Q 001-38897 10.2 August 2, 2023 10.21 Second Amendment to the Senior Secured Credit Facilities Credit Agreement dated as of February 16, 2021, among Fastly, Inc., the several lenders from time to time party thereto, and Silicon Valley Bank, dated as of February 16, 2024. 10-K 001-38897 10.22 February 21, 2024 10.22 Third Amendment to the Senior Secured Credit Facilities Credit Agreement dated as of February 16, 2021, among Fastly, Inc., the several lenders from time to time party thereto, and Silicon Valley Bank, dated as of April 30, 2024. 10-Q 001-38897 10.2 May 1, 2024 10.23+ Offer Letter by and between Fastly, Inc. and Ronald W. Kisling, dated June 22, 2021. 8-K 001-38897 10.1 June 29, 2021 10.24+ Offer Letter by and between Fastly, Inc. and Todd Nightingale, dated August 1, 2022. 8-K 001-38897 10.1 August 3, 2022 10.25+ Offer Letter by and between Fastly, Inc. and Scott Lovett, dated May 16, 2024. 10-Q 001-38897 10.1 August 7, 2024 19.1 Insider Trading Po li cy X 21.1 Subsidiaries of the Registrant. 10-K 001-38897 21.1 February 24, 2023 141 Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Herewith 23.1 Consent of Independent Registered Public Accounting Firm. X 24.1 Power of Attorney (contained on the signature page of this report). X 31.1 Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1 Incentive Compensation Recoupment Policy. 10-K 001-38897 97.1 February 21, 2024 101. INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X 101.SCH Inline XBRL Taxonomy Schema Linkbase Document. X 101.CAL Inline XBRL Taxonomy Calculation Linkbase Document. X 101.DEF Inline XBRL Taxonomy Definition Linkbase Document. X 101.LAB Inline XBRL Taxonomy Labels Linkbase Document. X 101.PRE Inline XBRL Taxonomy Presentation Linkbase Document. X 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). __________ + Indicates management contract or compensatory plan. * The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to be furnished with this Annual Report on Form 10-K and will not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference. Item 16. Form 10-K Summary None. 142 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Fastly, Inc. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. FASTLY, INC. Date: February 25, 2025 By: /s/ Todd Nightingale Todd Nightingale Chief Executive Officer (Principal Executive Officer) Date: February 25, 2025 By: /s/ Ronald W. Kisling Ronald W. Kisling Chief Financial Officer (Principal Financial and Accounting Officer) 143 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Todd Nightingale and Ronald W. Kisling, and each of them, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such individual in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or the individual’s substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the Company and in the capacities and on the dates indicated. Signature Title Date /s/ Todd Nightingale Chief Executive Officer February 25, 2025 Todd Nightingale (Principal Executive Officer) /s/ Ronald W. Kisling Chief Financial Officer February 25, 2025 Ronald W. Kisling (Principal Financial Officer and Principal Accounting Officer) /s/ David Hornik Director and Chairperson of our Board of Directors February 25, 2025 David Hornik /s/ Aida Álvarez Director February 25, 2025 Aida Álvarez /s/ Artur Bergman Chief Technology Officer and Director February 25, 2025 Artur Bergman /s/ Richard Daniels Director February 25, 2025 Richard Daniels /s/ Paula Loop Director February 25, 2025 Paula Loop /s/ Charles Meyers Director February 25, 2025 Charles Meyers /s/ Christopher B. Paisley Director February 25, 2025 Christopher B. Paisley /s/ Vanessa Smith Director February 25, 2025 Vanessa Smith 144