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美國
證券交易委員會
華盛頓特區20549
____________________________
表格 10-Q
____________________________

☒季度報告根據1934年證券交易所法案第13或第15(d)條款
 
截至季度結束 2024年9月30日

or
 
☐根據1934年證券交易法第13條或第15（d）條的轉型報告
 
過渡期從             至      

委託文件編號：001-39866001-38897
____________________________
FASTLY, INC.
(根據其章程規定的註冊人準確名稱)
____________________________
特拉華州27-5411834
（國家或其他管轄區的
公司成立或組織）
（IRS僱主
唯一識別號碼）
475 Brannan Street, Suite 300
（主要營業地址，包括郵政編碼）, 加利福尼亞州 94107
(主要執行辦事處地址) (郵政編碼)

(844) 432-7859
（註冊人的電話號碼，包括區號）

不適用
（前名稱、地址及財政年度，如果自上次報告以來有更改）
____________________________
在法案第12(b)條的規定下注冊的證券：
每一類的名稱交易標誌在其上註冊的交易所的名稱
A類普通股，面值$0.00002FSLY紐約證券交易所

檢查標記是否申報了《證券交易法》第13或15(d)條規定的所有報告，對於在過去的12個月內（或對於註冊申報此類報告的較短期間）進行檢查，並且是否在過去的90天內受到這些申報要求的影響。  Yes ☒沒有。☐

勾選本段文字標誌着註冊者在過去的12個月內每個交互式數據文件均已按照規則405條和監管S-T(本章節232.405條)提交，並將在未來提交交互式數據文件。Yes ☒沒有。☐

請在交易所法規則120.2規定的「大型加速申報人」、「加速申報人」、「小型報告公司」和「新興成長公司」的定義中選中相應選項。
大型加速報告人☒加速文件申報人☐
非加速文件提交人☐更小的報告公司☐
成長型公司☐
如果是新興成長公司，請在複選框中標示，如果註冊機構選擇不使用根據交換法第13(a)條規定提供的任何新的或修訂後的財務會計標準的延長過渡期來遵守，也請在複選框中標示。☐

請勾選表示註冊申報人是否爲外殼公司（根據交易所12b-2號規則定義）。是☐沒有。☒

截至2024年10月31日， 140.3 百萬股註冊人的A類普通股已經發行。

1

目錄

2


有關前瞻性聲明之特別說明
本Form 10-Q季度報告中包含根據1933年證券法修正案第27A條和1934年證券交易法修正案第21E條（「證券法」和「交易所法」）對我們和我們所在行業的前瞻性陳述，涉及重大風險和不確定性。本報告中除歷史事實陳述外的所有陳述，包括關於我們未來經營業績、財務狀況、業務策略以及管理層未來業務運營的計劃和目標的陳述，均屬前瞻性陳述。在某些情況下，前瞻性陳述可能以諸如「預期」、「相信」、「繼續」、「可能」、「設計」、「估計」、「期望」、「打算」、「可能」、「計劃」、「潛在」、「預測」、「項目」、「應該」、「將會」、「將」、「目標」或這些術語的否定形式或其他類似表述來識別。
前瞻性聲明基於我們管理層的信念和假設，以及目前可獲得的信息。這些前瞻性聲明可能受到衆多已知和未知風險、不確定性和假設的影響，包括在《風險因素》部分和本季度10-Q表格中的其他地方描述的風險，涉及，等等：
•我們平台出現的缺陷、中斷、停機、性能延遲或類似問題；
•我們吸引新企業客戶的能力，並讓現有企業客戶繼續並增加對我們平台的使用；
•我們的一個或多個主要客戶可能會出現潛在的損失或顯著減少使用量；
•零部件延誤、短缺和價格上漲；
•我們有限的經營歷史和經營虧損的歷史;
•安防-半導體措施或第三方依賴的措施可能會受到損害，或者我們的信息技術、軟件、服務、網絡、通信或數據的安全、保密性、完整性或可用性可能受到損害、限制或失敗；
•我們能夠高效開發和賣出新產品，並有效應對快速變化的技術、不斷髮展的行業標準、變化的法規以及變化的客戶需求、要求或偏好；
•我們準確預測營業收入並管理支出的能力;
•我們有效地開發和擴大我們的營銷和銷售能力;
•我們有效地與現有競爭對手和新市場進入者競爭的能力；
•我們維護和增強我們品牌的能力；
•我們識別和整合收購、戰略投資、合作伙伴關係或聯盟的能力；
•我們吸引和留住合格的員工和關鍵人員的能力。
•我們對高技能人員的表現依賴較大，包括我們的高級管理人員和其他關鍵員工，以及其中一名或多名此類人員的離職或過渡，或大量團隊成員的流失；
•我們參與集體訴訟和其他訴訟事務；
•我們對關鍵會計估計或判斷可能被證明是不正確或受損；和
•股價波動大，並且我們的A類普通股價值可能會下降。
我們提醒您，上述列表可能不包含在本季度報告第10-Q表格中所做的所有前瞻性聲明。
3

本季度的其他章節可能包括可能危害我們業務和財務表現的額外因素。此外，我們在一個競爭激烈且快速變化的環境中運作。新的風險因素會不時出現，我們的管理團隊無法預測所有風險因素，也無法評估所有因素對我們業務的影響，或者任何因素或一系列因素可能導致實際結果與包含在任何前瞻性陳述中的結果不同，或不被隱含。
您不應將前瞻性聲明視爲未來事件的預測。我們無法向您保證前瞻性聲明中反映的事件和情況將會實現或發生。儘管我們認爲前瞻性聲明中反映的期望是合理的，但我們無法保證未來的結果、活動水平、表現或成就。除法律要求外，我們不承諾在本報告日期後因任何原因公開更新任何前瞻性聲明，或將這些聲明調整爲實際結果或對我們期望的變化。您應該閱讀本季度10-Q表格的季度報告，以及我們在本季度10-Q表格中引用的文件，並與我們在本報告中作爲附件提交的文件一起理解，我們的實際未來結果、活動水平、表現和成就可能與我們所期望的大不相同。我們通過這些警告性聲明對所有我們的前瞻性聲明進行限定。
此外，「我們相信」等類似表述反映了我們對相關主題的信念和觀點。 這些陳述基於我們於本季度報告在表格10-Q上提交之日可獲得的信息。 儘管我們認爲這些信息構成了這些陳述的合理基礎，但這些信息可能是有限或不完整的，我們的陳述不應被解讀爲表明我們已對所有潛在可獲得的相關信息進行了詳盡調查或審查。 這些陳述本質上是不確定的，投資者應該謹慎不要過度依賴這些陳述。
投資者和其他人應該注意，我們可能會使用我們的投資者關係網站（www.fastly.com/investors）、向證券交易委員會提交的文件、我們的企業X（之前稱爲Twitter）賬號（@Fastly）、我們的博客（www.fastly.com/blog）、我們的企業LinkedIn賬號（www.linkedin.com/company/fastly）、網絡直播、新聞稿和電話會議等方式向投資者宣佈重要的業務和財務信息。我們使用這些媒體，包括我們的網站，與投資者和公衆溝通有關我們、我們的產品和其他問題。我們在這些媒體上提供的信息可能被視爲重要信息。因此，我們鼓勵對我們感興趣的投資者和其他人通過這些渠道查看我們提供的信息。
4


第一部分 - 財務信息

項目1. 基本報表
三藩市   CA   94107
縮表合併資產負債表
（以千為單位）
（未經審計）
截至2024年9月30日截至2023年12月31日
資產
流動資產:
現金及現金等價物$217,514 $107,921 
流動資產中的有價證券90,733 214,799 
應收帳款，扣除信用損失准備金 $6,847 15.17,054 分別截至2024年9月30日和2023年12月31日的已發行和流通股份數
116,800 120,498 
預付費用及其他流動資產28,011 20,455 
全部流動資產453,058 463,673 
物業及設備，扣除折舊後淨值180,288 176,608 
營運租賃權利資產，淨額47,700 55,212 
商譽670,356 670,356 
無形資產，扣除累計攤銷47,776 62,475 
非流動市場證券投資— 6,088 
其他資產72,576 90,779 
資產總額$1,471,754 $1,525,191 
負債及股東權益
流動負債：
應付賬款$11,354 $5,611 
應計費用40,854 61,818 
融資租賃負債，流動4,882 15,684 
營運租賃負債，流動23,857 24,042 
其他流動負債33,261 40,539 
流動負債合計114,208 147,694 
長期負債344,498 343,507 
融資租賃負債，非流動— 1,602 
營運租賃負債，非流動40,565 48,484 
其他長期負債3,029 4,416 
總負債502,300 545,703 
承諾及事前預警（附註9）
股東權益：
普通股票3 3 
資本公積額額外增資1,929,397 1,815,245 
累積其他全面損失(22)(1,008)
累積虧損(959,924)(834,752)
股東權益總額 969,454 979,488 
負債總計及股東權益 $1,471,754 $1,525,191 


附註是簡明合併財務報表的一個重要組成部分。

5

FASTLY, INC.
綜合營業損益匯縮陳述
（以千美元為單位，除每股數據外）
（未經審計）
三個月結束
九月三十日，		九個月結束了
九月三十日，
2024202320242023
營業收入$137,206 $127,816 $403,097 $368,211 
營業成本 62,466 61,730 182,222 177,657 
毛利潤74,740 66,086 220,875 190,554 
營業費用：
研發費用31,884 39,068 105,238 113,920 
銷售和市場推廣費用45,994 51,043 148,560 143,111 
總務與行政27,173 30,001 87,245 84,651 
減損費用559 4,316 3,696 4,316 
重组费用9,720 — 9,720 — 
營業費用總計115,330 124,428 354,459 345,998 
營運虧損(40,590)(58,342)(133,584)(155,444)
債務抹除的淨收益— — — 36,760 
利息收入3,819 4,908 11,604 13,602 
利息費用(473)(862)(1,516)(3,307)
其他費用，淨額
(317)(16)(213)(1,069)
所得稅前損益(37,561)(54,312)(123,709)(109,458)
所得稅費用（利益）
455 (1)1,463 244 
淨損失$(38,016)$(54,311)$(125,172)$(109,702)
每股普通股淨損失，基本和稀釋$(0.27)$(0.42)$(0.91)$(0.86)
用於計算基本和稀釋每股淨虧損（歸屬於普通股股東）的加權平均股份139,237 129,873 137,097 127,735 

附註是簡明合併財務報表的一個重要組成部分。


6

三藩市   CA   94107
綜合損益簡明合併財務報表
（以千計）
(未經審計)
截至三個月
9月30日,		截至九個月
9月30日,
2024202320242023
淨虧損$(38,016)$(54,311)$(125,172)$(109,702)
其他綜合收益:
外幣兌換調整— (8)— 550 
可供出售證券的未實現投資收益
260 1,226 986 6,802 
其他綜合收益總額
$260 $1,218 $986 $7,352 
全面損失$(37,756)$(53,093)$(124,186)$(102,350)

附註是這份簡明合併財務報表的不可分割部分。
7

FASTLY, INC.
股東權益的簡明合併報表
(以千爲單位；未經審計)
2024年9月30日止三個月
普通股股本溢價部分
資本		累計其他全面收益虧損累計
虧損		股東權益合計
股份金額
2024年6月30日餘額138,396 $3 $1,903,374 $(282)$(921,908)$981,187 
行使已歸屬股票期權7 — 19 — — 19 
限制性股票單位的認股權發放1,677 — — — — — 
基於股票的補償— 26,004 — — 26,004 
淨虧損— — — — (38,016)(38,016)
其他綜合收益— — — 260 — 260 
2024年9月30日的結餘140,080 $3 $1,929,397 $(22)$(959,924)$969,454 

截至2023年9月30日的三個月
普通股額外已付款
資本		累計其他綜合虧損累積
赤字		股東權益總額
股票金額
截至 2023 年 6 月 30 日的餘額129,027 $2 $1,747,959 $(3,152)$(757,055)$987,754 
行使既得股票期權144 — 1,137 — — 1,137 
限制性股票單位的歸屬1,511 — — — — — 
基於股票的薪酬— — 32,774 — — 32,774 
淨虧損— — — — (54,311)(54,311)
其他綜合收益— — — 1,218 — 1,218 
2023 年 9 月 30 日的餘額130,682 $2 $1,781,870 $(1,934)$(811,366)$968,572 

8

2024年9月30日結束的九個月
普通股股本溢價部分
資本		累計其他全面收益虧損累計
虧損		股東權益合計
股份金額
2023年12月31日餘額132,992 $3 $1,815,245 $(1,008)$(834,752)$979,488 
行使已歸屬股票期權125 — 310 — — 310 
限制性股票單位的認股權發放4,530 — — — — — 
與獎金計劃相關的限制性股票單位發行1,889 — 26,849 — — 26,849 
通過員工股票購買計劃發行的股票544 — 4,053 — — 4,053 
基於股票的補償— — 82,940 — — 82,940 
淨虧損— — — — (125,172)(125,172)
其他綜合收益— — — 986 — 986 
2024年9月30日的結餘140,080 $3 $1,929,397 $(22)$(959,924)$969,454 
截至2023年9月30日的九個月中，
普通股股本溢價累計其他全面收益虧損累計赤字股東權益合計
股份金額
2022年12月31日的餘額124,336 $2 $1,666,106 $(9,286)$(701,664)$955,158 
行使已歸屬股票期權265 — 2,008 — — 2,008 
限制性股票單位的認股權發放4,191 — — — — — 
與獎金計劃相關的限制股單位發行1,193 — 16,599 — — 16,599 
通過員工股票購買計劃發行的股票697 — 4,977 — — 4,977 
基於股票的補償— — 92,180 — — 92,180 
淨虧損— — — — (109,702)(109,702)
其他綜合收益— — — 7,352 — 7,352 
2023年9月30日的餘額130,682 $2 $1,781,870 $(1,934)$(811,366)$968,572 



附註是這份簡明合併財務報表的不可分割部分。
9

FASTLY, INC.
現金流量表簡明綜合報表
(以千爲單位；未經審計)
截至9月30日的九個月
20242023
經營活動現金流量：
淨虧損$(125,172)$(109,702)
調整使淨損失轉化爲經營活動產生的現金流量：
折舊費用40,251 38,015 
無形資產攤銷14,699 15,525 
非現金租賃費用16,819 17,227 
攤銷債務折扣和發行成本1,061 2,020 
推遲合同成本攤銷13,877 11,253 
基於股票的補償82,985 100,856 
遞延所得稅
900 — 
信用損失準備2,400 1,311 
處置物業和設備的損失444 505 
投資溢價（折價）攤銷
(3,466)344 
運營租賃權資產減值
371 588 
減值費用3,696 4,316 
Net gain on extinguishment of debt— (36,760)
其他調整83 (257)
運營資產和負債的變化：
應收賬款1,298 (10,355)
預付費用及其他流動資產(7,420)4,602 
其他資產(7,729)(16,269)
應付賬款4,514 1,258 
應計費用(4,142)(6,253)
營運租賃負債(19,341)(16,937)
其他負債(4,942)6,452 
經營活動產生的淨現金流量11,186 7,739 
投資活動現金流量：
購買有市場流通的證券(155,099)(73,091)
可變市場證券銷售— 775 
有價證券到期收益289,709 428,125 
購買房地產和設備預付款(790)— 
購買物業和設備(5,361)(8,283)
出售房產和設備的收益24 49 
資本化的內部使用軟件(20,492)(15,390)
投資活動提供的淨現金流量107,991 332,185 
融資活動的現金流：
償付債務— (196,934)
償還融資租賃負債(12,404)(21,243)
支付業務收購的遞延考慮費用(3,771)(4,393)
實行的註銷的可行權股票支付的款項310 2,008 
員工股票購買計劃收入6,083 7,009 
融資活動所使用的淨現金(9,782)(213,553)
匯率變動對現金、現金等價物和受限制現金的影響48 538 
現金、現金等價物及受限制的現金淨增加額109,443 126,909 
期初現金、現金等價物和受限制的現金餘額108,071 143,541 
期末現金、現金等價物和受限制的現金餘額$217,514 $270,450 

附註是這份簡明合併財務報表的不可分割部分。



10








FASTLY, INC.
壓縮的現金流量綜合報表-續
(以千爲單位)
(未經審計)
截至9月30日的九個月
20242023
現金流信息的補充披露：
支付的利息現金$453 $1,286 
所得稅實際付款（淨額）$739 $369 
融資租賃利息支付的現金 $342 $1,103 
非現金投資和融資活動：
應付賬款和應計費用中包括的物業和設備的淨增加
$1,278 $519 
以股份補償的方式計入固定資產$7,952 $6,912 
以經營租賃義務換取的資產$5,827 $1,324 
與修改和終止相關的經營租賃資產和負債的淨非現金變動$4,762 $(978)
預付資本設備的部署$11,912 $1,664 
現金、現金等價物和受限現金協調，如現金流量表所示：
現金及現金等價物$217,514 $270,300 
受限現金，流動資產— 150 
總現金、現金等價物和受限制現金$217,514 $270,450 



附註是這份簡明合併財務報表的不可分割部分。


11


1.     業務性質
Fastly, Inc. 建立了一個邊緣雲平台，能夠儘可能接近終端用戶處理、提供和保護客戶的應用程序。該公司於2011年在特拉華州成立，總部位於加利福尼亞州舊金山。
在此使用的「Fastly」、「公司」、「其」和類似術語包括Fastly, Inc.及其子公司，除非上下文另有指示。
2.     重要會計政策摘要
創課推薦基本報表原則和合並原則。
附帶的簡明合併基本報表及附註已按照美國通用會計原則（「GAAP」）編制，與公司於2023年12月31日結束的財政年度在提交給證券交易委員會（「SEC」）的10-K年度報告中適用的原則在所有重要方面一致。公司的簡明合併基本報表包括其帳戶及其全資子公司。所有重要的公司間餘額和交易在合併中已被消除。
公司的簡明合併基本報表未經審計，但包括爲公正呈現其季度業績所需的所有正常常規調整。公司的簡明合併基本報表應與2023年12月31日結束的財年的年度報告中經審計的合併基本報表及相關附註一起閱讀。
使用估計
根據通用會計準則編制簡明經營報表需要管理層進行影響資產、負債、營業收入、成本、費用及相關披露數字的估計、判斷與假設。實際結果和結局可能與公司的估計、判斷與假設有顯著不同。這些基本報表中使用的重要估計、判斷和假設包括但不限於與營業收入、應收賬款及相關準備、內部使用的軟件開發成本、公司租賃負債可能涉及的增量借款利率相關等。 在企業合併中獲得的資產及承擔的負債的公允價值、取得的無形資產和固定資產的使用年限、公司的長期資產以及商譽的公允價值、所得稅準備金以及股權激勵的會計。估計定期根據情況、事實和經驗的變化進行審查。估計的重大修訂效果在變更時期和從估計變更日期起前瞻性地反映在合併財務報表中。
重要會計政策
與公司截至2023年12月31日的年度10-k報告中"註釋2 - 重要會計政策的摘要"所述相比，公司在重要會計政策方面沒有實質性變化。
最近採納和發佈的會計準則
在2023年11月，財務會計標準委員會（「FASB」）發佈了會計標準更新（「ASU」）2023-07 "分部報告 - 可報告分部披露的改進"，該更新主要通過增強對重要分部費用的披露和用於評估分部表現的信息來更新可報告分部的披露要求。該指導適用於公司自2024年開始的年度期間以及自2025財年第一季度開始的中期期間。公司目前正在評估新指導的影響。
2023年12月，FASB發佈了ASU 2023-09「所得稅（主題740）：改進所得稅披露」，該公告擴大了企業所得稅率協調錶和關於現金稅在美國和國外司法管轄區支付的披露。該指導對公司在2025年開始的年度適用。公司
12

目前正在評估新指引的影響，並打算在2025年生效時前瞻性地採納該指引。
2024年11月，FASB發佈了ASU 2024-03「收入表費用分解」，旨在改善關於上市業務實體費用的披露，並應對投資者對常見費用項目類型更詳細信息的要求。該指南自2027年起適用於公司的年度期間，自2028財年第一季度起適用於中期期間。公司目前正在評估新指南的影響。
信用風險集中度

可能使公司面臨重大信用風險集中的金融工具主要包括現金、現金等價物、可交易證券和應收賬款。
公司的現金、現金及現金等價物和可市場證券主要由銀行存款、貨幣市場基金、投資級商業票據、公司票據和債券、美國國債、地方政府證券、外國政府和超國籍證券及資產支持證券組成，這些證券存放於公司認爲信譽良好的主要金融機構。其投資策略的主要重點是保護資本並滿足流動性要求。公司的投資政策限制任何一個金融機構或商業發行人的信用風險暴露額度。公司在聯邦保險的金融機構中保持超過聯邦保險限額的存入資金。若持有其現金及現金等價物的金融機構違約，公司將面臨信用風險，風險金額在資產負債表中有所記錄。儘管公司在這些帳戶中未經歷任何損失，並且公司歷史上將現金存儲在多個金融機構中，但2023年3月硅谷銀行（「SVB」）的倒閉使得公司在多個帳戶持有的現金及現金等價物面臨有限的信用風險，直到聯邦存款保險公司（「FDIC」）以充分保護所有存款人的方式完成對SVB的處置。
應收賬款的信用風險集中主要限於公司向其銷售額較大的某些客戶。公司的客戶基礎由衆多地理分散的客戶組成，遍佈多個行業。 截至2024年9月30日的三個月內，沒有單一客戶佔營業收入的比例超過10%，而有一個客戶佔比超過 10%的營業收入，截止2023年9月30日的三個月內。截止2024年和2023年9月30日的九個月內，沒有單一客戶的營業收入超過10%。 14作爲流媒體娛樂領域單一公司的業務單位的關聯客戶，分別在截至2024年和2023年9月30日的三個月內貢獻了少於10%的營業收入，以及 10%和 11%的營業收入，截止2024年和2023年9月30日的九個月間，分別爲 23%，截至2023年12月31日，這些同一關聯客戶佔公司應收賬款餘額的總額爲 11%，截至2024年9月30日。
3.     收入
按地域板塊劃分的營業收入基於客戶的賬單地址。 除了美國以外，沒有其他單一國家在截至2024年和2023年9月30日的三個月和九個月期間的營業收入中佔比超過10%。 以下表格展示了公司按地域板塊劃分的淨營業收入：
截至9月30日的三個月截至9月30日的九個月
2024202320242023
（以千計）
美國$104,454 $93,422 $300,921 $268,660 
亞太地區14,609 18,935 51,030 52,633 
歐洲13,015 10,493 36,364 31,877 
所有其他5,128 4,966 14,782 15,041 
總收入$137,206 $127,816 $403,097 $368,211 
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公司的營業收入大部分來自企業客戶，企業客戶被定義爲本季度年化營業收入超過$的客戶。100,000這通過將每個客戶在季度內的營業收入總和乘以四來計算。 下表展示了公司針對企業客戶和非企業客戶的淨營業收入：
截至9月30日的三個月截至9月30日的九個月
2024202320242023
(以千爲單位)
企業客戶$126,660 $117,327 $369,451 $337,359 
非企業客戶10,546 10,489 33,646 30,852 
總營業收入$137,206 $127,816 $403,097 $368,211 
公司按產品線報告其營業收入 三 產品線包括：網絡服務、安防-半導體和其他。網絡服務包括旨在提高網站、應用程序、應用程序編程接口（"APIs"）和數字媒體性能的解決方案。安防-半導體包括旨在保護網站、應用程序、APIs和用戶的產品。其他包括允許開發人員在Fastly的邊緣雲平台上構建和部署現代網絡應用的計算解決方案，以及提供實時日誌、數據和指標的Observability解決方案，這些數據從Fastly的邊緣平台流出，爲可行動的見解提供支持。 以下表格展示了公司按產品線劃分的營業收入：
截至9月30日的三個月截至9月30日的九個月
2024202320242023
（以千計）
網絡服務
$107,431 $102,526 $317,585 $295,320 
安全26,184 23,345 76,152 67,082 
其他3,591 1,945 9,360 5,809 
總收入
$137,206 $127,816 $403,097 $368,211 
合同餘額
收入確認的時機可能與向客戶開具發票的時機不同。當公司向客戶開具發票並記錄應收賬款時，公司就擁有了無條件的考慮權。當收入在開具發票之前確認時，公司將記錄一個合同資產，或未開票應收。當合同在收入確認之前提前開票時，公司將記錄一個合同負債，或遞延收入。
遞延營業收入涉及已向客戶開具賬單但尚未確認收入的金額，主要包括公司安防訂閱服務的未賺取部分和邊緣雲平台使用的未賺取部分。已開具的年度訂閱賬單中，尚未收款的金額記錄在應收賬款中，並根據服務是否已交付給客戶，將其記錄在未賺取收入或營業收入中。 公司的付款條款和條件因合同類型而異，一般區間爲30至90天。
下表展示了截至2024年9月30日和2023年12月31日公司的合同資產和合同負債：
截至2024年9月30日截至2023年12月31日
(以千爲單位)
合同資產
$1,121 $621 
合同責任$32,496 $38,150 
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下表展示了截至2024年和2023年9月30日的三個月和九個月內，從期初合同負債中確認的營業收入：
截至9月30日的三個月截至9月30日的九個月
2024202320242023
(以千爲單位)
在本期內確認的營業收入來自於期初合同負債中包含的金額$14,748 $12,279 $30,149 $27,616 
2023年9月30日
截至2024年9月30日，我們合同中的交易價格總額中，分配給尚未履約或部分履約的剩餘履約義務的金額爲$235.4 百萬。此金額包括爲當前客戶合同期內已承諾的未來營業收入，以及因已開具但相關履約義務尚未履行而產生的遞延收入。公司已選擇不提供關於其服務合同剩餘履約義務的某些信息，原始合同期限不超過一年。截至2024年9月30日，公司預計將在接下來的 77%時間內確認其剩餘履約義務的約 12 個月。公司與客戶的典型合同期限爲一年，儘管合同可能根據情況而有所不同。
獲取合同的成本
截至2024年9月30日和2023年12月31日，公司獲取合同的成本如下：
截至2024年9月30日截至2023年12月31日
(以千爲單位)
遞延合同成本，淨額$53,842 $61,981 
在截至2024年9月30日和2023年9月30日的三個月中，公司確認了與遞延合同成本相關的$4.8 百萬美元和美元4.1 百萬的攤銷。在截至2024年9月30日和2023年9月30日的九個月中，公司確認了與遞延合同成本相關的$13.9 百萬美元和美元11.3 百萬的攤銷。這些成本在附帶的綜合合併運營報表中的銷售和營銷費用內記錄。
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4.     投資和公允價值衡量
公司的現金、現金等價物和可交易證券總額包括以下內容：
截至2024年9月30日截至2023年12月31日
(以千爲單位)
現金及現金等價物：
現金$18,245 $21,269 
美國財政證券49,789 52,830 
貨幣市場基金149,480 21,166 
商業本票— 12,656 
現金及現金等價物總額(1)
$217,514 $107,921 
有市場的證券：
美國財政證券$37,557 $73,448 
企業票據和債券26,451 105,566 
商業本票26,725 25,934 
代理債券— 9,851 
流動的可市場證券總額(2)
$90,733 $214,799 
企業票據和債券— 5,999 
資產支持證券— 89 
非流動性總可交易證券(3)
$— $6,088 
所有基金類型投資$90,733 $220,887 
總現金及現金等價物和有市場交易的證券$308,247 $328,808 
(1) 公司的現金等價物包括原始到期日期爲三個月或更少的投資。
(2) 公司將其可交易證券歸類爲流動資產，計劃持有這些證券的時間少於12個月。
(3) 公司將其有市場性的證券分類爲非流動資產，意味着公司打算持有這些證券超過12個月。

16

下表總結了截至2024年9月30日和2023年12月31日的適應成本、未實現的毛利和損失以及與現金等價物和可供出售證券相關的公允價值，這些信息在附帶的合併資產負債表中顯示：
截至2024年9月30日
攤銷
成本		毛額
未實現
Gain		毛額
未實現
虧損		公允價值
價值
(以千爲單位)
貨幣等價物：
貨幣市場基金$149,480 $— $— $149,480 
美國財政證券49,773 16 — 49,789 
有市場的證券：
美國財政證券37,530 27 — 37,557 
企業票據和債券26,450 9 (8)26,451 
商業本票26,712 14 (1)26,725 
總計$289,945 $66 $(9)$290,002 
截至2023年12月31日
攤銷
成本		毛額
未實現
Gain		毛額
未實現
虧損		公允價值
價值
(以千爲單位)
貨幣等價物：
美國財政證券$52,824 $6 $— $52,830 
商業本票12,663 — (7)12,656 
有市場的證券：
美國財政證券73,444 8 (4)73,448 
企業票據和債券112,487 9 (931)111,565 
商業本票25,946 — (12)25,934 
資產支持證券89 — — 89 
代理債券9,854 — (3)9,851 
總計 $287,307 $23 $(957)$286,373 
在2024年和2023年九個月截至2024年9月30日及2023年9月30日的三個月裏，從積累的其他全面收益中重新分類至其他收入的可變證券銷售未實現任何實質收益或損失。定期審查投資以確定可能存在的非暫時性減值。截至2024年9月30日結束的三個月和九個月內，公司在其簡明合併利潤表中未記錄任何對可變債券的減值費用。由於公司無意出售任何降值證券，也無法肯定公司需要在攤銷成本基礎收回前出售降值證券的可能性大於不出售的可能性，因此未記錄任何減值損失。此外，公司已確定投資的公允價值下降不是由於信貸相關因素。
金融工具的公允價值
對於公司的某些金融工具，包括存放在銀行的現金、應收賬款和應付賬款，由於其短期到期，其賬面價值接近公允價值，因此不包括在下面的公允價值表中。
公允價值被定義爲在資產或負債的主要或最有利市場上進行有序交易的交易價格（退出價格），在測定日期市場參與者之間進行有序交易的交易價格。存在三個層次的公允價值層次結構，優先考慮用於衡量公允價值的輸入如下：
17

第一級——可觀察的輸入，如活躍市場中相同資產或負債的報價；
第2級——除第1級外的可觀察輸入，這些輸入可以直接或間接觀察，例如類似資產或負債的報價，非活躍市場的報價，或其他可觀察的輸入，這些輸入可以通過可觀察市場數據驗證，覆蓋資產或負債的基本完整期限；以及
第三級——幾乎沒有市場活動支持的不可觀察輸入，這需要管理層的判斷或估算。
公司以公允價值衡量其現金等價物、可交易證券和受限現金。公司將其現金等價物、可交易證券和受限現金分類爲一級或二級，因爲公司使用報價市場價格或替代定價來源以及利用市場可觀察輸入模型來評估這些投資。
公司將其投資分類爲二級公允價值層級，這些投資包括公司票據和債券、美國國債、外國政府和超國家證券以及資產支持證券，因爲這些證券的公允價值是通過使用基於非約束市場共識價格的輸入定價的，這些輸入主要通過可觀察的市場數據或類似工具的報價市場價格進行佐證。
持續按照公允價值計量和記錄的金融資產和負債包括以下類型的工具：
截至2024年9月30日
一級二級三級總計
(以千爲單位)
貨幣等價物：
貨幣市場基金$149,480 $— $— $149,480 
美國財政證券— 49,789 — 49,789 
現金及現金等價物總額149,480 49,789 — 199,269 
有市場的證券：
美國財政證券— 37,557 — 37,557 
企業票據和債券— 26,451 — 26,451 
商業本票— 26,725 — 26,725 
所有基金類型投資— 90,733 — 90,733 
所有財務資產$149,480 $140,522 $— $290,002 
18

截至2023年12月31日
第1級第2級第3級總計
(以千爲單位)
貨幣等價物：
貨幣市場基金$21,166 $— $— $21,166 
美國財政證券— 52,830 — 52,830 
商業本票— 12,656 — 12,656 
現金及現金等價物總額21,166 65,486 — 86,652 
有市場的證券：
美國財政證券— 73,448 — 73,448 
企業票據和債券— 111,565 — 111,565 
商業本票— 25,934 — 25,934 
資產支持證券— 89 — 89 
代理債券— 9,851 — 9,851 
所有基金類型投資— 220,887 — 220,887 
限制性現金：
受限現金，流動資產150 — — 150 
總限制現金150 — — 150 
所有財務資產$21,316 $286,373 $— $307,689 
公司沒有 截至2024年9月30日的限制性現金。截止2023年12月31日的限制性現金餘額爲$0.2百萬美元，包含與租賃安排相關的信用證，這些信用證由公司的現金進行擔保。該金額在公司的資產負債表上被列爲流動資產。
在2024年和2023年截至9月30日的三個月和九個月期間，沒有在一級和二級之間，或者在二級和三級之間以公允價值計量的資產和負債的劃轉。
5.     資產負債表信息
固定資產，淨值
淨固定資產包括以下內容:
截至2024年9月30日截至2023年12月31日
(以千爲單位)
計算機和網絡設備$233,412 $224,313 
租賃改良8,139 8,605 
傢俱和固定裝置2,153 2,142 
辦公設備1,218 1,228 
內部使用軟件116,073 97,623 
234,036$360,995 $333,911 
累計折舊及攤銷費用(180,707)(157,303)
物業和設備，淨值$180,288 $176,608 
截至2024年9月30日的三個月內，公司確認了一個減值費用爲$0.6百萬，與其未來網絡計劃中被認爲不再可用的設備相關。在截至2024年9月30日的九個月內，公司確認了一個減值費用爲$2.4百萬，與設備以及一個公司不打算繼續的內部使用軟件項目相關，因此予以放棄。
在截至2023年9月30日的三個月內，公司確認了一項與資產和設備淨值相關的減值損失，金額爲$4.3萬美元用於推遲的承銷佣金和分配給衍生證券認購證明的發行成本，分別。3.0百萬，並確認了一項與購買預付款相關的減值損失，金額爲$1.3百萬。
19

財產和設備。覈銷主要與計算機和網絡設備過剩有關，包括公司不打算使用且已被放棄的軟件。 沒有 在截至2023年9月30日的九個月內發生了減值。
減值費用包括在公司的簡化合並收益表中的減值費用行。
2024年9月30日至2023年9月30日的固定資產和設備折舊約爲$13.7 百萬美元和美元13.1 百萬，分別爲。在這些金額中，包括了截至2024年9月30日和2023年9月30日的資本化內部使用軟件成本的攤銷費用約爲$4.5 百萬美元和美元3.8 百萬。
截至2024年9月30日和2023年9月30日的九個月內，物業和設備的折舊大約爲$40.3 百萬美元和美元38.0 百萬，分別爲。在這些金額中，包括了截至2024年9月30日和2023年9月30日的資本化內部使用軟件成本的攤銷費用約爲$12.3 百萬美元和美元9.9 在截至2024年和2023年9月30日的九個月內分別爲 $ 百萬。
截至2024年9月30日和2023年12月31日，公司資產負債表上未攤銷的內部使用軟件成本餘額約爲$76.3百萬美元和$62.6百萬，分別。
公司通過設備融資租賃從多個第三方租賃某些網絡設備。截止到2024年9月30日和2023年12月31日，公司擁有的網絡設備資產包含總計$73.2百萬美元和$74.7百萬，根據融資租賃協議取得。這些租賃資本化在物業和設備中，相關的融資租賃資產折舊包括在折舊和攤銷費用中。相關網絡設備資產在融資租賃下的累計折舊總計爲$49.1百萬美元和$40.1分別爲2024年9月30日和2023年12月31日的百萬美元。
其他資產
其他資產包括以下內容：
截至2024年9月30日截至2023年12月31日
(以千爲單位)
遞延合同成本，淨額$53,842 $61,981 
購買房地產和設備預付款13,456 24,509 
其他資產5,278 4,289 
其他資產總計$72,576 $90,779 
應計費用
應計費用包括以下方面：
截至2024年9月30日截至2023年12月31日
(以千爲單位)
應計薪酬及相關福利$14,572 $14,918 
應計獎金4,364 24,614 
累計機櫃租用和帶寬成本14,684 14,362 
其他稅項負債
4,003 4,344 
其他應計費用
3,231 3,580 
總應計費用$40,854 $61,818 
20

其他流動負債
其他流動負債包括以下內容：
截至2024年9月30日截至2023年12月31日
(以千爲單位)
遞延收入$29,716 $33,824 
計算機-半導體和網絡設備的已計提數額1,741 1,673 
暫扣款項應付— 3,771 
其他流動負債1,804 1,271 
其他流動負債總額$33,261 $40,539 
累計其他全面收益虧損
截至2024年和2023年9月30日的三個月和九個月的累計其他綜合損失的組成部分（淨稅後）如下（單位：千）:

外幣翻譯 可供出售的投資累計其他綜合收益（損失）
餘額，2024年6月30日$(12)$(270)$(282)
其他綜合收益— 260 260 
餘額，2024年9月30日$(12)$(10)$(22)
外幣翻譯 可供出售的投資累計其他綜合收益（損失）
餘額，2023年6月30日$(19)$(3,133)$(3,152)
其他綜合收益（損失）(8)1,226 1,218 
餘額，2023年9月30日$(27)$(1,907)$(1,934)
外幣翻譯 可供出售的投資累計其他綜合收益（損失）
2023年12月31日餘額$(12)$(996)$(1,008)
其他綜合收益— 986 986 
餘額，2024年9月30日$(12)$(10)$(22)
外幣翻譯 可供出售的投資累計其他綜合收益（損失）
2022年12月31日餘額$(577)$(8,709)$(9,286)
其他綜合收益550 6,802 7,352 
餘額，2023年9月30日$(27)$(1,907)$(1,934)
對所呈現金額的實質稅收影響不大。
21

6.     租賃
公司的企業辦公室和數據中心（「數據中心租賃」）有經營租賃，以及用於網絡設備的融資租賃。公司的經營租賃剩餘租期不等，最短不足 11年內的租賃費用爲6 年，其中一些包括延長租賃的期權。公司的融資租賃剩餘租期長達 1 年。公司還對部分企業辦公空間進行轉租。公司的轉租剩餘租期不等，最短不足 11年內的租賃費用爲6 年。公司的轉租收入分別爲2024年和2023年截至9月30日的三個月每月收入爲0.4 百萬美元。公司的轉租收入爲每月收入爲1.1 百萬美元和美元1.0 在截至2024年和2023年9月30日的九個月內分別爲 $ 百萬。
租賃成本的元件如下：
截至9月30日的三個月截至9月30日的九個月
2024202320242023
(以千爲單位)
運營租賃費用:
經營租賃成本$6,466 $6,466 $19,904 $20,499 
變量租賃成本4,183 4,024 12,411 11,391 
總運營租賃費用$10,649 $10,490 $32,315 $31,890 
融資租賃費用：
融資租賃下資產的攤銷$3,294 $3,544 $10,329 $10,786 
利息70 297 342 1,103 
總融資租賃成本$3,364 $3,841 $10,671 $11,889 
在2024年和2023年截至9月30日的三個和九個月內，短期租賃成本對任何一方都不重要。
2024年9月30日結束的三個月內，公司認定了一筆與租賃資產相關的減值損失，金額爲$0.4 2024年9月30日結束的九個月內，公司認定了一筆與租賃資產相關的減值損失，金額爲$1.7 2024年9月30日結束的九個月內，公司認定了一筆與租賃資產相關的減值損失，金額爲$，其中$1.3 萬美元與公司退出某一辦公設施有關，幷包含在公司利潤表的減值費用一欄內。公司在截至2023年9月30日的三個月和九個月內並未認定其經營租賃租賃資產的任何重大減值。 沒有截至2023年9月30日的三個月和九個月內，公司未認定其經營租賃租賃資產的任何重大減值。
截至2024年9月30日截至2023年12月31日
加權平均剩餘租賃期限（以年計）：
經營租賃3.013.48
融資租賃0.491.00
加權平均折扣率：
經營租賃6.32 %6.03 %
融資租賃4.66 %4.67 %
22

截至2024年9月30日，不可撤銷租賃的未來最低租賃付款如下：
經營租賃融資租賃
(以千爲單位)
剩餘2024$8,516 $3,319 
202524,990 1,618 
202621,806 — 
202712,502 — 
20283,128 — 
然後1,971 — 
未來最低租賃付款總額$72,913 $4,937 
減去：隱含利息(6,297)(51)
總負債$66,616 $4,886 
截至2024年9月30日，公司有未經摺扣的承諾，金額爲$2.2 百萬美元，用於尚未開始的經營租賃，因此未包括在使用權資產或經營租賃負債中。這些經營租賃將在2024年第四季度開始，租期爲 3 年的時間內確認爲費用。
7.     商譽和無形資產
善意
截至2024年9月30日和2023年12月31日，公司商譽爲$670.4 百萬。在截至2024年和2023年9月30日的三個和九個月期間，公司沒有記錄商譽減損費用。
截至2024年9月30日和2023年12月31日，公司的無形資產包括以下內容：
截至2024年9月30日截至2023年12月31日
淨賬面價值累計攤銷淨賬面價值淨賬面價值累計攤銷淨賬面價值
(以千爲單位)
無形資產：
客戶關係$69,860 $(35,141)$34,719 $69,860 $(28,473)$41,387 
開發的科技50,130 (39,968)10,162 50,130 (32,424)17,706 
商標名稱3,910 (3,656)254 3,910 (3,542)368 
互聯網協議地址4,984 (2,343)2,641 4,984 (1,970)3,014 
總無形資產$128,884 $(81,108)$47,776 $128,884 $(66,409)$62,475 
公司的客戶關係、開發的科技、貿易名稱和互聯網協議地址代表着需要攤銷的無形資產。攤銷費用爲$4.9百萬美元和$5.2百萬，截止到2024年和2023年9月30日的三個月報告期內，攤銷費用爲$14.7百萬美元和$15.5百萬，截止到2024年和2023年9月30日的九個月報告期內。
公司在2024年3月31日和2023年3月31日結束的三個月內都沒有記錄任何所得稅支出。公司已爲所有報表期的淨運營虧損記錄了完整的減值準備，並未在隨附的簡明財務報表中反映任何此類淨運營虧損的盈餘。在測試商譽減值時，公司可以選擇 在2024年和2023年9月30日結束時，公司未購買任何無形資產。 沒有在2024年和2023年9月30日結束時，公司未記錄無形資產減值損失。
23

截至2024年9月30日，預計可攤銷無形資產的攤銷費用如下：
截至2024年9月30日
(以千爲單位)
2024年剩餘部分$4,900 
202516,976 
20269,193 
20279,051 
20286,891 
然後765 
總計$47,776 
8.     債務工具
高級擔保信貸設施協議
於2021年2月16日，公司與不時參與的貸款方（「貸款方」）及硅谷銀行作爲貸款方、行政代理和貸款方的擔保代理簽訂了高級擔保信貸設施協議（「信貸協議」），總承諾金額爲$100.0百萬，到期日爲2024年2月16日。公司在其精簡綜合資產負債表中記錄了與信貸協議相關的$0.6百萬的債務發行成本，作爲其他資產。

信貸協議最初的利息按年利率計算，等於適用利率期間的LIBOR之和加上 1.75% 到 2.00％，取決於信貸協議下所有貸款和信用證的平均每日未償餘額。2023年6月28日，公司與貸款人及First-Citizens Bank & Trust Company（作爲聯邦存款保險公司的接管人，接替了硅谷橋銀行股份有限公司（作爲硅谷銀行繼任者））簽署了《信貸協議第一修正案》，作爲貸款人及財務代理和擔保代理，修訂了信貸協議的利率條款，將LIBOR替換爲擔保隔夜融資利率（「SOFR」）作爲利率基準。2024年2月16日，公司與貸款人及First-Citizens Bank & Trust Company旗下的硅谷銀行簽署了《信貸協議第二修正案》，作爲貸款人及財務代理和擔保代理，其中，將信貸協議下貸款的到期日延長至2024年6月14日。2024年4月30日，公司與貸款人及First-Citizens Bank & Trust Company旗下的硅谷銀行簽署了《信貸協議第三修正案》，作爲貸款人及財務代理和擔保代理，其中，將信貸協議下貸款的到期日延長至2027年4月30日，並將承諾金額從$100.0 百萬到 $60.0百萬美元，其中包括$10.0 百萬爲發行信用證的子限額，以及高達$20.0 百萬的隨借隨還子項。經修訂後，循環貸款按公司選擇的年利率基於SOFR或基準利率。基於SOFR的貸款按年利率計算，等於SOFR加上 0.10加上%。 1.75% 到 2.00根據信貸協議項下所有貸款和信用證的平均每日未結清餘額，利率爲%。按基準利率計息的貸款的年利率爲基準利率加 0.75% 到 1.00根據信貸協議項下所有貸款和信用證的平均每日未結清餘額，利率爲%。
未償債務的利息支付應在每個利息期的最後一天支付。信貸協議規定，未使用的借款承諾部分需要支付一項承諾費，該費用應在每個日曆季度的最後一天支付，年利率爲 0.20% 到 0.25依據信貸協議下所有貸款和信用證的日均未償餘額，公司的信貸協議還包含一項財務約束，要求公司至少保持每個季度進行測試的合併調整後的速動比率不低於1:25到1:00的比率，並在某些時期要求一項彈性營業收入增長約定，如果公司的合併調整後的速動比率在任何財政季度的最後一天低於 1.75 至1:00，信貸協議要求公司遵守各種肯定和否定約定，幷包含慣例違約事件。
截至2024年9月30日，公司遵守了所有信用協議的契約。在截至2024年和2023年9月30日的三個月和九個月期間， 沒有 信用協議已提取款項。截至2024年9月30日和2023年12月31日， 沒有 信用協議下仍有未償還款項。
24

可轉換高級票據
2021年3月5日，公司發行了大約$948.8百萬的總本金金額爲 0%可轉換高級票據，期限至2026年（簡稱「票據」），包括首次購票者全部行使其購買額外約$123.8百萬本金金額的票據。票據通過定向增發的方式向合格的機構買方發行，依據《證券法》144A條款。票據將在2026年3月15日到期，除非提前轉換、贖回或回購。票據發行後的淨收益約爲$930.0百萬，扣除首次購票者的折扣和交易成本。
在2024年3月20日之前，公司可能不會贖回票據。在2024年3月20日或之後，公司可以按公司的選擇，以票面金額的百分比贖回所有或任何部分票據，贖回價格等於 100票據的本金金額的%，加上應計但尚未支付的特別利息（如有），直至但不包括贖回日，如果公司的A類普通股（「普通股」）的最後報價至少爲 130%，則Notes的轉換價格將在最少連續交易日期間內（包括該期間的最後一個交易日）達到該價格 20在任何{days}個連續的交易日期間內，此期間的每張債券的每1000美元的票面金額的「交易價格」低於以贖回日前一天爲基準的交易日的通知日期計算的每張債券的票面金額的百分之{principal amount}%。30 的情況下，從，包括公司提供贖回通知的日期之前的交易日，止於，包括贖回通知提供日期的前一個交易日。票據沒有提供沉沒基金。
票據持有者可以在2025年12月15日之前的最後一個業務日之前的任何時間選擇轉換其票據，僅在以下情況下： (i) 在2021年6月30日結束的日曆季度後開始的任何日曆季度（且僅在該日曆季度期間），如果公司普通股的最後報告銷售價格至少爲 20個交易日，無論是否連續30連續交易日，每天的交易價格均大於或等於轉換價格的％，最後一個交易日爲上一日曆季度的最後一個交易日。130票據轉換價格的百分之 五連續的x個交易日後，緊接着的y個交易日內。十 交易日的連續交易日期間（「測量期」），在該期間內，根據與票據相關的契約協議的定義，測量期內每個交易日每1000美元票面金額的票據的交易價格低於 98% 公司普通股最後報告銷售價格與每個交易日的轉換率的乘積的百分比；(iii) 如果公司在適用贖回日期前的交易日結束之前的任何時間召回這些票據，僅針對被召回（或視爲被召回）的票據；或 (iv) 在發生特定公司事件時。從2025年12月15日起至到期日第二個計劃交易日結束，持有人可以在任何時間轉換其所有或部分票據，不受前述情況的影響。
在轉換時，公司可以選擇支付現金、公司普通股股票或現金和公司普通股股票的組合形式來履行其轉股義務。初始轉股比率爲每1000美元票面金額的票據對應9.7272股普通股，相當於每股初步轉股價格約爲$102.80 。轉股比率將根據控制票據的《契約》中描述的要求進行調整，但不會因任何未計息或未支付的特殊利息而進行調整。此外，在票據到期日之前發生某些公司事件或公司發出關於票據的贖回通知時，公司將根據具體情況增加持票人選擇在相關贖回期間進行轉股的票據的轉股比率，與該公司事件相關的轉換票據的持票人或贖回期間內召回（或被視爲召回）其票據的持票人，具體情況視情況而定。
契約包括慣例的契約，並列明瞭某些違約事件，在此事件發生後，債券可能立即被宣佈到期支付，並列明瞭涉及公司的某些破產或破產違約事件後，債券自動到期並支付。如果公司發生基本變革，根據控制債券條款的契約協議中定義的基本變革，則在某些條件和除在控制債券條款中描述的情況下，持有人可以要求公司以基本變革回購價格現金回購其債券全部或任何部分，其金額等於 100債券待回購的本金金額的%，加上截至基本變革回購日期但不包括的應計及未償還的特殊利息。
25

公司評估了其債務的條款，得出結論認爲該工具不需要分離，並且沒有其他需要分離的衍生品。因此，公司將這些特徵與主合同結合在一起，並在其簡明合併資產負債表中將可轉換債務作爲長期債務的單一負債進行會計處理。與發行票據相關的初始購買者折扣和交易成本爲$18.6與發行票據相關的 百萬美元費用被列爲負債，並表示票據的本金與負債組成部分（「債務折扣」）之間的差額，該差額通過有效利息法在票據期限內攤銷至利息費用中。
截至2024年9月30日，轉換條件尚未達到，因此票據尚不可轉換。
2022年5月25日，公司與持有人就回購部分票據進行了單獨的、私下協商的交易，回購了$235.0百萬美元票面金額的票據，以$176.4百萬美元的總現金回購價格及總交易成本$0.7截至2021年3月27日，未償還本金總額爲$。
在2023年12月31日結束的一年內，公司與部分債券持有人進行了數筆私下協商的交易，以回購$367.3百萬美元票面總額的債券，總現金回購價格爲$309.1百萬美元，總交易成本爲$2.0截至2021年3月27日，未償還本金總額爲$。
以下表格反映了截至2024年9月30日和2023年12月31日的債務協議的賬面價值：
截至2024年9月30日截至2023年12月31日
(以千爲單位)(以千爲單位)
可轉換的高級債券（有效利率爲 0.38%)
名義金額$346,489 $346,489 
減：未攤銷債務發行成本(1,991)(2,982)
減：長期債務的流動部分— — 
長期債務，減去當期部分$344,498 $343,507 
For the three months ended September 30, 2024 and 2023, interest expense related to the Company’s debt obligations was $0.4 million and $0.6 million, respectively. For the nine months ended September 30, 2024 and 2023, interest expense related to the Company’s debt obligations was $1.2 million and $2.2 million, respectively. As of September 30, 2024 and December 31, 2023, the total estimated fair value of the Notes was $317.0 million and $301.4 million, respectively.
9.     Commitments and Contingencies
Purchase Commitments
As of September 30, 2024, 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.
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Aside from the Company’s finance and operating lease commitments, including its colocation operating commitments, which have been disclosed in Note 6—Leases, the minimum future commitments related to the Company's purchase commitments as of September 30, 2024 were as follows:
Cost of Revenue CommitmentsOperating Expense CommitmentsTotal Purchase Commitments
(in thousands)
Remainder of 2024$14,539 $2,679 $17,218 
202520,198 7,955 28,153 
20268,128 5,376 13,504 
2027154 — 154 
202870 — 70 
Thereafter18 — 18 
Total$43,107 $16,010 $59,117 
Sales and Use Tax
The Company conducts its operations in many tax jurisdictions throughout the United States. In some of these jurisdictions the Company is subject to indirect taxes, such as sales and use taxes, and may be subject to certain other taxes. 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. The Company has accrued $4.0 million and $4.3 million as of September 30, 2024 and December 31, 2023, respectively, for sales and use tax. These estimates are based on several key assumptions, including the taxability of the Company’s operations and the jurisdictions in which the Company believes it has nexus. In the event these jurisdictions challenge the Company’s assumptions and analysis, its actual exposure could differ materially from its current estimates.
Legal Matters
On May 24, 2024, a purported securities class action lawsuit was filed in the United States District Court for the Northern District of California, captioned Ken Kula v. Fastly, Inc., et al. (Case No. 4:24-cv-03170), naming the Company and certain of its officers as defendants. Motions for lead plaintiff were filed on July 23, 2024. On August 22, 2024, the court appointed lead plaintiff ("Lead Plaintiff") and lead counsel. On November 1, 2024, Lead Plaintiff filed an amended complaint. The amended complaint alleges violations of Section 10(b) and 20(a) of the Exchange Act purportedly on behalf of all those who purchased or acquired Fastly securities between November 15, 2023 and August 7, 2024. The complaint seeks unspecified compensatory damages, and other relief. The deadline for defendants to file a motion to dismiss is January 15, 2025. It is possible that additional lawsuits will be filed, or allegations made by stockholders, regarding these same or other matters and also naming as defendants the Company and its officers and directors.
On June 12, 2024, certain of the Company's officers and directors were named as defendants in a stockholder derivative action filed in the United States District Court for the Northern District of California, captioned Roy v. Nightingale, et al. (Case No. 3:24-cv-03549-JCS). On July 1, 2024, a substantially similar stockholder derivative complaint was filed against the Company's officers and directors in the same court, captioned Steffens v. Nightingale et al. (Case No. 4:24-cv-03984-DMR). The derivative complaints assert that defendants breached their fiduciary duties as directors and/or officers of the Company, as well as claims of unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, violations of Section 14(a) of the Exchange Act, and contribution under Sections 10(b) and 21D of the Exchange Act. On September 17, 2024, the court consolidated and stayed the derivative actions until after resolution of the Company's anticipated motion(s) to dismiss in the above-referenced securities class action. On August 23, 2024, a substantially similar stockholder derivative complaint was filed against the Company's officers and directors in the United States District Court for the District of Delaware, captioned Mark Sweitzer v. Nightingale, et al. (Case No. 1:24-cv-00969-GBW) (the "Sweitzer Action"). On September 26, 2024, the court stayed the Sweitzer Action until after resolution of the Company's anticipated motion(s) to dismiss in the above-referenced securities class action. It is possible that additional lawsuits will be filed, or allegations made by stockholders, regarding these same or other matters and also naming as defendants the Company and its officers and directors.

The Company is also party to various disputes that management considers routine and incidental to its business. Management does not expect the results of any of these routine actions to have a material effect on the Company's business, results of operations, financial conditions, or cash flows.
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待決的訴訟及任何其他相關訴訟存在固有的不確定性，實際的軍工股和處置成本將取決於許多未知因素。待決訴訟及任何其他相關訴訟的結果必然是不可確定的。公司可能被迫在待決訴訟和任何額外訴訟的辯護中花費大量資源，並且可能不會勝訴。此外，公司可能在與這些訴訟相關的過程中產生可觀的法律費用和成本。由於待決訴訟目前處於早期階段，公司目前無法估算這些事項可能帶來的成本，也無法確定解決待決訴訟所需的時間或可能需要支付的賠償金額。如果公司在對待決訴訟及任何其他相關訴訟的辯護中沒有勝訴，或者即使勝訴，這些金額對公司的基本報表可能會產生重大影響。

截至2024年9月30日，公司尚未針對上述訴訟記錄任何重大損失或風險的應計賬款，因爲公司認爲產生損失的結果不太可能。如果同時發生預期會產生損失和公司能夠合理估算損失的金額或區間的情況，則將計提損失的應計賬款。
補償
公司在日常業務中籤訂標準的賠償協議。根據這些協議，公司同意對因其提供服務而遭受或產生的損失對被 indemnified 方進行賠償、持有免責並進行報銷，通常包括公司的業務夥伴或客戶。通常，這些義務限於與專利、版權或其他知識產權的侵權、公司安防-半導體或數據保護義務的違反或其過失、故意不當行爲或違法行爲有關的索賠。在適用的時效法下，這些賠償協議的期限通常爲協議的持續時間。公司在這些賠償協議下可能需要支付的最大潛在金額是無限的；然而，公司投保了覆蓋與公司服務相關的某些第三方索賠的保險，可以在這方面限制其風險。
公司同意在其任期內爲每位董事和高管提供賠償，以應對因其作爲公司董事或高管而發生的某些事件或情況。公司擁有董事和高管保險，可能會限制其風險，並有可能補償未來支付的部分金額。
截至目前，公司尚未因此類補償義務產生重大成本，並未在其基本報表中計提任何相關責任。在評估是否應建立計提時，公司考慮諸如不利結果可能性程度和能夠對損失金額做出合理估計的能力等因素。
10.     股東權益
其他板塊
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 and the Signal Sciences Corp. 2014 Stock Option and Grant Plan, as amended (the 「Signal Plan」). The 2019 Plan became effective in May 2019 and replaced the 2011 Plan. The Company’s 2019 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units (「RSUs」), restricted stock awards, performance-based stock awards (「PSUs」), and other forms of equity compensation, which are collectively referred to as stock awards to its employees, directors, and consultants. The Signal Plan includes 251,754 registered shares which can be exercised to purchase shares of Fastly’s common stock.
截至2024年9月30日和2023年12月31日，分別有 6.4 百萬美元和 8.9 分別於2024年9月30日和2023年12月31日，根據2019年計劃，有可發行的普通股百萬股。 140.1 百萬美元和 133.0 分別擁有發行和流通的普通股百萬股。
股票期權
根據2011年計劃和2019年計劃授予的期權可用於購買普通股，通常在 10 年內行使，通常按照 四年的比例歸屬， 25%在授予日期的第一週年進行。
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and ratably on a monthly basis over the remaining 36-month period thereafter based on continued service. Forfeitures are recognized as they occur.
The following table summarizes stock option activity during the nine months ended September 30, 2024:
股份加權-
平均的
行使
價格		加權-
平均
剩餘
加權
期限		總計
內在價值
(以千爲單位)（以年爲單位）(以千爲單位)
2023年12月31日未實現的基於時間的股票限制單位
2,710 8.145.1$26,383 
已授予— — 
已行權(125) 2.48
取消/作廢(33)11.92 
2024年9月30日的未結項
2,552  8.38 4.2$5,466 
截至2024年9月30日，已授予並可行使
2,100  6.63 3.2$5,466 
在截至2024年9月30日和2023年9月30日的三個月期間，公司記錄了來自期權的股票基礎補償費用，約爲$0.4百萬美元和$0.2百萬。
在截至2024年9月30日和2023年9月30日的九個月期間，公司記錄的期權相關的股票薪酬費用約爲$1.5百萬美元和$1.3百萬。
限制性股票單位（「RSUs」）
公司在2019年計劃下於2019年12月31日結束的財政年度開始授予限制性股票單位（RSUs）。RSUs的公允價值基於授予日期的公允價值，並按照適用的解鎖期直線攤銷。通常，新員工獲得的RSUs將在 三 或 四年的速度分別於第一個解鎖開始日期的首個週年日解鎖，並在隨後的季度基礎上按比例進行解鎖 33大約25％，並在隨後的季度中按比例進行解鎖。 24 個月 或 36個月 在此後的兩個期間分別。授予現有員工的 RSUs 通常按照相等的季度分期歸屬。 三 或 四年 服務期。所有歸屬均取決於繼續服務。棄權將在發生時確認。
下表總結了截至2024年9月30日的九個月內RSU活動情況：
股票數量 0.1
授予日期每股公允價值
(以千爲單位)
2023年12月31日之前的未授予限制性股票
11,244 $17.46 
已授予9,813 11.83 
歸屬(6,180)16.95 
取消/作廢(1,116)17.51 
2024年9月30日尚未投資的限制性股票單位
13,761 $13.73 
在截至2024年9月30日和2023年9月30日的三個月期間，公司確認了與限制性股票單位（RSUs）相關的股票報酬費用爲$23.8百萬美元和$28.7百萬。
在2024年和2023年截至9月30日的九個月內，公司確認與RSUs相關的股票補償費用爲$74.2百萬美元和$79.7百萬。
基於業績的限制性股票單位（「PSUs」）
高管績效股票獎勵（「高管PSUs」）
2023年3月和5月，根據公司2019年的股權激勵計劃，公司授予了某些員工PSU股票，這些股票的歸屬將基於公司在2023財政年度的經營計劃相關的特定全公司目標的達成水平。公司已將這些獎勵納入股權獎勵。
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會根據每個報告期末公司整體目標的預期達成情況，在員工必需服務期內確認基於股票的補償費用。
根據公司的2019年股權激勵計劃，2024年2月，公司授予某些員工PSU股票，這些股票的歸屬將基於公司2024財政年度運營計劃相關的公司整體目標的達成水平。公司已將這些獎勵視爲基於股權的獎勵，並將在員工的必要服務期間內，按照每個報告期末公司整體目標的預期達成情況確認股權基礎補償費用。
股票數量加權平均授予日期每股公允價值
(以千爲單位)
截至2023年12月31日的未歸屬PSU
732 $16.49 
已授予909 12.60 
歸屬(239)16.41 
取消/作廢(271)16.43 
截至2024年9月30日的未歸屬PSU
1,131 $13.40 
截至2024年9月30日和2023年，公司確認與這些獎勵相關的股票補償費用$0.8百萬美元和$1.5百萬。
For the nine months ended September 30, 2024 and 2023, the Company recognized $2.7 million and $3.2 million of stock-based compensation expense associated with these awards, respectively.
Company-wide Bonus Program (“Bonus Program”)
In March 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 (“2023 Bonus Program”). Shares awarded under the program were paid out in February 2024 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 2023. 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 2024, the Company paid out 1.9 million of restricted stock units associated with the 2023 Bonus Program, and correspondingly recorded a charge to additional paid-in-capital of $26.8 million.
In February 2024, the Compensation Committee approved a company-wide bonus program, including performance targets, for the current fiscal year to most of the Company’s employees on active payroll in fiscal year 2024 ("2024 Bonus Program"). 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 2024. The payout of the 2024 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. 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 three months ended September 30, 2024 and 2023, the Company recognized $1.5 million and $6.6 million of stock-based compensation expense associated with the Bonus Programs, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $8.0 million and $15.6 million of stock-based compensation expense associated with the Bonus Programs, respectively.
Market-Based Performance Stock Awards (“MPSUs”)
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 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.
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Number of SharesWeighted-Average Grant Date Fair Value Per Share
(in thousands)
Nonvested MPSUs as of December 31, 2023
1,471 $6.46 
Granted— — 
Vested— — 
Cancelled/forfeited(158)6.56 
Nonvested MPSUs as of September 30, 2024
1,313 $6.45 
Stock-based compensation expense relating to the MPSUs are recognized using the accelerated attribution method over the derived service period. During the three months ended September 30, 2024 and 2023, the Company recognized $0.7 million and $1.5 million stock-based compensation expense associated with these awards, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $2.2 million and $4.9 million stock-based compensation expense associated with these awards, respectively.
Employee Stock 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.
During the three months ended September 30, 2024 and 2023 the Company recognized $0.3 million and $0.8 million in stock-based compensation expense related to the ESPP, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $2.3 million and $3.1 million in stock-based compensation expense related to the ESPP, respectively.
During the nine months ended September 30, 2024, 0.5 million shares of the Company’s common stock was purchased under the offering period that commenced in November 2023. During the nine months ended September 30, 2023, 0.7 million shares of the Company’s common stock were purchased under the offering period that commenced in November 2022. No shares of the Company’s common stock were purchased for either the three months ended September 30, 2024 or 2023.
Equity Awards Modification
There were no material equity modifications during the three and nine months ended September 30, 2024.
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 $0.4 million for the three and nine months ended September 30, 2023.
Stock-Based Compensation Expense
The following table summarizes the components of total stock-based compensation expense included in the accompanying condensed consolidated statements of operations:
Three months ended September 30,Nine months ended September 30,
2024202320242023
(in thousands)
Cost of revenue$1,911 $2,860 $6,734 $8,378 
Research and development7,378 12,122 25,684 35,808 
Sales and marketing7,113 9,061 22,014 25,643 
General and administrative8,614 11,670 28,553 31,027 
Total stock-based compensation expense$25,016 $35,713 $82,985 $100,856 
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For the three months ended September 30, 2024 and 2023, the Company capitalized $2.5 million and $3.7 million of stock-based compensation expense, respectively. For the nine months ended September 30, 2024 and 2023, the Company capitalized $8.0 million and $6.9 million of stock-based compensation expense, respectively.
For the three months ended September 30, 2024 and 2023, the Company recognized $1.5 million and $6.6 million of stock-based compensation expense associated with the liability classified awards related to the company-wide Bonus Program, respectively. For the nine months ended September 30, 2024 and 2023, the Company recognized $8.0 million and $15.6 million of stock-based compensation expense associated with liability classified awards related to the company-wide Bonus Program, respectively.
11.     Net Loss Per Share Attributable to Common Stockholders
Basic net loss per share is computed by dividing net loss by basic weighted-average shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by diluted weighted-average shares outstanding, including potentially dilutive securities.
The following table presents the computation of basic and diluted net loss per share of common stock:
Three months ended September 30,Nine months ended September 30,
2024202320242023
(in thousands, except per share amounts)
Net loss attributable to common stockholders$(38,016)$(54,311)$(125,172)$(109,702)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted139,237 129,873 137,097 127,735 
Net loss per share attributable to common stockholders, basic and diluted$(0.27)$(0.42)$(0.91)$(0.86)
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
As of September 30,
20242023
(in thousands)
Stock options2,552 2,135 
RSUs13,761 12,301 
PSUs1,132 829 
MPSUs1,313 2,161 
Shares issuable pursuant to the ESPP579 345 
Convertible senior notes (if-converted)3,370 4,644 
Total22,707 22,415 
The dilution table above excludes RSUs to be awarded under the Company’s 2024 Bonus Program, which is expected to have an impact on its outstanding awards in the first quarter of 2025. Refer to Note 10 — Stockholders' Equity for further details on the Company’s 2024 Bonus Program.
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12.     Income Taxes
The Company’s provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.
The Company continues to maintain a full valuation allowance on the Company’s U.S. Federal and state net deferred tax assets. The tax expense for the three and nine months ended September 30, 2024 and 2023 was primarily due to foreign tax expense.
In the three months ended September 30, 2024 and 2023, the Company recorded income tax expense of $0.5 million and income tax benefit of less than $0.1 million, respectively. In the nine months ended September 30, 2024 and 2023, the Company recorded income tax expense of $1.5 million and $0.2 million, respectively.
13.     Information About Revenue and Geographic Areas
Revenue
Revenue by geography is based on the billing address of the customer. Refer to Note 3—Revenue for more information on net revenue by geographic area.
Long-Lived Assets
The Company’s property and equipment and operating lease right-of-use assets, each net, by geographic area were as follows:
As of September 30, 2024As of December 31, 2023
(in thousands)
United States$168,251 $166,413 
All other countries59,737 65,407 
Total long-lived assets$227,988 $231,820 
14.    Restructuring Charges
During the three and nine months ended September 30, 2024, in an effort to streamline its organization, the Company initiated a restructuring plan to reduce expenses including a reduction of the Company’s workforce. In connection with this plan, the Company incurred charges of $9.7 million primarily consisting of employee-related severance and termination benefits. These charges are included within the restructuring charges line in the Company's condensed consolidated statements of operations. The plan was substantially completed by October 31, 2024.
The following table presents activity related to the liability, which is recorded in accrued expenses in the Company's condensed consolidated balance sheet, for restructuring-related employee severance and benefits:
Total
(in thousands)
Balance as of June 30, 2024$— 
Restructuring charges
9,720 
Cash payments(5,070)
Balance as of September 30, 2024
$4,650 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this Quarterly Report on Form 10-Q. Our fiscal year ends on December 31.
As used herein, “Fastly,” “we,” “our,” “the Company” and similar terms include Fastly, Inc. and its subsidiaries, unless the context indicates otherwise.
Overview
Organizations around the world are more dependent on the quality of digital experiences they provide than ever before. At Fastly, we deliver an edge cloud platform capable of delivering fast, safe, and engaging digital experiences. By focusing holistically on the edge cloud from developer inspiration to end-user experience, we have the opportunity to differentiate with our global footprint, dynamic infrastructure, and security solution. Performance, security, and building the most engaging applications are paramount to driving mission success for Fastly’s customers.
The edge cloud is a category of Infrastructure as a Service (“IaaS”) that enables developers to build, secure, and deliver digital experiences, at the edge of the Internet. This service represents the convergence of the Content Delivery Network (“CDN”) with functionality that has been traditionally delivered by hardware-centric appliances such as Application Delivery Controllers (“ADC”), Web Application Firewalls (“WAF”), Bot Detection, Distributed Denial of Service (“DDoS”) and Observability solutions. It also includes the emergence of a new, but growing, edge computing market which aims to move compute power and logic as close to the end user as possible. When milliseconds matter, processing at the edge is an ideal way to handle highly dynamic and time-sensitive data. This has led to its acceptance and adoption by organizations who monetize or grow their user base with every millisecond saved. Organizations that want to improve their user experience, whether it’s faster loading websites or reduced shopping cart abandonment, can benefit from processing at the edge. The edge cloud complements data center, central cloud, and hybrid solutions.
Organizations must keep up with complex and ever-evolving end-user requirements. We help them surpass their end users’ expectations by powering fast, safe, and engaging digital experiences. We built a powerful edge cloud platform, designed from the ground up to be programmable and support agile software development. We believe that our platform gives our customers a significant competitive advantage, whether they were born into the digital age or are just embarking on their digital transformation journey.
Developers on the Fastly platform have a high degree of flexibility with granular control and real-time visibility, where they can write and deploy code in a serverless environment and push application logic to the edge. Our infrastructure is built for the software-defined future. Our network is powerful, efficient, and flexible, designed to enable us to rapidly scale to meet the needs of the most demanding customers. Our approach to scalable, secure reliability integrates security into multiple layers of development: architecture, engineering, and operations. That’s why we invest in building security into the fabric of our platform, alongside performance. We provide developers and security operations teams with a fast and safe environment to create, build, and run modern applications.
We serve established enterprises, mid-market companies, and technology-savvy organizations. Our customers represent a diverse set of organizations across many industries with one thing in common: they care about delivering best-in-class digital experiences. With our edge cloud platform, our customers are disrupting existing industries and creating new ones. For example, several of our customers have reinvented digital publishing by connecting readers through subscription models to indispensable content. Fastly’s ability to dynamically manage content in real time enables readers to have instant access to the most up to date information.
Our customers’ ecommerce solutions use Fastly’s edge compute functionality to deliver very low-latency customer experiences, including providing better recommendations to their shoppers, converting more shopping carts into sales and executing fast and secure financial transactions. Content streaming organizations leverage Fastly’s platform to deliver content to users around the world and those that livestream gain easy access to enormous edge compute resources for even greater reliability. The range of applications that developers build with our edge cloud platform continues to expand rapidly.
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Our mission is to make the Internet a better place where all experiences are fast, safe, and engaging. We want all developers to have the ability to deliver the next transformative digital experience on a global scale. And because big ideas often start small, we love it when developers experiment and iterate on our platform, coming up with exciting new ways to solve today’s complex problems.
For the three months ended September 30, 2024 and 2023, our revenue was $137.2 million and $127.8 million, respectively, an increase of 7%. For the nine months ended September 30, 2024 and 2023, our revenue was $403.1 million and $368.2 million, respectively, an increase of 9%.
Our 10 largest customers generated an aggregate of 35% and 37% of our revenue in the trailing 12 months ended September 30, 2024 and 2023, respectively. No single customer accounted for more than 10% of revenue for the three months ended September 30, 2024, whereas one customer accounted for more than 10% of revenue for the three months ended September 30, 2023. No single customer accounted for more than 10% of revenue for each of the nine months ended September 30, 2024 and 2023. Affiliated customers that are business units of a single company in the streaming entertainment space generated an aggregate of less than 10% and 14% of the Company’s revenue for the three months ended September 30, 2024 and 2023, respectively, and 10% and 11% for the nine months ended September 30, 2024 and 2023, respectively.
For the three months ended September 30, 2024 and 2023, we incurred a net loss of $38.0 million and $54.3 million, respectively. For the nine months ended September 30, 2024 and 2023, we incurred a net loss of $125.2 million and $109.7 million, respectively.
We focus our direct selling efforts on expanding our customer’s use of our platform, which includes companies that are exhibiting significant growth. We engage with and support these customers with our field sales representatives, account managers, and technical account managers who focus on customer satisfaction and drive expansion of their usage of our platform and products. These teams work with technical and business leaders to help our customers’ end-users receive the best possible digital experience, while also lowering our customers’ total cost of ownership. These direct selling efforts are reflected by the revenue generated by our enterprise customers. Our Last-Twelve Months Net Retention Rate (“LTM NRR”) metric also measures the revenue growth from existing customers attributable to increased usage of our platform and features, and purchase of additional products and services. For additional details on our key metrics, refer to the “Key Business Metrics” section.
Factors Affecting Our Performance
Winning New Customers
We are focused on continuing to attract new customers, including those in diverse vertical markets, and expanding our relationship with existing customers, by enhancing our product experience, investing in technology, and leveraging our partner ecosystem. Our customer base includes large, established enterprises that are undergoing digital transformation and emerging companies spanning a wide array of industries and verticals. Developers within these companies often use and advocate for the adoption of our platform by their companies and promotion across the broader developer community. We will continue to invest in our products and features and developer outreach, leveraging it as a cost-efficient approach to attracting new customers, and our sales and marketing programs, including various online marketing activities as well as targeted account-based marketing.
We are continuing to bring a durable, consistent, and predictable pipeline of new innovations to our edge cloud platform and software-defined modern network architecture, and are seeing interest from customers in our existing product lines like Network Services and Security, and newer product lines like Compute and Observability. We will continue to build out a single, unified platform, simplify customer onboarding and service usage, and simplify our pricing and packaging. This will require us to dedicate significant resources to further develop the market for our platform and differentiate our platform from competitive products and services. We will also need to expand, retain, and motivate our sales and marketing personnel in order to target our sales efforts at larger enterprises and senior management of these potential customers.
Many jurisdictions have enacted laws on data localization and cross-border data transfers, and the evolving enforcement and interpretation of such laws has created uncertainty regarding data stored abroad and transferred across borders, which could impact customer growth and acquisition for customers and potential customers conducting business in Europe and elsewhere outside of the United States. For additional details, refer to the section titled “Risk Factors.”
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Expanding into New Markets and within Our Existing Customer Base
We aim to continue to add customers from a diverse set of industry verticals through our differentiated platform that offers a broad range of capabilities. By focusing on our key differentiators, including performance and security, we have an opportunity to continue to add customers from a diverse set of industries.
We emphasize retaining our customers and expanding their usage of our platform and adoption of our other products. Customers often begin with smaller deployments of one of our products and then expand their usage over time. Our platform includes a variety of offerings across Network Services, Security, Compute and Observability product lines. As our customers mature, we assist them in expanding their use of our platform, including the use of additional offerings beyond content delivery or security. As enterprises grow and experience increased traffic, their needs evolve, leading them to find additional use cases for our platform and expand their usage accordingly. In addition, given that customer acquisition costs are incurred largely for acquiring and initial onboarding, we may gain operating leverage to the extent that existing customers expand their use of our platform and products.
Our ability to retain customers and expand their usage could be impaired for a variety of reasons, including a customer moving to another provider or reducing usage within the term of their contract. Even if our customers expand their usage of our platform, we cannot guarantee that they will maintain those usage levels for any meaningful period of time or that they will renew their commitments. The data localization and cross-border data transfer issues described above also impact current customers' usage of our products and services.
In addition, we cannot be certain what actions the United States or another country’s government may take with respect to certain of our customers that may adversely affect our ability to do business with our customers that operate in China, target China as a market or that have strong business ties to China. And any action they do take could have a negative impact on our business. One of our largest customers during the three and nine months ended September 30, 2024 operates in and has strong business ties to China.

International Expansion
We intend to continue expanding our efforts to attract customers outside of the United States by augmenting our sales teams and strategically increasing our presence in the number of markets in select international locations.
Our international expansion, including our global sales efforts, continues to add increased complexity and cost to our business. This requires us to expand our sales and marketing capabilities outside of the United States, increase the number of markets we have a presence in around the world to support our customers, and manage the administrative aspects of a global organization, each of which place a strain on our business and culture. In addition, our bandwidth costs are higher in markets outside of the United States and Europe, which may impact our gross margins.
We are closely monitoring the unfolding events of the Russian invasion of Ukraine, as well as the more recent hostilities in Israel, and their global impacts. While the conflicts are still evolving and the outcomes remain highly uncertain, we do not believe the Russia-Ukraine or Israel-Hamas conflicts will have a material impact on our business and results of operations. We do not have Points of Presence (“POPs”) or operations in Russia, Ukraine, or Israel. However, some threat actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell, and distribute our goods and services. If either conflict continues or worsens, leading to greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted.
Our customers operating in Russia, Ukraine, and Israel represented an immaterial portion of our consolidated revenue as of both the three and nine months ended September 30, 2024 and 2023.
Investing in Sales and Marketing
Our customers have been pivotal in driving brand awareness and broadening our reach. While we continue to leverage the self-service approach to drive adoption by developers, we will continue to expand our sales and marketing efforts, with an increased focus on sales to enterprises globally. Utilizing our direct sales force, we have multiple selling points within organizations to acquire new customers and increase usage from our existing customers. We will continue to increase our discretionary marketing spend, including account-based, targeted demand generation and brand spend, to drive the effectiveness
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of our sales teams. As a result, we expect our total operating expenses to increase as we continue to expand. Our investments in sales and marketing teams are intended to help accelerate our sales, onboarding, and ramp cycles.
These efforts will require us to continue to invest in sales and marketing resources. Furthermore, we believe that there is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training, and retaining sufficient numbers of sales personnel to support our growth.
Continued Investment in Our Platform and Network Infrastructure
We must continue to invest in our platform and network infrastructure to maintain our position in the market. We expect our revenue growth to be dependent on an expanding customer base and continued adoption of our edge cloud delivery, security, and other products and services. In anticipation of winning new customers and staying ahead of our customers’ needs, we plan to continue to invest in order to expand the scale and capacity of our software-defined modern network. This could result in increased network service provider fees, which could adversely affect our gross margins if we are unable to offset these costs with revenue from new customers and increase revenue from existing customers. Our customers require constant innovation within their own organizations and expect the same from us. Therefore, we will continue to invest in resources to enhance our development capabilities and introduce new products and features on our platform. We believe that investment in research and development will contribute to our long-term growth but may also negatively impact our short-term profitability. For the three months ended September 30, 2024 and 2023, our research and development expenses as a percentage of revenue were 23% and 31%, respectively. For the nine months ended September 30, 2024 and 2023, our research and development expenses as a percentage of revenue were 26% and 31%, respectively. We may also seek to acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities. For example, in May 2022, we acquired Glitch, a software company specializing in developer project management tools to bolster our existing product offerings, by making it easier to innovate at a layer in the Fastly software stack.
Developers use our platform to build custom applications and require a state-of-the-art infrastructure to test and run these applications. We will continue to invest in our network infrastructure by strategically increasing our POPs. We also anticipate making investments in upgrading our technology and hardware to continue providing our customers a fast and secure platform. Our gross margins and operating results are impacted by these investments. As we continue to experience growth, we may face challenges managing adequate server capacity in our POPs due to potential component delays, shortages, price increases, hardware efficiencies gained through internal development, or any potential changes in server architecture, including due to technological advances or obsolescence. If we have server asset levels in excess of forecasted network capacity needs, we have in the past and may need to continue to write-down or write-off server assets. Conversely, if we underestimate network capacity needs, we may in future periods be unable to meet demand and be required to incur higher costs to secure necessary parts and components of our servers.
In the event that there are errors in software, failures of hardware, damages to a facility or misconfigurations of any of our services, whether caused by our own error, security breaches, third-party error, or natural disasters, we could experience lengthy interruptions in our platform availability as well as delays and additional expenses in arranging new facilities and services. In addition, there can be no assurance that we are adequately prepared for unexpected increases in bandwidth demands by our customers, particularly when we or our customers experience cyber-attacks. The bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including service outages, payment disputes, network providers going out of business, natural disasters, networks imposing traffic limits, or governments adopting regulations that impact network operations.
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Key Business Metrics
We use the following key metrics presented in the table below to evaluate our business, measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. The calculation of these key metrics below may differ from other similarly titled metrics used by other companies, analysts, or investors. We no longer consider Average Enterprise Customer Spend, Dollar-Based Net Expansion Rate, and Quarterly Net Retention Rate to be key business metrics. We believe Average Enterprise Customer Spend to be redundant in light of our disclosure of Total Customer Count and Enterprise Customer Count. Dollar-Based Net Expansion Rate and Quarterly Net Retention Rate were used infrequently by investors and are no longer used by management to manage and monitor the performance of our business. In lieu of Quarterly Net Retention Rate, a measure that is seasonal and fluctuates frequently throughout the year, management believes LTM Net Retention Rate, which measures the last twelve-month period and removes seasonality, is a more accurate performance metric to monitor the business. As such, we will no longer report those metrics because we do not believe they are material to an understanding of our business.
As of September 30,
20242023
Customer metrics:
Total Customer Count (as of period end)
3,638 3,102 
Enterprise Customer Count (as of period end)
576 547 
Other key metrics:
Last-Twelve Months Net Retention Rate (“LTM NRR”)
105.3 %113.6 %
Total Customer Count
We believe that our total number of customers is an important indicator of the adoption of our platform. Our definition of a customer consists of identifiable operating entities with which we have a billing relationship in good standing and which we have recognized revenue from. An identifiable operating entity is defined as a company, a government entity, or a distinct business unit of a larger company that has a relationship with us through direct sales or through one of our reseller partners where charges are identified on an end-customer basis. We may treat separate subsidiaries, segments, divisions, or business units of a single organization that use our platform as unique customers where they have distinct account identifiers. In cases where charges are identified through a reseller partner rather than on an end-customer basis, we would count the reseller as a single customer in our customer count. Our customer groupings may be impacted by changes to our customers’ business, including any impact from acquisition activities, internal business reorganizations leading to operational and decision-making changes, and corporate structure changes such as subsidiary consolidation and reorganization that may arise in the future.
In addition to our paying customers, we also have trial, developer, nonprofit and open source programs, and other non-paying accounts that are excluded from our customer count metric. We operate globally and as a result, the success of our ability to retain our customers is also affected by general economic and market conditions around the world. As of September 30, 2024 and 2023, we had 3,638 and 3,102 customers, respectively.
Enterprise Customer Count
Historically our revenue has been driven primarily by a subset of our customers, our enterprise customers, who have leveraged our platform substantially from a usage standpoint. We believe that the recruitment and cultivation of enterprise customers is critical to our long-term success. Our enterprise customer count is defined as customers with annualized current quarter revenue in excess of $100,000. This is calculated by taking the revenue we recognized for each customer in the current quarter and multiplying it by four. As of September 30, 2024, we had 576 of such enterprise customers that generated 92% of the total annualized current quarter revenue from our total customers for the period ended September 30, 2024. As of September 30, 2023, we had 547 of such enterprise customers that generated 92% of the total annualized current quarter revenue from our total customers for the period ended September 30, 2023.
Last-Twelve Months Net Retention Rate (“LTM NRR”)
Our ability to generate and increase our revenue is also dependent upon our ability to retain our existing customers. LTM NRR allows us to track customer retention which demonstrates the stickiness of our edge cloud platform.
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Our LTM NRR removes some of the volatility that is inherent in a usage-based business model from the measurement of the NRR metric. We calculate LTM NRR by dividing the total customer revenue for the prior twelve-month period (“prior 12-month period”) ending at the beginning of the last twelve-month period (“LTM period”) minus revenue contraction due to billing decreases or customer churn, plus revenue expansion due to billing increases during the LTM period from the same customers by the total prior 12-month period revenue. For the trailing twelve months ended September 30, 2024 and 2023 our LTM NRR was 105.3% and 113.6%, respectively.
Key Components of Statement of Operations
Revenue
We derive our revenue primarily from usage-based fees earned from customers using our platform. We also earn fixed-rate recurring revenue from security and other products and services.
Our usage-based fees earned from customers using our platform are generally billed in arrears. Our security products are primarily annual subscriptions that are billed in advance. Many customers have tiered usage pricing which reflects discounted rates as usage increases. For most contracts, usage charges are determined on a monthly basis based on actual usage within the month and do not impact usage charges within any other month. Our larger customers often enter into contracts that contain minimum billing commitments and reflect discounted pricing associated with such usage levels.
We report our revenue by three product lines: Network Services, Security and Other. Network Services include solutions designed to improve performance of websites, apps, application programming interfaces (“APIs”) and digital media. Security includes products designed to protect websites, apps, APIs and users. Other includes Compute solutions that allow developers to build and deploy modern web applications on our edge cloud platform, and Observability solutions that provide real-time logs, data and metrics streamed from our edge platform for actionable insights.
We define United States revenue (“U.S. revenue”) as revenue from customers that have a billing address in the United States, and we define international revenue as revenue from customers that have a billing address outside of the United States.
Cost of Revenue and Gross Margin
Cost of revenue consists primarily of fees paid to network providers for bandwidth and to third-party network data centers for housing servers, also known as colocation costs. Cost of revenue also includes employee costs for network operation, build-out and support and services delivery, network storage costs, cost of managed services and software-as-a-service, depreciation of network equipment used to deliver services, and amortization of network-related internal-use software. Our arrangements with network service providers require us to pay fees based on bandwidth use, in some cases subject to minimum commitments, which may be underutilized. Over the long term we expect cost of revenue to decrease as a percentage of revenue as we continue to drive efficiencies in our operations. However, our cost of revenue may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Our gross margin has been and will continue to be affected by a number of factors, including utilization of our network, the timing of our investments in the expansion of our network, which can increase depreciation and colocation costs in advance of expected demand, our ability to manage our network service providers and cloud infrastructure-related fees, the timing of amortization of capitalized software development costs, changes in personnel costs to provide customer support and operate the network, and customer pricing. Over the long term we expect gross margin to increase as we continue to drive efficiencies in our operations and increase our revenue. However, our gross margin may fluctuate from period to period.
Research and Development
Research and development expenses consist primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation. Research and development expenses also include cloud infrastructure fees for development and testing, and an allocation of our general overhead expenses. We capitalize the portion of our software development costs that meet the criteria for capitalization.
We continue to focus our research and development efforts on adding new features and products including new use cases, improving the efficiency and performance of our network, and increasing the functionality of our existing products. Over the long term we expect our research and development expenses to decrease as a percentage of our revenue. However, our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
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Sales and Marketing
Sales and marketing expenses consist primarily of personnel costs, including commissions for our sales employees, salaries, benefits, bonuses, and stock-based compensation. Sales and marketing expenses also include expenditures related to advertising, marketing, our brand awareness activities, bandwidth and co-location costs for free trial users, costs related to our customer events, including our customer conferences, professional services fees, amortization of our intangible assets, and an allocation of our general overhead expenses.
We focus our sales and marketing efforts on generating awareness of our platform and products, creating sales leads, and establishing and promoting our brand, both domestically and internationally. Over the long term, we expect our sales and marketing expenses to decrease as a percentage of our revenue. However, our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
General and Administrative
General and administrative expenses consist primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation for our administrative support personnel. General and administrative expenses also include costs related to legal and other professional services fees, SaaS costs, an allocation of our general overhead expenses, credit losses and acquisition-related costs.
In the near term, we expect to continue to incur costs associated with supporting the growth of our business, including international expansion, but expect these costs to decrease as a percentage of our revenue over the long term as we continue to drive efficiencies in our operations. However, our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Impairment Expense
Our impairment expense relates to write-off charges for certain long-lived assets.
Restructuring Charges
Our restructuring charges relate to a restructuring plan to reduce expenses including a reduction of the Company’s workforce. The charges incurred consist primarily of employee-related severance and termination benefits.
Net Gain on Extinguishment of Debt
Our net gain on extinguishment of debt relates to the partial repurchases of our outstanding senior convertible notes in May 2023.
Other Income and Expenses
Our interest income consists primarily of interest earned on our cash, cash equivalents and investments. Our interest expense consists primarily of the interest expense on our finance leases and amortization of discount and debt issuance costs associated with our debt obligations. Our other income (expense), net, consists primarily of foreign currency transaction gains and losses.
Income Taxes
Our income tax expense consists primarily of income taxes in certain foreign jurisdictions where we conduct business and state minimum income taxes in the United States. We currently maintain a full valuation allowance on our U.S. Federal and state net deferred tax assets. We expect to maintain this valuation allowance for the foreseeable future.
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Results of Operations
The following tables set forth our results of operations for the period presented:
Three months ended
September 30,		Nine months ended
September 30,
2024202320242023
(in thousands)
Condensed Consolidated Statement of Operations:
Revenue$137,206 $127,816 $403,097 $368,211 
Cost of revenue62,466 61,730 182,222 177,657 
Gross profit74,740 66,086 220,875 190,554 
Operating expenses:
Research and development31,884 39,068 105,238 113,920 
Sales and marketing45,994 51,043 148,560 143,111 
General and administrative27,173 30,001 87,245 84,651 
Impairment expense559 4,316 3,696 4,316 
Restructuring charges9,720 — 9,720 — 
Total operating expenses115,330 124,428 354,459 345,998 
Loss from operations(40,590)(58,342)(133,584)(155,444)
Net gain on extinguishment of debt— — — 36,760 
Interest income3,819 4,908 11,604 13,602 
Interest expense(473)(862)(1,516)(3,307)
Other expense, net(317)(16)(213)(1,069)
Loss before income tax expense(37,561)(54,312)(123,709)(109,458)
Income tax expense (benefit)455 (1)1,463 244 
Net loss attributable to common stockholders$(38,016)$(54,311)$(125,172)$(109,702)
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The following tables set forth our results of operations for the period presented as a percentage of our revenue:
Three months ended
September 30,		Nine months ended
September 30,
2024202320242023
Condensed Consolidated Statements of Operations, as a percentage of revenue:*
Revenue100 %100 %100 %100 %
Cost of revenue46 48 45 48 
Gross profit54 52 55 52 
Operating expenses:
Research and development23 31 26 31 
Sales and marketing34 40 37 39 
General and administrative20 23 22 23 
Impairment expense— 3 1 1 
Restructuring charges7 — 2 — 
Total operating expenses84 97 88 94 
Loss from operations(30)(45)(33)(42)
Net gain on extinguishment of debt— — — 10 
Interest income3 4 3 4 
Interest expense— (1)— (1)
Other expense, net— — — — 
Loss before income tax expense(27)(42)(30)(29)
Income tax expense (benefit)— — — — 
Net loss attributable to common stockholders(27)%(42)%(30)%(29)%
__________
*    Columns may not add up to 100% due to rounding.
Revenue
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Network Services
$107,431 $102,526 5 %$317,585 $295,320 8 %
Security
26,184 23,345 12 %76,152 67,082 14 %
Other
3,591 1,945 85 %9,360 5,809 61 %
Total revenue$137,206 $127,816 7 %$403,097 $368,211 9 %
Percentage of revenue:
Network Services
78 %80 %(2)%79 %80 %(1)%
Security
19 %18 %1 %19 %18 %1 %
Other
3 %2 %1 %2 %2 %— %
Revenue was $137.2 million for the three months ended September 30, 2024 compared to $127.8 million for the three months ended September 30, 2023, an increase of $9.4 million, or 7%. Revenue was $403.1 million for the nine months ended September 30, 2024, compared to $368.2 million for the nine months ended September 30, 2023, an increase of $34.9 million, or 9%.
In both the three months ended September 30, 2024 and 2023, approximately 95% of our revenue was driven by usage on our platform. In the nine months ended September 30, 2024 and 2023, approximately 95% and 94% of our revenue was driven by usage on our platform, respectively. Revenue was primarily from existing customers, as revenue from new customers
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contributed less than 10% of our revenue. The proportion of the revenue contribution between new and existing customers is consistent with prior periods and typical customer behavior as customers tend to contribute more revenue over time as their use of the platform increases. The remainder of our revenue was generated by our other products and services, including support and professional services.
Network Services revenue was $107.4 million for the three months ended September 30, 2024, compared to $102.5 million for the three months ended September 30, 2023, an increase of $4.9 million, or 5%. The increase in Network Services revenue was primarily driven by growth in usage from existing customers. Security revenue was $26.2 million for the three months ended September 30, 2024, compared to $23.3 million for the three months ended September 30, 2023, an increase of $2.9 million, or 12%. The increase in Security revenue was primarily driven by an increase in Next-Gen WAF revenue, partially offset by a decrease in Fastly legacy WAF revenue. Other revenue was $3.6 million for the three months ended September 30, 2024, compared to $1.9 million for the three months ended September 30, 2023, an increase of $1.7 million, or 85%. The increase in Other revenue was primarily driven by further adoption of Compute solutions.
Network Services revenue was $317.6 million for the nine months ended September 30, 2024, compared to $295.3 million for the nine months ended September 30, 2023, an increase of $22.3 million, or 8%. The increase in Network Services revenue was primarily driven by growth in usage from existing customers. Security revenue was $76.2 million for the nine months ended September 30, 2024, compared to $67.1 million for the nine months ended September 30, 2023, an increase of $9.1 million, or 14%. The increase in Security revenue was primarily driven by an increase in Next-Gen WAF revenue, partially offset by a decrease in Fastly legacy WAF revenue. Other revenue was $9.4 million for the nine months ended September 30, 2024, compared to $5.8 million for the nine months ended September 30, 2023, an increase of $3.6 million, or 61%. The increase in Other revenue was primarily driven by further adoption of Compute solutions.
U.S. revenue was $104.5 million, or 76% of revenue, for the three months ended September 30, 2024, compared to $93.4 million, or 73% of revenue, for the three months ended September 30, 2023. This represents an increase of $11.1 million, or 12%. International revenue was $32.8 million, or 24% of revenue, for the three months ended September 30, 2024, compared to $34.4 million, or 27%, of revenue for the three months ended September 30, 2023. This represents a decrease of $1.6 million, or 5%.
U.S. revenue was $300.9 million, or 75% of revenue, for the nine months ended September 30, 2024, compared to $268.7 million, or 73% of revenue, for the nine months ended September 30, 2023. This represents an increase of $32.2 million, or 12%. International revenue was $102.2 million, or 25% of revenue, for the nine months ended September 30, 2024, compared to $99.6 million, or 27% of revenue, for the nine months ended September 30, 2023. This represents an increase of $2.6 million, or 3%.
Cost of Revenue
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Cost of revenue$62,466 $61,730 1 %$182,222 $177,657 3 %
Cost of revenue was $62.5 million for the three months ended September 30, 2024 compared to $61.7 million for the three months ended September 30, 2023, an increase of $0.8 million, or 1%. The increase was primarily due to a $0.7 million increase in equipment maintenance costs, a $0.7 million in other network costs, a $0.6 million increase in depreciation due to increased investments in our platform and a $0.4 million increase in equipment purchases. The increase was partially offset by a $0.9 million decrease in stock-based compensation expense as well as a $0.4 million decrease in bandwidth costs.
Cost of revenue was $182.2 million for the nine months ended September 30, 2024 compared to $177.7 million for the nine months ended September 30, 2023, an increase of $4.5 million, or 3%. The increase was primarily due to a $2.2 million increase in depreciation and amortization due to increased investments in our platform, a $1.9 million increase in salaries expenses due to increase in headcount, a $1.0 million increase in bandwidth as well as a $0.6 million increase in other network costs. The increase was also due to a $1.3 million increase in equipment maintenance costs, $0.8 million increase of equipment purchases, as well as a $0.7 million increase in colocation costs. The increase was partially offset by a $1.6 million decrease in stock-based compensation expense, a $1.4 million decrease in cloud computing costs, a $0.4 million decrease in travel and expenses, as well as a $0.4 million decrease on loss on disposal of assets.
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Gross Profit and Gross Margin
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Gross profit$74,740 $66,086 13 %$220,875 $190,554 16 %
Gross margin54 %52 %2 %55 %52 %3 %
Gross profit was $74.7 million for the three months ended September 30, 2024 compared to $66.1 million for the three months ended September 30, 2023, an increase of $8.6 million, or 13%. Gross margin was 54% for the three months ended September 30, 2024 compared to 52% for the three months ended September 30, 2023, an increase of 2%. The increase in gross margin was driven by revenue growth during the three months ended September 30, 2024 outpacing the increases in the costs incurred to support the growth of our network.
Gross profit was $220.9 million for the nine months ended September 30, 2024 compared to $190.6 million for the nine months ended September 30, 2023, an increase of $30.3 million, or 16%. Gross margin was 55% for the nine months ended September 30, 2024 compared to 52% for the nine months ended September 30, 2023, an increase of 3%. The increase in gross margin was driven by revenue growth during the nine months ended September 30, 2024 outpacing the increases in the costs incurred to support the growth of our network.
Operating Expenses
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Research and development$31,884 $39,068 (18)%$105,238 $113,920 (8)%
Sales and marketing45,994 51,043 (10)%148,560 143,111 4 %
General and administrative27,173 30,001 (9)%87,245 84,651 3 %
Impairment expense559 4,316 (87)%3,696 4,316 (14)%
Restructuring charges9,720 — 100 %9,720 — 100 %
Total operating expenses$115,330 $124,428 (7)%$354,459 $345,998 2 %
Percentage of revenue:
Research and development23 %31 %(8)%26 %31 %(5)%
Sales and marketing34 %40 %(6)%37 %39 %(2)%
General and administrative20 %23 %(3)%22 %23 %(1)%
Impairment expense— %3 %(3)%1 %1 %— %
Restructuring charges7 %— %7 %2 %— %2 %
Research and development
Research and development expenses were $31.9 million for the three months ended September 30, 2024 compared to $39.1 million for the three months ended September 30, 2023, a decrease of $7.2 million, or 18%. The decrease is primarily due to a $3.0 million decrease in stock-based compensation expenses, a $2.4 million decrease of executive transition costs and a $1.9 million increase in capitalization of cost associated with software development.
Research and development expenses were $105.2 million for the nine months ended September 30, 2024 compared to $113.9 million for the nine months ended September 30, 2023, a decrease of $8.7 million, or 8%. The decrease is primarily due to a $8.4 million decrease in stock-based compensation expenses, a $5.4 million increase in capitalized software expenses, as well as a decrease of $2.4 million of executive transition costs. The decreases were partially offset by a $6.7 million increase in personnel related costs as well as a $0.8 million increase in software costs.
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Sales and marketing
Sales and marketing expenses were $46.0 million for the three months ended September 30, 2024 compared to $51.0 million for the three months ended September 30, 2023, a decrease of $5.0 million, or 10%. The decrease is primarily due to a $3.0 million decrease in marketing expenses as well as a $2.0 million decrease in stock-based compensation expenses. The decrease was also due to a $0.5 million decrease in personnel related costs including sales commissions. The decrease was partially offset by a $0.8 million increase in third party commissions.
Sales and marketing expenses were $148.6 million for the nine months ended September 30, 2024 compared to $143.1 million for the nine months ended September 30, 2023, an increase of $5.5 million, or 4%. The increase is primarily due to a $11.0 million increase in personnel related costs including sales commissions and a $2.1 million increase in third party commissions. These increases were partially offset by a $3.0 million decrease in stock-based compensation expenses, a $2.9 million decrease in marketing expenses, a $0.8 million decrease in amortization expense as well as a $0.5 million increase in capitalized cloud computing costs.
General and administrative
General and administrative costs were $27.2 million for the three months ended September 30, 2024 compared to $30.0 million for the three months ended September 30, 2023, a decrease of $2.8 million, or 9%. The decrease was primarily due to a $3.1 million decrease in stock-based compensation expenses as well as a $0.4 million decrease in capitalized cloud computing costs. The decrease was partially offset by a $0.8 million increase in bad debt expense.
General and administrative costs were $87.2 million for the nine months ended September 30, 2024 compared to $84.7 million for the nine months ended September 30, 2023, an increase of $2.5 million, or 3%. The increase was primarily due to a $3.6 million sales tax refund received in the prior year, a $2.0 million increase in personnel related costs, a $1.1 million increase in bad debt expense, as well as a $0.3 million increase in travel and entertainment expenses. The increase was partially offset by a $2.5 million decrease in stock-based compensation expenses, a $1.1 million decrease in professional fees, a $0.8 million decrease in insurance expense as well as a $0.5 million increase in capitalized cloud computing costs.
Impairment expense
During the three months ended September 30, 2024, we recognized an impairment charge of $0.6 million related to a write-off of certain equipment. During the nine months ended September 30, 2024, we recognized an impairment charge of $3.7 million related to write-off of certain equipment, internal-use software project as well as right-of-use asset.
During the three and nine months ended September 30, 2023, we 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 we expect to not be used.
Restructuring charges
During the three and nine months ended September 30, 2024, in an effort to streamline its organization, we initiated a restructuring plan to reduce expenses including a reduction of our workforce. In connection with this plan, we incurred charges of $9.7 million primarily consisting of employee-related severance and termination benefits. There were no restructuring activities in 2023.
Net Gain on Extinguishment of Debt
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Net gain on extinguishment of debt$— $— — %$— $36,760 (100)%
We recognized a net gain on extinguishment of debt of $36.8 million for the nine months ended September 30, 2023 relating to our repurchase in May 2023 of approximately $236.4 million aggregate principal amount of our outstanding 0% convertible senior unsecured notes due in 2026 at a discount for an aggregate cash repurchase price of approximately $195.7
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million. We did not recognize a net gain on extinguishment of debt for the three months ended September 30, 2023, nor for the three and nine months ended September 30, 2024.
Other Income and Expense
Interest income
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Interest income$3,819 $4,908 (22)%$11,604 $13,602 (15)%
Interest income was $3.8 million for the three months ended September 30, 2024 compared to $4.9 million for the three months ended September 30, 2023, a decrease of $1.1 million, or 22%. This decrease is due to a decrease in the investment portfolio.
Interest income was $11.6 million for the nine months ended September 30, 2024 compared to $13.6 million for the nine months ended September 30, 2023, a decrease of $2.0 million, or 15%. This decrease is due to a decrease in the investment portfolio.
Interest expense
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Interest expense$473 $862 (45)%$1,516 $3,307 (54)%
Interest expense was $0.5 million for the three months ended September 30, 2024 compared to $0.9 million for the three months ended September 30, 2023, a decrease of $0.4 million, or 45%. Interest expense decreased primarily due to the repurchases that occurred during the year ended December 31, 2023, which reduced the principal amount of our Notes (as defined below), thereby reducing debt discount and issuance cost amortization.
Interest expense was $1.5 million for the nine months ended September 30, 2024 compared to $3.3 million for the nine months ended September 30, 2023, a decrease of $1.8 million, or 54%. Interest expense decreased primarily due to the repurchases that occurred during the year ended December 31, 2023, which reduced the principal amount of our Notes (as defined below), thereby reducing debt discount and issuance cost amortization.
Other income (expense), net
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Other expense, net$(317)$(16)1881 %$(213)$(1,069)(80)%
Other expense was $0.3 million for the three months ended September 30, 2024 compared to less than $0.1 million for the three months ended September 30, 2023, an increase of $0.3 million. The change was mainly driven by our foreign currency transaction gains and losses between the periods.
Other expense was $0.2 million for the nine months ended September 30, 2024 compared to $1.1 million for the nine months ended September 30, 2023, an increase of $0.9 million, or 80%. The change was mainly driven by our foreign currency transaction gains and losses between the periods.
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Income Taxes
Three months ended September 30,Nine months ended September 30,
20242023% Change20242023% Change
(in thousands)(in thousands)
Income tax expense (benefit)$455 $(1)(45600)%$1,463 $244 500 %
Income tax expense was $0.5 million for the three months ended September 30, 2024 compared to income tax benefit of less than $0.1 million for the three months ended September 30, 2023, an increase of $0.5 million. The Company continues to maintain a full valuation allowance in the U.S. and the tax expense for the periods were primarily due to foreign tax expense.
Income tax expense was $1.5 million for the nine months ended September 30, 2024 compared to $0.2 million for the nine months ended September 30, 2023, an increase of $1.3 million. The Company continues to maintain a full valuation allowance in the U.S. and the tax expense for the periods were primarily due to foreign tax expense.
Liquidity and Capital Resources
As of September 30, 2024, we had cash, cash equivalents, and marketable securities and restricted cash totaling $308.2 million. Our 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. As of September 30, 2024, we did not have any marketable securities classified as non-current.
To date, we have financed our operations primarily through equity issuances, payments received from customers, the net proceeds we received through sales of our debt securities, and proceeds from our convertible notes. Our principal uses of cash in the near term have primarily been around funding our operations, our capital expenditures, business acquisitions, investments and fulfilling our debt and contractual commitments. We have also entered into longer term commitments to support our operations, including arrangements to directly lease and operate our infrastructure assets and colocation facilities. We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.
We believe that our cash and cash equivalents balances, available borrowing capacity under our credit facility, and the cash flows generated by our operations, net of the cash outflows used in our operations, will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. We have generated losses from operations in the past and expect to continue to incur operating losses for the foreseeable future due to the investments and strategic initiatives we intend to make to grow our business. Our uses of cash beyond the next 12 months will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which are uncertain. We may also use our cash to buy back any outstanding debt on our convertible notes or on any future equity issuances.
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Senior Secured Credit Facilities Agreement
On February 16, 2021, we 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 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, we 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, we 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. On April 30, 2024, we entered into the Third 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 April 30, 2027 and decreased the commitment amount from $100.0 million to $60.0 million, including a $10.0 million sublimit for the issuance of letters of credit, and a swingline subfacility of up to $20.0 million. 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 annual 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% to 0.25% depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement. The Credit Agreement contains a financial covenant that requires us to maintain a consolidated adjusted quick ratio of at least 1:25 to 1:00 tested on a quarterly basis as well as a springing revenue growth covenant for certain periods if our consolidated adjusted quick ratio falls below 1.75 to 1:00 on the last day of any fiscal quarter. As of September 30, 2024, we were in compliance with these covenants and we expect to continue to be in compliance for at least the next 12 months. During the nine months ended September 30, 2024 and 2023, no amounts were drawn down on the Credit Agreement.
Convertible Senior Notes
In March 2021, we issued approximately $948.8 million aggregate principal amount of 0% convertible senior unsecured notes due in 2026 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act.
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.
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 remaining Notes will mature on March 15, 2026, unless earlier converted, redeemed or repurchased.
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Cash Flows
The following table summarizes our cash flows for the period indicated:
Nine months ended September 30,
20242023
(in thousands)
Net cash provided by operating activities$11,186 $7,739 
Net cash provided by investing activities$107,991 $332,185 
Net cash used in financing activities$(9,782)$(213,553)
Cash Flows from Operating Activities
For the nine months ended September 30, 2024, cash provided by operating activities was $11.2 million, consisting primarily of our net loss of $125.2 million, adjusted for non-cash items of $174.1 million, and net cash flows used in operating assets and liabilities of $37.8 million. The main drivers of the changes in operating assets and liabilities were a $19.3 million of operating lease payments, a $4.1 million decrease in accrued expenses due to timing of payments, a $7.7 million decrease in other assets, a $4.9 million decrease in other liabilities as well as a $7.4 million decrease in prepaid expenses and other current assets. This was offset by a $4.5 million increase in accounts payable due to timing of payments as well as a net increase of accounts receivable of $1.3 million, primarily due to the growth of our business and the timing of cash receipts from our customers.
For the nine months ended September 30, 2023, cash provided by operating activities was $7.7 million, consisting primarily of our net loss of $109.7 million, adjusted for non-cash items of $154.9 million, and net cash flows used in operating assets and liabilities of $37.5 million. The main drivers of the changes in operating assets and liabilities were an increase in other long-term assets of $16.3 million primarily due to an increase in capitalized commissions. The increase was further driven by a net increase in accounts receivable of $10.4 million, primarily due to the growth of our business and the timing of cash receipts from our customers. We also had $16.9 million of operating lease payments.
Cash Flows from Investing Activities
For the nine months ended September 30, 2024, cash provided by investing activities was $108.0 million, primarily consisting of $289.7 million of maturities and sales of marketable securities. The cash inflow was partially offset by $155.1 million purchases of marketable securities, $20.5 million of additions to capitalized internal-use software, $5.4 million of payments related to purchases of property and equipment to expand our network and $0.8 million related to advance purchases of property and equipment.
For the nine months ended September 30, 2023, cash provided by investing activities was $332.2 million, primarily consisting of $428.9 million of maturities and sales of marketable securities, offset by $15.4 million of additions to capitalized internal-use software and $8.3 million of payments related to purchases of property and equipment to expand our network.
Cash Flows from Financing Activities
For the nine months ended September 30, 2024, cash used in financing activities was $9.8 million, primarily consisting of $12.4 million of finance lease payments as well as a $3.8 million payment of deferred consideration for business acquisition. The cash outflow was partially offset by inflow of $6.1 million in proceeds from the employee stock purchase plan (“ESPP”) and $0.3 million in proceeds from stock option exercises by our employees.
For the nine months ended September 30, 2023, cash used in financing activities was $213.6 million, primarily consisting of $196.9 million used for the debt extinguishment, $21.2 million of finance lease payments and $4.4 million of deferred consideration payment for prior acquisitions. The cash outflow was partially offset by inflow of $2.0 million in proceeds from stock option exercises by our employees and $7.0 million in proceeds from the employee stock purchase plan (“ESPP”).
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Contractual Obligations and Other Commitments
Our principal commitments consist of obligations under operating and finance leases, purchase obligations for capital expenditures, purchase obligations for contracts with our cloud infrastructure providers, network service providers, and other vendors, and outstanding debt. There have not been any material changes in our contractual obligations and commitments from our most recently filed Annual Report on Form 10-K for the fiscal year ended December 31, 2023, except for those described under Note 6, Note 8, and Note 9 of our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
Critical Accounting Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, expenses, and related disclosures. Actual results and outcomes could differ significantly from our estimates, judgments, and assumptions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
Except for goodwill impairment below, there have been no material changes to our critical accounting estimates disclosure as compared to the critical accounting estimates disclosed in “Management’s Discussion and Analysis – Critical Accounting Estimates” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Goodwill Impairment
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and identifiable intangible assets acquired. The carrying amount of goodwill is reviewed for impairment at least annually, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We have a single operating segment and reporting unit structure for all of the periods presented. To test for goodwill impairment, we compare the carrying value of our reporting unit with its fair value. If the carrying value of the goodwill is considered impaired, a loss is measured as the excess of the reporting unit’s carrying value over the fair value.
During the nine months ended September 30, 2024, we identified certain triggering events, including a sustained decrease in our stock price and market capitalization. As of June 30, 2024, we performed a fair value assessment of our one single reporting unit by using a combination of income and market approaches and concluded that the estimated fair value of our single reporting unit substantially exceeded its carrying value. As of September 30, 2024, we performed a qualitative assessment and concluded it is not more likely than not that the fair value of our one single reporting unit is less than its carrying amount.
Certain critical assumptions used to estimate the fair value of our reporting unit, including management’s forecasted revenue growth, gross and operating margins and cost of capital, are based on management’s best estimate about our current and future conditions. These estimates are inherently uncertain and can be affected by numerous factors, including changes in economic, industry or market conditions, changes in business operations, a loss of significant customer revenues or changes in competition. If our stock price were to trade below book value per share for an extended period of time or we experience adverse effects of a continued downward trend in the overall economic environment, changes in the business itself, including changes in projected earnings and cash flows, we may have to recognize an impairment of all or some portion of our goodwill in subsequent periods.
Recent Accounting Pronouncements
See Note 2 — Summary of Significant Accounting Policies of our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks in the ordinary course of our business. These risks primarily include interest rate and currency exchange risks as follows:
Interest Rate Risk
We had cash, cash equivalents, and marketable securities of $308.2 million as of September 30, 2024, which primarily consisted of bank deposits, money market funds, investment-grade commercial paper, corporate notes and bonds, U.S. treasury securities, foreign government and supranational securities and asset-backed securities held at major financial institutions. The cash and cash equivalents are held for working capital purposes. The restricted cash is held as cash collateral in connection with our existing lease arrangements. Notwithstanding the recent fluctuations in interest rates, the increase in interest income has not been significant. The primary objective of our investment activities is to preserve principal while generating income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during the period presented would not have had a material impact on our consolidated financial statements.
Currency Exchange Risks
The functional currency of our foreign subsidiaries is the U.S. dollar. Therefore, we are exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars. Our foreign subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at the average exchange rate in effect during the period. If there is a change in foreign currency exchange rates, the conversion of our foreign subsidiaries’ financial statements into U.S. dollars would result in a realized gain or loss which is recorded in our consolidated statements of operations. We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future. A hypothetical 10% change in foreign exchange rates during the period presented would not have had a material impact on our consolidated financial statements.

Item 4.         Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has 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 the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that as of September 30, 2024, our disclosure controls and procedures were, in design and operation, effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
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 Quarterly Report on Form 10-Q 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
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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.
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PART II - OTHER INFORMATION
Item 1.         Legal Proceedings
The information set forth under “Legal Matters” in Note 9 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
In addition, from time to time, the Company may be subject to legal proceedings and claims arising from the normal course of business, and an unfavorable resolution of any of these matters could materially affect our future results of operations, cash flows, or financial position.

Item 1A.     Risk Factors
Investing in our Class A common stock involves a high degree of risk. Investors should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes, before deciding to invest in our Class A common stock. Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, customer growth, results of operations, financial condition, or prospects. Any of these events could cause the trading price of our Class A common stock to decline, which would cause our stockholders to lose all or part of their investment. Our business, results of operations, financial condition, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.
We have marked with an asterisk (*) those risks described below that reflect substantive changes from, or additions to, the risks described in our Annual Report on Form 10-K for the year ended December 31, 2023.
Select Risk Factors Affecting Our Business
Our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks include, among others, the following:
•If our platform fails to perform properly due to defects, interruptions, outages, delays in performance, or similar problems, and if we fail to develop enhancements to resolve any defect, interruption, delay, or other problems, we could lose customers, become subject to service performance or warranty claims or incur significant costs.
•If we are unable to attract new customers, in particular, enterprise customers, and to have existing enterprise customers continue and increase their use of our platform, our business will likely be harmed.
•We receive a substantial portion of our revenues from a limited number of customers from a limited number of industries, and the loss of, or a significant reduction in usage by, one or more of our major customers would result in lower revenues and could harm our business.*
•Component delays, shortages or price increases could interrupt our ability to complete the construction of our servers to meet the usage needs of our customers. Our operating results could be materially harmed if we are unable to adequately manage our server needs.
•Our limited operating history and our history of operating losses makes it difficult to evaluate our current business and prospects and may increase the risks associated with your investment.
•If our information technology systems or data, or those of third parties upon which we rely, are compromised now, or in the future, or the security, confidentiality, integrity or availability of our information technology, software, services, networks, communications or data is compromised, limited or fails, our business could experience materially adverse consequences, including but not limited to regulatory investigations or actions, litigation, fines and penalties,
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disruptions of our business operations, loss of revenue or profits, loss of customers or sales, reputational harm, and other adverse consequences.
•If we fail to efficiently develop and sell new products and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences, our products may become less competitive.
•If we fail to forecast our revenue accurately, or if we fail to manage our expenditures, our operating results could be adversely affected.*
•Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.
•The markets in which we participate are competitive, and if we do not compete effectively, our business will be harmed.
•If we fail to maintain and enhance our brand, our ability to expand our customer base will be impaired and our business, results of operations and financial condition may suffer.
•Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, and dilute stockholder value.
•The failure to attract and retain qualified personnel could prevent us from executing our business strategy.
•We rely on the performance of highly skilled personnel, including our senior management and other key employees, and the loss or transition of one or more of such personnel, or of a significant number of our team members, could harm our business.
•We are, and may in the future be, involved in class-action lawsuits and other litigation matters that are expensive and time-consuming. If resolved adversely, lawsuits and other litigation matters could seriously harm our business.*
•If our estimates or judgments relating to our critical accounting estimates prove to be incorrect or impaired, our results of operations could be adversely affected.*
•Our stock price may be volatile, and the value of our Class A common stock may decline.

Risks Related to Our Business, Industry and Technology
If our platform fails to perform properly due to defects, interruptions, outages, delays in performance, or similar problems, and if we fail to develop enhancements to resolve any defect, interruption, delay, or other problems, we could lose customers, become subject to service performance or warranty claims, or incur significant costs.
Our operations are dependent upon our ability to prevent system interruption. The applications underlying our edge cloud computing platform are inherently complex and may contain material defects or errors, which may cause disruptions in availability or other performance problems. We have from time to time found defects and errors in our platform and may discover additional defects or errors in the future that could result in data unavailability, unauthorized access to, loss, corruption, or other harm to our customers’ data. These defects or errors could also be found in third-party applications or open source software on which we rely. We may not be able to detect and correct defects or errors before implementing our products. Consequently, we or our customers may discover defects or errors after our products have been deployed.
We currently serve our customers from our POPs located around the world. Our customers need to be able to access our platform at any time, without interruption or degradation of performance. However, we have not developed redundancies for all aspects of our platform. We depend, in part, on our third-party facility providers’ ability to protect these facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts, armed conflict, public health issues, such as a pandemic or epidemic, and similar events. In some cases, third-party cloud providers run their own platforms that we access, and are, therefore, vulnerable to their service interruptions. In the event that there are any defects or errors in
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software, failures of hardware, damages to a facility, or misconfigurations of any of our services, we may have to divert resources away from other planned work, could experience lengthy interruptions in our platform, and also incur delays and additional expenses in arranging new facilities and services. Our customers may choose to divert their traffic away from our platform as a result of interruptions or delays. Disaster recovery arrangements, including the existence of redundant data centers that are designed to become active during certain lapses of service, may not function as intended, and any disruptions to our service could harm our business.
We design our system infrastructure and procure and own or lease the computer hardware used for our platform. Design and mechanical errors, spikes in usage volume, and failure to follow system protocols and procedures could cause our systems to fail, resulting in interruptions on our platform. Moreover, we have experienced and may in the future experience system failures or interruptions in our platform as a result of human error. These outages have resulted and may in the future result in service level agreement claims. Any interruptions or delays in our platform, whether caused by our products or our data centers, third-party error, our own error, natural disasters, the effects of climate change (such as drought, flooding, wildfires, increased storm severity, and sea level rise), security breaches, or whether accidental or willful, could harm our relationships with customers, reduce customers’ usage of our platform, cause our revenue to decrease and our expenses to increase, and divert resources away from product development. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability and cause us to issue service credits or cause customers to fail to renew their customer contracts, any of which could harm our business.
The occurrence of any defects, errors, disruptions in service, failures involving redundant data centers, or other performance problems, interruptions, or delays with our platform, whether in connection with the day-to-day operations or otherwise, could result in:
•loss of customers;
•reduced customer usage of our platforms;
•lost or delayed market acceptance and sales of our products, or the failure to launch products or features on anticipated timelines;
•delays in payment to us by our customers;
•injury to our reputation and brand;
•governmental inquiry or oversight;
•legal claims, including warranty and service level agreement claims, against us; or
•diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
The costs incurred in correcting any material defects, errors, or other performance problems in our platform may be substantial and could harm our business.
If we are unable to attract new customers, in particular, enterprise customers, and to have existing enterprise customers continue and increase their use of our platform, our business will likely be harmed.
To grow our business, we must continue to attract new customers, in particular, enterprise customers, and generate revenue from those new customers. To do so, we must successfully convince potential customers of the benefits and the value of our platform. This may require significant and costly sales efforts that are targeted at larger enterprises and senior management of these potential customers. Sales to enterprise customers may involve longer sales cycles as a result of customers requiring considerable time to evaluate our platform, requiring participation in a competitive purchasing process, having more formal processes for approval of purchases, and more complex requirements. These factors significantly impact our ability to add new customers and increase the time, resources, and sophistication required to do so. In addition, numerous other factors, some of which are out of our control, may now or in the future impact our ability to acquire new customers, including potential customers’ commitments to other providers, real or perceived costs of switching to our platform, our failure to expand, retain,
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and motivate our sales and marketing personnel, our failure to develop or expand relationships with potential customers and channel partners, failure by us to help our customers to successfully deploy our platform, negative media or industry or financial analyst commentary regarding us or our solutions, litigation, and deteriorating general economic conditions. If we fail to attract new customers, particularly enterprise customers, as a result of these and other factors our business will likely be harmed.
In addition, our ability to grow and generate incremental revenue depends on our ability to maintain and grow our relationships with our existing enterprise customers so that they continue and increase their usage of our platform. If these customers do not maintain and increase their usage of our platform, our revenue may decline and our results of operations will likely be harmed.
For some of our products, we charge our customers based on the usage of our platform. Most of our customers, including some of our largest enterprise customers, do not have long-term contractual financial commitments to us. In addition, most of our current customer contracts are only one year in duration and these customers may not use our platform in a subsequent year. In order for us to maintain or improve our results of operations, it is important that our customers, in particular, our enterprise customers, use our platform in excess of their commitment levels, if any, and continue to use our platform on the same or more favorable terms. Our ability to retain our largest customers and expand their usage could be impaired for a variety of reasons, including customer budget constraints, customer satisfaction, changes in our customers’ underlying businesses, changes in the type and size of our customers, pricing changes, competitive conditions (including customers building their own CDNs), the acquisition of our customers by other companies, governmental actions, or the possibility thereof, and general economic conditions. Because many of our largest customers’ minimum usage commitments for our platform are relatively low compared to their expected usage, it can be easy for certain customers to quickly reallocate usage or switch from our platform to an alternative platform altogether. In addition, they may reduce or cease their use of our products at any time without penalty or termination charges, even after they have expanded usage in prior periods.

We base our decisions about expense levels and investments on estimates of our future revenue and anticipated rate of growth. Many of our expenses are fixed cost in nature for some minimum amount of time, such as colocation and bandwidth, so if we do experience slower usage growth on our platform it may not be possible to reduce costs in a timely manner or without the payment of fees to exit certain obligations early. If any of these events were to occur, our business may be harmed.
In addition, many of our customers have negotiated and may continue to negotiate lower rates in exchange for an agreement to renew, expand their usage in the future, or adopt new products. As a result, in certain cases, even though customers have not reduced their usage of our platform, the revenue we derive from that usage has decreased. If our platform usage or revenue fall significantly below the expectations of the public market, securities analysts, or investors, our business would be harmed, which could cause our stock price to decline.
Our future success also depends in part on our ability to expand our existing customer relationships, in particular, with enterprise customers, by increasing their usage of our platform, selling them additional products and upgrading their existing products. The rate at which our customers increase their usage of our platform and purchase products from us depends on a number of factors, including our ability to grow our platform and maintain the security and availability of it, develop and deliver new features and products, maintain customer satisfaction, general economic conditions and pricing and services offered by our competitors. If our efforts to increase usage of our platform by, or sell new and additional products to, our enterprise customers are not successful, our business would be harmed. In addition, even if our largest customers increase their usage of our platform, we cannot guarantee that they will maintain those usage levels for any meaningful period of time. In addition, because many of our products endeavor to deliver increased efficiency and functionality, the successful sale of a new or additional product to an existing customer could result in a reduction of the customer’s overall usage of our platform.
We receive a substantial portion of our revenues from a limited number of customers from a limited number of industries, and the loss of, or a significant reduction in usage by, one or more of our major customers would result in lower revenues and could harm our business.*
Our future success is dependent on establishing and maintaining successful relationships with a diverse set of customers. We currently receive a substantial portion of our revenues from a limited number of customers and from a limited number of industries, such as media and entertainment. Our 10 largest customers generated an aggregate of 35% and 37% of our revenue in the trailing 12 months ended September 30, 2024 and 2023, respectively. Affiliated customers that are business units of a single company in the streaming entertainment space generated an aggregate of 11% of our revenue in both the trailing 12 months ended September 30, 2024 and 2023. In addition, one of our largest customers during the three and nine months ended September 30, 2024 operates in and has strong business ties to China and we cannot be certain how their traffic levels may be impacted by applicable laws or regulations in the current environment of economic trade negotiations and tensions between the Chinese and the United States governments. It is likely that we will continue to be dependent upon a limited number of
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customers for a significant portion of our revenues for the foreseeable future and, in some cases, the portion of our revenues attributable to individual customers may increase in the future. In addition, changes to our customers’ business may contribute to further customer concentration, including any impact from acquisition activities, internal business reorganizations leading to operational and decision making changes, and corporate structure changes such as subsidiary consolidation and reorganization that may arise in the future. The loss of one or more key customers or a reduction in usage by any major customers would reduce our revenues. If we fail to maintain existing customers or develop relationships with new customers and across different industries, our business would be harmed.
Component delays, shortages or price increases could interrupt our ability to complete the construction of our servers to meet the usage needs of our customers. Our operating results could be materially harmed if we are unable to adequately manage our server needs.
Our business depends on the timely supply of certain parts and components to construct our servers. We rely on a limited number of suppliers for several components of the equipment we use to operate our network and provide products to our customers. Our reliance on these suppliers exposes us to risks including reduced control over production costs and constraints based on the then current availability, terms, and pricing of these components, including pricing changes as a result of inflationary pressures. The COVID-19 pandemic caused disruptions and delays for these components and the delivery and installation of such components at our colocation facilities, in addition to pricing increases. If our supply of certain components is further disrupted or delayed, there can be no assurance that we will be able to obtain adequate replacements for the existing components or that supplies will be available on terms and prices that are favorable to us, if at all. Any disruption or delay in the supply of our hardware components has in the past and may in the future limit capacity expansion or replacement of defective or obsolete equipment, or cause other constraints on our operations that could damage our customer relationships and harm our business.
To ensure adequate supply of parts and components, we must forecast server needs and expenses and place orders sufficiently in advance with our suppliers based on estimates of future demand for network capacity. As we continue to experience growth, we may face challenges managing adequate server capacity due to potential component delays, shortages, price increases, hardware efficiencies gained through internal development, or any potential changes in server architecture including due to technological advances or obsolescence. We may incur charges in future periods related to server management or incorrectly forecast our network capacity needs in future periods. If we have excess server capacity, we have in the past needed to, and may in the future need to, write-down or write-off server assets, which may materially harm our operating results. For example, in the year ended December 31, 2023, we recognized computer and networking equipment related write-off charges of $4.3 million. Conversely, if we underestimate network capacity needs, we may in future periods be unable to meet demand and be required to incur higher costs to secure necessary parts and components of our servers, which could adversely affect our customer relationships and harm our business.
Our limited operating history and our history of operating losses makes it difficult to evaluate our current business and prospects and may increase the risks associated with your investment.
We were founded in 2011 and have experienced net losses and negative cash flows from operations since inception. Our limited operating history makes it difficult to evaluate our current business and our future prospects, including our ability to plan for and model future growth. We have encountered and will continue to encounter risks and difficulties frequently experienced by growth companies in constantly evolving industries, including companies in the technology sector, including the risks described in this report. If we do not address these risks successfully, our business may be harmed.
We generated a net loss of $38.0 million and $123.7 million for the three and nine months ended September 30, 2024, respectively, and as of September 30, 2024, we had an accumulated deficit of $959.9 million. We will need to generate and sustain increased revenue levels and manage costs in future periods in order to become profitable; even if we achieve profitability, we may not be able to maintain or increase our level of profitability. We intend to continue to expend significant funds to support further growth and further develop our platform, including expanding the functionality of our platform, expanding our technology infrastructure and business systems to meet the needs of our customers, expanding our direct sales force and partner ecosystem, increasing our marketing activities, and growing our international operations. We have in the past and will continue to face increased compliance costs associated with growth, expansion of our customer base, and the costs of being a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to achieve and sustain profitability, our business may be harmed.
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Further, we have limited historical financial data and operate in a rapidly evolving market. As such, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market.
If our information technology systems or data, or those of third parties upon which we rely, are compromised now, or in the future, or the security, confidentiality, integrity or availability of our information technology, software, services, networks, communications or data is compromised, limited or fails, our business could experience materially adverse consequences, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, loss of revenue or profits, loss of customers or sales, reputational harm, and other adverse consequences.
Our business is dependent on providing our customers with fast, efficient, and reliable distribution of applications and content over the Internet. In the ordinary course of our business, we and the third parties upon which we rely, collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share, proprietary, confidential, and sensitive data, including personal information, intellectual property, trade secrets, and encryption keys, including our data and data of our customers, including their end-users (collectively, sensitive information). Maintaining the security and availability of our platform, network, and internal information technology systems and the security of information we hold on behalf of our customers is a critical issue for us and our customers, and we expend significant resources, and may need to fundamentally change our business activities and continue to modify our practices and operations, in an effort to protect against security incidents and to mitigate, detect, and remediate actual and potential vulnerabilities.
Cyber-attacks, malicious Internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely. Such threats are prevalent and continue to rise, are difficult to detect, and come from a variety of sources, including threat actors, “hacktivists,” personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. We have in the past been subject to cyber-attacks from third parties, including parties who we believe are sponsored by government actors. Since our customers share our multi-tenant architecture, cyber-attacks on any one of our customers could have a negative effect on other customers. These attacks have in the past significantly increased the bandwidth used on our platform and have strained our network. During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell, and distribute our services.

We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code , malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, account takeover attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, attacks facilitated or enhanced by artificial intelligence (“AI”), loss of data or other information technology assets, adware, telecommunications failures, natural disasters, and other similar threats. For example, we have experienced DDoS attacks of significant size and severity that caused us to invest resources into improving our systems, and we expect to continue to be subject to DDoS and other forms of attacks in the future, particularly as they have become more prevalent in our industry. Similarly, we have been the target of phishing and social engineering schemes that may be designed to, among other things, improperly gain access to our confidential information or fraudulently obtain payments or funds from us. Further, we are not immune from the possibility of a malicious insider compromising our information systems and infrastructure or misappropriating our confidential information.
In particular, severe ransomware attacks are becoming increasingly prevalent, and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
We are incorporated into the supply chain of a number of companies worldwide and, as a result, if our services are compromised, a significant number or, in some instances, all of our customers and their data could be simultaneously affected. The potential liability and associated consequences we could suffer as a result of such a large-scale event could be catastrophic and result in irreparable harm.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’
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systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.
We rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, content delivery to customers, and other functions. Like many other companies, our ability to monitor third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their privacy and data security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized , unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our platform, products and services.
In addition, as we expand our emphasis on selling security-related products, we may become a more attractive target for attacks on our infrastructure intended to destabilize, overwhelm, or shut down our platform. For example, we have had security incidents in the past that have tested the limits of our infrastructure and impacted the performance of our platform.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Further, sensitive information of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies.

Certain privacy and data security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred. These vulnerabilities pose material risks to our business. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

Applicable privacy and data security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors of security incidents. For example, SEC rules require disclosure on Form 8-K of the nature, scope and timing of any material cybersecurity incident and the reasonably likely impact of such incident. Compliance with such disclosure efforts is costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines penalties, audits, and inspections); additional reporting requirements and/or oversight, restrictions on processing sensitive information (including personal data); litigation (including class action claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions or degradation of performance in our services (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may cause customers to stop using our platform, products, and services, cause us to offer pricing and other concessions, deter new customers from using our platform, products, and services, and negatively impact our ability to grow and operate our business.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our privacy and data security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and data security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.
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If we fail to efficiently develop and sell new products and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences, our products may become less competitive.
The market in which we compete is relatively new and subject to rapid technological change, evolving industry standards and regulatory changes, as well as changing customer needs, requirements, and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. If we are unable to develop and sell new products that satisfy and are adopted by our customers and provide enhancements, new features, and capabilities to our platform that keep pace with rapid technological and industry change, our revenue and operating results could be adversely affected. Further, some of our prospective customers may require custom development of features as part of their purchase decision, or our existing customers may require us to develop custom features. If we are unable to meet their requirements, they may look to our competitors or internal solutions that eliminate reliance on third-party providers, and our revenue and operating results could be adversely affected. Further, prioritizing such custom features can be difficult to adapt to other customers and may require significant engineering resources. If new technologies emerge that enable large Internet platform companies to utilize their own data centers and implement delivery approaches that limit or eliminate reliance on third-party providers like us, or that enable our competitors to deliver competitive products and applications at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete. If our platform does not allow us or our customers to comply with the latest regulatory requirements, our existing customers may decrease their usage on our platform and new customers will be less likely to adopt our platform.
Our platform must also integrate with a variety of network, hardware, mobile, and software platforms and technologies, and we need to continuously modify and enhance our products and platform capabilities to adapt to changes and innovation in these technologies. If developers widely adopt new software platforms, we would have to attempt to develop new versions of our products and enhance our platform’s capabilities to work with those new platforms. These development efforts may require significant engineering, marketing, and sales resources, all of which would affect our business and operating results. Any failure of our platform’s capabilities to operate effectively with future infrastructure platforms, technologies, and software platforms could reduce the demand for our platform. If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and our business may be harmed.
Moreover, our platform is highly technical and complex. For example, our delivery products rely on knowledge of the Varnish Configuration Language (“VCL”) to utilize many features of this platform. Potential developers may be unfamiliar or opposed to working with VCL and therefore decide to not adopt our platform, which may harm our business.
If we fail to forecast our revenue accurately, or if we fail to manage our expenditures, our operating results could be adversely affected.*
We cannot accurately predict customers’ usage or renewal rates given the diversity of our customer base across industries, geographies and size, and ability of customers to allocate usage, among other factors. Accordingly, we may be unable to accurately forecast our revenues. Notwithstanding our substantial investments in sales and marketing, infrastructure, and research and development in anticipation of growth in our business, if we do not realize returns on these investments in our growth, our results of operations could differ materially from our forecasts, which would adversely affect our results of operations and could disappoint analysts and investors, causing our stock price to decline. In addition, we have experienced, and may continue to experience, longer payment cycles in collecting accounts receivable from certain of our customers. If we are unable to timely collect accounts receivable from our customers, our business will be harmed.
Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.
We have historically benefited from word-of-mouth and other organic marketing to attract new customers. Through this word-of-mouth marketing, we have been able to build our brand with relatively low marketing and sales costs. This strategy has allowed us to build a substantial customer base and community of users who use our products and act as advocates for our brand and our platform, often within their own corporate organizations. However, our ability to further increase our customer base and achieve broader market acceptance of our products will significantly depend on our ability to expand our marketing and sales operations. We plan to continue expanding our sales force and strategic partners, both domestically and internationally. We also plan to continue to dedicate significant resources to sales, marketing, and demand-generation programs, including various online marketing activities as well as targeted account-based marketing. The effectiveness of our targeted account-based marketing has varied over time and may vary in the future. All of these efforts will require us to invest significant financial and other resources and if they fail to attract additional customers, our business will be harmed. We have also used a strategy of offering free trial versions of our platform in order to strengthen our relationship and reputation within
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the developer community by providing these developers with the ability to familiarize themselves with our platform without first becoming a paying customer. However, these developers may not perceive value in the additional benefits and services we offer beyond the free trial versions of our platform and may choose not to pay for those additional benefits. Moreover, some existing paying customers may choose not to renew their commitment with us in favor of relying on the free version of our platform. Most trial accounts do not convert to paid versions of our platform, and to date, only a few users who have converted to paying customers have gone on to generate meaningful revenue. If our other lead generation methods do not result in broader market acceptance of our platform and the users of trial versions of our platform do not become, or are unable to convince their organizations to become, paying customers, or if paying customers choose to convert to the free versions of our platform, we will not realize the intended benefits of this strategy, and our business will be harmed.
We believe that there is significant competition for sales personnel, including sales representatives, sales managers, and sales engineers, with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training, incentivizing, and retaining sufficient numbers of sales personnel to support our growth. New hires require significant training and may take significant time before they achieve full productivity. Our recent hires may not become productive as quickly as we expect, if at all, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. In addition, particularly if we continue to grow rapidly, new members of our sales force will have relatively little experience working with us, our platform, and our business model. If we are unable to hire and train sufficient numbers of effective sales personnel, our sales personnel do not reach significant levels of productivity in a timely manner, our sales personnel are not effectively incentivized, or our sales personnel are not successful in acquiring new customers or expanding usage by existing customers, our business will be harmed.
The markets in which we participate are competitive, and if we do not compete effectively, our business will be harmed.
The market for cloud computing platforms, particularly enterprise grade products, is highly fragmented, competitive, and constantly evolving. With the introduction of new technologies and market entrants, we expect that the competitive environment in which we compete will remain intense going forward. Application and API security vendors like Akamai, Amazon Web Services (“AWS”), Cloudflare, F5, and Thales (Imperva) offer products that compete with ours. We also compete with CDN providers, which now offer serverless edge compute functionality like Akamai (Linode), and Cloudflare, cloud hosting providers (or public cloud providers) that have added CDN and WAF capabilities like Alphabet (Google Cloud Platform), AWS, and Microsoft (Azure), legacy CDNs, such as Akamai and Edgio, point CDN players like Bunny CDN, CDNetworks, and CDN77, and traditional on-premise data center appliance vendors for load balancing, WAF, and DDoS like F5, Thales (Imperva), NetScaler and Radware. Some of our competitors have made or may make acquisitions or may enter into partnerships or other strategic relationships that may provide more comprehensive offerings than they individually had offered. Such acquisitions or partnerships may help competitors achieve greater economies of scale than us. In addition, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships, or strategic relationships. We compete on the basis of a number of factors, including:
•our platform’s functionality, scalability, performance, ease of use, ease of integration and programmability, reliability, security availability, and cost effectiveness relative to that of our competitors’ products and services;
•our global network coverage and availability;
•our ability to support modern application development processes and utilize new and proprietary technologies to offer services and features previously not available in the marketplace;
•our ability to identify new markets, applications, and technologies;
•our ability to attract and retain customers;
•our brand, reputation, and trustworthiness;
•our credibility with developers;
•the quality of our customer support;
•our ability to recruit software engineers and sales and marketing personnel;
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•our ability to protect our intellectual property; and
•our ability to identify opportunities for acquisitions and strategic relationships and successfully execute on them.
We face substantial competition from legacy CDNs, small business-focused CDNs, cloud providers, traditional data center, and appliance vendors. In addition, existing customers have transitioned or notified us of their intent to transition, and existing and potential customers may in the future transition, off of our platform, or may limit their use, because they pursue a “do-it-yourself” approach to develop their own CDN by putting in place equipment, software, and other technology products for content and application delivery within their internal systems; enter into relationships directly with network providers instead of relying on an overlay network like ours; or implement multi-vendor policies to reduce reliance on external providers like us.
Our competitors vary in size and in the breadth and scope of the products and services offered. Many of our competitors and potential competitors have greater name recognition, longer operating histories, more established customer relationships and installed customer bases, larger marketing budgets, and greater resources than we do. While some of our competitors provide a platform with applications to support one or more use cases, many others provide point-solutions that address a single use case. Other potential competitors not currently offering competitive applications may expand their product offerings, and our current customers may develop their own products or features, to compete with our offerings. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, and customer requirements. An existing competitor or new entrant could introduce new technology that reduces demand for our platform. In addition to application and technology competition, we face pricing competition. Some of our competitors offer their applications or services at a lower price, which has resulted in pricing pressures. Some of our larger competitors have the operating flexibility to bundle competing applications and services with other offerings, including offering them at a lower price or for no additional cost to customers as part of a larger sale of other products. For all of these reasons, we may not be able to compete successfully and competition could result in the failure of our platform to achieve or maintain market acceptance, the market for our edge cloud platform may grow more slowly than we anticipate, any of which could harm our business.
If we fail to maintain and enhance our brand, our ability to expand our customer base will be impaired and our business, results of operations and financial condition may suffer.
We believe that maintaining and enhancing our brand is important to continued market acceptance of our existing and future products, attracting new customers, and retaining existing customers. We also believe that the importance of brand recognition will increase as competition in our market increases. Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable products that continue to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to continue to develop new functionality and products, and our ability to successfully differentiate our platform from competitive products and services. Additionally, our brand and reputation may be affected if customers do not have a positive experience with our partners’ services. Our brand promotion activities may not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote and maintain our brand, our business may be harmed.
Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, and dilute stockholder value.
We have in the past acquired, and we may in the future seek to acquire or invest in, businesses, products, or technologies that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities. Our acquisitions of Glitch and Signal Sciences reflect this strategy. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing acquisitions, whether or not such acquisitions are completed. In addition, we have limited experience in acquiring other businesses and we may not successfully identify desirable acquisition targets or, when we acquire additional businesses, we may not be able to integrate them effectively following the acquisition. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results, may cause unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims, and may not generate sufficient financial returns to offset additional costs and expenses related to the acquisitions. We may also incur significant, and sometimes unanticipated costs in connection with these acquisitions or in integration with our business. In addition, if an acquired business fails to meet our expectations or we do not realize sufficient value, our business may be harmed.
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Further, it is possible that there could be a loss of our existing or any acquired company’s key employees and customers, disruption of either company’s or both companies’ ongoing businesses or unexpected issues, higher than expected costs and an overall post-completion process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in combining any company’s operations with ours in order to realize the anticipated benefits of the acquisition so the combined company performs as the parties hope:
•combining the companies’ corporate functions;
•combining their business with our business in a manner that permits us to achieve the synergies anticipated to result from the acquisition, the failure of which would result in the anticipated benefits of the acquisition not being realized in the time frame currently anticipated or at all;
•maintaining existing and new agreements with customers, service providers, and vendors;
•determining whether and how to address possible differences in corporate cultures, management philosophies and strategies relating to channels, resellers, and partners;
•integrating the companies’ administrative and information technology infrastructure;
•developing products and technology that allow value to be unlocked in the future; and
•evaluating and forecasting the financial impact of the acquisition transaction, including accounting impacts.
Failure to address any of the above listed issues could have a material adverse effect on our business, results of operations and financial position. In addition, at times the attention of certain members of our management and resources may be focused on completion of the acquisition and integration planning of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt our ongoing business and the business of the combined company. For example, certain members of our management team and other personnel spent significant time on the acquisition and integration of Signal Sciences.
We are, and may in the future be, involved in class-action lawsuits and other litigation matters that are expensive and time-consuming. If resolved adversely, lawsuits and other litigation matters could seriously harm our business.*
We are, and may in the future be, subject to litigation such as putative class action and stockholder derivative lawsuits brought by stockholders. For example, on May 24, 2024, we and certain of our officers were named as defendants in putative securities class action purportedly brought on behalf of holders of our Class A common stock. On November 1, 2024, the lead plaintiff filed an amended complaint. On June 12, 2024, July 1, 2024, substantially similar stockholder derivative complaints were filed against our officers and directors in the same court. These two shareholder derivative actions have been consolidated and stayed pending resolution of our anticipated motion to dismiss in the securities class action. On August 23, 2024, a substantially similar stockholder derivative complaint was filed against our officers and directors in the United States District Court for the District of Delaware (the "Sweitzer Action"). On September 26, 2024, the court stayed the Sweitzer Action until after resolution of our anticipated motion(s) to dismiss in the above-referenced securities class action. We anticipate that we will be a target for lawsuits in the future, as we have been in the past. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed on appeal, or we may decide to settle lawsuits on similarly unfavorable terms. Any such negative outcome could result in payments of substantial monetary damages and accordingly our business could be seriously harmed. The results of lawsuits and claims cannot be predicted with certainty. Regardless of the final outcome, defending these claims, and associated indemnification obligations, are costly and can impose a significant burden on management and employees, and we may receive unfavorable preliminary, interim, or final rulings in the course of litigation, which could seriously harm our business.
We may not be able to scale our business quickly enough to meet our customers’ growing needs. If we are not able to grow efficiently, our business could be harmed.
As usage of our edge cloud computing platform grows and as the breadth of use cases for our platform expands, we will need to devote additional resources to improving our platform architecture, integrating with third-party applications and maintaining infrastructure performance. In addition, we will need to appropriately scale our processes and procedures that support our growing customer base, including increasing our number of POPs around the world and investments in systems, training, and customer support.
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Any failure of or delay in these efforts could cause impaired system performance and reduced customer satisfaction. These issues could reduce the attractiveness of our platform to customers, resulting in decreased sales to new customers, lower renewal rates by existing customers, the issuance of service credits, or requested refunds, which would hurt our revenue growth and our reputation. Even if we are able to upgrade our systems and expand our staff, any such expansion will be expensive and complex, and require the dedication of significant management time and attention. We could also face inefficiencies or operational failures as a result of our efforts to scale our cloud infrastructure, such as by over investing in systems and equipment to support anticipated growth in our platform. We cannot be sure that the expansion and improvements to our cloud infrastructure will be effectively implemented on a timely basis, if at all, and such failures would harm our business.
We may have insufficient transmission bandwidth and colocation space, which could result in disruptions to our platform and loss of revenue.
Our operations are dependent in part upon transmission bandwidth provided by third-party telecommunications network providers and access to colocation facilities to house our servers. There can be no assurance that we are adequately prepared for unexpected increases in bandwidth demands by our customers, particularly when customers experience cyber-attacks. The bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including service outages, payment disputes, network providers going out of business, natural disasters, networks imposing traffic limits, or governments adopting regulations that impact network operations. In some regions, bandwidth providers have their own services that compete with us, or they may choose to develop their own services that will compete with us. These bandwidth providers may become unwilling to sell us adequate transmission bandwidth at fair market prices, if at all. This risk is heightened where market power is concentrated with one or a few major networks. We also may be unable to move quickly enough to augment capacity to reflect growing traffic or security demands. Failure to put in place the capacity we require could result in a reduction in, or disruption of, service to our customers and ultimately a loss of those customers. Such a failure could result in our inability to acquire new customers demanding capacity not available on our platform.
The nature of our business exposes us to inherent liability risks.
Our platform and related applications, including our security solutions, are designed to provide rapid protection against web application vulnerabilities and cyber-attacks. However, no security product can provide absolute protection against all vulnerabilities and cyber-attacks. Our platform is subject to cyber-attacks, and the failure of our platform and related applications to adequately protect against these cyber-attacks may allow our customers to be attacked. Any adverse consequences of these attacks, and our failure to meet our customers’ expectations as they relate to such attacks, could harm our business.
Due to the nature of our applications, we are potentially exposed to greater risks of liability for product or system failures than may be inherent in other businesses. Although substantially all of our customer agreements contain provisions that limit our liability to our customers, these limitations may not be sufficient, and we cannot assure you that these limitations will be enforced or the costs of any litigation related to actual or alleged omissions or failures would not have a material adverse effect on us even if we prevail.
Our dedication to our values may negatively influence our financial results.
We have taken, and may continue to take, actions that we believe are in the best interests of our customers, our employees, and our business, even if those actions do not maximize financial results in the short term. For instance, we do not knowingly allow our platform to be used to deliver content from groups that promote violence or hate, and that conflict with our values like strong ethical principles of integrity and trustworthiness, among others. In the past, we have removed customers from our platform who we believed took positions conflicting with these values, and we may continue to do so in the future. However, this approach may not result in the benefits that we expect, and our employees or third parties may disagree with our interpretation of our values, or take issue with how we execute on our values, which may result in us becoming a target for negative publicity, increased scrutiny, lawsuits, or network attacks, in which case our business could be harmed.
Our growth depends in large part on the success of our partner relationships.
We maintain a partner ecosystem of companies who build edge applications to integrate with our platform. We are dependent on these partner relationships to amplify our reach and provide our customers with enhanced value from our platform. Our future growth will be increasingly dependent on the success of our partner relationships, including their development of useful applications for our platform. If those partnerships do not provide these benefits or if our partners are unable to serve our customers effectively, we may need to allocate resources internally to provide these services or our customers may not realize the full value of our platform, which could harm our business.
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Moreover, our partners’ business partners may not completely align with our core values and therefore may do business with companies that we otherwise would not do business with. Our association with these companies could damage our brand and reputation and potentially harm our business.
We operate in an emerging and evolving market, which may develop more slowly or differently than we expect. If our market does not grow as we expect, or if we cannot expand our services to meet the demands of this market, our revenue may decline, or fail to grow, and we may incur operating losses.
The market for edge computing is still developing. There is considerable uncertainty over the size and rate at which this market will grow, as well as whether our platform will be widely adopted. Our success will depend, to a substantial extent, on the widespread adoption of our platform as an alternative to other solutions, such as legacy CDNs, and CDNs focused on enterprise data centers, central cloud, and small businesses. Some organizations may be reluctant or unwilling to use our platform for a number of reasons, including concerns about additional costs, uncertainty regarding the reliability, and security of cloud-based offerings or lack of awareness of the benefits of our platform. Moreover, many organizations have invested substantial personnel and financial resources to integrate traditional on-premise services into their businesses, and therefore may be reluctant or unwilling to migrate to cloud-based services. Our ability to expand sales of our product into new and existing markets depends on several factors, including potential customer awareness of our platform; the timely completion of data centers in those markets; introduction and market acceptance of enhancements to our platform or new applications that we may introduce; our ability to attract, retain and effectively train sales and marketing personnel; our ability to develop relationships with partners; the effectiveness of our marketing programs; the pricing of our services; and the success of our competitors. If we are unsuccessful in developing and marketing our product into new and existing markets, or if organizations do not perceive or value the benefits of our platform, the market for our product might not continue to develop or might develop more slowly than we expect, either of which may harm our business.
The estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business. Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.
Third-party market opportunity estimates and our growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of addressable companies or end-users covered by our market opportunity estimates will purchase our products at all or generate any particular level of revenues for us. Even if the market in which we compete meets the size estimates and growth forecasted, our business could fail to grow for a variety of reasons, including reasons outside of our control, such as competition in our industry.
Usage of our platform accounts for substantially all of our revenue, and as a result, our operating results could suffer from a reduction in usage.
We expect that we will be substantially dependent on our edge cloud platform to generate revenue for the foreseeable future. As a result, our operating results could suffer due to:
•any decline in demand for our edge cloud platform;
•the failure of our edge cloud platform to achieve continued market acceptance;
•the market for edge cloud computing services not continuing to grow, or growing more slowly than we expect;
•the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our edge cloud platform;
•technological innovations or new standards that our edge cloud platform does not address;
•sensitivity to current or future prices offered by us or our competitors;
•our customers’ development of their own edge cloud platform; and
•our inability to release enhanced versions of our edge cloud platform on a timely basis.
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In addition, because substantially all of our revenue from usage is recognized during the term of the relevant contract upon usage, downturns or upturns in sales contracts are not immediately reflected in full in our operating results.
If the market for our edge cloud platform grows more slowly than anticipated or if demand for our edge cloud platform does not grow as quickly as anticipated, whether as a result of competition, pricing sensitivities, product obsolescence, technological change, unfavorable economic conditions, uncertain geopolitical environment, budgetary constraints of our customers, or other factors, our business would be harmed.
We expect fluctuations in our financial results and key metrics, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors, our stock price and the value of your investment could decline significantly.
Our operating results, including revenue, gross margin and net income, as well as our key metrics, including our LTM NRR, have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance and period-to-period comparisons of our operating results and key metrics may not be meaningful or accurately measure our business. In addition to the other risks described herein, factors that may affect our operating results include the following:
•fluctuations in demand for or pricing of our platform;
•our ability to attract new customers;
•our ability to retain our existing customers;
•fluctuations in the usage of our platform by our customers, which is directly related to the amount of revenue that we recognize from our customers;
•fluctuations in customer delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors;
•changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;
•the timing of customer payments and any difficulty in collecting accounts receivable from customers;
•timing of new functionality of our existing platform;
•our ability to control costs, including our operating expenses and transmission bandwidth pricing;
•the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions;
•the amount and timing of costs associated with recruiting, training, and integrating new employees;
•the effects of acquisitions or other strategic transactions;
•expenses in connection with acquisitions or other strategic transactions;
•our ability to successfully deploy POPs in new regions;
•general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate;
•the ability to maintain our partnerships;
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•the impact of new accounting pronouncements;
•changes in the competitive dynamics of our market, including consolidation among competitors or customers;
•significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform; and
•awareness of our brand and our reputation in our target markets.
Additionally, certain large scale events, such as major elections and sporting events, can significantly impact usage of our platform, which could cause fluctuations in our results of operations. While increased usage of our platform during these events could result in increased revenue, these seasonal and one-time events could also impact the performance of our platform during those events and lead to a sub-optimal experience for some customers. Such annual and one-time events may cause fluctuations in our results of operations as they would impact both our revenue and our operating expenses.
Any of the foregoing and other factors may cause our results of operations to vary significantly. Furthermore, if our quarterly results of operations or our guidance fall below the expectations of investors and securities analysts who follow our stock, the price of our Class A common stock could decline substantially, and our business could be harmed. We cannot assure you that our operating results or projected operating results will meet the expectations of market analysts or our investors.
Our pricing models subject us to various challenges that could make it difficult for us to derive sufficient value from our customers, and we do not have sufficient history with our pricing models to accurately predict the optimal pricing necessary to attract new customers and retain existing customers.
We generally charge our customers for their usage of our platform based on the combined total usage, as well as the features and functionality enabled. Additionally, once our product is purchased, customers can also buy a combination of our add-on products. We do not know whether our current or potential customers or the market in general will continue to accept this pricing model going forward and, if it fails to gain acceptance, our business could be harmed. We also generally purchase bandwidth from Internet service providers and server colocation space from third parties based on expected usage from our customers. Moreover, if our customers use our platform in a manner that is inconsistent with how we have purchased bandwidth, servers, and colocation space, our business could be harmed.
We have limited experience with respect to determining the optimal prices for our products and, as a result, we have in the past changed our pricing model and expect that we may need to do so in the future, including as a result of inflationary pressures. In addition, during 2023 we introduced the option for customers to purchase product packages with single price points and set limits on usage. We do not charge for overages on these single price point product packages. We do not know whether our current or potential customers will accept these packages or the impact these packages will have on our existing usage-based pricing model. As the market for our products matures, or as new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing models as we have used historically. Pricing decisions may also impact the mix of adoption among our customers and negatively impact our overall revenue. Moreover, larger organizations may demand substantial price concessions. As a result, in the future we may be required to reduce our prices or develop new pricing models, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow.
Our sales and onboarding cycles with customers can be long and unpredictable, and our sales and onboarding efforts require considerable time and expense.
The timing of our sales with our enterprise customers and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for these customers. In addition, for our enterprise customers, the lengthy sales cycle for the evaluation and implementation of our products may also cause us to experience a delay between expenses for such sales efforts and the generation of corresponding revenue. The length of our sales cycle for these customers, from initial evaluation to payment, can range from several months to well over a year and can vary substantially from customer to customer. Similarly, the onboarding and ramping process with new enterprise customers, or with existing customers that are moving additional traffic onto our platform, can take several months. As the purchase of our products can be dependent upon customer initiatives, our sales cycle can extend to even longer periods of time. Customers often view a switch to our platform as a strategic decision requiring significant investment and, as a result, frequently require considerable time to evaluate, test, and qualify our product offering prior to entering into or expanding a contract commitment. During the sales cycle, we expend
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significant time and money on sales and marketing and contract negotiation activities, which may not result in a completed sale. Additional factors that may influence the length and variability of our sales cycle include:
•the effectiveness of our sales force, particularly new salespeople and sales leadership, as we increase the size of our sales force and train our new salespeople to sell to enterprise customers;
•the discretionary nature of customers’ purchasing decisions and budget cycles;
•customers’ procurement processes, including their evaluation of competing products;
•economic conditions and other factors affecting customer budgets;
•the regulatory environment in which our customers operate;
•integration complexity for a customer deployment;
•the customer’s familiarity with edge cloud computing platforms;
•evolving customer demands;
•selling new products to enterprise customers; and
•competitive conditions.
Given these factors, it is difficult to predict whether and when a customer will switch to our platform.
Given that it can take several months for our customers to ramp up their usage of our platform, during that time, we may not be able to generate enough revenue from a particular customer or that customer may not increase their usage in a meaningful way. Moreover, because the switching costs are fairly low, our customers are able to switch from our platform to alternative services relatively easily. As a result, actual usage could be materially below our forecasts, which could adversely affect our results of operations, disappoint analysts and investors, or cause our stock price to decline.
If our platform does not achieve sufficient market acceptance, our financial results and competitive position will suffer.
To meet our customers’ rapidly evolving demands, we invest substantial resources in research and development of enhanced products to incorporate additional functionality or expand the use cases that our platform addresses. Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market is essential. If we are unable to develop products internally due to inadequate or ineffective research and development resources, we may not be able to address our customers’ needs on a timely basis or at all. In addition, if we seek to supplement our research and development capabilities or the breadth of our products through acquisitions, such acquisitions could be expensive and we may not successfully integrate acquired technologies or businesses into our business. When we develop or acquire new or enhanced products, we typically incur expenses and expend resources upfront to develop, market, promote, and sell the new offering. Therefore, when we develop or acquire and introduce new or enhanced products, they must achieve high levels of market acceptance in order to justify the amount of our investment in developing or acquiring and bringing them to market. Our new products or enhancements and changes to our existing products could fail to attain sufficient market acceptance for many reasons, including:
•failure to predict market demand accurately in terms of functionality and a failure to supply products that meet this demand in a timely fashion;
•defects, errors, or failures;
•negative publicity about our platform’s performance or effectiveness;
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•changes in the legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our platform;
•emergence of a competitor that achieves market acceptance before we do;
•delays in releasing enhancements to our platform to the market; and
•introduction or anticipated introduction of competing products by our competitors.
If our platform and any future enhancements do not achieve adequate acceptance in the market, or if products and technologies developed by others achieve greater acceptance in the market, our business could be harmed.
Beyond overall acceptance of our platform by our customers, it is important that we maintain and grow acceptance of our platform among the developers that work for our customers. We rely on developers to choose our platform over other options they may have, and to continue to use and promote our platform as they move between companies. These developers often make design decisions and influence the product and vendor processes within our customers. If we fail to gain or maintain their acceptance of our platform, our business would be harmed.
We rely on third-party hosting providers that may be difficult to replace.
We rely on third-party hosting services such as AWS, Google Cloud Platform, Microsoft (Azure), and other cloud providers that facilitate the offering of our platform. Some of these third-party hosting services offer competing products to ours and therefore may not continue to be available on commercially reasonable terms, or at all. These providers may be unwilling to do business with us if they view our platform as a threat. Any loss of the right to use any of the hosting providers could impair our ability to offer our platform and harm our business until we are able to obtain alternative hosting providers.
If we do not or cannot maintain the compatibility of our platform with third-party applications that our customers use in their businesses, our business will be harmed.
Because our customers choose to integrate our products with certain capabilities provided by third-party providers, the functionality and popularity of our platform depends, in part, on our ability to integrate our platform and applications with third-party applications. These third parties may change the features of their technologies, restrict our access to their applications, or alter the terms governing use of their applications in a manner that is adverse to our business. Such changes could functionally limit or prevent our ability to use these third-party technologies in conjunction with our platform, which would negatively affect adoption of our platform and harm our business. If we fail to integrate our platform with new third-party applications that our customers use, we may not be able to offer the functionality that our customers need, which would harm our business.
We provide service level commitments under our customer agreements. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service, or face contract termination with refunds of prepaid amounts, which could harm our business.
Most of our customer agreements contain service level commitments. If we are unable to meet the stated service level commitments, including failure to meet the uptime and delivery requirements under our customer agreements, we may be contractually obligated to provide the affected customers with service credits which could significantly affect our revenues in the periods in which the uptime and delivery failure occurs and the credits are applied. In the past, as a result of degradation of service and interruptions to our platform, we have provided service credits to certain of our affected customers with whom we had service level commitments. We could also face customer terminations with refunds of prepaid amounts, which could significantly affect both our current and future revenues. Any service level failures could harm our business.
If we fail to offer high quality support, our business may be harmed.
Our customers rely on our support team to assist them in deploying our products effectively and resolve technical and operational issues. High-quality support is important for the renewal and expansion of our agreements with existing customers. The importance of maintaining high quality support will increase as we expand our business and pursue new customers. If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our relationships with existing and new customers could suffer and our business could be harmed. Further, increased demand for customer support, without corresponding revenue, could increase costs and adversely affect our business. In addition, as we
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continue to grow our operations and expand internationally, we will need to be able to provide efficient customer support that meets our customers’ needs globally at scale and our customer support team will face additional challenges, including those associated with delivering support and documentation in multiple languages. Our failure to do so could harm our business.
Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.
There is an increasing focus from certain investors, employees, and other stakeholders concerning corporate responsibility, specifically related to environmental, social, and governance matters (“ESG”). Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our ongoing policies and actions relating to corporate responsibility are inadequate. We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies. Furthermore, if our competitors’ corporate social responsibility performance is perceived to be better than ours, potential or current investors may elect to invest with our competitors instead. In addition, in the event that we communicate certain initiatives and goals regarding environmental, social, and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors, employees and other stakeholders or our initiatives are not executed as planned, our business may be harmed.
Risks Related to Employees and Managing Our Growth
The failure to attract and retain qualified personnel could prevent us from executing our business strategy.
To execute our business strategy, we must attract and retain highly qualified personnel. Competition for executive officers, software developers, sales personnel, product managers, and other key employees in our industry is intense. In particular, we compete with many other companies for software developers with high levels of experience in designing, developing, and managing cloud-based software, as well as for skilled sales, operations, and security professionals. In addition, we believe that the success of our business and corporate culture depends on employing people with a variety of backgrounds and experiences, and the competition for such diverse personnel is significant. The market for such talented personnel is competitive. Many of the companies with which we compete for experienced personnel have greater resources than we do and can frequently offer such personnel substantially greater compensation than we can offer, including, in some cases, large equity packages and cash incentive bonuses. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, experiences significant volatility, or increases such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to recruit and retain key employees. In order to manage attrition, including as a result of recent stock price decreases and market volatility on the perceived value of our equity awards, we have issued, and may continue to issue, additional equity awards and increased cash compensation to attract and retain employees, which may impact our results of operations or be dilutive to stockholders. Moreover, the increase in the number of equity awards has reduced the number of shares available for us to grant under our equity incentive plan. We also face significant competition in hiring and attracting qualified employees in all aspects of our business, and the move by companies to offer a remote or hybrid work environment has increased the competition for such employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our ability to maintain and enhance our platform, develop and deliver new products, fix bugs, support our existing customers, attract new customers, respond to competitive pressures, and otherwise execute our business plan would be harmed.
We rely on the performance of highly skilled personnel, including our senior management and other key employees, and the loss or transition of one or more of such personnel, or of a significant number of our team members, could harm our business.
We believe that our success has depended, and continues to depend, on the efforts and talents of senior management and key employees, including Artur Bergman, our Chief Technology Officer and Todd Nightingale, our Chief Executive Officer. There have been, and from time to time, there may continue to be, changes in our management team resulting from the hiring or departure of executives and key employees, or the transition of executives within our business, which could disrupt our business. Such changes in our executive management team may be disruptive to our business. Some of our executive officers and members of our management team have been with us for a short period of time and we continue to develop key functions within various aspects of our business. We are also dependent on the continued service of our existing software engineers because of the complexity of our platform. Our senior management, including Mr. Nightingale and Mr. Bergman, and key employees are employed on an at-will basis. We cannot ensure that we will be able to retain the services of any member of our senior management or other key employees or that we would be able to timely replace members of our senior management or other key employees should any of them depart. The loss of one or more of our senior management or other key employees could harm our business.

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Our past growth may not be indicative of our future growth and we may not be able to manage our growth effectively.
We have experienced growth in various aspects of our business in prior periods. For example, for the three months ended September 30, 2024 and 2023, our revenue was $137.2 million and $127.8 million, respectively. In addition, we are expanding, and expect to continue to expand in the future, our international operations. We have also experienced growth in the number of customers, usage, and amount of data delivered across our platform. This growth has placed, and may continue to place, significant demands on our corporate culture, operational infrastructure, and management. Although our business has experienced growth in the past, we cannot provide any assurance that our business will continue to grow at the same rate, or at all. Overall growth of our business depends on a number of factors, including our ability to:
•address new and developing markets, such as large enterprise customers outside the United States;
•recruit, hire, train, and manage additional qualified engineers and product managers;
•recruit, hire, train, and manage additional sales and marketing personnel;
•maintain and enhance our corporate culture;
•expand our international operations;
•establish more mature organizational designs and structures, with more skill, technical and leadership depth with experience scaling and expanding global businesses;
•implement and improve our administrative, financial and operational systems, procedures, and controls;
•attract new customers and increase our existing customers’ usage on our platform;
•expand the functionality and use cases for the products we offer on our platform;
•provide our customers with customer support that meets their needs;
•successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our products; and
•recruit experienced leaders and strategists to facilitate successful acquisitions and integrations.
We may not successfully accomplish any of the above objectives. We expect to continue to expend substantial financial and other resources on:
•sales and marketing, including a significant expansion of our sales organization;
•our infrastructure, including POP deployments, systems architecture, management tools, scalability, availability, performance, and security, as well as disaster recovery measures;
•product development, including investments in our product development team and the development of new products and new functionality for our existing products;
•acquisitions or strategic investments;
•international expansion; and
•general administration, including legal and accounting expenses associated with being a public company.
These activities will require significant investments and allocation of valuable management and employee resources, and our growth will continue to place significant demands on our management and our operational and financial infrastructure.
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There are no guarantees we will be able to grow our business in an efficient or timely manner, or at all. If we fail to manage the growth of our business and operations effectively, the quality of our services and the efficiency of our operations could suffer, which could adversely affect our business, financial condition, and results of operations. If we are unable to return to our prior level of growth, our business will be harmed.
In addition, our past rapid growth may make it difficult to evaluate our future performance. Our ability to forecast our future results of operations is subject to a number of uncertainties. If we fail to achieve the necessary level of efficiency in our company as it grows, or if we are not able to accurately forecast future growth, our business would be negatively impacted.
If we cannot maintain our company culture as we grow, our success and our business may be harmed.
We believe our culture has been a key contributor to our success to date and that the critical nature of the products that we provide promotes a sense of greater purpose and fulfillment in our employees. Any failure to preserve our culture could negatively affect our ability to recruit and retain personnel and to effectively focus on and pursue our corporate objectives. As we grow and develop the systems and processes associated with being a public company, we may find it difficult to maintain these important aspects of our culture. In addition, while we have historically benefited from having a dispersed workforce, as we have grown and our resources have become more globally dispersed and our organizational management structures have become more complex, we have found it increasingly difficult to maintain these beneficial aspects of our corporate culture. In addition, we may seek to acquire or invest in businesses, products or technologies with differing corporate cultures that could be difficult to integrate. If we fail to maintain our company culture, our business may be harmed.
Risks Related to Our Financial Position and Need for Additional Capital
Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all, and debt or equity issued to raise additional capital may reduce the value of our Class A common stock.
We have funded our operations since inception primarily through payments received from our customers, sales of equity and debt securities, and borrowings under our credit facilities. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business, or our debt obligations. We also intend to continue to make investments to support our business and may require additional funds to do so. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our growth rate, our operating cash flow, market acceptance of our platform, the expansion of sales and marketing activities, strategic transactions, as well as overall economic conditions.
We may need to engage in equity or debt financings to secure additional funds, in particular if we are required to repay our outstanding convertible notes in cash. Additional financing may not be available on favorable terms, if at all, and any additional financing will need to be in compliance with the terms of our Credit Agreement with the lenders from time to time party thereto 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 amended, restated, amended and restated, supplemented, restructured, or otherwise modified from time to time, the “Credit Agreement”).

We originally entered into our Credit Agreement with Silicon Valley Bank in 2021. On March 10, 2023, Silicon Valley Bank was announced as closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (the “FDIC”) was appointed as a receiver. On March 26, 2023, it was announced that First-Citizens Bank & Trust Company would assume all of Silicon Valley Bank’s deposits and loans as of March 27, 2023. Following that transaction, the credit facility remains available subject to the same terms and conditions as before. However, there can be no assurances that the closure of Silicon Valley Bank or any related impacts across the financial services industry will not adversely affect our ability to access the funds available under the Credit Agreement.

If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition. Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our Class A common stock. Any debt financing we secure may have higher interest rates and could involve additional restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we were to violate such restrictive covenants, we could incur penalties, increased expenses and an acceleration of the payment terms of our outstanding debt, which could in turn harm our business. Because our decision to issue securities in future offerings will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our Class A common stock and diluting their interests.

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Seasonality may cause fluctuations in our sales and operating results.
We have experienced, and expect to continue to experience in the future, seasonality in our business, and our operating results and financial condition may be affected by such trends in the future. We generally experience seasonal fluctuations in demand for our platform. For example, we have some customers who increase their usage and requests when they need more capacity during busy periods, especially in the fourth quarter of the year, and then subsequently scale back. Our customers host certain large-scale events, such as sporting events or coverage of major elections, increasing their usage on a seasonal or one-time basis which can cause revenue to fluctuate between the periods in which these events occur and subsequent periods. Since we have built our network to handle seasonal capacity fluctuations, we may not be able to reduce our capacity in a timely manner, and as such sustain more costs. We believe that the seasonal trends that we have experienced in the past may continue for the foreseeable future, particularly as we expand our sales to larger enterprises. To the extent we experience this seasonality, it may cause fluctuations in our operating results and financial metrics, and make forecasting our future operating results and financial metrics difficult. Additionally, we do not have sufficient experience in selling certain of our products to determine if demand for these products is, or will be, subject to material seasonality.
Our current operations are international in scope and we plan on further geographic expansion, creating a variety of operational challenges.
A component of our growth strategy involves the further expansion of our operations and customer base internationally. For the three and nine months ended September 30, 2024, the percentage of revenue generated from customers outside the United States was 24% and 25% of our total revenue, respectively. We continue to adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect. As of September 30, 2024, approximately 20% of our full-time employees were located outside of the United States. We expect that our international activities will grow over the foreseeable future as we continue to pursue opportunities in existing and new international markets, which will require significant management attention and financial resources. In connection with such expansion, we may face difficulties including costs associated with varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycles, difficulties in collecting accounts receivable in some countries, tariffs and trade barriers, a variety of regulatory or contractual limitations on our ability to operate, adverse tax events, reduced protection of intellectual property rights in some countries, and a geographically and culturally diverse workforce and customer base. Failure to overcome any of these difficulties could harm our business. Our current and future international business and operations involve a variety of risks, including:
•changes in a specific country’s or region’s political or economic conditions;
•longer payment cycles;
•greater difficulty collecting accounts receivable;
•potential or unexpected changes in trade relations, regulations, or laws;
•increased regulatory inquiry or oversight;
•more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe;
•differing labor regulations, especially in Europe and Japan, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations, and where potential labor organizing and works council negotiations in certain of those countries could contribute to increased operational costs or otherwise disrupt our business;
•challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs;
•challenges to our corporate culture resulting from a dispersed workforce;
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•difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems;
•increased travel, real estate, infrastructure, and legal compliance costs associated with international operations;
•currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future;
•challenges related to providing support and developing products in foreign languages;
•limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
•laws and business practices favoring local competitors or general market preferences for local vendors;
•potential tariffs and trade barriers;
•limited or insufficient intellectual property protection or difficulties enforcing our intellectual property rights;
•political instability, economic sanctions, terrorist activities, or international conflicts, including ongoing conflicts between Russia and Ukraine and Hamas and Israel, which may impact the operations of our business or the businesses of our customers;
•inflationary pressures, such as those the global market is currently experiencing, labor shortages and supply chain disruptions, which may increase costs for certain services;
•exposure to liabilities under anti-corruption and anti-money laundering laws, and similar laws and regulations in other jurisdictions; and
•adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
If any of the above risks materialize, it could harm our business and prospects. In addition, our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to further expand our international operations and are unable to do so successfully and in a timely manner, our business may be harmed.
If our estimates or judgments relating to our critical accounting estimates prove to be incorrect or impaired, our results of operations could be adversely affected.*
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include, but are not limited to, those related to revenue, accounts receivable and related reserves, fair value of assets acquired and liabilities assumed for business combinations, useful lives and realizability of long-lived assets including our goodwill and intangible assets, income tax reserves, and accounting for stock-based compensation. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.

For example, as a result of a sustained decrease in our stock price and market capitalization, we performed an interim qualitative impairment assessment of our goodwill as of September 30, 2024 and concluded it is not more likely than not that the fair value of our one single reporting unit is less than its carrying amount. Therefore, we determined that goodwill was not impaired and no impairment charge was recorded. Further declines in our market capitalization increase the risk that we may be
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required to perform a quantitative impairment analysis in subsequent periods, which could result in an impairment of up to the entire balance of our goodwill and other intangible assets. Any such impairment charge or write-off may have an adverse effect on our business, financial condition, and results of operation.

Current and future indebtedness could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions.
Our Credit Agreement contains, and any future indebtedness would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to incur additional indebtedness, grant liens, pay dividends and make distributions, transfer property, make investments, and take other actions that may otherwise be in our best interests. In addition, our Credit Agreement contains a financial covenant that requires us to maintain a consolidated adjusted quick ratio of at least 1:25 to 1:00 tested on a quarterly basis as well as a springing revenue growth covenant for certain periods if our consolidated adjusted quick ratio falls below 1:75 to 1:00 on the last day of any fiscal quarter. Our ability to meet these financial covenants can be affected by events beyond our control, and we may not be able to continue to meet those covenants. In addition, a breach of a covenant under our Credit Agreement or any other current or future credit facility of ours may result in a cross-default under any such separate credit facility. If we seek to enter into one or more additional credit facilities in the future, we may not be able to obtain debt financing on terms that are favorable to us, if at all. Holders of our existing debt have, and holders of any future debt we may incur would have, rights senior to holders of common stock to make claims on our assets. In addition, the terms of our existing debt do, and the terms of any future debt could, restrict our operations, including our ability to pay dividends on our Class A common stock. If we are unable to obtain adequate financing or financing on terms that are satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.
If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our Class A common stock may be seriously harmed.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in those internal controls. For example, we are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act 9 (“Section 404”). Our independent registered public accounting firm also needs to attest to the effectiveness of our internal control over financial reporting. We designed, implemented, and tested internal control over financial reporting required to comply with this obligation. That process is time-consuming, costly, and complicated.
We previously reported and have subsequently remediated material weaknesses in our internal control over financial reporting. We continue to evaluate and take actions to improve our internal control over financial reporting. However, we cannot assure you that the measures we have taken to date will be sufficient to avoid the identification of material weaknesses in the future.
If we fail to identify future material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion or expresses a qualified or adverse opinion about the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be negatively affected. Moreover, any failure to identify new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements that may continue undetected and cause us to fail to meet our reporting and financial obligations or incur significant additional costs to remediate new material weaknesses, each of which could harm our ability to raise capital on favorable terms in the future or otherwise have a negative impact on our financial condition. In addition, we could become subject to investigations by the New York Stock Exchange (the “NYSE”), the SEC, and other regulatory authorities, which could require additional financial and management resources.
We may not be able to successfully manage the growth of our business if we are unable to improve our internal systems, processes and controls.
We need to continue to improve our internal systems, processes, and controls to effectively manage our operations and growth. We may not be able to successfully implement and scale improvements to our systems and processes in a timely or efficient manner or in a manner that does not negatively affect our operating results. For example, we may not be able to effectively monitor certain extraordinary contract requirements or provisions that are individually negotiated by our sales force as the number of transactions continues to grow. Moreover, as we continue to improve our pricing structure, we will need to
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implement corresponding improvements to our systems around payment of sales commissions. In addition, our systems and processes may not prevent or detect all errors, omissions, or fraud. We may experience difficulties in managing improvements to our systems, processes, and controls or in connection with third-party software, which could impair our ability to manage our business, pay sales commissions, or offer our platform to our customers in a timely manner, causing us to lose customers or employees, limit our growth, limit us to smaller deployments of our products, or increase our technical support costs.
Our financial results may be adversely affected by changes in accounting principles applicable to us.
GAAP are subject to interpretation by the Financial Accounting Standards Board, the SEC and other various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results for periods prior to and subsequent to such change, and could affect the reporting of transactions completed before the announcement of a change.
Market practices with respect to these new disclosures are continuously evolving, and securities analysts and investors may not fully understand the implications of our disclosures or how or why they may differ from similar disclosures by other companies. Any additional new accounting standards could have a significant effect on our reported results. If our reported results fall below analyst or investor expectations, our stock price could decline.
Risks Related to Laws, Regulations, and the Global Economy
Failure to comply with United States and foreign governmental laws and regulations could harm our business.*
Our business is subject to regulation by various federal, state, local, and foreign governments. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws, we could face direct liability or delivery of content by our platform may be blocked by certain governments. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. For example, in June 2020, China passed a national security law for Hong Kong that imposes criminal liability for the violation of content regulations, it is currently not clear how broadly such legislation will be interpreted or applied in relation to our customers or our business, and additional developments in our understanding of the application of this law could cause us to remove our POP from Hong Kong. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, injunctions, or other collateral consequences. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business could be harmed. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business.
If the United States government prohibits our current or potential customers from doing business with us, whether through policy, regulations or laws, we could face direct liability or our delivery of content by our platform may be blocked. For example, in the current environment of economic trade negotiations and tensions between the Chinese and the United States governments, the United States government has expressed concerns about the ability of companies operating in China to do business in the United States or with United States companies. As a result, we could lose the ability to contract with current or potential customers and usage of our platform may decrease by affected customers, which could harm our business and reputation. Even in the absence of new restrictions or trade actions imposed by the United States or other governments, including potential new regulations resulting from the recent presidential and congressional elections in the United States, our customers that operate in China, target China as a market, or that have strong business ties to China, may take actions to reduce dependence on our platform, which could harm our business. One of our largest customers during the three and nine months ended September 30, 2024 operates in and has strong business ties to China.
We are subject, or may become subject, to stringent and evolving U.S. and foreign laws, governmental regulations and rules, and contractual obligations, industry standards, policies and other obligations related to privacy, infrastructure, and data security. Our actual or perceived failure to comply with such obligations could harm our business, by resulting in regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, adverse publicity and reputational damage, loss of revenue or profits, loss of customers or sales and other adverse consequences that may negatively affect the value of our business and decrease the price of our Class A common stock. Compliance with such obligations could also result in costs and liabilities to us or inhibit sales of our products.
We receive, store, process, collect, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share personal information and other proprietary, confidential, and sensitive data, including intellectual property, trade secrets, encryption keys, and including our data and data of our customers (including their end-users). Our handling of data is subject to a variety of obligations related to privacy and data security, contractual obligations, internal and external privacy
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policies, guidance, industry standards, and other obligations that govern the processing of personal information. Additionally, we are or may become subject to other laws and regulations around the world with respect to the Internet related to, among other things, content liability, security requirements, critical infrastructure designations, Internet resiliency, law enforcement access to information, net neutrality, data localization requirements, and restrictions on social media or other content.
In the United States, federal, state, and local governments have enacted numerous privacy and data security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the FTC Act), and other similar laws (e.g., wiretapping laws). Domestically, states have also begun to introduce more comprehensive privacy and data security legislation, including data breach notification laws, personal information privacy laws, and consumer protection laws.
In the past few years, numerous U.S. states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy and data security laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal information. As applicable, such rights may include the right to access, correct, or delete certain personal information, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal information, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018 as amended by the California Privacy Rights Act of 2020 (“CPRA”), collectively ("CCPA") applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights related to their personal information. The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation), as well as a private right of action for individuals affected by certain data breaches to recover significant statutory damages.
Similar laws have been proposed in several other states and at the federal and local levels, and we expect more states to pass similar laws in the future, which could increase our compliance costs and adversely affect our business.
Our customers may deploy AI models or technologies using our platform, and our employees and personnel may use AI to perform their work. Governments have passed and are likely to pass additional laws regulating AI. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use AI, it could make our business less efficient and result in competitive disadvantages. Due to inaccuracies or flaws in the inputs, outputs, or logic of the AI, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.
Several jurisdictions around the globe, including Europe and certain U.S. states, have proposed, enacted, or are considering laws governing the development, deployment and use of AI, such as the European Union’s (the “EU”) AI Act. We expect other jurisdictions will adopt similar laws. These obligations may make it harder for us to conduct our business using AI, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI, or prevent or limit our use of AI. If we cannot use or are restricted in using AI technologies, or deployment of AI by our customers using our platform is affected, our business may be less efficient, or we may be at a competitive disadvantage.

Outside of the United States, an increasing number of foreign laws and regulations apply to privacy and data security. For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), (collectively “GDPR”) Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais or “LGPD”) (Law No. 13,709/2018), Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) and Canada’s Anti-Spam Legislation (“CASL”), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing the personal information of individuals. For example, under the GDPR, government regulators may impose restrictions or injunctions on data processing, and fines of up to 20 million euros (£17.5 million) or 4% of annual global revenue, whichever is greater. The GDPR also provides for private litigation related to the processing of personal information, which can be brought by classes of data subjects or consumer protection organizations authorized by law to represent the interests of such classes. European legislative proposals and existing laws and regulations also apply to cookies and similar tracking technologies, electronic communications, and marketing. In the EU and the United Kingdom (the “UK”), regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising ecosystem. It is anticipated that the ePrivacy Regulation and national implementing laws will replace the current national laws that implement the ePrivacy Directive that governs electronic communications. Compliance with these laws may require us to make significant operational changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, and subject us to liabilities. Furthermore, there is a new regulation in the EU related to AI that will impose onerous obligations related to the use of AI-related systems and may require us to change our business practices. We
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may also become subject to new laws in the EU that regulate cybersecurity and non-personal information, such as the European Data Act. Depending on how these laws are interpreted, we may have to adapt our business practices and products to comply with such obligations.
Certain jurisdictions have enacted data localization laws and cross-border personal information transfer laws, which could make it more difficult to transfer information across jurisdictions. In particular, the European Economic Area (“EEA”) and the UK have significantly restricted the transfer of personal information to the United States and other countries whose privacy and data security laws are generally believed to be inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border personal information transfer laws. Although there are currently various mechanisms that may be used to lawfully transfer personal information to the United States, such as the standard contractual clauses for transfers from the EEA and UK, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal information to the United States or elsewhere. Certain countries outside Europe (e.g., Russia, China, Brazil) have also passed or are considering laws requiring local data residency or otherwise impeding the transfer of personal information across borders, any of which could increase the cost and complexity of doing business.

If there is no lawful manner for us to transfer personal information from the EEA, the UK or other jurisdictions to the United States or elsewhere, or if the requirements for a legally-compliant transfer are too onerous, we may face significant adverse consequences, such as the interruption or degradation of our operations, increased exposure to regulatory actions, substantial fines, injunctions against processing or transferring personal information, determinations by customers not to use our services, limited ability to collaborate with parties that are subject to cross-border data transfer or localization laws, and the need to increase or relocate our personal information processing capabilities and infrastructure in foreign jurisdictions at significant expense. Additionally, companies that transfer personal information out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the EU GDPR’s cross-border data transfer limitations.

In addition to government regulation, privacy advocates, and industry groups may propose new and different self-regulatory standards that may apply to us. We may publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding privacy and data security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences. We may also be bound by contractual obligations related to privacy and data security, and our efforts to comply with such obligations may not be successful. For example, certain privacy and data security laws, such as the EU GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers. Additionally, in limited circumstances, under various privacy and data security laws and other obligations, we may be required to obtain certain consents to process personal information. Our inability or failure to do so could result in adverse consequences. Laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted, or the content provided by users. Moreover, our global platform outage in June 2021 increased our public profile and resulted in more frequent interest in our company by regulators. Any additional outages may draw additional scrutiny or focused legislation from regulators.

In addition, the United States or foreign jurisdictions may establish new laws or regulations regarding the Internet or online services. These new laws and regulations may affect our products and infrastructure, which could cause us to incur substantial costs to comply, expose us to regulatory scrutiny, criminal or civil liability, require us to fundamentally change our products or operations, or otherwise have an adverse effect on our business.
Obligations relating to privacy and data security (and customers’ data privacy expectations) are evolving, increasingly stringent, creating uncertainty, and may result in increasing scrutiny. Such obligations may be subject to different applications and interpretations, and which may be inconsistent and conflicting among different jurisdictions. Preparing for and complying with these obligations require us to devote significant resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal information on our behalf. Because the interpretation and application of privacy and data security related obligations are uncertain, they may be interpreted or applied in a manner that is inconsistent with our existing data management practices or the functionality of our platform. We could be required to fundamentally change our business activities and practices or modify our software, which could have an adverse effect on our business. Future restrictions on the collection, use, sharing, or disclosure of data or additional requirements for express or implied consent of our customers, partners, or end-users for the use and disclosure of such information could require us to incur additional costs or modify our platform, possibly in a material manner, and could limit our ability to develop new functionality.

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We may at times fail (or be perceived to have failed) in our efforts to comply with our privacy and data security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations.

Any failure or perceived failure by us or third parties upon whom we rely to comply with obligations, relating to privacy and data security may result in significant consequences including but not limited to governmental investigations and enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar), litigation (including class-action claims), additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy or not use personal information.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations; inability to process personal information or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
Activities of our customers or the content of their websites and other Internet properties may violate applicable laws and/or our terms of service and could subject us to lawsuits, regulatory enforcement actions, and/or liability in various jurisdictions.
Through our network, we provide a wide variety of products that enable our customers and our customers’ users to exchange information, conduct business, and engage in various online activities both domestically and internationally. Our customers and our customers’ users may use our network and products in violation of applicable law or in violation of our terms of service or the customer’s own policies. The existing laws relating to the liability of providers of online products and services for activities of their users are highly unsettled and in flux both within the United States and internationally. In the future we may be subject to lawsuits and/or liability arising from the conduct of our customers and our customers’ users. Additionally, the conduct of our customers and our customers’ users may subject us to regulatory enforcement actions and/or liability. There can be no assurance that we will not face litigation in the future or that we will prevail in any litigation we may face. An adverse decision in one or more of these lawsuits could materially and adversely affect our business, results of operations, and financial condition.

Several U.S. federal statutes may apply to us with respect to various activities of our customers, including the Digital Millennium Copyright Act (“DMCA”), which provides recourse for owners of copyrighted material who believe their rights under U.S. copyright law have been infringed on the Internet; and section 230, enacted in the Communications Decency Act (“CDA”), which addresses blocking and screening of content on the Internet. Although these and other similar legal provisions provide limited protections from liability for service providers like us, those protections may not be interpreted in a way that applies to us, may be amended or removed in the future, or may not provide us with complete protection from liability claims. If we are found not to be protected by the safe harbor provisions of the DMCA, CDA or other similar laws, or if we are deemed subject to laws in other countries that may not have the same protections or that may impose more onerous obligations on us, we may owe substantial damages and our brand, reputation, and financial results may be harmed.

Policies and laws in this area remain highly dynamic, and we may face additional theories of intermediary liability in various jurisdictions. For example, policymakers in the United States have called for a re-examination of CDA section 230 and copyright law, the UK has passed the Online Safety Act 2023, and the EU has implemented the Digital Services Act and Digital Markets Act to impose additional legal requirements on certain service providers. The DSA sets out a framework of layered responsibilities targeted at different types of services, including requirements for service providers to act on orders against illegal content and to publish reports on moderation of content. Member States can also issue rules on penalties for violating the DSA, with fines of up to 6% of annual global revenue. Complying with these obligations could cause us to change our products, policies, and procedures. In addition, in 2019, the EU approved a Copyright Directive that will impose additional obligations on service providers and failure to comply could give rise to significant liability. Other laws and pending legislation at the EU level (terrorist content, child sexual abuse materials) and in the UK (online harms), Australia (online harms), and India (Digital India Act), as well as other new laws like them, may also expose Internet companies like us to significant liability. We may incur additional costs to comply with these new laws, which may have an adverse effect on our business, results of operations, and financial condition.

We could be subject to claims for potential damages based on a significant number of online occurrences under statutory or other damage theories. Such claims may result in liability that exceeds our ability to pay or our insurance coverage. Even if potential claims against us are ultimately unsuccessful, defending against such claims could increase our legal expenses and divert management’s attention from the operation of our business, which could materially and adversely impact our business and results of operations.

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Our sales to highly regulated organizations and government entities are subject to a number of challenges and risks.
We sell to customers in highly regulated industries such as financial services, insurance, and healthcare, as well as to various governmental agency customers, including state and local agency customers, and foreign governmental agency customers. Sales to such entities are subject to a number of challenges and risks. Selling to such entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Government contracting requirements may change and in doing so restrict our ability to sell into the government sector until we comply with the revised requirements. Government demand and payment for our offerings are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings.
Further, highly regulated and governmental entities may demand shorter contract terms or other contractual provisions that differ from our standard arrangements, including terms that can lead those customers to obtain broader rights in our offerings than would be standard. Such entities may have statutory, contractual, or other legal rights to terminate contracts with us or our partners due to a default or for other reasons, and any such termination may harm our business. In addition, these governmental agencies may be required to publish the rates we negotiate with them, which could harm our negotiating leverage with other potential customers and in turn harm our business.
The success of our business depends on customers’ continued and unimpeded access to our platform on the Internet.*
Our customers must have Internet access in order to use our platform. Some Internet providers may take measures that affect their customers’ ability to use our platform, such as degrading the quality of the content we transmit over their lines, giving that content lower priority, giving other content higher priority than ours, blocking our content entirely, or attempting to charge their customers more for using our platform.
In January 2018, the Federal Communications Commission (the “FCC”), repealed the “network neutrality” rules adopted during the Obama Administration, which barred Internet service providers from blocking or slowing down access to online content, protecting services like ours from such interference. The 2018 decision was largely affirmed by the United States Court of Appeals for the District of Columbia Circuit, subject to a remand to consider several issues raised by parties that supported network neutrality, and in November 2020 the FCC affirmed its decision to repeal the rules. On October 19, 2023, the FCC adopted a notice of proposed rulemaking that would reinstate the network neutrality rules, and asked for comment on that proposal and on potential changes to those rules. On April 25, 2024, the FCC voted to restore the network neutrality rules which bring back a national standard for broadband reliability, security, and consumer protection. On August 1, 2024, the United States Court of Appeals for the Sixth Circuit granted a stay of the network neutrality rules. We cannot predict the impact of such rules or the outcome of any legal challenges to such rules on our operations or business. A number of states have adopted or are adopting or considering legislation or executive actions that would regulate the conduct of broadband providers. California’s state-specific network neutrality law has taken effect, as has a similar law in Vermont, but a challenge to the Vermont law remains pending and has been suspended until an appeal in another case addressing state powers to adopt internet regulation is resolved. In addition, the status of state regimes may be affected by the FCC’s action in its new network neutrality proceeding. We cannot predict whether any FCC order or other state initiatives will be enforced, modified, overturned, or vacated by legal action of the court, federal legislation, or the FCC.
To the extent network operators attempt to interfere with our platform, absent network neutrality rules, attempt to interfere with our services, extract fees from us to deliver our platform, or otherwise engage in discriminatory practices, our business could be adversely impacted. Within such a regulatory environment, we could experience discriminatory or anti-competitive practices that could impede our domestic and international growth, cause us to incur additional expense, or otherwise harm our business. At the same time, re-adoption of network neutrality rules could affect the services used by us and our customers by restricting the offerings made by Internet service providers or reducing their incentives to invest in their networks. Such actions could limit or reduce the quality of Internet access services and have an adverse impact on the quality of the services we provide to our customers.
We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.
We are subject to the United States Foreign Corrupt Practices Act, the United States domestic bribery statute contained in 18 U.S.C. § 201, the United States Travel Act, the U.K. Bribery Act, and other anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies and their employees and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments, or benefits to recipients in the public or private
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sector. As we increase our international sales and business and sales to the public sector, we may engage with business partners and third-party intermediaries to market our platform and to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.
While we have policies and procedures to address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions in violation of our policies and applicable laws, for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase.
Detecting, investigating, and resolving actual or alleged violations can require a significant diversion of time, resources, and attention from senior management. In addition, noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution or other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed or if we do not prevail in any possible civil or criminal litigation, our business could be harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business.
Changes in our effective tax rate or tax liability may harm our business.
Our effective tax rate could be adversely impacted by several factors, including:
•Changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;
•Changes in tax laws, tax treaties, and regulations or the interpretation of them;
•Changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;
•The outcome of current and future tax audits, examinations, or administrative appeals; and
•Limitations or adverse findings regarding our ability to do business in some jurisdictions.
Should our effective tax rate rise, our business could be harmed.
We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our clients would have to pay for our offering and harm our business.
An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Additionally, the Supreme Court of the United States ruled in South Dakota v. Wayfair, Inc. et al (“Wayfair”) that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. A successful assertion by one or more jurisdictions requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could harm our business.
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Adverse tax laws or regulations could be enacted or existing laws could be applied to us, which could adversely affect our business and financial condition.
We operate, and are subject to taxes, in the United States and numerous other jurisdictions throughout the world. The U.S. federal, state, local, or non-U.S. international tax laws on income, sales, use, indirect, or other tax laws, statutes, rules, regulations, or ordinances on multinational corporations to which we are subject are or under which we operate are unsettled in certain respects and may be subject to significant change. For example, many countries in Europe, as well as a number of other countries and organizations, including the Organization for Economic Cooperation and Development and the European Commission, have recently proposed, recommended, or (in the case of countries) enacted changes to existing tax laws or new tax laws that could significantly increase our tax obligations in the countries where we do business or require us to change the manner in which we operate our business. These proposals, recommendations and enactments include changes to the existing framework in respect of income taxes, as well as new types of non-income taxes (such as taxes based on a percentage of revenue or taxes applicable to digital services), which could apply to our business. These contemplated tax initiatives, if finalized and adopted by countries, may ultimately impact our effective tax rate and could adversely affect our sales activity resulting in a negative impact on our operating results and cash flows.
In addition, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, modified, or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, fines or penalties, and interest for past amounts. The additional tax obligations could relate to our taxes or obligations to report or withhold on customer taxes. We could take steps to collect customer related taxes, but if we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, thereby adversely impacting our operating results and cash flows. Further, if our customers must pay additional fines or penalties, it could adversely affect demand for our services.
Legislation enacted in 2017 informally titled the “Tax Act” significantly revised the Internal Revenue Code of 1986, as amended (the “Code”). In 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted, which includes provisions that impact the U.S. federal income taxation of corporations, including imposing a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases that is imposed on the corporation repurchasing such stock. Future legislation or regulatory guidance, including under the Tax Act or the IRA, or other executive or Congressional actions in the United States may occur, including as a result of the recent presidential and congressional elections in the United States, and could ultimately increase or lessen the impact of such taxes on our business and financial condition. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our Class A common stock.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
Our net operating loss (“NOL”) carryforwards could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under United States tax law. For U.S. federal income tax purposes, our NOLs generated in tax years beginning before January 1, 2018 are permitted to be carried forward for 20 years. Our U.S. federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but our use of such U.S. federal NOLs generally is limited to 80% of such year’s taxable income, computed without regard to the NOL deduction and certain other deductions. It is uncertain if, and to what extent, various states will conform to these limitations on the use of U.S. federal NOLs.
In addition, under Section 382 of the Code, a corporation that undergoes an “ownership change” may be subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. A detailed analysis was performed through December 31, 2021 for us to determine whether an ownership change under Section 382 of the Code has occurred, and ownership changes were identified in 2013 and 2020. As a result of this analysis, we concluded that there is no longer any limitation on our utilization of such NOLs. A detailed analysis was performed for the period March 1, 2014 to October 1, 2020 for Signal Sciences to determine whether an ownership change under Section 382 of the Code has occurred and an ownership change was identified in 2020. As a result of this analysis, we concluded that there is no longer any limitation on our utilization of the NOLs of Signal Sciences. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which shifts are outside our control. Furthermore, our ability to utilize NOLs of companies that we have acquired or may acquire in the future may be subject to limitations. For these reasons, we may not be able to utilize a material portion of the NOLs, even if we were to achieve profitability.
Our international operations may subject us to potential adverse tax consequences.
We are expanding our international operations and staff to better support our growth into international markets. Our corporate structure and associated transfer pricing policies contemplate future growth into the international markets, and
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consider the functions, risks, and assets of the various entities involved in the intercompany transactions. The amount of taxes we pay in different jurisdictions may depend on: the application of the tax laws of the various jurisdictions, including the United States, to our international business activities; changes in tax rates; new or revised tax laws or interpretations of existing tax laws and policies; and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency.
We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate such controls.
Our products are subject to United States export controls, including the Export Administration Regulations administered by the United States Commerce Department, and economic sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department (“OFAC”). We incorporate encryption technology into certain of our products. These encryption products and the underlying technology may be exported outside of the United States only with the required export authorizations. Other countries also regulate the import and export of certain encryption products and technology through import and export licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement our products in those countries. Additionally, export restrictions recently imposed on Russia and Belarus in connection with the military conflict involving Ukraine specifically restrict the export of encryption software to these locations.
Furthermore, our activities are subject to United States economic sanctions laws and regulations that generally prohibit the direct or indirect exportation or provision of products and services to countries, governments, and individuals and entities targeted by United States embargoes or sanctions, except to the extent authorized by OFAC or exempt from sanctions. For example, following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions and severe export control restrictions against Russia and Belarus, and the United States and other countries could impose wider sanctions and export restrictions and take other actions should the conflict further escalate. Obtaining the necessary export license or other authorization for a particular sale may not always be possible, and, even if the export license is ultimately granted, the process may be time-consuming and may result in the delay or loss of sales opportunities. Violations of United States sanctions or export control laws can result in significant fines or penalties, and possible incarceration for responsible employees and managers could be imposed for criminal violations of these laws.
Changes in our products or future changes in export and import regulations may create delays in the introduction of our products in international markets, prevent our customers with international operations from deploying our products globally, or, in some cases, prevent the export or import of our products to certain countries, governments, or persons altogether. From time to time, various governmental agencies have proposed additional regulation of encryption products and technology, including the escrow and government recovery of private encryption keys. Any change in export or import regulations, economic sanctions or related legislation, increased export and import controls, or change in the countries, governments, persons, or technologies targeted by such regulations could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations. Any decreased use of our products or limitation on our ability to export or sell our products would harm our business.
We are exposed to fluctuations in currency exchange rates.
Our sales contracts are primarily denominated in U.S. dollars, and therefore a majority of our revenue is not subject to foreign currency revaluation. However, a strengthening of the U.S. dollar could increase the real cost of our platform to our customers outside of the United States, which could cause an increase in requests to renegotiate contracts and adversely affect our operating results. Foreign currency exchange rates have recently been and could continue to be subject to increased volatility. In addition, our international sales in the future could become foreign currency denominated sales, increasing our foreign currency risk. In addition, an increasing portion of our operating expenses is incurred outside the United States. These operating expenses are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. As these expenses become more material and if there are significant fluctuations in foreign currency exchange rates, this could result in significant fluctuations in our operating expenses and results of operations, which could harm our business.
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Unfavorable conditions in our industry or the global economy, rising inflation or reductions in information technology spending could harm our business.
Global economic conditions have impacted, and will likely continue to impact, businesses around the world, including ours. Inflation and other macroeconomic pressures in the U.S. and the global economy such as rising interest rates, banking instability and recession fears are creating a complex and challenging environment for us and our customers. Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers. Current or future economic uncertainties or downturns could adversely affect our business and results of operations. The U.S. capital markets experienced and continue to experience extreme volatility. While our ability to do business has not been materially affected, and the global restrictive measures that have been taken in response to such events, and could be taken in the future, have created significant global economic uncertainty that could prolong and escalate tensions and expand the geopolitical conflict, which could have a lasting impact on regional and global economies, any of which could harm our business and operating results. Further, due to political uncertainty and international military actions, we and the third parties upon which we rely may be vulnerable to a heightened risk of security breaches, computer malware, social-engineering attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, and other cyber-attacks, including attacks that could materially disrupt our systems and operations, supply chain, and ability to do business. These attacks are expected to continue to occur in the future. Furthermore, inflation rates in the U.S. in the past few years have increased to levels not seen in decades, prompting the Federal Reserve to increase interest rates. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, currency and interest rate fluctuations, political turmoil, natural catastrophes, warfare, public health issues, and terrorist attacks on the United States, Europe, the Asia Pacific region, or elsewhere, could cause a downturn or recession and a decrease in business investments, including spending on information technology, which would harm our business. To the extent that our platform and our products are perceived by customers and potential customers as too costly, or difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in general information technology spending. Also, our competitors, many of whom are larger and have greater financial resources than we do, may respond to market conditions by lowering prices and attempting to lure away our customers. In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on our products. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry.
Risks Related to Intellectual Property
We could incur substantial costs in protecting or defending our proprietary rights, and any failure to adequately protect our rights could impair our competitive position and we may lose valuable assets, experience reduced revenue, and incur costly litigation to protect our rights.
Our success is dependent, in part, upon protecting our proprietary technology. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret laws, and contractual provisions in an effort to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. While we have issued patents in the United States and other countries and have additional pending patent applications, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. Any of our patents, trademarks, or other intellectual property rights may be challenged or circumvented by others or invalidated through administrative process or litigation. There can be no guarantee that others will not independently develop similar products, duplicate any of our products, or design around our patents. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer, and disclosure of our products may be unenforceable under the laws of jurisdictions outside the United States. To the extent we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information may increase.
We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to and distribution of our products and proprietary information. Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our platform.
In order to monitor and protect our intellectual property rights, we may be required to spend significant resources. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming, and distracting to management
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and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our platform, impair the functionality of our platform, delay introductions of new products, result in our substituting inferior or more costly technologies into our products, or injure our reputation. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Moreover, policing unauthorized use of our technologies, trade secrets, and intellectual property may be difficult, expensive, and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. If we fail to meaningfully protect our intellectual property and proprietary rights, our business may be harmed.
We may in the future be subject to legal proceedings and litigation relating to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business. Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others.
Our industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets, and other intellectual property rights. From time to time, we may be required to defend against litigation claims by other companies based on allegations of infringement or other violations of their intellectual property rights. Many of these companies have the capability to dedicate substantially greater resources than us to enforce their intellectual property rights and to defend claims that may be brought against them. Therefore, we may not be able to withstand any third-party claims or rights against their use. In addition, we may be required to defend against litigation claims by patent holding companies or other adverse patent owners that have no relevant product revenue. If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop selling products impacted by the claim or injunction or cease business activities covered by such intellectual property, and may be unable to compete effectively. Any inability to license third-party technology in the future would have an adverse effect on our business and operating results, and would adversely affect our ability to compete. We may also be contractually obligated to indemnify our customers in the event of infringement of a third party’s intellectual property rights. We receive demands for such indemnification from time to time and expect to continue to do so. Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, and damage our reputation and brand.
Lawsuits are time-consuming and expensive to resolve and they divert management’s time and attention. Although we carry insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed. We cannot predict the outcome of lawsuits, and the results of any such actions may harm our business.
Elements of our platform and our products use open source software, which may restrict the functionality of our platform and our products, or require that we release the source code of certain products subject to those licenses.
Our platform incorporates software licensed under open source licenses. Such open source licenses typically require that source code subject to the license be made available to the public and that any modifications or derivative works to open source software continue to be licensed under open source licenses. Few courts have interpreted open source licenses, and the manner in which these licenses may be interpreted and enforced is therefore subject to some uncertainty. We rely on multiple software programmers to design our proprietary technologies, and we do not exercise complete control over the development efforts of our programmers and we cannot be certain that our programmers have not incorporated open source software into our proprietary products and technologies or that they will not do so in the future. In the event that portions of our proprietary technology are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our platform and technologies and materially and adversely affect our ability to sustain and grow our business.
Provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, data protection, and other losses.
Our agreements with customers and other third parties generally include provisions under which we are liable or agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, data protection, damages caused by us to property or persons, or other liabilities relating to or arising from our platform, services, or other contractual obligations. Some of these agreements provide for uncapped liability for which we would be responsible, and some
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provisions survive termination or expiration of the applicable agreement. Large liability payments could harm our business, results of operations, and financial condition. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them, and in case of an intellectual property infringement indemnification claim, we may be required to cease use of certain functions of our platform as a result of any such claims. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business. Even when we have contractual protections against such customer claims, we may choose to honor a customer’s request for indemnification or otherwise seek to maintain customer satisfaction by issuing customer credits, assisting our customer in defending against claims, or in other ways.
Risks Related to Ownership of Our Class A Common Stock
Our stock price may be volatile, and the value of our Class A common stock may decline.
Historically, our stock price has been volatile. During the year ended December 31, 2023, our stock traded as high as $24.31 per share and as low as $7.97 per share, and from January 1, 2024 to October 31, 2024, our stock price has ranged from $25.87 per share to $5.52 per share. The market price of our Class A common stock may continue to be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control or are related in complex ways, including:
•actual or anticipated fluctuations in our financial condition and operating results;
•decreased usage by one or more of our customers;
•variance in our financial performance from expectations of securities analysts or investors;
•changes in the pricing we offer our customers;
•changes in our projected operating and financial results;
•changes in laws or regulations applicable to our platform or related products;
•announcements by us or our competitors of significant business developments, acquisitions, or new offerings;
•publicity associated with network outages and problems;
•our involvement in litigation;
•changes in senior management or key personnel;
•the trading volume of our Class A common stock;
•potential equity or debt financings;
•changes in the anticipated future size and growth rate of our market; and
•general political, social, economic, regulatory, and market conditions, in both domestic and our foreign markets, including the effects of global events like the war in Ukraine and the more recent hostilities in Israel on the global economy, labor shortages, supply chain disruptions, inflation, increased interest rates, banking instability and slow or negative growth of our markets.
Broad market and industry fluctuations, as well as general economic, political, social, regulatory, and market conditions, may impact the market price of our Class A common stock. For example, in connection with the COVID-19 pandemic, we initially experienced an increase in the usage of our platform, and as a result, the trading price of our Class A common stock significantly increased. Over the past few years, our stock price has declined significantly. There are no assurances that the trading price of our Class A common stock will recover to prior levels. Moreover, the trading price of our Class A common stock could experience further volatility and declines. These fluctuations could cause you to lose all or part of your investment in our Class A common stock.
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In addition, extreme price and volume fluctuations in the stock markets have affected and continue to affect many technology companies’ stock prices, including ours. Often, their stock prices have fluctuated in ways unrelated or disproportionate to the companies’ operating performance.
In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention.
We may not have the ability to raise the funds necessary to repay or settle conversions of the Notes in whole or in part in cash or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.
In March 2021, we entered into a purchase agreement for the sale of an aggregate of $948.8 million principal amount of our 0% convertible senior notes due 2026 (the “Notes”). During the year ended December 31, 2022, we entered into separate, privately negotiated transactions with certain holders of the Notes to repurchase approximately $235.0 million aggregate principal amount of the Notes for an aggregate cash repurchase price of approximately $176.4 million. During the year ended December 31, 2023, we entered into several separate, privately negotiated transactions with certain holders of the Notes to repurchase (the “Repurchases”) $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 remaining Notes with an aggregate principal amount of $346.5 million will mature on March 15, 2026, unless earlier converted, redeemed or repurchased. Holders of the Notes will have the right, subject to certain conditions and limited exceptions, to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, as described in the indenture governing the Notes. If our stock price is lower than the conversion price of the Notes on maturity, the holders of our Notes will likely not convert and we will have to repay those Notes in cash. In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted as described in the indenture governing the Notes. However, we may not have enough available cash or be able to obtain financing at the time we are required to repay or make repurchases of Notes surrendered therefor or pay cash with respect to Notes being converted. In addition, our ability to repurchase the Notes or to pay cash upon conversions of the Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase notes at a time when the repurchase is required by the indenture or to pay any cash payable on future conversions of the Notes as required by the indenture would constitute a default under the indenture. A default under the indenture governing the Notes or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof. Such acceleration could result in our bankruptcy. In a bankruptcy, the holders of the Notes would have a claim to our assets that is senior to the claims of our equity holders.
Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our Class A common stock.
The conversion of some or all of the Notes will dilute the ownership interests of our stockholders. Upon conversion of the Notes, we have the option to pay or deliver, as the case may be, cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock. If we elect to settle our conversion obligation in shares of our Class A common stock or a combination of cash and shares of our Class A common stock, any sales in the public market of our Class A common stock issuable upon such conversion could adversely affect prevailing market prices of our Class A common stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our Class A common stock could depress the price of our Class A common stock.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
Our ability to make scheduled payments of the principal of or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt, including the Notes, and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, refinancing or restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance or restructure our indebtedness will depend on the capital markets and our financial condition at such time, and if the financial markets become difficult or costly to access, including due to rising interest rates, fluctuations in foreign currency exchange rates or other changes in economic conditions, our ability to raise additional
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capital may be negatively impacted. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. Even if we can refinance or restructure our debt, the revised terms may harm our business.

Regulatory actions and other events may adversely affect the trading price and liquidity of the Notes.
We expect that many investors in, and potential purchasers of, the Notes may employ, or seek to employ, a convertible arbitrage strategy with respect to the Notes. Investors would typically implement such a strategy by selling short the Class A common stock underlying the Notes and dynamically adjusting their short position while continuing to hold the Notes. Investors may also implement this type of strategy by entering into swaps on our Class A common stock in lieu of or in addition to short selling the Class A common stock.
The SEC and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our Class A common stock). Such rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc. and the national securities exchanges of a “Limit Up-Limit Down” program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Any governmental or regulatory action that restricts the ability of investors in, or potential purchasers of, the Notes to effect short sales of our Class A common stock, borrow our Class A common stock or enter into swaps on our Class A common stock could adversely affect the trading price and the liquidity of the Notes.
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert their Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital, which could impact our existing covenants and inhibit our ability to raise future debt. For additional information regarding the conditional conversion feature of the Notes, see Note 8, Debt Instruments.
Future sales and issuances of our capital stock or rights to purchase capital stock could result in dilution of the percentage ownership of our stockholders and could cause the price of our Class A common stock to decline.
Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. For example, we may issue approximately 3 million shares of our Class A common stock if the Notes convert, subject to customary anti-dilution adjustments. In addition, we may need to secure additional funds for our existing debt obligations, including repayment of the Notes. We may sell Class A common stock, convertible securities, and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences, and privileges senior to those of holders of our Class A common stock.
Future sales of our Class A common stock in the public market could cause the market price of our Class A common stock to decline.
Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our Class A common stock.
As of September 30, 2024, we have outstanding a total of 140 million shares of Class A common stock. All of our outstanding shares are eligible for sale in the public market, other than shares and options held by directors, executive officers, and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act, various vesting agreements, and shares that must be sold under an effective registration statement. Additionally, the shares of Class A common stock subject to outstanding options and restricted stock unit awards under our equity incentive plans and the shares reserved for future issuance
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under our equity incentive plans will become eligible for sale in the public market upon issuance, subject to applicable insider trading policies. The outstanding portion of the Notes will also become convertible at the option of the holders, subject to certain limitations and restrictions, prior to March 15, 2026.
Future sales also could cause the trading price of our Class A common stock to decline and make it more difficult for investors to sell shares of our Class A common stock.
If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our Class A common stock price and trading volume could decline.
Our stock price and trading volume are heavily influenced by the way analysts and investors interpret our financial information and other disclosures. If securities or industry analysts do not publish research or reports about our business, delay publishing reports about our business, or publish negative reports about our business, regardless of accuracy, our Class A common stock price and trading volume could decline.
The trading market for our Class A common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If the number of analysts that cover us declines, demand for our Class A common stock could decrease and our Class A common stock price and trading volume may decline.
Even if our Class A common stock is actively covered by analysts, we do not have any control over the analysts or the measures that analysts or investors may rely upon to forecast our future results. Over-reliance by analysts or investors on any particular metric to forecast our future results may result in forecasts that differ significantly from our own.
Regardless of accuracy, unfavorable interpretations of our financial information and other public disclosures could have a negative impact on our stock price. If our financial performance fails to meet analyst estimates, for any of the reasons discussed above or otherwise, or one or more of the analysts who cover us downgrade our Class A common stock or change their opinion of our Class A common stock, our stock price would likely decline.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. Any determination to pay cash dividends in the future will be at the discretion of our board of directors and are restricted by the terms of our Credit Agreement. The Credit Agreement permits the payment of cash dividends so long as, after giving effect to any such dividend, we maintain a consolidated adjusted quick ratio of at least 1.50 to 1.00 and are otherwise in pro forma compliance with all covenants under the Credit Agreement. In addition, the Credit Agreement permits us to pay up to $10.0 million in cash dividends per fiscal year so long as, after giving effect to any such dividend, we are in pro forma compliance with all covenants under the Credit Agreement, including a consolidated adjusted quick ratio of at least 1.25 to 1.00. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
As a public company, we incur significant legal, accounting, and other expenses that we did not incur as a private company. Such expenses have further increased now that we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE, and other applicable securities rules and regulations impose various requirements on public companies. Furthermore, the senior members of our management team do not have significant experience with operating a public company. As a result, our management and other personnel have to devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.
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Anti-takeover provisions in our charter documents, the indenture governing the Notes, and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current board of directors or management and limit the market price of our Class A common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in board of directors or our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
•authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Class A common stock;
•require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
•specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer;
•establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
•establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;
•prohibit cumulative voting in the election of directors;
•provide that our directors may be removed for cause only upon the vote of the holders of a majority of our outstanding shares of common stock; and
•provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our Class A common stock to decline.
Certain provisions in the indenture governing the Notes may make it more difficult or expensive for a third party to acquire us. For example, the indenture governing the Notes will require us, except as described therein, to repurchase the Notes for cash upon the occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its notes in connection with a make-whole fundamental change. A takeover of us may trigger the requirement that we repurchase the Notes, increase the conversion rate, or both, which could make it costlier for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
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•any derivative action or proceeding brought on our behalf;
•any action asserting a breach of fiduciary duty;
•any action asserting a claim against us arising under the Delaware General Corporation Law,
•our amended and restated certificate of incorporation, or our amended and restated bylaws; and
•any action asserting a claim against us that is governed by the internal-affairs doctrine.
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions. If a court were to find either exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with litigating Securities Act claims in state court, or both state and federal court, which could seriously harm our business, financial condition, results of operations, and prospects.
These forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 
None.
 
Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
Trading Arrangements

During the Company’s last fiscal quarter, the Company’s directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, terminated, or modified the contracts, instructions or written plans for the purchase or sale of the Company’s securities set forth in the table below.

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Type of Trading Arrangement
Name and Position
Action
Adoption/ Termination
Date
Rule 10b5-1*
Non-
Rule 10b5-1**
Total Shares of Class A Common Stock to be Sold
Total Shares of Class A Common Stock to be Purchased
Expiration Date
Ronald Kisling, Chief Financial Officer (1)
Adoption
9/5/2024
X
—
224,000
—
12/31/2025
* Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.
** “Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.

(1) Ronald Kisling, the Company's Chief Financial Officer, adopted a Rule 10b5-1 Plan on September 5, 2024. Mr. Kisling's plan provides for the potential sale of up to 224,000 shares of the Company’s Class A Common Stock; provided, however, because certain of Mr. Kisling’s planned sale amounts are equal to: (i) the difference between a certain number of shares and shares sold under a Rule 10b5-1 Plan previously entered into by Mr. Kisling on November 11, 2023, which is currently in progress, and (ii) a designated percentage of the net number of shares resulting from RSUs vesting, of which a portion will be surrendered to the Company or sold to cover withholding taxes, depending on how many shares are withheld in these instances, the maximum number of shares to be sold may be less. The plan expires on December 31, 2025, or upon the earlier completion of all authorized transactions under the plan.





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Item 6. Exhibits
Exhibit
Number		Exhibit Description FormFile No.ExhibitFiling DateFiled Herewith
3.18-K001-388973.1May 21, 2019
3.28-K001-388973.1June 10, 2020
3.3
8-K
001-38897
3.1
August 15, 2024
3.48-K001-388973.1July 13, 2021
4.1S-1/A333-2309534.1May 6, 2019
4.2Reference is made to Exhibits 3.1 through 3.4.
31.1X
31.2X
32.1*
32.2*
101. INSInline 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.SCHInline XBRL Taxonomy Schema Linkbase Document.X
101.CALInline XBRL Taxonomy Calculation Linkbase Document.X
101.DEFInline XBRL Taxonomy Definition Linkbase Document.X
101.LABInline XBRL Taxonomy Labels Linkbase Document.X
101.PREInline XBRL Taxonomy Presentation Linkbase Document.X
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).X
__________
+ Indicates management contract or compensatory plan.
*    The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to be furnished with this Quarterly Report on Form 10-Q 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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Fastly, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FASTLY, INC.
November 6, 2024By:/s/ Todd Nightingale
Todd Nightingale
Chief Executive Officer (Principal Executive Officer)
November 6, 2024By:/s/ Ronald W. Kisling
Ronald W. Kisling
Chief Financial Officer (Principal Financial and Accounting Officer)
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