FASTLY, INC. (Exact Name of Registrant As Specified in Its Charter) ______
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Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________________ FORM 10-K ____________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-38897 ____________________________ FASTLY, INC. (Exact name of registrant as specified in its charter) ____________________________ Delaware 27-5411834 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 475 Brannan Street, Suite 300 San Francisco, CA 94107 (Address of principal executive offices) (Zip code) (844) 432-7859 (Registrant's telephone number, including area code) Not Applicable (Former name, former address, or former fiscal year, if changed since last report) ____________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Class A Common Stock, $0.00002 par value FSLY The New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 1 Table of Contents The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of $20.28 for a share of the Registrant’s Class A common stock on June 28, 2019 (the last business day of the registrant's most recently completed second quarter), as reported by the New York Stock Exchange on such date, was approximately $263.5 million. As of February 28, 2020, 71.4 million shares of the registrants’ Class A common stock were outstanding and 24.5 million shares of registrant's Class B common stock were outstanding. Portions of the registrant’s Definitive Proxy Statement relating to the 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2019. 2 Table of Contents TABLE OF CONTENTS Page Part I Item 1. Business 5 Item 1A. Risk Factors 20 Item 1B. Unresolved Staff Comments 53 Item 2. Properties 53 Item 3. Legal Proceedings 53 Item 4. Mine Safety Disclosures 53 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 54 Item 6. Selected Financial Data 56 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 58 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 80 Item 8. Financial Statements and Supplemental Data 81 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 123 Item 9A. Controls and Procedures 123 Item 9B. Other Information 124 Part III Item 10. Directors, Executive Officers, and Corporate Governance 125 Item 11. Executive Compensation 125 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 125 Item 13. Certain Relationships and Related Transactions and Director Independence 125 Item 14. Principal Accountant Fees and Services 125 Part IV Item 15. Exhibits, Financial Statement Schedules 126 Item 16. Form 10-K Summary 128 Signatures 129 3 Table of Contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "anticipate," "believe," "continue," "could," "design," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "project," "should," "will," or the negative of these terms or other similar expressions. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled "Risk Factors" and elsewhere in this Annual Report on Form 10-K, regarding, among other things: • our ability to attract and retain customers; • our ability to increase the usage of our platform by existing customers; • defects, interruptions, security breaches, delays in performance, or similar problems with our platform; • our financial performance, including our revenue, cost of revenue, operating expenses, and our ability to attain and sustain profitability; • our ability to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences; • the growth of our relevant markets; • our platform’s functionality, scalability, performance, ease of use, reliability, and cost effectiveness relative to that of our competitors’ products and services; • our ability to compete effectively with existing competitors and new market entrants; • our ability to attract and retain qualified employees and key personnel; • our ability to maintain, protect, and enhance our intellectual property; and • our ability to comply with laws and regulations that currently apply or may become applicable to our business both in the United States and internationally. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Annual Report on Form 10-K. Other sections of this Annual Report on Form 10-K may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward- looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should 4 Table of Contents read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (www.investors.fastly.com), our filings with the Securities and Exchange Commission, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website. PART I Item 1. Business Overview Developers are reinventing the way we live, work, and play online.