Fastly shares tumble 14% as RPO declines 1% and guidance fails to impress

Fastly Inc. (FSLY) reported its fourth-quarter 2023 earnings on Thursday, showing a 15.5% year-over-year increase in revenue to $137.78 million, which was slightly below the consensus expectations of $139.8 million. The company also reported a loss of ($0.01) per share, excluding non-recurring items, which was $0.02 better than expectations. 

The company's gross margin improved to 55.0% from 52.4% in the fourth quarter of 2022. Non-GAAP gross margin improved to 59.2% from 57.0% in the same period last year. Non-GAAP net income increased to $1.7 million from a non-GAAP net loss of $9.5 million in the same period last year.

The company's 12-month net retention rate (LTM NRR) decreased to 113% in the fourth quarter from 114% in the third quarter. Total customer count was 3,243 in the fourth quarter, up 141 from the third quarter, with 578 being enterprise customers in the fourth quarter, up 31 from the third quarter. The average enterprise customer spend of $880 thousand in the fourth quarter was a 3% increase quarter-over-quarter.

The annual revenue retention rate (ARR) was 99.2% in 2023, up from 98.9% in 2022. Remaining performance obligations (RPO) were $245 million, a 1% decrease from $248 million in the third quarter of 2023 but a 24% increase from $198 million in the fourth quarter of 2022.

The company issued downside guidance for the first quarter of 2024, expecting an EPS of $(0.09)-$(0.05), compared to the consensus of ($0.04). The company also expects revenue of $131-135 million for the first quarter, compared to the Street expectations of $135.46 million. For the full year 2024, Fastly issued in-line guidance, expecting an EPS of $(0.06)-$0.00, compared to the consensus of ($0.03). The company expects revenue of $580-590 million for 2024, compared to consensus of $585.50 million.

In conclusion, Fastly's fourth-quarter 2023 earnings report showed a 15.5% year-over-year increase in revenue, a 2.6% sequential increase in average enterprise customer spend, and a 1% increase in total customer count. The company's gross margin and net income also improved, while its net retention rate and annual revenue retention rate remained strong. Although the company issued downside guidance for the first quarter of 2024, it expects to meet expectations for the full year.

$FSLY(FSLY)