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No. of Recommendations: 2
RafesUserName, 

To clarify, I said rate  at which they add enterprise customers is decelerating.

For two seq qtrs # of enterprise customer adds has dropped +14 > +9 > +7. Lets go by what you said.... we continue the deceleration at two customers per qtr. Heres what we end up with:
	       Q3'19	Q4'19	Q1'20	Q2'20	Q3'20	Q4'20	Q1'21	Q2'21	Q3'21
Ent Cust +/-	+12	+14	+9	+7	+5	+3	+1	-1	-3
Ent Cust Total	274	288	297	304	309	312	313	312	309

^ Doesn't this seem disconcerting. 

Yes, they are increasing avg. enterprise customer revenue. 716k last qtr up from 642k in previous qtr. This is great. Tells me, Product, Customer Success and Services teams are doing their work. 
But risk profile of the business goes up - significant revenue concentration in fewer and fewer customers. 

What about their enterprise Sales team? I saw VPs of Sales for specific verticals on LinkedIn. They are not adding new logos. 
Things are sliding down for enterprise sales in H1. One can attribute it to any # of reasons incl. pandemic but the goal for us as investors is to put our hard earned money on winning businesses now and for the long run. There are other businesses that are thriving right now and thats where our money should be. 

By the way, total # of customers added is not a great metric for Fastly, IMO, simply because this is an enterprise focused business with ~88% of TTM rev from those customers. 
Minimum spend for a paid customer is only $50.
See Monthly Minimum Charges section @ https://docs.fastly.com/en/guides/how-we-calculate-your-bill.... 

Issue is compounded because they had a brief earnings call where execs were not very forthcoming and a PR that raised concerns. 
This is CFO's response on TikTok:

Hey Brad. Yes, nothing at this time. I mean, we're sort of assuming a little bit of status quo at
this moment and again, as Josh has sort of mentioned, as you get to sort of the latter half of the
year also will give us a lot more time to react. So that's sort of built into that.

I even tried reading it without the 'sort of' x4.
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No. of Recommendations: 38
Saul, don't be discouraged. We all learn at our own pace. For me, I learn very slowly. I need to touch a hot stove several times before I realize that it really is hot. Besides falling in love with technology, I like to keep a large diversified portfolio--it makes me feel safe. I like to learn about stocks over a period of years and often find it painful to end the relationship, even when I realize it is toxic. I don't know why I make all these mistakes, but I am slowly learning how to be a better investor and still have a long way to go. This board is helping me tremendously. I think I need to go read the knowledge base again.
Thanks for providing an awesome place to learn,
Oli
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No. of Recommendations: 5
Saul, it's good of you to issue this additional warning. Many here praised FSLY, including you. It's decent of you to take back what you said. You've done so with clarity and emphasis.
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No. of Recommendations: 40
Hi Saul,

Rather than be discouraged, look at this another way. Countless times you've cautioned that you often make mistakes and people should not simply follow your moves.
Investors need to make up their own minds.

The recent posts on Fastly explained clearly your reasons for getting out of the stock.
Many people came to the same conclusion and trimmed or sold out completely.

If others held for their own reasons, that's okay. Everyone has a different timeline.
One year from now, holding may prove to have been a great decision.

"Saul's Board" has been a life changer for me and countless others who truly appreciate this forum and the generous sharing of insight and knowledge.

I sold out of Fastly after hours when they issued the press release. The next day's post announcing that you'd exited the position made me happy because I feel like I'm learning.

Like the old adage, you're teaching people how to fish.

Thanks
JT
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No. of Recommendations: 7
The disagreements on this board make this board stronger, not weaker. I appreciate all you do, Saul. You are a gem and I'm glad to be able to learn from you.

I can't tell you how many times I have "averaged up", something you have taught us, and it has worked tremendously in my favor. My last addition to Zoom was in the $200s, where as my cost basis was in the $70s. I can guarantee I would not have done this, had I not been part of this board. It's because of you I have become much less anchored to cost basis. So thank you !

I'm also in the same camp as you on FSLY. FSLY is a semi-unknown at this point. I'm happy to re-initiate a position at a much higher price if the company warrants it/posts solid growth #s. Actually, I'm hoping for that scenario - I'm not giving up on FSLY at all. But for now, as the Sharks say, I'm out.
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No. of Recommendations: 0
Cannot agree more.
Fool has always warned against "Price Anchoring" bias.
I have been averaging up on ZM too.

Thanks,
Pravin
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No. of Recommendations: 3
Saul - much respect. (insert fist bump emoji)


I trimmed my FSLY holdings by 50% after the news. I'm not sure I have ever responded to a change that quickly before. Baby steps for me.


In hindsight, I wish I had sold everything at that point. I has cost me a decent amount (so far).


Speaking as someone new-ish to the board, it is not normal for me to exit a "high conviction" stock that quickly - even when the news changes. Part of the reason is that I don't feel like we have complete info at this point. Another part of the reason is that I was hoping the 2 main technical resources I rely on related to FSLY (MUJI and Peter) would chime in with some opinions. They have not (at least as far as I have seen).


After your message today, I cut FSLY further - it is now a 3.5% position for me. I'm considering selling the rest. Just conflicted about it still.

Thanks for your input/counsel.
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No. of Recommendations: 13
How do you know that you are learning?

Has the board ever collectively done a review of stocks that were sold to see what the future would be if those stocks were simply held?

I know that MF has conducted such a review and concluded that they would have been better off never selling and that’s why you see them hold some very small old positions.....

While short term the selling of Fastly seems like the right move it’s not clear that it’s the best move if the objective is simply to make the highest return irrespective of volatility and saying you will simply buy it back when things look better is not realistic with a stock that could move 50% in a day potentially
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No. of Recommendations: 1
Hi Analog,

I could be wrong but it's possible that Poffringa made some adjustments per home page update in between his bi-weekly posts.


NET and FSLY both at 22% each as of Oct 16, 2020 after market close.

https://softwarestackinvesting.com/software-stock-recommenda...

I think as of FSLY's recent acquisition he was reportedly north of 30% but I haven't caught up on my reading so he may have discussed his reallocation in between somewhere.

Thanks,
Eddie
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No. of Recommendations: 4
" it's possible that Poffringa made some adjustments per home page update"


Yes, I looked at that also but assumed the new % were just due to the recent change in share price for NET and FSLY.
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No. of Recommendations: 17
I know that MF has conducted such a review and concluded that they would have been better off never selling and that’s why you see them hold some very small old positions.....While short term the selling of Fastly seems like the right move it’s not clear that it’s the best move if the objective is simply to make the highest return irrespective of volatility and saying you will simply buy it back when things look better is not realistic with a stock that could move 50% in a day potentially

For me personally, one of the lessons I have learned from this board is to take your best ideas (say 5-7 stocks) and ride those until the story changes. There are so few companies growing at 60%, 70%, 80% etc that to wait on companies growing slower, or even falling in FSLY's case, in hopes of a turnaround hampers what could be a much greater total portfolio percentage gains instead of sticking with those firing on all cylinders.

If company A returns 50% year 1 and 50% year 2, thats 125% total over the two years. =SUM(1)*(1.5)*(1.5)/1-1

If company B falters for a bit and grows by 10% year 1 and then magically returns to grow at 80% year 2, thats only a total of 98% over those same two years. =SUM(1)*(1.1)*(1.8)/1-1

So yes, while the Fool says it might be better to never sell, it doesn't mean its the best way to approach how many on this board invest.

Brandon
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No. of Recommendations: 6
Poffringa on Fastly


My portfolio allocation to FSLY went from roughly 40% to about 20%. Half of that was due to the drop in price from $120 to $80. The other half was re-allocation to NET, DOCU, TWLO and ESTC. I needed to balance my portfolio for FSLY’s size, but wanted to avoid a large capital gains hit. At the lower price, this was possible. Not ideal, but more palatable. If FSLY recovers to ATH, it will be my largest position again.
5. Between FSLY and NET allocations, I am now at about a 40% allocation to edge networks. I think both will benefit. I really like how NET is executing and think the two will compete in some areas and diverge in others. There is a large market opportunity IMO. Of course, I am very much looking forward to the Q3 reports for both.
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No. of Recommendations: 11
Has the board ever collectively done a review of stocks that were sold to see what the future would be if those stocks were simply held?

Have you missed Saul's frequent reminder that it doesn't matter what happens to a stock you don't own ... the only thing that matters is what happens to the stocks you do own.
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No. of Recommendations: 1
Learning is highly individual and idiosyncratic. When I found this board in the fall of 2019, and began consolidating from 40 stocks to 15 now, I decided to sell many stocks (not all) that weren't being discussed here, and bought many (not all) that were being actively talked about so I could follow along and learn. That meant dropping SQ, ROKU, and TWLO...those have done quite well this year. Hindsight is 20/20. And, I hung onto SHOP and MELI, two of my highest conviction stocks, even though many folks here either exited or weren't invested in the first place. While my portfolio has grown an astonishing amount thanks to the wisdom here and Saul's encouragement to buy ZM on the way up, I'm now learning to maybe take it a bit slower for the time being so I can really make this process my own. I halved my position in FSLY, it's now down to 3.2%. I chose not to exit completely because I'd like to wait and see, at least until earnings, and partly because I am not sure where to put the money, given my current allocations.
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No. of Recommendations: 5
>> Have you missed Saul's frequent reminder that it
>> doesn't matter what happens to a stock you don't own

I seldom disagree with Saul but I do on this one.

An important part of ANY educational endeavor, including learning how to invest, is to learn from one's mistakes. That includes mistakes like selling too soon... the stock then becomes a "stock you don't own" but is still worthy of space in your memory if you erred by selling too soon.

Eric [still holding a 0.69% piece of FSLY]
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No. of Recommendations: 7
"How do you know you are learning?" Am unsure but feels like this was directed at me.

My knowledge of technology is limited. Do I understand the different strengths of Fastly vs Cloudflare? No.

Analyzing financial statements isn't a strong suit either. That's why I appreciate everyone who posts and shares their insights.

Yesterday my IRA portfolio was up 200% YTD, an unheard of gain for me. The results are because of decisions and choices I've made.
I didn't blindly follow Saul or anyone here. Yes, I pay attention and try to absorb as much as possible.

I have done an analysis of "what if" I didn't go to 25% cash in early March. (Cost me 9%. Was the peace of mind during that scary time worth it? Maybe.. maybe not)
Also recently did an analysis what if I simply held my portfolio from January that included AYX, MDB, TWLO, and ZS. Selling those stocks and buying others resulted in additional gains of 15%.

The Motley Fool philosophy is great. In my opinion Saul's philosophy of investing is superior.
But it's not for everyone.

The beauty of this board is the shared information. Pick and choose what you want to act upon.
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No. of Recommendations: 2
I don't think Saul ever said you can't learn from your mistakes.

He said that the only thing that matters is what you actually own.
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No. of Recommendations: 2
https://www.fool.com/premium/coverage/investing/2020/10/22/w...

https://www.fool.com/premium/coverage/investing/2020/10/21/f...

why would the ones who bought at ~$20 and made FSLY a smaller part of their portfolio be selling at this point?
I would hardly call that a turn around story. Yes it came short one quarter but it is still one for the long ride.


tj
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No. of Recommendations: 1
It is not just short one qtr.
The rate at which they add enterprise customers(~85% of business) is decelerating.

Q3'19 Q4'19 Q1'20 Q2'20
Ent Cust +/- +12 +14 +9 +7
Ent Cust Total 274 288 297 304

Couple of qtrs in this trend....they are finished.
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No. of Recommendations: 1
Dear Saul,

Please do not be discouraged. This message board and your posts have been nothing short of life changing for me. I have an entirely new outlook on investing and it's all because of you and the wonderful community here.

I agree with your posts on Fastly and I exited the position a few days after their earnings announcement. I did not post my thoughts because I didn't want to clutter up the board, but there are probably many others who also agreed with you.

I think people are trying to figure out how to think for themselves and not copy you blindly.
We are all trying to learn from the best here. Give us time and know that we like to make our own mistakes (and hopefully learn from them)!

EV12
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No. of Recommendations: 0
* Pardon the formating.. still learning my way around...
	        Q3'19	Q4'19	Q1'20	Q2'20
Ent Cust +/-	+12	+14	+9	+7
Ent Cust Total	274	288	297	304
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No. of Recommendations: 1
In the beginning, I was pro FSLY. As it kept sinking day after day, and I did more and more thinking, I ended up selling about 2/3rds. There was just too much negativity: decelerating signups, TikTok, etc. The remaining 1/3rd is based on um... HOPE, to be honest. Although every company has their own story, I've seen AYX and TWLO come back. Maybe it will be the same for FSLY.

Beth Kindig saw little hype for faster loading websites, like SHOP. So edge is not all that necessary. Edge will become important for robotics and self driving cars. But what about video conferencing? Wouldn't everyone like to be at a video conference with minimal lag?

Fastly announced: "announced advancements to its comprehensive portfolio of live event and video-on-demand services. As organisations continue to experience a shift from in-person to online, the need to deliver high-quality, low-latency content in a secure and scalable way has become more crucial than ever before. Fastly’s enhanced Live Event Services and video-on-demand features will enable developers to respond to a recent rise in live streaming events influenced by the COVID-19 pandemic, in addition to preparing for long-term video streaming trends."

The other reason for some hope is that ARKW did buy some on the dip.

However, in the end, I will wait for something in addition to Hope before adding more.

DoesMIWork
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No. of Recommendations: 4
Saul,

Ouch, tell me what you really think ...

The market doesn’t reward “good tech”. I have no question they have good tech. The market rewards good businesses, not good tech. This is a company that hasn't figured out how to sign up more than a minuscule number of new customers per quarter.

That hit me in the gut as FSLY reminds me of my worst investment decision ever.

In the 90s, I decided all computers would be using 3D graphic chipsets. In hindsight, I was clearly correct. At the time, there were 3 big players: ATI, NVDA and TDFX (known as 3dfx). ATI was making functional 3d chips for laptops, but they weren't really effective for gaming. NVDA was putting up good numbers and was heavily promoting their stuff, but at the time had an inferior product to TDFX. TDFX had the consensus best 3d processors. Their forthcoming Voodoo line of 3D processors were on schedule to be really something special.

I thought about investing equal amounts in all three, but I decided to go with the best tech. NVDA was really annoying with all their promotion and press releases. Voodoo was going to crush them. I loaded up on TDFX. Well, what happened in short order was NVDA continued to meet deadlines, get new customers despite TDFX's forthcoming superior product. TDFX on the other hand ended up missing deadlines, losing customers etc. Eventually, Voodoo may have come out, but it was too little too late. NVDA crushed them. NVDA ended up buying the assets and tech of TDFX for peanuts. So, Saul is 100% correct about best technology doesn't always win. (I did get a very low cost marketing Voodoo t-shirt from TDFX!)

Saul is correct that right now it looks like Cloudflare is eating FSLY's lunch in marketing and execution right now. That may annoy us, but execution trumps best tech.

I recently bought a position (again) in NET, and I just sold short (after hours) 80% of my FSLY position to lock in very substantial gains. I may hold until next year to defer the gains until 2021. I may buy more NET. May close some FSLY short or buy more. Haven't decided, but I will sleep better tonight and through FSLY earnings after banking some very nice gains.

Mike

Long NET and FSLY (with similar weighting), and I note that I do not concentrate as much as others on this board.

XIRR - 196% YTD
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No. of Recommendations: 46
There is an even bigger problem looming over Fastly!

In post #72610 two days ago, BarrelHaus urged people to not be too precipitous to leave Fastly. He pointed out that Shopify hadn’t totally left them for Cloudflare, but while Cloudflare now seemed to be their main provider, Shopify was still using Fastly for checkout.

If you go to a CDN Finder tool and put in the main website, sure Shopify says NET (expected) but if you do www.shopify.com/checkout then guess what, its all FSLY.


Now I don’t even know what a CDN Finder tool is, so I took BarrelHaus on his word for this. But then, two posts later, he responded to someone who said TikTok had entirely moved off Fastly to Akami. What was apparently to BarrelHaus’ surprise, he responded:

I think you're right. I have been browsing through several different site maps within TikTok and have not been able to find a single capture of FSLY being used by TikTok and its all Akamai. Even searching for specific videos it seems to be all Akamai….


Now HERE is the huge problem!!!!!! BarrelHaus thus discovered two days ago, Wednesday, that TikTok was entirely off Fastly (as far as he could tell, anyway, which was pretty far. 😀) It was exactly just a week before, the Wednesday before in fact, that Fastly gave their pre-announcement that made the stock sink the way it has. It is INCONCEIVABLE that the CEO didn’t know when he sent out that announcement that TikTok was in the process of leaving or already left. How did he have the nerve to not mention that their largest customer (a 15% customer!!!!), was leaving to go to a different provider when he sent out that pre-announcement?

Talking about law suits! Maybe problems with the SEC? Talking about untrustworthy communication! Wow! Who will ever trust him again? And what will that do to the stock price.

Saul
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No. of Recommendations: 6
Saul -

Your contributions have been invaluable to everyone on this board.

I've also seen you warn multiple times on this board for people not to blindly follow your trades, so in my mind you've really done everything possible to both be transparent as well as caution others about the pitfalls of not learning for oneself but just copying.

Ultimately, you can't invest for other people. They have make their own decisions.

As others have said, your advice and way of investing is life-changing, so please accept our thanks and be happy! :)

-Purplemist
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No. of Recommendations: 24
First I want to say up front that I'm not adding any of this as an argument one way or another. I am just replying with some facts I dug out of past quarterly reports. I will try and keep opinion out of this post.


------

Re customer deceleration: (it is not)
Again, the numbers posted up thread are not correct. We don't know exactly how many enterprise customers were added last quarter. Some customers used to be counted as enterprise and are not any more because they fell bellow the $100k trailing 12 months spend. Saul shed good light on how this is a trailing figure so to fall out in one quarter things would have to be pretty bad...but we are in a pandemic...anyway this is not an opinion. We do not know for sure the number so to say it is decelerating MAY be false. Based on fortun8's table, they would only have to have 2 fall out of the enterprise cohort for this statement to be untrue though.

Instead, let's look at the reported numbers we DO know. The combination of these 2 views hopefully show meaningful customer growth (and maybe expansion) when taken together.

The total customer count. Again I will keep my opinion out of these numbers out of this and instead simply confirm what was said on the last call. They claimed it was the largest gain since they IPOed. It is:

Quarter: Q2'20 Q1'20 Q4'19 Q3'19 Q2'19
Total: 1,951 1,837 1,743 1,684 1,627
Change: +114 +94 +59 +57
Growth: +6.2% +5.4% +3.5% +3.5%


Here is another set of numbers we have that are specific to Enterprise customers. How much they spend as a cohort on average. This is also accelerating. This is good because it means the revenue is spreading out among these top-spending customers (this is a trailing-12-month figure; this group makes 88% of revenue):

Quarter: Q2'20 Q1'20 Q4'19 Q3'19 Q2'19
Total: $716k $642k $607k $575k $556k
Change: +74k +35k +32k +19k
Growth: +11.5%* +5.8% +5.6% +3.4%

*Note we do not know how much TikTok pulls this average up but probably not enough to cause deceleration.


Re TikTok: I think we should avoid jumping to conclusions. It IS possible they are in the process of migrating away. It may also be possible that they are only testing a solution in a small region (like A/B testing) and the vast majority hasn't switched. Fastly wouldn't necessarily know the details in every case. I don't know if contracts are involved or they are simply pay-per-usage and can reroute if they want to (I assume they can since this is common for CDNs). We don't know for sure what is going on. All things are possible. You could view this as uncertainty though, which we hate.

------



A little opinion: Looking at these numbers I do start to wonder how this fuels revenue growth growing forward. One one hand they have been accelerating and growing at a nice rate so perhaps these small customer growth numbers are all they need to fuel revenue growth. It was good enough in the past for >45% I believe? Which is what they were doing before the outlier quarter they just had.

I'm being won over to the side of defense and do plan to reduce my stake to about 5.5% of my portfolio pending what I learn from the earnings report next week. I'm taking the weekend to read and think.
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No. of Recommendations: 2
RafesUserName, 

To clarify, I said rate  at which they add enterprise customers is decelerating.

For two seq qtrs # of enterprise customer adds has dropped +14 > +9 > +7. Lets go by what you said.... we continue the deceleration at two customers per qtr. Heres what we end up with:
	       Q3'19	Q4'19	Q1'20	Q2'20	Q3'20	Q4'20	Q1'21	Q2'21	Q3'21
Ent Cust +/-	+12	+14	+9	+7	+5	+3	+1	-1	-3
Ent Cust Total	274	288	297	304	309	312	313	312	309

^ Doesn't this seem disconcerting. 

Yes, they are increasing avg. enterprise customer revenue. 716k last qtr up from 642k in previous qtr. This is great. Tells me, Product, Customer Success and Services teams are doing their work. 
But risk profile of the business goes up - significant revenue concentration in fewer and fewer customers. 

What about their enterprise Sales team? I saw VPs of Sales for specific verticals on LinkedIn. They are not adding new logos. 
Things are sliding down for enterprise sales in H1. One can attribute it to any # of reasons incl. pandemic but the goal for us as investors is to put our hard earned money on winning businesses now and for the long run. There are other businesses that are thriving right now and thats where our money should be. 

By the way, total # of customers added is not a great metric for Fastly, IMO, simply because this is an enterprise focused business with ~88% of TTM rev from those customers. 
Minimum spend for a paid customer is only $50.
See Monthly Minimum Charges section @ https://docs.fastly.com/en/guides/how-we-calculate-your-bill.... 

Issue is compounded because they had a brief earnings call where execs were not very forthcoming and a PR that raised concerns. 
This is CFO's response on TikTok:

Hey Brad. Yes, nothing at this time. I mean, we're sort of assuming a little bit of status quo at
this moment and again, as Josh has sort of mentioned, as you get to sort of the latter half of the
year also will give us a lot more time to react. So that's sort of built into that.

I even tried reading it without the 'sort of' x4.
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No. of Recommendations: 4
Question on FSLY - is it possible their network bandwidth is constraining expansion of more enterprise customers? I have to assume there is some theoretical limit on how much traffic they can handle - maybe they have deliberately slowed addition of new enterprise clients until they expand the network? Maybe network expansion was delayed due to COVID? Maybe existing customers were using so much bandwidth during COVID that FSLY temporarily slowed down adding new ones? Maybe COVID itself temporarily slowed down addition of new customers? Maybe they added new enterprise customers in Q3 but there is a lag for them to start using the FSLY network?

I think I recall FSLY saying something to the effect of being able to "backfill" any capacity if they ended up losing Tic Tok. This seems to imply they are currently limiting new customers and they have some they could bring on if the Tik Tok exit opened up some capacity.

This is all just speculation. Just trying to brainstorm possibilities.


Different topic - I do wonder in hindsight if the previous CEO stepping down was more than what they said it was at the time. Maybe he was not making good business decisions and the board removed him from the CEO spot because of that. (More speculation - just trying to learn from this and put together the pieces of the puzzle).

Still long FSLY 3.5% - but doing more soul searching this weekend.
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No. of Recommendations: 4
"I do wonder in hindsight if the previous CEO stepping down was more than what they said it was at the time. Maybe he was not making good business decisions and the board removed him from the CEO spot because of that."

Almost certainly not the case. Highly capable Founder Artur Bergman is the previous CEO of whom you refer, and he remains in control as "Executive Chairman and Chief Architect." My perspective is to seldom consider that a CEO has really stepped down when he remains as Executive Chairman. It often changes little immediately except for giving up some operational duties such as TV interviews and Quarterly CCs. Bergman remains in a central role to offer vision and to weigh in on strategic decisions.

But his successor CEO Bixby inspires much less confidence in me. I'm out of the stock now after having done very well. Sold in the $90s only to watch it explode up to the $130s. I might have hung in there longer had i felt better about Bixby's capability to lead a much larger company. I always ask that question: i.e is this CEO big enough to lead a company 10 times the current size? Good products and technological trends are not enough.

Bergman is one of factors attracted me to the stock in the first place. Obviously, Artur preferred to step away from some of the more visible duties and a few operational responsibilities.

There are some important questions that may be headwinds for FSLY. Is CDN the kind of technology that calls for large companies generally to take it in house? Is increasing competition from NET and AKAM squeezing FSLY?

The momentum in the stock is clearly over. From here FSLY must prove itself with outperformance in future quarters.
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No. of Recommendations: 2
Almost certainly not the case. Highly capable Founder Artur Bergman is the previous CEO of whom you refer, and he remains in control as "Executive Chairman and Chief Architect." My perspective is to seldom consider that a CEO has really stepped down when he remains as Executive Chairman. It often changes little immediately except for giving up some operational duties such as TV interviews and Quarterly CCs. Bergman remains in a central role to offer vision and to weigh in on strategic decisions.

I don't know this pair of people. However, a relationship like that can work. A technical wizard moves (or is moved) into a management role, doesn't like the work, then hires someone to do the day to day management tasks, while they go back to the technology tasks. They are still "leaders", but leading technical work more than business work.
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No. of Recommendations: 21
After thinking though this a lot, I questioned myself. Why did I ever buy FSLY? The simple answer is: To grow my portfolio, invest in the fastest growing tech/SaaS companies with a solid business model and keep learning as an investor.

Maybe being a developer creates a kind of bias that keeps me focussing on the tech part more than the business execution part. So if that's what's happening I'm really NOT learning how to be a better investor.

I’ve tried to look deeply into what FSLY’s tech is trying to achieve with (Compute@Edge). There's no doubt that what there building is novel and has great potential to enable a lot of use cases ( like the way apps are going to be built for the edge in the near/future). .. think about making apps work faster on low-end mobile devices etc. At the same time I feel FSLY is cognizant of the fact that multi-cdn is here to stay ( so that's not going to be a winner takes it all). For example they’re enabling devs to write code that picks the fastest CDN provider from a list of CDN providers at run time. So if someone is watching a video, the code can fetch individual video segments from the best performing CDN at that instant. I’m also not sure where Shopify is right now in it's journey with using lucet-wasi ( Lucet, FSLY's native WebAssembly compiler and runtime that was open sourced). It appears that lucet-wasi has to provide more functionality to be really useful (https://bytecodealliance.github.io/lucet/lucet-wasi.html). I know that FSLY has been working quite a lot on making AssemblyScript ( a TypeScript like language that compiles to WebAssembly) . I also know that they’re working on enabling TEL ( Network Error Logging, a W3C spec ) with C@E using Fastly Insights. I ran a quick test and saw that Spotify is using Insights and probably is a C@E beta customer).

Here's the test:

Request URL: https://www.fastly-insights.com/b?k=040e3997-282c-4275-ba9b-a406ce78b133&s=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9


* Host: www.fastly-insights.com
* Origin: https://www.spotify.com
* Referer: https://www.spotify.com


However, let’s keep in mind that WebAssembly is relatively new ( became a W3C recommendation on 5/12/2019 and alongside HTML, CSS, and JavaScript, is the fourth language to run natively in browsers. ) And the fact that the first WebAsssembly conference was held in February this year just before the pandemic hit hard. So a lot of this is pretty new stuff and it does look like there's work to do before the full power of WebAssembly can be used to empower uses cases like...better performance of apps on low-end mobile phones etc.


Now, I would like to bring the focus back to... I questioned myself. Why did I ever buy FSLY? The simple answer is: To grow my portfolio, invest in the fastest growing tech/SaaS companies with a solid business model and keep learning as an investor.

Here's what I've learned…

"We talk so much on the board about not falling in love with a stock, and admitting when something is wrong, and getting out. You can always get back in if it’s warranted. To put it in perspective, I started exiting at $94.50. To get back just to there from here would require a 23% rise in the stock."

Thanks to Saul for that important lesson. That sums it up!

So by not letting my developer bias influence my investing thesis, I intend to greatly reduce my FSLY position before the earnings. I’ll listen to the earnings call on the 28th before deciding whether to buy back what I sell.

Cheers!

ronjonb
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No. of Recommendations: 1
ronjonb,

I don't understand anything about the tech. Is the FSLY "system" something that a company could copy in the future (or now)? I think one of the posts on the board said that Tik Tok is rumored to be building their own CDN. In your professional opinion - is that possible? And if so, could other big companies do the same thing?

In my industry there are many examples of our customers starting to "self manufacture" for the widgets that we sell. They use self manufacturing as a threat sometimes to get us to drop our prices. I'm just wondering if CDN could end up being the same type of thing.

Thanks
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No. of Recommendations: 5
AnalogKid70,

Yes companies can build their own CDN. A great example is Netflix who I think started off with Akamai, Level3 and LimeLight but chose to build their own, called "Open Connect" using NGINX and and integrating with ISPs to make that work. But keep in mind that NFLX has some very specific uses cases and the NFLX clients ( like the NFLX app on your TV, Phone ) is also built by NFLX themselves. So they kind of control the whole experience.

On the other hand companies like FSLY and NET are CDNs for the modern world/cloud. Their goal is to help you focus on your business and not worry about delivery. These modern CDNs are trying to differentiate themselves by using WebAssembly and host of other services like Security, Logging, Monitoring, streaming video via their edges. So, though someone can pretty much build a simple CDN, building a clone of FSLY or NET is not going to be trivial ( though new companies like StackPath are showing up). That's why these companies like FSLY and NET are attracting so many customers.

I really don't know much about TikTok ( have never followed them). I think they were already using Akamai along with FSLY. I don't know if they have moved off FSLY completely.

ronjonb
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No. of Recommendations: 7
Now I don’t even know what a CDN Finder tool is ...

A CDN finder is a website (there are several) where you can enter a website path and it will tell you what CDN service is used to return the page to a requester. I think it sends a web page request to the site you tell it. It recognizes the IP address of who returns the page. If it is a known CDN (Akamai, Fastly, etc) it tells you. If there is no CDN, it returns "undefined". This is a guess from experimentation. I am not in that industry to know for sure.

I did a search on "cdn finder" with DuckDuckGo. Several come up. This was the top:

https://www.cdnplanet.com/tools/cdnfinder/

FWIW, I checked right now and SHOP used Fastly for shopify.com and shopify.com/checkout. I checked yesterday and shopify.com was NET and shopify.com/checkout was Fastly. So maybe they are splitting the business between multiple vendors.

I have checked tiktok.com several times. Their main site, their login site and the sites of some of their users. Each time it is Akamai. If you search tiktok, you can see lots of links to tiktok sites and their users to verify.
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No. of Recommendations: 6
Now I don’t even know what a CDN Finder tool is ...


How to find Which CDN is Used in a Website?

https://geekflare.com/find-cdn-used-on-site/

I was curious to find out what TMF boards are using...

https://www.dnswatch.info/dns/dnslookup?la=en&host=board...

¿¿¿Fastly???

Who would have thought? ;)

Denny Schlesinger
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No. of Recommendations: 1
"Who would have thought?"

No huge surprise. TMF regularly recs the companies whom with they have business alliances. Fastly is not the first.


🆁🅶🅱
post tenebras lux
For not in my bow do I trust, nor can my sword save me.
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No. of Recommendations: 14
Hi Saul,

Don’t feel discouraged.

For transparency, last week I decreased my position in Fastly in stages and then I sold out completely, despite initially wanting to wait to hear what the Q3 earnings call would entail before making any decision. Nothing has fundamentally changed in my view, I am still taking a ‘wait and see’ approach - except I’ve now decided to to ‘wait and see’ from the outside, without the exposure for the time being.

Ultimately, I sold because I now believe the earnings call portends more bad news than good, and I have lost much of my conviction in Fastly over the short-medium term.

Here’s why:

- I read the article posted here (https://medium.com/@soumya.avi/reviewing-fastly-fsly-after-q...), and saw the suggestions that Fastly may have lost (some of) Shopify usage. While this is just speculation, it is a concern, as Shopify’s Q4 usage seems integral in Fastly meeting its +18% QoQ guidance. We are going into Shopify’s seasonally strongest quarter, which will make a tougher YoY comparative for Fastly without their usage.

- When the above is considered alongside Fastly being impacted at the END of the quarter by customer usage (my main concern with their lowered guidance initially), what is their run-rate going into Q4? This smells like trouble. I would’ve much preferred a usage impact in July than September.

- What has concerned me most since the lowered guidance, something I saw come up time and again last week, is the implication that Fastly has lost TikTok completely, or that TikTok had at least diversified to other CDN's significantly. I was accepting that TikTok US (6% of revenue) was at risk, but not ALL of TikTok (as implied in the article 16% of Q2 revenue). I had also expected a relatively quick resolution to TikTok, but this seems increasingly unlikely. Customer concentration is normal in early stage companies, but to lose 12-16% of your revenue in one go is unquestionably damaging, particularly if you are facing headwinds with your other customers. I had still believed that Fastly would raise their FY guidance this week, but now I am not even so sure. Let’s consider that Signal Sciences will bring in around $30m of revenue this year, and annualised (16% of Q2) TikTok represents $48m of revenue for Fastly. Therefore in 2021 if Signal Sciences were to provide $50m revenue, this would only be offsetting the loss of TikTok. I had expected Signal Sciences to be an accelerant to Fastly’s revenue, not to be a stop gap.

- So how is Fastly going to accelerate its growth in the next few quarters, assumedly without TikTok? Fastly CFO: "in 2021, we’ll actually begin to recognize revenue on that. My best guess at this point is going to be a relatively minor contribution”. We have already discussed their slowing Enterprise customers to the death, and while I see some positive trends in Fastly’s business the main near term acceleration I saw was in the Signal Sciences acquisition. The potential loss of TikTok would negate this completely (in the short-medium term).

The above is largely speculation, but it adds to my uncertainty. I had said in a previous post:

"I agree that the story has become more complicated, and I well understand the argument that it’s a red flag (especially given the usage false flag ahead of Q2 earnings), and that we can always sell out now and re-enter once we have this information. And why bother with the uncertainty. But to do that, perhaps it would be to make a decision because of the absence of information (rather than because of new information)”

I was putting a lot of reliance on management’s comments in the Q3 earnings call. And then with the above points over Shopify and losing TikTok, I considered why am I still bothering with the uncertainty at all heading into that call. Not only was I placing a lot of importance in their comments, and all the signs are suggesting that the news will more likely be bad than good, but also history suggests that Fastly’s management will not be transparent or clear. Why place faith in them to be now? And this really underpinned my decision. I do not trust management to be transparent enough for my liking to shed enough light on those concerns.

Transparency

I have seen comments that management HAVE been transparent (to the best of their ability), but I disagree. Take their Q2 earnings call, when asked about TikTok:

Brad Reback -- Stifel Financial Corp. -- Analyst

"Great. And then, Adriel, just following up on this line of thought. As you look at the back half guidance, have you assumed status quo with TikTok? Or have you made any changes in the assumptions?"

Adriel Lares -- Chief Financial Officer

"Brad, yes, nothing at this time. I mean we're sort of assuming a little bit of a sort of a status quo at this moment. And again, as Joshua sort of mentioned, as you get to sort of the latter half of the year, also it gives us a lot more time to react. So that's sort of built into that."

As clear as mud. What does a 'little bit of a sort of a status quo' actually mean? This is just one extract, the full account continues in the same vein, with more 'sort ofs' than I am years old. Semantics perhaps, but it feels ambiguous to me. The message seems to be here that the TikTok impact is NOT baked in to guidance, as in Q4 they expect to be able catch up the usage elsewhere instead, and the TikTok impact is therefore effectively ‘built into that’ status quo. Or so I have (mis)interpreted.

Now compare that to comments made by Bixby a week or so later when asked about TikTok:

"Yes we tried to provide the real look...we tried to disclose this, it was voluntary...we understood this was a risk we had to take into consideration...this is something we thought about and baked in”

Ok, now it HAD been baked in? My gut feel while watching this interview was that Bixby was being evasive (I have paraphrased the digression in between), but there are reasons why he might have been. I gave him the benefit of the doubt.

So Fastly’s CFO says in the earnings call in a roundabout way that TikTok IS NOT explicitly built into guidance but subsumed in the status quo, then the CEO says a week later that it IS is baked in. What? It is leaving us to read between the lines, but that is management’s job to fill in those gaps, as best as possible. That is what management transparency is and why, for me, they failed to do this.

And yes they’re dealing with geopolitical uncertainty in the middle of the pandemic and that’s not easy, but just come out and say that. Be clearer and more consistent in your messaging. Be more transparent. Uncertainty does not make a difference to the fact that they have guided for it; they either included $xm impact in their guidance because of TikTok, or they didn’t. It really is that simple. Uncertainty just means that they might not have guided for it accurately. So why the ambiguity?

I have to model 'Covid impact' into my full year latest view every month at work, there is a lot of uncertainty of course of what the actual impact is going to be (with a usage based model), but I can tell you exactly what I've built in to my forecast. Fastly management seem to be at odds with each other over whether they've baked it in at all. Maybe I'm being harsh.

Let’s compare this to Zoom. Don’t forget Zoom has uncertainty of its own with the pandemic, primarily with regard to churn. Here is the Zoom CFO discussing how they have factored in churn into guidance during the Q2 earnings call:

Kelly Steckelberg -- Chief Financial Officer
"While better-than-expected churn was one of the drivers to our Q2 outperformance, we did experience a significantly higher level of overall churn in Q2 as compared to historical rates. As customers with 10 or fewer employees have increased to 36% of our revenue, we are assuming a higher rate of churn due to this mix shift.
So, remember going all the way back to the S-1, we talked about that the monthly customers churn, on average, about 4% per month. Their monthly rate is about 4%, and we did see an increase against that in Q2. And we have modeled at that same level going forward as we - with all the uncertainty with how long this pandemic will last and what other potential economic uncertainty there is. We've modeled at that same rate going forward."


The message seems infinitely clearer than Fastly’s management, no ‘sort of’s or evasiveness or conflicting opinions of what has been 'baked in'. Perhaps this is my Zoom bias, judge for yourself. There is a recognition of the uncertainty, but it does not make their guidance any less clear. Uncertainty does not forsake clarity, in my opinion. If Bixby is not a ‘founder type’ of CEO, then is his role not even more important as a spokesperson? A communicator?

And so I sold out, because I no longer have faith that the news will be good in the earnings call or that management will be clear and transparent about it, and I don’t want to have to read between the lines again if the news is bad. I'm simply reducing my exposure to that.

After the Q2 earnings call I posted:
"I do not expect Fastly to blow-out earnings for the rest of this financial year. My view is long term and I plan to hold until there's a change to the story (for me). There could be some short term pain, for long term gain. Although I hope to be proved wrong of course :)"

And last week:
"And then taking into account all of the above, and that Edge Computing as a market is only $3.19bn today, expected to grow to $43.7bn by 2027, and that both Fastly and Cloudfare are by far and away the best primed propositions to grow into this market, I decided to take a longer term perspective.”

I do still think the long term thesis for Fastly has not changed necessarily in light of the lowered guidance, which is why I have been so torn. And I’m not encouraging others to sell ahead of the call. I DO still believe in their technical excellence, and I DO believe in their future in ‘edge computing’. And that’s perhaps what I invested in them for in the first place, mostly. What has really changed for me in the last week is my conviction in Fastly over the next few quarters. I will pay close attention to the earnings call and over the coming months. While I do have a long term perspective, I can’t just invest in a long term story but there needs to be execution too; what I had perceived as near term tailwinds for Fastly are increasingly beginning to look like headwinds. And like many on this board, I now think my money could likely do better elsewhere for a few quarters if that is the case (something I have learned in the last few months), and I am no longer content to simply wait to hear management’s comments in the earnings call before making a decision.

I’m ok that I had not sold immediately after the lowered guidance and waited a few days to think it through, in spite of selling for a lower share price than I would have got, because I need to make my own decisions and to understand the rationale behind them. I'm not ruling out reinitiating a smaller position in Fastly if I like what I hear with the earnings call, either. I've just taken my chips off the table, for now.

It has been a bruising week or two for my portfolio, taking a double whammy with the stocks that I reallocated to then dropping with the general crash. The mistake I really made was letting Fastly grow to an oversized position in the first place (22%) and not then trimming, holding way beyond my conviction, for some of the wrong reasons (I haven’t discussed them all on the board as OT). That mistake has cost me a significant dent into my YTD returns, but I am not discouraged - these are hopefully lessons to be learned. I guess being prepared to adapt your thinking and change your opinion is an important part of investing, I don't expect it'll perfect overnight :)

I'm looking forward to the earnings call!

ATF
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No. of Recommendations: 6
There is an even bigger problem looming over Fastly!

In post #72610 two days ago, BarrelHaus urged people to not be too precipitous to leave Fastly. He pointed out that Shopify hadn’t totally left them for Cloudflare, but while Cloudflare now seemed to be their main provider, Shopify was still using Fastly for checkout.

If you go to a CDN Finder tool and put in the main website, sure Shopify says NET (expected) but if you do www.shopify.com/checkout then guess what, its all FSLY.


Now I don’t even know what a CDN Finder tool is, so I took BarrelHaus on his word for this. But then, two posts later, he responded to someone who said TikTok had entirely moved off Fastly to Akami. What was apparently to BarrelHaus’ surprise, he responded:

I think you're right. I have been browsing through several different site maps within TikTok and have not been able to find a single capture of FSLY being used by TikTok and its all Akamai. Even searching for specific videos it seems to be all Akamai….


Now HERE is the huge problem!!!!!! BarrelHaus thus discovered two days ago, Wednesday, that TikTok was entirely off Fastly (as far as he could tell, anyway, which was pretty far. 😀) It was exactly just a week before, the Wednesday before in fact, that Fastly gave their pre-announcement that made the stock sink the way it has. It is INCONCEIVABLE that the CEO didn’t know when he sent out that announcement that TikTok was in the process of leaving or already left. How did he have the nerve to not mention that their largest customer (a 15% customer!!!!), was leaving to go to a different provider when he sent out that pre-announcement?

Talking about law suits! Maybe problems with the SEC? Talking about untrustworthy communication! Wow! Who will ever trust him again? And what will that do to the stock price.

Saul



I was with the Fool since the early 1990's, worked for them (they paid my AOL bill anyway) as MF Husker and was one of early Iomegans. What I see on this board which I've recently started following closely, reminds me a lot of that time, in a good way. BarrelHaus and his CDN Finder tool is the modern day version of hundreds of Fools in various cities combing their Best Buys and CDW's to see how many zipdrives were on the shelf. People break down 10Q's like MF Robert did ( he was CFO of Denon at the time and obviously knew his stuff). A lot of group effort, particularly Saul's, has become a haven from the nonsense of most stock boards. Well done!
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