Fastly, Inc. - Annual Report: 2019 (Form 10-K)

---

---

---

•	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.

---

---

---

•	Developers must be empowered to innovate;

•	Platforms must innovate ahead of market demands while still being reliable, scalable, and secure; and

•	Vendors must provide exceptional flexibility and support.

•	Full programmability. Our powerful platform allows developers to write and deploy their custom code to push application logic to the edge. We believe that logic like A/B testing, URL redirects, paywall authentication, and location/language customization can all be executed faster and more efficiently at the edge;

•	Reusable modules. Our platform includes reusable modules based on commonly deployed custom code examples. We package and add these reusable modules to our platform, which do not require developer experience to implement.

•

Real-time visibility and control. Our edge cloud platform is built with instant visibility and control as a core tenet. We stream log data from our network edge in real time so developers can instantly see the impact of new code in production, troubleshoot issues as they occur and rapidly identify suspicious traffic. We also empower developers to make and roll back their own configuration or code changes on the fly; and

•	Agile development. Developers can build Fastly into their technology stack to power continuous integration and continuous deployment (“CI/CD") efforts. They can use our edge cloud platform to help

---

•	API acceleration. Accelerate and secure critical application programming interface (“API") responses at the edge for delightful application experiences, such as instant hotel lookup based on location and real-time inventory updates between retail stores and their online storefronts;

•	Internet of things ("IoT"). Process and secure data from connected devices at the edge for instant results for time-sensitive applications;

•	Cloud migration. Seamlessly migrate from data center to cloud, hybrid or multi-cloud environments, enabling the customer to take advantage of the functionality and cost savings of one or more cloud providers; and

•	Enabling blockchain. Cache and accelerate individual transactions on the blockchain in real time.

•

Software-centric approach at global scale. From the start, we realized that single purpose hardware-based solutions that rely on custom-designed chips are inflexible. Custom hardware, like routers, load balancers, and security appliances, do not have the flexibility to support the dynamic needs of the modern internet. We started with open source software like Varnish and Linux, then rewrote it to support the use cases of a multi-tenant, high-performance edge cloud. We created our own proprietary software-defined networking stack with built-in routing and load balancing, a storage system for optimal storage usage and performance, a massive data pipeline to send customer logs, a cache invalidation system that purges content around the world in an average of 150 milliseconds or less, and a proprietary control panel that allows our customers to update their edge application logic and configurations in seconds around the world. We architect the software to run on custom-designed servers built upon commodity components and network hardware so that we can control every aspect of the network, from request to response and drive as much utilization and scale as possible. Our software-centric approach is designed for better network efficiency and greater flexibility to scale as we add more services.

•

POP design. We built Fastly for the internet of today—meaning fewer POPs, each with massive scale and located at the key interconnection points of the internet. Our POPs are connected directly to the core internet, each connecting directly to core Internet Service Provider ("ISPs") and 78 Internet Exchange Points as of December 31, 2019 to offer high performance in long-tail content caching. We run fewer clusters of more powerful servers that provide superior performance for customers who expect updates to be pushed out to their global end-users nearly instantaneously. Legacy CDNs do not offer this benefit, as it is extremely difficult to update hundreds of thousands of servers around the world;

•

Server efficiency. We have a highly efficient global server footprint because we combine advanced server and network hardware with our world class software at each of our POPs. As of December 31, 2019, we had 2,216 servers. Our servers are optimized to handle the complex workloads of compute at the edge by using high-end Central Processing Units and significant amount of Random Access Memory to process Varnish Configuration Language ("VCL"). We use solid-state drives, for fast and constant lookup times, and modern 25 Gigabit Ethernet for robust bandwidth. This, combined with our algorithms and custom software, gives us the flexibility to scale while dramatically reducing operating burden; and

•	One network. We have built a single powerful, compliant network to support customers’ security and delivery needs:

---

◦	Our single network is designed to provide the massive scale needed to defend against today’s growing DDoS threats without sacrificing performance. The servers in our platform provide all of the features of our product suite, allowing rapid and predictable scaling; and

◦	We help meet customers’ Payment Card Industry ("PCI"), Health Insurance Portability and Accountability Act ("HIPAA"), and Service Organization Control ("SOC") needs without impacting performance. Because of our flexible routing and server architecture, we do not need to send PCI traffic off to a separate sub-optimal network.

•	Infrastructure-agnostic traffic distribution. Support enterprise hybrid and multi-cloud strategies by intelligently routing traffic across different cloud providers, or between cloud and on-premise data centers, regardless of location;

•	Efficient traffic spike management. Allow enterprises to accommodate traffic spikes by intelligently and rapidly distributing content requests across their network;

•	Live streaming at scale. Deliver highly-reliable live streaming experiences with minimal interruptions, even when concurrently streaming to large global audiences;

•	Responsive mobile applications. Serve rapidly-changing mobile content from the edge, enabling end-users to instantly access the very latest news updates, weather forecast, hotel availability, or store inventory from their mobile applications;

•

Operational agility. Our edge cloud platform minimizes risk through instant visibility and control. Security operation teams can use our real-time data feeds to see threats and exposures to vulnerabilities as they emerge. Our products are designed to make rule changes on the fly and update policies around the globe in seconds based on real-time traffic insights, without having to engage professional services. These features allow our security offerings to integrate into enterprise security software development cycles, thereby supporting modern DevSecOps practices.

•

Performance centric. Fastly’s security offerings allow developers to iterate and test code quickly, while providing security teams with tools that reduce risk without impeding performance. Our high-bandwidth, globally distributed network naturally scales to absorb disruptive DDoS attacks. Our WAF and bot detection solutions are built into our edge cloud platform, allowing us to protect web-based applications with minimal latency.

•

Serverless security. Fastly’s platform provides a secure, serverless development platform at the edge. It is designed to deploy custom applications, without impacting production traffic or having to worry about patching servers for the latest operating system vulnerabilities. Customers can spin up a sandbox environment which automatically executes code for a limited period of time and rapidly decommission it, significantly reducing the attack surface.

---

•	Freedom to try. Our free trial allows developers to sign up and start experimenting with our edge cloud platform in a frictionless, self-service manner;

•	Flexible support model. Developers are free to program on our edge cloud platform, taking advantage of our rich documentation and expertise of our developer community. For customers who require more guidance, we provide a range of support packages and access to deep technical expertise from front-of-line support staff to technical account managers; and

•	Partner friendly. Just as we expose the ability to program at the edge to our customer base, we extend that power and functionality to our partners as well. This allows our partners to build out applications that run at the edge, and provide a feature or service that is complementary to our platform. We enable these integrations with a focus on API-support and a large number of code libraries.

•

Invest in our technology platform. We intend to continue to invest in our large-scale, enterprise-grade edge cloud platform which is both developer-friendly and fully programmable. We will strengthen our investment in research and development so that we can add new and differentiated products on top of our edge cloud platform. Since the end of 2014, we have grown our research and development team by a factor of five, from 36 to 191 people as of December 31, 2019, deepening our talent across multiple functional groups;

•

Expansion into additional vertical markets. Our platform offers a broad range of capabilities, and our customers have diverse needs. To best serve these needs we have successfully adopted a vertical approach to our sales and marketing efforts. We intend to build upon our initial success in digital publishing, media and entertainment, technology, online retail, travel and hospitality, and financial technology services, while expanding into new markets over time;

•

Further enable channel partners. Our edge cloud platform is the backend of choice for many of the largest Platform as a Service ("PaaS") vendors serving the developer community. These PaaS vendors aggregate millions of unique web properties under one brand, using Fastly as their edge cloud. We believe that more and more web applications will be built on convenient and powerful out-of-the-box solutions offered by large PaaS vendors. Many of our solution partners are PaaS providers who built us into their platform to offer faster, more secure and scalable experience. Current examples include Brightcove, Shopify, Drupal, Magento, WIX, and Adobe Portfolio. As our partners expand their customer base, we will grow alongside them, providing us with exposure to millions of developers who will become familiar with us, and potentially become customers themselves;

•

Invest in marketing. Our developer customers have been our best marketers. Historically, we have grown based on word-of-mouth and delivering a great product, and have invested relatively small amounts in marketing. In year ended December 31, 2019, we spent a total of $71.1 million in sales and marketing. As we look towards our next stage of growth, we plan on significantly increasing our brand and digital marketing efforts, running campaigns that target both developers and business decision makers across different verticals;

•

Expand existing customer relationships. Over time, our customers have expanded their use of our platform. For the years ended December 31, 2019, December 31, 2018, and December 31, 2017, our DBNER was 135.5%, 132.0%, and 147.3%, respectively, highlighting the strength of our platform. Many of our largest customers have grown through a "land and expand" strategy. On average, our customers have increased their annual spend by more than 20% year over year since 2014, growing from an average last 12-months revenue of $35,000 to over $110,000 as of December 31, 2019. In more technically savvy organizations, developers have championed our solution, paving the way for us to engage with business decision makers. For more traditional organizations, we are often brought in to initially help facilitate a move to the cloud and from there we extend our product to support many other use cases. We plan to continually increase wallet-share over time for existing customers as we build out new products and features, and as customers continue to fully recognize the value of our platform;

---

•

Grow our technology ecosystem. We operate between the "big 3" origin cloud platforms and a growing community of companies that provide big data, machine learning, and security solutions. In this sense, we act as the unifying layer for a growing number of cloud services. Current partnerships and integrations include Sumo Logic, Amazon Web Services ("AWS"), Azure, and Google Cloud Platform. As customers consume more cloud and software as a service (“SaaS") offerings, we can create additional value and grow with our partners; and

•

Extend our global footprint. As our customer base grows, we plan to aggressively scale our network accordingly. For the years ended December 31, 2019 and December 31, 2018, 29% and 23%, respectively, of our revenue was generated from customers headquartered outside of the United States. We are expanding our global corporate footprint to support these international customers. As of December 31, 2019, we had 68 POPs strategically located in 53 markets, with more additions planned. We believe significant opportunity exists for further international growth.

•

Compute@Edge. Launched in beta in November 2019, this next generation serverless offering is intended to provide developers with a powerful new language-agnostic compute environment. From our inception, we have given developers the ability to use VCL to build more complex applications on our edge cloud platform. Compute@Edge is designed to support other popular coding languages. Like all our offerings, Compute@Edge is built to be secure, performant and scalable; at 35.4 microseconds it offers a 100x faster startup times than other solutions on the market.

•

Build on Fastly. This is a collection of 80+ code-based solutions designed to help developers solve problems faster and safer at the edge. Developers can take advantage of pre-built code developed by Fastly experts (and other customers) to do A/B testing, waiting rooms, website redirects, geofencing and much more on the edge. Step-by-step tutorials walk them through both simple configurations and more advanced solutions.

•	Edge Features. These are the building blocks which developers can use alongside our Build on Fastly solution library. Combining edge features with pre-built code from our library empowers developers to create complete solutions to solve problems at the edge.

•	Client Insights. Gives developers the ability to rapidly adjust the content served to end-users based on location, device type, and language detection.

•	Edge Dictionaries. Empower developers to make real-time decisions from every server in our network. Edge dictionaries act as a distributed database at the edge, made up of key-value pairs. For example, Edge Dictionaries allow customers to redirect end-users to a specific country site or update large referrer spam blacklists in real time.

•	Edge Access Control Lists ("ACLs"). Help mitigate evolving threats from attackers by letting developers make changes at scale. ACLs block bad internet protocol ("IP") addresses from visiting customer sites, and for added security, they can create their own allow-lists.

---

•	Dynamic Site Acceleration. Speeds up requests and responses between cache nodes in our POPs and customers’ origin servers, so their web and mobile content is served faster;

•

Origin Shield. Allows us to designate a specific POP to serve as a shield for a customer’s origin servers. When web content is refreshed, and multiple end-users request the new content simultaneously, it can lead to a deluge of requests hitting a customer’s origin server. This can result in poor web or application performance. With Origin Shield, we collapse all these content requests into a single request and hold it in queue at the Origin Shield POP. That allows us to go back to the customer’s origin server only once to retrieve the new content, then serve it to all end-users who requested it. This approach reduces costs for our customers, while improving performance for their end-users;

•

Instant Purge. Lets customers clear the cached copy of their content in an average of 150 milliseconds or less. We allow customers to send a command to our platform that invalidates an old version of their content throughout our global edge infrastructure. This causes a new version of content be retrieved from the application server the next time it is requested. This feature enables our customers to serve highly dynamic content at the edge more quickly and allows for delightful application experiences. Rapidly changing content like shopping cart items, flight search results, sports scores, or current weather conditions in any given location can all be served faster from the network edge;

•

Surrogate Keys. Allow customers to fine-tune purging by tagging related objects across their site with a key name and description, then purging by that key. They can purge their entire site of a given object or objects at once, without impacting performance. For example, they could purge any images and content related to discontinued sale items, discounted products, or outdated news across their site all in one go; and

•	Real-time Logging and Stats. Provide metrics and full visibility into end-user requests in real time from the network edge. Log traffic is encrypted using Transport Layer Security ("TLS") and logs can be streamed to most major logging endpoint solutions.

•	Live Streaming. Our platform is designed to concurrently deliver millions of near real-time, high-quality live streams to our customers’ viewers. Our edge cloud supports the delivery of all major HTTP video streaming formats, and we partner with multiple online video platform vendors to improve the flexibility and scale of live streaming workflows, while also reducing total cost of ownership;

•

Media Shield. Large streaming customers often route traffic across multiple CDNs for redundancy. Our Media Shield solution supports these efforts, while reducing total cost of ownership and improving visibility and performance. It does so by collapsing requests for the same video streaming content across all CDNs into one single request to the customer’s origin server. This reduces requests to origin and allows us to serve streaming content faster; and

•	Origin Connect. Ideal for companies moving more than one gigabyte of data, such as media, video, and streaming companies, Origin Connect provides a direct private network connection between an organization’s origin server and an Origin Shield POP. It is an effective way to lower transit costs, reduce engineering complexity, and improve reliability for high-volume streaming content.

•	DDoS. Our high-bandwidth, globally distributed network is built to absorb DDoS attacks without impacting performance. Customers can respond to attacks in real time, filtering malicious requests at the network edge, before they reach their origin.

---

•

WAF. Our WAF is designed to protect applications from malicious attacks that would otherwise compromise web servers. It is integrated into our edge cloud platform, minimizing the impact on performance, since we only inspect requests going to a customer’s origin. Customers get real-time access to security events and notifications from the edge and can make instant changes to their WAF rules via our API.

•	TLS. As part of our standard product, our platform terminates HTTPS connections at our network edge, offloading encrypted traffic from customer’s web servers for better performance. We provide a number of different certificate hosting options.

•	Platform TLS. Our Platform TLS offering is designed to allow customers with multiple web properties to manage TLS certificates at scale, while enabling a fast, secure experience for their end-users. It supports delivery and management of hundreds of thousands of certificates, supported by our worldwide TLS termination and acceleration solution.

•

Compliance. We speed up the caching and delivery of sensitive content at the edge, helping customers meet data compliance and privacy regulations such as HIPAA and the General Data Protection Regulation ("GDPR"), in addition to industry standards such as PCI Data Security Standard and SOC. Our Assurance Services offering includes support for additional documentation and audit procedures for customers with these needs.

•	Load Balancer. Our Layer 7 load balancer manages HTTP/HTTPS requests to a customer’s origin using granular content-aware routing decisions. We allow customers to manage traffic across multiple IaaS providers, data centers, and hybrid clouds. We also provide improved performance and cost savings over ADCs, especially during a spike or surge in traffic.

•

Image Optimizer. We offer a real-time image manipulation and delivery service and store transformations at the edge. When an image is requested, we resize it, adjust quality, crop/trim, change orientations, convert formats, and more, all on demand. Transforming images at the edge eliminates latency and reduces traffic to a customer’s origin servers, allowing them to save on infrastructure and egress costs.

•	Our edge cloud platform is designed to cache and rapidly deliver both frequently and infrequently requested on-demand videos. We significantly reduce the load on a customer’s origin servers while accelerating time to first frame. Our on-the-fly-packaging feature facilitates immediate playback, enhancing viewer experiences across multiple devices and platforms.

•	Our managed delivery service provides customers with maximum flexibility and control. We deploy our edge cloud platform on dedicated POPs within a customer’s private network, at locations of their choosing. This service can be used exclusively, or as part of a hybrid, multi-CDN strategy.

---

•	Google. A tight integration with Google Cloud Platform allows real-time logs to be streamed to any Google Cloud Platform big data service, including Google Cloud Storage, BigQuery, and Bigtable;

•	Microsoft. Our integration with Microsoft Azure allows real-time logs to be streamed to both Azure Blob Storage and Kusto;

•	Datadog. Datadog uses our API to pull in real-time stats and analytics for display in their dashboard;

•	Looker. Looker combines log data with other data sources in BigQuery, such as Google Analytics, Google Ads data, or security and firewall data. Customers can then run multiple queries against these data sets and present findings in Looker dashboards;

•	Sumo Logic. Sumo Logic integrates with our platform to offer more granular logging data for customers with large-scale analytics. Customers gain real-time insights into slow URLs, missing or most requested URLs, site performance by region, and more; and

•	Logentries. Logentries provides a one-click integration with our platform, making it easy for customers to quickly set up real-time logs.

•	Heroku. Heroku empowers companies to build, deliver, monitor, and scale applications. Our Heroku add-on lets developers seamlessly integrate their Heroku hosted applications with our edge cloud platform through the click of a button;

•	Magento. Magento, an Adobe company, provides a commerce platform that enables merchants to integrate digital and physical shopping experiences. Our Magento extension lets developers manage their entire content caching strategy from the Magento control panel while maintaining fast, reliable performance; and

•	Drupal and Wordpress. Drupal and Wordpress are CMS partners. They provide self-hosted solutions for customers to create and manage all the content on their websites. Our Drupal and Wordpress extensions allow developers to easily configure and manage their content caching strategy from within these CMS dashboards.

---

---

---

•	Integration Partners

•	Solutions Partners

•	Referral and Reseller Partners

•	Central Cloud Partners

•	Legacy CDNs like Akamai, Limelight, EdgeCast (part of Verizon Digital Media), Level3, and Imperva (for security);

•	Small business focused CDNs like InStart, Cloudflare, StackPath, and Section.io;

---

•	Cloud providers who are starting to offer compute functionality at the edge like Amazon’s CloudFront, AWS Lambda, and Google Cloud Platform; and

•	Traditional data center and appliance vendors like F5, Citrix, A10 Networks, Cisco, Imperva, Radware, and Arbor, as well as networks that offer a range of on-premise solutions for load balancing, WAF, and DDoS.

•	Platform scalability and performance;

•	Global network coverage;

•	Platform reliability and security;

•	Ease of integration and programmability;

•	Credibility with developers;

•	Ability to support modern application development processes;

•	Brand awareness, reputation, and trust;

•	Strength of our sales and marketing efforts;

•	Quality of customer support; and

•	Price and network cost savings.

---

---

---

•	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 customers;

---

•	injury to our reputation and brand;

•	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.

---

---

•	our platform’s functionality, scalability, performance, ease of use, reliability, security availability, and cost effectiveness relative to that of our competitors’ products and services;

•	our global network coverage;

•	our ability to 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; and

•	our ability to protect our intellectual property.

---

---

•	lead to the dissemination of proprietary information or sensitive, personal, or confidential data about us, our employees, or our customers—including personally identifiable information of individuals involved with our customers and their end-users;

•	lead to interruptions or degradation of performance in our platform;

•	threaten our ability to provide our customers with access to our platform;

•	generate negative publicity about us;

•	result in litigation and increased legal liability or fines; or

•	lead to governmental inquiry or oversight.

---

---

•	the popularity of our customers’ offerings as compared to those offered by companies that do not use our platform;

•	adoption of new technologies that allow end-users to access content from a core cloud without having to access our network;

•	customers, particularly large internet platform companies, utilizing their own data centers and implementing delivery approaches that limit or eliminate reliance on third-party providers like us; and

•	macro-economic market and industry pressures.

---

---

•	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.

•	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;

•	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;

•	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.

•	address new and developing markets, such as large enterprise customers outside the United States;

•	control expenses;

•	recruit, hire, train, and manage additional qualified engineers;

•	recruit, hire, train, and manage additional sales and marketing personnel;

•	maintain our corporate culture;

•	expand our international operations;

•	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; and

•	successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our products.

---

•	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 increased legal and accounting expenses associated with being a public company.

•	the effectiveness of our sales force, particularly new salespeople, 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; and

•	competitive conditions.

---

•	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;

•	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.

---

---

---

•	changes in a specific country’s or region’s political or economic conditions;

•	greater difficulty collecting accounts receivable and longer payment cycles;

•	potential or unexpected changes in trade relations, regulations, or laws;

•	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;

•	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;

•	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 chose 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;

•	political instability or terrorist activities;

•	limitations in the ability to travel caused by public health issues, such as the recent outbreak of coronavirus (COVID-2019);

•	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.

---

---

•	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, including the Tax Act;

•	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.

---

---

---

•	hired additional full-time accounting resources with appropriate levels of experience;

•	continue to actively recruit for open positions within the accounting department and will, as necessary, supplement any interim staffing needs with temporary resources;

•	reallocated responsibilities across the accounting organization to ensure that the appropriate level of knowledge and experience is applied based on risk and complexity of transactions and tasks under review;

•	strengthened our internal policies, processes and reviews, including substantial completion of the formal documentation thereof;

•	implemented a formal financial month-end close policy and process; and

•	engaged a professional accounting services firm to help us assess and commence documentation of our internal controls for complying with the Sarbanes-Oxley Act.

---

---

---

---

---

---

•	actual or anticipated fluctuations in our financial condition and operating results;

•	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 downtime and problems;

•	our involvement in litigation;

•	changes in senior management or key personnel;

•	the trading volume of our Class A common stock;

•	changes in the anticipated future size and growth rate of our market; and

•	general economic, regulatory, and market conditions.

---

---

---

•	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 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;

•	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;

•	reflect our two classes of common stock as described above.

•	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.

---

---

---

•	From January 1, 2019 to May 17, 2019, we granted stock options to purchase an aggregate of 2,119,092 shares of Class B common stock at exercise prices ranging from $8.42 to $15.00 per share to a total of 258 employees under our 2011 Equity Incentive Plan; and

•	From January 1, 2019 to May 17, 2019, we issued an aggregate of 1,330,318 shares of Class B common stock upon the exercise of options under our 2011 Equity Incentive Plan at exercise prices ranging from $0.03 to $8.24 per share, for an aggregate purchase price of $2.5 million.

---

---

---

---

---

---

---

---

---

---

---

(1)	Includes stock-based compensation expense as follows:

---

---

---

---

---

---

(1)	Includes stock-based compensation expense as follows:

---

(1)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics” for our definitions of these metrics.

---

---

---

(1)	Operating lease represent total future minimum rent payments under non-cancelable operating lease agreements, net of sublease income of $1.2 million.

(2)	Purchase obligations represent total future minimum payments under contracts with our cloud infrastructure provider, network service providers, and other vendors. Purchase obligations exclude agreements that are cancelable without penalty.

(3)	Debt represents principal and interest payments under our loan and security agreements.

---

---

•	Identification of the contract, or contracts, with a customer;

•	Identification of the performance obligations in the contract;

•	Determination of the transaction price;

•	Allocation of the transaction price to the performance obligations in the contract; and

•	Recognition of revenue when, or as, we satisfy a performance obligation.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

•

Fair Value of Common Stock. Because our common stock was not publicly traded until the completion of the IPO, the Board considered numerous objective and subjective factors to determine the fair value of our Common Stock at each meeting at which awards were approved. These factors included, but were not limited to (i) contemporaneous third-party valuations of Common Stock; (ii) the rights and preferences of Series Preferred relative to Common Stock; (iii) the lack of marketability of Common Stock; (iv) developments in the business; and (v) the likelihood of achieving a liquidity event, such as an IPO or sale of the Company, given prevailing market conditions.

•	Expected Term. The expected term represents the period that our stock-based awards are expected to be outstanding. The expected term assumptions were determined based on the vesting terms, exercise terms, and contractual lives of the options. The expected term was estimated using the simplified method allowed under Securities and Exchange Commission (SEC) guidance.

•	Volatility. Since we do not have a long trading history of our common stock, the expected volatility is determined based on the historical stock volatilities of its comparable companies. Comparable companies consist of public

---

•	Risk-free Interest Rate. The risk-free interest rate used in the Black-Scholes option pricing model is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equivalent to that of the options for each expected term.

•	Dividend Yield. The expected dividend assumption is based on our current expectations of our anticipated dividend policy. We have no history of paying any dividends and therefore used an expected dividend yield of zero.

---

---

---

•	identification of the contract, or contracts, with a customer;

•	identification of the performance obligations in the contract;

•	determination of the transaction price;

•	allocation of the transaction price to the performance obligations in the contract; and

•	recognition of revenue when, or as, we satisfy a performance obligation.

---

---

---

(1)	Balance as of January 1, 2019 represents deferred commissions as adjusted for Topic 606.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

(1)	Class A common stock includes the issuance of 12.9 million shares of Class A common stock issued by us in connection with our IPO and shares issued upon the exercise of options subsequent to our IPO.

(2)	Class B common stock includes, for all periods presented, the conversion of all of our preferred stock into an aggregate of 53.6 million shares of our Class B common stock upon closing of the IPO.

---

---

---

---

•	The first award for 109,027 shares will vest as to 12.5% of the total RSUs on the 15th of August 2020 and thereafter in 14 equal quarterly installments (i.e. 6.25% of the total RSUs will vest per quarter), in each case subject to Mr. Bergman’s continued service with us;

•

The second award for 43,959 shares will vest following the Board’s (or a committee thereof) determination that Mr. Bergman has achieved Company and individual performance targets for 2020, with a performance target of 100% and a maximum performance target of 200%. Following such determination, the shares will vest, based on the extent such targets were achieved, in four equal quarterly installments on the 15th of February, May, August, and November 2021, in each case subject to Mr. Bergman’s continued service with us; and

•	The third award for 17,023 shares will vest as to 50% of the RSUs on the 15th of August 2020 and thereafter as to 25% of the RSUs on November 15, 2020 and February 15, 2021, in each case subject to Mr. Bergman’s continued service with us.

---

•	The first award for 174,443 shares will vest as to 12.5% of the total RSUs on the 15th of August 2020 and thereafter in 14 equal quarterly installments (i.e. 6.25% of the total RSUs will vest per quarter), in each case subject to Mr. Bixby’s continued service with us;

•

The second award for 43,959 shares will vest following the Board’s (or a committee thereof) determination that Mr. Bixby has achieved Company and individual performance targets for 2020, with a performance target of 100% and a maximum performance target of 200%. Following such determination, the shares will vest, based on the extent such targets were achieved, in four equal quarterly installments on the 15th of February, May, August, and November 2021, in each case subject to Mr. Bixby’s continued service with us; and

•	The third award for 17,023 shares will vest as to 50% of the RSUs on the 15th of August 2020 and thereafter as to 25% of the RSUs on November 15, 2020 and February 15, 2021, in each case subject to Mr. Bixby’s continued service with us.

---

•	hired additional full-time accounting resources with appropriate levels of experience

•	continue to actively recruit for open positions within the accounting department and will, as necessary, supplement any interim staffing needs with temporary resources;

•	reallocated responsibilities across the accounting organization to ensure that the appropriate level of knowledge and experience is applied based on risk and complexity of transactions and tasks under review;

•	strengthened our internal policies, processes and reviews, including substantial completion of the formal documentation thereof;

•	implemented a formal financial month-end close policy and process; and

•	engaged a professional accounting services firm to help us assess and commence documentation of our internal controls for complying with the Sarbanes-Oxley Act.

---

---

---

---

---

+	Indicates management contract or compensatory plan.

---

---