Friday, Jul 2nd 2021

Cutting through the noise on Fastly’s new CFO


Fastly (FSLY), a software-defined, programmable edge cloud platform provider held in Titan’s Opportunities portfolio, recently announced its new CFO. Ron Kisling will replace Adriel Lares, who has served in the role since May 2016. Kisling previously spent three years as the CFO of Fitbit, where he led the company through its acquisition by Google this past January.

The company originally announced Lares’ departure in May as part of its Q1 2021 earnings report, just two quarters after FSLY’s acquisition of Signal Sciences, a web application and security solutions firm.

In the wake of that announcement, questions hovered around the company’s ability to meet 2021 earnings guidance, in the wake of tough year-over-year comparisons. These concerns contributed to the negative price reaction to Q1 2021 earnings. Following the announcement of Kisling’s hiring, rumors began swirling of Fastly being an acquisition target.

The CFO hire brings stability to Fastly’s executive team as it navigates an inflection point in the company’s life cycle. We view Kisling’s hire as a strategic move by Fastly’s Board to optimize the company's trajectory following the Signal Sciences acquisition.

Cutting through the noise, we also believe there is a growing probability that Kisling was brought on to not only ensure a seamless integration with Signal Sciences but also to position Fastly for a potential sale.

Comments made by Lares in the Q4 2020 earnings call indicated the difficulty of operating within the SaaS model of Signal Sciences and the usage-based model of Fastly. Focusing on the signal (pun intended) and reading through these facts, we believe that Lares’ decision to step down is more likely due to the heavy operational lift required to properly integrate Signal Sciences, rather than a disbelief in forward estimates.

Taking a step back, Fastly very much remains a “prove it” holding for us here at Titan. We remain bullish on the future of edge networks and believe Fastly can carve out a dominant role in this distributed computing paradigm if it can execute on its roll-out of Compute@Edge.

Maximizing the role of Signal Sciences in its product offering is the right path forward given the higher margins and growth coming from the security segment (in addition to the incremental upsell and cross-sell opportunities). We believe the company may be evaluating additional M&A opportunities given its $1B of cash on the Balance Sheet, following its convertible note offering earlier this year.

We will be maintaining our current position in Fastly as we continue checking on the company’s progress through industry experts leading up to the next earnings report. Fastly will need to demonstrate it is on the right path to compounding our investors’ capital through accelerating customer growth, sustained high retention rates, and most importantly, high visibility into the timing of general availability of Compute@Edge.

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