Edgio, Inc. (Nasdaq: EGIO), the platform of choice to power unmatched speed, security and simplicity at the edge, today reported financial results for the fourth quarter ended December 31, 2022. The company expects to file its Quarterly Reports on Form 10-Q for the period ending March 31, 2023, in August, and for the period ending June 30, 2023, shortly thereafter.
“With the restatement behind us, I am pleased to be announcing our Q4 2022 results, reconnecting with our analysts and investors, and providing an update on the significant progress we have made to become an edge solutions company. Since our last earnings call, we have launched award winning products, bolstered our leadership team with industry experts, revitalized our sales and marketing efforts, and expanded our channel partnerships,” said Bob Lyons, President and CEO of Edgio. “We are already seeing tangible benefits in pipeline, bookings and new customer interactions. For 2023, our goal is to achieve Adjusted EBITDA breakeven by year-end on the back of $85-90 million of expected run rate savings, churn reduction and higher pipeline conversion, which we believe should provide the foundation for profitable growth in 2024.”
Recent Business Highlights:
- New product momentum accelerates with launches of Edgio Applications v7, Advanced Bot Management and DDoS scrubbing.
- Notable wins for Applications solutions include a large mattress retailer in the U.S., a fast fashion retailer in China, a global sporting event association, a premium automaker from Europe and a leading premier league football club.
- Won the Web Application Security award from Cyber Defense Magazine (CDM), at the RSA Conference 2023 and, “Best of Show Award” for Uplynk at National Association of Broadcasters 2023.
- Recognized as a leader by technology research firms such as IDC, Frost & Sullivan and GIGAOM.
- Achieved Amazon Web Services (AWS) Retail Competency designation with Edgio’s Applications Platform and Uplynk now available in AWS Marketplace.
- Grew Applications pipeline by approximately 80% from the beginning of the year, with Applications bookings up nearly 100% sequentially in 2Q23
- On track to operationalize approximately $85-90 million of expected cost savings on a run rate basis, by end of 2023.
- Bolstered leadership team with the appointment of Eric Black as CTO/ GM of Media and Todd Hinders as Chief Revenue Officer.
- Launched API Security solution in General Availability
Fourth Quarter Financial Highlights:
Revenue
- Revenue of $108.8 million, 90% year over year growth.
Gross margin
- GAAP gross margin was 36.6%, compared to 35.7% year over year and 29.6% quarter over quarter.
- Non-GAAP gross margin was 38.1%, compared to 36.1% year over year and 31.4% quarter over quarter.
- Cash gross margin was 42.3%, compared to 46.4% year over year and 41.2% quarter over quarter.
Operating expenses
- GAAP operating expenses, including share-based compensation of $7.9 million, restructuring charges of $10.9 million to achieve cost synergies, and acquisition and legal related expenses of $6.2 million, were 78.9% of revenue versus 71.3% in the third quarter of 2022.
- Non-GAAP operating expenses, excluding share-based compensation, restructuring charges, and acquisition and legal related expenses, were 57.2% of revenue versus 50.8% in the third quarter of 2022.
- Cash operating expenses, excluding share-based compensation, restructuring charges, acquisition and legal related expenses, depreciation and amortization were 51.6% of revenue versus 46.4% in the third quarter of 2022.
Adjusted EBITDA
- Adjusted EBITDA for the quarter was a loss of $10.1 million, compared to a loss of $5.7 million in the third quarter of 2022.
Capital Expenditure
- Capital Expenditure, net of payments from ISPs, during the quarter was $4.5 million, or 4% of revenue and for 2022 was $23.0 million or 7% of revenue.
- We expect to be efficient with our capital expenditure as a result of stronger operational discipline, leveraging our excess capacity and due to higher revenue contribution from software solutions that have lower capital requirements.
Cash, Cash Equivalents, and Marketable Securities
- Cash, cash equivalents, and marketable securities was $74.0 million for the fourth quarter ended December 31, 2022, compared to $70.8 million for the third quarter ended September 30, 2022, and $79.3 million for the fourth quarter ended December 31, 2021.
- Cash flow provided by operations during the quarter was $8.1 million and cash flow used in operations year-to-date was $11.7 million.
2023 Guidance:
"We remain optimistic on Edgio’s transformation and our ability to generate long-term value for our shareholders. During the first half of the year, we experienced a lengthening of sales cycles due to softening macroeconomic conditions and natural uncertainty that comes with a restatement,” said Stephen Cumming, Chief Financial Officer. “However, with the restatement behind us, new best-of-breed products in the market and refined go-to-market strategies exhibiting positive results, we expect to build on our pipeline and improve conversion in the coming quarters. Moreover, we continue to align our cost structure with our revenue baseline and prioritize our margins and cash flow in the near-term. We believe this structure will reduce the fixed cost in the business, further moderating our breakeven point and increasing our cash flow potential."
For 2023, we are expecting:
- Revenue between $392 million and $398 million.
- Adjusted EBITDA range of negative $37 million to negative $31 million, implying Adjusted EBITDA margin between negative 9.5% and negative 8%. We expect Adjusted EBITDA to breakeven in 4Q23.
- Capital expenditure between $10 million and $13 million, implying 2.5% and 3.5% of revenue.
Financial Tables
| Edgio, Inc. | ||||||||||||
| Consolidated Balance Sheets | ||||||||||||
| (In thousands, except per share data) | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
2022 | 2022 | 2021 | ||||||||||
| As Restated | As Restated | |||||||||||
| (Unaudited) | ||||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 55,275 | $ | 59,306 | $ | 41,918 | ||||||
| Marketable securities | 18,734 | 11,444 | 37,367 | |||||||||
| Accounts receivable, net | 84,627 | 102,963 | 33,528 | |||||||||
| Income taxes receivable | 105 | 59 | 61 | |||||||||
| Prepaid expenses and other current assets | 36,374 | 35,799 | 17,810 | |||||||||
| Total current assets | 195,115 | 209,571 | 130,684 | |||||||||
| Property and equipment, net | 73,467 | 105,528 | 40,511 | |||||||||
| Operating lease right of use assets | 5,290 | 6,680 | 6,338 | |||||||||
| Deferred income taxes | 2,338 | 2,745 | 1,893 | |||||||||
| Goodwill | 169,156 | 171,065 | 114,511 | |||||||||
| Intangible assets, net | 91,661 | 67,738 | 14,613 | |||||||||
| Other assets | 5,353 | 7,820 | 5,525 | |||||||||
| Total assets | $ | 542,380 | $ | 571,147 | $ | 314,075 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 52,776 | $ | 38,155 | $ | 10,624 | ||||||
| Deferred revenue | 9,286 | 7,048 | 4,034 | |||||||||
| Operating lease liability obligations | 4,557 | 4,396 | 1,861 | |||||||||
| Income taxes payable | 3,133 | 433 | 873 | |||||||||
| Financing obligations | 6,346 | 6,314 | 4,648 | |||||||||
| Other current liabilities | 76,160 | 86,645 | 19,511 | |||||||||
| Total current liabilities | 152,258 | 142,991 | 41,551 | |||||||||
| Convertible senior notes, net | 122,631 | 122,416 | 121,782 | |||||||||
| Operating lease liability obligations, less current portions | 9,181 | 10,511 | 9,616 | |||||||||
| Deferred income taxes | 596 | 95 | 308 | |||||||||
| Deferred revenue, less current portion | 2,949 | 2,938 | 116 | |||||||||
| Financing obligations, less current portion | 13,784 | 14,243 | 7,851 | |||||||||
| Other long-term liabilities | 1,658 | 710 | 777 | |||||||||
| Total liabilities | 303,057 | 293,904 | 182,001 | |||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders' equity: | ||||||||||||
| Convertible preferred stock, $0.001 par value; 7,500 shares authorized; no shares issued and outstanding | - | - | - | |||||||||
| Common stock, $0.001 par value; 300,000 shares authorized; 22,232, 221,583, and 134,337 shares issued and outstanding at December 31, 2022, September 30, 2022 and December 31, 2021, respectively | 222 | 222 | 134 | |||||||||
| Common stock contingent consideration | 16,300 | 16,300 | - | |||||||||
| Additional paid-in capital | 807,507 | 800,697 | 576,807 | |||||||||
| Accumulated other comprehensive loss | (11,665 | ) | (13,462 | ) | (8,345 | ) | ||||||
| Accumulated deficit | (573,041 | ) | (526,514 | ) | (436,522 | ) | ||||||
| Total stockholders' equity | 239,323 | 277,243 | 132,074 | |||||||||
| Total liabilities and stockholders' equity | $ | 542,380 | $ | 571,147 | $ | 314,075 | ||||||
| Edgio, Inc. | |||||||||||||||||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||
| December 31, | September 30, | Percent | December 31, | Percent | December 31, | December 31, | Percent | ||||||||||||||||||||||
2022 | 2022 | Change | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||
| As Restated | As Restated | As Restated | |||||||||||||||||||||||||||
| Revenue | $ | 108,841 | $ | 110,832 | -2 | % | $ | 57,178 | 90 | % | $ | 338,598 | $ | 201,115 | 68 | % | |||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||||||
| Cost of services (1) | 64,356 | 67,140 | -4 | % | 30,876 | 108 | % | 202,887 | 122,687 | 65 | % | ||||||||||||||||||
| Depreciation - network | 4,629 | ||||||||||||||||||||||||||||
