Edgio Reports First Quarter 2023 Results

Edgio, Inc. (Nasdaq: EGIO) (Edgio), the platform of choice to power unmatched speed, security and simplicity at the edge, today reported financial results for the first quarter ended March 31, 2023 along with the filing of its Quarterly Report on Form 10-Q for the period ended March 31, 2023. The company expects to file its Quarterly Report on Form 10-Q for the period ended June 30, 2023 (“Q2 2023 Form 10-Q”), in September 2023. Due to the delay in filing the Q2 2023 Form 10-Q, the company expects a notice from The NASDAQ Stock Market LLC (“Nasdaq”) stating that it is not in compliance with the requirements for continued listing under Nasdaq Listing Rule 5250(c)(1) (the “Listing Rule”). The company expects to remedy this deficiency with the filing of the Q2 2023 Form 10-Q in September 2023.

“In the first quarter, we took substantial steps to accelerate progress in each of our product offerings. In Applications, we strengthened our security offering by adding DDoS scrubbing and enhanced WAAP capabilities, further establishing Edgio as a leading security company. In Media, we brought on streaming industry pioneer, Eric Black, as GM/ CTO to spearhead growth of our entire media portfolio,” said Bob Lyons, President and CEO of Edgio. "These enhanced products, new leadership, and improved execution are resulting in reduced churn, increased pipeline conversion, higher attach rates, and increased cross sell/upsell opportunities. This is reflected in our quarter-to-date Applications bookings, which are already ahead of second quarter levels. We expect this momentum to continue, and combined with our cost savings plans, we believe we have established a strong foundation for profitable growth in 2024."

Recent Business Highlights:

• Continued new product momentum with API Security solution in General Availability
• Recognized as a leader in Content Delivery Networks and Edge Computing by technology research firm Frost & Sullivan
• QTD Applications bookings already ahead of second quarter levels with new client wins and existing client expansion
• QTD Applications bookings are up 90% from total bookings in 1Q 2023
• On track to operationalize approximately $85-90 million of expected run rate cost savings, by end of 2023 and forecasted higher by end of 2024

First Quarter Financial highlights:

Revenue

• Revenue of $101.9 million, 84.2% year over year growth due to the inclusion of the Edgecast acquisition. Sequential decline of 6.3% was driven by seasonality and previously communicated churn.

Gross margin

• GAAP gross margin was 30.4%, compared to 30.4% year over year and 36.6% quarter over quarter.
• Non-GAAP gross margin was 31.2%, compared to 31.1% year over year and 38.1% quarter over quarter.
• Cash gross margin was 34.7%, compared to 41.7% year over year and 42.3% quarter over quarter.

Operating expenses

• GAAP operating expenses, including share-based compensation of $4.5 million, restructuring charges of $0.5 million to achieve cost synergies, restatement related expenses of $2.2 million, and acquisition and legal related expenses of $1.0 million, were 62.4% of revenue versus 78.9% in the fourth quarter of 2022.
• Non-GAAP operating expenses, excluding share-based compensation, restructuring charges, restatement related expenses, and acquisition and legal related expenses, were 54.3% of revenue versus 57.3% in the fourth quarter of 2022.
• Cash operating expenses, excluding share-based compensation, restructuring charges, restatement related expenses, and acquisition and legal related expenses, depreciation and amortization were 48.8% of revenue versus 51.6% in the fourth quarter of 2022. Sequential decline in cash operating expenses was primarily due to realization of cost savings.

Adjusted EBITDA

• Adjusted EBITDA for the quarter was a loss of $14.4 million, compared to a loss of $10.1 million in the fourth quarter of 2022 due to lower gross profit partially offset by realization of cost savings.

Capital Expenditure

• Capital expenditure, net of payments from ISPs, during the quarter was $3.6 million, or 3.6% of revenue.
• We expect to continue 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 were $48.2 million for the quarter, compared to $74.0 million for the fourth quarter of 2022.
• Cash flow used by operations during the quarter was $24.1 million.

2023 Guidance:

"With our new products and refined go-to-market, combined with the execution on our target run rate cost savings of approximately $85-90 million by year-end 2023, we remain optimistic about our profitable growth prospects in 2024,” said Stephen Cumming, CFO. “As we detailed last quarter, we expect to deliver mid to high single digit sequential decline in the second quarter of 2023 and then expect the normal increase due to seasonality in the fourth quarter. We expect cash gross margin to keep pace with revenue trends consistent with having a high fixed cost structure. We expect second quarter 2023 Adjusted EBITDA loss to be the bottom for the year with reduced losses in the third quarter and break even in the fourth quarter."

For 2023, our guidance is unchanged and we are currently 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%.
• Capital expenditure between $10 million and $13 million, implying 2.5% and 3.5% of revenue.

Financial Tables