Edgio Inc.

08/08/2022 | Press release | Distributed by Public on 08/08/2022 14:03

Edgio Reports Second Quarter Financial Results

Record second quarter revenue of $74.3 million, up 54% year over year

Raises synergy target from Edgecast acquisition to $60 million

Raises 2022 revenue guidance and issues 2023 outlook

TEMPE, Ariz.--(BUSINESS WIRE)-- Edgio, Inc. (Nasdaq: EGIO), securely powering the most performant applications, delivery, and streaming experiences at the edge, today reported strong financial results for the second quarter ended June 30, 2022. Continuing four consecutive quarters of improved profitability, expanding market share, and extending its product portfolio -bolstered by two transformative acquisitions - Edgio's solutions are demonstrating value and delivering meaningful impact.

"We continue to successfully execute on our multi-year transformation plan. In the past 12 months, we have completed two acquisitions, overhauled all aspects of our operating model, removed significant costs, and implemented a new growth-oriented commercial team. Our solutions are demonstrating proof of value, our clients are doing more with us as we innovate our technology business and continue to develop solutions to respond to dynamically evolving needs. While our strategy benefits from sector tailwinds, our innovation will allow us to continue to capture market share, sustain growth and improve profitability," said Bob Lyons, President and Chief Executive Officer.

"Second quarter 2022 revenue was ahead of plan and a historical best as we continue building on the momentum established late last year. While we do not intend to provide 2023 guidance until later this year, we have completed our initial bottom-up outlook for next year. We remain very excited about these transformative acquisitions and the foundation now in place to support our strategic objective of being the global leader in edge-enabled solutions for the outcome buyer - a technology company that can deliver continuously improving growth and profitability to our shareholders," said Lyons.

Q2 2022 highlights:

Revenue of $74.3 million, an expansion of 54% from the previous year:

  • Limelight contributed $61.5 million, a 27% year over year expansion, resulting from core business growth and the addition of Layer0 revenue.
  • Edgio had its third consecutive quarter of double-digit growth, a clear indication of the company's ability to capture market share.
  • Edgecast contributed $12.8 million in the quarter.

Gross margin was 30%, up 1050 basis points year over year:

  • A large in-quarter capacity acquisition and the integration of Edgecast's excess network capacity had a temporary negative impact.
  • New capacity will support planned Q3 and Q4 increased demand resulting from new content, Thursday Night Football and a large software client committing to double their traffic.
  • Online capacity adequately mitigates previously highlighted supply chain concerns.

Edgio's solutions: A foundation for continued growth and profitability improvement:

Edgio AppOps provides the most powerful, comprehensive integrated cloud security, development and CDN solution suite in the world.

Edgio Delivery, the second largest and the most performant edge delivery platform, boasts approximately 230 terabits per second and is delivered across more than 300 global PoPs.

Edgio Streaming is a mission-critical streaming platform that supports some of the most demanding, well-known companies with a unique ability to capture usage data that can be used to continuously improve viewer experience. Edgio will manage more than 30,000 live events and insert over 50 billion ads for clients this year.

Updating 2022 Guidance:

"We have implemented the first phase of our target operating model and have a clear line of sight to achieving our targeted pro forma financial performance. Based on current conditions, we are updating guidance for the remainder of 2022 as follows," said Dan Boncel, Chief Financial Officer.

Edgio, Inc.
2022 Guidance
August 2022 April 2022
Revenue $380 to $390 million $240 to $250 million
Adjusted EBITDA $13 to $16 million $24 to $28 million
Capital expenditures Less than 10% of revenue $20 to $25 million

Forward-Looking Outlook

"While we will not provide 2023 guidance until later this year, we have completed our initial deep dive combined pro-forma analysis and would like to share our initial outlook," continued Boncel.

  • The company completed the Edgecast acquisition on June 15 and has successfully implemented the first phase of integration.
  • Management has identified additional synergy opportunities beyond the original $50 million and now expects at least $60 million in annualized run rate synergies.
  • Management has achieved $17.5 million of synergies to date, well ahead of plan.
  • Initial 2023 revenue outlook of between $550 and $560 million, and adjusted EBITDA that exceeds $65 million.
  • An implied revenue expansion of 44% and adjusted EBITDA margin expansion from 4% in 2022 to 12% in 2023.
  • Approximately 45% of total revenue falling into the high margin and recurring profile.

Financial Tables

EDGIO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
June 30, March 31, December 31,

2022

2022

2021

(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents

$

55,175

$

27,175

$

41,918

Marketable securities

22,158

34,751

37,367

Accounts receivable, net

108,445

55,040

42,217

Income taxes receivable

58

63

61

Prepaid expenses and other current assets

32,107

16,044

13,036

Total current assets

217,943

133,073

134,599

Property and equipment, net

106,059

34,792

33,622

Operating lease right of use assets

7,124

6,064

6,338

Marketable securities, less current portion

40

40

40

Deferred income taxes

2,866

1,822

1,893

Goodwill

163,489

113,463

114,511

Intangible assets, net

72,655

13,827

14,613

Other assets

7,334

4,779

5,485

Total assets

$

577,510

$

307,860

$

311,101

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

19,800

$

15,599

$

11,631

Deferred revenue

4,790

2,189

3,266

Operating lease liability obligations

4,755

1,754

1,861

Income taxes payable

262

215

873

Other current liabilities

75,391

20,403

19,292

Total current liabilities

104,998

40,160

36,923

Convertible senior notes, net

122,202

121,991

121,782

Operating lease liability obligations, less current portions

11,352

9,209

9,616

Deferred income taxes

100

303

308

Deferred revenue, less current portion

1,530

282

116

Other long-term liabilities

716

721

777

Total liabilities

240,898

172,666

169,522

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; 219,706, 138,178 and 134,337 shares issued and outstanding at June 30, 2022, March 31, 2022 and December 31, 2021, respectively

220

138

134

Additional paid-in capital

793,522

590,249

576,807

Contingent consideration

16,900

-

-

Accumulated other comprehensive loss

(11,413

)

(9,004

)

(8,345

)

Accumulated deficit

(462,617

)

(446,189

)

(427,017

)

Total stockholders' equity

336,612

135,194

141,579

Total liabilities and stockholders' equity

$

577,510

$

307,860

$

311,101

EDGIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended

June 30,

March 31,

Percent

June 30,

Percent

June 30,

June 30,

Percent

2022

2022

Change

2021

Change

2022

2021

Change

Revenue

$

74,312

$

57,959

28

%

$

48,348

54

%

$

132,270

$

99,543

33

%

Cost of revenue:
Cost of services (1)

46,088

35,070

31

%

32,976

40

%

81,157

66,021

23

%

Depreciation - network

5,903

5,089

16

%

5,929

0

%

10,992

11,608

-5

%

Total cost of revenue

51,991

40,159

29

%

38,905

34

%

92,149

77,629

19

%

Gross profit

22,321

17,800

25

%

9,443

136

%

40,121

21,914

83

%

Gross profit percentage

30.0

%

30.7

%

19.5

%

30.3

%

22.0

%

Operating expenses:
General and administrative (1)

26,927

15,833

70

%

7,515

258

%

42,760

20,412

109

%

Sales and marketing (1)

10,946

7,627

44

%

5,784

89

%

18,573

15,631

19

%

Research & development (1)

12,161

9,577

27

%

5,187

134

%

21,738

11,315

92

%

Depreciation and amortization

1,508

1,032

46

%

549

175

%

2,540

1,089

133

%

Restructuring charges

4,368

698

526

%

2,155

103

%

5,066

9,028

-44

%

Total operating expenses

55,910

34,767

61

%

21,190

164

%

90,677

57,475

58

%

Operating loss

(33,589

)

(16,967

)

98

%

(11,747

)

186

%

(50,556

)

(35,561

)

42

%

Other income (expense):
Interest expense

(1,315

)

(1,313

)

0

%

(1,305

)

1

%

(2,628

)

(2,591

)

1

%

Interest income

33

27

22

%

42

-21

%

60

87

-31

%

Other, net

(1,146

)

(713

)

61

%

(440

)

160

%

(1,859

)

(655

)

184

%

Total other expense

(2,428

)

(1,999

)

21

%

(1,703

)

43

%

(4,427

)

(3,159

)

40

%

Loss before income taxes

(36,017

)

(18,966

)

90

%

(13,450

)

168

%

(54,983

)

(38,720

)

42

%

Income tax (benefit) expense

(19,589

)

206

NM

248

NM

(19,383

)

507

NM

Net loss

$

(16,428

)

$

(19,172

)

-14

%

$

(13,698

)

20

%

$

(35,600

)

$

(39,227

)

-9

%

Net loss per share:
Basic

$

(0.11

)

$

(0.14

)

$

(0.11

)

$

(0.25

)

$

(0.31

)

Diluted

$

(0.11

)

$

(0.14

)

$

(0.11

)

$

(0.25

)

$

(0.31

)

Weighted average shares used in per share calculation:
Basic

151,776

135,528

126,050

143,652

125,170

Diluted

151,776

135,528

126,050

143,652

125,170

(1)

Includes share-based compensation (see supplemental table for figures)

EDGIO, INC.
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2022

2022

2021

2022

2021

Share-based compensation:
Cost of services

$

326

$

408

$

458

$

734

$

704

General and administrative

2,166

2,103

1,874

4,269

7,902

Sales and marketing

1,376

1,181

395

2,557

958

Research and development

3,423

3,320

614

6,743

985

Restructuring and transition related charges

-

-

917

-

2,271

Total share-based compensation

$

7,291

$

7,012

$

4,258

$

14,303

$

12,820

Depreciation and amortization:
Network-related depreciation

$

5,903

$

5,089

$

5,929

$

10,992

$

11,608

Other depreciation and amortization

336

246

549

582

1,089

Amortization of intangible assets

1,172

786

-

1,958

-

Total depreciation and amortization

$

7,411

$

6,121

$

6,478

$

13,532

$

12,697

Net increase (decrease) in cash, cash equivalents and marketable securities:

$

15,407

$

(17,359

)

$

2,608

$

(1,952

)

$

(4,187

)

End of period statistics:
Approximate number of active clients

1,000

577

533

1,000

533

Number of employees and employee equivalents

1,317

556

459

1,317

459

EDGIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2022

2022

2021

2022

2021

Operating activities
Net loss

$

(16,428

)

$

(19,172

)

$

(13,698

)

$

(35,600

)

$

(39,227

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization

7,411

6,121

6,478

13,532

12,697

Share-based compensation

7,291

7,012

4,258

14,303

12,820

Foreign currency remeasurement loss (gain)

441

242

257

683

186

Deferred income taxes

(19,278

)

(2

)

(71

)

(19,280

)

(81

)

Gain on sale of property and equipment

(10

)

-

(107

)

(10

)

(107

)

Accounts receivable charges

6

272

381

278

847

Amortization of premium on marketable securities

204

280

573

484

1,182

Non-cash interest expense

211

209

201

420

400

Changes in operating assets and liabilities:
Accounts receivable

(4,861

)

(13,095

)

3,903

(17,956

)

5,962

Prepaid expenses and other current assets

(1,451

)

(3,174

)

(7

)

(4,625

)

439

Income taxes receivable

(553

)

(2

)

46

(555

)

10

Other assets

292

834

513

1,126

912

Accounts payable and other current liabilities

23,046

3,625

1,523

26,671

6,732

Deferred revenue

2,778

(911

)

(273

)

1,867

(357

)

Income taxes payable

52

(655

)

68

(603

)

141

Other long term liabilities

(2

)

(55

)

(108

)

(57

)

(111

)

Net cash provided by (used in) operating activities

(851

)

(18,471

)

3,937

(19,322

)

2,445

Investing activities
Purchases of marketable securities

(1,340

)

(6,839

)

(20,537

)

(8,179

)

(31,411

)

Sale and maturities of marketable securities

13,784

9,087

25,818

22,871

31,715

Purchases of property and equipment

(12,975

)

(5,350

)

(2,986

)

(18,325

)

(9,614

)

Proceeds from sale of property and equipment

10

-

107

10

107

Cash acquired in acquisition of business, net of transaction costs

30,374

492

-

30,866

-

Net cash provided by (used in) investing activities

29,853

(2,610

)

2,402

27,243

(9,203

)

Financing activities
Payment of debt issuance costs

-

(30

)

-

(30

)

Payment of employee tax withholdings related to restricted stock vesting

(524

)

(1,285

)

(427

)

(1,809

)

(1,098

)

Proceeds from employee stock plans

785

7,986

2,613

8,771

5,460

Net cash provided by financing activities

261

6,701

2,156

6,962

4,332

Effect of exchange rate changes on cash and cash equivalents

(1,263

)

(363

)

(50

)

(1,626

)

(304

)

Net increase (decrease) in cash and cash equivalents

28,000

(14,743

)

8,445

13,257

(2,730

)

Cash and cash equivalents, beginning of period

27,175

41,918

35,620

41,918

46,795

Cash and cash equivalents, end of period

$

55,175

$

27,175

$

44,065

$

55,175

$

44,065

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use non-generally accepted accounting principles (Non-GAAP) net income (loss), EBITDA and Adjusted EBITDA as supplemental measures of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income (loss) to be an important indicator of overall business performance. We define Non-GAAP net income (loss) to be U.S. GAAP net income (loss) adjusted to exclude share-based compensation, non-cash interest expense, restructuring and transition related charges, acquisition and legal related expenses, and amortization of intangible assets. We believe that EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define EBITDA as U.S. GAAP net income (loss) adjusted to exclude depreciation and amortization, interest expense, interest and other (income) expense, and income tax expense (benefit). We define Adjusted EBITDA as EBITDA adjusted to exclude share-based compensation, restructuring and transition related charges and acquisition and legal related expenses. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. Our management uses these Non-GAAP financial measures because, collectively, they provide valuable information on the performance of our on-going operations, excluding non-cash charges, taxes and non-core activities (including interest payments related to financing activities). These measures also enable our management to compare the results of our on-going operations from period to period, and allow management to review the performance of our on-going operations against our peer companies and against other companies in our industry and adjacent industries. We believe these measures also provide similar insights to investors and enable investors to review our results of operations "through the eyes of management."

Furthermore, our management uses these Non-GAAP financial measures to assist them in making decisions regarding our strategic priorities and areas for future investment and focus. The terms Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are not defined under U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Our Non-GAAP net income (loss), EBITDA and Adjusted EBITDA have limitations as analytical tools, and when assessing our operating performance, Non-GAAP net income (loss), EBITDA and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Some of these limitations include, but are not limited to:

  • EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
  • These measures do not reflect changes in, or cash requirements for, our working capital needs;
  • Non-GAAP net income (loss) and Adjusted EBITDA do not reflect the cash requirements necessary for litigation costs, including provision for litigation and litigation expenses;
  • These measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;
  • These measures do not reflect income taxes or the cash requirements for any tax payments;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will be replaced sometime in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
  • While share-based compensation is a component of operating expense, the impact on our financial statements compared to other companies can vary significantly due to such factors as the assumed life of the options and the assumed volatility of our common stock; and
  • Other companies may calculate Non-GAAP net income (loss), EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Non-GAAP net income (loss), EBITDA, and Adjusted EBITDA only as supplemental support for management's analysis of business performance. Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are calculated as follows for the periods presented in thousands:

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Item 10(e) of Regulation S-K, we are presenting the most directly comparable U.S. GAAP financial measures and reconciling the unaudited Non-GAAP financial metrics to the comparable U.S. GAAP measures. Per share amounts may not foot due to rounding.

EDGIO, INC.
Reconciliation of U.S. GAAP Net Loss to Non-GAAP Net Income (Loss)
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share
U.S. GAAP net loss

$

(16,428

)

$

(0.11

)

$

(19,172

)

$

(0.14

)

$

(13,698

)

$

(0.11

)

$

(35,600

)

$

(0.25

)

$

(39,227

)

$

(0.31

)

Share-based compensation

7,291

0.05

7,012

0.05

3,341

0.03

14,303

0.10

5,985

0.05

Non-cash interest expense

211

0.00

209

0.00

201

0.00

420

0.00

400

0.00

Restructuring and transition related charges

4,368

0.03

698

0.01

2,155

0.02

5,066

0.04

13,855

0.11

Acquisition and legal related expenses

14,167

0.09

5,107

0.04

-

-

19,274

0.13

-

-

Amortization of intangible assets

1,172

0.01

786

0.01

-

-

1,958

0.01

-

-

Non-GAAP net (loss) income

$

10,781

$

0.07

$

(5,360

)

$

(0.04

)

$

(8,001

)

$

(0.06

)

$

5,421

$

0.04

$

(18,987

)

$

(0.15

)

Weighted average basic shares used in per share calculation

151,776

135,528

126,050

143,652

125,170

EDGIO, INC.
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2022

2022

2021

2022

2021

U.S. GAAP net loss

$

(16,428

)

$

(19,172

)

$

(13,698

)

$

(35,600

)

$

(39,227

)

Depreciation and amortization

7,411

6,121

6,478

13,532

12,697

Interest expense

1,315

1,313

1,305

2,628

2,591

Interest and other (income) expense

1,113

686

398

1,799

568

Income tax (benefit) expense

(19,589

)

206

248

(19,383

)

507

EBITDA

$

(26,178

)

$

(10,846

)

$

(5,269

)

$

(37,024

)

$

(22,864

)

Share-based compensation

7,291

7,012

3,341

14,303

5,985

Restructuring and transition related charges

4,368

698

2,155

5,066

13,855

Acquisition and legal related expenses

14,167

5,107

-

19,274

-

Adjusted EBITDA

$

(352

)

$

1,971

$

227

$

1,619

$

(3,024

)

For future periods, we are unable to provide a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) as a result of the uncertainty regarding, and the potential variability of, the amounts of depreciation and amortization, interest expense, interest and other (income) expense and income tax expense (benefit), that may be incurred in the future.

Conference Call

At approximately 4:30 p.m. EDT (1:30 p.m. PDT) today, management will host a quarterly conference call for investors. Interested parties can access the call by dialing (844) 200-6205 from the United States or (929) 526-1599 internationally, with access code 974364. The conference call will also be audio cast live from www.edg.io and a replay will be available following the call from the Edgio website.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These statements include, among others, statements regarding our expectations regarding revenue, gross margin, non-GAAP net income (loss), capital expenditures, and our future prospects, areas of investment, and product launches. Our expectations and beliefs regarding these matters may not materialize. The potential risks and uncertainties that could cause actual results or outcomes to differ materially from the results or outcomes predicted include, among other things, reduction of demand for our services from new or existing clients, unforeseen changes in our hiring patterns, adverse outcomes in litigation, experiencing expenses that exceed our expectations, and acquisition activities and contributions from acquired businesses. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Forms 10-K and 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online on our investor relations website at investors.edgio.com and on the SEC website at www.SEC.gov. All information provided in this release and in the attachments is as of August 8, 2022, and we undertake no duty to update this information in light of new information or future events, unless required by law.

About Edgio

Edgio (NASDAQ: EGIO) is an edge-enabled software solutions provider powering unmatched, secure digital experiences through a seamlessly integrated delivery, applications and streaming platform. Our globally-scaled technology and expert services fuel the world's top brands with the capacity to deliver the fastest, most dynamic, and frictionless education, entertainment, events and applications to every user. Dedicated to providing unparalleled client care and extending value every step of the way, Edgio is a partner of choice, driving about 20 percent of worldwide internet traffic to support the most popular shows, movies, sports, games and music, and instant-loading websites. To learn more, visit edg.io and follow us on Twitter, LinkedIn and Facebook.

Edgio, Inc.
Investor relations: Sameet Sinha, 646-337-8909
[email protected]
Media relations: Katherine Webb, 919-323-6190
[email protected]

Source: Edgio, Inc.