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.

• App Security: The most complete web application and API protection solution in the market, it includes DDoS, WAF and Bot Management capabilities, and recently stopped a 355 million packets per second DDoS attack - one of the largest ever blocked.
• App Edge: Modern web development tools proven to double developer velocity.
• App Platform: Integrated suite of edge application CDN and compute services.

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.

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Edgio, Inc.

Investor relations: Sameet Sinha, 646-337-8909

ir@edg.io

Media relations: Katherine Webb, 919-323-6190

kwebb@edg.io

Source: Edgio, Inc.