Q4 2022 revenue of $108.8 million, 90% year over year growth

Applications pipeline increase of approximately 80% for 2023, to date

$85-$90 million of run rate savings expected by YE23, forecasted higher by YE24

Capital expenditure, net of payments from ISPs, was $4.5 million or 4% of revenue

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

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use non-generally accepted accounting principles (“Non-GAAP”) net loss, EBITDA, and Adjusted EBITDA as supplemental measures of operating performance. These measures include the same adjustments that our management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net loss to be an important indicator of our overall business performance. We define Non-GAAP net loss to be U.S. GAAP net loss, adjusted to exclude share-based compensation, non-cash interest expense, restructuring charges, acquisition and legal related expenses, amortization of intangible assets, and impairment charges. 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 loss, adjusted to exclude interest expense, interest and other (income) expense, income tax expense, and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted to exclude share-based compensation, restructuring 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, and they also enable us to compare 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 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 loss, EBITDA and Adjusted EBITDA have limitations as analytical tools, and when assessing our operating performance, Non-GAAP net 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:

• Non-GAAP net loss, 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 loss, EBITDA, 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;
• 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 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 financial results and using Non-GAAP net loss, EBITDA, and Adjusted EBITDA only as supplemental support for management’s analysis of business performance. Non-GAAP net 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.

Forward-looking non-GAAP financial measures are presented without reconciliations of such forward-looking non-GAAP measures because the GAAP financial measures are not accessible on a forward-looking basis and reconciling information is not available without unreasonable effort due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments reflected in our reconciliation of historic non-GAAP financial measures, the amounts of which, based on historical experience, could be material.