Third quarter revenue of $121.2 million, up 119% year over year

GAAP Gross margin of 30.5%, increased 180 basis points year over year

Record Applications bookings with momentum continuing into 4Q22

Pipeline growth of 75% since the beginning of the year

Capital expenditure of $2.2 million or 1.8% of revenue, a six-year low

Edgio, Inc. (NASDAQ:EGIO), the platform of choice to power unmatched speed, security and simplicity at the edge, today reported financial results for the third quarter ended September 30, 2022.

"Across the organization, we are realizing the benefits of the transformational Edgecast acquisition. We had the first-ever eight figure TCV win in Applications solutions and replaced a major competitor at one of the largest fintech companies in the world. Our unique ability to seamlessly integrate scale-enabled performance, security and programmability at the edge are being recognized by some of the most savvy technology companies in the world," said Bob Lyons, President and Chief Executive Officer. "Our growing pipeline includes major global brands that understand the demonstrative value in our solutions, with many in active proof of concept. We expect this momentum to continue into the fourth quarter, driven by our Security solutions."

Third Quarter Business Highlights:

Sales pipeline grew 75% from the beginning of the year, with the Applications pipeline growing much faster.
3Q22 was the highest bookings quarter for Edgio's Applications solutions, and we expect continued momentum into 4Q22.
The company has implemented more than $20 million of planned synergies on a run rate basis, well ahead of schedule.
CyberSec Asia recognized Edgio as a Rising Star in security for the impact our WAAP product suite had in customers' organizations.
Stephen Cumming joined as Edgio's CFO, bringing almost 30 years of experience leading technology companies through strategic, operational and financial transformations.
Three new Board members were appointed - Dianne Ledingham, Sr. Partner at Bain & Company, and Reed Rayman and E-Fei Wang from Apollo Global - to strengthen our strategic leadership with strategic, operational and financial prowess.

Third Quarter Financial highlights:

Revenue

Revenue of $121.2 million, an expansion of 119% from the previous year, and 63% quarter over quarter.
This includes the first full quarter of revenue from Edgecast.

Gross margin

GAAP gross margin was 30.5%, up 180 basis points year over year and 40 basis points quarter over quarter.
Sequential expansion in gross margin was primarily due to an increase in capacity utilization and realization of synergies.

Operating expenses

GAAP operating expenses, including share-based compensation of $8.4 million, restructuring charges of $4.1 million and acquisition- and legal-related expenses of $7.9 million, were 63.4% of revenue versus 75.2% in the second quarter of 2022 due to the inclusion of a full quarter of Edgecast.
Sequentially, our total operating expenses increased primarily due to headcount from Edgecast.

Adjusted EBITDA

Adjusted EBITDA for the quarter was a loss of $3.2 million, compared to a loss of $0.4 million in the second quarter of 2022, primarily due to the increased operating expenses from Edgecast.

Capital Expenditure

Capital Expenditure during the quarter was $2.2 million, or 1.8% of revenue and year-to-date was $20.5 million or 8.1% of revenue.
As a percent of revenue, capital expenditure was at a six-year low as a result of existing excess capacity and higher revenue contribution from software solutions that have lower capital requirements.

Cash, Cash Equivalents and Marketable Securities

Cash, cash equivalents and marketable securities was $70.8 million for the third quarter ended September 30, 2022, compared to $77.3 million for the second quarter ended June 30, 2022 and $79.3 million for the fourth quarter ended December 31, 2021.
Cash flow used in operations during the quarter was $2.4 million and year-to-date $21.8 million.

Updating 2022 Guidance:

"We remain bullish on Edgio's transformation and in our ability to drive long-term value creation for our shareholders. The current macro environment has made us more cautious in the near term and we anticipate companies will delay or defer capital spending in the fourth quarter. This could impact our ISP deployments which depend on capital investments from these clients. Additionally, while we are progressing well on the integration of our Edgecast acquisition, we have seen some churn across a group of smaller customers. This is not unusual during an acquisition of this magnitude," said Stephen Cumming, Chief Financial Officer. "Both of these are temporal in nature and we have already taken steps to address them. With this backdrop, we expect a more measured top line in Q4. Given our clear line of sight to where further synergies and efficiencies are available to us, we will prioritize improving our gross margin, Adjusted EBITDA and cash flow as we complete the integration of Edgecast."

For 4Q22, we are expecting:

Revenue between $109 million and $114 million.
Adjusted EBITDA range of a loss of $8 million to a loss of $6 million, implying adjusted EBITDA margin between -7.5% and -5.5%.
Capital expenditure between $2 million and $3.5 million, implying 2% and 3% of revenue.

Financial Tables


EDGIO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

	September 30,			June 30,			December 31,
	2022			2022			2021
	(Unaudited)			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	59,306		$	55,175		$	41,918
Marketable securities		11,444			22,158			37,367
Accounts receivable, net		122,397			108,445			42,217
Income taxes receivable		59			58			61
Prepaid expenses and other current assets		28,775			32,107			13,036
Total current assets		221,981			217,943			134,599
Property and equipment, net		91,670			106,059			33,622
Operating lease right of use assets		6,680			7,124			6,338
Marketable securities, less current portion		40			40			40
Deferred income taxes		2,745			2,866			1,893
Goodwill		171,065			163,489			114,511
Intangible assets, net		67,738			72,655			14,613
Other assets		7,780			7,334			5,485
Total assets	$	569,699		$	577,510		$	311,101

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	39,755		$	19,800		$	11,631
Deferred revenue		6,357			4,790			3,266
Operating lease liability obligations		4,396			4,755			1,861
Income taxes payable		433			262			873
Other current liabilities		86,754			75,391			19,292
Total current liabilities		137,695			104,998			36,923
Convertible senior notes, net		122,416			122,202			121,782
Operating lease liability obligations, less current portions		10,511			11,352			9,616
Deferred income taxes		95			100			308
Deferred revenue, less current portion		2,938			1,530			116
Other long-term liabilities		710			716			777
Total liabilities		274,365			240,898			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; 221,583, 219,706 and 134,337 shares issued and
outstanding at September 30, 2022, June 30, 2022 and December 31, 2021, respectively		222			220			134
Additional paid-in capital		797,508			793,522			576,807
Common Stock Contingent consideration		16,300			16,900			-
Accumulated other comprehensive loss		(13,462	)		(11,413	)		(8,345	)
Accumulated deficit		(505,234	)		(462,617	)		(427,017	)
Total stockholders' equity		295,334			336,612			141,579
Total liabilities and stockholders' equity	$	569,699		$	577,510		$	311,101


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


	Three Months Ended											Nine Months Ended

	September 30,			June 30,			Percent	September 30,			Percent	September 30,			September 30,			Percent
	2022			2022			Change	2021			Change	2022			2021			Change

Revenue	$	121,156		$	74,312		63%	$	55,202		119%	$	253,426		$	154,745		64%
Cost of revenue:
Cost of services (1)		74,421			46,088		61%		33,687		121%		155,578			99,708		56%
Depreciation - network		9,841			5,903		67%		5,685		73%		20,833			17,293		20%
Total cost of revenue		84,262			51,991		62%		39,372		114%		176,411			117,001		51%
Gross profit		36,894			22,321		65%		15,830		133%		77,015			37,744		104%
Gross profit percentage		30.5	%		30.0	%			28.7	%			30.4	%		24.4	%
Operating expenses:
General and administrative (1)		22,198			26,927		-18%		10,532		111%		64,958			30,944		110%
Sales and marketing (1)		14,428			10,946		32%		5,987		141%		33,001			21,619		53%
Research & development (1)		30,173			12,161		148%		5,205		480%		51,911			16,520		214%
Depreciation and amortization		5,943			1,508		294%		730		714%		8,483			1,818		367%
Restructuring charges (1)		4,070			4,368		-7%		1,770		130%		9,136			10,798		-15%
Total operating expenses		76,812			55,910		37%		24,224		217%		167,489			81,699		105%

Operating loss		(39,918	)		(33,589	)	NM		(8,394	)	NM		(90,474	)		(43,955	)	NM

Other income (expense):
Interest expense		(1,317	)		(1,315	)	NM		(1,308	)	NM		(3,945	)		(3,899	)	NM
Interest income		140			33		NM		17		NM		200			104		NM
Other, net		(1,082	)		(1,146	)	NM		(209	)	NM		(2,941	)		(864	)	NM
Total other expense		(2,259	)		(2,428	)	NM		(1,500	)	NM		(6,686	)		(4,659	)	NM

Loss before income taxes		(42,177	)		(36,017	)	NM		(9,894	)	NM		(97,160	)		(48,614	)	NM
Income tax expense (benefit)		440			(19,589	)	NM		211		NM		(18,943	)		718		NM

Net loss	$	(42,617	)	$	(16,428	)	NM	$	(10,105	)	NM	$	(78,217	)	$	(49,332	)	NM

Net loss per share:
Basic	$	(0.19	)	$	(0.11	)		$	(0.08	)		$	(0.46	)	$	(0.39	)
Diluted	$	(0.19	)	$	(0.11	)		$	(0.08	)		$	(0.46	)	$	(0.39	)

Weighted-average shares used in per share calculation:
Basic		220,194			151,776				126,791				169,166			125,710
Diluted		220,194			151,776				126,791				169,166			125,710

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


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

	Three Months Ended								Nine Months Ended

	September 30,			June 30,		September 30,			September 30,			September 30,
	2022			2022		2021			2022			2021
Share-based compensation:
Cost of services	$	855		$	326	$	438		$	1,589		$	1,142
General and administrative		2,200			2,166		2,301			6,469			10,203
Sales and marketing		727			1,376		640			3,284			1,598
Research and development		4,571			3,423		662			11,314			1,647
Restructuring charges		-			-		(384	)		-			1,887
Total share-based compensation	$	8,353		$	7,291	$	3,657		$	22,656		$	16,477

Depreciation and amortization:
Network-related depreciation	$	9,841		$	5,903	$	5,685		$	20,833		$	17,293
Other depreciation and amortization		1,026			336		409			1,608			1,497
Amortization of intangible assets		4,917			1,172		321			6,875			321
Total depreciation and amortization	$	15,784		$	7,411	$	6,415		$	29,316		$	19,111

Net (decrease) increase in cash, cash equivalents and marketable securities:	$	(6,583	)	$	15,407	$	(43,750	)	$	(8,535	)	$	(47,937	)

End of period statistics:
Approximate number of active clients		996			1,000		581			996			581
Number of employees and employee equivalents		1,256			1,317		529			1,256			529

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 our 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 our 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 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 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 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:

Non-GAAP net income (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 income (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 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 financial 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																		Nine Months Ended

	September 30, 2022						June 30, 2022						September 30, 2021						September 30, 2022						September 30, 2021
	Amount			Per Share			Amount			Per Share			Amount			Per Share			Amount			Per Share			Amount			Per Share

U.S. GAAP net loss	$	(42,617	)	$	(0.19	)	$	(16,428	)	$	(0.11	)	$	(10,105	)	$	(0.08	)	$	(78,217	)	$	(0.46	)	$	(49,332	)	$	(0.39	)

Share-based compensation		8,353			0.04			7,291			0.05			4,041			0.03			22,656			0.13			10,026			0.08
Non-cash interest expense		214			0.00			211			0.00			204			0.00			634			0.00			604			0.00
Restructuring charges		4,070			0.02			4,368			0.03			1,770			0.01			9,136			0.05			15,625			0.12
Acquisition and legal related expenses		8,529			0.04			14,167			0.09			2,263			0.02			27,803			0.16			2,441			0.02
Amortization of intangible assets		4,917			0.02			1,172			0.01			321			0.00			6,875			0.04			321			0.00

Non-GAAP net (loss) income	$	(16,534	)	$	(0.08	)	$	10,781		$	0.07		$	(1,506	)	$	(0.01	)	$	(11,113	)	$	(0.07	)	$	(20,315	)	$	(0.16	)


Weighted-average basic shares used in per share calculation					220,194						151,776						126,791						169,166						125,710


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


		Three Months Ended									Nine Months Ended

		September 30,			June 30,			September 30,			September 30,			September 30,
		2022			2022			2021			2022			2021

U.S. GAAP net loss		$	(42,617	)	$	(16,428	)	$	(10,105	)	$	(78,217	)	$	(49,332	)

	Depreciation and amortization		15,784			7,411			6,415			29,316			19,111
	Interest expense		1,317			1,315			1,308			3,945			3,899
	Interest and other expense		942			1,113			192			2,741			760
	Income tax expense (benefit)		440			(19,589	)		211			(18,943	)		718

EBITDA		$	(24,134	)	$	(26,178	)	$	(1,979	)	$	(61,158	)	$	(24,844	)

	Share-based compensation		8,353			7,291			4,041			22,656			10,026
	Restructuring charges		4,070			4,368			1,770			9,136			15,625
	Acquisition and legal related expenses		8,529			14,167			2,263			27,803			2,441

Adjusted EBITDA		$	(3,182	)	$	(352	)	$	6,095		$	(1,563	)	$	3,248

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 256972. 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), EBITDA, Adjusted EBITDA, 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 November 9, 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) provides unmatched speed, security, and simplicity at the edge through globally-scaled media and applications platforms. The world's most innovative companies and online properties – from entertainment, technology, retail, and finance – rely on our technology and services to accelerate and defend their web applications, APIs, and content. As the world continues to move to the edge, Edgio is the platform of choice to power valuable business outcomes. To learn more, visit edg.io and follow us on Twitter, LinkedIn and Facebook.

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Edgio Reports Third Quarter 2022 Financial Results