Edgio Announces Preliminary Unaudited Fourth Quarter 2023 Financial Results
- Strong Q4 2023 revenue projection of $93-$95 million.
- Robust cash balance of approximately $47 million as of December 31, 2023.
- Operationalized run-rate cost savings of around $84 million by the end of 2023.
- Significant growth in bookings, with Security/Applications bookings nearly doubling in the second half of 2023.
- Received $50 million in new financing in November 2023 and exchanged 95% of 2025 Convertible Notes for New 2027 Convertible Notes.
- Launched enterprise-level Protect and Perform Applications Bundles, winning the 'Overall Web Security Solution of the Year' award.
- Expectation to file a notification of late filing on Form 12b-25 with the SEC for the Annual Report due to a change in auditors.
- Engaged a new independent registered public accounting firm in January 2024.
- Obtained a waiver for delayed reporting through June 30, 2024, from lenders under its senior secured credit facility.
- Delayed annual report filing due to change in auditors.
- Potential additional interest under senior secured convertible notes if SEC filings are not made by May 14, 2024.
Insights
The preliminary revenue forecast of Edgio, Inc. for Q4 2023, ranging between $93 and $95 million, along with the Adjusted EBITDA projection, suggests a company navigating through a challenging financial landscape. The increase in cash reserves from $27.6 million in Q3 to roughly $47 million by year-end indicates a strengthened liquidity position, likely bolstered by the $50 million of new financing received in November 2023. However, the anticipated Adjusted EBITDA of negative $2 million to breakeven points to underlying operational challenges. The significant growth in bookings, particularly in the Security/Applications sector, reflects a potentially robust demand for the company's offerings, which could translate into future revenue streams.
Investors should note the operationalized run-rate cost savings of approximately $84 million, which aligns with the company's forecasted range and demonstrates a commitment to optimizing the cost structure. Such cost containment measures, if sustained, could improve profitability in the long term. The exchange of 95% of 2025 Convertible Notes for New 2027 Convertible Notes also indicates a restructuring of debt that may provide more financial flexibility in the medium term. However, the delay in the annual report due to the auditor change adds an element of uncertainty and could impact investor sentiment until the audited financials are available.
Edgio's strategic focus on market-leading solutions across Security/Applications and Media, leveraging its global edge network, positions the company to capitalize on the growing demand for cybersecurity and content delivery services. The new client wins, including a major Korean ecommerce company and a large fashion ecommerce company in China, signal an expansion of Edgio's market presence in Asia, a region with high growth potential in e-commerce and digital services.
The launch of the Protect and Perform Applications Bundles could represent a competitive advantage by offering a comprehensive package that addresses the increasing complexity of web security and performance needs. Recognition in the form of an award for 'Overall Web Security Solution of the Year' may enhance the company's brand reputation and could lead to increased market share.
From a market perspective, the delayed annual report and the change in the auditor could raise concerns among investors regarding transparency and financial governance. While the waiver obtained from lenders shows some level of confidence from creditors, the potential for additional interest on senior secured convertible notes if SEC filings are delayed past May 14, 2024, could be a point of concern for debt investors.
The filing of Form 12b-25 with the Securities and Exchange Commission, granting a 15-day extension for the annual report, is a regulatory compliance aspect that investors must consider. The resignation of the previous independent registered public accounting firm and the subsequent engagement of a new one could be a routine change, but it also may indicate deeper issues that could surface later. The delay in the audit completion and the subsequent late filing of the 2023 Form 10-K could lead to legal and regulatory scrutiny.
Investors should be aware of the implications of not meeting the extended deadline, including the potential for additional interest obligations and the impact on investor confidence. The waiver from lenders provides temporary relief, but it is not a permanent solution to the challenges posed by delayed financial reporting. The legal ramifications of these delays, including potential SEC inquiries or investor lawsuits, should be monitored closely.
Expects Preliminary Q4 2023 Revenue of
Total Cash and Cash Equivalents Balance of Approximately
Annual Report Delayed due to Change in Auditor
Todd Hinders, CEO, said, “Customer focus and a steadfast commitment to innovation and fiscal discipline are drivers of sustained shareholder value creation. At Edgio, we have built a solid foundation with market leading solutions across Security/Applications and Media, leveraging our highly performant global edge network. Our strong and differentiated technological foundation combined with focused go-to-market motions, improving unit economics, and optimized cost structure gives me confidence in our ability to drive profitable growth.”
Unaudited Fourth Quarter 2023 Financial and Operational Highlights:
Based on information currently available to the Company for the fourth quarter 2023, the Company expects:
-
Q4 2023 revenue in the range of
$93 -$95 million $2 Million -
Bookings in the second half of 2023 grew more than
30% versus the first half with Security/Applications bookings growth almost doubling in the same period. -
Operationalized run-rate cost savings at end of 2023 of approximately
$84 million $80 $90 million -
Cash, cash equivalents and short-term investment balance as of December 31, 2023, of approximately
$47 million $27.6 million -
Q4 2023 capital expenditures of approximately
$5 million $2.5 million
In addition, in November 2023, the Company received approximately
The financial results for the three months ended December 31, 2023, included in this release are preliminary, have not been reviewed or audited, are based upon the Company’s estimates, and were prepared prior to the completion of the Company's financial statement close process. As a result, these preliminary financial results could be subject to change as the Company’s independent registered public accounting firm completes its audit of these periods. These limited preliminary financial results should not be viewed as a substitute for the Company’s full fourth quarter results and do not present all information necessary for an understanding of the Company’s financial performance as of and for the three months ended December 31, 2023. Accordingly, undue reliance should not be placed on this preliminary data.
Business Highlights:
-
New client wins over the last few months include a major Korean ecommerce company, a domestic fashion label, the Asian subsidiary of a major hardware company, a domestic auto-parts ecommerce company, and a large fashion ecommerce company in
China . - Launched enterprise-level Protect and Perform Applications Bundles, combining web performance, full-spectrum web security suite and Security Operations Center (SOC) support services – all in a single, comprehensive package.
- Won “Overall Web Security Solution of the Year” award in the 7th annual CyberSecurity Breakthrough Awards program conducted by CyberSecurity Breakthrough.
Files Form 12b-25 with the Securities and Exchange Commission:
The Company also announced today that it expects to file a notification of late filing on Form 12b-25 with the Securities and Exchange Commission with respect to the Company’s Annual Report for 2023 on Form 10-K (“Annual Report”), which provides an automatic 15-day extension of the filing deadline for the Annual Report to April 1, 2024. As previously disclosed, on December 18, 2023, the Company received notice that the Company’s previous independent registered public accounting firm had decided to resign as independent registered public accounting firm of the Company, effective that day. The Audit Committee of the Board of Directors of the Company accepted the resignation and engaged in a thorough search for a new independent registered public accounting firm, and on January 26, 2024, the Company entered into an engagement with a new independent registered public accounting firm.
The onboarding of a new audit team takes considerable time as the new audit firm familiarizes itself with the Company’s accounting and financial processes. Due to the engagement of a new independent registered public accounting firm in the first quarter of 2024, which is late in the normal auditing process, the completion of the Company’s public company audit is delayed, and the Company does not expect the audit to be completed in time to file the 2023 Form 10-K on or before the extended deadline. The Company is working diligently to complete and file the 2023 Form 10-K as soon as practicable.
The Company has obtained a waiver from the lenders under its senior secured credit facility related to delayed reporting through June 30, 2024. The Company may incur certain additional interest under its senior secured convertible notes if its SEC filings are not made on or before May 14, 2024.
Use of Non-GAAP Financial Measures
To evaluate its business, the Company considers and uses non-generally accepted accounting principles (“non-GAAP”), including Adjusted EBITDA as contained in this press release, as supplemental measures of operating performance. EBITDA is defined as
The terms EBITDA and Adjusted EBITDA are not defined under
- Adjusted EBITDA does not reflect the Company’s cash expenditures or future requirements for capital expenditures or contractual commitments;
- This measure does not reflect changes in, or cash requirements for, the Company’s working capital needs;
- This measure does not reflect the cash requirements necessary for litigation costs, including provision for litigation and litigation expenses;
- This measure does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s debt;
- This measure does 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 Adjusted EBITDA does not reflect any cash requirements for such replacements;
- While share-based compensation is a component of operating expense, the impact on the Company’s 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 the Company’s common stock; and
- Other companies may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.
The Company compensates for these limitations by relying primarily on the Company’s
Because the preliminary Adjusted EBITDA ranges presented in this release represent the Company’s expectations with respect to the final financial results for the fourth quarter of 2023, these forward-looking non-GAAP financial measures are presented without reconciliations to the most directly comparable
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the federal securities laws. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking, including statements regarding the Company’s financial condition, anticipated financial performance, achieving profitability, business strategy and plans, market opportunity and expansion and objectives of the Company’s management for future operations. These forward-looking statements generally are identified by the words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast”, “future”, “intend,” “may,” “might”, “opportunity”, “plan,” “possible”, “potential,” “predict,” “project,” “should,” “strategy”, “strive”, “target,” “will,” or “would”, the negative of these words or other similar terms or expressions. The absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors, including specifically changes to the preliminary results presented in this release in connection with completion of the closing and audit review of the financial statements for 2023, and those factors disclosed in the Company’s SEC filings, including in its most recent reports on Form 10-K and 10-Q, particularly under the heading “Risk Factors.”
All forward-looking statements in this press release are based on information available to the Company as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
About Edgio
Edgio (NASDAQ: EGIO) helps companies deliver online experiences and content faster, safer, and with more control. Our developer-friendly, globally scaled edge network, combined with our fully integrated application and media solutions, provide a single platform for the delivery of high-performing, secure web properties and streaming content. Through this fully integrated platform and end-to-end edge services, companies can deliver content quicker and more securely, boosting overall revenue and business value. To learn more, visit edg.io and follow us on Twitter, LinkedIn and Facebook.
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Investor relations:
Sameet Sinha
602-850-4973
ir@edg.io
Media relations:
Patti Moran, Edgio
pmoran@edg.io
Source: Edgio, Inc.
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