8-K: Edgio Announces Preliminary Q4 2023 Results, Revenue Expected Between $93-$95 Million

Edgio reports preliminary unaudited Q4 2023 results, projecting revenue between $93-$95 million and a delay in their annual report due to a change in auditors.

Summary

• Edgio has released preliminary unaudited financial results for the fourth quarter of 2023, anticipating revenue between $93 and $95 million.
• The company expects adjusted EBITDA to be between negative $2 million and breakeven for the quarter.
• Bookings in the second half of 2023 increased by more than 30% compared to the first half, with Security/Applications bookings almost doubling.
• Edgio has achieved run-rate cost savings of approximately $84 million by the end of 2023, within the expected range of $80 to $90 million.
• The company's cash and cash equivalents balance was approximately $47 million as of December 31, 2023, up from $27.6 million at the end of September 2023.
• Capital expenditures for Q4 2023 were approximately $5 million, or $2.5 million net of financing receivables.
• In November 2023, Edgio secured approximately $50 million in new financing and exchanged 95% of its 2025 Convertible Notes for new 2027 Convertible Notes.
• The company has delayed its annual report due to a change in auditors and has filed a notification of late filing with the SEC.
• Edgio has obtained a waiver from lenders regarding delayed reporting through June 30, 2024, but may incur additional interest if SEC filings are not made by May 14, 2024.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the strong bookings growth, cost savings, and improved cash position, but tempered by the delay in the annual report and the still negative adjusted EBITDA.

Positives

• Edgio's revenue is expected to be between $93 and $95 million for Q4 2023.
• The company is close to achieving breakeven adjusted EBITDA for the quarter.
• Bookings have significantly increased in the second half of 2023, indicating strong sales momentum.
• The company has successfully implemented cost-saving measures, achieving $84 million in run-rate savings.
• Edgio's cash position has improved significantly, reaching approximately $47 million by the end of 2023.
• The company secured $50 million in new financing and restructured its convertible notes, improving its financial stability.
• Edgio has won new clients including a major Korean ecommerce company and a large fashion ecommerce company in China.
• The company launched enterprise-level Protect and Perform Applications Bundles.
• Edgio won the Overall Web Security Solution of the Year award.

Negatives

• The company's adjusted EBITDA is still expected to be negative, although close to breakeven.
• The annual report is delayed due to a change in auditors, which could raise concerns among investors.
• The preliminary financial results are unaudited and subject to change.
• The company may incur additional interest if SEC filings are not made by May 14, 2024.

Risks

• The preliminary financial results are subject to change upon completion of the audit.
• The delay in filing the annual report could negatively impact investor confidence.
• The company may incur additional interest under its senior secured convertible notes if SEC filings are not made on time.
• The company's adjusted EBITDA is still negative, indicating ongoing challenges with profitability.
• The company is reliant on non-GAAP measures such as Adjusted EBITDA which have limitations.

Future Outlook

The company is focused on driving profitable growth through customer focus, innovation, and fiscal discipline. They are working diligently to complete and file the 2023 Form 10-K as soon as practicable.

Management Comments

• Todd Hinders, CEO, stated that customer focus, innovation, and fiscal discipline are drivers of sustained shareholder value creation.
• He also expressed confidence in the company's ability to drive profitable growth due to its strong technological foundation, focused go-to-market motions, improving unit economics, and optimized cost structure.

Industry Context

Edgio operates in the competitive content delivery network (CDN) and web security space. The company's focus on edge network solutions and integrated application and media services aligns with industry trends towards faster, more secure online experiences. The company's new client wins in various regions and sectors indicate a growing market presence.

Comparison to Industry Standards

• Edgio's revenue guidance of $93-$95 million for Q4 2023 is relatively small compared to larger CDN players like Akamai and Cloudflare, which report billions in annual revenue.
• The company's adjusted EBITDA being close to breakeven is a positive sign, but it still lags behind industry leaders that typically report positive and substantial EBITDA margins.
• The 30% growth in bookings in the second half of 2023 is a strong indicator of growth, but it needs to be sustained to compete with the growth rates of other fast-growing tech companies.
• The cost savings of $84 million are significant and show progress in operational efficiency, which is crucial for competing with larger, more established players.
• The delay in the annual report due to a change in auditors is not uncommon but is a negative signal compared to companies that have smooth audit processes.

Stakeholder Impact

• Shareholders may be concerned about the delay in the annual report and the negative adjusted EBITDA, but encouraged by the revenue growth and cost savings.
• Employees may be impacted by the cost-saving measures, but the company's growth could provide opportunities.
• Customers may benefit from the company's new product offerings and improved services.
• Creditors may be reassured by the company's improved cash position and new financing.

Next Steps

• The company will complete the audit of its 2023 financial statements.
• The company will file its 2023 Form 10-K as soon as practicable.
• The company will continue to focus on driving profitable growth.

Key Dates

Keywords

Edgio, Financial Results, Q4 2023, Revenue, Adjusted EBITDA, Bookings, Cost Savings, Cash Balance, Convertible Notes, Audit Delay, Security, Applications, Edge Network