EGIO - Earnings call 3 2023

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Operator

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Edgio Third Quarter 2023 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Sameet Sinha, Vice President of Investor Relations. ahead. go Please

Sameet Sinha

forward-looking our Form you financial of Thank recorded statements the regarding include involve regarding third archived subject fiscal forward-looking can the along factors website. Please release macroeconomic statements. impact from for including factors Edgio future actual events the November found XX and Good conference for geopolitical note of of call. and impact forward-looking our integration in any the cause that The days. with are our XXXX number a on financial expressed be year. third results earnings will to comments the results guidance performance, XXXX, being statements for could A This differ quarter such to XX-Q from statements approximately uncertainties copy include that XX, XXXX trends, materially afternoon. for section today's and acquisitions and development. those of press from and joining website be call any risks today, quarter, any by Investor is Relations or implied the These

Please see earnings forward-looking on new the release disclaims law. as or only any speak be except in quarterly and company's events XX-Q. of entitled they which to not on the to obligation required any Edgio circumstances, statements, Form update disclaimer Undue are as our included future the well Edgio's by on date should made. placed these reliance statement Risk information, Factors with as SEC, Form XX-K reflect the statements the sections filings as including press report forward-looking annual reports on

The non-GAAP measure and measures a of be be in we intended measures is will are a such GAAP GAAP financial to financial earnings non-GAAP Lyons, and section directly the the provided press reconciliation measure referring results. I our course comparable discussed website. President to substitute Relations financial turn not certain the Bob the of between or will non-GAAP yours. each release in call, differences our the financial of used are today's Bob, to most These During now to CEO. financial our Investor over for call measures. floor

Robert Lyons

require our afternoon, of third the Good XXXX. the of opportunity. also and working and In This fall year to relentlessly in as to challenges but opportunity. Sameet. for transformational like never to recent have the welcome quarters, embarked the challenges XXXX, on to unlock us you, offered these realize has earnings easy navigate, the past call Thank quarter journey. Transformations we are X a through several Edgio expected, begun

with objectives One of better strategic our our previously stated capital align structure our to strategic was plans.

we goals. Specifically, X had

continue we wanted to on the recent liquidity building ensure First, adequate momentum. to

avoid XXXX to Second, without near-term more to for due And converts to exchange we our we pressure wanted any new stock. remove in our converts wanted XXXX listing uncertainty putting status on around headwinds. third, our NASDAQ

That work to our Over way providers. remained following X the transfer capital to including to team was a quarters, best market, process the the accelerated these ascertain objectives the an undertook overall over XX of outreach objectives, and management NASDAQ to but listing Board thorough our unchanged. accomplish past capital the

these filing each X-K to address yesterday, have X been successfully we our in outlined able of As objectives.

convertible investor due notes notes LP existing XXXX in unsecured Fund in Our Lake convertible Lynrock existing its XXXX. exchanged Master due secured for

company financing. the Additionally, of provided with million $XX has new Lynrock

in the us momentum a put continue established provide balance with transactions QX building on financial in sheet stronger these Importantly, QX. and position strengthened to and a us

that size from we Last, return steps X of necessary and to with us As we we the overall transactions, part appoint taken members compliance X. to X believe NASDAQ. will the have reduce first new these independent Board to board

taken are shareholders and and growth steps our thorough on preserve most protect based for option to complete short, company's In the we strategies. the and our that best these drive process, confident value are

to a we on with transactions, profitability these forward With full moving look and forward of growth focus improving the business. the

improving margin profitability make of toward an overall XX%. to adjusted least EBITDA achieving at continue progress We

achieve efficient continuing by to We capacity implement to this pivoting and unit company-wide will economics network model, an operating more a asset-light strategy. by improving

We operating remain those by from million by costs efficiency. of committed XX% $XX driven our reducing of to plans run improved are million Approximately to savings $XX rate year-end.

costs. a total peering of expanded from implying hosting XXX have resulted year-to-date. expenses our company margins more expense gross by We by and $XX basis operating reduced in savings operating than Approximately reducing bandwidth annualized by improved XX% sequentially. XX% Cash million, reduction economics unit points

has strategy year-to-date. reducing intensity resulted X.X% asset-light to revenue capital just in Our of

achievement road in of recognition. continue the awards of With map to into savings solutions in security current introduction execute XXXX. to adjusted track the on has growth-oriented and and well and EBITDA industry are new quarter this on in the fourth The resulted several backdrop, our deliver we quarter. application breakeven We

security security security with secured. patterns of proud endpoints in the our us are high-growth we fully secured learning boasts we are believe this our many powered progress release and API with third delivered application content awards edge this reinforce this of the that capabilities, our here of leverages differentiated expertise. In We solutions on managed streaming Consistent continue our is API natively broadened now network by the made and Edgio product machine position This deep and application, security offering scaled we traffic modules, ensure to these quarter, enhancements with solution to well our year one both focus solutions. to integrated industry. as globally security discovered, inspect solution. our other and

the during in security Security Award we Breakthrough overall Web the this of awards Awards. Year Adding multiple Solution recently Seventh to CyberSecurity were year, Annual the the named

a Our Year security Awards solution the in is the DevSecOps. InfoWorld's of also for Technology finalist

to combines in web web X security Perform capabilities, out existing and suite just released one value of A key We Protect X all have solution always Bundle do as operations availability customers our Upon proposition a simple price the support simplify This enterprise-level our continues buyer enterprise-level full to access Applications experience. of with bundle the package suite customers. recently been model. adoption, to has our performance the Version rolled year April single element security to predictable comprehensive new of that. services, announced upgrade of an and quick in with along be breadth the our bundled model. Applications this a to full and simplified pricing Tier

a leading by and In comprehensive Edgio's strategic solution simplified, OTT business, led announced vendors we or live services offering. our provide media streaming to with managed on-demand technology cost-effective a partnership recently linear,

enable Uplynk our Our service. partnership via with fast Wurl announced last will syndication week

bookings momentum from quarter, outlined new almost overhaul customer taken previous have both application stabilization revenue. of client the market. In by These for XXX% [ The support to almost balanced was new third first from bookings routes and enablement call, XXX% our expansion capabilities, last quarter. improved we the the teams our implementation that channel team, growing customer more many the ] more than the improved with growing customer sequentially. than expands expansion our our expansion acquisition improved existing steps include XXX% suite bookings across XXX% and During quarter and our and we commercial success go-to-market of a steps quarterly program of to our of and

third declined time. for In the expansion quarter, Churn has outpaced declining more first meaningfully also revenue churn than revenue with churn XX% the sequentially.

this trend and into expect to fourth XXXX. well quarter the We in continue

by qualified rate to quarter. Airlines, billion group than supply we grow pipeline in of time Our their doubled of quarter that also measured bookings to third web of has Pacific the since XX% and in more XX%. bookings first pipeline retailer sales automotive retail important, American period. Highlights continues include acquisition the and the productivity $XXX improved response large conversion improved stores the by from same competitive a North more cost Equally than Cebu a Europe, a takeout X,XXX with where pet by

solutions in security health large a company unicorn to media a the India. e-commerce Brazil company We in Asia, food also and leading hardware a a in company U.S., in platform upsold

commercial operating are security. our efficiency and of demonstrably to directly diversity and and to the wins these improve scope The ability performance, our breadth capabilities of attributable

this to of April. Version All in the Applications is directly of attributable release X

We This the their and both legacy the reposition offers have the the in also challenges consolidation ongoing StackPath, CDM business taken that we also company. offerings. but strategic to shuttering our steps of validation speaks industry in industry, seen CDN to trend CDN with Lumen have

a see improve to opportunity supported Edge business in continue the and profitability to capital at price customers. through while We our will invested fair our Open quality approach performance delivery strategy. and on This continually providing return asset-light

In summary, the required place. our now is in strategic to support pivot foundation

to move differentiated edge-enabled of continue our supported and our by profitability vision toward solutions. growth, company We the

results. quarter to Now to I over second the will Stephen turn call Stephen? discuss

Stephen Cumming

Thank you, Bob.

improved the high of for sequentially quarter third by $XX of revenue seasonality, efforts increasing the was driven reducing expected, X.X%, conversion in to the second for our XXXX and bottom churn Revenues year. by successful revenue. were million, quarter bookings As

Moving margin. basis amortization partially gross platform was improvement cost-saving points. gross to to acquisition-related from to XXX depreciation a revenue the XX.X%, by Cash which and margin, our impact and The costs stock-based services provider was sequential excludes and points expenses offset continued related XXX impacting cloud due basis compensation, switching sequentially. gross up approximately higher by initiatives, margin higher

to We cost most going be forward. incremental expect of nonrecurring this

or XX.X% and expenses, acquisition Turning excluding restructuring depreciation charges, to operating million share-based $XX.X $XX.X million second Cash of operating XXXX. XX.X% of in down quarter the or compensation, from charges, revenue, legal-related expenses. and were amortization

We continue cost make to initiatives. significant our in reduction progress

efficiency executing well marketing introductions and in synergies planned new sales on our operational acquisition programs revitalized our and and product We motions. investing are while

$XX.X Cash a XX.X% $XX the full to territory-based million the R&D or announced sequentially of as of commercial revenue benefit $XXX,XXX million to sales we revenues revenues model. decreased of remaining marketing restructuring. Cash, $XX.X revenues XX.X% $X.X million productive by XX.X% benefit team as XX.X% a $XX.X more saw we saw from expense organizational or to of from go-to-market sequentially previously and from expense million, approximately quarter decreased million from or transitioning

million G&A Cash efforts $X.X legal of fees. from onetime $XX.X announced and Previously or offset increased XX.X% containment million expense revenue of cost sequentially $XX.X or partially accounting by revenue. by to XX.X% were million

Share-based was to the versus compensation expenses at $XX,XXX of compared operating $X.X XXXX. second $X for million quarter charges $X.X Restructuring were included second the million. quarter million in

quarter. approximately in second the approximately with in acquisition connection included $X.X million COGS charges for expenses legal-related operating and and to EdgeCast Acquisition million the compared $X were

of cost XXXX the loss and for third revenues XXXX in have on due of structure. in in the a compared cost second was quarter quarter to of which $XX.X our loss a million sequential million decline continued EBITDA execution initiatives, $X.X Adjusted to saving higher resulted of

Moving marketable of quarter second million, XXXX. Cash and and of balance sheet the to decrease securities from cash equivalents totaled a the million $XX.X approximately cash and flow. $X.X

expenditure Third revenues. X.X% was XXXX of or quarter capital $X.X million

resulted have was which X months, historical up CapEx last the in initiated tighter the CapEx goals, slightly second Over quarter. have XX for second the quarter DSO significantly we days, below spending levels. from

continued Now to improved guidance. helped the macro Strong moving motions and product softness environment. the in go-to-market execution overcome

portfolio the savings our with to focused by remain product we're seeing value and customers deliver on outlined Bob Our to million proposition track year-end. on opportunities broad leading and We resonating $XX solutions of are indicators, executing $XX which cost-saving million on of and improvements rate earlier. in our the are run

Our million. range or guidance are, to $XXX growth year to XX% This we $XX and for revenue year $XX XXXX, million fourth quarter fourth of in a quarter XX.X% the year-over-year. the revenue $XXX full the to million range expect for of of the implies of full million

in of quarter negative fourth $X EBITDA of the million. For XXXX, million we positive $X range expect adjusted and the between

adjusted the $X of XXXX, negative range we expect $XX $X the of we year, in for EBITDA in the capital to negative million. quarter fourth million $XX expenditure the expect And to of million range For million.

to range For of million. million CapEx year in revenue $XX This we expect X.X%. implies as the a about full X.X% of XXXX to CapEx the of $XX percent

more context around Now guidance. you let our me provide

accelerating our unit quality revenue on focus are We economics. and

at As fourth we sequentially are the result, the a a flat midpoint. in revenue guiding quarter

on expect reduction provider improvements We revenue sequentially platform in focus quality. by as expand initiatives, to services cash gross due continued cloud points margin cost-saving approximately XXX basis and margin to we

expect in at midpoint annualized perspective, adjusted cash reduced To the expenses breakeven fourth on it almost of an As quarter. we've by put basis. previously EBITDA $XX communicated, we fourth in quarter the million guidance

operating we've in and As progress significant the synergies our cost expenses. mentioned, of and Edgio driving transforming Bob made efficiencies by costs structure

set us year operational we further the quarter, further turn for the of expect in adjusted XXXX. With reduction expenses by the Bob since fourth some XX%, the that, Our will for I'll beginning call expansion remarks. margin in back and closing which to declined up EBITDA

Robert Lyons

continue platform CDN company reiterating progress. to the in by and operator, of that, foundation a Thank our up lines wrap move vision platform our first-generation the you, Stephen. the transformation by up toward please the to now session. from a solutions. With third-generation supported place to continues profitability into I solutions differentiated that to want We question-and-answer edge-enabled for growth have edge open

Operator

[Operator from the of James. Instructions] Louthan Your first question line Raymond comes Frank with

Frank Louthan

-- a I little for the outlook get appreciate the wanted on to fourth color quarter. the

forward, business? exit Has expect or and question That's anything? so. how a low or then And flow. cash about Is we StackPath breakeven we -- for then over is can to this changed cross one, ] of free QX we of next should next can and when of EBITDA kind Looking question the sort positive done expect of set that give you think first the of Lumen how forward. second quarter EBITDA positive going year? us an delivery And should permanent [ the or idea your first

Stephen Cumming

Yes, Stephen progression. see, with can I mean great Frank, here. EBITDA we've to Yes. our progress is you as made this regards

If first of an this you year, we take half had EBITDA of million. the $XX loss

I think to going loss a we're year, second in breakeven this half be of the and of million getting the based QX. on somewhere EBITDA that's to $XX in our us guidance, midpoint of a

Obviously, go year. -- So put you into the around to of going see taken a with we've expansion as I And in take see that the can would A gross that we I that. more COGS we're numbers should lift. lot this margin transitioning expect half EBITDA. cost-saving we're that initiatives of the first to you of of to on continued want out. But was don't all XXXX cost now reduction, our in say, lot OpEx, primarily

should expansion certainly as There of of a into we the a progression. next expect see half, seasonality go but first in continued year. EBITDA be little continual we So will bit

free working cash flow, of we're some regards working net through be capital to With to true-up. going the

we So certainly the I on StackPath? should the Bob, free into and again, flow half, second as turning want you the year positive. comment if know, EBITDA expansion cash throughout be don't to

Robert Lyons

Yes, Look, Lumen StackPath I saw with think dynamics for is I'll really X about way us. do that. the and that things to you think the

volumes the challenges think think walk the running business, And traditional as to I I X in it speaks challenges. underpins one, from it the of away the companies way business. that CDN when literally, of kind

and not of new to -- any So certainly that's us.

the company are years and and as have also the X over video solutions and underpins edge-enabled the importance important. I we think focused moves last those it of app company a why repositioned on so stack security moving why up

strategically, So the we've I validates just all the think moves it X last years. making over

operationally, inbound some seen opportunities we've from think I that.

so strategy make But about that the the that for the important. to less return to. to capital way that's we opportunity on of why is think number And we've got is an we invested in of we us asset-light it's generate I think actually become the space. one sure need parties can that it positive

that the think the right allow long navigate a and strategy EBITDA that as as consolidates, return it pushing business strategy that. for will that that in challenging industry And business, a capital more why more can opportunity now. to way actually do our just we we're industry much we no effectively us So is on shareholders, pursuing way We we as hard. which for in think the industry do it doubt we're that asset-light us generate and provides really can invested the is about that

Operator

from Street. comes of Martinuzzi Eric line the with question Next Lake

Eric Martinuzzi

pick of then we to X% million deeper at with yesterday's got million notes. but million convertible with the finished in X/XX, we to buttoned get looks And quarter we million $XXX financing, It September paid on a that time like cash. obviously, the $XX the convertible out we congrats $XXX million. up and clear remaining $X had the million $XXX into we've $XX of had wanted in notes transaction, cash, the the around out on here. up bit I refinancing Yes. and We getting little

XX I cash us forma with pro know, a give all takes, pro November forma kind puts and So and you of wanted to those just can debt?

Stephen Cumming

with debt puts Proforma and the to to around be be is cash about somewhere takes, Yes. $XXX all think and going million. $XX I million is going

Eric Martinuzzi

Okay. looking business streaming. and is a as it And CDN, not year characterized All from look it is business, on XX% now, now? for business How your a today, that XXXX year revenue, the right. does and the is XX%, the then I'm as apps, from XX% specifics historically you've but about

Stephen Cumming

of the going piece than of Yes. see delivery. Eric, nondelivery continue to growing is just I sort mean, you're again. I say this the business, Stephen would trajectories to growth faster the

And so as the split move other as a delivery are into grow Uplynk you and expect, exit We're 'XX about stay said, about, revenues. faster of and X portion larger and the 'XX to becoming delivery. we company apps than are disproportionately should the XX% But overall XX% businesses. going you that business they then between

as portion So the in we there out go higher subsequent be will mix years. a of the

Operator

from question Capital Craig-Hallum the Daniel Hibshman comes Next Group. with line of

Daniel Hibshman

This Rhee. Van is Jeff on for Daniel

on sort initiatives, with Stephen, would of Just risks thought cost terms in a -- I of particular, level double-clicking sort And out yet? Is have you saving costs the potential reached that to then come specifically there coming of new for we've that more emphasized there the out on for OpEx, more maybe COGS is 'XX. room OpEx the savings, of in yet.

if see efficiency Just down in at drill you you do where opportunities could COGS? all,

Stephen Cumming

with reductions. would we've say, great OpEx firstly, made Yes. mean regards I progress I to the

about of we about in got annualized. $XX QX rate run a were where If reduction, it XX% from XXXX, to you we've million think about

further the to on there based OpEx QX, be is As reductions. we guidance, into go going

million. be it about out $XX to think million, $XX works I

going of to we COGS down QX. be I through we're where And reductions. but I said reductions. more And earlier, those largely to transit from be in most we're going that's as think [ ] were So

terms Some et you're by providers with margin expand see gross our and on of cetera. colos, those seeing of bandwidth points. But in our initiatives flat are basis more renegotiating you revenue guide can XXX-plus QX to lengthy already,

going to in start into to in, gross really you're improvement reductions XXXX. that So kick margin QX and see cost and

Robert Lyons

tie a bit color more to And strategic me add Daniel, little let perspective. that more a a little of to

that X of of Stephen improving the out strategy. and types improved like those is economics, really which we are and large driving highlighted, hosting part costs the really X top of the -- pillars our things that things So we to asset-light on is software is just where system our partner our already on don't and economics have focus costs pay unit the cost our reducing on out stuff peering which the unit who COGS lot And asset-light we can gets of strategy have today. for that. them and The a of those delivering around take of and with strategically people

when more So to at will out the more intensity together, same And by at costs we about on time. then just as efficiently. asset-light well capital take you strategy think as we'll have improve the look things X our our continue what economics differently running chunky strategically those we costs as unit reduce capacity the

Daniel Hibshman

about ongoing? of for scope you see around boundaries margins? that as less to kind could any this on revenue. in you quarter? impact relation and that talking a zoom of mean wanted more up then that mostly And also just attractive And for similar following from one upside for might revenue to something the what sort in just in just of something gross me, I is stepping Was there. then away Or vein put

Robert Lyons

Yes.

any it wants, let I frame just Steve color I'll for I'll you. think he -- add but

is we managing way actually think talked lot in think a about I to what just costs. like our it the about

for pay works you our that then is you capacity the when for, rest of level that's pay for way you the the and So essentially hit peak year. business the that

have the week drives cost say, we once but up a And our we're spiky the super week, it not so couple using hours a business, of if for, and customers rest have it. we're for then who of paying let's

out we're we traffic spikes, not do it and about it's of of really a with if actually handful for yield driving carrying up find just optimize And by that the threshold other the across to manage that handful rest than you There's customer. and caused a cost at of how that customer really and cost looking around reduce -- traffic working us, customers that our most -- it's of so So the ways them -- and we're and cost that less that overall to business. smooth will, threshold.

Stephen Cumming

forward, that just I'll sort But margins. sort quality think I color a that. out sort in on look would Obviously, sort little weeding revenue. our on focusing focusing poor to overall impact I revenue and of and margin going a been of deliberately say of of we've we're terms direct revenue. quite we of the thresholds implementing of out quality don't straight at coming can of add

going clients and our adding some to and sort we're of services and on to to existing amenable new contracts So business. are new their sort of renegotiating products

but just with certainly, business terms forward of of out revenue, in on taking So of EBITDA our and it's coming going margin. improving type not the focus to going very be a thoughtful we're big we're straight

Operator

to are There time. no I Lyons, turn back over Instructions]. call further at questions you. Mr. the this [Operator

Robert Lyons

us We analysts and you. our go great today. and progress investors continuing Okay. sharing Thank and have forward joining for a Thank as day. you, of forward your to look conversations everyone, rest with we Great. our

Operator

concludes today's call. conference This

may You now disconnect.

Edgio (EGIOQ) 15 Nov 232023 Q3 Earnings call transcript