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EI

Edgio, Inc. (EGIO)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 revenue was $97.0M, up ~1% sequentially and down ~12% YoY; non-GAAP EPS was -$0.07 (in line), and Adjusted EBITDA improved to a -$9.5M loss from -$13.4M in Q2 .
  • Management guided Q4 revenue to $96–$98M and updated FY23 revenue to $391–$393M, reiterating a breakeven Adjusted EBITDA target in Q4 and emphasizing cost savings and asset-light execution .
  • Liquidity strengthened via a $66M financing and exchange of ~95% of 2025 notes into 2027 secured convertible notes; pro forma cash ~$88M and debt ~$183M post-transaction per the call .
  • Stock catalysts: demonstrated execution on cost savings, improving unit economics, applications bookings up >150% QoQ, and clarity on capital structure following refinancing .

What Went Well and What Went Wrong

  • What Went Well

    • Applications bookings were “record,” up >150% sequentially, reflecting traction in security/applications portfolio and revitalized go-to-market motions .
    • Adjusted EBITDA loss narrowed to -$9.5M from -$13.4M in Q2 on higher revenue and continued cost savings; cash OpEx fell to 41.8% of revenue (from 44.8% in Q2) .
    • Balance sheet flexibility improved via $66M new financing and exchanging 95% of 2025 notes into 2027 secured notes; CFO cited ~$88M pro forma cash and ~$183M pro forma debt .

  • What Went Wrong

    • Revenue declined ~12% YoY to $97.0M despite sequential improvement, reflecting lingering macro softness and prior churn dynamics; non-GAAP net loss persisted .
    • GAAP net loss remained sizeable (~$24.5M), underscoring ongoing restructuring/acquisition charges and amortization drag while transformation continues .
    • FY23 revenue guidance was tightened to $391–$393M from $392–$398M earlier, implying a slight top-line tempering even as EBITDA breakeven is reiterated for Q4 .

Financial Results

MetricQ3 2022Q1 2023Q2 2023Q3 2023
Revenue ($USD Millions)$121.2 $101.9 $95.8 $97.0
Non-GAAP EPS ($)n/an/a-$0.09 -$0.07
Adjusted EBITDA ($USD Millions)n/a-$14.4 -$13.4 -$9.5
Cash OpEx (% of Revenue)46.4% n/a44.8% 41.8%

Notes:

  • Q3 2023 GAAP net loss was ~$24.5M; gross profit was ~$23.2M (contextual reference) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2023n/a$96–$98M —
RevenueFY 2023$392–$398M $391–$393M Lowered (tightened)
Adjusted EBITDAQ4 2023Breakeven reiterated Breakeven reiterated Maintained
Capex (net of ISP payments)YTD 2023n/a$4.9M YTD (1.7% of revenue) —

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2023 and Q2 2023)Current Period (Q3 2023)Trend
Cost savings and run-rate efficienciesTargeting $85–$90M run-rate savings by YE23; broad OpEx reductions ~28% YoY operating expense reduction YTD; cash OpEx cut to 41.8% of revenue Improving
Asset-light/network unit economicsPivot to asset-light capacity strategy; improving peering/hosting costs Continued improvement in unit economics; reiterated path to adjusted EBITDA margin expansion Positive
Applications/security growthApps v7 launch; bookings momentum building Record applications bookings, +150% QoQ; improved attach/cross-sell Positive
Capital structure & liquidityCash ~$36M (Q2), notes outstanding $66M financing; exchange of 95% 2025 notes into 2027 secured notes; pro forma cash ~$88M, debt ~$183M Strengthened

Management Commentary

  • “We remain committed to our plans of reducing run rate costs by $85 million to $90 million by year-end… improving network unit economics and pivoting to an asset-light capacity strategy.” (CEO/CFO) .
  • “Guidance for the fourth quarter… revenue in the range of $96–$98 million… implying full-year revenue of $391–$393 million… we remain focused on delivering breakeven Adjusted EBITDA in Q4.” (CFO) .
  • “Pro forma, cash is about $88 million and debt around $183 million” following the financing and note exchange. (CFO, Q&A) .

Q&A Highlights

  • Liquidity update: management quantified pro forma cash ($88M) and pro forma debt ($183M), improving flexibility post-refinancing .
  • Outlook detail: reiterated Q4 revenue $96–$98M and FY23 $391–$393M; emphasized execution against cost savings and asset-light strategy to reach Q4 adjusted EBITDA breakeven .
  • Operating model: discussed mix shift toward higher-margin applications/security, better unit economics (hosting/peering), and sales productivity improvements .

Estimates Context

  • Wall Street consensus for Q3 2023: revenue ~$96.4M and non-GAAP EPS -$0.07; actual revenue of $97.0M beat by ~$0.6M, EPS was in line at -$0.07 .
  • Note: S&P Global consensus via tool access was unavailable for EGIO due to mapping; consensus figures above are sourced from AP/Zacks/Site coverage.

Key Takeaways for Investors

  • Execution momentum: sequential revenue growth, improved Adjusted EBITDA, and lower cash OpEx signal operating leverage as cost programs mature .
  • Product-led mix shift: record applications bookings (+150% QoQ) support thesis of migrating toward higher-margin ARR software/security, potentially accelerating gross margin expansion in 2024 .
  • Liquidity de-risking: $66M financing and note exchange extend maturities and reduce near-term balance-sheet risk; CFO outlined improved pro forma cash/debt .
  • Near-term trading: watch Q4 breakeven Adjusted EBITDA delivery and revenue within $96–$98M guidance; any over-delivery on EBITDA or bookings could be a positive catalyst .
  • Medium-term thesis: continued unit economics improvements (hosting/peering), asset-light capacity, and ARR growth can support sustained margin expansion and FCF improvement in 2024 .

Source Documents Read (Primary)

  • Edgio Q3 2023 8‑K with press releases (Item 2.02; Exhibits 99.1 & 99.2) and broader 8‑K filing context .
  • Q3 2023 earnings call transcript (Nov 15/16, 2023) .
  • Other relevant press releases Q3 2023: financing and note exchange, cash OpEx, bookings, guidance (embedded in Q3 press release) .

Prior Two Quarters (for trend analysis)

  • Q2 2023 press release & call: Revenue $95.8M; Adjusted EBITDA loss -$13.4M; reaffirmed FY23 revenue $392–$398M and Q4 Adjusted EBITDA breakeven .
  • Q1 2023 press release: Revenue $101.9M; Adjusted EBITDA loss -$14.4M; set run-rate savings target $85–$90M .