No Anticipated Impact on Cash, Cash Flows or
Business Operations
Provides Operational Highlights Demonstrating
Continued Business Momentum
Expects Preliminary Q4 2022 Revenue of $107 -
$109 Million and Capital Expenditures of Approximately $2.5
Million
Total Cash, Cash Equivalents and Short-Term
Investment Balance of Approximately $74 Million as of December 31,
2022
Edgio, Inc. (Nasdaq: EGIO) (the “Company”), today announced that
it will restate its previously issued financial statements for the
years ended December 31, 2021 and 2020, as well as Quarterly
Reports for 2022 and 2021 (collectively, the “Prior Period
Financial Statements”) related to the revenue recognition of its
Open Edge Solution.
Adjustments to Open Edge Transactions
The Company and the Audit Committee identified an error in the
Company’s historic accounting treatment of Edgio’s Open Edge
solution. Edgio’s Open Edge solution is a fully managed content
delivery network (“CDN”) service that embeds Edgio’s content
delivery platform directly into internet service provider (“ISP”)
clients’ networks (the “Impacted Transactions”). The Impacted
Transactions had a revenue sharing arrangement under which Edgio
and ISP clients shared revenue from the traffic that runs through a
point of presence (“PoP”) using Edgio’s content delivery
platform.
Based on the Company’s review to-date of a sample of the
Impacted Transactions related to Edgio’s large customers, which
remains ongoing, the Company believes the sale of Open Edge
equipment should be accounted for as financing leases, in which (1)
the up-front payments received from the Company’s customers
associated with the transaction are recognized as a financing
liability on the balance sheet, with the related equipment costs
remaining in fixed assets and depreciated over time, and (2)
pursuant to lease accounting, the revenue sharing payments made by
Edgio to the customers allocated between cost of sales and lease
payments, as an offset on the balance sheet against the lease
liability. While the Company’s determination regarding the revised
accounting treatment for the Impacted Transactions is based on
management’s evaluation of a sample of the Impacted Transactions,
the Company has not yet completed its evaluation of all such
transactions and could reach a different determination as to the
remaining transactions.
No Anticipated Impact on Cash, Cash Flows or Business
Operations
Based on the Company’s review to-date of a sample of the
Impacted Transactions, it is not anticipated that the revised
accounting treatment related to the Impacted Transactions will
impact the Company’s cash or cash equivalents for all prior
periods. It is important to note that the changes being recorded
did not result from a change in published accounting guidance
during the relevant time period or any override of controls or
misconduct, nor has the Audit Committee been informed of any issues
related to an override of controls or misconduct.
Bob Lyons, President and Chief Executive Officer, said, “Upon
identifying the issue during the audit, we immediately began a
thorough review of the adjustments needed to resolve this matter as
quickly as possible. Open Edge is, and will remain, a strategic
initiative for Edgio as we look to grow our network capacity,
improve our gross margins and grow in an asset light manner.”
The Company currently anticipates that the primary effects to
correct this accounting may result in a reduction in revenues of up
to approximately $6.6 million for the 12-month period ended
December 31, 2020, up to approximately $16.7 million for the
12-month period ended December 31, 2021, and up to approximately
$23.0 million for the nine-month period ended September 30, 2022,
with a corresponding costs of sales reduction and impact to
depreciation expenses and income taxes, as well as other
adjustments. This represents a reduction of 5.8% on a consolidated
pro-forma basis for the nine months ending September 30, 2022, and
a reduction in previously reported revenue of 7.7% in 2021 and 2.9%
in 2020.
Building on Strong Business Momentum
Mr. Lyons concluded, “Operationally, our business continues to
generate positive results following our transformative combination
with Edgecast last year. We are seeing validation of the efficacy
of our strategy and our solutions as evidenced by new business wins
with large, tech-savvy clients, making meaningful progress on
improving profitability, and integrating the combined capabilities
of our Layer0 and Edgecast acquisitions. We remain confident in our
ability to continue accelerating our commercial momentum going
forward.”
Highlights for the Fourth Quarter of 2022 include:
- Cash, cash equivalents and short-term investment balance
increased sequentially to approximately $74 million as of December
31, 2022, from $70.8 million as of September 30, 2022
- Double-digit bookings growth on a sequential basis
- Launched two security solutions in Q4 2022 – Bot management and
DDoS scrubbing – and further enhanced Edgio’s WAAP
capabilities
- New client wins included a premium automobile manufacturer in
Germany, a worldwide sports governing body who held a global
sporting event in the fourth quarter, a $100 billion fast fashion
brand in China and a leading home furnishing retailer, where Edgio
was selected to replace a large competitor
- Achieved the high end of guidance of $25 to $30 million for
operationalized run rate synergies
- Granted a patent for a unique mechanism to mitigate bot
attacks, and filed another patent application which will further
bolster IP and capabilities in Security
- Expected preliminary Q4 2022 capital expenditures of
approximately $2.5 million due to disciplined spend, focus on high
margin businesses and existing capacity in the Company’s
network
Preliminary Q4 2022 Revenues
For the fourth quarter, the Company currently expects to report
revenue of between $107 million and $109 million.
Cash, Cash Equivalents and Short-Term Investment
Balance
As of December 31, 2022, the Company had total cash, cash
equivalents and short-term investment balance of approximately $74
million. As of today, the Company has approximately $20.6 million
of cash held at Silicon Valley Bank (“SVB”). According to a March
12, 2023 joint statement by the Department of the Treasury, Board
of Governors of the Federal Reserve System and Federal Deposit
Insurance Corporation, all depositors of SVB will have full access
to their deposits starting Monday, March 13, 2023. The Company will
continue to monitor the situation and any impact on the Company and
its operations. Edgio has no outstanding balance under its credit
facility with SVB.
Next Steps
As a result of the restatement, the Company will experience a
delay in the filing of its Form 10-K and expects to file a
notification of late filing on Form 12b-25 with the SEC. Due to the
complexities associated with accounting for the Impacted
Transactions, the Company does not expect that it will complete the
preparation and filing of the Form 10-K within the 15-day extension
period. As such, the Company expects to receive notice that it is
not in compliance with Nasdaq’s Listing Rule on timely filing
requirements. Additional details have been provided on the
Company’s Current Report on Form 8-K that has been filed today with
the SEC. In addition to the above, the Company expects to correct
certain items in the Prior Period Financial Statements as it
completes its work.
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,
cash balances, capital expenditures; our future prospects, areas of
investment, and product launches; and the Company’s ability to
recover its cash on deposit at SVB. Our expectations and beliefs
regarding these matters may not materialize. The Company’s actual
results could differ materially from those stated or implied in
forward-looking statements due to a number of factors, including,
but not limited to: the risk that the Company’s cash on deposit on
SVB may not be recoverable above the FDIC insured limit and the
risk that the Company may experience liquidity or cash flow issues;
the risk that additional information may arise prior to the filing
of the restated financial statements; additional adjustments the
Company may determine to include as it finalizes the restated
financial statements and the financial statements for the fiscal
year ended December 31, 2022; the risk that the Company could reach
a different determination regarding the revised accounting
treatment for the Impacted Transactions upon completion of its
evaluation of such transactions; the risk that the sample of
Impacted Transactions management evaluated may not accurately
represent all such transactions; the risk that Open Edge will no
longer be a strategic initiative for the Company; the timing and
ultimate conclusions of the auditors regarding the audit of the
Company’s financial statements; the risk that the completion and
filing of the Company’s Annual Report on Form 10-K will take longer
than expected and will not be completed by the extension period
provided by Rule 12b-25 of the Securities Exchange Act of 1934, as
amended; the possibility that The Nasdaq Stock Market may delist
the Company’s securities; the possibility that the Company will not
be able to become current in its filings with the SEC;
investigations or actions by governmental authorities or regulators
and the consequences thereof, including the imposition of civil or
criminal penalties; and the risk that the Company may become
subject to stockholder lawsuits or claims. It is very difficult to
predict the effect of known factors, and the Company cannot
anticipate all factors that could affect actual results that may be
important to an investor. All forward-looking information should be
evaluated in the context of these risks, uncertainties and other
factors, including those factors disclosed 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 March 13, 2023, 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) 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, thus boosting overall revenue and business value. To
learn more, visit edg.io and follow us on Twitter, LinkedIn and
Facebook.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230313005441/en/
Investor relations:
Sameet Sinha 602-850-4973 ir@edg.io
Media:
Joele Frank, Wilkinson Brimmer Katcher Andi Rose / Mahmoud
Siddig 212-355-4449
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