Edgio, Inc.

Today, ladies and gentlemen, welcome to the AGO 2022 third quarter financial results conference call. At this time, all participants are in a listen only mode. At the end of the prepared remarks, we will provide instructions for those interested in entering the queue for the question and answer session. I will now turn the call over to Samit Sinha, VP Investor Relations and Corporate Development.

good afternoon thank you for joining the edu third quarter 2022 financial results conference call this call is being recorded today november 9 2022 and will be archived on our website for approximately 10 days let me start by quickly covering the safe harbor we'd like to remind everyone that we will be making forward-looking statements on this call except for statements of historical fact forward-looking statements include but are not limited to our priorities our expectations are operational plans, business strategies, secular trends, products and feature functionalities, non-GAAP results, acquisition activities, and contributions from acquired businesses. These statements are not guarantees of future performance, and undue reliance should not be placed on them. Forward-looking statements are based upon what management believes are reasonable assumptions, and actual results could differ materially from those contemplated by our forward-looking statements, and reported results should not be considered as an indication of future performance. For more information, please refer to the risk factors discussed in our periodic filings, including our most recent annual Form 10-K and quarterly reports on Form 10-Q. The forward-looking statements from this call are based on information available to us as of today's date, November 9, 2022, and we disclaim any obligation to update any forward-looking statements except as required by law. The company prepares its financial results in accordance with accounting principles generally accepted in the United States of America. In addition to the GAAP financial measures, the company may also present certain non-GAAP financial measures, including non-GAAP net income, EBITDA, not just an EBITDA, non-GAAP gross profit, and non-GAAP gross margin. The company believes that non-GAAP financial measures are important supplemental measures of operating performance. The company's presentation of non-GAAP financial measures does not replace the presentation of the company's financial results in accordance with GAAP. And non-GAAP financial measures should not be construed as substitutes for or better indicators of the company's performance than the most directly comparable GAAP measures. Joining me on the call today are Bob Lyons, our CEO, and Stephen Cumming, our new CFO. Bob will start today's call with a brief discussion of the results, an update on our business, and a solution structure. Stephen will then review financial results and guidance. Following that, Bob will use the remainder of the call to summarize our strategy and corporate initiatives going forward. I will now turn the call over to Bob. Bob, the floor is yours.

Thank you, Sumit, and welcome, everyone. The third quarter was the first full quarter of our transformational combination with EDGECAST. We remain very excited about this combination, which has expanded our scale and further diversified our edge-enabled solutions, both key building blocks to improve profitability and accelerate growth. Before I jump into the details of the quarter, I want to welcome Stephen Cummings, who joins us as our CFO. Stephen has led an exemplary career as a finance executive at a variety of technology companies and has a strong history of creating shareholder value. He brings a depth of experience and knowledge critical to our plan to make Egeo a leading platform solutions company powering speed, security, and simplicity at the edge. In the third quarter of 2022, we continue to build on our four previous quarters of positive momentum with revenue of $121.2 million and increase of 119% year over year. We made good progress in increasing utilization of our excess capacity from the second quarter, which drove up non-GAAP gross margin 140 basis points quarter over quarter. Adjusted EBITDA was a loss of $3.2 million, largely driven by the anticipated edge-cast impact that we were addressing with planned operational synergies. Let's review some of the highlights from the quarter. First, we continue building awareness about Egeo and our solutions across the industry. We are starting to capture industry recognition that will help us continue building commercial momentum. Just last week, CyberSec Asia recognized us as a rising star in security after its survey of hundreds of CISOs and cybersecurity practitioners. We are proud of this achievement and will continue to build on it. Our pipeline has grown high double digits from the beginning of the year. and even more robustly for our strategic recurring high-growth revenue application solutions. Our pipeline includes major global brands that understand the demonstrative value our solutions offer. These opportunities are at various stages, including many in active proof of concept. Bookings of our application solution this quarter were our highest to date, and we are on track to grow that number meaningfully in the fourth quarter driven by our security solutions. We signed our first eight-figure deal with a leading security company and also deployed our application solution into one of the world's largest fintech companies, displacing a major competitor. These customers chose Egeo due to our unique ability to seamlessly integrate scale-enabled performance, security, and programmability at the edge. We are excited to see these early wins from our large tech-savvy companies, further validating the efficacy of our strategy and our solutions. Given our ongoing pipeline growth and bookings trajectory, we remain confident in our ability to continue accelerating our commercial momentum going forward. Second, we are making meaningful progress on improving profitability. On the second quarter call, we increased our annualized run rate synergy estimate from $50 million to $60 million. To date, we have achieved over $20 million against this estimate and are well ahead of plan. We continue to identify additional synergies and will provide further updates as we operationalize them. These synergies are run rate in nature, are focused on both gross margin and operating expenses, and will continue to support profitability improvements well into next year. Third, we continue to integrate the combined capabilities of our Layer 0 and EDGECAST acquisitions. We now have a much more complete set of solutions with a credible right to win. Let me take a few minutes and share some highlights. Our applications platform offers a suite of products that provide a one-stop shop for developers looking to build the third generation, highly performant, and secure web properties. This meets the need to improve performance, productivity, and protection across distributed architectures, which have increased complexity, latency, and attack services. Most sites on the internet are failing Google's Core Web Vitals benchmark, and our solutions offer industry-leading sub-second websites that improve business outcomes for our customers. Relations for tax are on the rise, And the size, pace, and sophistication of the task continues to escalate. We are handling some of these large attacks on digital properties around the world across highly sensitive verticals such as e-commerce and financial services. Last year, we outlined our plan to become more relevant in the cybersecurity market where they focus on automation and machine learning. These capabilities are vital to any modern cyber strategy and are required for companies to get appropriate protection from their RAS, DDoS, and bot management investments. Our acquisitions of Layer Zero and Edgecast have enabled us to execute on that strategy, and we are now a credible provider of a leading web application and API protection product. We will further expand the value of this platform with the upcoming launch of our advanced bot solution currently in beta. This approach has proven to be a differentiator for us and enables us to take market share as evidenced by the two wins and rapidly growing pipeline we have highlighted. In addition to performance and security, our application solutions allows development teams to ship twice as fast. Today, more than 70% of IT budgets are spent on maintenance and plumbing rather than focused on growth initiatives. Our solutions enable developers to eliminate the agency costs associated with tool sprawl, allowing them to spend more time building things that create business value. In short, our application solutions powers the fastest websites in the world, reduces the attack surface, all while lowering operational costs for customers. Performance, protection, and productivity were the pillars of the strategy we outlined a year ago and remain the pillars of our existing value proposition today. We believe we are well on our way to becoming the platform of choice for builders to productively power the fastest and most secure web properties. Our media platform has the capacity to deliver approximately 250 terabytes per second to more than 300 cops across the globe, making us the second largest and most performant network in the world. Our media products continue to benefit from secular tailwinds as consumers cut the cord. According to eMarketer, we are at an inflection point where non-pay TV households are expected to surpass pay TV households in 2023. The most recent report from Nielsen indicates a new milestone where, for the first time, streaming minutes have exceeded that of cable and broadcast. Additionally, sporting events are quickly moving toward 100% streaming now, as we saw with Thursday Night Football. COVID-driven content constraints continue to abate, and it is also worth mentioning that we now support all of the major gaming consoles. Uplink, our solution for streaming, provides an industry-leading set of features that reduces the complexity of mission-critical tasks for media companies, further entrenching our platform in their workflows. The value of our platform is best articulated by the recent feedback that we received from a leading media customer who said, we would need 10 times the current staff if we did not have your platform available to us. We will continue to invest in this solution and look forward to Uplink quickly returning to its place as the gold standard. We believe there is an opportunity to improve customer and shareholder value simultaneously with the new pricing model that shares economic benefits created through better platform utilization. We are also transforming some of our capacity to be embedded and directly delivered from ISP networks. This model improves the performance and quality for the viewer, reduces energy consumption, and supports better margins overall. We are maniacally focused on performance and customer support and know that doing so will allow us to earn more share of our clients' spend. These actions all support our ability to continue growing while improving our profitability and cash flow. As you can see, we have taken and continue to take steps to strategically align our company with secular tailwinds that benefit from an edge-enabled solutions platform that natively powers speed, security, and simplicity. We have established a right to win, and this is supported by a go-to-market team that is aggressively targeting the funnel at the top and bottom. I am proud to say that our product efficacy shines during competitive evaluations, and we win a disproportionate percentage of proof of concepts with some of the most sophisticated companies in e-commerce, technology, and fintech. We will continue fine-tuning our go-to-market motions to further accelerate new logo wins, upsells, and cross-sells to both our direct sales teams and channel partners. At this time, I will turn the call over to Stephen to share third quarter financials.