SEC Filing | Edgio

View:

llnw-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission file number 001-33508

Item

Edgio, Inc.

(Exact name of registrant as specified in its charter)


Delaware						20-1677033
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

11811 North Tatum Blvd., Suite 3031,

Phoenix, AZ 85028

(Address of principal executive offices, including Zip Code)

(602) 850-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act;


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	EGIO	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☑

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of shares outstanding of the registrant’s Common Stock, par value $0.001 per share, as of August 11, 2023: 222,702,083 shares.

Table of Contents

EDGIO, INC.

FORM 10-Q

Quarterly Period Ended March 31, 2023

TABLE OF CONTENTS


		Page
Note Regarding Forward-Looking Statements		3

PART I. FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	5
	Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022	6
	Unaudited Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022	7
	Unaudited Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2023 and 2022	8
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	9
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
Item 4.	CONTROLS AND PROCEDURES	39

PART II. OTHER INFORMATION
Item 1.	LEGAL PROCEEDINGS	42
Item 1A.	RISK FACTORS	42
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	42
Item 3.	DEFAULTS UPON SENIOR SECURITIES	42
Item 4.	MINE SAFETY DISCLOSURES	42
Item 5.	OTHER INFORMATION	42
Item 6.	EXHIBITS	43
	SIGNATURES	44

Table of Contents

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events, as well as trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These statements include, among other things:

•our beliefs regarding delivery traffic growth trends and demand for digital content and edge services;

•our expectations regarding revenue, costs, expenses, gross margin, and capital expenditures;

•our plans regarding investing in our Media and Applications platforms, our coordinated complete solution to deliver instant, secure, and reliable digital experiences, as well as other products and technologies;

•our beliefs regarding the competition within the digital edge platform industry;

•our beliefs regarding the growth of our business and how that impacts our liquidity and capital resources requirements;

•our expectations regarding headcount and our ability to recruit personnel;

•the impact of certain new accounting standards and guidance as well as the time and cost of continued compliance with existing rules and standards;

•our plans with respect to investments in marketable securities;

•our expectations and strategies regarding acquisitions;

•our expectations regarding litigation and other pending or potential disputes;

•our ability to remediate the material weaknesses identified in internal control over financial reporting;

•our determination to restate the prior period consolidated financial statements and its impact on investor confidence and reputational issues;

•our ability to maintain an effective system of internal controls;

•our estimations regarding taxes and belief regarding our tax reserves;

•our approach to identifying, attracting and keeping new and existing clients, our focus on core market growth segments where we have a right-to-win, as well as our expectations regarding client turnover;

•the sufficiency of our sources of funding;

•our beliefs regarding our interest rate risk;

•our beliefs regarding inflation risks;

•our beliefs regarding expense and productivity of and competition for our sales force;

•our beliefs regarding the significance of our large clients;

•our beliefs regarding the United States and global economy; and

•our beliefs regarding the impact of health epidemics and pandemics, such as the COVID-19 pandemic, on our current and potential clients, our balance sheet, financial condition, and results of operations.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the caption “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q and those discussed in other documents we file with the Securities and Exchange Commission (the “SEC”).

In addition, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

The forward-looking statements contained herein are based on our current expectations and assumptions and on information available as of the date of the filing of this Quarterly Report on Form 10-Q. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms “Edgio,” “company,” “we,” “us,” and “our” in this document refer to Edgio, Inc., a Delaware corporation, and, where appropriate, its wholly owned subsidiaries. All information is presented in thousands, except per share amounts, client count, headcount and where specifically noted.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Table of Contents

Edgio, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)


	March 31, 2023		December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	32,787	$	55,275
Marketable securities	15,396		18,734
Accounts receivable, net (1)	82,461		84,627
Income taxes receivable	373		105
Prepaid expenses and other current assets (1)	36,987		36,374
Total current assets	168,004		195,115
Property and equipment, net	72,976		73,467
Operating lease right of use assets	5,053		5,290
Deferred income taxes	2,388		2,338
Goodwill	168,961		169,156
Intangible assets, net	86,348		91,661
Other assets (1)	2,586		5,353
Total assets	$	506,316	$	542,380
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable (1)	$	48,312	$	52,776
Deferred revenue	10,500		9,286
Operating lease liability obligations	4,483		4,557
Income taxes payable	3,286		3,133
Financing obligations	6,839		6,346
Other current liabilities (1)	76,947		76,160
Total current liabilities	150,367		152,258
Convertible senior notes, net	122,849		122,631
Operating lease liability obligations, less current portion	8,066		9,181
Deferred income taxes	602		596
Deferred revenue, less current portion	2,333		2,949
Financing obligations, less current portion	12,738		13,784
Other long-term liabilities	721		1,658
Total liabilities	297,676		303,057
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 7,500 shares authorized; no shares issued and outstanding	—		—
Common stock, $0.001 par value; 300,000 shares authorized; 222,702 and 222,232 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	223		222
Common stock contingent consideration	16,300		16,300
Additional paid-in capital	811,571		807,507
Accumulated other comprehensive loss	(11,430)		(11,665)
Accumulated deficit	(608,024)		(573,041)
Total stockholders’ equity	208,640		239,323
Total liabilities and stockholders’ equity	$	506,316	$	542,380

(1) Includes amounts due to/from related parties. See Notes 6, 9, and 20 for further details.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

Edgio, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except per share data)


	Three Months Ended March 31,
	2023		2022
Revenue (1)	$	101,948	$	55,339
Cost of revenue:
Cost of services (1)(2)	67,353		32,673
Depreciation — network	3,610		5,848
Total cost of revenue	70,963		38,521
Gross profit	30,985		16,818
Operating expenses:
General and administrative (1)	16,836		15,833
Sales and marketing (1)	19,622		7,627
Research and development (1)	21,016		9,577
Depreciation and amortization	5,607		1,032
Restructuring charges	500		698
Total operating expenses	63,581		34,767
Operating loss	(32,596)		(17,949)
Other income (expense):
Interest expense	(1,577)		(1,431)
Interest income	397		27
Other, net	(809)		(713)
Total other expense	(1,989)		(2,117)
Loss before income taxes	(34,585)		(20,066)
Income tax expense	398		206
Net loss	$	(34,983)	$	(20,272)
Net loss per share:
Basic	$	(0.16)	$	(0.15)
Diluted	$	(0.16)	$	(0.15)
Weighted average shares used in per share calculation:
Basic	222,462		135,528
Diluted	222,462		135,528

(1)The three months ended March 31, 2023, includes revenue and costs from related parties. See Note 20 for further details.

(2) Cost of services excludes amortization related to intangible assets, including technology, customer relationships, and trade names, which are included in depreciation and amortization in operating expenses.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

Edgio, Inc.

Unaudited Consolidated Statements of Comprehensive Loss

(In thousands)


	Three Months Ended March 31,
	2023		2022
Net loss	$	(34,983)	$	(20,272)
Other comprehensive gain (loss), net of tax:
Unrealized gain (loss) on investments	2		(88)
Foreign currency translation gain (loss)	233		(571)
Other comprehensive gain (loss)	235		(659)
Comprehensive loss	$	(34,748)	$	(20,931)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

Edgio, Inc.

Unaudited Consolidated Statements of Stockholders' Equity

(In thousands)

For the Three Months Ended March 31, 2023


	Common Stock			Common Stock Contingent Consideration		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount
Balance December 31, 2022	222,232	$	222	$	16,300	$	807,507	$	(11,665)	$	(573,041)	$	239,323

Net loss	—	—		—		—		—		(34,983)		(34,983)
Change in unrealized gain on available-for-sale investments, net of taxes	—	—		—		—		2		—		2
Foreign currency translation adjustment, net of taxes	—	—		—		—		233		—		233
Exercise of common stock options	6			—		3		—		—		3
Vesting of restricted stock units	503	1		—		(1)		—		—		—
Restricted stock units surrendered in lieu of withholding taxes	(39)	—		—		(194)		—		—		(194)


Share-based compensation	—	—		—		4,256		—		—		4,256



Balance March 31, 2023	222,702	$	223	$	16,300	$	811,571	$	(11,430)	$	(608,024)	$	208,640

For the Three Months Ended March 31, 2022


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
Balance December 31, 2021	134,337	$	134	$	576,807	$	(8,345)	$	(436,522)	$	132,074

Net loss	—	—		—		—		(20,272)		(20,272)
Change in unrealized loss on available-for-sale investments, net of taxes	—	—		—		(88)		—		(88)
Foreign currency translation adjustment, net of taxes	—	—		—		(571)		—		(571)
Exercise of common stock options	3,138	3		7,983		—		—		7,986
Vesting of restricted stock units	978	1		(1)		—		—		—
Restricted stock units surrendered in lieu of withholding taxes	(318)	—		(1,285)		—		—		(1,285)

Share-based compensation	—	—		6,745		—		—		6,745
Issuance of common stock for business acquisition	43	—		—		—		—		—


Balance March 31, 2022	138,178	$	138	$	590,249	$	(9,004)	$	(456,794)	$	124,589

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

Edgio, Inc.

Unaudited Consolidated Statements of Cash Flows

(In thousands)


	Three Months Ended March 31,
	2023		2022
Operating activities
Net loss	$	(34,983)	$	(20,272)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	9,217		6,880
Share-based compensation	5,200		7,012
Foreign currency remeasurement loss	809		242
Deferred income taxes	—		(2)

Accounts receivable charges	1,032		272
(Accretion) amortization of (discount) premium on marketable securities	(180)		280
Noncash interest expense	218		209

Changes in operating assets and liabilities:
Accounts receivable	1,134		(12,161)
Prepaid expenses and other current assets	(3,607)		(2,728)
Income taxes receivable	(268)		(2)
Other assets	1,815		466
Accounts payable and other current liabilities	(4,230)		3,813
Deferred revenue	2,951		(868)

Income taxes payable	(2,244)		(655)
Other long term liabilities	(937)		(55)
Net cash used in operating activities	(24,073)		(17,569)
Investing activities
Purchases of marketable securities	(8,583)		(6,839)
Sale and maturities of marketable securities	12,103		9,087
Purchases of property and equipment	(3,788)		(5,863)

Cash used for acquisition of business	—		(163)
Net cash used in investing activities	(268)		(3,778)
Financing activities



Proceeds from capital contributions	2,135		—
Proceeds from financing obligations	158		1,602
Repayment of financing obligations	(661)		(1,336)
Payments of employee tax withholdings related to restricted stock vesting	(194)		(1,285)
Proceeds from employee stock plans	3		7,986
Net cash provided by financing activities	1,441		6,967
Effect of exchange rate changes on cash and cash equivalents	412		(363)
Net decrease in cash and cash equivalents	(22,488)		(14,743)
Cash and cash equivalents, beginning of period	55,275		41,918
Cash and cash equivalents, end of period	$	32,787	$	27,175
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	1,485	$	2,282
Cash paid during the period for income taxes, net of refunds	$	7	$	868

Property and equipment remaining in accounts payable and other current liabilities	$	2,253	$	2,026
Noncash additions to financing receivables	$	108	$	2,779
Noncash additions to short-term financing liabilities	$	33	$	774
Noncash additions to long-term financing liabilities	$	75	$	2,005

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

Edgio, Inc.

Notes to Unaudited Consolidated Financial Statements

March 31, 2023

1. Nature of Business

Edgio, Inc. (“Edgio”) is a globally-scaled, edge-enabled solutions provider for fast, secure, and frictionless digital experiences. Our solutions include customer-focused edge platforms running on top of our Global Network, Media and Applications Platforms. The media platform enables companies to stream large files (video, software downloads, live events) across the globe in a fast and secure way. The Edgio applications platform enables our clients to build, secure, and accelerate their web-based applications.

We were incorporated in Delaware in 2003, and have operated in the Phoenix metropolitan area since 2001 and elsewhere throughout the United States since 2003. We began international operations in 2004. On June 15, 2022, we changed our corporate name from Limelight Networks, Inc. to Edgio, Inc.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities Exchange Commission (the “SEC”). They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that are, in the opinion of management, necessary for the fair presentation of the interim periods presented and of a normal recurring nature. This quarterly report on Form 10-Q should be read in conjunction with our audited consolidated financial statements and footnotes included in our annual report on Form 10-K for the fiscal year ended December 31, 2022. All information is presented in thousands, except per share amounts and where specifically noted.

The consolidated financial statements include accounts of Edgio and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results and outcomes may differ from those estimates. The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or for any future periods.

In accordance with its accounting policies, the company reviews the estimated useful lives of its property and equipment on an ongoing basis. In January 2023, we completed an assessment of the useful lives of our network equipment and concluded to adjust our estimate of the useful life of our network equipment from three to five years due to advances in technology and improvements in how we operate our network equipment. The effect of this change in estimate, effective January 1, 2023, was a reduction of $3,770 primarily in depreciation - network expense in cost of services within our consolidated statement of operations, an increase of net income by approximately $3,601, and an increase in basic and diluted earnings per share by $0.02, for the three months ended March 31, 2023.

Restatement of Previously Issued Consolidated Financial Statements

The company restated the consolidated financial statements for the years ended December 31, 2021 and 2020 presented in its Annual Report on Form 10-K for the year ended December 31, 2022, necessary to correct for the following errors: (i) accounting for certain financing arrangements (as failed sale leasebacks), (ii) accounting treatment for certain transitional services, and (iii) other immaterial adjustments. In addition, the company restated its unaudited quarterly financial data for the periods ended September 30, 2022 and 2021, June 30, 2022 and 2021, and March 31, 2022 and 2021. Such restated and unaudited quarterly financial data and related impacted amounts were presented in the company's Annual Report on Form 10-K for the year ended December 31, 2022. All amounts in this quarterly report on Form 10-Q affected by the restatement, including but not limited to the three months ended March 31, 2022, reflect such restated amounts. For the three months ended March 31, 2023, we incurred restatement related expenses of $2,175 included in general and administrative within our unaudited consolidated statement of operations.

Table of Contents

Adopted Accounting Standards

None

Recently Issued Accounting Standards applicable to Edgio, Inc.

None

Significant Accounting Policies

There have been no changes in the significant accounting policies from those that were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our contractual arrangements with customers generally specify monthly billing terms, and we apply the variable consideration allocation exception and record revenue based on actual usage during the month. Certain contracts contain minimum commitments over the contractual term; however, we generally have concluded that these commitments are not substantive. Accordingly, the consideration for these contracts is substantially considered variable and is recognized based on actual usage as we apply the variable consideration allocation exception to these contracts. These customers have entered into contracts with contract terms generally from one to ten years.

As of March 31, 2023, we have approximately $69,087 of remaining unsatisfied performance obligations for contracts with terms over one year. Of the remaining unsatisfied performance obligations we expect to recognize 33% in 2023, 31% in 2024, 14% in 2025, 7% in 2026, and the remainder in 2027 and thereafter.

From time to time, we enter into arrangements in which we receive payments from customers based upon contractual billing schedules. We record accounts receivables when the right to consideration becomes unconditional. Contract liabilities primarily reflect deferred revenue from advance payments we have received from customers. We classify deferred revenue as current or non-current based on the timing of when we expect to recognize revenue. Revenue recognized in the three months ended March 31, 2023 and 2022 from amounts included in deferred revenue at the beginning of the period was $2,670 and $2,099, respectively.

3. Business Acquisitions

Edgecast Acquisition

On June 15, 2022, Edgio completed the acquisition (the “Edgecast Acquisition”) of 100% of the equity interests of Edgecast Inc., a California corporation (“Edgecast”), and certain Edgecast-related businesses and assets from College Parent for total purchase consideration of $199,837. The total purchase consideration included 75,842 shares of our common stock allocated to the Edgecast Acquisition. Edgecast is a leading provider of edge security, content delivery and video services. Edgio accounted for the acquisition in accordance with ASC 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recognized on the balance sheet at their fair values as of the acquisition date.

We retained an independent third-party valuation firm to assist in our valuation of the acquired assets and liabilities.

The following table presents the allocation of the purchase price consideration for Edgecast:


Consideration:
Common stock	$	192,956
Common stock - contingent consideration	16,300
Less: Consideration allocated to employee compensation arrangements	(9,419)
Total consideration allocated to Edgecast Acquisition	$	199,837

The fair value of our common stock consideration was based on the 79,734 shares issued to College Parent and the opening price of our common stock of $2.42 per share on the acquisition closing date. Inclusive within the common stock consideration, and pursuant to the purchase agreement, Edgio issued 7,287 shares of common stock in exchange for cash from College Parent of $30,000. As the economic substance of this issuance was to provide additional cash to Edgecast for liabilities

Table of Contents

that existed prior to the business combination and the transaction occurred on June 15, 2022, Edgio concluded that this was part of the business combination, and therefore, should be considered as part of the consideration transferred in exchange for the acquisition of Edgecast. The initial common stock purchase consideration of 79,734 shares was adjusted downward for 3,892 shares issued for employee compensation arrangements accounted for as separate transactions as further discussed below.

The purchase agreement contains an “earn-out” or contingent consideration provision in the event that the price of our common stock exceeds certain thresholds during the period ending on the third anniversary of the acquisition date of the transaction (the “Earnout Period”), Edgio will be required to issue approximately up to an additional 12,685 shares of our common stock to College Parent (the “common stock contingent consideration”). If during the Earnout Period, the closing share price of our common stock exceeds the following share prices for 10 trading days in any 30 consecutive trading day period the following number of shares of our common stock will be issued: (a) approximately 5,398 shares of our common stock if the closing share price of our common stock exceeds $6.1752 per share, (b) approximately 4,048 shares of our common stock if the closing share price of our common stock exceeds $8.2336 per share, and (c) approximately 3,239 shares of our common stock if the closing share price of our common stock exceeds $10.2920 per share. Edgio estimated that the fair value of the common stock contingent consideration, with the assistance of a third-party valuation specialist using a Monte Carlo simulation, and concluded it was $16,300 as of the acquisition date.

As a result of the Edgecast Acquisition, certain cash awards that existed for Edgecast’s employees require the transferred employee to provide services to Edgio in the post-combination period in order for the cash award to be earned. When the awards are earned, Edgio will either a) pay the employees the amount earned and will subsequently be reimbursed by College Parent or b) College Parent will directly pay the employee the amount earned. Edgio considered whether the employee awards were part of the Edgecast Acquisition's purchase consideration, or separate transactions, and not part of purchase accounting. Under ASC 805, a transaction entered into by or on behalf of the acquirer or primarily for the benefit of the acquirer or the combined entity, rather than primarily for the benefit of the acquiree (or its former owners) before the combination, is likely to be a separate transaction. The employee awards represent compensation for post-combination services rendered to Edgio and the reimbursement right was initiated by Edgio for the future economic benefit of the combined entity. Accordingly, Edgio concluded the employee awards represent transactions separate from the Edgecast Acquisition. Edgio allocated $9,419 of the total consideration transferred to College Parent to the employee compensation arrangements based on the post-combination fair value of the employee awards. As service is required to be rendered for the award to be earned, Edgio will recognize expense as the employee performs service. The employee compensation arrangements related to post-combination services and the related reimbursement right resulted in the recognition of $6,573 in prepaid expenses and other current assets and $2,846 in other assets on June 15, 2022.

During the three months ended March 31, 2023, Edgio recorded $666, in compensation expense to the unaudited consolidated statements of operations as a result of the employee compensation arrangements. Of the $666 of compensation expense, $111, $103, $42, and $410 was recorded to cost of services, general and administrative, sales and marketing, and research and development, respectively. The employee compensation arrangements are time-based vesting only and the unrecognized compensation expense was $2,030 as of March 31, 2023, of which $1,654 is expected to be recognized during the remainder of 2023 and the remainder in 2024.

The Edgecast Acquisition was accounted for under the acquisition method of accounting and the operating results of Edgecast have been included in our unaudited consolidated financial statements as of the acquisition date. Under the acquisition method of accounting, the aggregate amount of consideration paid by us was allocated to Edgecast’s net tangible assets and intangible assets based on their estimated fair values as of the acquisition date. The excess of the purchase price over the value of the net tangible assets and intangible assets was recorded to goodwill. The factors contributing to the recognition of goodwill were based upon our conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. Goodwill, which is non-deductible for tax purposes, represents expected synergies and the assembled workforce at the time of the acquisition.

The following table summarizes the final allocation of the purchase consideration to the acquisition date fair value of the assets, including intangible assets, liabilities assumed and related goodwill acquired:

Table of Contents


Cash (inclusive of $30,000 as described above)	$	30,037
Accounts receivable	48,669
Income taxes receivable	119
Prepaid expenses and other current assets	5,676
Property and equipment	32,185
Operating lease right of use assets	1,365
Goodwill	56,546
Intangible assets
Customer relationships	41,000
Technology	49,000
Other assets	1,220
Total assets acquired	265,817
Accounts payable and accrued liabilities	6,917
Deferred revenue	1,259
Operating lease liability obligations	3,071
Income taxes payable	2,465
Other current liabilities	27,500
Operating lease liability obligations, less current portion	2,531
Deferred income taxes	22,237

Total liabilities	65,980
Total purchase consideration	$	199,837

The fair value of acquired property and equipment was valued using the market approach and indirect cost approach and primarily consists of computer and networking equipment. The weighted-average depreciation period for the acquired property and equipment was 3.0 years at the acquisition date. The fair value of the acquired intangible assets was determined as follows, customer relationships, utilizing the excess earnings method, and technology, utilizing the relief from royalty method. The amortization period of the acquired intangible assets was 7.0 years for customer relationships and 4.0 for technology at the acquisition date. The deferred income tax liability was $22,237, primarily as a result of the fair value attributable to the identifiable intangible assets.

4. Investments in Marketable Securities

The following is a summary of marketable securities (designated as available-for-sale) as of March 31, 2023:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificate of deposit	$	40	$	—	$	—	$	40
Commercial paper	7,885		—		—		7,885
Corporate notes and bonds	5,527		—		5		5,522
Treasury bills	995		—		—		995
Agency bonds	994		—		—		994

Total marketable securities	$	15,441	$	—	$	5	$	15,436

Table of Contents

The amortized cost and estimated fair value of marketable securities as of March 31, 2023, by maturity are shown below:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities:
Due in one year or less	$	15,401	$	—	$	5	$	15,396
Due after one year and through five years	40		—		—		40
Total marketable securities	$	15,441	$	—	$	5	$	15,436

The following is a summary of marketable securities (designated as available-for-sale) as of December 31, 2022:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificate of deposit	$	40	$	—	$	—	$	40
Commercial paper	5,884		—		—		5,884
Corporate notes and bonds	11,395		—		16		11,379
Treasury bills	985		—		—		985
Agency bonds	486		—		—		486

Total marketable securities	$	18,790	$	—	$	16	$	18,774

The amortized cost and estimated fair value of marketable securities as of December 31, 2022, by maturity are shown below:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities:
Due in one year or less	$	18,750	$	—	$	16	$	18,734
Due after one year and through five years	40		—		—		40
Total marketable securities	$	18,790	$	—	$	16	$	18,774

5. Accounts Receivable, net

Accounts receivable, net include:


	March 31,		December 31,
	2023		2022
Accounts receivable	$	88,134	$	90,046
Less: credit allowance	(864)		(1,514)
Less: allowance for doubtful accounts	(4,809)		(3,905)
Total accounts receivable, net	$	82,461	$	84,627

The following is a roll-forward of the allowance for doubtful accounts related to trade accounts receivable for the three months ended March 31, 2023 and the twelve months ended December 31, 2022:


	Three Months Ended		Twelve Months Ended
	March 31, 2023		December 31, 2022
Beginning of period	$	3,905	$	1,500
Provision for credit losses	1,032		2,413
Recoveries/write-offs	(128)		(8)
End of period	$	4,809	$	3,905

Table of Contents

6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets include:


	March 31,		December 31,
	2023		2022
Prepaid bandwidth and backbone	$	7,506	$	7,431
VAT receivable	6,657		5,805
Prepaid expenses and insurance	4,237		5,352
Financing receivables	3,168		3,218

Related party receivable	7,775		7,962
Vendor deposits and other	7,644		6,606
Total prepaid expenses and other current assets	$	36,987	$	36,374

7. Property and Equipment, net

Property and equipment, net include:


	March 31,		December 31,
	2023		2022
Network equipment	$	178,236	$	176,899
Computer equipment and software	3,632		3,680
Furniture and fixtures	1,322		1,322
Leasehold improvements	6,021		6,017
Other equipment	17		17
Total property and equipment	189,228		187,935
Less: accumulated depreciation	(116,252)		(114,468)
Total property and equipment, net	$	72,976	$	73,467

Cost of revenue depreciation expense related to property and equipment was $3,610 and $5,848, for the three months ended March 31, 2023 and 2022, respectively.

Operating expense depreciation and amortization expense related to property and equipment was $294 and $246, for the three months ended March 31, 2023 and 2022, respectively.

8. Goodwill and Other Intangible Assets

We have recorded goodwill as a result of past business acquisitions. We concluded that we have one reporting unit and assigned the entire balance of goodwill to this reporting unit as of March 31, 2023. We review goodwill for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may exceed their fair value. The estimated fair value of the reporting unit is determined using a market approach. Our market capitalization is adjusted for a control premium based on the estimated average and median control premiums of transactions involving companies comparable to us. We noted that the estimated fair value of our reporting unit, using an estimated control premium of 30%, on March 31, 2023 exceeded carrying value by approximately $20,075 or 10%. Adverse changes to certain key assumptions as described above could result in a future goodwill impairment charge to earnings, such charge may be material.

During 2023, management identified a goodwill impairment indicator related to a decline in the company's stock price. Management will continue to monitor the relevant goodwill impairment indicators to determine whether a goodwill impairment charge to earnings is appropriate, and such impairment charge, if any, could be material.

The changes in the carrying amount of goodwill for the three months ended March 31, 2023, were as follows:


Balance, December 31, 2022	$	169,156
Foreign currency translation adjustment	(195)
Balance, March 31, 2023	$	168,961

Table of Contents

Intangible assets consisted of the following as of March 31, 2023:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade name	$	91	$	(48)	$	43
Client relationships	48,090		(6,779)		41,311
Technology	57,480		(12,486)		44,994
Total other intangible assets	$	105,661	$	(19,313)	$	86,348

Aggregate expense related to amortization of other intangible assets for the three months ended March 31, 2023 was $5,313. There were no impairment charges incurred in the three months ended March 31, 2023.

As of March 31, 2023, the weighted-average remaining useful lives of our acquired intangible assets were 1.4 years for trade name, 5.8 years for client relationships, and 3.2 years for technology, and 4.5 years in total, for all acquired intangible assets.

Intangible assets consisted of the following as of December 31, 2022:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade name	$	91	$	(40)	$	51
Client relationships	48,090		(4,960)		43,130
Technology	57,480		(9,000)		48,480
Total other intangible assets	$	105,661	$	(14,000)	$	91,661

Aggregate expense related to amortization of other intangible assets for the three months ended March 31, 2022 was $786. There were no impairment charges incurred in the three months ended March 31, 2022.

As of December 31, 2022, the weighted-average remaining useful lives of our acquired intangible assets were 1.7 years for trade name, 6.1 years for client relationships, and 3.4 years for technology, and 4.7 years in total, for all acquired intangible assets.

As of March 31, 2023, future amortization expense related to our other intangible assets is expected to be recognized as follows:


Remainder of 2023	$	16,112
2024	21,415
2025	21,394
2026	13,141
2027	5,911
Thereafter	8,375
Total	$	86,348

Table of Contents

9. Other Current Liabilities

Other current liabilities include:


	March 31,		December 31,
	2023		2022
Accrued compensation and benefits	$	21,127	$	19,982
Accrued cost of revenue	34,128		27,422
Accrued interest payable	741		1,823
Related party payable	2,989		9,931
Restructuring charges and accrued legal fees	4,498		6,184

Other accrued expenses	13,464		10,818
Total other current liabilities	$	76,947	$	76,160

10. Debt

Convertible Senior Notes - Due 2025

On July 27, 2020, we issued $125,000 aggregate principal amount of 3.50% Convertible Senior Notes due 2025 (the “Notes”), including the initial purchasers’ exercise in full of their option to purchase an additional $15,000 principal amount of the Notes, in a private placement to qualified institutional buyers in an offering exempt from registration under the Securities Act of 1933, as amended. The net proceeds from the issuance of the Notes was $120,741 after deducting transaction costs.

The Notes are governed by an indenture (the “Indenture”) between us, as the issuer, and U.S. Bank, National Association, as trustee. The Notes are senior, unsecured obligations of ours and will be equal in right of payment with our senior, unsecured indebtedness; senior in right of payment to our indebtedness that is expressly subordinated to the notes; effectively subordinated to our senior, secured indebtedness, including future borrowings, if any, under our amended credit facility with First Citizens Bank (formerly Silicon Valley Bank) (“FCB”), to the extent of the value of the collateral securing that indebtedness; and structurally subordinated to all indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries. The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the Notes become automatically due and payable.

As a result of the restatement of our previously issued consolidated financial statements described in Note 2, we were unable to file our Annual Report on Form 10-K for the year ended December 31, 2022 on a timely basis. For the same reason, we were also unable to timely file our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. Pursuant to the terms of the Indenture, on April 12, 2023, we notified the Trustee that due to our failure to timely file with the SEC our Annual Report on Form 10-K for the year ended December 31, 2022, a default (as defined in the Indenture) had occurred.

On April 17, 2023, a holder of the Notes delivered a notice of default to U.S. Bank National Association (the “Trustee”) and the company notifying us that we were in breach of the Indenture for failing to provide the Trustee our Annual Report on Form 10-K for the year ended December 31, 2022. Under the terms of the Indenture, such default matured into an event of default (the “Reporting Event of Default”) on June 17, 2023. On July 21, 2023, the Trustee for the Notes delivered a notice of default to the company notifying us that we were in breach of the Indenture for failing to provide the Trustee our Quarterly Report on Form 10-Q for the three-months ended March 31, 2023. Under the terms of the Indenture, such default was cured with the filing of this Quarterly Report.

By notice to the holders of the Notes and the Trustee on June 12, 2023 and in accordance with the Indenture, we notified the Trustee that due to our failure to timely file with the SEC our Annual Report on Form 10-K, the company elected that the sole remedy for the Reporting Event of Default during the period beginning on June 17, 2023 (the “Reporting Event of Default Date”) and ending on the earlier of (x) 365 calendar days after the Reporting Event of Default Date and (y) the date on which we deliver the Annual Report for the year ended December 31, 2022 to the Trustee will consist of the accrual of additional interest (“Special Interest”) at a rate equal to one quarter of one percent (0.25%) of the principal amount of the outstanding Notes for the first 180 calendar days on which Special Interest accrues and, thereafter, at a rate per annum equal to one half of one percent (0.50%) of the principal amount of the outstanding Notes. The Notes will be subject to acceleration pursuant to the Indenture on account of the Reporting Event of Default if we fail to pay Special Interest when due under the Indenture. We delivered our Annual Report for the year ended December 31, 2022 to the Trustee on June 29, 2023, and as a result we incurred an immaterial amount of Special Interest charges for the three months ended March 31, 2023, which was paid to holders of the Notes on August 1, 2023.

The Notes mature on August 1, 2025, unless earlier converted, redeemed or repurchased in accordance with their term

Table of Contents

prior to the maturity date. Interest is payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2021. The holders of the Notes may convert all or any portion of their Notes at their option only in the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price per share of our common stock exceeds 130% of the conversion price of $8.53 for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any ten consecutive trading day period (such ten consecutive trading day period, the measurement period) in which the trading price per $1 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions of our common stock;

(4) if we call such Notes for redemption; and

(5) at any time from, and including, May 1, 2025, until the close of business on the second scheduled trading day immediately before the maturity date.

On or after May 1, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in minimum principal amount denominations of $1 or any integral multiple of $1 in excess thereof, at the option of the holder regardless of the foregoing circumstances. Upon conversion, we may satisfy our conversion obligation by paying or delivering, as applicable, cash, shares of common stock or a combination of cash and shares of common stock, at our election, in the manner and subject to the terms and conditions provided in the Indenture. The Notes have an initial conversion rate of 117.2367 shares of our common stock per $1 principal amount of Notes, which is equal to an initial conversion price of approximately $8.53 per share of our common stock. The initial conversion price of the Notes represents a premium of approximately 27.5% over the last reported sale price of our common stock on The Nasdaq Global Select Market of $6.69 per share on July 22, 2020. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that occur prior to the maturity date or if we deliver a notice of redemption, we will increase the conversion rate in certain circumstances for a holder who elects to convert its Notes in connection with such a corporate event or convert its Notes called (or deemed called) for redemption in connection with such notice of redemption, provided that the conversion rate will not exceed 149.4768 share of our common stock per $1 principal amount of Notes, subject to adjustment.

We may not redeem the Notes prior to August 4, 2023. We may redeem for cash all, or any portion in an authorized denomination, of the Notes, at our option, on or after August 4, 2023, and on or prior to the 41st scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, whether or not consecutive, including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes, which means that we are not required to redeem or retire the Notes periodically.

If we undergo a fundamental change (as defined in the Indenture), holders may require us to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

As of March 31, 2023, the conditions allowing holders of the Notes to convert had not been met and therefore the Notes are not yet convertible. The Notes are classified as long-term debt on our unaudited consolidated balance sheets as of March 31, 2023, and December 31, 2022.

Table of Contents

The net carrying amount of the liability and equity components of the Notes consisted of the following:


	March 31,		December 31,
	2023		2022
Liability component:
Principal	$	125,000	$	125,000
Unamortized transaction costs	(2,151)		(2,369)
Net carrying amount	$	122,849	$	122,631

Interest expense recognized related to the Notes was as follows:


	Three Months Ended March 31,
	2023		2022
Contractual interest expense	$	1,106	$	1,094
Amortization of transaction costs	218		209
Total	$	1,324	$	1,303

As of March 31, 2023, and December 31, 2022, the estimated fair value of the Notes was $111,009 and $107,031, respectively. We estimated the fair value based on the quoted market prices in an inactive market on the last trading day of the reporting period, which are considered Level 2 inputs.

Capped Call Transactions

In connection with the offering of the Notes, we entered into privately negotiated capped call transactions with certain counterparties (collectively, the Capped Calls). The Capped Calls have an initial strike price of approximately $8.53 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have an initial cap price of $13.38 per share, subject to certain adjustments. The Capped Calls are generally intended to reduce or offset the potential economic dilution of approximately 14.7 million shares to our common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. As the Capped Calls are considered indexed to our own stock and are equity classified, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $16,400 incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital.

Line of Credit

In November 2015, we entered into the original Loan and Security Agreement (the “Credit Agreement”) with FCB. Since the inception, there have been ten amendments, with the most recent amendment being in June 2023 (the “Tenth Amendment”). Under the Tenth Amendment, our borrowing capacity as of March 31, 2023 was the lesser of the commitment amount of $50,000 or 50% of eligible accounts receivable while the maturity date remains at April 2, 2025. All outstanding borrowings owed under the Credit Agreement, if any, become due and payable no later than the final maturity date of April 2, 2025. As of March 31, 2023 and December 31, 2022, we had no outstanding borrowings.

As of March 31, 2023, borrowings under the Credit Agreement bear interest at the greater of the current prime rate minus 0.25% or 4%. In the event of default, obligations shall bear interest at a rate per annum that is 3% above the then applicable rate.

Amendment fees and other commitment fees are included in interest expense. During the three months ended March 31, 2023 and 2022, there was no interest expense and fees expense and amortization was $24 and $10, respectively.

Any borrowings are secured by essentially all of our domestic personal property, with a negative pledge on intellectual property. FCB’s security interest in our foreign subsidiaries is limited to 65% of the voting stock of each such foreign subsidiary.

We are required to maintain an Adjusted Quick Ratio of at least 1.0 to 1.0. We are also subject to certain customary limitations on our ability to, among other things, incur debt, grant liens, make acquisitions and other investments, make certain restricted payments such as dividends, dispose of assets or undergo a change in control. As of March 31, 2023 and December 31, 2022 we were not in compliance with our Adjusted Quick Ratio requirement. On June 27, 2023, we have received a waiver for, among other thing, our non-compliance.

Table of Contents

11. Restructuring Charges

During the third and fourth quarters of 2021, management committed to restructure certain parts of the company to align our workforce and facility requirements with our continued investment in the business as we focus on cost efficiencies, improved growth and profitability. As a result, outside service contracts and professional fees were incurred. Additionally, with the decision to close, and in some cases, sublease facilities, we incurred impairment charges related to certain operating lease assets and related leasehold improvements. During the three months ended March 31, 2022, we incurred $698 of restructuring charges, the majority of which related to this restructuring plan and were incurred due to facility impairment charges. Actions related to this restructuring program are substantially complete.

In the fourth quarter of 2022, management committed to a separate action to restructure strategic and financial objectives and to optimize resources for long term growth including a reduction in global workforce. For the three months ended March 31, 2023, relating to this action, we incurred $500 of costs which primarily consisted of employee severance and related benefits costs. Future restructuring charges related to this plan, are expected to be immaterial.

The following table summarizes the activity of our restructuring accrual (recorded in other current liabilities on our unaudited consolidated balance sheet) during the three months ended March 31, 2023 (in thousands):

2023 Restructuring Charges


	Employee Severance and Related Benefits		Share-Based Compensation		Facilities Related Charges		Professional Fees and Other		Total
Balance as of December 31, 2022	$	2,772	$	240	$	3,172	$	—	$	6,184
Costs incurred (recorded in restructuring charges)	500		—		—		—		500
Cash disbursements	(1,488)		—		(698)		—		(2,186)
Noncash charges	—		—		—		—		—
Balance as of March 31, 2023	$	1,784	$	240	$	2,474	$	—	$	4,498

The following table summarizes the activity of our restructuring accrual during the three months ended March 31, 2022 (in thousands):

2022 Restructuring Charges


	Employee Severance and Related Benefits		Share-Based Compensation		Facilities Related Charges		Professional Fees and Other		Total
Balance as of January 1, 2022	$	235	$	—	$	180	$	—	$	415
Costs incurred (recorded in restructuring charges)	(95)		—		791		2		698
Cash disbursements	(140)		—		(687)		(2)		(829)
Noncash charges	—		—		3		—		3
Balance as of March 31, 2022	$	—	$	—	$	287	$	—	$	287

On June 6, 2023, the company's Board of Directors approved a restructuring plan (the “Restructuring Plan”) in order to reduce its operating costs to continue to optimize its business model and increase efficiencies. The Restructuring Plan is anticipated to entail a reduction in force of approximately 134 employees, or approximately 12% of the company’s global workforce, to be implemented through the third quarter of 2023. Restructuring charges of approximately $3,200 related to the Restructuring Plan will be recorded in the second quarter of 2023. Remaining future estimated restructuring charges of approximately $500 are expected be recorded in the third quarter of 2023. These charges, which will be cash expenditures, consist of one-time severance charges and continuation of health benefits. The company anticipates it will generate approximately $23,700 in net annual savings.

Table of Contents

12. Contingencies

Legal Matters

We are subject to various legal proceedings and claims, either asserted or unasserted, arising from time to time, in the ordinary course of business. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. We have not recorded any accruals related to any legal matters. No assurances can be given with respect to the extent or outcome of any such litigation in the future.

Indirect Tax Matters

We are subject to indirect taxation in various states and foreign jurisdictions. Laws and regulations that apply to communications and commerce conducted over the Internet are becoming more prevalent, both in the United States and internationally, and may impose additional burdens on us conducting business online or providing Internet-related services. Increased regulation could negatively affect our business directly, as well as the businesses of our clients, which could reduce their demand for our services. For example, tax authorities in various states and abroad may impose taxes on the Internet-related revenue we generate based on regulations currently being applied to similar but not directly comparable industries.

There are many transactions and calculations where the ultimate tax determination is uncertain. In addition, domestic and international taxation laws are subject to change. In the future, we may come under audit, which could result in changes to our tax estimates. We believe we have maintained adequate tax reserves to offset potential liabilities that may arise upon audit. Our reserve for indirect tax matters was immaterial as of March 31, 2023 and December 31, 2022. Although we believe our tax estimates and associated reserves are reasonable, the final determination of tax audits and any related litigation could be materially different than the amounts established for tax contingencies. To the extent these estimates ultimately prove to be inaccurate, the associated reserves would be adjusted, resulting in the recording of a benefit or expense in the period in which a change in estimate or a final determination is made.

13. Net Loss Per Share

We calculate basic and diluted net loss per weighted average share. We use the weighted-average number of shares of common stock outstanding during the period for the computation of basic net loss per share. Diluted net loss per share includes the dilutive effect of all potentially dilutive common stock, including awards granted under our equity incentive compensation plans in the weighted-average number of shares of common stock outstanding.

The following table sets forth the components used in the computation of basic and diluted net loss per share for the periods indicated (in thousands, except per share data):


	Three Months Ended March 31,
	2023		2022
Net loss	$	(34,983)	$	(20,272)
Basic weighted-average outstanding shares of common stock	222,462		135,528
Basic weighted-average outstanding shares of common stock	222,462		135,528
Dilutive effect of stock options, restricted stock units, other equity incentive plans, convertible senior notes, and contingently issuable shares	—		—
Diluted weighted-average outstanding shares of common stock	222,462		135,528
Basic net loss per share	$	(0.16)	$	(0.15)
Diluted net loss per share	$	(0.16)	$	(0.15)

For the three months ended March 31, 2023 and 2022, respectively, the following potentially dilutive common stock, including awards granted under our equity incentive compensation plans were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive.

Table of Contents


	Three Months Ended March 31,
	2023	2022
Employee stock purchase plan	2,090	230
Stock options and warrants	410	3,177
Restricted stock units	77	5,834
Convertible senior notes	14,654	14,654
Contingently issuable shares (1)	12,685	—
	29,916	23,895

(1) Represents common stock contingent consideration related to the Edgecast Acquisition.

14. Stockholders’ Equity

Common Stock

On March 14, 2017, our board of directors authorized a $25,000 share repurchase program. Any shares repurchased under this program will be canceled and returned to authorized but unissued status. We did not purchase any shares during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, there remained $21,200 under this share repurchase program.

Amended and Restated Equity Incentive Plan

We established the 2007 Equity Incentive Plan (the “2007 Plan”), which allows for the grant of equity, including stock options and restricted stock unit awards. In June 2016, our stockholders approved the Amended and Restated Equity Incentive Plan (the “Restated 2007 Plan”), which amended and restated the 2007 Plan. Approval of the Restated 2007 Plan replaced the terms and conditions of the 2007 Plan with the terms and conditions of the Restated 2007 Plan and extended the term of the Restated 2007 Plan to April 2026. There was no increase in the aggregate amount of shares available for issuance. The total number of shares available to be issued under the Restated 2007 Plan as of March 31, 2023 was approximately 17,730.

2017 Moov Corporation Equity Incentive Plan

In connection with our acquisition of Moov, we assumed each outstanding and unvested option to purchase Moov common stock granted pursuant to the Moov Corporation 2017 Equity Incentive Plan and such options became exercisable to purchase shares of our common stock, subject to appropriate adjustments to the number of shares and the exercise price of each such option.

2021 Inducement Plan

In November 2021, we adopted the Inducement Plan pursuant to which we reserved 11,000 shares of common stock, to be used exclusively for grants of equity-based awards to highly qualified prospective officers and employees as an inducement material to the individual's entry into employment with us within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The Inducement Plan provides for the grant of equity-based awards in the form of non-statutory stock options, stock appreciation rights, restricted stock awards, and restricted stock unit awards. The Inducement Plan was adopted by our board of directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. We have issued 10,497 shares under the Inducement Plan as of March 31, 2023.

Employee Stock Purchase Plan

In June 2013, our stockholders approved our 2013 Employee Stock Purchase Plan (ESPP), authorizing the issuance of 4,000 shares. In May 2019, our stockholders approved the adoption of Amendment 1 to the ESPP. Amendment 1 increased the number of shares authorized to 9,000 shares (an increase of 5,000 shares) and amended the maximum number of shares of common stock that an eligible employee may be permitted to purchase during each offering period to be 5 shares. The ESPP allows participants to purchase our common stock at a 15% discount of the lower of the beginning or end of the offering period using the closing price on that day. During the three months ended March 31, 2023 and 2022, we did not issue any shares under the ESPP. As of March 31, 2023, shares reserved for issuance to employees under this plan totaled 2,220, and we held employee contributions of $1,340 (included in other current liabilities) for future purchases under the ESPP.

Table of Contents

Preferred Stock

Our board of directors have authorized the issuance of up to 7,500 shares of preferred stock as of March 31, 2023. The preferred stock may be issued in one or more series pursuant to a resolution or resolutions providing for such issuance duly adopted by the board of directors. As of March 31, 2023, the board of directors had not adopted any resolutions for the issuance of preferred stock.

15. Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2023, were as follows:




	Foreign		Available for
	Currency		Sale Securities		Total
Balance, December 31, 2022	$	(11,640)	$	(25)	$	(11,665)
Other comprehensive gain before reclassifications	233		2		235
Amounts reclassified from accumulated other comprehensive loss	—		—		—
Net current period other comprehensive gain	233		2		235
Balance, March 31, 2023	$	(11,407)	$	(23)	$	(11,430)

16. Share-Based Compensation

The following table summarizes the components of share-based compensation expense included in our unaudited consolidated statements of operations:


	Three Months Ended March 31,
	2023		2022
Share-based compensation expense by type:
Stock options and warrants	$	477	$	534
Restricted stock units	3,016		4,160
Financial-based performance restricted stock units	853		2,196
ESPP	854		122
Total share-based compensation expense	$	5,200	$	7,012
Share-based compensation expense:
Cost of services	$	679	$	408
General and administrative expense	1,416		2,103
Sales and marketing expense	617		1,181
Research and development expense	2,488		3,320

Total share-based compensation expense	$	5,200	$	7,012

Unrecognized share-based compensation expense totaled $25,241 as of March 31, 2023, of which $3,523 related to stock options, $9,485 related to financial-based performance restricted stock units, $12,233 related to restricted stock units. Unrecognized share-based compensation includes both time-based and performance-based equity. We currently expect to recognize share-based compensation expense of $9,462 during the remainder of 2023, $10,059 in 2024, $4,528 in 2025, and the remainder thereafter based on scheduled vesting of the stock options, performance-based restricted stock units, and restricted stock units outstanding as of March 31, 2023.

17. Leases and Commitments

Operating Leases - Right of Use Assets and Liabilities

We have various operating leases for office space that expire through 2030. Below is a summary of our right of use assets and liabilities as of March 31, 2023.

Table of Contents


Right-of-use assets	$	5,053

Lease liability obligations, current	$	4,483
Lease liability obligations, less current portion	8,066
Total lease liability obligations	$	12,549

Weighted-average remaining lease term	4.6 years

Weighted-average discount rate	5.05		%

During the three months ended March 31, 2023, operating lease costs were $619 and included primarily in operating expenses in our consolidated statements. During the three months ended March 31, 2023, cash paid for operating leases was $1,359. During the three months ended March 31, 2022, operating lease costs were $360 and included primarily in operating expenses in our consolidated statements. During the three months ended March 31, 2022, cash paid for operating leases was $652.

Approximate future minimum lease payments for our right of use assets over the remaining lease periods as of March 31, 2023, are as follows:


Remainder of 2023	$	3,796
2024	2,360
2025	1,440
2026	1,468
2027	1,497
Thereafter	3,866
Total minimum payments	14,427
Less: amount representing interest	1,878
Total	$	12,549

Financing Obligations

We enter into equipment purchase arrangements (“Open Edge arrangements”) with our partners, typically Internet service providers, where we deliver point-of-presence equipment to our partner in exchange for cash consideration. The equipment is subsequently leased back for substantially all of the equipment’s economic life, resulting in the classification of these arrangements as failed-sale leasebacks that are accounted for as financing arrangements.

Open Edge arrangements' financing obligations are recognized as short-term or long-term liabilities based on the estimated payment dates. Minimum commitment payments required to pay down the financing liability by the end of the minimum commitment term, are based on our estimated incremental borrowing rate and are recorded as a reduction of the financing liability in the period they are paid.

Interest expense related to Open Edge arrangements was $229 and $118 for the three months ended March 31, 2023 and 2022, respectively.

Table of Contents

As of March 31, 2023, future minimum payments under the Open Edge arrangements were as follows:


Remainder of 2023	$	6,656
2024	4,990
2025	4,806
2026	3,862
2027	1,222
Thereafter	52
Total minimum payments	21,588
Less: imputed interest	2,011
Total financing obligations	19,577
Less: financing obligations, current	6,839
Financing obligations, less current portion	$	12,738

Purchase Commitments

We have long-term commitments for bandwidth usage and co-location with various networks and Internet service providers. The following summarizes our minimum non-cancellable commitments for future periods as of March 31, 2023:


Remainder of 2023	$	53,534
2024	40,168
2025	27,846
2026	18,850
2027	7,045
Thereafter	988
Total minimum payments (1)	$	148,431

(1) Includes Open Edge partner commitments which typically have a minimum fee commitment that is paid to the partners over the course of the arrangement. The aggregate minimum fee commitment is allocated between cost of services and financing obligations. The above table reflects the minimum fee commitment allocated to cost of services.

18. Concentrations

During the three months ended March 31, 2023, we had two clients, Verizon and Amazon, who each represented 10% or more of our total revenue. During the three months ended March 31, 2022, we had two clients, Amazon and Sony, who each represented 10% or more of our total revenue. As of March 31, 2023, we had four clients, Verizon, Amazon, Disney, and Microsoft, who each represented 10% or more of our total accounts receivable. As of December 31, 2022, we had three clients, Amazon, Verizon, and Microsoft, who each represented 10% or more of our total accounts receivable.

Revenue from clients located within the United States, our country of domicile, was $78,186 for the three months ended March 31, 2023, compared to $31,967 for the three months ended March 31, 2022.

During the three months ended March 31, 2023, based on client location, we had one country, the United States, that individually accounted for 10% or more of our total revenue. During the three months ended 2022, based on client location, we had two countries, the United States and Japan, that individually accounted for 10% or more of our total revenue.

19. Income Taxes

Income taxes for the interim periods presented have been included in the accompanying unaudited consolidated financial statements on the basis of an estimated annual effective tax rate. Based on an estimated annual effective tax rate and discrete items, income tax expense for the three months ended March 31, 2023 and 2022 was $398 and $206, respectively. Income tax expense was different than the statutory income tax rate primarily due to us providing for a valuation allowance on deferred tax assets in the U.S., and the recording of state and foreign tax expense for the three month periods.

We file income tax returns in jurisdictions with varying statutes of limitations. Tax years 2019 through 2022 remain subject to examination by federal tax authorities. Tax years 2018 through 2022 generally remain subject to examination by state tax authorities. As of March 31, 2023, we are not under any federal or state income tax examinations.

Table of Contents

For the three months ended March 31, 2023 and 2022, respectively, there was no impact to income tax expense related to the Global Intangible Low-Taxed Income inclusion (“GILTI”) as a result of our net operating loss carryforwards (“NOL”) and valuation allowance position.

20. Related Party Transactions

College Parent and its related affiliates is considered to be a related party following the close of the Edgecast Acquisition due to its ownership interest. As of March 31, 2023, College Parent had approximately 36% ownership interest in Edgio. As of March 31, 2023, we had recorded receivables from College Parent and its affiliates related to reimbursement for certain compensation and severance plans. Additionally, as of March 31, 2023, we had recorded payables related to transition service agreements, which had been entered into between Edgio and College Parent and its related affiliates. For the three months ended March 31, 2023, expenses related to these agreements were $8,305 of which $5,166 was recorded in cost of services, $2,102 was recorded in general and administrative, and $1,037 was recorded in research and development within our unaudited consolidated statement of operations. The following table summarizes the amounts due to and due from College Parent and its related affiliates:


	March 31,		December 31,
	2023		2022
Prepaid assets and other current assets (1)	$	7,775	$	7,962
Other assets	—		2,318
Total amount due from related party	$	7,775	$	10,280

Accounts payable	$	13,747	$	18,224
Other current liabilities	2,989		9,931
Total amount due to related party (2)	$	16,736	$	28,155

(1) December 31, 2022 balance included $2,271 of receivables related to reimbursement from College Parent and its related affiliates for certain employee compensation expenses in excess of company requirements as of December 31, 2022 which were recorded as a capital contributions.

(2) Inclusive of $5,484 of transition service agreement credits from College Parent and its related affiliates issued in 2022 which recorded as a capital contributions.

Revenue from College Parent and its affiliates were $718 for the three months ended March 31, 2023. Trade accounts receivable were $941 and $1,695 as of March 31, 2023 and December 31, 2022, respectively.

21. Segment Reporting and Geographic Information

Our chief operating decision maker (who is our Chief Executive Officer) reviews our financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. We operate in one industry segment — content delivery and related services and we operate in three geographic areas — Americas, Europe, Middle East, and Africa (“EMEA”), and Asia Pacific.

Revenue by geography is based on the location of the client from where the revenue is earned based on bill to locations. The following table sets forth our revenue by geographic area:


	Three Months Ended March 31,
	2023				2022
Americas	$	79,940	79	%	$	32,791	59	%
EMEA	6,501		6	%	5,302		10	%
Asia Pacific	15,507		15	%	17,246		31	%
Total revenue	$	101,948	100	%	$	55,339	100	%

Table of Contents

The following table sets forth the individual countries and their respective revenue for those countries whose revenue exceeded 10% of our total revenue:


	Three Months Ended March 31,
Country / Region	2023		2022
United States / Americas	$	78,186	$	31,967

Japan / Asia Pacific	$	8,918	$	10,731

The following table sets forth property and equipment, net by geographic area where they are located:


	March 31,		December 31,
	2023		2022
Americas	$	64,498	$	65,190
International	8,478		8,277
Total long-lived assets	$	72,976	$	73,467

22. Fair Value Measurements

As of March 31, 2023, and December 31, 2022, we held certain assets that were required to be measured at fair value on a recurring basis.

The following is a summary of fair value measurements as of March 31, 2023:


			Fair Value Measurements at Reporting Date Using
Description	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	30,268	$	30,268	$	—	$	—
Cash equivalents:
Money market funds	1,523		1,523		—		—
Commercial paper	996		—		996		—


Total cash equivalents	2,519		1,523		996		—
Total cash and cash equivalents	32,787		31,791		996		—
Marketable securities:
Agency bonds	994		—		994		—
Certificate of deposit (1)	40		—		40		—
Commercial paper	7,885		—		7,885		—
Corporate notes and bonds	5,522		—		5,522		—
Treasury bills	995		—		995		—
Total marketable securities	15,436		—		15,436		—
Total assets measured at fair value	$	48,223	$	31,791	$	16,432	$	—

______________

(1)Classified in other assets

Table of Contents

The following is a summary of fair value measurements as of December 31, 2022:


			Fair Value Measurements at Reporting Date Using
Description	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	49,422	$	49,422	$	—	$	—
Cash equivalents:
Money market funds	2,036		2,036		—		—
Commercial paper	1,195		—		1,195		—
Corporate notes and bonds	1,622		—		1,622		—
Yankee bond	1,000		—		1,000		—
Total cash equivalents	5,853		2,036		3,817		—
Total cash and cash equivalents	55,275		51,458		3,817		—
Marketable securities:
Agency bonds	486		—		486		—
Certificate of deposit (1)	40		—		40		—
Commercial paper	5,884		—		5,884		—
Corporate notes and bonds	11,379		—		11,379		—
Treasury bills	985		—		985		—
Total marketable securities	18,774		—		18,774		—
Total assets measured at fair value	$	74,049	$	51,458	$	22,591	$	—

______________

(1)Classified in other assets

The carrying amount of cash equivalents approximates fair value because their maturity is less than three months from the date of purchase. The carrying amount of short-term and long-term marketable securities approximates fair value as the securities are marked to market as of each balance sheet date with any unrealized gains and losses reported in stockholders’ equity. The carrying amount of accounts receivable, accounts payable, and accrued liabilities approximates fair value due to the short-term maturity of the amounts.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2022, included in Part II of our annual report on Form 10-K, as filed with the SEC, on June 29, 2023.

The company restated the consolidated financial statements for the years ended December 31, 2022 and 2021 presented in its Annual Report. In addition, the company restated its unaudited quarterly financial data for the periods ended September 30, 2022 and 2021, June 30, 2022 and 2021, and March 31, 2022 and 2021. Such restated unaudited quarterly financial data and related impacted amounts were presented in the company’s Annual Report. The following discussion gives effect to the restatement of our unaudited interim consolidated financial statements for the three months ended March 31, 2022. See the related discussion in Note 2, “Summary of Significant Accounting Policies” of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q

All information in this Item 2 is presented in thousands, except per share amounts and client count and where otherwise specifically noted.

Overview

We are a leading provider of solutions that enable communications and media companies to optimize their digital content delivery and we provide solutions that allow e-commerce, banking, and other interactive-heavy applications to improve their customer experiences. Our holistic solution allows customer teams to efficiently deliver instant, secure web applications that improve our client's revenue. We are a trusted partner to some of the world’s notable brands and serve their global customers with experiences such as livestream sporting events, global movie launches, video games, and file downloads. We support some of the most trusted brands in their interactions with their customers including high fashion, automobile manufactures, giant online stores, banks and the like. We offer one of the largest, best-optimized private networks coupled with a global team of industry experts to provide edge services that are fast, secure, and reliable. Our mission is to deliver a globally-scaled edge platform that seamlessly powers faster, safer and simpler business solutions. We want to be the platform of choice to power video and application solutions at the edge of the Internet to make connected living faster, safer and simpler.

Our business is dependent on creating an exceptional digital experience by providing our clients with fast, safe, efficient, and reliable edge access, distribution of content delivery and digital asset management services over the Internet every minute of every day. Because of this, we operate a globally distributed network with services that are available 24 hours a day, seven days a week, and 365 days a year. Our sophisticated and powerful network is fully redundant and includes extensive diversity through data centers and telecommunication suppliers within and across regions.

A meaningful portion of our revenue and profit comes from our Applications Platform, a global edge-based service that allows teams to build, secure, and accelerate their most important customer-facing websites and APIs. The platform uniquely enables best-in-class security, instant-loading interactive experiences, and improved team velocity with few tradeoffs. Today’s disjointed tools offered by the hyperscaler cloud, edge, security, and observability vendors force the market to choose between protection, performance, and team productivity. Our offering allows our customers to earn more revenue, reduce security risk, prevent more fraud, and lower costs through a holistic approach not easily realized through the current approach of assembling multiple vendors’ point solutions. Further, to enable easy adoption by the market, clients can buy a small, best-of-breed piece of the offering before upgrading to the full suite. Clients have the option to purchase unique expert and managed services to ensure they realize the most value from the platform. Our Application Platform currently powers the largest US wireless carrier, the largest online payments service, several top 20 banks and insurers, name-brand social networks, three of the top five most valuable technology companies, and hundreds of other leaders in e-commerce, automotive, travel, and other industries.

We provide our services in a highly competitive industry in which differentiation is primarily measured by performance and cost and the difference between providers can be as small as a fraction of a percent. We have experienced the commoditization of our once innovative and highly valued content delivery service, which, when combined with the low switching costs in a multi-CDN environment, results in on-going price compression, despite the large, unmet market need for our services. In 2023, we continued to see a decline in our average selling price, primarily due to the on-going price compression with our multi-CDN clients.

We implemented a go-forward strategy designed to simultaneously address short-term headwinds and to position us to achieve near- and long-term success by building upon and more fully leveraging our ultra-low latency, global network, and operational expertise. We are focused on three key areas:

Table of Contents

• Improving Our Core. Our ability to consistently grow revenue requires us to do a better job at managing the cost structure of our network while anticipating and providing our clients with the tools and reliable performance they need and to do it sooner and better than our competitors. Our operating expenses are largely driven by payroll and related employee costs. Our employee and employee equivalent headcount decreased from 980 on December 31, 2022, to 893 on March 31, 2023, primarily due to synergies created by the Edgecast Acquisition. We implemented a broader and more detailed operating model in 2021, built on metrics, process discipline, and improvements to client satisfaction, performance, and cost. We are building an internal culture that embraces speed, transparency, and accountability. Since the close of the Edgecast Acquisition, we have put other cost savings measures into place. We are continuously seeking opportunities to be more efficient and productive in order to achieve cost savings and improve our profitability. In December 2022, we announced a restructuring plan to reduce approximately 10% of our workforce. In June, 2023, we announced a restructuring plan to reduce an additional 12% of our workforce with estimated future restructuring charges of approximately $3,700 for this plan to be recorded in the second and third quarters of 2023.

• Expanding Our Core. We have redesigned our commercial and product approaches to strengthen and broaden our key client relationships, to support a land and expand strategy. We believe that this, coupled with new edge-based tools and solutions we anticipate bringing to market, will assist in our ability to re-accelerate growth. Key elements of our plan to Expand the Core include tightening the alignment between our Sales and Marketing organizations, moving to a “client success” model that pairs client relationship managers with client performance managers to ensure proactive client success and exploring ways to dynamically optimize how we price our services that gives us more flexibility – and a renewed ability to sell more broadly into our existing client base. We are expanding the competency and capacity of our marketing and sales efforts and increasing our effectiveness through targeted go-to-market segmentation.

• Extending Our Core. Longer term, we believe we can drive meaningful improvements to profitability and growth by diversifying our capabilities, clients, and revenue mix. We need to enable digital builders to easily load content faster, personalize it more and protect it outside of a controlled environment. We believe we have an opportunity of extending the use of our network to new clients with new solutions that utilize non-peak traffic solutions.

In September 2021, we acquired Moov Corporation (“Moov”), a California corporation doing business as Layer0, a sub-scale SaaS based application acceleration and developer platform. The combination of application acceleration development platform with security and a power edge network provides a unique offering for potential clients.

In June 2022, we completed the acquisition of Yahoo's Edgecast, a leading provider of edge security, content delivery and video services, in an all-stock transaction. Edgecast was a business unit of Yahoo, which was owned by funds managed by affiliates of Apollo and Verizon Communications. Edgio will deliver significantly increased scale and scope with diversified revenue across products, clients, geographies, and channels.

The acquisitions have provided Edgio with a highly-performant globally scaled, edge enabled network supported by software solutions with media solutions that generate value in video and live stream content delivery and apps solutions that enable the development, delivery, and operation of highly performant web and mobile applications. These combined give Edgio a $14 billion target market in the broader $40 billion marketplace.

We are committed to helping our clients deliver better digital experiences to their customers, create better returns for our shareholders, and provide our employees an environment in which they can grow, develop, and win.

Table of Contents

The following table summarizes our revenue, costs, and expenses for the three months ended March 31, 2023 and 2022 (in thousands of dollars and as a percentage of total revenue):


	Three Months Ended March 31,
	2023				2022
Revenue	$	101,948	100.0	%	$	55,339	100.0	%
Cost of revenue	70,963		69.6	%	38,521		69.6	%
Gross profit	30,985		30.4	%	16,818		30.4	%
Operating expenses	63,081		61.9	%	34,069		61.6	%
Restructuring charges	500		0.5	%	698		1.3	%
Operating loss	(32,596)		(32.0)	%	(17,949)		(32.4)	%
Total other expense	(1,989)		(2.0)	%	(2,117)		(3.8)	%
Loss before income taxes	(34,585)		(33.9)	%	(20,066)		(36.3)	%
Income tax expense	398		0.4	%	206		0.4	%
Net loss	$	(34,983)	(34.3)	%	$	(20,272)	(36.6)	%

Critical Accounting Estimates

Our critical accounting estimates are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. During the three months ended March 31, 2023, there have been no significant changes in our critical accounting estimates.

Results of Operations

Revenue

We derive revenue primarily from the sale of our Media and Applications platforms which include digital content delivery, video delivery, website development and acceleration, cloud security and monitoring, edge compute, and origin storage services. We also generate revenue through the sale of professional services and other infrastructure services, such as transit, and rack space services.

The following table reflects our revenue for the three months ended March 31, 2023, compared to the three months ended March 31, 2022:


	Three Months Ended March 31,
					$	%
	2023		2022		Change	Change
Revenue	$	101,948	$	55,339	46,609	84.2	%

Our revenue increased during the three months ended March 31, 2023, versus the comparable 2022 period, primarily due to the inclusion of revenue from the Edgecast Acquisition. Our active clients worldwide increased to 900 as of March 31, 2023, compared to 577 as of March 31, 2022. The increase was primarily driven by the Edgecast Acquisition in June 2022.

During the three months ended March 31, 2023 and 2022, sales to our top 20 clients accounted for approximately 74% and 77%, respectively, of our total revenue. The clients that comprised our top 20 clients change from time to time, and our large clients may not continue to be as significant going forward as they have been in the past.

During the three months ended March 31, 2023, we had two clients, Amazon and Verizon, who each represented 10% or more of our total revenue. During the three months ended March 31, 2022, we had two clients, Amazon and Sony, who each represented 10% or more of our total revenue.

Table of Contents

Revenue by geography is based on the location of the client from which the revenue is earned based on bill to locations. The following table sets forth revenue by geographic area (in thousands and as a percentage of total revenue):


	Three Months Ended March 31,
	2023				2022
Americas	$	79,940	79	%	$	32,791	59	%
EMEA	6,501		6	%	5,302		10	%
Asia Pacific	15,507		15	%	17,246		31	%
Total revenue	$	101,948	100	%	$	55,339	100	%

Cost of Revenue

Cost of revenue consists primarily of fees paid to network providers for bandwidth and backbone, costs incurred for non-settlement free peering and connection to Internet service providers, and fees paid to data center operators for housing of our network equipment in third party network data centers, also known as co-location costs. Cost of revenue also includes leased warehouse space and utilities, depreciation of network equipment used to deliver our content delivery services, payroll and related costs, and share-based compensation for our network operations and professional services personnel. Other costs include cloud service costs, professional fees and outside services, travel and travel-related expenses and fees and license, and insurance costs.

Cost of revenue was composed of the following (in thousands and as a percentage of total revenue):


	Three Months Ended March 31,
	2023				2022
Bandwidth and co-location fees	$	44,311	43.5	%	$	24,449	44.2	%
Depreciation - network	3,610		3.5	%	5,848		10.6	%
Payroll and related employee costs (1)	9,446		9.3	%	2,272		4.1	%
Share-based compensation	679		0.7	%	408		0.7	%
Other costs	12,917		12.6	%	5,544		10.0	%
Total cost of revenue	$	70,963	69.6	%	$	38,521	69.6	%

(1) Includes $111 of acquisition related expenses for the three months ended March 31, 2023.

Our cost of revenue increased in aggregate dollars and was flat as a percentage of total revenue for the three months ended March 31, 2023, versus the comparable 2022 period. The changes in cost of revenue were primarily a result of the following:

•Bandwidth and co-location fees increased in aggregate dollars due to continued expansion in existing and new geographies and capacity acquired with the Edgecast Acquisition. Bandwidth and co-location fees slightly decreased as a percentage of total revenue primarily due to favorable product mix cost reductions and synergies realized from the Edgecast Acquisition.

•Depreciation expense decreased primarily due to a change in the estimate of useful lives related to network equipment, partially offset by an increase in depreciation as a result of property and equipment acquired from the Edgecast Acquisition. Refer to Note 2 “Summary of Significant Accounting Policies” of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on this change in estimate.

•Payroll and related employee costs were higher as a result of increased headcount due to the Edgecast Acquisition. We have also increased the use of third party consultants to augment direct staffing expense.

•Share-based compensation increased primarily due to increased headcount due to the Edgecast Acquisition.

•Other costs increased primarily due to costs associated with increased international re-seller costs, professional fees including third party consultants, cloud service costs, and increased fees and licenses.

Table of Contents

General and Administrative

General and administrative expense was composed of the following (in thousands and as a percentage of total revenue):


	Three Months Ended March 31,
	2023				2022
Payroll and related employee costs	$	4,393	4.3	%	$	4,872	8.8	%
Professional fees and outside services	2,723		2.7	%	2,002		3.6	%
Share-based compensation	1,416		1.4	%	2,103		3.8	%
Acquisition and legal related expenses	589		0.6	%	5,107		9.2	%
Other costs	7,715		7.6	%	1,749		3.2	%
Total general and administrative	$	16,836	16.5	%	$	15,833	28.6	%

Our general and administrative expense increased in aggregate dollars and decreased as a percentage of total revenue for the three months ended March 31, 2023, versus the comparable 2022 period. The increase in aggregate dollars for the three months ended March 31, 2023, versus the comparable 2022 period was primarily driven by an increase in professional fees and outside services and other costs, largely offset by a decrease in acquisition and legal related expenses, share-based compensation, and payroll and related employee costs. The increase in other costs primarily related to an increase in fees and licenses, software fees from Edgecast acquisition, as well as, restatement expenses incurred. The decrease in acquisition and legal related expenses was a result of the lower Edgecast Acquisition related expense in the current year. The decrease in payroll and related employee costs was due to decreased department headcount and share-based compensation decreased primarily as a result of lower equity compensation.

We expect our general and administrative expenses for 2023 to increase in both aggregate dollars and as a percentage of total revenue.

Sales and Marketing

Sales and marketing expense was composed of the following (in thousands and as a percentage of total revenue):


	Three Months Ended March 31,
	2023				2022
Payroll and related employee costs (1)	$	15,434	15.1	%	$	4,879	8.8	%
Share-based compensation	617		0.6	%	1,181		2.1	%
Marketing programs	1,133		1.1	%	471		0.9	%
Other costs	2,438		2.4	%	1,096		2.0	%
Total sales and marketing	$	19,622	19.2	%	$	7,627	13.8	%

(1) Includes $42 of acquisition related expenses for the three months ended March 31, 2023.

Our sales and marketing expense increased in both aggregate dollars and as a percentage of total revenue for the three months ended March 31, 2023, versus the comparable 2022 period. The increase in aggregate dollars for the three months ended March 31, 2023, versus the comparable 2022 periods was primarily driven by an increase in payroll and related employee costs, other costs, and marketing programs, partially offset by a decrease in share-based compensation. The increase in payroll and related employee costs was due to increased headcount associated with the Edgecast Acquisition. The increase in other costs was mainly due to an increase in licenses and subscriptions, and an increase in professional fees for consultants and casual labor. Marketing program expenses increased due to increased trade show, and promotional and advertising costs. Share-based compensation decreased primarily as a result of lower equity compensation.

We expect our sales and marketing expenses for 2022 to increase in both aggregate dollars and as a percentage of total revenue, compared to 2022 due to full year of Edgecast expenses.

Table of Contents

Research and Development

Research and development expense was composed of the following (in thousands and as a percentage of total revenue):


	Three Months Ended March 31,
	2023				2022
Payroll and related employee costs (1)	$	12,849	12.6	%	$	4,089	7.4	%
Share-based compensation	2,488		2.4	%	3,320		6.0	%
Other costs	5,679		5.6	%	2,168		3.9	%
Total research and development	$	21,016	20.6	%	$	9,577	17.3	%

(1) Includes $410 of acquisition related expenses for the three months ended March 31, 2023.

Our research and development expense increased in both aggregate dollars and as a percentage of total revenue for the three months ended March 31, 2023, versus the comparable 2022 period. The increase in aggregate dollars during the three months ended March 31, 2023, versus the comparable 2022 periods was primarily driven by an increase in payroll and related employee costs, and other costs, partially offset by a decrease in share-based compensation. The increase in payroll and related employee costs was due to increased headcount associated with the Edgecast Acquisition. The increase in other costs, was primarily due to increased professional fees, including casual labor and consulting, and increased fees and licenses. Share-based compensation decreased primarily as a result of lower equity compensation.

We expect our research and development expenses for 2023 to increase both in aggregate dollars and as percentage of total revenue, compared to 2022 due to full year of Edgecast expenses.

Depreciation and Amortization (Operating Expenses)

Depreciation expense consists of depreciation on equipment used by general administrative, sales and marketing, and research and development personnel. Amortization expense consists of amortization of acquired intangible assets.

Depreciation and amortization expense was $5,607, or 5.5% of revenue, for the three months ended March 31, 2023, versus $1,032, or 1.9% of revenue, for the comparable 2022 period.

The increase in depreciation and amortization expense for the three months ended March 31, 2023, versus the comparable 2022 period was primarily due to the amortization of intangible assets acquired as part of the Edgecast Acquisition in June 2022. For the three months ended March 31, 2023 and 2022, amortization of intangibles was $5,313 and $786.

Restructuring Charges

Restructuring charges were $500 and $698 for the three months ended March 31, 2023 and 2022, respectively, and were the result of management's commitment to restructure certain parts of the company to focus on cost efficiencies, improved growth and profitability, and align our workforce and facility requirements with our continued investment in the business. As a result, we are incurring certain charges for facilities, right of use assets, outside service contracts, and professional fees. Refer to Note 11 “Restructuring Charge” of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Future restructuring charges related to these plans are expected to be immaterial. On June 6, we announced a Restructuring Plan to reduce an additional 12% of our workforce to be implemented through the third quarter of 2023. Restructuring charges of approximately $3,200 related to the Restructuring Plan will be recorded in the second quarter of 2023. Remaining future estimated restructuring charges related to this plan are approximately $500 and expected be recorded in the third quarter of 2023. These charges, which will be cash expenditures, consist of one-time severance charges and continuation of health benefit. The company anticipates it will generate approximately $23,700 in net annual savings.

Interest Expense

Interest expense was $1,577 for the three months ended March 31, 2023, versus $1,431 for the comparable 2022 period. Interest expense includes expense associated with the issuance of our senior convertible notes in July 2020, fees associated with the Credit Agreement originally entered into in November 2015, and expenses relating to financing arrangements from our Open Edge arrangements.

Table of Contents

Interest Income

Interest income was $397 for the three months ended March 31, 2023, versus $27 for the comparable 2022 period. Interest income includes interest earned on financing lease arrangements, invested cash balances, and marketable securities.

Other Income (Expense)

Other expense was $809 for the three months ended March 31, 2023, versus other expense of $713 for the comparable 2022 period. For the three months ended March 31, 2023 and 2022, other expense consisted primarily of foreign currency transaction gains and losses.

Income Tax Expense

Based on an estimated annual effective tax rate and discrete items, the estimated income tax expense for the three months ended March 31, 2023 was $398, versus $206 for the comparable 2022 period. Income tax expense on net loss before taxes was primarily due to us providing for a valuation allowance on deferred tax assets in the U.S., and the recording of state and foreign tax expense for the three month periods. The effective income tax rate is based primarily upon income or loss for the year, the composition of the income or loss in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions for tax audits.

Liquidity and Capital Resources

As of March 31, 2023, our cash, cash equivalents, and marketable securities classified as current totaled $48,183. Included in this amount is approximately $13,035 of cash and cash equivalents held outside the United States. Changes in cash, cash equivalents, and marketable securities are dependent upon changes in, among other things, working capital items such as deferred revenues, accounts payable, accounts receivable, and various accrued expenses, as well as purchases of property and equipment and changes in our capital and financial structure due to stock option exercises, sales of equity investments, and similar events.

Cash used in operations could also be affected by various risks and uncertainties, including, but not limited to, other risks detailed in Part II, Item 1A titled “Risk Factors” of this Quarterly Report on Form 10-Q. However, we believe that our existing cash, cash equivalents and marketable securities, and available borrowing capacity will be sufficient to meet our anticipated cash needs for at least the next twelve months. If the assumptions underlying our business plan regarding future revenue and expenses change or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or debt securities.

The major components of changes in cash flows for the three months ended March 31, 2023 and 2022, are discussed in the following paragraphs.

Operating Activities

Net cash used in operating activities was $24,073 for the three months ended March 31, 2023, compared to net cash used in operating activities of $17,569 for the comparable 2022 period, an increase of $6,504. Changes in operating assets and liabilities of $5,386 during the three months ended March 31, 2023, compared to $12,190 in the comparable 2022 period, were primarily due to:

•accounts receivable decreased $1,134 during the three months ended March 31, 2023, as a result of timing of collections as compared to a $12,161 increase in the comparable 2022 period;

•prepaid expenses and other current assets increased $3,607 during the three months ended March 31, 2023, compared to an increase of $2,728 in the comparable 2022 period primarily due to an increase in vendor deposits and other, prepaid bandwidth and backbone expenses, and VAT receivables.

•accounts payable and other current liabilities decreased $4,230 during the three months ended March 31, 2023, compared to an increase of $3,813 for the comparable 2022 period primarily due to a decrease in accounts payable, related party payable, accrued restructuring charges, and accrued interest payable, partially offset by an increase in accrued cost of revenue, accrued compensation and benefits, and other accrued expenses.

Cash provided by operating activities may not be sufficient to cover new purchases of property and equipment during the remainder of 2023 and beyond. The timing and amount of future working capital changes and our ability to manage our days sales outstanding will also affect the future amount of cash used in or provided by operating activities.

Table of Contents

Investing Activities

Net cash used in investing activities was $268 for the three months ended March 31, 2023, compared to net cash used in investing activities of $3,778 for the comparable 2022 period. For the three months ended March 31, 2023, net cash used in investing activities was related to the purchase of marketable securities and capital expenditures, offset by cash received from the sale and maturities of marketable securities. For the three months ended March 31, 2022, net cash used in investing activities was primarily related to the purchase of marketable securities and capital expenditures, primarily for servers and network equipment associated with the build-out and expansion of our global computing platform, offset by cash received from the sale and maturities of marketable securities.

We expect to have ongoing capital expenditure requirements as we continue to invest in and expand our network. During the three months ended March 31, 2023, we made capital expenditures of $3,788, which represented approximately 4% of our total revenue. We currently expect capital expenditures in the remainder of 2023 to be less than 10% of revenue.

Financing Activities

Net cash provided by financing activities was $1,441 for the three months ended March 31, 2023, compared to net cash provided by financing activities of $6,967 for the comparable 2022 period. Net cash provided by financing activities in the three months ended March 31, 2023, primarily relates to cash received from proceeds from capital contributions and financing obligations, partially offset by the repayments of financing obligations and payments of employee tax withholdings related to the net settlement of vested restricted stock units.

Net cash provided by financing activities in the three months ended March 31, 2022, primarily related to the exercise of stock options and our employee stock purchase plan of $7,986 and cash received from proceeds from financing obligations of $1,602, partially offset by the repayments of financing obligations of $1,336 and the payments of employee tax withholdings related to the net settlement of vested restricted stock units of $1,285.

Convertible Senior Notes and Capped Call Transactions

In July 2020, we issued $125,000 aggregate principal amount of 3.50% Convertible Senior Notes due 2025 (the “Notes”), with an initial conversion rate of 117.2367 shares of our common stock (equal to an initial conversion rate of $8.53 per share), subject to adjustment in some events. The Notes will be senior, unsecured obligations of ours and will be equal in right of payment with our senior, unsecured indebtedness; senior in right of payment to our indebtedness that is expressly subordinated to the Notes; effectively subordinated to our senior, secured indebtedness, including future borrowings, if any, under our amended credit facility with First Citizens Bank (formerly Silicon Valley Bank) (“FCB”), to the extent of the value of the collateral securing that indebtedness; and structurally subordinated to all indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries. The Notes are governed by an indenture (the “Indenture”) between us, as the issuer, and U.S. Bank, National Association, as trustee (the “Trustee”). The Indenture does not contain any financial covenants.

The Notes mature on August 1, 2025, unless earlier converted, redeemed or repurchased in accordance with their term prior to the maturity date. Interest is payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2021. We may not redeem the Notes prior to August 4, 2023.

On or after August 4, 2023, and on or before the 40th scheduled trading day immediately before the maturity date, we may redeem for cash all or any portion of the Notes if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will equal 100% of the principal amount of the Notes being redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.

As of March 31, 2023, the conditions allowing holders of the Notes to convert had not been met and therefore the Notes are not yet convertible.

In connection with the offering of the Notes, we also entered into privately negotiated capped call transactions (collectively, the “Capped Calls”). The Capped Calls have an initial strike price of approximately $8.53 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have an initial cap price of $13.38 per share, subject to certain adjustments. The capped call transactions cover, subject to anti-dilution adjustments, approximately 14.7 million shares of our common stock and are expected to offset the potential economic dilution to our common stock up to the initial cap price.

Table of Contents

As a result of the restatement of our previously issued consolidated financial statements described in Note 2 "Debt" of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we were unable to file our Annual Report on Form 10-K for the year ended December 31, 2022 on a timely basis. For the same reason, we were also unable to timely file our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. Pursuant to the terms of the Indenture, on April 12, 2023, we notified the Trustee that due to our failure to timely file with the SEC our Annual Report on Form 10-K for the year ended December 31, 2022, a default (as defined in the Indenture) had occurred.

On April 17, 2023, a holder of the Notes delivered a notice of default to the Trustee and the company notifying us that we were in breach of the Indenture for failing to provide the Trustee our Annual Report on Form 10-K for the year ended December 31, 2022. Under the terms of the Indenture, such default matured into an event of default (the “Reporting Event of Default”) on June 17, 2023. On July 21, 2023, the Trustee for the Notes delivered a notice of default to the company notifying us that we were in breach of the Indenture for failing to provide the Trustee our Quarterly Report on Form 10-Q for the three-months ended March 31, 2023. Under the terms of the Indenture, such default was cured with the filing of this Quarterly Report.

Line of Credit

In November 2015, we entered into the original Loan and Security Agreement (the “Credit Agreement”) with FCB. Since the inception, there have been ten amendments, with the most recent amendment being in June 2023 (the “Tenth Amendment”). Under the Tenth Amendment, our borrowing capacity as of March 31, 2023 was the lesser of the commitment amount of $50,000 or 50% of eligible accounts receivable while the maturity date remains at April 2, 2025. All outstanding borrowings owed under the Credit Agreement become due and payable no later than the final maturity date of April 2, 2025.

Financial Covenants and Borrowing Limitations

The Credit Agreement requires, and any future credit facilities will likely require, us to comply with specified financial requirements that may limit the amount we can borrow. A breach of any of these covenants could result in a default. Our ability to satisfy those covenants depends principally upon our ability to meet or exceed certain financial performance results. Any debt agreements we enter into in the future may further limit our ability to enter into certain types of transactions.

We are required to maintain an Adjusted Quick Ratio of at least 1.0. We are also subject to certain customary limitations on our ability to, among other things, incur debt, grant liens, make acquisitions and other investments, make certain restricted payments such as dividends, dispose of assets or undergo a change in control. As of March 31, 2023, we were not in compliance with our Adjusted Quick Ratio requirement. On June 27, 2023, we have received a waiver for, among others, our non-compliance.

For a more detailed discussion regarding our Credit Agreement, please refer to Note 10 “Debt” of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by restrictive covenants within the Credit Agreement. These restrictions may also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to finance our operations, enter into acquisitions, execute our business strategy, effectively compete with companies that are not similarly restricted or engage in other business activities that would be in our interest. In the future, we may also incur debt obligations that might subject us to additional and different restrictive covenants that could affect our financial and operational

Table of Contents

flexibility. We cannot assure you that we will be granted waivers or amendments to the Indenture governing the Credit Agreement, or such other debt obligations if for any reason we are unable to comply with our obligations thereunder or that we will be able to refinance our debt on acceptable terms, or at all, should we seek to do so. Any such limitations on borrowing under the Credit Agreement, including payments related to litigation, could have a material adverse impact on our liquidity and our ability to continue as a going concern could be impaired.

Share Repurchases

On March 14, 2017, our board of directors authorized a $25,000 share repurchase program. Any shares repurchased under this program will be canceled and returned to authorized but unissued status. During the three months ended March 31, 2023 and 2022, we did not repurchase any shares under the repurchase program. As of March 31, 2023, there remained $21,200 under this share repurchase program.

Contractual Obligations, Contingent Liabilities, and Commercial Commitments

In the normal course of business, we make certain long-term commitments for right-of-use (“ROU”) assets (primarily office facilities), Open Edge partner commitments, and purchase commitments for bandwidth, and computer rack space. These commitments expire on various dates ranging from 2023 to 2030. We expect that the growth of our business will require us to continue to add to long-term commitments in 2023 and beyond. As a result of our growth strategies, we believe that our liquidity and capital resources requirements will grow.

The following table presents our contractual obligations and commercial commitments, as of March 31, 2023, over the next five years and thereafter. See Note 17 “Leases and Commitments” of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.


	Payments Due by Period
			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Purchase and Other Commitments
Open Edge partner commitments (1)	$	109,645	$	35,709	$	53,654	$	20,282	$	—
Bandwidth commitments	21,687		18,260		3,427		—		—
Rack space commitments	17,099		12,424		4,675		—		—
Total purchase and other commitments	148,431		66,393		61,756		20,282		—
Right-of-use assets and other operating leases	14,491		5,085		2,942		2,979		3,485
Open Edge arrangements' financing obligations (1)	21,588		7,923		9,681		3,952		32
Total commitments	$	184,510	$	79,401	$	74,379	$	27,213	$	3,517

(1) The Open Edge partner commitments typically include a minimum fee commitment that is paid to the partners over the course of the arrangement. The aggregate minimum fee commitment is allocated between cost of services and financing obligations. Refer to Note 17 “Leases and Commitments” of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.

As of March 31. 2023, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that may be material to investors.

Off Balance Sheet Arrangements

As of March 31, 2023, we are not involved in any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our debt and investment portfolio. In our investment portfolio, we do not use derivative financial instruments. Our investments are primarily with our commercial and investment banks and, by policy, we limit the amount of risk by investing primarily in money market funds, United States Treasury obligations, high quality corporate and municipal obligations, and certificates of deposit. The interest rate on our line of credit is at the greater of the current prime rate minus 0.25% or 4%. In the event of default, obligations shall bear interest at a rate per annum which is 3% above the then applicable rate. An increase in interest rates of 100 basis points would add $10 of

Table of Contents

interest expense per year, to our results of operations, for each $1,000 drawn on the line of credit. As of March 31, 2023, there were no outstanding borrowings against the line of credit. The interest rate on our Notes is 3.50%. In connection with an event of default with respect to certain reporting obligations and our election to pay Special Interest in respect thereof, the Notes shall bear additional interest at a rate per annum of 0.25% of the principal amount for the first 180 days and 0.50% thereafter until the earlier of the date such event of default is cured and 365 days after the initial date of the event of default. An election to pay Special Interest in connection with such an event of default could add up to $471 of interest expense in a 365-day period.

Foreign Currency Risk

We operate in the Americas, EMEA and Asia-Pacific. As a result of our international business activities, our financial results could be affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets, and there is no assurance that exchange rate fluctuations will not harm our business in the future. We have foreign currency exchange rate exposure on our results of operations as it relates to revenues and expenses denominated in foreign currencies. A portion of our cost of revenues and operating expenses are denominated in foreign currencies as are our revenues associated with certain international clients. To the extent that the U.S. dollar weakens, similar foreign currency denominated transactions in the future will result in higher revenues and higher cost of revenues and operating expenses, with expenses having the greater impact on our financial results. Similarly, our revenues and expenses will decrease if the U.S. dollar strengthens against these foreign currencies. Although we will continue to monitor our exposure to currency fluctuations, and, where appropriate, may use financial hedging techniques in the future to minimize the effect of these fluctuations, we are not currently engaged in any financial hedging transactions. Assuming a 10% weakening of the U.S. dollar relative to our foreign currency denominated revenues and expenses, our net loss for the three months ended March 31, 2023, the impact would have been approximately $1,355. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumption that foreign exchange rate movements across multiple jurisdictions are similar and would be linear and instantaneous. As a result, the analysis is unable to reflect the potential effects of more complex markets or other changes that could arise, which may positively or negatively affect our results of operations.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Credit Risk

During any given fiscal period, a relatively small number of clients typically account for a significant percentage of our revenue. During the three months ended March 31, 2023 and 2022, sales to our top 20 clients accounted for approximately 74% and 77%, respectively, of our total revenue. During the three months ended March 31, 2023, we had two clients, Verizon and Amazon, who each represented 10% or more of our total revenue. During the three months ended March 31, 2022, we had two clients, Amazon and Sony, who each represented 10% or more of our total revenue.

As of March 31, 2023, we had four clients, Verizon, Amazon, Disney, and Microsoft, who each represented 10% or more of our total accounts receivable. As of December 31, 2022 we had three clients, Amazon, Verizon, and Microsoft, who each represented 10% or more of our total accounts receivable.

In 2023, we anticipate that our top 20 client concentration levels will remain consistent with 2022. In the past, the clients that comprised our top 20 clients have continually changed, and our large clients may not continue to be as significant going forward as they have been in the past.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer) as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that

Table of Contents

as of March 31, 2023, our disclosure controls and procedures were not effective because of previously disclosed material weaknesses in internal control over financial reporting described below.

Material Weaknesses & Remediation Activities

As previously disclosed in our management’s report on internal control over financial reporting within Part II, Item 9A. “Controls and Procedures” in our Annual Report Form 10-K for the year ended December 31, 2022, we identified material weaknesses in our internal control over financial reporting with respect to the following:

1) Non-routine/complex transactions

We identified deficiencies related to the design of controls to analyze, account for and disclose complex transactions included in certain contractual arrangements such as (i) the “Open Edge” agreements and (ii) the Transition Service Agreement entered into between the company and Yahoo, Inc. as part of the Edgecast acquisition during the second quarter of 2022 (both of which resulted in the restatement of our previously issued consolidated financial statements, as described in Note 3). We also identified deficiencies in the design of certain other controls related to the Edgecast acquisition, including those that related to the identification of proper inputs and assumptions used in valuation models and a lack of sufficiently precise review of opening balance sheet accounts. Specifically, given the complexity of these agreements, we determined there was a lack of sufficient technical accounting personnel involved with the review and evaluation of these contractual agreements and transactions to ensure they were accounted for in accordance with US GAAP and in order to prevent or detect material misstatements on a timely basis.

2) Revenue accounting system controls

We identified deficiencies related to the design of application controls and information technology dependent manual controls related to certain revenue processes. There was inaccurate data aggregation and processing of revenue events within our storage revenue systems, a lack of controls to identify and resolve errors if and when they occur, and a lack of sufficient documentation over the review of underlying data and reports used in the revenue accounting process. In addition, the operation of controls related to the precision of review of certain content delivery agreements entered into during 2022 was not sufficient.

3) Financial close and reporting processes

We identified certain operating deficiencies related to the control activities related to segregation of duties controls over the preparation and review of journal entries. In addition, we identified certain operating deficiencies over the performance of certain account reconciliations, which was impacted by the growth in the organization from the Edgecast acquisition, and our ongoing effort to expand the accounting team during 2022.

These material weaknesses did not result from a change in published accounting guidance during the relevant time period or override of controls or misconduct, nor has the Audit Committee been informed of any issues related to an override of controls or misconduct.

Remediation Activities

We are in the process of remediating these material weaknesses and will continue to do so until such remediation is complete. Steps we have taken since the fourth quarter of 2022, include, but are not limited to:

•Increase the use of qualified internal or third-party resources with accounting expertise on complex and/or non-routine transactions who will provide accounting interpretation guidance to assist us in identifying and addressing any issues that affect our consolidated financial statements;

•Establish a steering committee to improve internal communications among the legal, sales, operations and finance departments, bolster identification and review of non-standard revenue and other non-routine transactions and augment personnel and resources as necessary;

•Provide training to the finance organization on our product offerings to bolster finance teams' knowledge of operational issues that could impact accounting for non-standard revenue and other non-routine transactions as well as system reports and underlying data used to support the finance function;

•Improve business applications and reporting; and

Table of Contents

•Enhance our risk assessment process to identify and assess risks of material misstatements and ensure that the impacted financial reporting processes and related internal controls are properly designed, maintained, and executed to respond to those risks in our financial reporting.

We believe these steps will address the underlying cause of the material weaknesses which resulted from an insufficient complement of resources with an appropriate level of accounting knowledge, expertise and training to evaluate the accounting implications of non-standard revenue and other non-routine transactions commensurate as well as system reports and underlying data with our financial reporting requirements.

As we work to improve our internal control over financial reporting, we may modify our remediation plan and may implement additional measures as we continue to review, optimize and enhance our financial reporting controls and procedures in the ordinary course. We believe that these remediation actions, when fully implemented, will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. Material weaknesses are not considered remediated until the new controls have been operational for a sufficient period of time, are tested, and management concludes that these controls are operating effectively. We are committed to the continuous improvement of our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

In June 2022, we completed the acquisition of Edgecast which operated under its own set of systems and internal controls. During the second half of 2022 and the three months ended March 31, 2023, we transitioned certain of Edgecast’s processes to our internal control processes and added other internal controls over significant processes specific to the acquisition and to post-acquisition activities, including internal controls associated with the valuation of certain assets acquired and liabilities assumed in the transaction and the process of consolidating the Edgecast business into our financial statements. We will continue the process of incorporating and aligning the internal control over financial reporting of Edgecast, into our internal control over financial reporting.

Except as it relates to remediation procedures, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On July 18, 2022, a stockholder filed a verified class action captioned George Assad v. Walter Amaral, Edgio, Inc. et al.; Diane Botelho v. Walter Amaral, Edgio, Inc. et al. Delaware Chancery Court (Case No. 2022-0626); Delaware Chancery Court (Case No. 2022-0624). The class action complaint alleges that the Edgio Board of Directors violated its fiduciary duties in entering into the stockholders' agreement as part of the Edgecast Acquisition. The plaintiffs challenge certain provisions of the stockholders’ agreement alleging that the defensive measures in the agreement create a significant and enduring stockholder block designed to entrench the Board of Directors and protect it from stockholder activism. The complaint seeks injunctive relief in the form of an injunction enjoining the enforcement of the challenged provisions. Edgio filed a motion to dismiss and the matter was heard on October 12, 2022 in the Delaware Chancery Court. The Vice Chancellor granted Edgio's motion to dismiss on the record; however on December 8, 2022, the court requested supplemental briefing on certain issues raised at oral arguments. Supplemental briefs and answering briefs were filed in January 2023.

On May 2, 2023, the Delaware Chancery Court issued a memorandum opinion reversing its order on the record and denying the company’s motion to dismiss. On May 12, 2023, the parties entered into an interim arrangement to avoid the costs and burdens of expedited litigation where the company agreed not to enforce the provisions of the stockholders’ agreement that the plaintiffs challenged in the suit in connection with the company’s 2023 annual meeting.On April 25, 2023, a stockholder filed a complaint in the United States District Court for the District of Arizona a complaint captioned Mehran Esfandiari et al. v. Edgio, Inc. et al., Case No. 2:23-cv-00691 (D. Ariz.), against the company, and current and former officers (the “Class Action Complaint”). The Class Action Complaint includes two claims: (1) violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder (against all defendants); and (2) violation of Section 20(a) of the Exchange Act (against the individual defendants). The Class Action Complaint alleges that the defendants made materially false and/or misleading statements and failed to disclose material facts concerning accounting and internal controls regarding the company's Open Edge arrangements. The Class Action Complaint seeks compensatory damages, including interest thereon, costs and expenses.

For additional information regarding contingencies relating to our legal proceedings, please refer to Note 12 “Contingencies - Legal Matters” of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that could materially affect the company’s business, financial condition or future results discussed in the company’s Annual Report on Form 10-K for the fiscal year December 31, 2022 (the “2022 Form 10-K”) in Part I, Item 1A. The risks described in the 2022 Form 10-K are not the only risks that could affect the company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results in the future. There have been no material changes to our risk factors previously disclosed in our 2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File No.

Exhibit

Filing

Date

Provided

Herewith

3.1

Amended and Restated Certificate of Incorporation of Edgio, Inc. (f/k/a Limelight Networks, Inc.)

8-K

001-33508

3.1

6/14/11

3.2

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Edgio, Inc. (f/k/a Limelight Networks, Inc.), dated June 15, 2022.

8-K

001-33508

3.1

6/16/22

3.3

Third Amended and Restated Bylaws of Edgio, Inc.

10-Q

001-33508

3.3

8/9/22

31.1

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).

31.2

Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*

101.SCH

INLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT

101.CAL

INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT

101.DEF

INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT

101.LAB

INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT

101.PRE

INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

104

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.)

*This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Edgio, Inc. specifically incorporates it by reference.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Edgio, Inc.

Date:	August 15, 2023	By:	/S/ STEPHEN CUMMING
			Stephen Cumming Chief Financial Officer (Principal Financial Officer)

Document

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Robert A. Lyons, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Edgio, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	August 15, 2023	By:	/s/ ROBERT A. LYONS
		Name:	Robert A. Lyons
		Title:	President, Chief Executive Officer and Director (Principal Executive Officer)

Document

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Stephen Cumming, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Edgio, Inc.;

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	August 15, 2023	By:	/s/ STEPHEN CUMMING
		Name:	Stephen Cumming
		Title:	Chief Financial Officer (Principal Financial Officer)

Document

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to

18 U.S.C. Section 1350,

As Adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Robert A. Lyons, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of Edgio, Inc. on Form 10-Q for the period ended March 31, 2023, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such quarterly report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Edgio, Inc.


Date:	August 15, 2023	By:	/s/ ROBERT A. LYONS
		Name:	Robert A. Lyons
		Title:	President, Chief Executive Officer and Director (Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to Edgio, Inc. and will be retained by, Edgio, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification “accompanies” the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Document

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to

18 U.S.C. Section 1350,

As Adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Stephen Cumming, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of Edgio, Inc. on Form 10-Q for the period ended March 31, 2023, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such quarterly report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Edgio, Inc.


Date:	August 15, 2023	By:	/s/ STEPHEN CUMMING
		Name:	Stephen Cumming
		Title:	Chief Financial Officer (Principal Financial Officer)