Q2 2023 Edgio Inc. Earnings Call

[music].

Good afternoon, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the edge. You go 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

And if you would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one.

I will now turn your conference over to meet senior Vice President of Investor Relations You May begin your conference.

Good afternoon. Thank you for joining the <unk> second quarter 2020 financial results Conference call.

While it is being recorded today September 12 two.

2023, and will be archived on our website for approximately 10 days.

A copy of our Form 10-Q for the second quarter, along with today's earnings press release can be found in the Investor Relations section of our website.

Please note that today's comments include forward looking statements regarding future events and financial performance, including statements regarding guidance for the 2020 fiscal year. These forward looking statements are subject to risks and uncertainties.

A number of factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements.

The factors include any impact from macro economic trends the integration of any acquisitions and any impact from geopolitical developments.

Please see the forward looking statement disclaimer on the Companys earnings press release.

Issued after the close of market today as well as the sections entitled Risk factors included in <unk> filings with the SEC, including our annual report on Form 10-K, and quarterly reports on Form 10-Q.

Undue reliance should not be placed on forward looking statements, which speak only as the date they have made.

<unk> disclaims any obligation to update these statements to reflect new information future events or circumstances, except as required by law.

During the course of today's call, we will be referencing certain.

non-GAAP financial measures to GAAP financial measures most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between such measures are provided in the earnings release and our investor.

Relations section of our website. These non-GAAP financial measures are not intended to be a substitute for our GAAP financial results.

I will now turn the call over to Bob Lyons, President and CEO , Bob the floor is yours.

Thank you Sydney, Good afternoon, and welcome to our earnings call for the second quarter of 2023. This quarterly report and the associated 10-Q filing addresses the outstanding compliance issues with applicable NASDAQ listing rules.

With this filing we can now put the restatement and compliance issues behind us.

Throughout this entire process, we have continued to be laser focused on executing our strategy and customer feedback continues to show that <unk> is the preferred partner for creating more valuable connected digital experiences with each passing month, we are adding new customers and seeing existing ones reaffirming their trust and the value that <unk> brings to their organizations.

We have built a very capable leadership team who recognizes the work in front of us, but as equally motivated by the opportunity available to us.

We have accumulated several industry awards in recent quarters from industry analysts and experts for our innovative solutions. We are also seeing a growing number of notable customer wins, many of whom switched to us from competitors.

Let me share the operating highlights that we believe will enable us to continue building on in capitalizing on this momentum.

The successful implementation of our client success team the redesign of our commercial teams and the improvement of our sales enablement motions hasnt back begun to demonstrate that we have turned the corner churn in our acquired applications business has been reduced to rates in line with industry norms, and we expect expansion revenue to exceed churn into the back half of the year for the first.

Since the acquisition our qualified pipeline continues to grow and more importantly, we are converting more of that pipeline to bookings at higher rates than we have historically.

By the end of the third quarter, we will have had three sequential quarters of bookings growth.

With our commercial motion is now positioned for success. We believe that momentum is building into the next year second we continue to aggressively manage cost.

Remain committed to our plans of reducing run rate operating cost by $85 million to $90 million by year end in the second quarter, we reduced our cash operating expense by 24% compared to the fourth quarter of 2022 and are on track to successfully complete our cost roadmap for this year.

Our product strategy continues to establish <unk> as a leading edge enabled solution provider and applications security and streaming.

Number of awards received after releasing applications version seven validates our strategy of having best in class products powered by a globally scaled edge network.

Krista: [inaudible] Good afternoon, my name is Krista and I'll be your conference operator today.

<unk> with native Enterprise class security and delivered with deep expertise.

Krista: At this time, I would like to welcome everyone to the Edgigo 2023 earnings call. All lines have been placed on mute to prevent any background noise.

We have established <unk> as a credible and recognize enterprise security solution for high stake web properties. We continue to have the most complete suite of streaming capabilities in the industry.

Krista: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, please press star one. Thank you.

All of this builds on the strategy that we outlined in August of 2021, a strategy that pivots us away from a heavy reliance on low margin usage based revenue to profitable and growing edge enabled solutions with a revenue profile that is both recurring and high margin.

Sydney Sinha: I will now turn your conference over to Sydney Sinha, Vice President of Investor Relations. You may begin your conference. Good afternoon.

We remain committed to aggressively improving profitability this year, while laying the foundation for growth next year. We believe that 2023 will prove to be an inflection point for the company and we are happy to have the distractions behind US Let me take a few minutes to unpack each of these important milestones in more detail.

Sydney Sinha: Thank you for joining the Edgigo second quarter, 2023 Financial Results Conference call. This call is being recorded today, September 12, 2023 and will be archived on our website for approximately 10 days. A copy of our form sent to you for the second quarter, along with today's earnings press release can be found in the Investor Relations section of our website. Please note that today's comments include forward-looking statements regarding future events and finals.

The first key takeaway, we have now stabilized revenue with clear support for revenue expansion in 2024.

We have made significant progress reducing previously discussed customer churn in our acquired applications business.

Sydney Sinha: Financial performance, including statements regarding guidance for the 2023 fiscal year. These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The factors include any impact from macroeconomic trends, the integration of any acquisitions and any impact from geopolitical developments. We see the forward-looking statement disclaimer on the company's earnings press release issued after the close of market today, as well as the sections entitled, this factors included in edgigo's filings with the SEC, including a annual report on form 10K and quarterly reports on form 10K.

And in the most recent quarter was approximately 1% as compared to 6% in the first quarter and 4% in the fourth quarter of last year. This is a significant improvement in two quarters and is now in line with industry norms.

Our renewal bookings continue to grow and are up double digits quarter to date versus the second quarter, we believe that our progress in reducing churn and improving renewals will support expansion revenue outpacing churn in the back half of this year for the first time since the close of the acquisition.

Our rebuilt marketing organization has implemented the first phase of our demand. Gen. Plans. This has resulted in meaningful growth in our qualified pipeline and an improvement to our first 60 day conversion rate by more than five times from 2% to more than 10% now in line with industry norms. This speaks to improvements in both rate of growth in the <unk>.

Quality of our pipeline going into 2024.

Sydney Sinha: Undue reliance should not be placed on forward-looking statements which speak only as the date they are made. Edgigo disclaims any obligation to update these statements to reflect new information, future events or circumstances, except as acquired by law. During the course of today's call, we will be referencing certain non-gap financial measures. The gap financial measures most directly comparable to each non-gap financial measure used or discussed, and a reconciliation of the differences between such measures are provided in the earnings relief in our installation section of our website. These non-gap financial measures are not intended to be a substitute for our gap financial results.

Todd Hinders joined <unk> as Chief revenue officer during the second quarter, Todd properly organized the commercial teams into a more productive territory model and implemented a number of sales enablement improvements sales productivity has improved by four times year over year.

Customer acquisition costs bookings ratio as quickly trending to a one to one ratio and more in line with SaaS industry norms as of the end of August bookings for application solutions and more than doubled from the first quarter and are already ahead of second quarter levels with a month ago.

This improvement has been broad based across new logos and renewals.

As uncertainty surrounding a restatement wanes, we expect continued improvements in the growth of qualified pipeline the conversion rates of that pipeline and subsequent bookings.

Bob Lyons: I will now turn the call over to Bob Lyons, President and CEO, Bob, the floor is yours. Thank you for me. Good afternoon and welcome to our earnings call for the second quarter of 2023.

In the quarter, we continued to expand our routes to market with the expansion of our relationship with AWS as a channel partner. We anticipate this partnership will prove to be a meaningful contributor to our channel enabled growth objectives.

Bob Lyons: This quarterly report and the associated PENQ filing addresses the outstanding compliance issues with applicable NASDAQ listing rules, with this filing, we can now put the restatement and compliance issues behind us. Throughout this entire process, we have continued to be laser focused on executing our strategy, and customer feedback continues to show that Edgio is the preferred partner for creating more valuable connected digital experiences. With each passing month, we are adding new customers and seeing existing ones reaffirming their trust in the value that Edgio brings to the organizations.

We will continue to explore opportunities to add additional high quality partners throughout the balance of this year and into next.

Key performance indicators for our commercial motion suggest we are in fact laying a strong foundation for growth.

Our qualified pipeline is growing faster and with improved quality, our sales productivity is improving and we continue to add new high quality routes to market. While there is plenty of additional work to do we expect in the second half of 2023 to demonstrate slightly positive net revenue retention and sequential growth with continued improvement into 2024.

Bob Lyons: We have recognized the work in front of us, but is equally motivated by the opportunity available to us. We have accumulated several industry awards in recent quarters from industry analyst and expert to poor innovative solutions. We have also seen a growing number of notable customer wins, many of whom switch to us from competitors.

The second key takeaway.

We continue to execute as planned on our profitability and positive free cash flow objectives.

We continue to execute on our plans to achieve between $85 million to $90 million of run rate cost reductions by year end, we remain committed to that number and have a solid roadmap beyond that number to continuously improve profitability well into 2024.

Bob Lyons: Let me share the operating highlights that we believe will enable us to continue building on and capitalizing from this momentum. First, the successful implementation of a client success team, the redesign of our commercial teams, and the improvement of our sales-enabling motions has, in fact, begun to demonstrate that we have turned the corner. Turn and our acquired applications business has been reduced to rates in line with industry norms, and we expect expansion revenue to exceed turn into the back half of the year for the first time since the acquisition.

We have largely completed implementation of our operating model synergies post acquisition, resulting in cash operating expenses declining by 24% in the first six months of this year.

We continue to focus on improving our unit economics with detailed plans that reduce our hosting bandwidth and peering cost.

Bob Lyons: Our qualified pipeline continues to grow, and more importantly, we are converting more of that pipeline to bookings at higher rates than we have historically. By the end of the third quarter, we will have had three sequential quarters of booking growth. With our commercial motions now positioned for success, we believe that momentum is building into the next year. Second, we continue to aggressively manage costs. We remain committed to our plans of reducing run rate operating costs by $85 to $90 million by year end. In the second quarter, we reduced our cash operating expense by 24% compared to the fourth quarter of 2022, and our interactive success be complete, our cost roadmap for this year.

While we have had success. This year, we are in the early stages of what will prove to be multiple quarters of notable improvements.

<unk> are open edge platform, we are becoming more asset light and have reduced capital intensity for more than 10% of sales in 2022 to under 3% in 2023 at the midpoint of guidance.

We will remain focused on becoming a more asset light company as we continue to expand our high margin edge software and security applications business.

We have executed and will continue to execute well against our cost savings initiatives progress should accelerate in the back half of the year to reach adjusted EBITDA breakeven in the fourth quarter with anticipated sequential revenue growth gross margin expansion and additional cost savings, we expect to deliver substantial year over year improvements in adjusted EBITDA and free cash flow in 'twenty.

Bob Lyons: Third, our product strategy continues to establish EGO as a leading edge-enabled solution provider in applications, security, and streaming. The number of awards received after releasing applications version seven validates our strategy of having best-in-class products powered by a globally-scaled edge network protected with native enterprise-class security and delivered with deep expertise. We have established EGO as a credible and recognized enterprise security solution for high-stake web properties. We continue to have the most complete suite of streaming capabilities in the industry.

24.

The third key takeaway, we continue to make meaningful progress transforming our company from a usage based CDN utility to an edge enabled a base technology solutions company.

Let me start by highlighting some of the exciting progress we have made with our applications and security and media solutions in the second quarter. We released our award winning applications version seven suite. This release as a fully integrated workflow orchestration technology stack that enables companies with Hiseq web properties to deliver unmatched business outcomes with sub second speed.

Bob Lyons: All of this builds on the strategy that we outlined in August of 2021, a strategy that pivoted us away from a heavy reliance on low margin usage-based revenue to profitable and growing edge-enabled solutions with a revenue profile that is both recurring and high margin. We remain committed to aggressively improving profitability this year while laying the foundation for growth next year.

Lower operating costs and meaningfully better security.

Are seamlessly integrated next generation architecture powered by a globally scaled edge platform and protected by our native enterprise class security capabilities removes the latency cost and complexity associated with traditional point solution as Youre now enables unmatched monetization operating cost and security for our customers.

Bob Lyons: We believe that 2020-3 will prove to be an inflection point for the company, and we are happy to have the distractions behind us. Let me take a few minutes to unpack each of these important milestones in more detail. The first key takeaway, we have now stabilized revenue with clear support for revenue expansion in 2024. We have made significant progress, reducing previously discussed customer churn in our acquired applications business. Churn in the most recent quarter was approximately 1% as compared to 6% in the first quarter and 4% in the fourth quarter of last year.

In 2021, we unabashedly stated that we would have a much more compelling cyber security story to tell we continue to build on that promise I can now say that AGL is recognized as a compelling security company for enterprises in Q1, we locked our advanced Bot management solution, which was well received and resulted in double digit attach rates per trial.

Across our existing customer base.

More importantly in Q2, we validated that trials could successfully be converted into contracted in paying customers. We recently released our API security solution, which leverages machine learning to inspect both application traffic patterns and content to ensure API endpoints are discovered managed and secured.

Bob Lyons: This is a significant improvement in two quarters and is now in line with industry norms. Charles. Our renewal bookings continue to grow and are of double digits quarter to date versus the second quarter. We believe that our progress in reducing churn and proving renewals will support expansion revenue outpacing churn in the back half of this year for the first time since the close of the acquisition. Our rebuilt marketing organization has implemented the first phase of our demand gen plans.

Having exceptional security operations is increasingly critical as <unk> becomes a more sensitive partner to protect our customers critical applications. We have recently expanded our security operations Center with new leadership and services that we bundle with our security products best in class products enabled with expert services ensure AGL can deliver unmatched protection to our customer.

Bob Lyons: This has resulted in meaningful growth in our qualified pipeline and an improvement to our first 60-day conversion rate by more than 5 times from 2 percent to more than 10 percent, now in line with industry norms. This speaks to improvements in both rate of growth and the quality of our pipeline going into 2024.

Yeah.

Independent research firms continue to recognize NGO with awards in strong published rankings, we were recognized by gig as leader in its recent edge platform radar report.

Bob Lyons: Todd Hinder has joined Edgio as chief revenue officer during the second quarter. Todd properly organized the commercial teams into a more productive territory model and implemented a number of sales and enablement improvements. Sales productivity has improved by four times year over year. Our customer acquisition cost to bookings ratio is quickly trending to a one-to-one ratio and more in line with SaaS industry norms. As of the end of August, bookings for application solutions have more than doubled from the first quarter and are already had a second quarter levels with a month ago.

Frost <unk> Sullivan award at AGL, The best practices competitive strategy leadership Award and Edgier won a covenant Global Info Security Award at the RSA Conference early in the quarter.

Our applications version seven suite directly enabled a competitive takeout from a large north American pet supply retailer, who chose azure over the incumbent competitor.

<unk> advanced architecture was able to achieve performance levels within a very short time, they were not attainable under existing architecture.

Bob Lyons: This improvement has been broad-based across new levels and renewals. As uncertainty surrounding our statement wings, we expect continued improvements in the growth of qualified pipeline, the conversion rates of that pipeline and subsequent bookings. In the quarter, we continued to expand our roster market with the expansion of our relationship with AWS as a channel partner. We anticipate this partnership will prove to be a meaningful contributor to our channel-enabled growth objectives. We will continue to explore opportunities to add additional high quality partners throughout the balance of this year and end of next.

Other notable wins include a 15000 employee safety and security solutions in Europe , a leading Asian web two <unk> company and a global consumer product brand applications version seven also resulted in the expansion of our solution within the world's largest AI semiconductor company.

Our advanced security features drove a key renewal with an Asian Airlines and upsell with a regional bank and a new contract with a large hardware company building on this success, we will soon be releasing a more advanced version of our edge functions, which empowers developers to better personalized content improved performance and have more control over the user experience at the edge.

Bob Lyons: Keep performance indicators for our commercial motion suggests we are, in fact, laying a strong foundation for growth. Our qualified pipeline is growing faster and with improved quality. Our sales productivity is improving and we continue to add new high quality routes to market.

Our media solutions continue to offer the most complete suite of <unk> capabilities in the industry today, the product is difficult to consumed by other than the largest media companies. So we're addressing that in the coming weeks, we will be making improvements that will simplify the buying experience, making the product more accessible to the top 2000 media streaming companies.

Bob Lyons: While there is plenty of additional work to do, we expect the second half of 2023 to demonstrate slightly positive net revenue retention and sequential growth with continued improvements in the 2024. The second key takeaway, we continue to execute as planned on our profitability and positive free cash flow objectives. We continue to execute on our plans to achieve between 85 and 90 million dollars of run rate cost reductions by year end. We remain committed to that number and have a solid roadmap beyond that number to continuously improve profitability well in the 2024.

This will include a more modular design so companies can acquire what they need a robust set of Apis for easy integration and expanding ecosystem of Prebuilt third party integrations and a more simplified pricing model in fact yesterday, we announced an alliance with other leading streaming vendors to help companies manage the complexity of the entire screening workflow as part of this <unk>.

Ship NGL will act as the primary solutions provider streamlining the entire workflow for customers. We are excited to be able to offer out of the box complete enterprise class <unk> capabilities to a broader market.

Bob Lyons: We have largely completed implementation of our operating model synergies post-acquisition resulting in cash operating expenses declining by 24 percent in the first six months of this year. We continue to focus on improving our unit economics with detailed plans that reduce our hosting bandwidth and pairing costs. While we have had success this year, we are in the early stages of what will prove to be multiple quarters of notable improvements. Leveraging our open edge platform, we are becoming more asset light and have reduced capital intensity for more than 10 percent of sales in 2022 to under 3 percent in 2023 at the midpoint of guidance.

We expect our delivery business to remain flattish for the foreseeable future. We have seen further industry consolidation a slowdown in subscription rates and lower post COVID-19 volume growth, but are also seeing pricing trends begin to stabilize we are managing this business to prioritize profitability and return on invested capital.

Our commitment to reduce our asset and capital intensity by leveraging our open edge product coupled with a roadmap to improve unit economics will support improved profitability for our delivery business in 2024.

Bob Lyons: We will remain focused on becoming a more asset light company as we continue to expand our high margin edge software and security applications business. We have executed and will continue to execute well against our cost savings initiatives.

In summary, with the restatement and associated reporting requirements behind us our full attention is on executing the transition plan. Initially articulated in 2021, we continue to make notable progress on that plan and believe we have quickly building blocks in place for multiple years of profitable growth are leading indicators suggest we are on the right track and have established a foundation for profit.

Bob Lyons: Progress should accelerate in the back half of the year to reach adjusted EBITDA break even in the fourth quarter. With anticipated sequential revenue growth, gross margin expansion and additional cost savings, we expect to deliver substantial year-over-year improvements in adjusted EBITDA and pre-cash flow in 2024.

Building improvement and growth in 2024.

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

Bob Lyons: The third tea takeaway, we continue to make meaningful progress transforming our company from a usage-based CDM utility to an Ed-enabled ARR-based technology solutions company. Let me start by highlighting some of the exciting progress we have made with our applications of security and media solutions. In the second quarter, we released our award-winning Applications Virgin Steppen suite. This releases a fully integrated workflow and orchestration technology stack that enables those companies with high-stake web properties to deliver unmatched business outcomes with sub-second speeds, lower operating costs, and meaningfully better security.

Thank you Bob.

For the second quarter 2023 with stronger than expected at $95 8 million.

Up 56% from the second quarter of 2022 due to the inclusion of the <unk> acquisition completed on June 15th 2022.

We saw a sequential decline of six 1% driven by normal summer seasonality and previously communicated churn primarily associated with the edge cloud business.

We expect second quarter revenue to be the low point for the year as revitalized sales and commercial motions on reducing churn and driving new product adoption and increasing conversion of our growing qualified pipeline.

Bob Lyons: Our seamlessly integrated next-generation architecture powered by our globally-scaled Edge platform and protected by our native enterprise class security capabilities removes the latency, cost, and complexity associated with traditional point solutions. Edgio now enables unmatched monetization, operating costs, and security for our customers. In 2021, we unabashedly stated that we would have a much more compelling cybersecurity story to tell. We continue to build on that promise and can now say that Edgio is recognized as a compelling security company for enterprises.

Moving to gross margin cash gross margin, which excludes the impact from stock based compensation acquisition related expenses and depreciation was 38% down 390 basis points sequentially cash.

Cash gross margin was impacted by the seasonal decline in traffic consistent with having a high fixed cost structure, partially offset by savings from previously announced cost containment efforts.

Bob Lyons: In Q1, we locked our advanced bot management solution, which was well received and resulted in double-digit attached rates for trials across our existing customer base. More importantly, in Q2, we validated that trials could successfully be converted into contracted and paying customers. We recently released our API security solution, which leverages machine learning to inspect both application traffic patterns and content to ensure API endpoints are discovered, managed, and secured. Having exceptional security operations is increasingly critical as Edgio becomes a more essential partner to protect our customers' critical applications.

Turning to operating expenses cash operating expenses, excluding share based compensation restructuring charges acquisition and legal related charges depreciation and amortization were $42 9 million or 44, 8% of revenue down from $49 $7 million.

48, 8% in the first quarter of 2023.

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

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

Bob Lyons: We have recently expanded our security operations center with new leadership and services that we bundle with our security product. Best-in-class products enabled with expert services ensure Edgio can deliver unmatched protection to our customers. Independent research firms continue to recognize Edgio with awards in strong public rankings. We were recognized by Giga as leader in its recent edge platform radar report. Frost and Sullivan awarded Edgio the best practices competitive strategy leadership award, and Edgio won a coveted global import security award at the RSA conference early in the quarter.

Cash R&D expenses decreased by one 4 million sequentially to $16 7 million.

Proximately 17, 4% of revenue from $18 1 million or 17, 8% of revenue due to the savings from previously announced cost containment efforts.

Cash sales and marketing expenses decreased $3 2 million sequentially to $15 7 million or 16, 4% of revenue from $19 million or 18, 6% of revenue due to the savings from previously announced cost containment efforts reduction in variable compensation and discretionary.

Bob Lyons: Our application's version 7 suite directly enabled a competitive takeout from a large North American pet supply retailer who chose Edgio over the incumbent competitor. Edgio's advanced architecture was able to achieve performance levels within a very short time that were not attainable on their existing architecture. Other notable wins include a 15,000 employee safety and security solutions in Europe, a leading Asian webtoon company, and a global consumer product brand. Applications version 7 also resulted in the expansion of our solution within the world's largest AI semiconductor company.

We spend.

Cash G&A expense decreased by $2 2 million sequentially to $10 5 million or 10, 9% of revenue from $12 7 million or 12, 4% of revenues due to savings from previously announced cost containment efforts as well as the conclusion of the transition services.

Bob Lyons: Our advanced bot security features drove a key renewal with an Asian airline and upsell with a regional bank and a new contract with a large hardware company. Building on the success, we will soon be releasing a more advanced version of our edge functions which empowers developers to better personalize content, improve performance, and have more control over the user experience at the edge. Our media solutions continue to offer the most complete suite of streaming capabilities in the industry.

Some of the <unk> acquisition and reduction in other discretionary expenses.

Share based compensation included in operating expenses was $3 million below the first quarter at $4 5 million restructured.

Restructuring charges were $3 3 million compared to a half a million dollars for the <unk>.

Bob Lyons: Today, the product is difficult to consume by other than the largest media companies, so we are addressing that. In the coming weeks, we will be making improvements that will simplify the buying experience, making the product more accessible to the top 2,000 media streaming companies, and I. This will include a more modular design so companies can acquire what they need, a robust set of APIs for easy integration, an expanded ecosystem of pre-built third-party integrations, and a more simplified pricing model.

Fourth quarter of 2023 acquisition and related charges included in Cogs and operating expenses in connection with the edge cloud transaction were approximately $1 million compared to $1 2 million for the first quarter.

Adjusted EBITDA for the second quarter of 2023 was a loss of $13 4 million compared to a loss of $14 4 million in the first quarter of 2023 due to continuous execution and cost saving initiatives.

Bob Lyons: In fact, yesterday we announced an alliance with other leading streaming vendors to help companies manage the complexity of the entire streaming workflow. As part of this partnership, Edgio will act as the primary solutions provider streamlining the entire workflow for customers. We are excited to be able to offer out of the box complete enterprise-class streaming capabilities to a broader market.

Which have resulted in across the board sequential declines in all operating expense line items.

Moving to the balance sheet and cash flow cash and cash equivalents and marketable securities totaled $36 2 million.

A decrease of $12 million from the first quarter of 2023.

Bob Lyons: We expect our delivery business to remain flatish for the foreseeable future. We have seen further industry consolidation, a slowdown in subscription rate, and lower post-COVID volume growth, but have also seen pricing trends begin to stabilize. We are imagining this business to prioritize profitability and return on investment capital. Our commitment to reduce our asset and capital intensity by leveraging our open edge product, coupled with a roadmap to improve unit economics, will support and prove profitability for our delivery business in 2024.

We've been very disciplined about our cash management and expect to maintain a similar level of cash balance in the second half of the year.

First half 2023 capital expenditure net of payments from Isps was $2 6 million.

Or one 3% of revenues.

Over the last nine months, we have initiated tightened capex spending controls, which have resulted in capex significantly below historical levels.

Bob Lyons: In summary, with the restatement and associated reporting requirements behind us, our full attention is on executing the transition plan initially articulated in 2021. We continue to make notable progress on that plan, and believe we have quick-of-the-building blocks in place for multiple years of profitable growth. Our leading indicators suggest we are on the right track and have a status-based foundation for profitability improvement and growth in 2024.

DSO for the second quarter was 60 days 13 days lower than the first quarter as we continue to accelerate our efforts integrating edge customers.

And streamlining the collections process.

Now moving to guidance.

Long product execution and improved go to market motions have helped overcome the continued softness in the macro environment.

Steven Cumming: Now, I will turn the call over to Steven to discuss second-quarter results. Thank you, Bob. Revenue for the second quarter 2023 was stronger than expected at $95.8 million, up 50.6% from the second quarter of 2022.

Our broad product portfolio and the value proposition of our solutions are resonating with customers and we are seeing improvements in our leading indicators.

We remain focused on executing on cost savings opportunities.

We're on track to deliver the $85 million to $90 million of run rate savings by year end.

Steven Cumming: Due to the inclusion of the Edgecast acquisition completed on June 15, 2022. We saw a sequential decline of 6.1% driven by normal summer seasonality and previously communicated churn, primarily associated with the Edgecast business. We expect second quarter revenue to be the low points of the year as revitalized sales and commercial motions are reducing churn, driving new product adoption and increasing conversion of our growing qualified pipeline. Moving to growth margin, cash growth margin, which excludes the impact from stock-based compensation, acquisition related expenses and depreciation was 30.8% down 390 basis points sequentially.

But now we are reaffirming our guidance for the year with revenue range of between $392 million to $398 million.

Which implies a growth of 16% to 18%.

Adjusted EBITDA range of between negative $37 million to negative $31 million.

And capital expenditure in the range of 10 million to $13 million.

This implies business capex as a percent of revenue of about 3% to three 5%.

We expect payments from Isps of between $5 million to $10 million.

Okay.

Now, let me provide you more context around our guidance.

Based on seasonality reduction in churn and improvements in bookings, we expect a flat to slight uptick in revenue sequentially in the third quarter of 2023, followed by a sequential increase in the fourth quarter.

Steven Cumming: Cash growth margin was impacted by the seasonal decline in traffic consistent with having a high fixed cost structure partially offset by savings from previously announced cost containment efforts. Turning to operating expenses, cash operating expenses excluding share-based compensation, restructuring charges, acquisition and legal related charges, depreciation and amortization were $42.9 million or $44.8% of revenue down from $49.7 million or $48.8% in the first quarter of 2023. We continue to make significant progress in our cost reduction initiative.

Our pro forma second half revenue implies a meaningful improvement year over year revenue trajectory versus the first half.

We expect cash gross margins to start improving sequentially consistent with the revenue trajectory with additional benefits from cost savings and synergies.

The first quarter was the bottom for adjusted EBITDA, and we expect to breakeven in the fourth quarter.

To put it into perspective midpoint of our guidance implies adjusted EBITDA loss in the second half to be about 6 million.

Steven Cumming: We are executing well on our planned acquisition synergies and operational efficiency programs while investing in new product introduction and revitalized sales and marketing William. Cash R&D expenses decreased by $1.4 million sequentially to $16.7 million approximately 17.4% of revenue from $18.1 million or $17.8% of revenue due to the savings from previously announced cost containment effort. Cash sales and marketing expenses decreased by $2.2 million sequentially to $15.7 million or $16.4% of revenue from $19 million or $18.6% of revenue due to the savings from previously announced cost containment effort, reduction in variable compensation and discretionary spend.

Listen as a loss of approximately $28 million in the first half of the year.

Our cash balance at the end of the second quarter was $36 $2 million.

We expect our cash levels to be similar in the second half of 2023 and remain Undrawn on our line of credit.

In summary, I want to reiterate our key financial priorities. Our focus is on revenue stabilization in 2023 and return to revenue growth in 2024, driven by a reduced churn when you go to market initiatives, new product solutions and by leveraging our reconfigured Chan.

<unk> and direct sales team.

We made great progress in right sizing our cost structure to align with revenue growth assumptions, we expect our cost savings initiatives to continue through the rest of this year and into next year, focusing on improving unit economics through managing client profitability and driving efficiency in our network.

Steven Cumming: Cash GNA expense decreased by $2.2 million sequentially to $10.5 million or $10.9% of revenue from $12.7 million or $12.4% of revenues due to savings from previously announced cost containment effort, as well as the conclusion of the transition services agreement for the edge-carp acquisition and reduction in other discretionary expenses. Share-based compensation included in operating expenses was $3 million below the first quarter at $4.5 million. Restructuring charges were $3.3 million compared to a half a million dollars for the first quarter of 2023.

Operating model.

So this year, we remain focused on capacity optimization tools rationalization, capex and organizational productivity initiatives.

We continue to explore additional cost saving opportunities as we drive more operational efficiency and optimization of our network, which would be incremental to the $85 million to $90 million run rate savings we have highlighted.

The combination of expected revenue growth and cost saving initiatives should result in 2020 for being a year of profitable growth.

Steven Cumming: Acquisition and related charges included in cogs and operating expenses in connection with the edge-carp transaction were approximately $1 million compared to $1.2 million for the first quarter. Adjusted EBITDA for the second quarter of 2023 was a loss of $13.4 million compared to a loss of $14.4 million in the first quarter of 2023, due to continuous execution and cost saving initiatives, which have resulted in across-the-board sequential declines in all operating expense line items.

With that I'll turn the call back to Bob for some closing remarks.

<unk>.

Thank you Steven we are well on our way to transforming <unk> from a first generation CDN platform that historically served commodity like utility services into a third generation edge solutions platform that helps customers manage high Stakes digital properties at the edge with better monetization.

Steven Cumming: Moving to the balance sheet and cash flow, cash and cash equivalence and marketable securities totaled $36.2 million a decrease of $12 million from the first quarter of 2023. We've been very disciplined about our cash management and expect to maintain a similar level of cash balance in the second half of the year. First half 2023 capital expenditure net of payments from ISPs was $2.6 million or 1.3% of revenues. Over the last nine months, we have initiated tighter capital expenditure net controls which have resulted in capex significantly below historical levels.

<unk> and security.

We continue to develop holistic solutions and software capable of serving mission critical workloads for many of the largest blue chip companies in the world. Some of the largest social networks fintech streaming companies and even the largest AI semiconductor company and trust NGO for solutions that drive business outcomes unmatched elsewhere.

Having extended the reach of our solutions enables us to expand revenue.

In a rush to market, all while aggressively managing our cost structure and improving profitability as we continue with our transformation process. We are increasingly better positioned to leverage what we have created and are focused on profitable revenue growth in 2024 and beyond.

Steven and I look forward to being actively engaged with our investor community again, we will be participating at the Lake Street Conference in New York City. This week and we'll be meeting with investors in other cities throughout the rest of the year. We have also posted video content delivered from our leadership team that helps further unpack, where we started where we are and where we're going you can find it.

Steven Cumming: DSO for the second quarter was 60 days, 13 days lower than the first quarter as we continue to accelerate our efforts integrating edge-carp customers and streamlining the collections process. Moving to guidance, strong product execution and improved go-to market motions have helped overcome the continued softness in the macro environment. Our broad product portfolio and the value proposition of our solutions are resonating with customers and we are seeing improvements in our leading indicators.

It on the homepage of our website at EDG Dot Io in the about section. Please take a few minutes to review and gain a deeper understanding of our strategy progress and plans.

We will continue to add content to our website for you throughout the balance of this year. Thank you for your patience, while we continue to work on building what we believe is uniquely possible for us.

Steven Cumming: We remain focused on executing on cost saving opportunities and are on track to deliver the $85 to $90 million of run rate savings by year S, and Robert Lyons. For now, we are reaffirming our guidance for the year with revenue range of between $392 to $398 million, which implies a growth of 16 to 18%. Adjusted EBITDA range of between negative $37 million to negative $31 million, and capital expenditure in the range of $10 million to $13 million. This implies business capex as a percent of revenue of about 3 to 3.5%. We expect payments from ISPs of between $5 to $10 million.

With that operator, please open up the lines for the question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad will pause for a moment to compile the Q&A roster.

Your first question comes from the line of Eric Eric Martin Newsy from Lake Street. Please go ahead.

Yes first off congratulations on getting the SEC filings up to date I know that was a project that.

It took a lot longer than expected, but it's good to have it in the rearview mirror.

With that I wanted to focus.

The churn color that you gave you talked about customer churn of 1% in Q2 versus 4% in Q4, but then you also talked about logo churn of down 40% in the same chair and I Wonder could you just.

Steven Cumming: Now, let me provide you more context around our guidance. Based on seasonality, reduction in churn and improvements in booking, we expect a flat-to-slite uptick in revenue sequentially in the third quarter of 2023, followed by a sequential increase in the fourth quarter. Our pro-former second half revenue implies a meaningful improvement year-over-year revenue trajectory versus the first part. We expect cash growth margins to start improving sequentially consistent with the revenue trajectory with additional benefits from cost savings and synergies.

Just take me a layer deeper there what does the 40% when you say in the same period is it Q2 versus Q4.

Okay.

Alright, listen Steven I'll take that one Bob.

Add any additional color now that.

Q2 versus Q4.

On the two metrics that we're showing there is absolute customer logo churn and number of customers that you can see in our reported results in our earnings release, we have that metric out there and then the 40% was actually looking at the dollar values around that is substantially reduced by 40% and I think I gave that data point when we gave our Q4 update as well so we certainly.

Steven Cumming: The first quarter was the bottom for adjusted EBITDA, and we expect to break even in the fourth quarter. To put it into perspective, midpoint of our guidance implies adjusted EBITDA loss in the second half to be about $6 million versus a loss of approximately $28 million in the third half of the year. Our cash balance at the end of the second quarter was $36.2 million. We expect our cash levels to be similar in the second half of 2023 and remain undrawn on our line of credit.

Got our arms around this substantially and we're pleased with.

The results as you know this has been a major focus for us as a company.

We put dedicated resources around the along with the senior leadership team and really targeting specifically a lot of the hedge cost customers.

We're churning substantially when we acquired that asset.

Steven Cumming: In summary, I want to reiterate our key financial priorities. Our focus is on revenue stabilization in 2023 and return to revenue growth in 2024, driven by our reduced churn for new go-to-market initiatives, new product solutions, and by leveraging our reconfigured channel and direct sales teams. We've made great progress in right-sizing our cost structure to align with revenue growth assumptions. We expect our cost-saving initiatives to continue through the rest of this year and into next year, focusing on improving unit economics through managing client profitability and driving efficiency in our network and operating models.

I think also just add that we've seen the introduction of our expanded solutions with Avi seven product offerings that are on a simpler pricing plan. That's also.

<unk>, helping that Nextgen environment.

So have we know the customer base doesn't all renew in a given quarter or we are our major exposures have we addressed our major exposures and either turn them off or renew them.

Yes, so Eric this is Bob how are you doing.

So you might recall that we the two primary root causes of churn.

One.

Client engagement or lack thereof, and the second was feature gaps that we had were.

Competitors had certain features we had some towering strengths in some areas, but we're missing some basics.

Steven Cumming: For this year, we remain focused on capacity optimization, tools or optimization, capex, and organizational productivity initiatives. We continue to explore additional cost-saving opportunities as we drive more operational efficiency and optimization of our network, which would be incremental to the 85 to $90 million run rate savings we have highlighted. The combination of expected revenue growth and cost-saving initiatives should result in 2024 being a year of profitable growth.

Lease that we did with application version seven close those 'twenty three feature gaps that we had.

And then of course, we implemented the client success team late Q4 early Q1.

Starting to see the results of that the net result is.

Churn is down as importantly, renewals are going up and in a direction, where we want them to and even more importantly at renewal, we're seeing more typically an expansion of use versus just called.

<unk> renewal. So that's why we believe in the second half of the year Youll start to see for the first time since the acquisition were renewals and expansion revenue outpace churn, which is what you want SaaS company obviously.

Bob Lyons: With that, I'll turn the call back to Bob for some closing remarks. Bob, thank you, Steven. We are well on our way to transforming EGEO, my first generation CDN platform that historically served commodity-like utility services into a third-generation ed solutions platform that helps customers manage high-stakes digital properties at the edge with better monetization, efficiency, We continue to develop holistic solutions and software capable of serving mission-critical workloads for many of the largest blue chip companies in the world, some of the largest social networks, Fintech, streaming companies, and even the largest AI semiconductor company and trust EGEO for solutions that drive business outcomes unmatched elsewhere.

Yes.

Okay, and then the <unk>.

Health of your two largest customers.

Amazon and Verizon could you comment on those relationships.

Yes, very strong positive on all fronts with Verizon.

Because of application version seven we were able to renew that portion of the agreement recently.

They couldnt be happier about about the capabilities and features that we have and again expansion conversations there as well they're also a big reseller partner of ours, So very strong relationship there and Amazon.

As always has been a great partner and consistent partner with us and we're actually growing with them.

Bob Lyons: Having extended the reach of our solutions enables us to expand revenue and our roads to market, all while aggressively managing our cost structure and improving profitability. As we continue with our transformation process, we are increasingly better positioned to leverage what we have created and are focused on profitable revenue growth in 2024 and beyond.

And which we're excited about so.

And I would add a third.

Disney is up in that mix as well, we have a very strong relationship there and feeling pretty happy about that relationship as well.

Okay and then last question for me the cash gross margins you've talked about.

Bob Lyons: Stephen and I look forward to being actively engaged with our investor community again. We will be participating at the Lake Street Conference in New York City this week and will be meeting with investors in other cities throughout the rest of the year. We have also posted video content delivered from our leadership team that helps further unpack where we started, where we are, and where we are going. You can find it on the homepage of our website at edg.io in the About section.

Being I guess sequentially higher than Q3 can we get a little bit more granularity around that obviously the 38%.

That was below where I was forecasting for Q2.

I have a pretty substantial step up in Q3, but can you put some.

Maybe a range around the what's your expectation here for Q3 or for 2023.

Bob Lyons: Please take a few minutes to review and gain a deeper understanding of our strategy, progress, and plans. We will continue to add content to our website for you throughout the balance of this year. Thank you for your patience while we continue to work on building what we believe is uniquely possible for us.

Yeah, Eric this is Steve and ill.

We're a little bit more so so as a company I mentioned in the prepared remarks, we have a high fixed cost structure.

From the operations of our network that has pressured our gross margins that certainly came out in the first half of this year and in Q2, even more so being a seasonally weaker quarter.

Krista: With that operator, please open up the lines for the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. We'll pause for a moment to compile the Q&A roster.

As I said, you should expect our cost gross margins to sequentially improve.

Eric Martinuzzi: Your first question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead. First off, congratulations on getting the SEC filings up the date. I know that was a project that took a lot longer than expected, but it's good to have it in the rear view mirror. With that, I wanted to focus on the churn color that you gave. You talked about the customer churn of 1% in Q2 versus 4% in Q4.

Sort of like in it to somewhere in the realms of the.

300, plus type basis points as we go into into the third quarter.

Obviously, we've got a lot of.

Cost saving initiatives and synergies.

We are working towards on that $85 million to $90 million of cost Takeouts and a lot of those offline, but it takes time to work through some of those from a run rate perspective, youll see a lot more of that materialize towards the end of the year and in tears up very nicely.

2024.

Eric Martinuzzi: Then you also talked about logo churn of down 40% in the same period. Could you just take me a layer deeper there? What is that 40% when you say in the same period? Is it Q2 versus Q4? Eric, listen Steven here. I'll take that one and I'll both add any additional color. That's Q2 versus Q4. The two metrics that we're showing there is absolute customer logo churn. A number of customers that turn and you can see in our reported results on our own release, we have that metric out there.

I understand thanks for taking my questions and good luck.

Thank you Ron.

Your next question comes from the line of Frank <unk> from Raymond James. Please go ahead.

Great. Thank you Hey, guys. This is rob on for Frank.

<unk> pricing and the delivery segment holding up.

And you were just characterizing the churn before Adam.

Curiosity have you guys seen any churn from existing customers related to the share price. Thank you.

Yes, no problem, Hey, Rob I know, it's Bob So I'll start with the churn we actually the churn that we've always talked about was in the applications business acquired as part of the acquisition, we have not seen churn and.

Eric Martinuzzi: Then the 40% was actually looking at the dollar values around that is substantially reduced by 40%. I think I gave that data point when we gave our Q4 update as well. We've certainly got our arms around this substantially. We're pleased with the results. As you know, this has been a major focus for us as a company. We put dedicated resources around there along with the senior leadership team and really targeting specifically.

Kind of our legacy business in fact, our net one of the metrics. We use is net revenue retention, which is year over year.

Traffic that we get from our top 20 clients and that's up year over year. So we're actually seeing pretty positive. There. Obviously, that's one factor the other factor that drives revenue there is pricing compression, which historically has been.

<unk>.

We're actually seeing that settled down for a couple of reasons I think one youre not seeing.

Eric Martinuzzi: A lot of the edge cast customers that were churning substantially when we acquired that asset. I think also just to add that we've seen an introduction of our expanded solutions with our V7 product offerings that are. And a simpler pricing plan that's also substantially helping that that churn environment. So, have we, you know, I know the customer base doesn't all renew in a given quarter. Are we, are our major exposures? Have we addressed our major exposures and either turn them off or renew them?

The market grow as fast as it had in the past I think most industry <unk>, putting that in low single digits, maybe three 5% overall growth.

And when you have that.

Media companies have less leverage they have less subscribers and then also we've seen further consolidation in the industry. Some of the news it's out recently, where you see yet other players following out of the market. So I think with all those things being true and the fact that we maintain our high performance and our quality support that part of the business.

Run pretty stably, we're not going to grow it partly because.

Eric Martinuzzi: Yeah, so Eric, this is Bob. How you doing? So, you might recall that we, the two primary root causes of churn were one client engagement or lack thereof. And the second was feature gaps that we had where, you know, competitors had certain features. We had some towering strength in some areas, but we were missing some basics. The release that we did with application versus seven closed those 23 feature gaps that we had.

The way to grow it is to try to take market share from somebody else, which means you've got to come in lower the pricing. So instead, what we're focused on right now is how do we take what we have in and earn more based on performance and really focus on return on invested capital for that business, which we think is a better and more prudent move for our shareholders.

Great. That's helpful. Thanks, guys.

Eric Martinuzzi: And then, of course, we implemented the client success team, late Q4, early Q1, and you're starting to see the results of that. The result is the churn is down as importantly renewals are going up in the direction where we want them to. And even more importantly, at Renewal, we're seeing more typically an expansion of use, you know, versus just a cold renewal. So, that's why we believe in the second half of the year, you'll start to see for the first time since the acquisition where renewals and expansion revenue outpace churn, which is what you want in this fast company, obviously.

Thank you.

Your next question comes from the line of Jeff Van <unk> from Craig Hallum. Please go ahead.

Great Yeah. Thanks for taking the questions congrats on getting the getting the feel of the restate and all the heavy lifting for sure a couple of questions from me, Bob maybe just be worth taking a second given this is kind of the reemergence of NGO coming out from from all the noise.

If you look back to like mid 'twenty, two when you're bringing <unk> on I think the original expectations were around $270 million for that business.

Eric Martinuzzi: Yeah. Okay. And then the, the health of your two largest customers, Amazon and Verizon, could you comment on those relationships? Yeah, very strong positive on all fronts. With Verizon, we, you know, because of application versus seven, we were able to renew that portion of their agreement recently, and, you know, they couldn't be happier about the capabilities and features that we have. And again, expansion conversations there as well. There are also a big reseller partner of ours.

And since then there's been a lot of noise I think obviously the ISP relationships you have to take some of that revenue out at a lot of churn there I guess unclear maybe what happened in the base business, just what you spend a minute and talk about what happened in each of those three components from there to here to give us a sense of where the.

Now that you've got a little more clarity on the numbers, where the bulk of the disappointments.

Revenue Miss came.

Sure Yes.

Eric Martinuzzi: So, very strong relationship there. And Amazon, as always, has been a great partner and a consistent partner with us. And we're actually growing with them, which we're excited about. So, and I'd add a third, you know, Disney is up in that mix as well. We have a very strong relationship there and feel pretty happy about that relationship as well. Okay. And then last question for me, the cash growth margins you talked about, them being, I guess, sequentially higher in Q3.

And Steven feel free to jump in but I will frame. It this way, Jeff and thanks for that comment on early on so the way to think about it is when we.

Looked at the revenue of the business there were a couple of factors number one.

We had some pricing compression with large customers, who I wouldn't even call it pricing compression I call reset where they were much higher than market and so when we come in and put them on our paper and renegotiate that opened up the door to.

Reduced prices. So we had one very large social media customer who.

Eric Martinuzzi: Can we get a little bit more granularity around that? Obviously, the 30.8%. It was below where I was forecasting for Q2. I have a pretty substantial step up in Q3. But can you put some, maybe a range around what your expectation is for Q3 or for 2023? Yeah, Eric, this is Steven. I'll elaborate a little bit more. So, as a company, you know, I mentioned that the bad marks, we have a high fixed cost structure from the operations on that work that has pressured our growth margins.

Wanted to have.

Better price was unreasonable ask but so we had to take out here could do that but we were able to renew them for multiple years are actually back to growth with that customer today, but it was kind of a onetime reset. So we had that on a couple of customers that were larger customers all of those turned out to be.

Growing customers on the other side. So it was a onetime reset we had some revenue that we thought was less quality revenue than what we wanted and so we took that out of the equation as well as you normally do when you do an acquisition and then of course, we have insurance. So that's really probably the three drivers.

When you look at all three of those the resets are done where pass those we've gotten through those renewals and theyre now growth customers with multi year relationships.

Eric Martinuzzi: That certainly came out in the first half of this year and Q2, even also being a seasonally weaker quarter. As I said, you should expect our cash growth margins to sequentially improve. I would sort of liken it to somewhere in the realms of 300 plus tight basis points as we go into the third quarter. Obviously, we've got a lot of cost-gaving initiatives and synergies that we're working towards on that 85 to 90 million dollars of cost takeouts and a lot of those going to the cost line.

The revenue that we wanted to get out because it wasn't good quality revenue has been taken out and then of course, the churn was something that we set up in last year and we said look we're going to do two things, it's going to take US a couple of quarters, we're going to build our client success team and we're going to make sure that we shore up the product and bring those two things together to reinsure.

<unk> churn into what would be normal rates and assess industry and that's exactly what we've done is taken us about $2 five three quarters.

But we are at run rates now that you would expect to have in a well run SaaS company. So.

Eric Martinuzzi: But it takes time to work through some of those. So, from a run rate perspective, you'll see a lot more of that materialized towards the end of the year and TSM, very nicely for 2024. I understand. Thanks for taking my questions and good luck. Thank you.

That's the way I'd frame frame it overall.

This point forward, we don't have those headwinds, we don't see any resets churn, we've gotten our arms around it and.

I think it's fair to say that we're turning the corner.

On the top line and the revenue stability.

Frank Louthan: Your next question comes from the line of Frank Lutheran from Raymond James. Please go ahead. Great. Thank you. Hey guys, this is Rob on for Frank. How's pricing in the delivery segment holding up and you were just characterizing the churn before out of curiosity? Have you guys seen any churn from existing customers related to the share price? Thank you. Yeah, no problem. Hey, Rob. How you doing? It's Bob.

You referenced Jason.

Just one comment to add to that.

It is important to note certainly we went through a fairly substantial restatement.

Unfortunately, it does take some wind out of our sales certainly there is a.

As a handling fee from our customer base.

Sort of elongated the sales cycle and sort of natural fear uncertainty and doubt when when your when youre.

In compliance so I think that sort of tie that a little bit more headwind for us as we can into the first half of this year, obviously thats behind US now and you can see from our results.

Bob Lyons: So I'll start with the churn. We actually the churn that we've always talked about was in the applications business acquired as part of the acquisition. We have not seen churn and you know, kind of a legacy business. In fact, you know, one of the metrics we use is net traffic retention, which is your year traffic that we get from our top 20 clients and that's all year over year. So we're actually seeing pretty positive there.

<unk>.

Very much more contained and we're starting to get to this inflection point for growth in the second half sequentially.

Okay got it and then on the.

Revenue you mentioned to not expect growth in general out of the Meteor CDN side of that side of the business might be worth just taken a second to talk about the revenue splits how you break up the business and if media is flattish how do you think about the other sectors.

Bob Lyons: Obviously, what that's one factor, the other factor that drives revenue there is pricing compression, which historically is, you know, business at times. We're actually seeing that settle down for a couple of reasons. I think one you're not seeing the market grow as fast as it had in the past. I think most industry pundits put it at low single digits and maybe 35% overall growth. And when you have that, you know, the media companies have less levers, they have less subscribers.

Yes, do you want take that Steven.

Yes, So I think you saw from our.

Commentary in our prepared remarks, we're seeing a very strong pipeline.

And we're seeing some really strong bookings activity is certainly in our apps and security side. In fact, we've seen sequential booking increases since the beginning of this year.

Bob Lyons: And then also, you know, we've seen further consolidation in the industry. Some of the news that's out recently where. You know, you see yet other players following out of the market. So I think with all those things being true and the fact that we maintain our high performance and our quality support that part of the business is run pretty stably. We're not going to grow it partly because, you know, the way to grow it is to try to take market share from somebody else, which means you got to come in lower the price.

Yes.

We're building that machine now and so we do expect those will be the growth engine of the company I don't want to put growth rates around at this point in time, but as we get to this inflection point in the second half, we'll see a little bit of uptick in delivery for the second half of the pop this year, just partly because of the seasonality of the business.

Bob Lyons: And so instead, what we're focused on right now is how do we take what we have and earn more based on performance and really focus on return on invested capital for that business. Which we think is a better and more prudent move for our shareholders. Great. That's helpful. Thanks, guys. Yeah. Thank you.

But we certainly see some very strong bookings activity in our apps and security side as well as doubling.

And the delivery side is roughly what as a percent of revenue.

It's roughly about 50% give or take.

Okay, and then last one for me.

Jeff Van Ree: Your next question comes from the line of Jeff Van Ree from Craig Hallem. Please go ahead. Great. Yeah. Thanks for taking the questions.

If I can just add one more comment today, we spent a lot of time internally talking about.

The easiest way for us to go get growth as with delivery because you could turn it on fast, but it's also the lowest margin.

Bob Lyons: Congrats on getting the, you know, getting through all the restate and all the heavy lifting for sure. A couple questions for me, Bob. Maybe just it be it be worth taking a second given. This is kind of the re-emergence of edgeo coming out from from all the noise. You know, if you look back to like mid 22 when you're bringing edge cast on, I think the original expectations are around 270 million for that business.

And it also requires capex to expand the capacity to do that and so while the other part of the other 50% of the business.

Much better profile and it takes a little bit longer to drive growth because you've got the lead time, we think that's the better answer in the long term for the business and so thats where were focused.

Understood.

And then lastly, I guess just for me on the on the cost cut side I know I think you reiterated the target of $85 90 by the end of the year, where are you now as of the end of Q2, how much of that have you taken out of that 85% to 90 run rate expense.

Bob Lyons: And, you know, since then there's been a lot of noise. I think obviously the ISP relationship. See how to take some of that revenue out. It a lot of turn there. It's, I guess, unclear. Maybe what happened in the base business.

Expense.

Bob Lyons: Just what spend a minute and talk about what happened in each of those three components from there to here to give us a sense of, you know, where now that you've got a little more clarity on the numbers, where the bulk of the disappointments or revenue miscame. Sure. Yeah, I didn't even feel pretty jump in, but I'll frame it this way, Jeff. And thanks for that comment on early on. So, you know, the way to think about it is when we looked at the revenue of the business, there were a couple factors.

Yeah.

I would say tough to put out.

Specific number on it Jeff, but a lot of that as you've seen from our numbers have come out from from the Opex line. Some of the Cogs items fairly accentual substantial re negotiations with our vendors and takes a while to unlike contracts.

Just as a frame of reference we're at 44, 8% of sales now for Opex.

We're at about $56 million exiting 2022, and we're now down to $43 million Opex. So we've seen for the $50 million of run rate saving some of that was in the previous year on our other cost saving initiatives, but a large portion of that is behind us. So we're probably sort of 40 ish plus million.

Bob Lyons: Number one. [inaudible] You know, we had some pricing compression with large customers who I wouldn't even call pricing compression, I call it reset, you know, where they were much higher than market. And so when we come in and put them on our paper and renegotiate, I opened up the door to, you know, reduce prices. So we had, you know, one very large social media customer who wanted to have a better price.

There and obviously a lot more to happen in the second half probably more in the Cogs line and less in the Opex.

Bob Lyons: It was unreasonable to ask, but so we had to take that haircut to do that. But we were able to renew them for multiple years and are actually back to growth with that customer today. But it was, you know, kind of a one, one time at reset. So we had that on a couple of customers that were larger customers. All of those turned out in, to be growing customers on the other side.

Okay.

Got it okay I'll leave it there thank you.

Thanks, Jeff.

Bob Lyons: So it was one time reset. We had some revenue that we thought was less quality revenue than what we wanted. And so we, you know, we took that out of the equation as well as you normally do when you do an acquisition. And then of course, we had the chance. So that's really probably the three drivers. When you look at all three of those, the, the resets are done, we're passed those.

If you would like to ask a question. Please press star one on your telephone keypad.

Our next question comes from the line of Cooper Boulanger from TD Cowen. Please go ahead.

Hi, everyone. Thank you.

As mentioned my name is <unk>.

Yes.

I was hoping that.

You guys could provide some color on plans to address.

Bob Lyons: We've gotten through those renewals. And they're now growth customers with multi-year relationships, you know, the revenue that we wanted to get out because it wasn't good quality revenue has been taken out. And then of course, the turn was something that we set up in last year and we said, look, we're going to do two things. It's going to take us a couple quarters. We're going to build a client success team and we're going to make sure that we shore up the product and bring those two things together to land churn into what would be normal rates and assess industry. And that's exactly what we've done. It's taken us about two and a half, three quarters. But you know, we're at run rates now that you'd expect to have in a well-run SaaS company.

Refinancing your convertible debt due in 2025 and as part of that is there a leverage level that banks want to see for you to be able to refinance that.

Thank you.

Yeah. Thanks, Steve Let me frame it up and then I'll, let Steven.

Wayne as well so one of the things when we look at the.

We actually have four pillars of our strategy. The first is improved profitability second is expand our revenue and the third is extend our products into areas. The fourth we don't talk about publicly too much is really aligned our capital structure to support strategy. So we are at the same time horizon and in that there are really two focuses one is the convert obviously as you pointed out in the.

Bob Lyons: So that's, that's the way I'd frame, frame it overall from, you know, from this point forward, we don't have those headwinds. We don't see any resets churn, you know, we've gotten our arms around it. And, you know, I think it's fair to say that we're turning the corner on the top line and the revenue stability. Yeah. You referenced. I just had just one comment, Jess, to that, but I think it's important to know, you know, certainly we went through a 30 substantial restatement and, you know, unfortunately that does take some wind out of our trails.

Second is making sure that we have adequate liquidity to be able to fund the growth that we want to have and we're very very focused on both of those things.

I can tell you that we.

Steven and I spend a significant amount of time on those topics exploring a number of venues.

Ranging from a full range of possibilities.

<unk> abilities, but what I will tell you is that all roads lead back to getting as much EBITDA hitting our EBIT targets going into 2025, if we can hit the EBIT targets that we have and continue on our successful path that we're on now that gives us a lot of optionality ranging from retiring at two converting it to something else and so.

Bob Lyons: Certainly there's a, there's a hesitancy from our customer base that sort of elongated the sales cycle and sort of natural fear uncertainty and doubt when, when you're, when you're not in compliance. And so I think that sort of created a little bit more headwind for us as we came into the first half of the year. Obviously that's behind us now and you can see from our results our churns very much more contained and we're starting to get to this infection point for a growth and effect of consequential.

Bob Lyons: Okay. Got it.

Well, we certainly explore options today, the best path for US is to continue on this profitability path and make sure that we're putting.

Adequate EBITDA on the bottom line going into 2025, so that we give ourselves the most optionality.

Yeah, and just just to add to that I mean, I think given that given the significant progress we have already made and the changes to our financial model and the re profile cuts cost structure.

Steven Cumming: And then on the revenue, you mentioned to not expect growth in general out of the media or CDN side of the, side of the business, might be worth just taking a second to talk about the revenue splits, how you break up the business and if media is flatish, how do you think about the other sectors? Yeah. Do you want to take that Steven? Yeah. So I think, you know, you saw from our commentary in our prepared remarks, right?

We expect to be in a much better place really in the over the next few quarters.

To look at that and obviously the time on our side.

I think it's worth adding that refinancing is one option.

And we know where we need to be as we come into 2024 in order to do that but we're looking at many other options as well so not just a refi I, obviously can't talk about many of them that we're.

Steven Cumming: We're seeing a very strong pipeline and we're seeing some really strong bookings activities certainly in our apps and security side. In fact, we've seen sequential booking increases since the beginning of this year. So I, you know, we're building that machine now and so we do expect those will be the growth engines of the company. I don't want to put growth rates around at this point in time, but you know, as we get to this inflection point, the second half, we'll see a little bit of uptick in delivery for the second half of this year just partly because of the seniority of the business.

We're looking at a number of options, but refi being one of them.

Okay.

Thank you.

Steven Cumming: But we certainly see some very strong bookings activity in our apps and security side as well as ever. Lang. And the delivery site is roughly what as a percent of revenue? It's roughly about 50 percent. It will take.

Okay.

Your next question comes from the line.

Rudy Kissinger from D. A Davidson. Please go ahead.

Yes.

Hey, this is lucky on for <unk>, Thanks for taking our question.

Can you clarify does positive EBITDA in Q4 does that also equal positive free cash flow in Q4, and if not when might we expect to see positive free cash flow.

Yes. This is Stephen we actually haven't guided to positive EBITDA in Q4.

Plan is to is to breakeven.

Bob Lyons: Okay, and then last one for me. Jeff, I can just add one more comment today. We spent a lot of time internally talking about, you know, the easiest way for us to go get growth is with delivery because you can turn it on fast, but it's also the lowest margin. And it also requires catbacks to to expand the capacity to do that. And so, well, the other part of the other 50 percent of the business is a much better profile and takes a little bit longer to drive growth because you've got the lead time. We think that's the better answer to the long term for the business. And so that's what we're focused.

I am pleased with the progress we've already made in Q2, our EBITDA was.

Better than than we guided and we expect to see.

Essentially improvements throughout the second half, but we're really looking at sort of a.

Our break even EBITDA number you can see from our from a balance sheet, where we have been catching up nicely on some of the payables associated with <unk> acquisition and some one time event. So I think.

Cash flow will be a little bit behind that as we go into 2024, I don't want to pinpoint exactly.

Jeff Van Ree: Understood. And the last I guess just for me on the cost cut side, I know I think you reiterated the target of 85 90 by the end of the year. Where are you now? As of the end of Q2, how much of that have you taken out of that 85 to 90 run rate expense? Yeah, I would say it's tough to put a specific number on it, Jeff, but a lot of that, as you've seen from our numbers, has come out from the offex line.

I think at that time, and all of it but certainly with the progress we're making the cost takeout. So we should be in good shape as we go into 2024.

And we have no further questions in the queue at this time I will turn the call back over to the presenters for closing remarks.

Okay.

Well, thank you everybody for joining us today.

Jeff Van Ree: You know, some of the cogs items are fairly substantial substantial renegotiations with our vendors and takes a lot of on white contracts. So, you know, just as a frame of reference, we're at what 44.8% of sales now for our offex. We were at what 56 million dollars exiting 2022. And we're now down to 43 million dollars offex. So, you know, we've seen sort of 50 million dollars of run rate saving some of that was in the previous year on our other cost saving initiatives, but a large portion of that is behind us. So, we're probably sort of 40 plus million there and obviously a lot more to happen in the second half, probably more in the cogs line and less in the offex.

I think a couple of quick points that I want to share is that well the last six months have been.

Certainly difficult incredibly difficult in fact, I think it's fair to say that during that time, we have in fact strengthening the leadership team. We've strengthened the products that we have and we have really gotten in front of some of the headwinds that we were challenged with and really set the company up so that we can go into the back half of this year moving back into a positive direction and set up for <unk>.

<unk> 2024, so that's what we're focused on.

The management team is pretty excited about what's in front of us. So we've still got a lot to do and we'll stay focused on that but we appreciate everybody's patience Stephen and I are both very happy to have this distraction behind us and looking forward to engaging with our investors much more actively as we in the back half of this year as we start to move forward. So thank you very much and I look forward to speaking everybody soon.

Jeff Van Ree: Got it. Okay. I'll leave it there. Thank you. Thanks, Jeff.

Krista: If you would like to ask a question, please press star one on your telephone keypad.

This concludes today's conference. Thank you for your participation and you may now disconnect.

Cooper Belanger: Your next question comes from the line of Cooper Belage from TD Cowan. Please go ahead. Hi, everyone. Thank you. As mentioned, my name is Cooper.

[music].

Yes.

Yes.

Bob Lyons: I was hoping that you guys could provide some color on plans to address refinancing your convertible debt due in 2025. And as part of that, is there a leverage level that banks want to see for you to be able to refinance that? Thank you. Thanks, Cooper. Let me frame it up. And then I'll let Steven, you know, weigh in as well.

Okay.

Okay.

Steven Cumming: So, you know, one of the things when we look at the week, we actually have four pillars of our strategy. You know, the first is improve profitability. The second is expand our revenue and the third is extend our products into our areas. The fourth, we don't talk about publicly too much is really align our capital structure to support the strategy. So we have the same time horizon. And then that there are really two focuses.

Yeah.

Yes.

[music].

Steven Cumming: One is the convert. Obviously, as you point out in the second is making sure that we have adequate liquidity to be able to fund the growth that we want to have. And we're very, very focused on both of those things. I can tell you that we, you know, Steven and I spend a significant amount of time on those topics exploring a number of venues, you know, ranging from a full range of possibilities.

Yes.

Steven Cumming: But what I will tell you is that all roads lead back to getting as much EBITDA, you know, hitting our EBITDA targets going into 2025 if we can hit the EBITDA targets that we have and continue on the successful path that we're on. That gives us a lot of optionality, you know, ranging from retiring it to, you know, converting it to something else. And so, well, we certainly explore options today. The best path for us is to continue on this profitability path and make sure that we're putting adequate EBITDA on the bottom line going into 2025 so that we give ourselves the most options. DeGenerally.

[music].

Okay.

Okay.

Stephen Cumming: Yeah, and just to add to that, I mean, I think given Cooper, given the significant progress we have already made and the changes to our financial model and the repro file cost structure, you know, it's about the point. We expect to be in a much better place really in the over the next few quarters to just just look at that, and obviously we've got time on our side. You know, I think we're adding that refinancing is one option and we know where we need to be as we come into 2024 in order to do that, but we're looking at many other options as well. So, you know, not just to refile, I think I'm talking about many of them, but we're looking at a number of options, but refiling one of them. Thank you.

Yes.

Sure.

Okay.

[music].

Rudy Kissinger: Your next question comes from the line of Rudy Kissinger from DA Davidson. Please go ahead. Hey, this is Lucky on for Rudy. Thanks for taking our question. Can you clarify? Does positive eve done Q4? Does that also equal positive free cash flow in Q4? And if not, when might we expect to see positive free cash flow? Thanks. Yeah, this is Stephen. We actually haven't guided to positive EBITDA in Q4. Our plan is to break even.

Okay.

Rudy Kissinger: I'm pleased with the progress we've already made in Q2 of our EBITDA was better than we guide in, and we expect to see sequential improvements throughout the second half, but we're really looking at sort of a break even EBITDA number. You can see from our balance sheet where we have been catching up nicely on some of the payables associated with edge cost acquisition and some one-time event. So I think cash flow break will be a little bit behind that as we go into 2024.

Rudy Kissinger: I don't want to pinpoint exactly that exact time of it, but certainly with the progress we're making the cost takeout, so we should be in good shape as we go into 24.24. You only have no further questions in the Q with this time.

Bob Lyons: I will turn the call back over to the presenters for closing remarks. Well, thank you everybody for joining us today. You know, I think a couple of quick points that I want to share is that well, the last six months have been certainly difficult, incredibly difficult in fact. I think it's fair to say that during that time, we have in fact strengthened the leadership team. We've strengthened the products that we have, and we have really gotten in front of some of the headwinds that we were challenged with, and really set the company up so that we can go into the back half of this year, moving back into a positive direction set up for us from 2024.

Bob Lyons: So that's what we're focused on. The management team is pretty excited about what's in front of us, so we've still got a lot to do, and we'll stay focused on that, but we appreciate everybody's patience. Stephen and I are both very happy to have this distraction behind us and looking forward to engaging with our investors much more actively as we in the back half of this year, you know, as we start to move forward. So thank you very much and I look forward to speaking to everybody soon.

Krista: This concludes today's conference. Thank you for your participation, and you may now disconnect.

[music].

Frank Louthan: Frank Louthan, Stephen Cumming, Robert Lyons Frank Louthan, Stephen Cumming, Robert Lyons, Eric Martinuzzi, Jeffrey Rhee, Sameet Sinha, Jeffrey Rhee, Sameet Sinha, Jeffrey Rhee, Jeffrey Rhee, Sameet Sinha, Jeffrey Rhee, Sameet Sinha, Jeffrey[inaudible] Jeffrey Rhee, Sameet Sinha, Jeffrey Rhee,[inaudible] Frank Louthan, Stephen Cumming, Robert Lyons, Eric Martinuzzi Frank Louthan, Stephen Cumming, Robert Lyons, Eric Martinuzzi Frank Louthan, Stephen Cumming, Robert Lyons, Eric Martinuzzi Frank Louthan, Stephen Cumming, Robert Lyons, Eric Martinuzzi Good afternoon.

[music].

Good afternoon, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the edge to go 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer.

Session.

I would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one.

Thank you I will now turn your conference over to meet senior Vice President of Investor Relations You May begin your conference.

Good afternoon. Thank you for joining the <unk> second quarter 2020 key financial results Conference call. This call is being recorded today September 20.

2023, and will be archived on our website for approximately 10 days.

A copy of our Form 10-Q for the second quarter, along with today's earnings press release can be found in the Investor Relations section of our website.

Please note that today's comments include forward looking statements regarding future events and financial performance, including statements regarding guidance for the fiscal year. These forward looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such forward.

<unk> looking statements.

The factors include any impact from macro economic trends the integration of any acquisitions and any impact from geopolitical developments.

Please see the forward looking statement disclaimer on the Companys earnings press release.

Issued after the close of market today as well as the sections entitled Risk factors included in <unk> filings with the SEC, including our annual report on Form 10-K, and quarterly reports on Form 10-Q.

Reliance should not be placed on forward looking statements, which speak only as of the date they are made.

<unk> disclaims any obligation to update these statements to reflect new information future events or circumstances, except as required by law.

During the course of today's call, we will be referencing certain.

These non-GAAP financial measures the GAAP financial measures most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between such measures are provided in the earnings release, and our Investor Relations section of our website.

non-GAAP financial measures are not intended to be a substitute for our GAAP financial results.

I will now turn the call over to Bob Lyons, President and CEO , Bob the floor is yours.

Thank you Sydney, Good afternoon, and welcome to our earnings call for the second quarter of 2023.

This quarterly report and the associated 10-Q filing addresses the outstanding compliance issues with applicable NASDAQ listing rules.

With this filing we can now put the restatement and compliance issues behind us.

Throughout this entire process, we have continued to be laser focused on executing our strategy and customer feedback continues to show that <unk> is the preferred partner for creating more valuable connected digital experiences with each passing month, we are adding new customers and seeing existing ones reaffirming their trust and the value that <unk> brings to their organizations.

We have built a very capable leadership team who recognizes the work in front of us, but as equally motivated by the opportunity available to us.

We have accumulated several industry awards in recent quarters from industry analysts and experts for our innovative solutions. We are also seeing a growing number of notable customer wins, many of whom switched to us from competitors.

Let me share the operating highlights that we believe will enable us to continue building on in capitalizing on this momentum first the successful implementation of our client success team the redesign of our commercial teams and the improvement of our sales enablement motions hasnt back begun to demonstrate that we have turned the corner.

And our acquired applications business has been reduced to rates in line with industry norms, and we expect expansion revenue to exceed churn into the back half of the year for the first time since the acquisition. Our qualified pipeline continues to grow and more importantly, we are converting more of that pipeline to bookings at higher rates than we have historically.

By the end of the third quarter, we will have had three sequential quarters of bookings growth.

With our commercial motion is now positioned for success. We believe that momentum is building into the next year second we continue to aggressively manage cost.

Remain committed to our plans of reducing run rate operating cost by $85 million to $90 million by year end in the second quarter, we reduced our cash operating expense by 24% compared to the fourth quarter of 2022 and are on track to successfully complete our cost roadmap for this year.

Third our product strategy continues to establish <unk> as a leading edge enabled solution provider and applications security and streaming.

Number of awards received after releasing applications version seven validates our strategy of having best in class products powered by a globally scaled edge network.

Krista: My name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to the Edgigo 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to destroy your question, please press star one. Thank you.

<unk> with native Enterprise class security and delivered with deep expertise.

We have established mgo as a credible and recognize enterprise security solution for high stake web properties. We continue to have the most complete suite of streaming capabilities in the industry.

All of this builds on the strategy that we outlined in August of 2021, a strategy that pivots us away from a heavy reliance on low margin usage based revenue to profitable and growing edge enabled solutions with a revenue profile that is both recurring and high margin.

Sydney Sinha: I will now turn your conference over to Sydney Sinha, Vice President of Investor Relations. You may begin your conference. Good afternoon. Thank you for joining the Edgigo second quarter, 2023 financial results conference call. This call is being recorded today, September 12, 2023 and will be archived on our website for approximately 10 days. A copy of our form sent you for the second quarter along with today's earnings press release can be found in the Investor Relations section of our website.

We remain committed to aggressively improving profitability this year, while laying the foundation for growth next year. We believe that 2023 will prove to be an inflection point for the company and we are happy to have the distractions behind US Let me take a few minutes to unpack each of these important milestones in more detail.

The first key takeaway, we have now stabilized revenue with clear support for revenue expansion in 2024.

We have made significant progress reducing previously discussed customer churn in our acquired applications business. During the most recent quarter was approximately 1% as compared to 6% in the first quarter and 4% in the fourth quarter of last year. This is a significant improvement in two quarters and is now in line with industry norms.

Sydney Sinha: Please note that today's comments include forward-looking statements regarding future events and financial performance, including statements regarding guidance for the 2023 fiscal year. These forward-looking statements are subject to risk and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The factors include any impact from macroeconomic trends, the integration of any acquisitions and any impact from geopolitical developments. Please see the forward-looking statement disclaimer on the company's earnings press release issued after the close of market today as well as the sections entitled this factors included in edgigo's filings with the SEC, including a annual report on form 10K and quarterly reports on form 10K.

<unk> bookings continue to grow and are up double digits quarter to date versus the second quarter, we believe that our progress in reducing churn and improving renewals will support expansion revenue outpacing churn in the back half of this year for the first time since the close of the acquisition.

Our rebuilt marketing organization has implemented the first phase of our demand. Gen. Plans. This has resulted in meaningful growth in our qualified pipeline and an improvement to our first 60 day conversion rate by more than five times from 2% to more than 10% now in line with industry norms.

This speaks to improvements in both rate of growth and the quality of our pipeline going into 2024.

Sydney Sinha: Undue reliance should not be placed on forward-looking statements which speak only as the date they are made. Edgigo describes any obligation to update these statements to reflect new information, future events or circumstances except as acquired by law. During the course of today's call, we will be referencing certain non-gap financial measures. The gap financial measures most directly comparable to each non-gap financial measure used or discussed, and a reconciliation of the differences between such measures are provided in the earnings relief in an oscillation section of our website. These non-gap financial measures are not intended to be a substitute for our gap financial results.

Todd Hinders joined <unk> as Chief revenue officer during the second quarter, Todd properly organized the commercial teams into a more productive territory model and implemented a number of sales enablement and improvements there.

Sales productivity has improved by four times year over year, our customer acquisition cost bookings ratio as quickly trending to a one to one ratio and more in line with SaaS industry norms as at the end of August bookings for application solutions and more than doubled from the first quarter and are already ahead of second quarter levels with a month ago.

This improvement has been broad based across new logos and renewals.

As uncertainty surrounding a restatement wanes, we expect continued improvements in the growth of qualified pipeline the conversion rates of that pipeline and subsequent bookings.

Bob Lyons: I will now turn the call over to Bob Lyons, President and CEO, Bob, the floor is yours. Good afternoon and welcome to our earnings call for the second quarter of 2023. This quarterly report and the associated PENQ pioneering addresses the outstanding compliance issues with applicable NASDAQ listing reports, with this filing, we can now put the restatement and compliance issues behind us. Throughout this entire process, we have continued to be laser focused on executing our strategy, and customer feedback continues to show that Edgio is the preferred partner for creating more valuable connected digital experiences.

In the quarter, we continued to expand our routes to market with the expansion of our relationship with AWS as a channel partner. We anticipate this partnership will prove to be a meaningful contributor to our channel enabled growth objectives.

We will continue to explore opportunities to add additional high quality partners throughout the balance of this year and into next.

Key performance indicators for our commercial motion suggests we are in fact laying a strong foundation for growth.

Our qualified pipeline is growing faster and with improved quality, our sales productivity is improving and we continue to add new high quality routes to market. While there is plenty of additional work to do we expect in the second half of 2023 to demonstrate slightly positive net revenue retention and sequential growth with continued improvement into 2024.

Bob Lyons: With each passing month, we are adding new customers and seeing existing ones reaffirming their trust in the value that Edgio brings to the organizations. We have built a very capable leadership team who recognizes the work in front of us, but is equally motivated by the opportunity available to us. We have accumulated several industry awards in recent quarters from industry analysts and experts for our innovative solutions. We have also seen a growing number of notable customer wins, many of whom switched to us from competitors.

The second key takeaway.

We continue to execute as planned on our profitability and positive free cash flow objectives.

We continue to execute on our plans to achieve between 85% to $90 million of run rate cost reductions by year end, we remain committed to that number and have a solid roadmap beyond that number to continuously improve profitability well into 2024.

Bob Lyons: Let me share the operating highlights that we believe will enable us to continue building on and capitalizing from this momentum. First, the successful implementation of a CLI success team, the redesign of our commercial teams, and the improvement of our sales-enablement motions has, in fact, begun to demonstrate that we have turned the corner. Turn and our acquired applications business has been reduced to rates in line with industry norms, and we expect expansion revenue to exceed turn into the back half of the year for the first time since the acquisition.

We have largely completed implementation of our operating model synergies post acquisition, resulting in cash operating expenses declining by 24% in the first six months of this year.

We continue to focus on improving our unit economics with detailed plans that reduce our hosting bandwidth and peering costs. While we have had success. This year. We are in the early stages of what will prove to be multiple quarters of notable improvements.

Bob Lyons: Our qualified pipeline continues to grow, and more importantly, we are converting more of that pipeline to bookings at higher rates than we have historically. By the end of the third quarter, we will have had three sequential quarters of booking growth. With our commercial motions now positioned for success, we believe that momentum is building into the next year. Second, we continue to aggressively manage costs. We remain committed to our plans of reducing run rate operating costs by $85 to $90 million by year end.

Leveraging our open edge platform, we are becoming more asset light and have reduced capital intensity for more than 10% of sales in 2022 to under 3% in 2023 at the midpoint of guidance.

We will remain focused on becoming a more asset light company as we continue to expand our high margin edge software and security applications business we.

We have executed and will continue to execute well against our cost savings initiatives progress should accelerate in the back half of the year to reach adjusted EBITDA breakeven in the fourth quarter with anticipated sequential revenue growth gross margin expansion and additional cost savings, we expect to deliver substantial year over year improvements in adjusted EBITDA and free cash flow in 2020.

Bob Lyons: In the second quarter, we reduced our cash operating expense by 24% compared to the fourth quarter of 2022, and are on track to successfully complete our cost roadmap for this year. Third, our product strategy continues to establish EGEO as a leading edge-enabled solution provider in applications, security, and streaming. The number of awards received after releasing applications version 7 validates our strategy of having best-in-class products powered by our globally-scaled edge network protected with native enterprise-class security and delivered with deep expertise.

Sure.

The third key takeaway, we continue to make meaningful progress transforming our company from a usage based CDN utility to an edge enabled a base technology solutions company.

Let me start by highlighting some of the exciting progress we have made with our applications and security and media solutions in the second quarter. We released our award winning applications version seven suite. This release as a fully integrated workflow orchestration technology stack that enables companies with high stake web properties to deliver unmatched business outcomes with sub seconds.

Bob Lyons: We have established EGEO as a credible and recognized enterprise security solution for high-stake web properties. We continue to have the most complete suite of streaming capabilities in the industry. All of this builds on the strategy that we outlined in August of 2021, a strategy that pivots us away from a heavy reliance on low margin usage-based revenue to profitable and growing edge-enabled solutions with a revenue profile that is both recurring and high margin.

Lower operating costs and meaningfully better security.

Are seamlessly integrated next generation architecture powered by a globally scaled edge platform and protected by our native enterprise class security capabilities removes the latency cost and complexity associated with traditional point solution.

Bob Lyons: We remain committed to aggressively improving profitability this year while laying the foundation for growth next year. We believe that 2020-3 will prove to be an inflection point for the company, and we are happy to have the distractions behind us. Let me take a few minutes to unpack each of these important milestones in more detail. The first key takeaway, we have now stabilized revenue with clear support for revenue expansion in 2024. We have made significant progress reducing previously discussed customer churn in our acquired applications business.

<unk> now enables unmatched monetization operating cost and security for our customers.

In 2021, we unabashedly stated that we would have a much more compelling cyber security story to tell we continue to build on that promise and can now say that AGL is recognized as a compelling security company for enterprises in Q1, we locked our advanced Bot management solution, which was well received and resulted in double digit attach rates ports.

Bob Lyons: Churn in the most recent quarter was approximately 1% as compared to 6% in the first quarter and 4% in the fourth quarter of last year. This is a significant improvement in two quarters and is now in line with industry norms. I renew a bookings continue to grow and are up double digits quarter to date versus the second quarter. We believe that our progress in reducing churn and proving renewals will support expansion revenue outpacing churn in the back half of this year for the first time since the close of the acquisition.

Miles across our existing customer base.

More importantly in Q2, we validated that trials could successfully be converted into contracted in paying customers. We recently released our API security solution, which leverages machine learning to inspect both application traffic patterns and content to ensure API endpoints are discovered managed and secured.

Having exceptional security operations is increasingly critical as youll becomes a more essential partner to protect our customers critical applications. We have recently expanded our security operations Center with new leadership and services that we bundle with our security products.

Bob Lyons: Our rebuilt marketing organization has implemented the first phase of our demand gen plans. This has resulted in meaningful growth in our qualified pipeline and an improvement to our first 60-day conversion rate by more than five times from 2 percent to more than 10 percent, now in line with industry norms. This speaks to improvements in both rate of growth and the quality of our pipeline going into 2024. Todd Hinder is joined as Chief Revenue Officer during the second quarter.

In class products enabled with expert services ensure AGL can deliver unmatched protection to our customers.

Independent research firms continue to recognize NGO with awards in strong published rankings, we were recognized as leader in its recent edge platform radar report.

Bob Lyons: Todd properly organized the commercial teams into a more productive territory model and implemented a number of sales enablement improvements. Fails for activity has improved by four times year over year. Our customer acquisition cost to bookings ratio is quickly trending to a one-to-one ratio and more in line with SaaS industry norms. As of the end of August, bookings for application solutions have more than doubled from the first quarter and are already had of second quarter levels with a month to go.

Frost <unk> Sullivan award at AGL, the best practices competitive strategy leadership Award in NGL won a covenant Global Info Security Award at the RSA Conference early in the quarter.

Our applications version seven suite directly enabled a competitive takeout from a large north American pet supply retailer, who chose azure over the incumbent competitor.

<unk> advanced architecture was able to achieve performance levels within a very short time, they were not attainable on their existing architecture.

Bob Lyons: This improvement has been broad-based across new logos and renewals. As uncertainty surrounding our statement waned, we expect continued improvements in the growth of qualified pipeline, the conversion rates of that pipeline and subsequent bookings. In the quarter, we continued to expand our roster market with the expansion of our relationship with AWS as a channel partner. We anticipate this partnership will prove to be a meaningful contributor to our channel and able growth objectives.

Other notable wins include a 15000 employee safety and security solutions in Europe , a leading Asian web two <unk> company and a global consumer product brand applications version seven also resulted in the expansion of our solution within the world's largest AI semiconductor company.

Our advanced spot security features drove a key renewal with an Asian Airlines and upsell with a regional bank and a new contract with a large hardware company building on this success, we will soon be releasing a more advanced version of our edge functions, which empowers developers to better personalized content improved performance and have more control over the user experience at the edge.

Bob Lyons: We will continue to explore opportunities to add additional high quality partners throughout the balance of this year and end of next. Keep performance indicators for our commercial motion suggests we are in fact laying a strong foundation for growth. Our qualified pipeline is growing faster and with improved quality. Our sales productivity is improving and we continue to add new high quality routes to market. While there is plenty of additional work to do, we expect the second half of 2023 to demonstrate slightly positive net revenue retention and sequential growth with continued improvements in the 2024.

Our media solutions continue to offer the most complete suite of <unk> capabilities in the industry today, the product is difficult to consumed by other than the largest media companies. So we're addressing that in the coming weeks, we will be making improvements that will simplify the buying experience, making the product more accessible to the top 2000 media streaming companies.

This will include a more modular design so companies can acquire what they need a robust set of Apis for easy integration and expanding ecosystem of Prebuilt third party integrations and a more simplified pricing model in fact yesterday, we announced an alliance with other leading streaming vendors to help companies manage the complexity of the entire screening workflow as part of this.

Bob Lyons: The second key takeaway, we continue to execute as planned on our profitability and positive pre-cashable objectives. We continue to execute on our plans to achieve between 85 and 90 million dollars of run rate cost reductions by year end. We remain committed to that number and have a solid roadmap beyond that number to continuously improve profitability well into 2024. We have largely completed implementation of our operating model synergies, post acquisition, resulting in cash operating expenses declining by 24% in the first six months of this year.

<unk> NGL will act as the primary solutions provider streamlining the entire workflow for customers. We are excited to be able to offer out of the box complete enterprise class <unk> capabilities to a broader market.

We expect our delivery business to remain flattish for the foreseeable future. We have seen further industry consolidation a slowdown in subscription rates and lower post COVID-19 volume growth.

Bob Lyons: We continue to focus on improving our unit economics with detailed plans that reduce our hosting bandwidth and pairing costs. While we have had success this year, we are in the early stages of what will prove to be multiple corners of notable improvements. Leveraging our open edge platform, we are becoming more asset light and have reduced capital intensity for more than 10% of sales in 2022 to under 3% in 2023 at the midpoint of guidance.

We are also seeing pricing trends begin to stabilize we are managing this business to prioritize profitability and return on invested capital.

Our commitment to reduce our asset and capital intensity by leveraging our open edge product coupled with a roadmap to improve unit economics will support improved profitability for our delivery business in 2024.

Bob Lyons: We will remain focused on becoming a more asset light company as we continue to expand our high margin edge software and security applications business. We have executed and will continue to execute well against our cost savings initiatives. Progress should accelerate in the back half of the year to reach adjusted EBITDA, break even in the fourth quarter. With anticipated sequential revenue growth, gross margin expansion and additional cost savings, we expect to deliver substantial year-over-year improvements in adjusted EBITDA and pre-cash low in 2024.

In summary, with the restatement and associated reporting requirements behind us our full attention is on executing the transition plan. Initially articulated in 2021, we continue to make notable progress on that plan and believe we have quickly building blocks in place for multiple years of profitable growth are leading indicators suggest we are on the right track and have established a foundation for.

Stability improvement and growth in 2024.

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

Bob Lyons: The third tea takeaway, we continue to make meaningful progress transforming our company from a usage-based CDN utility to an Ed-enabled ARR-based technology solutions company. Let me start by highlighting some of the exciting progress we have made with our applications of security and media solutions. In the second quarter, we released our award-winning Applications Virgin Steven Suite. This releases a fully integrated workflow and orchestration technology stack that enables both companies with high-stake web properties to deliver unmatched business outcomes with sub-second speeds, lower operating costs, and meaningfully better security.

Thank you Bob.

For the second quarter 2023 with stronger than expected at $95 8 million.

Up 56% from the second quarter of 2022 due to the inclusion of the edge cough acquisition completed on June 15th 2020, we.

We saw a sequential decline of six 1% driven by normal summer seasonality and previously communicated churn primarily associated with the edge cloud business.

We expect second quarter revenue to be the low point for the year as revitalized sales and commercial motions are reducing churn and driving new product adoption and increasing conversion of our growing qualified pipeline.

Bob Lyons: Our seamlessly integrated next-generation architecture powered by our globally-scaled Edge platform and protected by our native enterprise-class security capabilities removes the latency, cost, and complexity associated with traditional point solutions. Edgio now enables unmatched monetization, operating costs, and security for our customers. In 2021, we unabashedly stated that we would have a much more compelling, fiber security story to tell. We continue to build on that promise, and can now say that Edgio is recognized as a compelling security company for enterprises.

Moving to gross margin cash gross margin, which excludes the impact from stock based compensation acquisition related expenses and depreciation was 38% down 390 basis points sequentially cash.

Cash gross margin was impacted by the seasonal decline in traffic consistent with having a high fixed cost structure, partially offset by savings from previously announced cost containment efforts.

Bob Lyons: In Q1, we locked our advanced bot management solution, which was well received and resulted in double-digit attached-raised portrayals across our existing customer base. More importantly, in Q2, we validated that trials could successfully be converted into contracted and paying customers. We recently released our API security solution, which leverages machine learning to inspect both application traffic patterns and content to ensure API endpoints are discovered, managed, and secured. Having exceptional security operations is increasingly critical as Edgio becomes a more expensive partner to protect our customers' critical applications.

Turning to operating expenses cash operating expenses, excluding share based compensation restructuring charges acquisition and legal related charges depreciation and amortization were $42 9 million or <unk> 44, 8% of revenue down from $49 7 million.

48, 8% in the first quarter of 2023.

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

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

Bob Lyons: We have recently expanded our security operations center with new leadership and services that we bundle with our security products. Best in-class products enabled with expert services ensure Edgio can deliver unmatched protection to our customers. Independent research firms continue to recognize Edgio with awards in strong public rankings. We were recognized by Giga as leader in its recent edge platform radar report. Frost and Sullivan awarded Edgio the best practices competitive strategy leadership award, an Edgio won a coveted global import security award at the RSA conference early in the quarter.

Cash R&D expenses decreased by $1 4 million sequentially to $16 $7 million approximately 17, 4% of revenue from $18 1 million or 17, 8% of revenue due to the savings from previously announced cost containment efforts.

Cash sales and marketing expenses decreased $3 2 million sequentially to $15 7 million or 16, 4% of revenue from $19 million or 18, 6% of revenue due to the savings from previously announced cost containment efforts reduction in variable compensation and.

Bob Lyons: Our application's version 7 suite directly enabled a competitive takeout from a large North American pet supply retailer who chose Edgio over the incumbent competitor. Edgio's advanced architecture was able to achieve performance levels within a very short time that were not attainable under existing architecture. Other notable wins include a 15,000 employee safety and security solutions in Europe, a leading Asian webtoon company, and a global consumer product brand. Applications version 7 also resulted in the expansion of our solution within the world's largest AI semiconductor company.

Discretionary spend.

Cash G&A expense decreased by $2 2 million sequentially to $10 5 million or 10, 9% of revenue from $12 7 million or 12, 4% of revenues due to savings from previously announced cost containment efforts as well as the conclusion of the transition services.

Bob Lyons: Our advanced bot security features drove a key renewal with an Asian airline and upsell with a regional bank and a new contract with a large hardware company. Building on the success, we will soon be releasing a more advanced version of our edge functions which empowers developers to better personalize content, improve performance, and have more control over the user experience at the edge. Our media solutions continue to offer the most complete suite of streaming capabilities in the industry.

Premium.

The <unk> acquisition and reduction in other discretionary expenses.

Share based compensation included in operating expenses was $3 million below the first quarter at $4 5 million restructuring.

Restructuring charges were $3 3 million compared to a half a million dollars for the <unk>.

Bob Lyons: Today, the product is difficult to consume by other than the largest media companies, so we are addressing that. In the coming weeks, we will be making improvements that will simplify the buying experience, making the product more accessible to the top 2,000 media streaming companies. EGNUS. This will include a more modular design so companies can acquire what they need, a robust set of APIs for easy integration, an expanded ecosystem of pre-built third-party integrations, and a more simplified pricing model.

First quarter of 2023 acquisition and related charges included in Cogs and operating expenses in connection with the edge cloud transaction were approximately $1 million compared to $1 2 million for the first quarter.

Adjusted EBITDA for the second quarter of 2023 was a loss of $13 4 million.

Compared to a loss of $14 4 million in the first quarter of 2023 due to continuous execution and cost saving initiatives.

Bob Lyons: In fact, yesterday we announced an alliance with other leading streaming vendors to help companies manage the complexity of the entire streaming workflow. As part of this partnership, Edgio will act as the primary solutions provider streamlining the entire workflow for customers. We are excited to be able to offer out of the box complete enterprise-class streaming capabilities to a broader market. We expect our delivery business to remain flatish for the foreseeable future. We have seen further industry consolidation, a slowdown in subscription rates, and lower post-COVID-volume growth.

Which have resulted in across the board sequential declines in all operating expense line items.

Moving to the balance sheet and cash flow cash and cash equivalents and marketable securities totaled $36 2 million.

A decrease of $12 million from the first quarter of 2023.

We've been very disciplined about our cash management and expect to maintain a similar level of cash balance in the second half of the year.

Bob Lyons: But I've also seen pricing trends begin to stabilize. We are managing this business to prioritize profitability and return on investment capital. Our commitment to reduce our asset and capital intensity by leveraging our open-edge product, coupled with a roadmap to improve unit economics, will support improved profitability for our delivery business in 2024.

First half 2023 capital expenditure net of payments from ISP was $2 6 million or.

One 3% of revenues.

Over the last nine months, we have initiated tightened capex spending controls, which have resulted in capex significantly below historical levels.

Bob Lyons: In summary, with the restatement and associated reporting requirements behind us, our full attention is on executing the transition plan initially articulated in 2021. We continue to make notable progress on that plan and believe we have quit the building blocks in place for multiple years of profitable growth. Our leading indicators suggest we are on the right track and have established a foundation for profitability improvement and growth in 2024.

DSO for the second quarter was 60 days 13 days lower than the first quarter as we continue to accelerate our efforts integrating edge customers.

Streamlining the collections process.

Now moving to guidance.

Long product execution and improved go to market motions have helped overcome the continued softness in the macro environment.

Steven Cumming: Now I will turn the call over to Steven to discuss second-quarter results. Steven. Thank you, Bob. Revenue for the second quarter 2023 was stronger than expected at $95.8 million, up 50.6% from the second quarter of 2022. Due to the inclusion of the edge-carf acquisition completed on June 15, 2022, we saw a sequential decline of 6.1% driven by normal summer seasonality and previously communicated churn primarily associated with the edge-carf business. We expect second quarter revenue to be the low point for the year as revitalized sales and commercial motions are reducing churn, driving new product adoption and increasing conversion of our growing qualified pipeline.

Our broad product portfolio and the value proposition of our solutions are resonating with customers and we are seeing improvements in our leading indicators.

We remain focused on executing on cost savings opportunities and are on track to deliver the $85 million to $90 million of run rate savings by year end.

But now we are reaffirming our guidance for the year with revenue range of between $392 million to $398 million.

Which implies a growth of 16% to 18%.

Adjusted EBITDA range of between negative $37 million to negative $31 million.

And capital expenditure in the range of 10 million to $13 million.

This implies business capex as a percent of revenue of about 3% to three 5%.

Steven Cumming: Moving to growth margin, cash growth margin which excludes the impact from stock-based compensation, acquisition related expenses and depreciation was 30.8% down 390 basis points sequentially. Cash growth margin was impacted by the seasonal decline in traffic consistent with having a high fixed cost structure partially offset by savings from previously announced cost-containment efforts. Turning to operating expenses, cash operating expenses excluding share-based compensation, restructuring charges, acquisition and legal related charges, depreciation and amortization were $42.9 million or $44.8% of revenue, down from $49.7 million or $48.8% in the first quarter of 2023.

We expect payments from Isps of between $5 million to $10 million.

Okay.

Now, let me provide you more context around our guidance.

Based on seasonality reduction in churn and improvements in bookings, we expect a flat to slight uptick in revenue sequentially in the third quarter of 2023, followed by a sequential increase in the fourth quarter.

Our pro forma second half revenue implies a meaningful improvement year over year revenue trajectory versus the first half.

We expect cash gross margin to start improving sequentially consistent with the revenue trajectory with additional benefits from cost savings and synergies.

The first quarter was the bottom for adjusted EBITDA, and we expect to breakeven in the fourth quarter.

Steven Cumming: We continue to make significant progress in our cost reduction initiative. We are executing well on our planned acquisition synergies and operational efficiency programs while investing in new product introduction and revitalize sales and marketing motions. As Bob has highlighted, William. Cash R&D expenses decreased by $1.4 million sequentially to $16.7 million, approximately 17.4% of revenue from $18.1 million or $17.8% of revenue due to the savings from previously announced cost containment efforts. Cash sales and marketing expenses decreased by $2.2 million sequentially to $15.7 million or $16.4% of revenue from $19 million or $18.6% of revenue due to the savings from previously announced cost containment efforts, reduction and variable compensation and discretionary spend.

To put it into perspective midpoint of our guidance implies adjusted EBITDA loss in the second half to be about 6 million.

Listen as a loss of approximately $28 million in the first half of the year.

Our cash balance at the end of the second quarter was $36 $2 million, we expect our cash levels to be similar in the second half of 2023 and remain undrawn on our line of credit.

In summary, I want to reiterate our key financial priorities. Our focus is on revenue stabilization in 2023 and return to revenue growth in 2020 for Greenland buyout reduce churn when you go to market initiatives, new product solutions and by leveraging our reconfigured channel.

And direct sales team.

<unk> made great progress in right sizing our cost structure to align with revenue growth assumptions, we expect our cost savings initiatives to continue through the rest of this year and into next year, focusing on improving unit economics through managing client profitability and driving efficiency in our network.

Steven Cumming: Cash GNA expands decreased by $2.2 million sequentially to $10.5 million or $10.9% of revenue from $12.7 million or $12.4% of revenues due to savings from previously announced cost containment efforts, as well as the conclusion of the transition service to the agreement for the edge-carf acquisition and reduction in other discretionary expenses. Share-based compensation included in operating expenses was $3 million below the first quarter at $4.5 million. Restructuring charges were $3.3 million compared to a half a million dollars for the first quarter of 2023.

Operating model.

So this year, we remain focused on capacity optimization tools rationalization, capex and organizational productivity initiatives.

We continue to explore additional cost saving opportunities as we drive more operational efficiency and optimization of our network, which would be incremental to the $85 million to $90 million run rate savings we have highlighted.

The combination of expected revenue growth and cost saving initiatives should result in 2020 for being a year of profitable growth.

Steven Cumming: Acquisition and related charges included in cogs and operating expenses in connection with the edge-carf transaction were approximately $1 million compared to $1.2 million for the first quarter. Adjusted EBITDA for the second quarter of 2023 was a loss of $13.4 million compared to a loss of $14.4 million in the first quarter of 2023 due to continuous execution and cost-dating initiatives which have resulted in across-the-board sequential declines in all operating expense line items.

With that I'll turn the call back to Bob for some closing remarks.

<unk>.

Thank you Steven we are well on our way to transforming <unk> from a first generation CDN platform that historically served commodity like utility services into a third generation edge solutions platform that helps customers manage high Stakes digital properties at the edge with better monetization.

Steven Cumming: Moving to the balance sheet and cash flow, cash and cash equivalence and marketable securities totaled $36.2 million a decrease of $12 million from the quarter of 2023. We've been very disciplined about our cash management and expect to maintain a similar level of cash balance in the second half of the year. First half 2023 capital expenditure net of payments from ISPs was $2.6 million or 1.3% of revenues. Over the last nine months we have initiated tighter cap-expending controls which have resulted in cap-ex significantly below historical levels.

And security.

We continue to develop holistic solutions and software capable of serving mission critical workloads for many of the largest blue chip companies in the world. Some of the largest social networks fintech streaming companies and even the largest AI semiconductor company and trust NGO for solutions that drive business outcomes unmatched elsewhere.

Having extended the reach of our solutions enables us to expand revenue.

In a rush to market, all while aggressively managing our cost structure and improving profitability as we continue with our transformation process. We are increasingly better positioned to leverage what we have created and are focused on profitable revenue growth in 2024 and beyond.

Steven and I look forward to being actively engaged with our investor community again, we will be participating at the Lake Street Conference in New York City. This week and we'll be meeting with investors in other cities throughout the rest of the year. We have also posted video content delivered from our leadership team that helps further unpack, where we started where we are and where we're going you can find it.

Steven Cumming: DSO for the second quarter was 60 days, 13 days lower than the first quarter as we continue to accelerate our efforts integrating edge-carf customers and streamlining the collections process. Moving to guidance, strong product execution and improved go-to-market motions have helped overcome the continued softness in the macro environment. Our broad product portfolio and the value proposition of our solutions are resonating with customers and we are seeing improvements in our leading indicators. We remain focused on executing on cost savings opportunities and are on track to deliver the $85 to $90 million of run rate savings by year-end.

It on the homepage of our website at <unk> Dot Io in the about section. Please take a few minutes to review and gain a deeper understanding of our strategy progress and plans.

We will continue to add content to our website for you throughout the balance of this year. Thank you for your patience, while we continue to work on building what we believe is uniquely possible of course.

With that operator, please open up the lines for the question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad, we will pause for a moment to compile the Q&A roster.

Steven Cumming: For now, we are reaffirming our guidance for the year with revenue range of between 392 to 398 million dollars which implies a growth of 16 to 18 percent. Adjusted EBITDA range of between negative 37 million dollars to negative 31 million dollars and capital expenditure in the range of 10 million to 13 million dollars. This implies business capex of the percent of revenue of about 3 to 3.5 percent. We expect payments from ISPs of between 5 to 10 million dollars.

Your first question comes from the line of Eric Eric Martin Newsy from Lake Street. Please go ahead.

Yes first off congratulations on getting the SEC filings up to date and I know that was a project that.

It took a lot longer than expected, but it's good to have it in the rearview mirror.

With that I wanted to focus.

The churn color that you gave you talked about customer churn of 1% in Q2 versus 4% in Q4, but then you also talked about logo churn of down 40% in the same period and I Wonder could you just.

Steven Cumming: Now, let me provide you more context around our guidance. Based on seasonality, reduction in churn and improvements in booking, we expect a flat to flight uptick in revenue sequentially in the first quarter of 2023 followed by a sequential increase in the fourth quarter. Our pro forma second half revenue implies a meaningful improvement year over year revenue trajectory versus the third part. We expect cash gross margin to start improving sequentially consistent with the revenue trajectory with additional benefits from cost savings and synergies.

Just take me a layer deeper there what does the 40% when you say in the same period is it Q2 versus Q4.

Okay.

Alright, listen Steven I'll take that one Bob.

Add any additional color now that.

Q2 versus Q4.

On the two metrics that we're showing there is absolute customer logo churn and number of customers that you can see in our reported results in our earnings release, we have that metric out there and then the 40% was actually looking at the dollar values around that is substantially reduced by 40% and I think I gave that data point when we gave our Q4 update as well so we certainly.

Steven Cumming: The first quarter was the bottom for adjusted EBITDA and we expect to break even in the fourth quarter. To put it into perspective, midpoint of our guidance implies adjusted EBITDA loss in the second half to be about $6 million versus a loss of approximately $28 million in the third half of the year. Our cash balance at the end of the second quarter was $36.2 million. We expect our cash levels to be similar in the second half of 2023 and remain undrawn on our line of credit.

<unk> got our arms around this substantially and we're pleased with.

The results as you know this has been a major focus for us as a company.

<unk> put dedicated resources around the along with the senior leadership team and really targeting specifically a lot of the hedge cost customers.

We're churning substantially when we acquired that asset I.

Steven Cumming: In summary, I want to reiterate our key financial priorities. Our focus is on revenue stabilization in 2023 and return to revenue growth in 2024, driven by our reduced churn for new go-to-market initiatives, new product solutions and by leveraging our reconfigured channel and direct sales teams. We've made great progress in right sizing our cost structure to align with revenue growth assumptions. We expect our cost savings initiatives to continue through the rest of this year and into next year, focusing on improving unit economics through managing client profitability and driving efficiency in our network and operating model.

I think also just add that we've seen the introduction of our expanded solutions with Avi seven product offerings that are on a simpler pricing plan. That's also substantially.

Substantially helping that nextgen environment.

So have we.

The customer base doesn't renew in a given quarter our way.

Our our major exposures have we addressed our major exposures and either turn them off or renew them.

Yes, so Eric this is Bob how are you doing.

So you might recall that the two primary root causes of churn were one.

Client engagement or lack thereof.

And the second was feature gaps that we had were.

Competitors had certain features we had some towering strengths in some areas, but we're missing some basics.

Steven Cumming: For this year, we remain focused on capacity optimization, tools or authorization, capex and organizational productivity initiatives. We continue to explore additional cost-faving opportunities as we drive more operational efficiency and optimization of our network, which would be incremental to the $85 to $90 million run rate savings we have highlighted. The combination of expected revenue growth and cost-faving initiatives should result in 2024 being a year of profitable growth.

In the release that we did with application version seven close those 'twenty three feature gaps that we had.

And then of course, we implemented the client success team late Q4 early Q1.

Turning to see the results of that the net result is.

The churn is down as importantly, renewals are going up and in the direction, where we want them to and even more importantly at renewal, we're seeing more typically an expansion of use versus just a.

Coal renewals. So that's why we believe in the second half of the year Youll start to see for the first time since the acquisition were renewals and expansion revenue outpace churn, which is what you want in SaaS company obviously.

Bob Lyons: With that, I'll turn the call back to Bob for some closing remarks. Thank you, Steven. We are well on our way to transforming EGEO, my first-generation CDN platform that historically served commodity-like utility services into a third-generation edge solutions platform that helps customers manage high-stakes digital properties at the edge with better monetization, efficiency and security. We continue to develop holistic solutions and software capable of serving mission critical workloads for many of the largest blue chip companies in the world, some of the largest social networks, Fintech, streaming companies, and even the largest AI semiconductor company and trust EGEO for solutions that drive business outcomes unmatched elsewhere.

Yes.

Okay and then the.

Health of your two largest customers Amazon and Verizon could you comment on those relationships.

Yes, very strong positive on all fronts with Verizon.

Because of application version seven we were able to renew that portion of the agreement recently and.

They couldnt be happier about about the capabilities and features that we have.

Again, an expansion conversations there as well they're also a big reseller partner of ours, So very strong relationship there and Amazon.

<unk> has been a great partner and consistent partner with us and we're actually growing with them.

Bob Lyons: Having extended the reach of our solutions enables us to expand revenue and our roads to market, all while aggressively managing our cost structure and improving profitability. As we continue with our transformation process, we are increasingly better positioned to leverage what we have created and are focused on profitable revenue growth in 2024 and beyond. Stephen and I look forward to being actively engaged with our investor community again. We will be participating at the Lake Street Conference in New York City this week and we'll be meeting with investors in other cities throughout the rest of the year.

And which we're excited about so and I would add a third.

Disney is up in that mix as well, we have a very strong relationship there and feeling pretty happy about that relationship as well.

Okay and then last question for me the cash gross margins you've talked about.

Them being I guess sequentially higher than Q3 can we get a little bit more granularity around that obviously the 38%.

Below where I was forecasting for Q2.

Bob Lyons: We have also posted video content delivered from our leadership team that helps further unpack where we started, where we are, and where we are going. You can find it on the homepage of our website at edg.io in the about section. Please take a few minutes to review and gain a deeper understanding of our strategy, progress, and plans. We will continue to add content to our website for you throughout the balance of this year. Thank you for your patience while we continue to work on building what we believe is uniquely possible for us.

I have a pretty substantial step up in Q3, but can you put some.

Maybe a range around the what's your expectation is for Q3 or for 2023.

Yeah, Eric this is Steven.

A little bit more so.

As a company.

And in the prepared remarks, we have a high fixed cost structure from.

From the operations of our network that has pressured our gross margins that certainly came out in the first half of this year and Q2, even more so being a seasonally weaker quarter.

Krista: With that operator, please open up the lines for the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. We'll pause for a moment to compile the Q&A roster.

As I said, you should expect our cost gross margins to sequentially improve.

Eric Martinuzzi: Your first question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead. First off, congratulations on getting the SEC filings up to date. I know that was a project that took a lot longer than expected, but it's good to have it in the rear view mirror. With that, I wanted to focus on the churn color that you gave. You talked about the customer churn of 1% in Q2 versus 4% in Q4.

Sort of like in it to somewhere in the realms of the 300 plus type basis points as we go into into the third quarter.

Obviously, we've got a lot of.

On cost saving initiatives and synergies.

We are working towards on the $85 million to $90 million of cost Takeouts and a lot of those into the Cogs line, but it takes time to work through some of those from a run rate perspective, you'll see a lot more of that materialize towards the end of the year and then tees up very nicely.

Eric Martinuzzi: Then you also talked about logo churn of down 40% in the same tier. Could you just take me a layer deeper there? What is that 40% when you say in the same period? Is it Q2 versus Q4? Eric, listen Steven here. I'll take that one and I'll both add any additional color. That's Q2 versus Q4. The two metrics that we're showing there is absolute customer logo churn. A number of customers that turn you can see in our reported results on our own release.

2024.

I understand thanks for taking my questions and good luck.

Thank you Ron.

Your next question comes from the line of Frank <unk> from Raymond James. Please go ahead.

Great. Thank you Hey, guys. This is rob on for Frank.

<unk> pricing and the delivery segment holding up.

And you were just characterizing the churn before out of curiosity have you guys seen any churn from existing customers related to the share price. Thank you.

No problem, Rob I know, it's Bob So I'll start with the churn we actually the churn that we've always talked about was in the applications business acquired as part of the acquisition, we have not seen churn and.

Eric Martinuzzi: We have that metric out there. Then the 40% was actually looking at the dollar values around that. It's substantially reduced by 40%. I think I gave that data point when we gave our Q4 update as well. We've certainly got our arms around this substantially. We're pleased with the results. As you know, this has been a major focus for us as a company. We've put dedicated resources around there along with senior leadership team and really targeting specifically.

Our legacy business in fact, our net one of the metrics. We use is net revenue retention, which is year over year.

Traffic that we get from our top 20 clients and that's up year over year. So.

We see pretty positive there obviously, that's one factor the other factor that drives revenue there is pricing compression, which historically has been.

<unk>.

We're actually seeing that settle down for a couple of reasons I think one youre not seeing.

Eric Martinuzzi: A lot of the edge cast customers that were churning substantially when we acquired that asset. I think also just to add that we've seen an introduction of our expanded solutions with our V7 product offerings that are. And a simpler pricing plan that's also substantially helping that that churn environment. So have we, you know, I know the customer base doesn't all renew in a given quarter. Are we, are our major exposures? Have we addressed our major exposures and either turn them off or renew them?

The market grow as fast as it had in the past I think most industry <unk>, putting that in low single digits, maybe three 5% overall growth and.

And when you have that.

Media companies have less leverage they have less subscribers and then also we've seen further consolidation in the industry. Some of the news it's out recently, where you see yet other players bowing out of the market. So I think with all of those things being true and the fact that we maintain our high performance and our quality support that part of the business.

Run pretty stably, we're not going to grow it partly because.

Eric Martinuzzi: Yeah, so Eric, this is Bob. How you doing? So you might recall that we the two primary root causes of churn were one client engagement or lack thereof in the second was feature gaps that we had where, you know, competitors had certain features. We had some towering strength and summaries, but we're missing some basics yet the release that we did with application version seven. Close those 23 feature gaps that we had.

The way to grow it is to try to take market share from somebody else, which means you've got to come in lower the pricing. So instead, what we're focused on right now is how do we take what we have in and earn more based on performance and really focus on return on invested capital for that business, which we think is a better and more prudent move for our shareholders.

Great. That's helpful. Thanks, guys.

Thank you.

Eric Martinuzzi: And then, of course, we implemented the client success team, late Q for early Q one and you're starting to see the results of that. The result is the churn is down as importantly renewals are going up in the direction where we want them to. And even more importantly at renewal, we're seeing more typically an expansion of use, you know, versus just a cold renewal. So that's why we believe in the second half of the year.

Your next question comes from the line of Jeff Van <unk> from Craig Hallum. Please go ahead.

Great Yeah. Thanks for taking the questions congrats on getting the getting the feel of the restate and all the heavy lifting for sure a couple of questions for me, Bob maybe just it'd be worth taking a second given this is kind of the reemergence of NGO coming out from from all the noise. If you look back to like mid 'twenty, two when youre, bringing edge.

Eric Martinuzzi: You'll start to see for the first time since the acquisition where renewals and expansion revenue outpace churn, which is what you want in the past company, obviously. Yeah. Okay. And then the the help of your two largest customers, Amazon and Verizon. Could you comment on those relationships? Yeah, very strong positive on all fronts with Verizon. We, you know, because of application version seven. We were able to renew that portion of their agreement recently.

Stan I think the original expectations were around $270 million for that business.

And since then there's been a lot of noise I think obviously the ISP relationships you have to take some of that revenue out at a lot of churn there I guess unclear maybe what happened in the base business just what.

Send a minute and talk about what happened in each of those three components from there to here to give us a sense of where now that you've got a little more clarity on the numbers, where the bulk of the disappointments or revenue Miss came.

Eric Martinuzzi: And they couldn't be happier about about the capabilities and features that we have. And again, expansion conversations there as well. They're also a big reseller partner of ours. So very strong relationship there. And Amazon as always has been a great partner and consistent partner with us. And we're actually growing with them. And which we're excited about. So, and I had a third, you know, Disney is up in that mix as well.

Sure, Yes, Steven feel free to jump in but I will frame. It this way, Jeff and thanks for that comment on early on so the way to think about it is when we <unk>.

I looked at the revenue of the business there were a couple of factors number one.

We had some pricing compression with large customers, who I wouldn't even call it pricing compression I call reset where they were much higher than market and so when we come in and put them on our paper and renegotiate that opened up the door to.

Eric Martinuzzi: We have a very strong relationship there and feeling pretty happy about that relationship as well. Okay. And then last question for me, the cash growth margins you talked about them being, I guess, sequentially higher in Q3. Can we get a little bit more granularity around that. Obviously, the 30.8%. It was below where I was forecasting for Q2. I have a pretty substantial step up in Q3. But can you put some maybe a range around the what your expectation is for Q3 or for 2023?

Reduced prices. So we had one very large social media customer who wanted to have.

Better price was unreasonable ask but so we had to take out here could do that but we were able to renew them for multiple years are actually back to growth with that customer today, but it was kind of a onetime reset. So we had that on a couple of customers that were larger customers all of those turned out to be.

Growing customers on the other side. So it was a onetime reset we had some revenue that we thought was less quality revenue than what we wanted and so we took that out of the equation as well as you normally do when you do an acquisition and then of course, we had the churn. So that's really probably the three drivers.

Eric Martinuzzi: Yeah, Eric. This is Steven. I'll elaborate a little bit more. So, so as a company, you know, I mentioned that we have a high fixed cost structure from the operations on that work that has pressured our growth margins. That certainly came out in the first half of this year. And Q2 even also being a seasonally weaker quarter. As I said, you should expect our cash growth margins to sequentially improve. I would sort of liken it to somewhere in the realms of 300 plus tied basis points as we go into into the third quarter.

When you look at all three of those the resets are done where pass those we've gotten through those renewals and theyre now growth customers with multi year relationships.

The revenue that we wanted to get out because it wasn't good quality revenue has been taken out and then of course, the churn was something that we set up in last year and we said look we're going to do two things, it's going to take US a couple of quarters, we're going to build our client success team and we're going to make sure that we shore up the product and bring those two things together.

Eric Martinuzzi: Obviously, we've got a lot of cost-gaving initiatives and synergies that we're working towards on that 85 to 90 million dollars of cost takeouts and a lot of those going to the cost line. But it takes time to work through some of those. So, from a run rate perspective, you'll see a lot more of that materialized towards the end of the year and then TSM, very nicely for 2024. I understand. Thanks for taking my questions and good luck. Thank you.

<unk> churn into what would be normal rates and assess industry and that's exactly what we've done is taken us about $2 five three quarters.

But we are at run rates now that you would expect to have in a well run SaaS company. So.

That's the way I'd frame frame it overall.

From this point forward, we don't have those headwinds, we don't see any resets churn, we've gotten our arms around it and.

I think it's fair to say that we're turning the corner.

On the top line and the revenue stability.

Frank Louthan: Your next question comes from the line of Frank Louthan from Raymond James. Please go ahead. Great. Thank you. Hey, guys. This is Rob one for Frank. How's pricing in the delivery segment holding up. And you were just characterizing the churn before out of curiosity. Have you guys seen any churn from existing customers related to the share price? Thank you. Yeah, no problem. Hey, Rob. How you doing? It's Bob. So I'll start with the churn.

You referenced Jason.

Just one comment to add to that.

It's important to note certainly we went through a fairly substantial restatement in.

Unfortunately that does take some wind out of our sales certainly you guys are doing.

As a handles and see from our customer base.

Sort of elongated the sales cycle and sort of natural fear uncertainty and doubt when when your when youre.

Not in compliance so I think that sort of tie that a little bit more headwind for us as we can into the first half of this year, obviously thats behind US now and you can see from our results.

Frank Louthan: We actually the churn that we've always talked about was in the applications business acquired as part of the acquisition. We have not seen churn and, you know, kind of a legacy business. In fact, you know, one of the metrics we use is net traffic retention, which is your year traffic that we get from our top 20 clients. And that's all year over year. So we're actually seeing pretty positive there. Obviously, what that that's one factor, the other factor that drives revenue there is pricing compression, which historically is, you know, bit us at times.

<unk>.

Very much more contained and we're starting to get to this inflection point for growth in the second half sequentially.

Okay got it and then on the.

The revenue you mentioned to not expect growth in general out of the Meteor CDN side of that side of the business might be worth just taking a second to talk about the revenue splits how you break up the business and if media is flattish how do you think about the other sectors.

Frank Louthan: We're actually seeing that settle down for a couple of reasons. I think one you're not seeing the market grow as fast as it had in the past. I think most industry pundits put it at low single digits and maybe 35% overall growth. And when you have that, you know, the media companies have less leverage, they have less subscribers. And then also, you know, we've seen further confederation in the industry. Some of the news that felt recently where you know, you see yet other players fouling out of the market.

Yes, do you want take that Steven.

Yes, so I think.

You saw from our commentary in our prepared remarks, we're seeing a very strong pipeline.

And we're seeing some really strong bookings activity is certainly in our apps and security side. In fact, we've seen sequential booking increases since the beginning of this year.

Frank Louthan: So I think with all those things being true and the fact that we maintain our high performance and our quality support, that part of the business is run pretty stably. We're not going to grow it partly because, you know, the way to grow it is to try to take market share from somebody else, which means you got to come in lower the price. And so instead what we're focused on right now is how do we take what we have and earn more based on performance and really focus on return on invested capital for that business. Which we think is a better and more prudent move for our shareholders. Great. That's helpful. Thanks, guys. Thank you.

Yes.

We're building that machine now and so we do expect those will be the growth engine of the company I don't want to put growth rates around at this point in time, but as we get to this inflection point in the second half, we'll see a little bit of uptick in delivery for the second half. This year, just partly because of the seasonality of the business.

But we certainly see some very strong bookings activity in our apps and security side as well as doubling.

And the delivery side is roughly what as a percent of revenue.

It's roughly about 50% give or take.

Okay, and then last one for me.

Jeff Van Ree: Your next question comes from the line of Jeff Van Rie from Craig Hallum. Please go ahead. Great. Yeah. Thanks for taking the questions. Congrats on getting the, you know, getting the feel of the restate and all the heavy lifting for sure. A couple of questions for me, Bob. Maybe just it'd be it'd be worth taking a second given. This is kind of the re-emergence of the edgeo coming out from from all the noise.

If I can just add one more comment today, we spent a lot of time internally talking about.

The easiest way for us to go get growth as with delivery because you can turn it on fast, but it's also the lowest margin.

And it also requires capex to expand the capacity to do that and so while the other part of the other 50% of the business.

Much better profile, it takes a little bit longer to drive growth because you've got the lead time, we think that's the better answer in the long term for the business and so thats where were focused.

Jeff Van Ree: You know, if you look back to like mid 22 when you're bringing an edge cast on, I think the original expectations are around 270 million for that business. And, you know, since then, there's been a lot of noise. I think obviously the ISP relationships. You have to take some of that revenue out. It a lot of turn there. It's I guess unclear. Maybe what happened in the base business. Just what spend a minute and talk about what happened in each of those three components from there to here to give us a sense of, you know, where the now that you've got a little more clarity on the numbers, where the bulk of the disappointments or revenue miscame.

Understood.

And then lastly, I guess just for me on the on the cost cut side I know I think you reiterated the target of $85 90 by the end of the year, where are you now as of the end of Q2, how much of that have you taken out of that 85% to 90 run rate expense.

Expense.

Yeah.

I would say tough to put a.

Specific number on it Jeff, but a lot of that as you've seen from our numbers have come out from from the Opex line. Some of the Cogs items fairly accentual substantial re negotiations with our vendors and takes a while to unlike contracts.

Jeff Van Ree: Sure. Yeah, I and Stephen feel free to jump in, but I'll frame it this way, Jeff. And thanks for that comment on early on. So, you know, the way to think about it is when we looked at the revenue of the business, there were a couple factors. Number one. Number two. We had some pricing compression with large customers who, I wouldn't even call it pricing compression, I call it reset, where they were much higher than market.

Just as a frame of reference we're at 44, 8% of sales now for Opex.

We're at about $56 million exiting 2022, and we're now down to $43 million Opex. So we've seen sort of $50 million of run rate saving some of that was in the previous year on our other cost saving initiatives, but a large portion of that is behind us. So we're probably sort of 40 ish plus million.

Jeff Van Ree: And so when we come in and put them on our paper and renegotiate that opened up the door to reduce prices. So we had one very large social media customer who wanted to have a better price. It was unreasonable to ask, but so we had to take that haircut to do that. But we were able to renew them for multiple years and are actually back to growth with that customer today. But it was kind of a one time at reset.

There and obviously a lot more to happen in the second half probably more in the Cogs line and less in the Opex.

Okay.

Got it okay I'll leave it there thank you.

Thanks, Jeff.

If you would like to ask a question. Please press star one on your telephone keypad.

Jeff Van Ree: So we had that on a couple of customers that were larger customers. All of those turned out to be growing customers on the other side. So it was one time reset. We had some revenue that we thought was less quality revenue than what we wanted. And so we took that out of the equation as well as you normally do when you do an acquisition. And then of course we had the chance.

Your next question comes from the line of Cooper Boulanger from TD Cowen. Please go ahead.

Hi, everyone. Thank you.

As mentioned my name is <unk>.

Yes.

I was hoping that.

Jeff Van Ree: So that's really probably the three drivers. When you look at all three of those, the resets are done, we're past those. We've gotten through those renewals. And they're now growth customers with multi-year relationships. You know, the revenue that we wanted to get out because it wasn't good quality revenue has been taken out. And then of course the turn was something that we set up in last year. We said, look, we're going to do two things.

You guys could provide some color on plans to address.

Refinancing your convertible debt due in 2025 and as part of that is there a leverage level that banks want to see for you to be able to refinance that.

Thank you.

Yeah. Thanks, Steve Let me frame it up and then I'll, let Steven.

Jeff Van Ree: It's going to take us a couple quarters. We're going to build a client success team and we're going to make sure that we shore up the product and bring those two things together to land churn into what would be normal rates and assess industry. And that's exactly what we've done. It's taken us about two and a half three quarters. But, you know, we're at run rates now that you'd expect to have in a well-run SaaS company.

Wayne as well so one of the things when we.

We look at the.

We actually have four pillars of our strategy. The first is improved profitability second is expand our revenue and the third is extend our products into areas. The fourth we don't talk about publicly too much is really aligned our capital structure to support strategy. So we are at the same time horizon and in that there are really two focuses one is the convert obviously as you pointed out in the.

Jeff Van Ree: So that's the way I'd frame it overall from, you know, from this point forward, we don't have those headwinds. We don't see any resets churn. You know, we've gotten our arms around it. And, you know, I think it's fair to say that we're turning the corner on the top line and the revenue stability. Yeah, you referenced. I just had just one comment just to that. I think it's important to know, you know, certainly we went through a steady substantial restatement.

Second is making sure that we have adequate liquidity to be able to fund the growth that we want to have and we're very very focused on both of those things.

I can tell you that.

Steven and I spend a significant amount of time on those topics exploring a number of venues.

Ranging from a full range of possibilities, but what I will tell you is that all roads lead back to getting as much EBITDA hitting our EBIT targets going into 2025, if we can hit the EBIT targets that we have and continue on our successful path that we're on that gives us a lot of optionality ranging from retiring at two converting it to something else.

Jeff Van Ree: And, you know, unfortunately, that does take some wind out of our sales. Certainly there's a there's a hesitancy from our customer base that sort of elongated the sales cycle and sort of natural fear uncertainty and doubt when when you're when you're not in compliance. So I think that sort of created a little bit more headwind for us as we came into the first half of the year. I'll see that's behind us now.

So well.

Well, we certainly explore options today, the best path for US is to continue on this profitability path and make sure that we're putting.

Jeff Van Ree: And, you can see from our results, our churns very much more contained and we're starting to get to this intersection point for a growth and effect of consequential. Okay, got it. And then on the revenue, you mentioned to not expect growth in general out of the meteor CDN side of the side of the business. Might be worth just taking a second to talk about the revenue splits, how you break up the business and if media is flatish, how do you think about the other sectors?

Adequate EBITDA on the bottom line going into 2025, so that we give ourselves the most optionality.

Yeah, and just just to add to that I mean, I think given Cuba, given the significant progress we have already made and the changes to our financial model and the re profile cuts cost structure.

At this point, we expect to be in a much better place really in the over the next few quarters.

To look at that and obviously the time on our side.

Jeff Van Ree: Yeah, do you want to take that Steven? Yeah. Yeah, so I think, you know, you saw from our commentary in our prepared remarks, right, we're seeing a very strong pipeline. And we're seeing some really strong bookings activities, certainly in our action security side. In fact, we've seen sequential booking increases since the beginning of this year. So I, you know, we're building that machine now. And so we do expect those will be the growth engines of the company.

I think it's worth adding that refinancing is one option.

Now, where we need to be as we come into 2024 in order to do that but we're looking at many other options as well so not just a refi I, obviously can't talk about many of them that.

We're looking at a number of options, but refi being one of them.

Okay.

Thank you.

Okay.

Your next question comes from the line.

Rudy Kissinger from D. A Davidson. Please go ahead.

Yes.

Jeff Van Ree: I don't want to put growth rates around at this point in time, but, you know, as we get to this inflection point, the second half will see a little bit of uptick in delivery for the second half of the past this year. And they just partly because of the seniority of the business, but we certainly see some very strong booking activity in our apps and security side as well as ever, and the delivery side is roughly what, as a percent of revenue?

Hey, this is lucky on for <unk>, Thanks for taking our question.

Can you clarify does positive EBITDA in Q4 does that also equal positive free cash flow in Q4, and if not when might we expect to see positive free cash flow.

Yes. This is Stephen we actually haven't guided to positive EBITDA in Q4.

Jeff Van Ree: It's roughly about 50 percent, it will take. Okay, and then last one for me. Jeff, I can just add one more comment today. We spent a lot of time internally talking about, you know, the easiest way for us to go get growth is with delivery because you can turn it on fast, but it's also the lowest margin. And it also requires catbacks to to expand the capacity to do that. And so, well, the other part of the other 50 percent of the business is a much better profile and takes a little bit longer to drive growth because you got the lead time.

Plan is to is to breakeven.

I am pleased with the progress we've already made in Q2, our EBITDA was.

Better than than we guided and we expect to see some.

Essentially improvements throughout the second half, but we're really looking at sort of.

A.

A break even EBITDA number you can see from from a balance sheet, where we have been catching up nicely on some of the payables associated with edge cost acquisition and some one time event. So I think.

Jeff Van Ree: We think that's the better answer in the long term for the business. And so that's what we're focused. Understood. And the last I guess just for me on the cost cut side, I know I think you reiterated the target of 8590 by the end of the year. Where are you now? As of the end of Q2, how much of that have you taken out of that 85 to 90 run rate expense?

Cash flow will be a little bit behind that as we go into 2024, I don't want to pinpoint exactly.

I think at that time, and all of it but certainly with the progress we're making the cost takeout. So we should be in good shape as we go into 2024.

And we have no further questions in the queue at this time I will turn the call back over to the presenters for closing remarks.

Jeff Van Ree: Yeah, I would say it's tough to put a specific number on it, Jeff, but a lot of that, as you've seen from our numbers, has come out from the offex line. You know, some of the cogs items are fairly substantial substantial renegotiations with our vendors and takes a lot to unwide contracts. So, you know, just as a frame of reference, we're at what 44.8 percent of sales now for our offex. We were at what 56 million dollars exiting 2022.

Okay.

Well, thank you everybody for joining us today.

Couple of quick points that I want to share is that well the last six months have been.

Certainly difficult incredibly difficult in fact, I think it's fair to say that during that time, we have in fact strengthening the leadership team. We've strengthened the products that we have and we have really gotten in front of some of the headwinds that we were challenged with and really set the company up so that we can go into the back half of this year moving back into a positive direction and set up for <unk>.

Jeff Van Ree: And we're now down to 43 million dollars offex. So, you know, we've seen sort of 50 million dollars of run rate saving some of that was in the previous year on our other cost saving initiatives, but a large portion of that is behind us. So, we're probably sort of 40 plus million there and obviously a lot more to happen in the second half, probably more in the cogs line and less in the offex. Got it. Okay, I'll leave it there. Thank you. Thanks, Jeff. If you would like to ask a question, please press star one on your telephone keypad.

Around 2024, so that's what we're focused on.

The management team is pretty excited about what's in front of us. So we've still got a lot to do and we'll stay focused on that but we appreciate everybody's patience Stephen and I are both very happy to have this distraction behind us and looking forward to engaging.

With our investors much more actively as we in the back half of this year as we start to move forward. So thank you very much and look forward to speaking everybody soon.

This concludes today's conference. Thank you for your participation and you may now disconnect.

Cooper Belanger: Your next question comes from the line of Cooper Belage from TD Cowan. Please go ahead. Hi, everyone. Thank you. As mentioned, my name is Cooper. I was hoping that you guys could provide some color on plans to address refinancing your convertible debt due in 2025. And as part of that is their leverage level that banks want to see for you to be able to refinance that. Thank you. Thanks, Cooper. Let me frame it up and then I'll let Steven, you know, weigh in as well.

Cooper Belanger: So, you know, one of the things when we look at the week, we actually have four pillars of our strategy. You know, the first is improved profitability. The second is expand our revenue and the third is extend our products into our areas. The fourth, we don't talk about publicly too much is really align our capital structure to support strategy. So we have the same time horizon. And then that there are really two focuses.

Cooper Belanger: One is the convert. Obviously, as you point out in the second is making sure that we have adequate liquidity to be able to fund the growth that we want to have. And we're very, very focused on both of those things. I can tell you that we, you know, Steven and I spend a significant amount of time on those topics exploring a number of venues. You know, ranging from a full range of possibilities, but what I will tell you is that all roads lead back to getting as much EBITDA, you know, hitting our EBITDA targets going into 2025 if we can hit the EBITDA targets that we have and continue on the successful path that we're on.

Cooper Belanger: That gives us a lot of optionality, you know, ranging from retiring it to, you know, converting it to something else. And so well, we certainly explore options today. The best path for us is to continue on this profitability path and make sure that we're putting adequate EBITDA on the bottom line going into 2025 so that we give ourselves the most options.

Bob Lyons: [inaudible] This concludes today's conference. Thank you for your participation, and you may now disconnect.