Edgio, Inc. (Nasdaq: EGIO), the globally-scaled software solutions provider powering secure seamlessly integrated delivery, applications and streaming experiences at the edge, announced on Thursday the successful completion of Limelight’s acquisition of Edgecast. The combined company will operate as Edgio, delivering significantly increased scale and scope with diversified revenue across products, clients, geographies and channels, and an expanded total addressable market of $40 billion.
Edgio solutions combine the power of edge platform with a complete set of capabilities for web applications, APIs and video content – continuing on its strategy to improve profitability and growth. Edgio now delivers about 20 percent of the world’s internet traffic from instant-loading websites to high-demand content for 20,000 leading digital companies such as Amazon, Sony, Kate Spade, Microsoft, Sun TV, Verizon, Disney, TikTok and Twitter.
“In a world where digital workloads and their consumers are increasingly distributed, the ability for companies to deliver exceptional digital experiences requires them to more productively build faster and safer solutions for their customers at the edge. Today marks a meaningful step in our ability to address this need. Edgio now boasts the most complete edge-native web application and API solution, best-in-class streaming and delivery capabilities – all running on the world’s most performant globally-scaled edge network. These unique capabilities create a robust platform for growth and profitability,” said Bob Lyons, CEO of Edgio.
Growth and profitability
Building on this platform, Edgio will immediately improve its revenue profile to include a balance of both usage-based and SaaS-like margin profiles. The expansion of cross- and up-sell opportunities coupled with increased channel capabilities support planned growth improvements. On a pro-forma basis, the largest client will be approximately 13 percent of revenue, with no other client exceeding 10 percent.
Profitability will benefit from annual run-rate cost synergies of greater than $50 million, including approximately $30 to 35 million of COGs related to colocation and internet peering expenses, and approximately $15 to 20 million of operating expense savings. Edgio expects to achieve approximately half of the $50 million in synergies in the first two quarters after closing. Additionally, the $30 million cash investment by Apollo Funds further strengthens the balance sheet to support continued growth initiatives.
Based on these drivers, Edgio will continue building growth and profitability momentum in the near term toward its longer-term strategic target of a balanced rule-of-40 performance.
“Edgio stands to be a recognized leader in delivering digital solutions natively at the edge, and Apollo is very excited to participate in this shared vision,” said Apollo Partner Reed Rayman, who will join the company’s board of directors. “We believe Edgio can quickly become the recognized go-to partner to power edge native digital solutions for businesses seeking to deliver faster and safer digital experiences for their customers.”
In connection with the sale, Yahoo received approximately 80.8 million shares of Limelight common stock, valuing Edgecast at approximately $300 million based on the 30-day trailing VWAP of approximately $4.12. The purchase price included a $30 million cash investment into Edgio by Apollo and its co-investors, through their ownership of Yahoo as well as preliminary net working capital adjustments, which include the prepayment of certain expenses by Yahoo.
Yahoo can also receive up to an additional 12.7 million shares of Edgio, representing up to $100 million of additional deal consideration, over the period ending on the third anniversary of the closing of the transaction, subject to the achievement of share-price targets. Edgio stockholders own approximately 66.8 percent of the combined company, or approximately 63.5 percent under the assumption that Edgio achieves all share price targets under the conditional consideration agreement, while Yahoo will own approximately 33.2 percent or 36.5 percent, respectively.
Hivestack and Yahoo announce strategic global programmatic DOOH partnership