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Press Release

Limelight Networks(R) Reports Third Quarter 2011 Results

Company Release - 11/7/2011 4:01 PM ET

TEMPE, Ariz., Nov. 7, 2011 (GLOBE NEWSWIRE) -- Limelight Networks, Inc. (Nasdaq:LLNW) ("Limelight") today reported third quarter 2011 financial results.

"We were pleased with our progress in scaling Limelight Networks' globally distributed, high-performance content delivery, storage and compute platform in the quarter. This platform serves as a great foundation for our core growth initiative – the launch of high-value, integrated software-as-a-service and platform-as-a-service offerings, which are differentiated from those of point solution providers. Revenue from these value-added services excluding EyeWonder and chors grew 73% year-over-year," said Jeff Lunsford, chairman and chief executive officer. "In the quarter, we saw many instances of customer success, as Limelight solutions enabled our customers to increase competitiveness, enhance user experience and operate more nimbly and efficiently in today's hyper-connected world."

Specific highlights for the third quarter included:

  • Revenue of $47.3 million, including $42.4 million from continuing operations
  • Value added services revenue growth of 73% year-over year after backing out EyeWonder and chors
  • Value added services comprised 29% of revenue:
  • Mobile internet and tablet computing revenue grew in excess of 150% year-over-year
  • Online video platform revenue grew in excess of 180% year-over-year
  • Site and application acceleration services revenue grew in excess of 50% year-over-year
  • Enterprise cloud storage revenue grew in excess of 35% year-over-year
  • Repurchased approximately 3.8 million shares of common stock at an average price of $2.42 per share during the third quarter.  As of November 4, 2011, we have re-purchased 7.5 million shares of common stock at an average price of $2.50 per share.  

Financial Highlights

For the third quarter of 2011, the Company reported revenue of $42.4 million from continuing operations, adjusted EBITDA of $3.6 million and non-GAAP net loss, before share-based compensation, litigation expenses, amortization of intangible assets, acquisition-related expenses, and discontinued operations of $2.2 million or 2 cents per basic share. GAAP net loss from continuing operations was $6.4 million, or 6 cents per basic share. Total net income, which includes the gain from discontinued operations of approximately $11.4 million, was $5.0 million or 4 cents per basic share.

Capital investments were $7.5 million in the quarter. The Company ended the quarter with no bank debt and approximately $158 million in cash and short-term marketable securities.

2011 Outlook

The Company anticipates fourth quarter revenue to be in the range of $44-$46 million. 

Financial Tables

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
     
  September 30,  December 31, 
  2011 2010
  (Unaudited)  
ASSETS    
Current Assets:    
 Cash and cash equivalents  $ 143,840  $ 54,861
 Marketable securities  13,889  12,009
 Accounts receivable, net of reserves of $4,688 and $6,732 at September 30, 2011 and December 31, 2010  27,648  28,022
 Income taxes receivable  833  215
 Prepaid expenses and other current assets  23,789  8,277
 Assets of discontinued operations  --  64,739
Total current assets  209,999  168,123
Property and equipment, net  58,904  52,891
Marketable securities, less current portion  66  103
Deferred income tax, less current portion  946  718
Goodwill  80,287  68,390
Other intangible assets, net  10,106  2,061
Other assets  10,624  6,354
Total assets  $ 370,932  $ 298,640
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current Liabilities:    
 Accounts payable  $ 9,955  $ 10,300
 Deferred revenue, current portion  5,867  6,554
 Capital lease obligation, current portion  1,733  934
 Other current liabilities  16,980  16,754
 Liabilities of discontinued operations  --  6,301
Total current liabilities  34,535  40,843
Capital lease obligation, less current portion  2,543  1,641
Deferred income tax, less current portion  370  26
Deferred revenue, less current portion  419  --
Other long term liabilities  3,852  21
Total liabilities  41,719  42,531
Commitments and contingencies  --  --
Stockholders' equity:    
 Convertible preferred stock, $0.001 par value; 7,500 shares authorized; 0 shares issued and outstanding  --  --
 Common stock, $0.001 par value; 300,000 shares authorized at September 30, 2011 and 150,000 shares authorized    
 at December 31, 2010; 110,265 and 100,068 shares issued and outstanding at September 30, 2011 and     
 and December 31, 2010, respectively  110  100
 Additional paid-in capital  473,669  380,338
 Contingent consideration  219  1,608
 Accumulated other comprehensive income   216  329
 Accumulated deficit  (145,001)  (126,266)
Total stockholders' equity  329,213  256,109
Total liabilities and stockholders' equity  $ 370,932  $ 298,640
               
LIMELIGHT NETWORKS, INC.              
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS              
(In thousands, except per share data)              
(Unaudited)              
                           
                           
  Three Months Ended Nine Months Ended              
                           
  September 30, June 30, September 30, June 30, September 30, September 30,              
  2011 2011 2010 2010 2011 2010              
                           
Revenues  $ 42,352  $ 41,558  $ 39,952  $ 35,563  $ 125,313  $ 111,199              
Costs and operating expenses                          
 Cost of revenues * †  27,278  28,377  24,976  21,974  81,920  67,910              
 General and administrative * †  9,915  9,675  7,027  8,725  26,752  24,374              
 Sales and marketing *  9,176  9,929  10,021  9,483  29,903  28,891              
 Research & development *  4,360  4,503  2,909  2,304  12,554  7,490              
Total costs and operating expenses  50,729  52,484  44,933  42,486  151,129  128,665              
                           
Operating loss   (8,377)  (10,926)  (4,981)  (6,923)  (25,816)  (17,466)              
                           
Interest expense  (89)  (100)  --  (3)  (225)  (3)              
Interest income  186  254  210  255  624  767              
Other income (expense)  (18)  32  (145)  10  17  (161)              
                           
Loss before taxes  (8,298)  (10,740)  (4,916)  (6,661)  (25,400)  (16,863)              
Income tax (benefit) expense  (1,896)  429  406  463  (1,329)  1,110              
                           
Loss from continuing operations  (6,402)  (11,169)  (5,322)  (7,124)  (24,071)  (17,973)              
                           
Discontinued operations:                          
 Gain (loss) from discontinued operations  11,420  (2,766)  (632)  4,859  5,336  3,969              
                           
Net income (loss)  $ 5,018  $ (13,935)  $ (5,954)  $ (2,265)  $ (18,735)  $ (14,004)              
                           
Net income (loss) per share:                          
 Basic                          
 Continuing operations  $ (0.06)  $ (0.10)  $ (0.05)  $ (0.07)  $ (0.22)  $ (0.19)              
 Discontinued operations  $ 0.10  $ (0.02)  $ (0.01)  $ 0.05  $ 0.05  $ 0.04              
 Total  $ 0.04  $ (0.12)  $ (0.06)  $ (0.02)  $ (0.17)  $ (0.15)              
                           
 Diluted                          
 Continuing operations  $ (0.06)  $ (0.10)  $ (0.05)  $ (0.07)  $ (0.22)  $ (0.19)              
 Discontinued operations  $ 0.10  $ (0.02)  $ (0.01)  $ 0.05  $ 0.05  $ 0.04              
 Total  $ 0.04  $ (0.12)  $ (0.06)  $ (0.02)  $ (0.17)  $ (0.15)              
                           
Shares used in per share calculations:                          
 Basic  113,662  113,113  98,634  93,889  110,231  92,547              
 Diluted  113,662  113,113  98,634  93,889  110,231  92,547              
                           
                           
* Includes share-based compensation (see supplemental table for figures)                      
                           
† Includes depreciation and amortization (see supplemental table for figures)                      
                           
                           
                           
LIMELIGHT NETWORKS, INC.
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
             
             
  Three Months Ended Nine Months Ended
             
  September 30, June 30, September 30, June 30, September 30, September 30,
  2011 2011 2010 2010 2011 2010
Supplemental financial data (in thousands):            
             
Share-based compensation:            
             
Cost of revenues  $ 514  $ 716  $ 609  $ 572  $ 1,805  $ 1,779
General and administrative  1,093  1,769  1,418  1,322  4,133  4,574
Sales and marketing  695  1,099  1,246  1,250  2,932  3,702
Research and development  687  1,288  795  720  2,824  2,220
             
Total share-based compensation  $ 2,989  $ 4,872  $ 4,068  $ 3,864  $ 11,694  $ 12,275
             
Depreciation and amortization:            
             
Network-related depreciation  $ 7,035  $ 7,316  $ 5,828  $ 5,288  $ 21,008  $ 15,894
Other depreciation and amortization  725  599  578  592  1,723  1,760
Amortization of intangible assets  774  605  121  28  1,531  180
             
Total depreciation and amortization  $ 8,534  $ 8,520  $ 6,527  $ 5,908  $ 24,262  $ 17,834
             
             
Net increase (decrease) in cash, cash equivalents and marketable securities:  $ 44,248  $ (19,064)  $ (11,963)  $ (66,817)  $ 90,822  $ (84,373)
             
             
End of period statistics:            
             
Approximate number of active customers  1,602  1,630  1,565  1,401  1,602  1,565
             
Number of employees  473  486  384  350  473  384
 
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
             
  Three Months Ended Nine Months Ended
             
  September 30, June 30, September 30, June 30, September 30, September 30,
  2011 2011 2010 2010 2011 2010
             
             
Cash flows from operating activities:            
Net income (loss)  $ 5,018  $ (13,935)  $ (5,954)  $ (2,265)  $ (18,735)  $ (14,004)
Income (loss) from discontinued operations  11,420  (2,766)  (632)  4,859  5,336  3,969
Net loss from continuing operations  (6,402)  (11,169)  (5,322)  (7,124)  (24,071)  (17,973)
             
Adjustments to reconcile net loss to net cash            
 provided by (used in) operating activities:            
Depreciation and amortization  8,533  8,520  6,521  5,908  24,262  17,832
Share-based compensation  2,989  4,872  4,068  3,863  11,694  12,275
Deferred income taxes  43  5  10  --  (31)  10
Loss (gain) on foreign currency transactions  --  --  --  --  --  --
Loss (gain) on sale of property and equipment  --  --  60  3  --  152
Accounts receivable charges  298  388  550  588  919  2,307
Accretion of marketable securities  (81)  (58)  (50)  300  (90)  274
Non cash tax benefit associated with sale of discontinued operations  (2,165)  --  --  --  (2,165)  --
Non cash cost basis investment  (397)  (282)  --  --  (679)  --
Changes in operating assets and liabilities:            
 Accounts receivable  (1,623)  847  (3,562)  344  384  (3,280)
 Prepaid expenses and other current assets  (1,028)  253  671  (405)  (1,684)  1,065
 Income taxes receivable  (106)  (37)  94  279  (268)  377
 Other assets  370  81  216  1,185  (3,563)  1,234
 Accounts payable  2,666  491  (300)  (1,033)  2,324  (998)
 Deferred revenue  45  (1,831)  (1,881)  757  (2,561)  (4,227)
 Other current liabilities  (2,039)  (289)  1,070  1,523  (4,302)  3,396
 Other long term liabilities  549  370  21  --  1,002  21
Net cash provided by (used in) operating activities  1,652  2,161  2,166  6,188  1,171  12,465
             
Cash flows from investing activities:            
Purchase of marketable securities  (9,688)  (4,218)  (8,715)  (2,000)  (15,316)  (27,470)
Sale of marketable securities  2,350  4,200  12,405  33,180  13,520  73,585
Purchases of property and equipment  (7,529)  (11,370)  (11,509)  (9,426)  (26,872)  (25,180)
Acquisition of discontinued operations  --  --  --  (61,903)  --  (63,907)
Acquisition of businesses, net of cash acquired  133  (7,493)  (2,622)  --  (7,360)  (2,622)
Proceeds from sale of discontinued operations  61,000  --  --  --  61,000  --
Net cash provided by (used in) investing activities  46,266  (18,881)  (10,441)  (40,149)  24,972  (45,594)
             
Cash flows from financing activities:            
Payments on capital lease obligations  (352)  (403)  --  --  (982)  --
Proceeds from exercise of stock options  136  71  335  100  622  462
Proceeds from secondary public offering, net  (48)  (72)  --  --  77,049  --
Cash paid for re-purchase of common stock  (9,210)  --  --  --  (9,210)  --
Payment of employee tax withholdings related to restricted stock  (113)  (713)  (245)  (385)  (1,060)  (632)
Net cash (used in) provided by financing activities  (9,587)  (1,117)  90  (285)  66,419  (170)
Effect of exchange rate changes on cash  (420)  90  --  40  (96)  189
             
Cash flows from discontinued operations:            
Cash (used in) provided by operating activities of discontinued operations  (899)  (793)  4  1,909  (2,803)  (4,639)
Cash used in investing activities of discontinued operations  (143)  (464)  (169)  (52)  (684)  (226)
Net cash (used in) provided by discontinued operations  (1,042)  (1,257)  (165)  1,857  (3,487)  (4,865)
Net increase (decrease) in cash and cash equivalents  36,869  (19,004)  (8,350)  (32,349)  88,979  (37,975)
Cash and cash equivalents, beginning of period   106,971  125,975  59,884  92,233  54,861  89,509
Cash and cash equivalents, end of period  $ 143,840  $ 106,971  $ 51,534  $ 59,884  $ 143,840  $ 51,534

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use Non-GAAP net income (loss) and Adjusted EBITDA as a supplemental measure of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income (loss) to be an important indicator of overall business performance because it allows us to illustrate the impact of the effects of share-based compensation, litigation expenses, amortization of intangibles, acquisition related expenses and discontinued operations. We define EBITDA as GAAP net income (loss) before interest income, interest expense, other income and expense, provision for income taxes, depreciation and amortization, and discontinued operations. We believe that EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA adjusted for operational expenses that we do not consider reflective of our ongoing operations. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors' use of operating performance comparisons from period to period. In addition, it should be noted that our performance-based executive officer bonus structure is tied closely to our performance as measured in part by certain non-GAAP financial measures.

The terms Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are not defined under United States generally accepted accounting principles, or United States GAAP, and are not measures of operating income, operating performance or liquidity presented in accordance with United States GAAP. Our Non-GAAP net income (loss), EBITDA and Adjusted EBITDA have limitations as analytical tools, and when assessing our operating performance, Non-GAAP net income (loss), EBITDA and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with United States GAAP. Some of these limitations include, but are not limited to:

  • EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
  • they do not reflect changes in, or cash requirements for, our working capital needs;
  • they do not reflect the cash requirements necessary for litigation costs;
  • they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;
  • they do not reflect income taxes or the cash requirements for any tax payments;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will be replaced sometime in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
  • while share-based compensation is a component of operating expense, the impact on our financial statements compared to other companies can vary significantly due to such factors as the assumed life of the options and the assumed volatility of our common stock; and
  • other companies may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our GAAP results and using Non-GAAP net income (loss) and Adjusted EBITDA only as supplemental support for management's analysis of business performance. Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are calculated as follows for the periods presented in thousands:

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable GAAP measures.

LIMELIGHT NETWORKS, INC.
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)
(In thousands)
(Unaudited)
             
             
  Three Months Ended Nine Months Ended
             
  September 30, June 30, September 30, June 30, September 30, September 30,
  2011 2011 2010 2010 2011 2010
             
GAAP net income (loss)  $ 5,018  $ (13,935)  $ (5,954)  $ (2,265)  $ (18,735)  $ (14,004)
             
Share-based compensation  2,989  4,872  4,068  3,864  11,694  12,275
Litigation defense expenses  463  269  9  1,726  1,075  2,127
Acquisition related expenses  (41)  559  345  409  659  1,358
Amortization of intangible assets  774  605  121  28  1,531  180
(Income) loss from discontinued operations  (11,420)  2,766  632  (4,859)  (5,336)  (3,969)
             
Non-GAAP net loss  $ (2,217)  $ (4,864)  $ (779)  $ (1,097)  $ (9,112)  $ (2,033)
LIMELIGHT NETWORKS, INC.
Reconciliation of GAAP Net Income (Loss) to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)
             
             
  Three Months Ended Nine Months Ended
             
  September 30, June 30, September 30, June 30, September 30, September 30,
  2011 2011 2010 2010 2011 2010
             
GAAP net income (loss)  $ 5,018  $ (13,935)  $ (5,954)  $ (2,265)  $ (18,735)  $ (14,004)
             
Depreciation and amortization  8,534  8,520  6,527  5,908  24,262  17,834
Interest expense  89  100  --  3  225  3
Interest and other (income) expense  (168)  (286)  (65)  (265)  (641)  (606)
Income tax expense (benefit)   (1,896)  429  406  463  (1,329)  1,110
(Income) loss from discontinued operations  (11,420)  2,766  632  (4,859)  (5,336)  (3,969)
             
EBITDA  157  (2,406)  1,546  (1,015)  (1,554)  368
             
Share-based compensation  2,989  4,872  4,068  3,864  11,694  12,275
Litigation defense expenses  463  269  9  1,726  1,075  2,127
Acquisition related expenses  (41)  559  345  409  659  1,358
             
Adjusted EBITDA   $ 3,568  $ 3,294  $ 5,968  $ 4,984  $ 11,874  $ 16,128

Conference Call

At approximately 4:30 p.m. EST (1:30 p.m. PST) today, management will host a quarterly conference call for investors. Investors can access this call toll-free at 877-388-8480 within the United States or +1 678-809-1592 outside of the U.S. The conference call will also be audiocast live from http://www.limelight.com and a replay will be available following the call from the Company's website.

Safe-Harbor Statement

This press release contains forward-looking statements concerning, among other things, the outlook for the Company's revenues, net loss and stock-based compensation expenses, customer growth, market growth, pricing pressures, expansion into additional market segments, product and services improvements, the integration of acquired businesses and litigation and acquisition related expenses. Forward-looking statements represent the current judgment and expectations of Limelight Networks and are not guarantees and are subject to a number of risks and uncertainties that could cause actual results to differ materially including, but not limited to, risks and uncertainties discussed in the Company's Annual Report on Form 10K and other filings with the Securities and Exchange Commission and the final review of the results and amendments and preparation of quarterly financial statements, including consultation with our outside auditors. Accordingly, readers are cautioned not to place undue reliance on any forward-looking statements. The Company assumes no duty or obligation to update or revise any forward-looking statements for any reason.

About Limelight Networks, Inc.

Limelight Networks, Inc. (Nasdaq:LLNW) provides solutions that enable business and technology decision makers to profit from the shift of content and advertising to the online world, the explosive growth of mobile and connected devices, and the migration of IT applications and services into the cloud. Our worldwide customers use Limelight's massively scalable software services to engage audiences, enhance brand presence, analyze viewer preferences, optimize advertising, manage and monetize digital assets, and ultimately build stronger customer relationships. For more information, please visit http://www.limelight.com or follow us on Twitter at www.twitter.com/llnw.

Copyright (C) 2011 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

CONTACT: Heather Miller
         215-867-8600 ext. 239
         media@llnw.com
Source: Limelight Networks

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Limelight Networks, Inc.

222 S. Mill Ave.
Tempe AZ 85281
602-850-5000
limelight.com

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