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Press Release

Limelight Networks® Reports Financial Results for the Third Quarter of 2016

Company Release - 10/26/2016 4:01 PM ET
  • Q3 revenue of $39.5 million, down 6 percent
  • Gross margin of 41.1%, up 330 basis points
  • GAAP EPS of $(0.06), compared to $(0.08) prior year
  • Break-even non-GAAP EPS, compared to $(0.04) prior year
  • Generated cash from operations
  • Guidance reflects momentum heading into Q4

TEMPE, Ariz.--(BUSINESS WIRE)-- Limelight Networks, Inc. (Nasdaq:LLNW) (Limelight), a global leader in digital content delivery, today reported revenue of $39.5 million for the third quarter ended September 30, 2016, compared to $42.0 million in the third quarter of 2015, a decrease of six percent.

Gross margin was 41.1% in the third quarter of 2016, an increase of 330 basis points from 37.8% in the third quarter of 2015.

Limelight reported a net loss of $6.1 million, or $0.06 per basic share, for the third quarter of 2016, compared to a net loss of $7.8 million, or $0.08 per basic share, in the third quarter of 2015.

Non-GAAP net loss was $0.3 million, or break-even per basic share, for the third quarter of 2016 compared to a non-GAAP net loss of $4.3 million, or $0.04 per basic share, in the third quarter of 2015.

EBITDA was negative $0.7 million for the third quarter of 2016 compared to negative $3.0 million for the third quarter of 2015. Adjusted EBITDA was $5.1 million for the third quarter of 2016 compared to $0.3 million for the third quarter of 2015.

During the third quarter of 2016, Limelight generated $1.0 million in cash from operations. This is the sixth consecutive quarter of cash provided by operations.

Limelight ended the third quarter with 502 employees and employee equivalents, down from 512 employees at the end of the second quarter of 2016, and down from 556 employees in the year ago period.

Commenting on the results, Chief Executive Officer, Robert Lento said, “We delivered strong financial and operational performance driven by margin expansion, meaningful cost structure improvements, and disciplined revenue acquisition and restrained discounting. Limelight has achieved four consecutive quarters of triple digit gross margin expansion compared to prior year. Limelight’s customer satisfaction as measured by NPS score improved to the highest level since we started tracking this measure. Increasingly, we are being recognized for our quality, performance and service.”

He added, “We expect to deliver a strong fourth quarter with sequential and year-over-year quarterly revenue growth, and possibly the best quarterly gross margin and profitability profile for the year. With a strong financial foundation in place, we are focused on driving profitable revenue growth, and we expect to grow the business in the fourth quarter and into 2017, even as we further expand margins.”

Based on current conditions, for the fourth quarter, Limelight expects revenues to be between $43 and $45 million. Gross margin is expected to improve by over 250 basis points versus prior year, translating into positive non-GAAP earnings per share. Capital expenditures should total less than $15 million for the full year.

Financial Tables

 

LIMELIGHT NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

       
September 30, June 30, December 31,
2016 2016 2015
(Unaudited) (Unaudited)

ASSETS

Current assets:
Cash and cash equivalents $ 74,400 $ 30,885 $ 44,680
Restricted cash - 62,790 -
Marketable securities - - 28,322
Accounts receivable, net 22,859 24,872 26,795
Income taxes receivable 117 135 170
Deferred income taxes 85 80 89
Prepaid expenses and other current assets   5,347     6,278     9,578  
Total current assets 102,808 125,040 109,634
Property and equipment, net 29,643 30,647 36,143
Marketable securities, less current portion 40 40 40
Deferred income taxes, less current portion 1,317 1,284 1,252
Goodwill 76,437 76,242 76,143
Other assets   1,848     1,903     2,415  
Total assets $ 212,093   $ 235,156   $ 225,627  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 9,922 $ 7,630 $ 9,137
Deferred revenue 1,400 2,469 2,890
Capital lease obligations - 1,119 466
Income taxes payable 141 165 204
Provision for litigation 18,000 18,000 -
Other current liabilities   10,828     10,391     10,857  
Total current liabilities 40,291 39,774 23,554
Long-term debt - 12,790 -
Capital lease obligations, less current portion - 3,008 1,436
Deferred income taxes 148 145 137
Deferred revenue, less current portion 30 52 92
Provision for litigation, less current portion 31,500 36,000 -
Other long-term liabilities   1,747     1,963     2,311  
Total liabilities 73,716 93,732 27,530
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $0.001 par value; 7,500 shares authorized; no shares issued and outstanding - - -
Common stock, $0.001 par value; 300,000 shares authorized; 105,218, 104,653 and 102,299 shares issued and outstanding at September 30, 2016, June 30, 2016 and December 31, 2015, respectively
105 104 102
Additional paid-in capital 486,574 483,903 477,202
Accumulated other comprehensive loss (9,901 ) (10,304 ) (10,812 )
Accumulated deficit   (338,401 )   (332,279 )   (268,395 )
Total stockholders' equity   138,377     141,424     198,097  
Total liabilities and stockholders' equity $ 212,093   $ 235,156   $ 225,627  
 
                   

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, Percent September 30, Percent September 30, September 30, Percent

2016

2016 Change 2015 Change 2016 2015 Change
 
Revenues $ 39,473   $ 43,560   -9 % $ 42,049   -6 % $ 124,456   $ 128,173   -3 %
Cost of revenue:
Cost of services (1) 18,834 20,271 -7 % 21,502 -12 % 59,214 64,430 -8 %
Depreciation - network   4,401     4,489   -2 %   4,636   -5 %   13,558     13,164   3 %
Total cost of revenue   23,235     24,760   -6 %   26,138   -11 %   72,772     77,594   -6 %
Gross profit 16,238 18,800 -14 % 15,911 2 % 51,684 50,579 2 %
Gross profit percentage 41.1 % 43.2 % 37.8 % 41.5 % 39.5 %
Operating expenses:
General and administrative (1) 8,033 7,241 11 % 6,586 22 % 22,082 19,518 13 %
Sales and marketing (1) 7,711 8,117 -5 % 9,489 -19 % 24,730 29,767 -17 %
Research & development (1) 5,626 6,289 -11 % 7,429 -24 % 18,241 21,338 -15 %
Depreciation and amortization 613 626 -2 % 648 -5 % 1,862 1,924 -3 %
Provision for litigation   -     54,000   NA   -   NA   54,000     -   NA
Total operating expenses   21,983     76,273   -71 %   24,152   -9 %   120,915     72,547   67 %
 
Operating loss (5,745 ) (57,473 ) -90 % (8,241 ) -30 % (69,231 ) (21,968 ) 215 %
 
Other income (expense):
Interest expense (406 ) (279 ) 46 % - NA (865 ) (4 ) NA
Interest income 8 8 0 % 82 -90 % 22 231 -90 %
Other, net   151     (79 ) -291 %   473   -68 %   472     2,155   -78 %
Total other income (expense)   (247 )   (350 ) -29 %   555   -145 %   (371 )   2,382   -116 %
 
Loss before income taxes (5,992 ) (57,823 ) -90 % (7,686 ) -22 % (69,602 ) (19,586 ) 255 %
Income tax expense   130     115   13 %   76   71 %   404     221   83 %
 
Net loss   (6,122 )   (57,938 ) -89 %   (7,762 ) -21 %   (70,006 )   (19,807 ) 253 %
 
Net loss per share:
Basic and diluted $ (0.06 ) $ (0.56 ) $ (0.08 ) $ (0.67 ) $ (0.20 )
 
Weighted average shares used in per share calculation:
Basic and diluted 104,860 103,904 100,552 103,819 99,676
 
 
(1) Includes share-based compensation (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, September 30, September 30,
2016 2016 2015 2016 2015
 
 

Share-based compensation:

Cost of services $ 209 $ 436 $ 400 $ 1,118 $ 1,484
General and administrative 1,616 1,677 1,513 5,119 4,395
Sales and marketing 641 638 643 2,016 1,940
Research and development   521   542   568     1,523   1,654  
 
Total share-based compensation $ 2,987 $ 3,293 $ 3,124   $ 9,776 $ 9,473  
 

Depreciation and amortization:

Network-related depreciation $ 4,401 $ 4,489 $ 4,636 $ 13,558 $ 13,164
Other depreciation and amortization 611 620 445 1,848 1,322
Amortization of intangible assets   2   6   203     14   602  
 
Total depreciation and amortization $ 5,014 $ 5,115 $ 5,284   $ 15,420 $ 15,088  
 
Net increase (decrease) in cash, cash equivalents and marketable securities: $ 43,515 $ 6,744 $ (5,342 ) $ 1,398 $ (23,509 )
 
End of period statistics:
Approximate number of active customers 875 904 981 875 981
Number of employees and employee equivalents 502 512 556 502 556
 
             
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
   
 
Three Months Ended Nine Months Ended
 
September 30, June 30, September 30, September 30, September 30,
2016 2016 2015 2016 2015
 
Operating activities
Net loss $ (6,122 ) $ (57,938 ) $ (7,762 ) $ (70,006 ) $ (19,807 )
 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 5,014 5,115 5,284 15,420 15,088
Share-based compensation 2,987 3,293 3,124 9,776 9,473
Provision for litigation - 54,000 - 54,000 -
Foreign currency remeasurement loss (gain) 343 467 (488 ) 509 (2,083 )
Deferred income taxes (39 ) (68 ) 94 (25 ) (21 )
Gain on sale of property and equipment (162 ) (134 ) - (296 ) -
Accounts receivable charges 69 83 268 36 738
Amortization of premium on marketable securities - - 46 19 152
Realized loss on sale of marketable securities - - - 32 -
Changes in operating assets and liabilities:
Accounts receivable 1,944 2,497 4,025 3,901 (5,267 )
Prepaid expenses and other current assets 941 (191 ) 498 4,333 296
Income taxes receivable 16 51 24 54 35
Other assets 50 166 578 558 1,587
Accounts payable and other current liabilities 1,769 1,566 (1,156 ) (670 ) 510
Deferred revenue (1,091 ) (934 ) (568 ) (1,552 ) (251 )
Income taxes payable (21 ) 72 (78 ) (76 ) (78 )
Provision for litigation (4,500 ) - - (4,500 ) -
Other long term liabilities   (213 )   (1,237 )   (225 )   (550 )   (669 )
Net cash provided by (used in) operating activities   985     6,808     3,664     10,963     (297 )
 

Investing activities

Purchases of marketable securities - - (4,899 ) - (16,820 )
Sale and maturities of marketable securities - - 5,160 28,315 16,920
Change in restricted cash 62,790 - - - -
Purchases of property and equipment   (2,986 )   (259 )   (8,693 )   (4,666 )   (20,754 )
Net cash provided by (used in) investing activities   59,804     (259 )   (8,432 )   23,649     (20,654 )
 
Financing activities
Principal payments on capital lease obligations (4,207 ) (319 ) - (4,685 ) (358 )
Payment of employee tax withholdings related to restricted stock vesting (362 ) (298 ) (335 ) (1,306 ) (2,279 )
Cash paid for purchase of common stock - - - - (957 )
Proceeds from line of credit (12,790 ) - - - -
Proceeds from employee stock plans   48     813     212     904     2,731  
Net cash (used in) provided by financing activities   (17,311 )   196     (123 )   (5,087 )   (863 )
Effect of exchange rate changes on cash and cash equivalents   37     (1 )   (159 )   195     (501 )

Net increase (decrease) in cash and cash equivalents

43,515 6,744 (5,050 ) 29,720 (22,315 )

Cash and cash equivalents, beginning of period

  30,885     24,141     40,502     44,680     57,767  

Cash and cash equivalents, end of period

$ 74,400   $ 30,885   $ 35,452   $ 74,400   $ 35,452  
 

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use non-generally accepted accounting principles (Non-GAAP) net income (loss), EBITDA and Adjusted EBITDA as supplemental measures 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. We define Non-GAAP net income (loss) to be U.S. GAAP net income (loss) adjusted to exclude provision for litigation, share-based compensation, litigation expenses and amortization of intangible assets. We believe that EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define EBITDA as U.S. GAAP net income (loss) adjusted to exclude interest and other (income) expense, interest expense, income tax expense, and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted to exclude provision for litigation, share-based compensation and litigation expenses. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. Our management uses these Non-GAAP financial measures because, collectively, they provide valuable information on the performance of our on-going operations, excluding non-cash charges, taxes and non-core activities (including interest payments related to financing activities). These measures also enable our management to compare the results of our on-going operations from period to period, and allow management to review the performance of our on-going operations against our peer companies and against other companies in our industry and adjacent industries. We believe these measures also provide similar insights to investors, and enable investors to review our results of operations “through the eyes of management.”

Furthermore, our management uses these Non-GAAP financial measures to assist them in making decisions regarding our strategic priorities and areas for future investment and focus.

The terms Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are not defined under U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in accordance with U.S. 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 U.S. 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;
  • these measures do not reflect changes in, or cash requirements for, our working capital needs;
  • Non-GAAP net income (loss) and Adjusted EBITDA do not reflect the cash requirements necessary for litigation costs, including provision for litigation and litigation expenses;
  • these measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;
  • these measures 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 Non-GAAP net income (loss), EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Non-GAAP net income (loss), EBITDA, 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

Limelight is presenting the most directly comparable U.S. GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable U.S. GAAP measures. Per share amounts may not foot due to rounding.

                       

LIMELIGHT NETWORKS, INC.

Reconciliation of U.S. GAAP Net Loss to Non-GAAP Net Income (Loss)

(In thousands)

(Unaudited)

 
 
Three Months Ended Nine Months Ended
 
September 30, 2016 June 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share
 
U.S. GAAP net loss $ (6,122 ) $ (0.06 ) $ (57,938 ) $ (0.56 ) $ (7,762 ) $ (0.08 ) $ (70,006 ) $ (0.67 ) $ (19,807 ) $ (0.20 )
 
Provision for litigation - - 54,000 0.52 - - 54,000 0.52 - -
Share-based compensation 2,987 0.03 3,293 0.03 3,124 0.03 9,776 0.09 9,473 0.10
Litigation expenses 2,837 0.03 1,271 0.01 140 0.00 5,286 0.05 (1,015 ) (0.01 )
Amortization of intangible assets   2     0.00     6     0.00     203     0.00     14     0.00     602     0.01  
 
Non-GAAP net income (loss) $ (296 ) $ (0.00 ) $ 632   $ 0.01   $ (4,295 ) $ (0.04 ) $ (930 ) $ (0.01 ) $ (10,747 ) $ (0.11 )
 
 
Weighted average shares used in per share calculation 104,860 103,904 100,552 103,819 99,676
 
             
LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)
 
 
Three Months Ended Nine Months Ended
 
September 30, June 30, September 30, September 30, September 30,
2016 2016 2015 2016 2015
 
U.S. GAAP net loss $ (6,122) $ (57,938) $ (7,762) $ (70,006) $ (19,807)
 
Depreciation and amortization 5,014 5,115 5,284 15,420 15,088
Interest expense 406 279 - 865 4
Interest and other (income) expense (159) 71 (555) (494) (2,386)
Income tax expense 130 115 76 404 221
 
EBITDA $ (731) $ (52,358) $ (2,957) $ (53,811) $ (6,880)
 
Provision for litigation - 54,000 - 54,000 -
Share-based compensation 2,987 3,293 3,124 9,776 9,473
Litigation expenses 2,837 1,271 140 5,286 (1,015)
 
Adjusted EBITDA $ 5,093 $ 6,206 $ 307 $ 15,251 $ 1,578
 

For future periods, we are unable to provide a reconciliation of EBITDA and Adjusted EBITDA to net loss as a result of the uncertainty regarding, and the potential variability of, the amounts of depreciation and amortization, interest expense, interest and other (income) expense and income tax expense, that may be incurred in the future.

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 audio cast live from http://www.limelight.com and a replay will be available following the call from the Limelight website.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These statements include, among others, statements regarding our expectations regarding revenue, gross margin, non-GAAP net income, capital expenditures, litigation, and our future prospects. Our expectations and beliefs regarding these matters may not materialize. The potential risks and uncertainties that could cause actual results or outcomes to differ materially from the results or outcomes predicted include, among other things, reduction of demand for our services from new or existing customers, unforeseen changes in our hiring patterns, adverse outcomes in litigation, and experiencing expenses that exceed our expectations. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Forms 10-K and 10-Q, particularly under the heading “Risk Factors.” Copies of these filings are available online on our investor relations website at investors.limelightnetworks.com and on the SEC website at www.SEC.gov. All information provided in this release and in the attachments is as of October 26, 2016, and we undertake no duty to update this information in light of new information or future events, unless required by law.

About Limelight

Limelight Networks (NASDAQ: LLNW), a global leader in digital content delivery, empowers customers to better engage online audiences by enabling them to securely manage and globally deliver digital content, on any device. The Company’s award-winning Limelight Orchestrate™ platform includes an integrated suite of content delivery technology and services that helps organizations secure digital content, deliver exceptional multi-screen experiences, improve brand awareness, drive revenue, and enhance customer relationships — all while reducing costs. For more information, please visit www.limelight.com, read our blog, follow us on TwitterFacebook and LinkedIn and be sure to visit Limelight Connect.

Copyright © 2016 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

Limelight Networks, Inc.
Sajid Malhotra, 602-850-5778
ir@llnw.com

Source: Limelight Networks

Media Contacts

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or
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Investor Contact

ir@llnw.com

Limelight Networks, Inc.

222 S. Mill Ave.
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602-850-5000
limelight.com

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