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Press Release

Limelight Networks Reports Financial Results for the Second Quarter of 2017

Company Release - 7/26/2017 4:01 PM ET
  • Revenue of $45.4 million, up 4 percent year over year
  • GAAP gross margin of 47.1%, up 390 basis points, year over year
  • GAAP EPS of $(0.01) and Non-GAAP EPS of $0.03
  • Cash and marketable securities of $60.6 million
  • Raising 2017 revenue, gross margin, Non-GAAP earnings per share and Adjusted EBITDA guidance

TEMPE, Ariz.--(BUSINESS WIRE)-- Limelight Networks, Inc. (Nasdaq:LLNW) (Limelight), a global leader in digital content delivery, today reported revenue of $45.4 million for the second quarter of 2017, up four percent compared to $43.6 million in the second quarter of 2016, and up one percent compared to $44.7 million in the first quarter of 2017. Currency headwinds negatively impacted year-over-year comparison by $0.3 million, or one percent.

Gross margin was 47.1% in the second quarter of 2017, an increase of 390 basis points from 43.2% in the second quarter of 2016.

On a GAAP basis, Limelight reported a net loss of $1.6 million, or $0.01 per basic share, for the second quarter of 2017, compared to a net loss of $57.9 million, or $0.56 per basic share, in the second quarter of 2016. The second quarter of 2016 net loss included a $54 million provision for litigation related to the settlement of the Akamai lawsuit.

Non-GAAP net income was $2.9 million, or $0.03 per basic share, for the second quarter of 2017, compared to non-GAAP net income of $0.6 million, or $0.01 per basic share, in the second quarter of 2016.

EBITDA was $3.4 million for the second quarter of 2017, compared to negative $52.4 million for the second quarter of 2016. Adjusted EBITDA was $7.9 million for the second quarter of 2017, compared to $6.2 million for the second quarter of 2016.

Limelight ended the second quarter with 533 employees and employee equivalents, up from 528 employees at the end of the first quarter of 2017, and up from 512 employees in the year ago period.

“Our second quarter results continued to show meaningful year-over year improvements across revenue, margin, profitability and cash flow measures. Our performance improvements have strengthened our financial profile and improved our competitive position. Demand for our capabilities and services is growing and our R&D investments and strategic focus are continuing to gain traction. We continue to pursue numerous internal and external opportunities to accelerate growth and profitability and expect their realization to generate incremental shareholder returns,” said Bob Lento, Chief Executive Officer at Limelight.

“Our solid and consistent first half performance coupled with growing confidence as to our second half outlook, leads us to expect that we can deliver full year 2017 results above our previous guidance. We believe we may deliver close to double digit revenue growth for the two remaining quarters, and along with improving margins and continuing expense discipline, Limelight’s 2017 performance could represent our best year since we became a publicly traded company,” Mr. Lento added.

Based on current conditions, for the full-year 2017, we are providing the following updates to our previously announced guidance for 2017:

 
Limelight Networks, Inc.
2017 Guidance
       
2017 Guidance
July 26, 2017 April 24, 2017 February 8, 2017
Revenue $180 to $182 million $177 to $181 million $175 to $180 million
 
Gross margin percentage

Expansion of 300 basis
points over 2016

Expansion of 200 basis
points over 2016

Expansion of more than 150
basis points over 2016

 
Non-GAAP EPS $0.05 to $0.07 $0.03 to $0.06 $0.02 to $0.06
 
Adjusted EBITDA $24 to $28 million $23 to $27 million $22 to $27 million
 
Capital expenditures Approx. $20 million Approx. $20 million Approx. $20 million
 

Financial Tables

 
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
     
June 30,
2017
March 31,
2017
December 31,
2016
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 22,972 $ 19,152 $ 21,734
Marketable securities 37,624 41,676 44,453
Accounts receivable, net 28,154 26,191 27,418
Income taxes receivable 112 99 125
Prepaid expenses and other current assets   4,121     3,989     4,865  
Total current assets 92,983 91,107 98,595
Property and equipment, net 30,415 30,204 30,352
Marketable securities, less current portion 40 40 40
Deferred income taxes 1,307 1,193 1,105
Goodwill 77,032 76,702 76,243
Other assets   1,802     1,806     1,794  
Total assets $ 203,579   $ 201,052   $ 208,129  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,763 $ 8,558 $ 8,790
Deferred revenue 1,741 1,845 2,138
Income taxes payable 334 193 188
Provision for litigation 18,000 18,000 18,000
Other current liabilities   12,722     10,600     12,836  
Total current liabilities 43,560 39,196 41,952
Deferred income taxes 147 154 152
Deferred revenue, less current portion 15 13 22
Provision for litigation, less current portion 18,000 22,500 27,000
Other long-term liabilities   1,057     1,238     1,435  
Total liabilities 62,779 63,101 70,561
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; 109,248, 107,979 and 107,059 shares issued and
outstanding at June 30, 2017, March 31, 2017 and December 31, 2016, respectively 109 108 107
Additional paid-in capital 497,018 493,567 490,819
Accumulated other comprehensive loss (9,045 ) (10,067 ) (11,038 )
Accumulated deficit   (347,282 )   (345,657 )   (342,320 )
Total stockholders' equity   140,800     137,951     137,568  
Total liabilities and stockholders' equity $ 203,579   $ 201,052   $ 208,129  
 
   
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
             
Three Months Ended Six Months Ended
 
June 30,
2017
March 31,
2017
Percent
Change
June 30,
2016
Percent
Change
June 30,
2017
June 30,
2016
Percent
Change
 
Revenues $ 45,370   $ 44,735   1 % $ 43,560   4 % $ 90,105   $ 84,982   6 %
Cost of revenue:
Cost of services (1) 19,464 19,007 2 % 20,271 -4 % 38,471 40,380 -5 %
Depreciation - network   4,531     4,557   -1 %   4,489   1 %   9,088     9,157   -1 %
Total cost of revenue   23,995     23,564   2 %   24,760   -3 %   47,559     49,537   -4 %
Gross profit 21,375 21,171 1 % 18,800 14 % 42,546 35,445 20 %
Gross profit percentage 47.1 % 47.3 % 43.2 % 47.2 % 41.7 %
Operating expenses:
General and administrative (1) 6,804 8,514 -20 % 7,241 -6 % 15,319 14,049 9 %
Sales and marketing (1) 8,997 9,267 -3 % 8,117 11 % 18,265 17,020 7 %
Research & development (1) 6,715 6,220 8 % 6,289 7 % 12,934 12,614 3 %
Depreciation and amortization 597 589 1 % 626 -5 % 1,186 1,249 -5 %
Provision for litigation   -     -   NA   54,000   NA   -     54,000   NA
Total operating expenses   23,113     24,590   -6 %   76,273   -70 %   47,704     98,932   -52 %
 
Operating loss (1,738 ) (3,419 ) -49 % (57,473 ) -97 % (5,158 ) (63,487 ) -92 %
 
Other income (expense):
Interest expense (10 ) (14 ) -29 % (279 ) -96 % (24 ) (459 ) -95 %
Interest income 121 117 3 % 8 1413 % 239 14 1607 %
Other, net   153     87   76 %   (79 ) -294 %   241     321   -25 %
Total other income (expense)   264     190   39 %   (350 ) -175 %   456     (124 ) -468 %
 
Loss before income taxes (1,474 ) (3,229 ) -54 % (57,823 ) -97 % (4,702 ) (63,611 ) -93 %
Income tax expense   151     108   40 %   115   31 %   260     273   -5 %
 
Net loss   (1,625 )   (3,337 ) -51 %   (57,938 ) -97 %   (4,962 )   (63,884 ) -92 %
 
Net loss per share:
Basic and diluted $ (0.01 ) $ (0.03 ) $ (0.56 ) $ (0.05 ) $ (0.62 )
 
Weighted average shares used in per share calculation:
Basic and diluted 108,422 107,363 103,904 107,893 103,299
 

(1) Includes share-based compensation (see supplemental table for figures)

 
LIMELIGHT NETWORKS, INC.
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
           
 
Three Months Ended Six Months Ended
 
June 30,
2017
March 31,
2017
June 30,
2016
June 30,
2017
June 30,
2016
 
 
Share-based compensation:
 
Cost of services $ 364 $ 359 $ 436 $ 723 $ 909
General and administrative 1,674 1,534 1,677 3,208 3,503
Sales and marketing 617 620 638 1,237 1,375
Research and development   600     562     542   1,162     1,002  
 
Total share-based compensation $ 3,255   $ 3,075   $ 3,293 $ 6,330   $ 6,789  
 
Depreciation and amortization:
 
Network-related depreciation $ 4,531 $ 4,557 $ 4,489 $ 9,088 $ 9,157
Other depreciation and amortization 597 589 620 1,186 1,237
Amortization of intangible assets   -     -     6   -     12  
 
Total depreciation and amortization $ 5,128   $ 5,146   $ 5,115 $ 10,274   $ 10,406  
 
 
Net increase (decrease) in cash, cash equivalents and marketable securities: $ (232 ) $ (5,359 ) $ 6,744 $ (5,591 ) $ (42,117 )
 
 
End of period statistics:
 
Approximate number of active customers 779 813 904 779 904
 
Number of employees and employee equivalents 533 528 512 533 512
 
 
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
           
 
Three Months Ended Six Months Ended
 
June 30,
2017
March 31,
2017
June 30,
2016
June 30,
2017
June 30,
2016
 
Operating activities
Net loss $ (1,625 ) $ (3,337 ) $ (57,938 ) $ (4,962 ) $ (63,884 )
 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 5,128 5,146 5,115

10,274

10,406
Share-based compensation 3,255 3,075 3,293 6,330 6,789
Provision for litigation - - 54,000 - 54,000
Foreign currency remeasurement loss 290 289 467 579 166
Deferred income taxes (94 ) (50 ) (68 ) (144 ) 14
Gain on sale of property and equipment (17 ) (75 ) (134 ) (92 ) (134 )
Accounts receivable charges (recoveries) 241 249 83 490 (33 )
Amortization of premium on marketable securities 80 83 - 163 19
Realized loss on sale of marketable securities - - - - 32
Changes in operating assets and liabilities:
Accounts receivable (2,204 ) 978 2,497 (1,226 ) 1,957
Prepaid expenses and other current assets (47 ) 914 (191 ) 867 3,392
Income taxes receivable (8 ) 29 51 21 38
Other assets 11 (3 ) 166 8 508
Accounts payable and other current liabilities 3,861 (1,160 ) 1,566 2,701 (2,439 )
Deferred revenue (101 ) (302 ) (934 ) (403 ) (461 )
Income taxes payable 138 (4 ) 72 134 (55 )
Payments for provision for litigation (4,500 ) (4,500 ) - (9,000 ) -
Other long term liabilities   (185 )   (197 )   (1,237 )  

(382

)   (337 )
Net cash provided by operating activities   4,223     1,135     6,808     5,358     9,978  
 
Investing activities
Purchases of marketable securities (2,993 ) (4,526 ) - (7,519 ) -
Sale and maturities of marketable securities 6,994 7,250 - 14,244 28,315
Change in restricted cash - - - - (62,790 )
Purchases of property and equipment (4,733 ) (5,745 ) (259 ) (10,478 ) (1,680 )
Proceeds from sale of property and equipment   22     58     -     80     -  
Net cash used in investing activities   (710 )   (2,963 )   (259 )   (3,673 )   (36,155 )
 
Financing activities
Principal payments on capital lease obligations - - (319 ) - (478 )
Payment of employee tax withholdings related to restricted stock vesting (880 ) (1,036 ) (298 ) (1,916 ) (944 )
Proceeds from line of credit - - - - 12,790
Proceeds from employee stock plans   1,077     111     813     1,188     856  
Net cash provided by (used in) financing activities   197     (925 )   196     (728 )   12,224  
Effect of exchange rate changes on cash and cash equivalents   110     171     (1 )   281     158  
Net increase (decrease) in cash and cash equivalents 3,820 (2,582 ) 6,744 1,238 (13,795 )
Cash and cash equivalents, beginning of period   19,152     21,734     24,141     21,734     44,680  
Cash and cash equivalents, end of period $ 22,972   $ 19,152   $ 30,885   $ 22,972   $ 30,885  
 

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 depreciation and amortization, interest expense, interest and other (income) expense, and income tax expense. 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 Six Months Ended
 
June 30, 2017 March 31, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share
 
U.S. GAAP net loss $ (1,625 ) $ (0.01 ) $ (3,337 ) $ (0.03 ) $ (57,938 ) $ (0.56 ) $ (4,962 ) $ (0.05 ) $ (63,884 ) $ (0.62 )
 
Provision for litigation - - - - 54,000 0.52 - - 54,000 0.52
Share-based compensation 3,255 0.03 3,075 0.03 3,293 0.03 6,330 0.06 6,789 0.07
Litigation expenses 1,276 0.01 1,909 0.02 1,271 0.01 3,185 0.03 2,449 0.02
Amortization of intangible assets   -     -     -     -     6     0.00     -     -     12     0.00  
 
Non-GAAP net income (loss) $ 2,906   $ 0.03   $ 1,647   $ 0.02   $ 632   $ 0.01   $ 4,553   $ 0.04   $ (634 ) $ (0.01 )
 
 
Weighted average shares used in per share calculation 108,422 107,363 103,904 107,893 103,299
 
           
LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)
 
 
Three Months Ended Six Months Ended
 
June 30,
2017
March 31,
2017
June 30,
2016
June 30,
2017
June 30,
2016
 
U.S. GAAP net loss $ (1,625 ) $ (3,337 ) $ (57,938 ) $ (4,962 ) $ (63,884 )
 
Depreciation and amortization 5,128 5,146 5,115 10,274 10,406
Interest expense 10 14 279 24 459
Interest and other (income) expense (274 ) (204 ) 71 (480 ) (335 )
Income tax expense   151     108     115     260     273  
 
EBITDA $ 3,390 $ 1,727 $ (52,358 ) $ 5,116 $ (53,081 )
 
Provision for litigation - - 54,000 - 54,000
Share-based compensation 3,255 3,075 3,293 6,330 6,789
Litigation expenses   1,276     1,909     1,271     3,185     2,449  
 
Adjusted EBITDA $ 7,921   $ 6,711   $ 6,206   $ 14,631   $ 10,157  
 

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 888-317-6016 within the United States or +1 412-317-6016 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 July 26, 2017, 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 (C) 2017 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, Inc.

Media Contacts

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smilmore@llnw.com
or
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Investor Contact

ir@llnw.com

Limelight Networks, Inc.

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

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