Limelight Networks Reports Record Financial Results for the First Quarter of 2018

  • Q1 Revenue of $52.1 million, up 16 percent year over year
  • Q1 GAAP gross margin of 51.2%, up 390 basis points, year over year
  • Q1 GAAP EPS of break-even and Non-GAAP EPS of $0.06
  • Raising 2018 revenue, gross margin, Non-GAAP earnings per share, and Adjusted EBITDA guidance

TEMPE, Ariz.--()--Limelight Networks, Inc. (Nasdaq: LLNW) (Limelight), a global leader in digital content delivery, today reported revenue of $52.1 million for the first quarter of 2018, up 16 percent, compared to $44.7 million in the first quarter of 2017, and up 8% compared to $48.2 million in the fourth quarter of 2017. Currency favorably impacted year-over-year comparison by $0.5 million and the sequential comparison by $0.3 million.

GAAP gross margin was 51.2% in the first quarter of 2018, an increase of 390 basis points from 47.3% in the first quarter of 2017.

Limelight reported net income of $0.1 million, or break-even per basic and fully diluted share, for the first quarter of 2018, compared to a net loss of $3.3 million, or loss of $0.03 per basic share, for the first quarter of 2017.

Non-GAAP net income was $6.2 million, or $0.06 per basic share, for the first quarter of 2018, compared to non-GAAP net income of $1.6 million, or $0.02 per basic share, for the first quarter of 2017.

EBITDA was $4.9 million for the first quarter of 2018, compared to $1.7 million for the first quarter of 2017. Adjusted EBITDA was $11.0 million for the first quarter of 2018 compared to $6.7 million for the first quarter of 2017.

Limelight ended the first quarter with 544 employees and employee equivalents, up from 533 at the end of the fourth quarter of 2017, and up from 528 at the end of the first quarter of 2017.

“Limelight has started 2018 on a strong note, with double-digit revenue growth, gross margins in excess of 50 percent, and positive GAAP profitability. We are raising our full-year guidance and are excited about the opportunities that surround us. We continue to be encouraged by healthy growth trends for content delivery, and we are pleased with the completion of certain matters we think will be of value to Limelight shareholders going forward. For example, in recent months, Goldman Sachs successfully exited its large equity ownership stake in Limelight, which erases a decade-long stock overhang issue. Separately, Limelight also entered into a definitive agreement with Akamai with regard to all outstanding litigation, bringing to an end an equally longstanding legal battle between the two companies,” said Bob Lento, Chief Executive Officer at Limelight Networks.

“We continue to expand Limelight’s product features and functionality, and improve our efficiency and reliability, to enable Limelight customers to better achieve their goals. We believe Limelight’s focus on quality will allow us to remain disciplined in our approach to pricing. Our business purpose is secure, global delivery of digital content, and we will remain true to our mission. And our initiatives to build out Edge Computing solutions, and expand into adjacent markets, remain on track,” Lento added.

Weighing early strength in Limelight’s financial and operational performance and what the company perceives as favorable industry tailwinds, Limelight is providing the following updates to its previously announced full-year 2018 guidance, issued on February 7, 2018:

Revenue is expected to be in the range of $198 to $202 million, up from previously issued guidance of $196 to $200 million. Gross margin expectation is now an improvement of over 150 basis points, up from our previous guidance of a 100 basis point improvement. GAAP EPS is expected to be between $0.07 and $0.11. Non-GAAP EPS is expected to be between $0.13 and $0.17 per share, up from $0.11 and $0.15 per share. Adjusted EBITDA is now expected to be between $33 and $37 million, compared to our previous guidance of between $32 and $36 million. At the same time, operational efficiency will allow us to deliver these higher results with lower capital deployment. We now expect capital expenditures to be between $20 and $22 million, down from our previous expectation of between $22 and $24 million.

Financial Tables

       
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 
March 31, December 31,
2018 2017
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 19,863 $ 20,912
Marketable securities 23,832 28,404
Accounts receivable, net 32,433 32,381
Income taxes receivable 224 98
Prepaid expenses and other current assets   5,717     5,397  
Total current assets 82,069 87,192
Property and equipment, net 27,371 28,991
Marketable securities, less current portion 40 40
Deferred income taxes 1,546 1,506
Goodwill 77,027 77,054
Other assets   2,174     1,665  
Total assets $ 190,227   $ 196,448  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,376 $ 4,439
Deferred revenue 950 1,187
Income taxes payable 72 452
Provision for litigation 18,000 18,000
Other current liabilities   11,495     18,507  
Total current liabilities 40,893 42,585
Deferred income taxes 159 144
Deferred revenue, less current portion 16 16
Provision for litigation, less current portion 4,500 9,000
Other long-term liabilities   411     558  
Total liabilities 45,979 52,303
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; 110,657 and 110,824 shares issued and
outstanding at March 31, 2018 and December 31, 2017, respectively 111 111
Additional paid-in capital 500,305 502,312
Accumulated other comprehensive loss (7,861 ) (8,328 )
Accumulated deficit   (348,307 )   (349,950 )
Total stockholders' equity   144,248     144,145  
Total liabilities and stockholders' equity $ 190,227   $ 196,448  
 
                   
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
 
March 31, December 31, Percent March 31, Percent
2018 2017 Change 2017 Change
 
Revenues $ 52,114   $ 48,186   8% $ 44,735   16%
Cost of revenue:
Cost of services (1) 21,054 20,665 2% 19,007 11%
Depreciation - network   4,380     4,544   -4%   4,557   -4%
Total cost of revenue   25,434     25,209   1%   23,564   8%
Gross profit 26,680 22,977 16% 21,171 26%
Gross profit percentage

51.2%

 

47.7%

 

47.3%

 

Operating expenses:
General and administrative (1) 9,522 8,656 10% 8,514 12%
Sales and marketing (1) 10,280 8,997 14% 9,267 11%
Research & development (1) 6,339 5,965 6% 6,220 2%
Depreciation and amortization   588     587   0%   589   0%
Total operating expenses   26,729     24,205   10%   24,590   9%
 
Operating loss (49 ) (1,228 ) -96% (3,419 ) -99%
 
Other income (expense):
Interest expense (59 ) (38 ) 55% (14 ) 321%
Interest income 130 128 2% 117 11%
Other, net   112     204   -45%   87   29%
Total other income   183     294   -38%   190   -4%
 
Income (loss) before income taxes 134 (934 ) -114% (3,229 ) -104%
Income tax (benefit) expense   (15 )   (22 ) -32%   108   -114%
 
Net income (loss) $ 149   $ (912 ) -116% $ (3,337 ) -104%
 
 
Net income (loss) per share:
Basic $ 0.00   $ (0.01 ) $ (0.03 )
Diluted $ 0.00   $ (0.01 ) $ (0.03 )
 
Weighted average shares used in per share calculation:
Basic 110,761 110,128 107,363
Diluted 118,909 110,128 107,363
 
(1) Includes share-based compensation (see supplemental table for figures)
 
           
LIMELIGHT NETWORKS, INC.
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
March 31, December 31, March 31,
2018 2017 2017
 
 
Share-based compensation:
 
Cost of services $ 357 $ 375 $ 359
General and administrative 1,810 1,729 1,534
Sales and marketing 603 622 620
Research and development   597     576     562  
 
Total share-based compensation $ 3,367   $ 3,302   $ 3,075  
 
Depreciation and amortization:
 
Network-related depreciation $ 4,380 $ 4,544 $ 4,557
Other depreciation and amortization   588     587     589  
 
Total depreciation and amortization $ 4,968   $ 5,131   $ 5,146  
 
 
Net decrease in cash, cash equivalents and marketable securities: $ (5,621 ) $ (8,376 ) $ (5,359 )
 
 
End of period statistics:
 
Approximate number of active customers 703 717 813
 
Number of employees and employee equivalents 544 533 528
 
           
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
   
 
Three Months Ended
 
March 31, December 31, March 31,
2018 2017 2017
 
Operating activities
Net income (loss) $ 149 $ (912 ) $ (3,337 )
 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 4,968 5,131 5,146
Share-based compensation 3,367 3,302 3,075
Foreign currency remeasurement loss 110 140 289
Deferred income taxes 41 (108 ) (50 )
Gain on sale of property and equipment (16 ) (316 ) (75 )
Accounts receivable charges 218 217 249
Amortization of premium on marketable securities 33 55 83
Changes in operating assets and liabilities:
Accounts receivable (270 ) (3,886 ) 978
Prepaid expenses and other current assets 882 (887 ) 914
Income taxes receivable (124 ) 4 29
Other assets (495 ) 249 (3 )
Accounts payable and other current liabilities (2,286 ) (730 ) (1,160 )
Deferred revenue 130 (507 ) (302 )
Income taxes payable (397 ) 69 (4 )
Payments for provision for litigation (4,500 ) (4,500 ) (4,500 )
Other long term liabilities   (151 )   (206 )   (197 )
Net cash provided by (used in) operating activities   1,659     (2,885 )   1,135  
 
Investing activities
Purchases of marketable securities - (4,547 ) (4,526 )
Sale and maturities of marketable securities 4,515 13,012 7,250
Purchases of property and equipment (1,990 ) (4,919 ) (5,745 )
Proceeds from sale of property and equipment   16     14     58  
Net cash provided by (used in) investing activities   2,541     3,560     (2,963 )
 
Financing activities
Payment of employee tax withholdings related to restricted stock vesting (1,606 ) (1,925 ) (1,036 )
Cash paid for purchase of common stock (3,800 ) - -
Proceeds from employee stock plans   30     1,448     111  
Net cash used in financing activities   (5,376 )   (477 )   (925 )
Effect of exchange rate changes on cash and cash equivalents   127     (30 )   171  
Net (decrease) increase in cash and cash equivalents (1,049 ) 168 (2,582 )
Cash and cash equivalents, beginning of period   20,912     20,744     21,734  
Cash and cash equivalents, end of period $ 19,863   $ 20,912   $ 19,152  
 

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 share-based compensation and litigation expenses. 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 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 Income (Loss) to Non-GAAP Net Income
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
March 31, 2018 December 31, 2017 March 31, 2017
Amount Per Share Amount Per Share Amount Per Share
 
U.S. GAAP net income (loss) $ 149 $ 0.00 $ (912 ) $ (0.01 ) $ (3,337 ) $ (0.03 )
 
Share-based compensation 3,367 0.03 3,302 0.03 3,075 0.03
Litigation expenses   2,670   0.02   1,470     0.01     1,909     0.02  
 
Non-GAAP net income $ 6,186 $ 0.06 $ 3,860   $ 0.04   $ 1,647   $ 0.02  
 
 
Weighted average basic shares used in per share calculation 110,761 110,128 107,363
 
           
LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Income (Loss) to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
March 31, December 31, March 31,
2018 2017 2017
 
U.S. GAAP net income (loss) $ 149 $ (912 ) $ (3,337 )
 
Depreciation and amortization 4,968 5,131 5,146
Interest expense 59 38 14
Interest and other (income) expense (242 ) (332 ) (204 )
Income tax (benefit) expense   (15 )   (22 )   108  
 
EBITDA $ 4,919 $ 3,903 $ 1,727
 
Share-based compensation 3,367 3,302 3,075
Litigation expenses   2,670     1,470     1,909  
 
Adjusted EBITDA $ 10,956   $ 8,675   $ 6,711  
 

For future periods, we are unable to provide a reconciliation of EBITDA and Adjusted EBITDA to net income (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.

2018 Guidance Table

       
Limelight Networks, Inc.
2018 Guidance
 
2018 Guidance
April 19, 2018 February 7, 2018
Revenue $198 to $202 million $196 to $200 million
 
Gross margin percentage

Expansion of more than 150
basis points over 2017

Expansion of more than 100 basis
points over 2017

 
GAAP EPS $0.07 to $0.11 $(0.07) to $(0.03)
 
Non-GAAP EPS $0.13 to $0.17 $0.11 to $0.15
 
Adjusted EBITDA $33 to $37 million $32 to $36 million
 
Capital expenditures $20 to $22 million $22 to $24 million
 

Conference Call

At approximately 4:30 p.m. EDT (1:30 p.m. PDT) today, management will host a quarterly conference call for investors. Investors can access this call toll-free at 877-296-5190 within the United States or +1 412-317-5233 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, GAAP net income, non-GAAP net income, capital expenditures, 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 April 19, 2018, 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) 2018 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

Contacts

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

Contacts

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