Press Release Details

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

04/19/2018

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.--(BUSINESS WIRE)-- 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 Twitter, Facebook and LinkedIn and be sure to visit Limelight Connect.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180419006353/en/

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

Source: Limelight Networks, Inc.