Limelight Networks Reports 2018 Fourth Quarter and Full Year Financial Results

Press Release Details 5.23

Limelight Networks Reports 2018 Fourth Quarter and Full Year Financial Results

01/30/2019

Q4 Revenue of $44.0 million
Q4 GAAP EPS of $(0.05) and Non-GAAP EPS of break-even
Full year 2018 revenue of $195.7 million
Full year 2018 GAAP EPS of $0.09 and Non-GAAP EPS of $0.12
Cash and marketable securities of $50.5 million

TEMPE, Ariz.--(BUSINESS WIRE)-- Limelight Networks, Inc. (Nasdaq: LLNW) (Limelight), a leading provider of edge cloud services, today reported revenue of $44.0 million for the fourth quarter of 2018, down 9 percent, compared to $48.2 million in the fourth quarter of 2017. Currency negatively impacted year-over-year comparison by $0.2 million.

Gross margin was 40.7% in the fourth quarter of 2018, a decrease of 700 basis points from 47.7% in the fourth quarter of 2017.

Limelight reported a net loss of $5.2 million, or $0.05 per basic share for the fourth quarter of 2018, compared to a net loss of $0.9 million, or $0.01 per basic share in the fourth quarter of 2017.

Non-GAAP net income was $0.3 million or break-even per basic share for the fourth quarter of 2018, compared to non-GAAP net income of $3.9 million, or $0.04 per basic share in the fourth quarter of 2017.

EBITDA was negative $0.9 million for the fourth quarter of 2018, compared to $3.9 million for the fourth quarter of 2017. Adjusted EBITDA was $4.6 million for the fourth quarter of 2018 compared to $8.7 million for the fourth quarter of 2017.

For the full year ended December 31, 2018, Limelight reported revenue of $195.7 million, an increase of 6% compared to $184.4 million for the year ended December 31, 2017. Gross margin was 47.8% for the year ended December 31, 2018; an increase of 20 basis points compared to 47.6% for the year ended December 31, 2017.

Limelight reported net income of $9.8 million, or $0.09 per basic share, for the year ended December 31, 2018, compared to a net loss of $7.6 million, or $0.07 per basic share, in 2017. Net income for the full year of 2018 includes $14.9 million, or $0.13 per basic share, of non-operating income related to the settlement and patent license agreement.

Non-GAAP net income was $13.7 million, or $0.12 per basic share, for the year ended December 31, 2018, compared to non-GAAP net income of $10.6 million, or $0.10 per basic share, in 2017.

EBITDA was $28.7 million for the year ended December 31, 2018, compared to $12.4 million for the year ended December 31, 2017. Adjusted EBITDA was $32.5 million for the year ended December 31, 2018, compared to $30.7 million for the year ended December 31, 2017.

Limelight ended the fourth quarter with 563 employees and employee equivalents, up from 551 at the end of the third quarter of 2018, and up from 533 at the end of 2017.

Commenting on the fourth quarter and full year results, Chief Executive Officer, Robert Lento said, “We made some tough choices in the latter half of 2018, as new revenue grew slower than planned. As we closed the year, we were increasingly encouraged by the pace of business growth, including delivering all-time record traffic in December. In addition, the fourth quarter was marked by substantial progress in marketing our new products, launching a strategic partnership with Ericsson, putting in place new leadership for sales, and dedicating a new leader for our Edge services.

“Traffic volumes continue to grow at healthy rates, and customer satisfaction, as measured by Net Promoter Score, remains strong. We expect sequential growth each quarter in 2019, and stronger growth rates than 2018. Revenues from our initiatives in Edge computing and Realtime Streaming, and from our partnership with Ericsson, should meaningfully contribute to overall growth. At the same time, we continue to invest in geographic expansion, with an emphasis on Latin America. Revenue from China, India and Brazil should grow at significantly higher rates than the corporate average.

“While our 2019 guidance is ambitious, we’re entering the year with significant momentum, and the preparatory work underpinning our continued growth is well underway. Thank you for your support.”

Based on current conditions, our full-year 2019 guidance is as follows:

Limelight Networks, Inc.
2019 Guidance


	2019	2018	2017
Revenue	$215 to $225 million	$195.7 million	$184.4 million

GAAP Basic EPS	Break-even to $0.10	$0.09	($0.07)

Non-GAAP EPS	$0.10 to $0.20	$0.12	$0.10

Adjusted EBITDA	$30 to $40 million	$32.5 million	$30.7 million

Capital expenditures	$20 to $24 million	$16.1 million	$20.7 million

Financial Tables


LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

	December 31,			September 30,			December 31,
	2018			2018			2017
	(Unaudited)			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	25,383		$	28,678		$	20,912
Marketable securities		25,083			23,957			28,404
Accounts receivable, net		26,041			26,147			32,381
Income taxes receivable		122			154			98
Prepaid expenses and other current assets		14,789			17,859			5,397
Total current assets		91,418			96,795			87,192
Property and equipment, net		27,378			27,392			28,991
Marketable securities, less current portion		40			40			40
Deferred income taxes		1,462			1,590			1,506
Goodwill		76,407			76,683			77,054
Other assets		2,220			2,434			1,665
Total assets	$	198,925		$	204,934		$	196,448

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	9,216		$	8,976		$	4,439
Deferred revenue		1,883			853			1,187
Income taxes payable		124			111			452
Provision for litigation		9,000			13,500			18,000
Other current liabilities		12,922			13,804			18,507
Total current liabilities		33,145			37,244			42,585
Deferred income taxes		152			174			144
Deferred revenue, less current portion		42			68			16
Provision for litigation, less current portion		-			-			9,000
Other long-term liabilities		435			385			558
Total liabilities		33,774			37,871			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; 114,246, 113,198 and 110,824 shares issued and outstanding at December 31, 2018, September 30, 2018 and December 31, 2017, respectively		114			113			111
Additional paid-in capital		513,682			509,846			502,312
Accumulated other comprehensive loss		(10,033	)		(9,477	)		(8,328	)
Accumulated deficit		(338,612	)		(333,419	)		(349,950	)
Total stockholders' equity		165,151			167,063			144,145
Total liabilities and stockholders' equity	$	198,925		$	204,934		$	196,448


LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)


	Three Months Ended											Twelve Months Ended

	December 31,			September 30,			Percent	December 31,			Percent	December 31,			December 31,			Percent
	2018			2018			Change	2017			Change	2018			2017			Change

Revenue	$	43,992		$	49,315		-11%	$	48,186		-9%	$	195,670		$	184,360		6%
Cost of revenue:
Cost of services (1)		22,141			21,519		3%		20,665		7%		85,920			78,423		10%
Depreciation - network		3,941			3,761		5%		4,544		-13%		16,277			18,138		-10%
Total cost of revenue		26,082			25,280		3%		25,209		3%		102,197			96,561		6%
Gross profit		17,910			24,035		-25%		22,977		-22%		93,473			87,799		6%
Gross profit percentage		40.7	%		48.7	%			47.7	%			47.8	%		47.6	%
Operating expenses:
General and administrative (1)		7,482			7,851		-5%		8,656		-14%		32,372			32,053		1%
Sales and marketing (1)		9,484			9,766		-3%		8,997		5%		39,553			36,098		10%
Research & development (1)		5,781			5,882		-2%		5,965		-3%		24,075			25,342		-5%
Depreciation and amortization		476			616		-23%		587		-19%		2,313			2,376		-3%
Total operating expenses		23,223			24,115		-4%		24,205		-4%		98,313			95,869		3%

Operating (loss) income		(5,313	)		(80	)	NM		(1,228	)	NM		(4,840	)		(8,070	)	-40%

Other income (expense):
Interest expense		(10	)		(10	)	NM		(38	)	NM		(86	)		(80	)	NM
Interest income		230			177		NM		128		NM		670			494		NM
Settlement and patent license income		-			-		NM		-		NM		14,900			-		NM
Other, net		90			(246	)	NM		204		NM		(264	)		452		NM
Total other income (expense)		310			(79	)	NM		294		NM		15,220			866		NM

(Loss) income before income taxes		(5,003	)		(159	)	NM		(934	)	NM		10,380			(7,204	)	NM
Income tax expense (benefit)		190			113		NM		(22	)	NM		538			426		NM

Net (loss) income		(5,193	)		(272	)	NM		(912	)	NM		9,842			(7,630	)	NM

Net income (loss) per share:
Basic	$	(0.05	)	$	(0.00	)		$	(0.01	)		$	0.09		$	(0.07	)
Diluted	$	(0.05	)	$	(0.00	)		$	(0.01	)		$	0.08		$	(0.07	)

Weighted average shares used in per share calculation:
Basic		113,578			112,760				110,128				112,114			108,814
Diluted		113,578			112,760				110,128				120,010			108,814

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


LIMELIGHT NETWORKS, INC.
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)


	Three Months Ended								Twelve Months Ended

	December 31,			September 30,		December 31,			December 31,		December 31,
	2018			2018		2017			2018		2017


Share-based compensation:

Cost of services	$	756		$	352	$	375		$	1,815	$	1,450
General and administrative		2,792			1,887		1,729			8,458		6,502
Sales and marketing		963			638		622			2,837		2,470
Research and development		974			544		576			2,720		2,322

Total share-based compensation	$	5,485		$	3,421	$	3,302		$	15,830	$	12,744

Depreciation and amortization:

Network-related depreciation	$	3,941		$	3,761	$	4,544		$	16,277	$	18,138
Other depreciation and amortization		476			616		587			2,313		2,376

Total depreciation and amortization	$	4,417		$	4,377	$	5,131		$	18,590	$	20,514


Net increase (decrease) in cash, cash equivalents and marketable securities:	$	(2,169	)	$	7,065	$	(8,376	)	$	1,150	$	(16,871	)


End of period statistics:

Approximate number of active customers		649			667		717			649		717

Number of employees and employee equivalents		563			551		533			563		533


LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


			Three Months Ended									Twelve Months Ended

			December 31,			September 30,			December 31,			December 31,			December 31,
			2018			2018			2017			2018			2017

Operating activities
	Net (loss) income		$	(5,193	)	$	(272	)	$	(912	)	$	9,842		$	(7,630	)

	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Depreciation and amortization		4,417			4,377			5,131			18,590			20,514
		Share-based compensation		5,485			3,421			3,302			15,830			12,744
		Settlement and patent license income		-			-			-			(14,900	)		-
		Foreign currency remeasurement (gain) loss		(65	)		64			140			(162	)		798
		Deferred income taxes		103			(16	)		(108	)		17			(325	)
		Gain on sale of property and equipment		(6	)		(18	)		(316	)		(137	)		(410	)
		Accounts receivable charges		449			157			217			902			949
		Amortization of premium on marketable securities		33			24			55			115			283
		Realized loss on sale of marketable securities		-			-			-			-			-
		Changes in operating assets and liabilities:
		Accounts receivable		(343	)		5,558			(3,886	)		5,438			(5,912	)
		Prepaid expenses and other current assets		64			(2,757	)		(887	)		(2,466	)		(342	)
		Income taxes receivable		25			7			4			(31	)		38
		Other assets		201			(192	)		249			(558	)		270
		Accounts payable and other current liabilities		(1,807	)		3,058			(730	)		(4,333	)		4,019
		Deferred revenue		1,004			(82	)		(507	)		1,089			(957	)
		Income taxes payable		17			(113	)		69			(333	)		249
		Payments related to litigation, net		(1,520	)		(1,520	)		(4,500	)		(9,060	)		(18,000	)
		Other long term liabilities		51			(4	)		(206	)		(121	)		(790	)
	Net cash provided by (used in) operating activities			2,915			11,692			(2,885	)		19,722			5,498

Investing activities
		Purchases of marketable securities		(4,669	)		(15,962	)		(4,547	)		(20,631	)		(14,930	)
		Sale and maturities of marketable securities		3,500			8,850			13,012			23,865			30,756
		Purchases of property and equipment		(5,618	)		(4,214	)		(4,919	)		(16,113	)		(20,725	)
		Proceeds from sale of property and equipment		4			18			14			135			97
	Net cash (used in) provided by investing activities			(6,783	)		(11,308	)		3,560			(12,744	)		(4,802	)

Financing activities
		Payment of employee tax withholdings related to restricted stock vesting		(985	)		(996	)		(1,925	)		(4,793	)		(4,496	)
		Cash paid for the purchase of common stock		-			-			-			(3,800	)		-
		Proceeds from employee stock plans		1,374			737			1,448			6,173			2,648
	Net cash provided by (used in) financing activities			389			(259	)		(477	)		(2,420	)		(1,848	)
	Effect of exchange rate changes on cash and cash equivalents			184			(166	)		(30	)		(87	)		330
Net increase (decrease) in cash and cash equivalents				(3,295	)		(41	)		168			4,471			(822	)
Cash and cash equivalents, beginning of period				28,678			28,719			20,744			20,912			21,734
Cash and cash equivalents, end of period			$	25,383		$	28,678		$	20,912		$	25,383		$	20,912

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 the settlement and patent license income, 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 the settlement and patent license income, 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																		Twelve Months Ended

	December 31, 2018						September 30, 2018						December 31, 2017						December 31, 2018						December 31, 2017
	Amount			Per Share			Amount			Per Share			Amount			Per Share			Amount			Per Share			Amount			Per Share

U.S. GAAP net (loss) income	$	(5,193	)	$	(0.05	)	$	(272	)	$	(0.00	)	$	(912	)	$	(0.01	)	$	9,842		$	0.09		$	(7,630	)	$	(0.07	)

Settlement and patent license income		-			-			-			-			-			-			(14,900	)		(0.13	)		-			-
Share-based compensation		5,485			0.05			3,421			0.03			3,302			0.03			15,830			0.14			12,744			0.12
Litigation expenses		3			0.00			19			0.00			1,470			0.01			2,907			0.03			5,518			0.05

Non-GAAP net income	$	295		$	0.00		$	3,168		$	0.03		$	3,860		$	0.04		$	13,679		$	0.12		$	10,632		$	0.10


Weighted average shares used in per share calculation					113,578						112,760						110,128						112,114						108,814

LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)


		Three Months Ended									Twelve Months Ended

		December 31,			September 30,			December 31,			December 31,			December 31,
		2018			2018			2017			2018			2017

U.S. GAAP net (loss) income		$	(5,193	)	$	(272	)	$	(912	)	$	9,842		$	(7,630	)

	Depreciation and amortization		4,417			4,377			5,131			18,590			20,514
	Interest expense		10			10			38			86			80
	Interest and other (income) expense		(320	)		69			(332	)		(406	)		(946	)
	Income tax expense (benefit)		190			113			(22	)		538			426

EBITDA		$	(896	)	$	4,297		$	3,903		$	28,650		$	12,444

	Settlement and patent license income		-			-			-			(14,900	)		-
	Share-based compensation		5,485			3,421			3,302			15,830			12,744
	Litigation expenses		3			19			1,470			2,907			5,518

Adjusted EBITDA		$	4,592		$	7,737		$	8,675		$	32,487		$	30,706

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 877 296 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, 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 January 30, 2019, 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, Inc. (NASDAQ: LLNW), a leading provider of digital content delivery, video, cloud security, and edge computing services, empowers customers to provide exceptional digital experiences. Limelight’s edge services platform includes a unique combination of global private infrastructure, intelligent software, and expert support services that enable current and future workflows. For more information, visit www.limelight.com, follow us on Twitter, Facebook and LinkedIn.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190130005709/en/

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

Source: Limelight Networks, Inc.

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