Limelight Networks Inc.

10/16/2019 | Press release | Distributed by Public on 10/16/2019 14:25

Limelight Networks(R) Reports Financial Results for the Third Quarter of 2019

  • Revenue of $51.3 million, up 4 percent year over year, up 12% sequentially
  • GAAP basic EPS of $(0.02) and Non-GAAP EPS of $0.01
  • Confirming accelerated growth in revenue, profitability and free cash flow for Q4 2019
  • Delivered record traffic, exceeding previous record by approximately 20%

SCOTTSDALE, Ariz.--(BUSINESS WIRE)-- Limelight Networks, Inc. (Nasdaq:LLNW) (Limelight), a leading provider of edge cloud services, today reported revenue of $51.3 million for the third quarter of 2019, up 4% compared to $49.3 million in the third quarter of 2018. Currency negatively impacted year-over-year comparison by $0.2 million.

Limelight reported a net loss of $2.8 million, or $(0.02) per basic share for the third quarter of 2019, compared to a net loss of $0.3 million, or break-even per basic share, in the third quarter of 2018.

Non-GAAP net income was $0.6 million, or $0.01 per basic share, for the third quarter of 2019, compared to non-GAAP net income of $3.2 million, or $0.03 per basic share, in the third quarter of 2018.

EBITDA was $2.5 million for the third quarter of 2019, compared to $4.3 million for the third quarter of 2018. Adjusted EBITDA was $5.8 million for the third quarter of 2019, compared to $7.7 million for the third quarter of 2018.

Limelight ended the third quarter with 609 employees and employee equivalents, up from 594 at the end of the second quarter of 2019, and up from 551 in the year ago period.

'We are extremely pleased with our third quarter results. Our revenue was the highest third quarter revenue ever and our second highest revenue in any quarter. We also set a new record for traffic in the quarter, continuing the rapid growth that we have demonstrated throughout the year. We achieved these results by accelerating investments in infrastructure and significantly growing capacity, while still maintaining fiscal discipline by controlling expenses,' said Bob Lento, Chief Executive Officer at Limelight.

'We believe the fourth quarter will see year-over-year acceleration in revenue growth and meaningful improvements in gross margin and overall profitability. Even at the low end of our guidance, fourth quarter growth rates exceed 35% year-over-year and in excess of 15% sequentially. These healthy trends validate our strategy to focus on video-based edge services. We believe this positions us for a strong 2020 and beyond and will lead to the creation of tremendous shareholder value,' Mr. Lento added.

Based on current conditions, we expect 2019 revenue to be between $200 and $210 million dollars. GAAP net loss is expected to be approximately $0.10 per share and Non-GAAP earnings per share should be near breakeven. Capital expenditures should be approximately $30 million dollars.

Financial Tables

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

September 30,

June 30,

December 31,

2019

2019

2018

(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents

$

14,832

$

24,698

$

25,383

Marketable securities

3,218

4,224

25,083

Accounts receivable, net

35,818

31,098

26,041

Income taxes receivable

77

125

122

Prepaid expenses and other current assets

9,522

8,739

14,789

Total current assets

63,467

68,884

91,418

Property and equipment, net

46,304

35,531

27,378

Operating lease right of use assets

12,667

2,701

-

Marketable securities, less current portion

40

40

40

Deferred income taxes

1,474

1,443

1,462

Goodwill

77,051

76,848

76,407

Other assets

7,394

5,848

2,220

Total assets

$

208,397

$

191,295

$

198,925

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

20,641

$

14,346

$

9,216

Deferred revenue

1,205

1,331

1,883

Operating lease liability obligations

1,870

1,579

-

Income taxes payable

325

270

124

Provision for litigation

-

-

9,000

Other current liabilities

12,516

15,227

12,922

Total current liabilities

36,557

32,753

33,145

Operating lease liability obligations, less current portions

13,331

1,325

-

Deferred income taxes

123

140

152

Deferred revenue, less current portion

162

149

42

Other long-term liabilities

300

283

435

Total liabilities

50,473

34,650

33,774

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; 116,513, 115,760 and 114,246 shares issued and
outstanding at September 30, 2019, June 30, 2019 and December 31, 2018, respectively

117

116

114

Additional paid-in capital

524,758

520,375

513,682

Accumulated other comprehensive loss

(9,837

)

(9,483

)

(10,033

)

Accumulated deficit

(357,114

)

(354,363

)

(338,612

)

Total stockholders' equity

157,924

156,645

165,151

Total liabilities and stockholders' equity

$

208,397

$

191,295

$

198,925

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

2019

2019

Change

2018

Change

2019

2018

Change

Revenue

$

51,321

$

45,904

12

%

$

49,315

4

%

$

140,505

$

151,678

-7

%

Cost of revenue:
Cost of services (1)

25,602

22,769

12

%

21,519

19

%

71,311

63,779

12

%

Depreciation - network

4,961

4,628

7

%

3,761

32

%

13,905

12,337

13

%

Total cost of revenue

30,563

27,397

12

%

25,280

21

%

85,216

76,116

12

%

Gross profit

20,758

18,507

12

%

24,035

-14

%

55,289

75,562

-27

%

Gross profit percentage

40.4

%

40.3

%

48.7

%

39.4

%

49.8

%

Operating expenses:
General and administrative (1)

7,356

8,340

-12

%

7,851

-6

%

23,231

24,890

-7

%

Sales and marketing (1)

10,713

10,994

-3

%

9,766

10

%

32,679

30,068

9

%

Research & development (1)

5,160

6,013

-14

%

5,882

-12

%

17,075

18,294

-7

%

Depreciation and amortization

172

127

35

%

616

-72

%

545

1,837

-70

%

Total operating expenses

23,401

25,474

-8

%

24,115

-3

%

73,530

75,089

-2

%

Operating (loss) income

(2,643

)

(6,967

)

NM

(80

)

NM

(18,241

)

473

NM

Other income (expense):
Interest expense

(10

)

(10

)

NM

(10

)

NM

(30

)

(76

)

NM

Interest income

81

110

NM

177

NM

402

440

NM

Settlement and patent license income

-

-

NM

-

NM

-

14,900

NM

Other, net

(13

)

(70

)

NM

(246

)

NM

(89

)

(355

)

NM

Total other income (expense)

58

30

NM

(79

)

NM

283

14,909

NM

(Loss) income before income taxes

(2,585

)

(6,937

)

NM

(159

)

NM

(17,958

)

15,382

NM

Income tax expense

166

255

NM

113

NM

544

347

NM

Net (loss) income

$

(2,751

)

$

(7,192

)

NM

$

(272

)

NM

$

(18,502

)

$

15,035

NM

Net (loss) income per share:
Basic

$

(0.02

)

$

(0.06

)

$

(0.00

)

$

(0.16

)

$

0.13

Diluted

$

(0.02

)

$

(0.06

)

$

(0.00

)

$

(0.16

)

$

0.13

Weighted average shares used in per share calculation:
Basic

116,270

115,275

112,760

115,318

111,626

Diluted

116,270

115,275

112,760

115,318

120,025

(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,

2019

2019

2018

2019

2018

Share-based compensation:
Cost of services

$

331

$

377

$

352

$

1,119

$

1,059

General and administrative

2,006

2,140

1,887

6,240

5,666

Sales and marketing

584

598

638

1,666

1,874

Research and development

437

534

544

1,438

1,746

Total share-based compensation

$

3,358

$

3,649

$

3,421

$

10,463

$

10,345

Depreciation and amortization:
Network-related depreciation

$

4,961

$

4,628

$

3,761

$

13,905

$

12,337

Other depreciation and amortization

172

127

616

545

1,837

Total depreciation and amortization

$

5,133

$

4,755

$

4,377

$

14,450

$

14,174

Net increase (decrease) in cash, cash equivalents and marketable securities:

$

(10,872

)

$

(9,719

)

$

7,065

$

(32,416

)

$

3,319

End of period statistics:
Approximate number of active customers

609

621

667

609

667

Number of employees and employee equivalents

609

594

551

609

551

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,

2019

2019

2018

2019

2018

Operating activities
Net (loss) income

$

(2,751

)

$

(7,192

)

$

(272

)

$

(18,502

)

$

15,035

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization

5,133

4,755

4,377

14,450

14,174

Share-based compensation

3,358

3,649

3,421

10,463

10,345

Settlement and patent license income

-

-

-

-

(14,900

)

Foreign currency remeasurement (gain) loss

21

(135

)

64

(104

)

(97

)

Deferred income taxes

(61

)

82

(16

)

(30

)

(86

)

(Gain) loss on sale of property and equipment

(5

)

(21

)

(18

)

(56

)

(131

)

Accounts receivable charges

580

437

157

1,274

453

Amortization of premium on marketable securities

9

8

24

29

82

Changes in operating assets and liabilities:
Accounts receivable

(5,300

)

(2,031

)

5,558

(11,051

)

5,781

Prepaid expenses and other current assets

(885

)

582

(2,757

)

(777

)

(2,530

)

Income taxes receivable

45

-

7

43

(56

)

Other assets

781

(1,685

)

(192

)

(2,641

)

(759

)

Accounts payable and other current liabilities

(2,798

)

4,230

3,058

3,675

(2,526

)

Deferred revenue

(112

)

(148

)

(82

)

(557

)

85

Income taxes payable

61

81

(113

)

204

(350

)

Payments related to litigation, net

-

(1,520

)

(1,520

)

(3,040

)

(7,540

)

Other long term liabilities

16

22

(4

)

(137

)

(173

)

Net cash (used in) provided by operating activities

(1,908

)

1,114

11,692

(6,757

)

16,807

Investing activities
Purchases of marketable securities

-

(1,013

)

(15,962

)

(10,279

)

(15,962

)

Sale and maturities of marketable securities

1,000

18,929

8,850

32,153

20,365

Purchases of property and equipment

(7,750

)

(11,456

)

(4,214

)

(24,224

)

(10,495

)

Proceeds from sale of property and equipment

5

17

18

51

131

Net cash (used in) provided by investing activities

(6,745

)

6,477

(11,308

)

(2,299

)

(5,961

)

Financing activities
Payment of employee tax withholdings related to restricted stock vesting

(1,015

)

(619

)

(996

)

(2,528

)

(3,808

)

Cash paid for purchase of common stock

-

-

-

-

(3,800

)

Proceeds from employee stock plans

13

1,095

737

1,116

4,799

Net cash (used in) provided by financing activities

(1,002

)

476

(259

)

(1,412

)

(2,809

)

Effect of exchange rate changes on cash and cash equivalents

(211

)

132

(166

)

(83

)

(271

)

Net (decrease) increase in cash and cash equivalents

(9,866

)

8,199

(41

)

(10,551

)

7,766

Cash and cash equivalents, beginning of period

24,698

16,499

28,719

25,383

20,912

Cash and cash equivalents, end of period

$

14,832

$

24,698

$

28,678

$

14,832

$

28,678

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 (Loss)
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share
U.S. GAAP net (loss) income

$

(2,751

)

$

(0.02

)

$

(7,192

)

$

(0.06

)

$

(272

)

$

(0.00

)

$

(18,502

)

$

(0.16

)

$

15,035

$

0.13

Settlement and patent license income

-

-

-

-

-

-

-

-

(14,900

)

(0.13

)

Share-based compensation

3,358

0.03

3,649

0.03

3,421

0.03

10,463

0.09

10,345

0.09

Litigation expenses

-

-

-

-

19

0.00

-

-

2,904

0.03

Non-GAAP net income (loss)

$

607

$

0.01

$

(3,543

)

$

(0.03

)

$

3,168

$

0.03

$

(8,039

)

$

(0.07

)

$

13,384

$

0.12

Weighted average basic shares used in per share calculation

116,270

115,275

112,760

115,318

111,626

LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Income (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,

2019

2019

2018

2019

2018

U.S. GAAP net (loss) income

$

(2,751

)

$

(7,192

)

$

(272

)

$

(18,502

)

$

15,035

Depreciation and amortization

5,133

4,755

4,377

14,450

14,174

Interest expense

10

10

10

30

76

Interest and other (income) expense

(68

)

(40

)

69

(313

)

(85

)

Income tax expense

166

255

113

544

347

EBITDA

$

2,490

$

(2,212

)

$

4,297

$

(3,791

)

$

29,547

Settlement and patent license income

-

-

-

-

(14,900

)

Share-based compensation

3,358

3,649

3,421

10,463

10,345

Litigation expenses

-

-

19

-

2,904

Adjusted EBITDA

$

5,848

$

1,437

$

7,737

$

6,672

$

27,896

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.

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 October 16, 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.

Copyright (C) 2019 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

View source version on businesswire.com : https://www.businesswire.com/news/home/20191016005734/en/

Limelight Networks, Inc.
Sajid Malhotra, 602-850-5778
[email protected]

Source: Limelight Networks