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

  • Q2 Revenue of $45.9 million
  • Q2 GAAP basic EPS of $(0.06) and Non-GAAP EPS of $(0.03)
  • Cash and marketable securities of $29.0 million

TEMPE, Ariz.–(BUSINESS WIRE)–Limelight Networks, Inc. (Nasdaq:LLNW) (Limelight), a leading provider of edge cloud services, today reported revenue of $45.9 million for the second quarter of 2019, down 9% compared to $50.2 million in the second quarter of 2018. Currency negatively impacted year-over-year comparison by $0.3 million.

Limelight reported a net loss of $7.2 million, or $0.06 per basic share for the second quarter of 2019, compared to net income of $15.2 million, or $0.14 per basic share and $0.13 per fully diluted share, in the second quarter of 2018. Net income in the second quarter of 2018 included $14.9 million of non-operating income ($0.13 per basic share and $0.12 per fully diluted share) related to a settlement and patent license agreement.

Non-GAAP net loss was $3.5 million, or $0.03 per basic share, for the second quarter of 2019, compared to Non-GAAP net income of $4.0 million, or $0.04 per basic share, in the second quarter of 2018.

EBITDA was negative $2.2 million for the second quarter of 2019, compared to $20.3 million for the second quarter of 2018, which included the positive impact of $14.9 million of non-operating income related to the settlement and patent license agreement. Adjusted EBITDA was $1.4 million for the second quarter of 2019, compared to $9.2 million for the second quarter of 2018.

Limelight ended the second quarter with 594 employees and employee equivalents, up from 562 at the end of the first quarter of 2019, and up from 549 at the end of the second quarter of 2018.

“Second quarter results were in line with analyst expectations,” said Bob Lento, Chief Executive Officer. “Building upon our sequential top-line growth, we continue to anticipate year-over-year growth accelerating in the back half of the year and into 2020. We believe that the fourth quarter, in particular, will set us up for industry leading growth in revenue in 2020. During the first half of the year, we have achieved significant increases in capacity through software enhancements and investments in our infrastructure which leaves us well positioned to take advantage of the massive growth in demand for digital video services that most industry analysts are predicting for the near future.”

We are updating guidance to reflect the impact of timing issues on completion of certain major customer and partner-driven initiatives in 2019. 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 $25 million dollars.

 

Financial Tables

 

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 
June 30, March 31, December 31,

 

2019

 

 

2019

 

 

2018

 

(Unaudited)

(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents

$

24,698

 

$

16,499

 

$

25,383

 

Marketable securities

 

4,224

 

 

22,142

 

 

25,083

 

Accounts receivable, net

 

31,098

 

 

29,505

 

 

26,041

 

Income taxes receivable

 

125

 

 

124

 

 

122

 

Prepaid expenses and other current assets

 

8,739

 

 

12,276

 

 

14,789

 

Total current assets

 

68,884

 

 

80,546

 

 

91,418

 

Property and equipment, net

 

35,531

 

 

32,996

 

 

27,378

 

Operating lease right of use assets

 

2,701

 

 

3,012

 

 

 

Marketable securities, less current portion

 

40

 

 

40

 

 

40

 

Deferred income taxes

 

1,443

 

 

1,508

 

 

1,462

 

Goodwill

 

76,848

 

 

76,707

 

 

76,407

 

Other assets

 

5,848

 

 

4,199

 

 

2,220

 

Total assets

$

191,295

 

$

199,008

 

$

198,925

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable

$

14,346

 

$

17,858

 

$

9,216

 

Deferred revenue

 

1,331

 

 

1,524

 

 

1,883

 

Operating lease liability obligations

 

1,579

 

 

1,620

 

 

 

Income taxes payable

 

270

 

 

186

 

 

124

 

Provision for litigation

 

 

 

4,500

 

 

9,000

 

Other current liabilities

 

15,227

 

 

11,656

 

 

12,922

 

Total current liabilities

 

32,753

 

 

37,344

 

 

33,145

 

Operating lease liability obligations, less current portions

 

1,325

 

 

1,630

 

 

 

Deferred income taxes

 

140

 

 

128

 

 

152

 

Deferred revenue, less current portion

 

149

 

 

105

 

 

42

 

Other long-term liabilities

 

283

 

 

263

 

 

435

 

Total liabilities

 

34,650

 

 

39,470

 

 

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; 115,760 114,874 and 114,246 shares issued and
outstanding at June 30, 2019, March 31, 2019 and December 31, 2018, respectively

 

116

 

 

115

 

 

114

 

Additional paid-in capital

 

520,375

 

 

516,251

 

 

513,682

 

Accumulated other comprehensive loss

 

(9,483

)

 

(9,657

)

 

(10,033

)

Accumulated deficit

 

(354,363

)

 

(347,171

)

 

(338,612

)

Total stockholders’ equity

 

156,645

 

 

159,538

 

 

165,151

 

Total liabilities and stockholders’ equity

$

191,295

 

$

199,008

 

$

198,925

 

 
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended Six Months Ended
 
June 30, March 31, Percent June 30, Percent June 30, June 30, Percent

 

2019

 

 

2019

 

Change

 

2018

 

Change

 

2019

 

 

2018

 

Change

 
Revenue

$

45,904

 

$

43,280

 

6

%

$

50,249

 

-9

%

$

89,184

 

$

102,363

 

-13

%

Cost of revenue:
Cost of services (1)

 

22,769

 

 

22,941

 

-1

%

 

21,206

 

7

%

 

45,710

 

 

42,260

 

8

%

Depreciation – network

 

4,628

 

 

4,317

 

7

%

 

4,196

 

10

%

 

8,944

 

 

8,576

 

4

%

Total cost of revenue

 

27,397

 

 

27,258

 

1

%

 

25,402

 

8

%

 

54,654

 

 

50,836

 

8

%

Gross profit

 

18,507

 

 

16,022

 

16

%

 

24,847

 

-26

%

 

34,530

 

 

51,527

 

-33

%

Gross profit percentage

 

40.3

%

 

37.0

%

 

49.4

%

 

38.7

%

 

50.3

%

Operating expenses:
General and administrative (1)

 

8,340

 

 

7,535

 

11

%

 

7,517

 

11

%

 

15,875

 

 

17,038

 

-7

%

Sales and marketing (1)

 

10,994

 

 

10,972

 

0

%

 

10,022

 

10

%

 

21,966

 

 

20,302

 

8

%

Research & development (1)

 

6,013

 

 

5,901

 

2

%

 

6,073

 

-1

%

 

11,915

 

 

12,412

 

-4

%

Depreciation and amortization

 

127

 

 

245

 

-48

%

 

633

 

-80

%

 

372

 

 

1,221

 

-70

%

Total operating expenses

 

25,474

 

 

24,653

 

3

%

 

24,245

 

5

%

 

50,128

 

 

50,973

 

-2

%

 
Operating (loss) income

 

(6,967

)

 

(8,631

)

NM

 

 

602

 

NM

 

 

(15,598

)

 

554

 

NM

 

 
Other income (expense):
Interest expense

 

(10

)

 

(10

)

NM

 

 

(7

)

NM

 

 

(20

)

 

(66

)

NM

 

Interest income

 

110

 

 

212

 

NM

 

 

134

 

NM

 

 

321

 

 

263

 

NM

 

Settlement and patent license income

 

 

 

 

NM

 

 

14,900

 

NM

 

 

 

 

14,900

 

NM

 

Other, net

 

(70

)

 

(6

)

NM

 

 

(221

)

NM

 

 

(76

)

 

(109

)

NM

 

Total other income (expense)

 

30

 

 

196

 

NM

 

 

14,806

 

NM

 

 

225

 

 

14,988

 

NM

 

 
(Loss) income before income taxes

 

(6,937

)

 

(8,435

)

NM

 

 

15,408

 

NM

 

 

(15,373

)

 

15,542

 

NM

 

Income tax expense

 

255

 

 

124

 

NM

 

 

249

 

NM

 

 

378

 

 

234

 

NM

 

 
Net (loss) income

$

(7,192

)

$

(8,559

)

NM

 

$

15,159

 

NM

 

$

(15,751

)

$

15,308

 

NM

 

 
Net (loss) income per share:
Basic

$

(0.06

)

$

(0.07

)

$

0.14

 

$

(0.14

)

$

0.14

 

Diluted

$

(0.06

)

$

(0.07

)

$

0.13

 

$

(0.14

)

$

0.13

 

 
Weighted average shares used in per share calculation:
Basic

 

115,275

 

 

114,410

 

 

111,356

 

 

114,843

 

 

111,059

 

Diluted

 

115,275

 

 

114,410

 

 

120,033

 

 

114,843

 

 

119,454

 

 

(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, March 31, June 30, June 30, June 30,

 

2019

 

 

2019

 

 

2018

 

2019

 

 

2018

 

 
 
Share-based compensation:
 
Cost of services

$

377

 

$

411

 

$

350

$

788

 

$

707

 

General and administrative

 

2,140

 

 

2,094

 

 

1,969

 

4,234

 

 

3,779

 

Sales and marketing

 

598

 

 

484

 

 

633

 

1,082

 

 

1,236

 

Research and development

 

534

 

 

467

 

 

605

 

1,001

 

 

1,202

 

 
Total share-based compensation

$

3,649

 

$

3,456

 

$

3,557

$

7,105

 

$

6,924

 

 
Depreciation and amortization:
 
Network-related depreciation

$

4,628

 

$

4,317

 

$

4,196

$

8,944

 

$

8,576

 

Other depreciation and amortization

 

127

 

 

245

 

 

633

 

372

 

 

1,221

 

 
Total depreciation and amortization

$

4,755

 

$

4,562

 

$

4,829

$

9,316

 

$

9,797

 

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

$

(9,719

)

$

(11,825

)

$

1,875

$

(21,544

)

$

(3,746

)

 
 
End of period statistics:
 
Approximate number of active customers

 

621

 

 

643

 

 

689

 

621

 

 

689

 

 
Number of employees and employee equivalents

 

594

 

 

562

 

 

549

 

594

 

 

549

 

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

Three Months Ended

Six Months Ended

 
June 30, March 31, June 30, June 30, June 30,

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 
Operating activities
Net (loss) income

$

(7,192

)

$

(8,559

)

$

15,159

 

$

(15,751

)

$

15,308

 

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

 

4,755

 

 

4,562

 

 

4,829

 

 

9,316

 

 

9,797

 

Share-based compensation

 

3,649

 

 

3,456

 

 

3,557

 

 

7,105

 

 

6,924

 

Settlement and patent license income

 

 

 

 

 

(14,900

)

 

 

 

(14,900

)

Foreign currency remeasurement (gain) loss

 

(135

)

 

10

 

 

(271

)

 

(125

)

 

(161

)

Deferred income taxes

 

82

 

 

(51

)

 

(111

)

 

31

 

 

(70

)

(Gain) loss on sale of property and equipment

 

(21

)

 

(30

)

 

(97

)

 

(51

)

 

(113

)

Accounts receivable charges

 

437

 

 

257

 

 

78

 

 

694

 

 

296

 

Amortization of premium on marketable securities

 

8

 

 

12

 

 

25

 

 

20

 

 

58

 

Changes in operating assets and liabilities:
Accounts receivable

 

(2,031

)

 

(3,720

)

 

493

 

 

(5,751

)

 

223

 

Prepaid expenses and other current assets

 

582

 

 

(474

)

 

(655

)

 

108

 

 

227

 

Income taxes receivable

 

 

 

(2

)

 

61

 

 

(2

)

 

(63

)

Other assets

 

(1,685

)

 

(1,737

)

 

(72

)

 

(3,422

)

 

(567

)

Accounts payable and other current liabilities

 

4,230

 

 

2,243

 

 

(3,298

)

 

6,473

 

 

(5,584

)

Deferred revenue

 

(148

)

 

(297

)

 

37

 

 

(445

)

 

167

 

Income taxes payable

 

81

 

 

62

 

 

160

 

 

143

 

 

(237

)

Payments related to litigation, net

 

(1,520

)

 

(1,520

)

 

(1,520

)

 

(3,040

)

 

(6,020

)

Other long term liabilities

 

22

 

 

(175

)

 

(19

)

 

(152

)

 

(170

)

Net cash provided by (used in) operating activities

 

1,114

 

 

(5,963

)

 

3,456

 

 

(4,849

)

 

5,115

 

 
Investing activities
Purchases of marketable securities

 

(1,013

)

 

(9,266

)

 

 

 

(10,279

)

 

 

Sale and maturities of marketable securities

 

18,929

 

 

12,224

 

 

7,000

 

 

31,153

 

 

11,515

 

Purchases of property and equipment

 

(11,456

)

 

(5,018

)

 

(4,291

)

 

(16,474

)

 

(6,281

)

Proceeds from sale of property and equipment

 

17

 

 

29

 

 

97

 

 

46

 

 

113

 

Net cash provided by (used in) investing activities

 

6,477

 

 

(2,031

)

 

2,806

 

 

4,446

 

 

5,347

 

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

 

(619

)

 

(894

)

 

(1,206

)

 

(1,513

)

 

(2,812

)

Cash paid for purchase of common stock

 

 

 

 

 

 

 

 

 

(3,800

)

Proceeds from employee stock plans

 

1,095

 

 

8

 

 

4,032

 

 

1,103

 

 

4,062

 

Net cash provided by (used in) financing activities

 

476

 

 

(886

)

 

2,826

 

 

(410

)

 

(2,550

)

Effect of exchange rate changes on cash and cash equivalents

 

132

 

 

(4

)

 

(232

)

 

128

 

 

(105

)

Net increase (decrease) in cash and cash equivalents

 

8,199

 

 

(8,884

)

 

8,856

 

 

(685

)

 

7,807

 

Cash and cash equivalents, beginning of period

 

16,499

 

 

25,383

 

 

19,863

 

 

25,383

 

 

20,912

 

Cash and cash equivalents, end of period

$

24,698

 

$

16,499

 

$

28,719

 

$

24,698

 

$

28,719

 

 

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 Six Months Ended
 
June 30, 2019 March 31, 2019 June 30, 2018 June 30, 2019 June 30, 2018

Amount

 

Per Share

 

Amount

 

Per Share

 

Amount

 

Per Share

 

Amount

 

Per Share

 

Amount

 

Per Share

 
U.S. GAAP net (loss) income

$

(7,192

)

$

(0.06

)

$

(8,559

)

$

(0.07

)

$

15,159

 

$

0.14

 

$

(15,751

)

$

(0.14

)

$

15,308

 

$

0.14

 

 
Settlement and patent license income

 

 

 

 

 

 

 

 

 

(14,900

)

 

(0.13

)

 

 

 

 

 

(14,900

)

 

(0.13

)

Share-based compensation

 

3,649

 

 

0.03

 

 

3,456

 

 

0.03

 

 

3,557

 

 

0.03

 

 

7,105

 

 

0.06

 

 

6,924

 

 

0.06

 

Litigation expenses

 

 

 

 

 

 

 

 

 

215

 

 

0.00

 

 

 

 

 

 

2,885

 

 

0.03

 

 
Non-GAAP net (loss) income

$

(3,543

)

$

(0.03

)

$

(5,103

)

$

(0.04

)

$

4,031

 

$

0.04

 

$

(8,646

)

$

(0.08

)

$

10,217

 

$

0.09

 

 
 
Weighted average basic shares used in per share calculation

 

115,275

 

 

114,410

 

 

111,356

 

 

114,843

 

 

111,059

 

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

June 30,

March 31,

June 30,

June 30,

June 30,

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 
U.S. GAAP net (loss) income

$

(7,192

)

$

(8,559

)

$

15,159

 

$

(15,751

)

$

15,308

 

 
Depreciation and amortization

 

4,755

 

 

4,562

 

 

4,829

 

 

9,316

 

 

9,797

 

Interest expense

 

10

 

 

10

 

 

7

 

 

20

 

 

66

 

Interest and other (income) expense

 

(40

)

 

(206

)

 

87

 

 

(245

)

 

(154

)

Income tax expense

 

255

 

 

124

 

 

249

 

 

378

 

 

234

 

 
EBITDA

$

(2,212

)

$

(4,069

)

$

20,331

 

$

(6,282

)

$

25,251

 

 
Settlement and patent license income

 

 

 

 

 

(14,900

)

 

 

 

(14,900

)

Share-based compensation

 

3,649

 

 

3,456

 

 

3,557

 

 

7,105

 

 

6,924

 

Litigation expenses

 

 

 

 

 

215

 

 

 

 

2,885

 

 
Adjusted EBITDA

$

1,437

 

$

(613

)

$

9,203

 

$

823

 

$

20,160

 

 

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 July 17, 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.

Contacts

Limelight Networks, Inc.

Sajid Malhotra, 602-850-5778

ir@llnw.com

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