Limelight Networks(R) Reports Strong Financial Results for the Fourth Quarter and Full Year 2019

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Limelight Networks, Inc. (Nasdaq:LLNW) (Limelight), a leading provider of edge cloud services, today reported record revenue of $60.1 million for the fourth quarter of 2019, up 37% compared to $44.0 million in the fourth quarter of 2018.

Limelight reported GAAP net income of $2.5 million, or $0.02 per basic share for the fourth quarter of 2019, compared to a net loss of $5.2 million, or $0.05 per basic share, in the fourth quarter of 2018.

Non-GAAP net income was $5.8 million, or $0.05 per basic share, for the fourth quarter of 2019, compared to non-GAAP net income of $0.3 million, or break even per basic share, in the fourth quarter of 2018.

EBITDA was $8.1 million for the fourth quarter of 2019, compared to a loss of $0.9 million for the fourth quarter of 2018. Adjusted EBITDA was $11.4 million for the fourth quarter of 2019, compared to $4.6 million for the fourth quarter of 2018.

For the full year ended December 31, 2019, Limelight reported revenue of $200.6 million, an increase of 3% compared to $195.7 million for the year ended December 31, 2018.

Limelight reported GAAP net loss of $16.0 million, or $0.14 per basic share, for the year ended December 31, 2019, compared to net income of $9.8 million, or $0.09 per basic share, in 2018. Net income for the full year of 2018 includes $14.9 million, or $0.12 per basic share, of non-operating income related to the settlement and patent license agreement.

Non-GAAP net loss was $2.3 million, or $0.02 per basic share, for the year ended December 31, 2019, compared to non-GAAP net income of $13.7 million, or $0.12 per basic share, in 2018.

EBITDA was $4.3 million for the year ended December 31, 2019, compared to $28.7 million for the year ended December 31, 2018. Adjusted EBITDA was $18.1 million for the year ended December 31, 2019, compared to $32.5 million for the year ended December 31, 2018.

Limelight ended the fourth quarter with 610 employees and employee equivalents, up from 609 at the end of the third quarter of 2019, and up from 563 in the year ago period.

“The fourth quarter was our best ever performance across multiple financial and non-financial measures as we continued to execute our strategy of focusing on edge services and high-quality video delivery. The business momentum accelerated during the fourth quarter, primarily due to our significant participation in multiple live and on-demand OTT launches by some of the largest media companies in the world. Those companies looked to us as a trusted partner in these launches based on the superior performance of our network, global scale, and strong value proposition, said Bob Lento, Chief Executive Officer at Limelight.

“We are excited about the current and projected industry trends. We believe that we are poised to deliver a record year of volume, revenue and growth on a number of metrics, as our 2020 guidance reflects. OTT launches and demand for low latency-based edge services are predicted to expand globally in 2020 and beyond. We believe that we have unique assets to meet the computational and connectivity challenges of emerging business, both securely and globally. We are grateful for our customers, partners and employees who have helped build this business and position it for continued success,” Mr. Lento added.

Based on current conditions, and compared to 2019, our 2020 guidance implies double digit revenue growth, higher GAAP and Non-GAAP earnings, higher adjusted EBITDA, and lower capital expenditures.

Limelight Networks, Inc.
2020 Guidance

			Actual
	January 2020	December 2019	2019
Revenue	$223 to $235 million	$220 to $235 million	$200.6 million

GAAP Basic EPS	$(0.10) to Break-even	$(0.10) to Break-even	($0.14)

Non-GAAP EPS	Break-even to $0.10	Break-even to $0.10	($0.02)

Adjusted EBITDA	$25 to $35 million	$25 to $35 million	$18.1 million

Capital expenditures	$25 to $30 million	$25 to $30 million	$34.7 million

Financial Tables


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

	December 31,		September 30,		December 31,
	2019		2019		2018
	(Unaudited)		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	18,335	$	14,832	$	25,383
Marketable securities		–		3,218		25,083
Accounts receivable, net		34,476		35,818		26,041
Income taxes receivable		82		77		122
Prepaid expenses and other current assets		9,920		9,522		14,789
Total current assets		62,813		63,467		91,418
Property and equipment, net		46,136		46,304		27,378
Operating lease right of use assets		12,842		12,667		–
Marketable securities, less current portion		40		40		40
Deferred income taxes		1,319		1,474		1,462
Goodwill		77,102		77,051		76,407
Other assets		9,117		7,394		2,220
Total assets	$	209,369	$	208,397	$	198,925

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,020	$	20,641	$	9,216
Deferred revenue		976		1,205		1,883
Operating lease liability obligations		2,056		1,870		–
Income taxes payable		178		325		124
Provision for litigation		–		–		9,000
Other current liabilities		13,398		12,516		12,922
Total current liabilities		28,628		36,557		33,145
Operating lease liability obligations, less current portion		13,488		13,331		–
Deferred income taxes		239		123		152
Deferred revenue, less current portion		161		162		42
Other long-term liabilities		316		300		435
Total liabilities		42,832		50,473		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; 118,368, 116,513 and 114,246 shares issued and
outstanding at December 31, 2019, September 30, 2019 and December 31, 2018, respectively		118		117		114
Additional paid-in capital		530,285		524,758		513,682
Accumulated other comprehensive loss		(9,210)		(9,837)		(10,033)
Accumulated deficit		(354,656)		(357,114)		(338,612)
Total stockholders’ equity		166,537		157,924		165,151
Total liabilities and stockholders’ equity	$	209,369	$	208,397	$	198,925

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
	2019		2019		Change	2018		Change	2019		2018		Change

Revenue	$	60,129	$	51,321	17%	$	43,992	37%	$	200,634	$	195,670	3%
Cost of revenue:
Cost of services (1)		28,586		25,602	12%		22,141	29%		99,897		85,920	16%
Depreciation – network		5,288		4,961	7%		3,941	34%		19,193		16,277	18%
Total cost of revenue		33,874		30,563	11%		26,082	30%		119,090		102,197	17%
Gross profit		26,255		20,758	26%		17,910	47%		81,544		93,473	-13%
Gross profit percentage		43.7%		40.4%			40.7%			40.6%		47.8%
Operating expenses:
General and administrative (1)		7,554		7,356	3%		7,482	1%		30,785		32,372	-5%
Sales and marketing (1)		10,399		10,713	-3%		9,484	10%		43,078		39,553	9%
Research & development (1)		5,459		5,160	6%		5,781	-6%		22,534		24,075	-6%
Depreciation and amortization		328		172	91%		476	-31%		872		2,313	-62%
Total operating expenses		23,740		23,401	1%		23,223	2%		97,269		98,313	-1%

Operating income (loss)		2,515		(2,643)	NM		(5,313)	NM		(15,725)		(4,840)	NM

Other income (expense):
Interest expense		(45)		(10)	NM		(10)	NM		(76)		(86)	NM
Interest income		25		81	NM		230	NM		427		670	NM
Settlement and patent license income		–		–	NM		–	NM		–		14,900	NM
Other, net		169		(13)	NM		90	NM		80		(264)	NM
Total other income (expense)		149		58	NM		310	NM		431		15,220	NM

Income (loss) before income taxes		2,664		(2,585)	NM		(5,003)	NM		(15,294)		10,380	NM
Income tax expense		206		166	NM		190	NM		750		538	NM

Net income (loss)		2,458		(2,751)	NM		(5,193)	NM		(16,044)		9,842	NM

Net income (loss) per share:
Basic	$	0.02	$	(0.02)		$	(0.05)		$	(0.14)	$	0.09
Diluted	$	0.02	$	(0.02)		$	(0.05)		$	(0.14)	$	0.08

Weighted average shares used in per share calculation:
Basic		117,603		116,270			113,578			115,890		112,114
Diluted		123,801		116,270			113,578			115,890		120,010

(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,
	2019		2019		2018		2019		2018


Share-based compensation:

Cost of services	$	376	$	331	$	756	$	1,495	$	1,815
General and administrative		1,858		2,006		2,792		8,098		8,458
Sales and marketing		597		584		963		2,263		2,837
Research and development		484		437		974		1,922		2,720

Total share-based compensation	$	3,315	$	3,358	$	5,485	$	13,778	$	15,830

Depreciation and amortization:

Network-related depreciation	$	5,288	$	4,961	$	3,941	$	19,193	$	16,277
Other depreciation and amortization		328		172		476		872		2,313

Total depreciation and amortization	$	5,616	$	5,133	$	4,417	$	20,065	$	18,590


Net increase (decrease) in cash, cash equivalents and marketable securities:	$	285	$	(10,872)	$	(2,169)	$	(32,131)	$	1,150


End of period statistics:

Approximate number of active customers		599		609		649		599		649

Number of employees and employee equivalents		610		609		563		610		563

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,
		2019		2019		2018		2019		2018

Operating activities
	Net income (loss)	$	2,458	$	(2,751)	$	(5,193)	$	(16,044)	$	9,842
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Depreciation and amortization		5,616		5,133		4,417		20,065		18,590
	Share-based compensation		3,315		3,358		5,485		13,778		15,830
	Settlement and patent license income		–		–		–		–		(14,900)
	Foreign currency remeasurement (gain) loss		79		21		(65)		(25)		(162)
	Deferred income taxes		300		(61)		103		270		17
	(Gain) loss on sale of property and equipment		–		(5)		(6)		(56)		(137)
	Accounts receivable charges		519		580		449		1,793		902
	Amortization of premium on marketable securities		1		9		33		30		115
	Realized loss on marketable securities		9		–		–		9		–
	Changes in operating assets and liabilities:
	Accounts receivable		823		(5,300)		(343)		(10,228)		5,438
	Prepaid expenses and other current assets		(324)		(885)		64		(1,101)		(2,466)
	Income taxes receivable		(3)		45		25		40		(31)
	Other assets		(1,547)		781		201		(4,188)		(558)
	Accounts payable and other current liabilities		(2,383)		(2,798)		(1,807)		1,292		(4,333)
	Deferred revenue		(232)		(112)		1,004		(789)		1,089
	Income taxes payable		(143)		61		17		61		(333)
	Payments related to litigation, net		–		–		(1,520)		(3,040)		(9,060)
	Other long term liabilities		15		16		51		(121)		(121)
	Net cash provided by (used in) operating activities		8,503		(1,908)		2,915		1,746		19,722

Investing activities
	Purchases of marketable securities		–		–		(4,669)		(10,279)		(20,631)
	Sale and maturities of marketable securities		3,211		1,000		3,500		35,364		23,865
	Purchases of property and equipment		(10,480)		(7,750)		(5,618)		(34,704)		(16,113)
	Proceeds from sale of property and equipment		–		5		4		51		135
	Net cash used in investing activities		(7,269)		(6,745)		(6,783)		(9,568)		(12,744)

Financing activities
	Payment of employee tax withholdings related to restricted stock vesting		(1,079)		(1,015)		(985)		(3,607)		(4,793)
	Cash paid for the purchase of common stock		–		–		–		–		(3,800)
	Proceeds from employee stock plans		3,290		13		1,374		4,406		6,173
	Net cash provided by (used in) financing activities		2,211		(1,002)		389		799		(2,420)
	Effect of exchange rate changes on cash and cash equivalents		58		(211)		184		(25)		(87)
Net increase (decrease) in cash and cash equivalents			3,503		(9,866)		(3,295)		(7,048)		4,471
Cash and cash equivalents, beginning of period			14,832		24,698		28,678		25,383		20,912
Cash and cash equivalents, end of period		$	18,335	$	14,832	$	25,383	$	18,335	$	25,383

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, 2019				September 30, 2019				December 31, 2018				December 31, 2019				December 31, 2018
	Amount		Per Share		Amount		Per Share		Amount		Per Share		Amount		Per Share		Amount		Per Share

U.S. GAAP net income (loss)	$	2,458	$	0.02	$	(2,751)	$	(0.02)	$	(5,193)	$	(0.05)	$	(16,044)	$	(0.14)	$	9,842	$	0.09

Settlement and patent license income		–		–		–		–		–		–		–		–		(14,900)		(0.13)
Share-based compensation		3,315		0.03		3,358		0.03		5,485		0.05		13,778		0.12		15,830		0.14
Litigation expenses		–		–		–		–		3		0.00		–		–		2,907		0.03

Non-GAAP net income	$	5,773	$	0.05	$	607	$	0.01	$	295	$	0.00	$	(2,266)	$	(0.02)	$	13,679	$	0.12


Weighted average shares used in per share calculation				117,603				116,270				113,578				115,890				112,114

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,
		2019		2019		2018		2019		2018

U.S. GAAP net income (loss)		$	2,458	$	(2,751)	$	(5,193)	$	(16,044)	$	9,842
	Depreciation and amortization		5,616		5,133		4,417		20,065		18,590
	Interest expense		45		10		10		76		86
	Interest and other (income) expense		(194)		(68)		(320)		(507)		(406)
	Income tax expense		206		166		190		750		538

EBITDA		$	8,131	$	2,490	$	(896)	$	4,340	$	28,650
	Settlement and patent license income		–		–		–		–		(14,900)
	Share-based compensation		3,315		3,358		5,485		13,778		15,830
	Litigation expenses		–		–		3		–		2,907

Adjusted EBITDA		$	11,446	$	5,848	$	4,592	$	18,118	$	32,487

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 January 29, 2020, 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.

Source: Limelight Networks

Ticker Slug:

Ticker: LLNW

Exchange: NASDAQ

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