Limelight Networks, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 19, 2018

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Exhibit 99.1

April 19, 2018
Limelight Networks Reports Record Financial Results for the First Quarter of 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
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 $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 a 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.


Exhibit 99.1

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 $0.07and $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.




Exhibit 99.1

Financial Tables
Limelight Networks, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
 
March 31,
2018
 
December 31,
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

 
 
 
 

 


Exhibit 99.1

Limelight Networks, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended
 
March 31,
 
Dec. 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 and development (1)
6,339

 
5,965

 
6
 %
 
6,220

 
2
 %
Depreciation and amortization
588

 
587

 
—
 %
 
589

 
—
 %
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
$
—

 
$
(0.01
)
 
 
 
$
(0.03
)
 
 
Diluted
$
—

 
$
(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)



Exhibit 99.1

Limelight Networks, Inc.
Supplemental Financial Data
(In thousands)
(Unaudited)
 
Three Months Ended
 
March 31,
 
Dec. 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 increase (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




Exhibit 99.1

Limelight Networks, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Three Months Ended
 
March 31,
 
Dec. 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


Exhibit 99.1

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:




Exhibit 99.1

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

 
$
—

 
$
(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 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.





Exhibit 99.1

2018 Guidance Table
Limelight Networks, Inc.
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. 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, litigation, 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, 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 Limelight Orchestrate Platform includes a global infrastructure with a fully-integrated suite of capabilities and services to help you address all


Exhibit 99.1

your content delivery needs. The Orchestrate Platform solves your most important content delivery challenges so you can deliver the next great digital experience anywhere. For more information, please visit www.limelight.com and follow us on Twitter, Facebook and LinkedIn.
Copyright (C) 2018 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.
Source: Limelight Networks
Language:
English
CONTACT:
Limelight Networks, Inc.
Sajid Malhotra, 602-850-5778
ir@llnw.com

Ticker Slug:
Ticker: LLNW
Exchange: NASDAQ



Limelight Networks, Inc. Reports