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Press Release -- February 8th, 2017
Source: Limelight Networks
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Limelight Networks Reports Financial Results for the Fourth Quarter and Full Year of 2016

  • Q4 Revenue of $43.8 million, up 2 percent, year over year and up 11 percent sequentially
  • Q4 Gross Margin of 44.9%, up 390 basis points, year over year
  • Q4 GAAP EPS of $(0.04) and Non-GAAP EPS of $0.02
  • Cash and marketable securities of $66.2 million

TEMPE, Ariz.--(BUSINESS WIRE)-- Limelight Networks, Inc. (NASDAQ:LLNW, news, filings) (Limelight), a global leader in digital content delivery, today reported revenue of $43.8 million for the fourth quarter of 2016, up 2 percent, compared to $42.7 million in the fourth quarter of 2015, and up 11 percent, compared to $39.5 million in the third quarter of 2016. Currency headwinds negatively impacted year-over-year comparison by $0.3 million and sequential comparison by $0.5 million.

Gross margin was 44.9% in the fourth quarter of 2016, an increase of 390 basis points from 41.0% in the fourth quarter of 2015, and up 380 basis points from 41.1% in the third quarter of 2016.

Limelight reported a net loss of $3.9 million, or $0.04 per basic share for the fourth quarter of 2016, compared to a net loss of $4.1 million, or $0.04 per basic share in the fourth quarter of 2015.

Non-GAAP net income was $1.8 million or $0.02 per basic share for the fourth quarter of 2016, compared to a non-GAAP net loss of $0.4 million, or break-even per basic share in the fourth quarter of 2015.

EBITDA was $1.9 million for the fourth quarter of 2016, compared to $2.1 million for the fourth quarter of 2015. Adjusted EBITDA was $7.5 million for the fourth quarter of 2016 compared to $5.3 million for the fourth quarter of 2015.

For the full year ended December 31, 2016, Limelight reported revenue of $168.2 million, a decrease of 2% compared to $170.9 million for the year ended December 31, 2015. Currency negatively impacted full year revenue by $0.8 million.

Gross margin was 42.4% for the year ended December 31, 2016, an increase of 250 basis points compared to 39.9% for the year ended December 31, 2015.

Limelight reported a net loss of $73.9 million, or $0.71 per basic share, for the year ended December 31, 2016, compared to a net loss of $24.0 million, or $0.24 per basic share, in 2015. The full year 2016 net loss includes a $54.0 million provision for litigation related to the settlement and license agreement with Akamai.

Non-GAAP net income was $0.8 million, or $0.01 per basic share, for the year ended December 31, 2016, compared to a non-GAAP net loss of $11.2 million, or $0.11 per basic share, in the same period of 2015.

EBITDA was negative $51.9 million for the year ended December 31, 2016, compared to negative $4.8 million for the year ended December 31, 2015. Adjusted EBITDA was $22.8 million for the year ended December 31, 2016, compared to $6.9 million for the year ended December 31, 2015.

Limelight ended the fourth quarter with 510 employees and employee equivalents, up from 502 at the end of the third quarter of 2016, and up slightly from 509 at the end of 2015.

Commenting on the fourth quarter and full year results, Chief Executive Officer, Robert Lento said, “The fourth quarter was our strongest of the year, and 2016 was our best year ever across a number of operational and financial metrics. These results help solidify our belief that the transition to profitable growth is underway and gaining momentum.”

"We operate in an attractive industry and our position is improving significantly. We’ve set aggressive goals for 2017 and we are pleased with the business trends as we begin the year. We believe our disciplined approach to drive better business performance is the best way to build a stronger company that delivers superior solutions for our customers and incremental value for our shareholders."

Based on current conditions, Limelight is confirming the following guidance for 2017:

  • Revenue between $175 million and $180 million,
  • GAAP gross margin expansion greater than 150 basis points over 2016,
  • Non-GAAP earnings per share between $0.02 and $0.06 per share,
  • Adjusted EBITDA is expected to be between $22 million and $27 million, and
  • Capital expenditures at approximately $20 million dollars.

Financial Tables

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
December 31, September 30, December 31,
2016 2016 2015
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 21,734 $ 74,400 $ 44,680
Marketable securities 44,453 - 28,322
Accounts receivable, net 27,418 22,859 26,795
Income taxes receivable 125 117 170
Deferred income taxes 88 85 89
Prepaid expenses and other current assets 4,865 5,347 9,578
Total current assets 98,683 102,808 109,634
Property and equipment, net 30,352 29,643 36,143
Marketable securities, less current portion 40 40 40
Deferred income taxes, less current portion 1,017 1,317 1,252
Goodwill 76,243 76,437 76,143
Other assets 1,794 1,848 2,415
Total assets $ 208,129 $ 212,093 $ 225,627
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,790 $ 9,922 $ 9,137
Deferred revenue 2,138 1,400 2,890
Capital lease obligations - - 466
Income taxes payable 188 141 204
Provision for litigation 18,000 18,000 -
Other current liabilities 12,836 10,828 10,857
Total current liabilities 41,952 40,291 23,554
Capital lease obligations, less current portion - - 1,436
Deferred income taxes 152 148 137
Deferred revenue, less current portion 22 30 92
Provision for litigation, less current portion 27,000 31,500 -
Other long-term liabilities 1,435 1,747 2,311
Total liabilities 70,561 73,716 27,530
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; 107,059, 105,218 and 102,299 shares issued and
outstanding at December 31, 2016, September 30, 2016 and December 31, 2015, respectively 107 105 102
Additional paid-in capital 490,819 486,574 477,202
Accumulated other comprehensive loss (11,038 ) (9,901 ) (10,812 )
Accumulated deficit (342,320 ) (338,401 ) (268,395 )
Total stockholders' equity 137,568 138,377 198,097
Total liabilities and stockholders' equity $ 208,129 $ 212,093 $ 225,627
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
2016 2016 Change 2015 Change 2016 2015 Change
Revenues $ 43,778 $ 39,473 11% $ 42,739 2% $ 168,234 $ 170,912 -2%
Cost of revenue:
Cost of services (1) 19,642 18,834 4% 20,388 -4% 78,857 84,818 -7%
Depreciation - network 4,474 4,401 2% 4,811 -7% 18,032 17,975 0%
Total cost of revenue 24,116 23,235 4% 25,199 -4% 96,889 102,793 -6%
Gross profit 19,662 16,238 21% 17,540 12% 71,345 68,119 5%
Gross profit percentage 44.9% 41.1% 41.0% 42.4% 39.9%
Operating expenses:
General and administrative (1) 7,960 8,033 -1% 5,509 44% 30,042 25,027 20%
Sales and marketing (1) 8,215 7,711 7% 8,101 1% 32,945 37,868 -13%
Research & development (1) 6,094 5,626 8% 6,678 -9% 24,335 28,016 -13%
Depreciation and amortization 590 613 -4% 1,005 -41% 2,452 2,929 -16%
Provision for litigation - - NA - NA 54,000 - NM
Total operating expenses 22,859 21,983 4% 21,293 7% 143,774 93,840 53%
Operating loss (3,197) (5,745) -44% (3,753) -15% (72,429) (25,721) 182%
Other income (expense):
Interest expense (54) (406) -87% (25) 116% (918) (29) NM
Interest income 101 8 NM 86 17% 123 317 -61%
Other, net (570) 151 -477% (407) 40% (98) 1,748 -106%
Total other income (expense) (523) (247) 112% (346) 51% (893) 2,036 -144%
Loss before income taxes (3,720) (5,992) -38% (4,099) -9% (73,322) (23,685) 210%
Income tax expense 199 130 53% 46 333% 603 267 126%
Net loss (3,919) (6,122) -36% (4,145) -5% (73,925) (23,952) 209%
Net loss per share:
Basic and diluted $ (0.04) $ (0.06) $ (0.04) $ (0.71) $ (0.24)
Weighted average shares used in per share calculation:
Basic and diluted 105,942 104,860 101,391 104,350 100,105

(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,
2016 2016 2015 2016 2015
Share-based compensation:
Cost of services $ 375 $ 209 $ 563 $ 1,493 $ 2,047
General and administrative 1,951 1,616 1,002 7,070 5,398
Sales and marketing 776 641 716 2,792 2,657
Research and development 581 521 582 2,104 2,236
Total share-based compensation $ 3,683 $ 2,987 $ 2,863 $ 13,459 $ 12,338
Depreciation and amortization:
Network-related depreciation $ 4,474 $ 4,401 $ 4,811 $ 18,032 $ 17,975
Other depreciation and amortization 590 611 544 2,438 1,866
Amortization of intangible assets - 2 461 14 1,063
Total depreciation and amortization $ 5,064 $ 5,014 $ 5,816 $ 20,484 $ 20,904
Net increase (decrease) in cash, cash equivalents and marketable securities: $ (8,213 ) $ 43,515 $ 3,427 $ (6,815 ) $ (20,082 )
End of period statistics:
Approximate number of active customers 851 875 963 851 963
Number of employees and employee equivalents 510 502 509 510 509

LIMELIGHT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended Twelve Months Ended

December 31,
2016

September 30,
2016

December 31,
2015

December 31,
2016

December 31,
2015

Operating activities
Net loss $ (3,919) $ (6,122) $ (4,145) $ (73,925) $ (23,952)

Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:

Depreciation and amortization 5,064 5,014 5,816 20,484 20,904
Share-based compensation 3,683 2,987 2,863 13,459 12,338
Accrual of provision for litigation - - - 54,000 -
Foreign currency remeasurement loss (gain) 76 343 492 585 (1,591)
Deferred income taxes 195 (39) 67 170 46
Gain on sale of property and equipment (218) (162) - (514) -
Accounts receivable charges 101 69 299 137 1,037
Amortization of premium on marketable securities 48 - 42 67 194
Realized loss on sale of marketable securities - - - 32 -
Changes in operating assets and liabilities:
Accounts receivable (4,661) 1,944 57 (760) (5,210)
Prepaid expenses and other current assets 315 941 (490) 4,648 (194)
Income taxes receivable (15) 16 9 39 44
Other assets 22 50 1,477 580 3,064
Accounts payable and other current liabilities (1,087) 1,769 (425) (1,757) 85
Deferred revenue 730 (1,091) (681) (822) (932)
Income taxes payable 68 (21) (2) (8) (80)
Payments for provision for litigation (4,500) (4,500) - (9,000) -
Other long term liabilities (307) (213) 1,358 (857) 688
Net cash provided by (used in) operating activities (4,405) 985 6,737 6,558 6,441
Investing activities
Purchases of marketable securities (45,629) - - (45,629) (16,821)
Sale and maturities of marketable securities 1,000 - 5,700 29,315 22,620
Change in restricted cash - 62,790 - - -
Purchases of property and equipment (4,897) (2,986) (3,960) (9,563) (24,714)
Proceeds from sale of property and equipment 504 - - 504 -
Net cash provided by (used in) investing activities (49,022) 59,804 1,740 (25,373) (18,915)
Financing activities
Principal payments on capital lease obligations - (4,207) (95) (4,685) (453)
Payment of employee tax withholdings related to restricted stock vesting (676) (362) (348) (1,982) (2,627)
Cash paid for purchase of common stock - - - - (957)
Proceeds from line of credit - (12,790) - - -
Proceeds from employee stock plans 1,839 48 1,287 2,743 4,018
Net cash provided by (used in) financing activities 1,163 (17,311) 844 (3,924) (19)
Effect of exchange rate changes on cash and cash equivalents (402) 37 (93) (207) (594)
Net increase (decrease) in cash and cash equivalents (52,666) 43,515 9,228 (22,946) (13,087)
Cash and cash equivalents, beginning of period 74,400 30,885 35,452 44,680 57,767
Cash and cash equivalents, end of period $ 21,734 $ 74,400 $ 44,680 $ 21,734 $ 44,680

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 provision for litigation, share-based compensation, litigation expenses and amortization of intangible assets. 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 provision for litigation, 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 Loss to Non-GAAP Net Income (Loss)
(In thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, 2016 September 30, 2016 December 31, 2015 December 31, 2016 December 31, 2015
Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share
U.S. GAAP net loss $ (3,919 ) $ (0.04 ) $ (6,122 ) $ (0.06 ) $ (4,145 ) $ (0.04 ) $ (73,925 ) $ (0.71 ) $ (23,952 ) $ (0.24 )
Provision for litigation - - - - - - 54,000 0.52 - -
Share-based compensation 3,683 0.03 2,987 0.03 2,863 0.03 13,459 0.13 12,338 0.12
Litigation expenses 1,998 0.02 2,837 0.03 402 0.00 7,284 0.07 (613 ) (0.01 )
Amortization of intangible assets - - 2 0.00 461 0.00 14 0.00 1,063 0.01
Non-GAAP net income (loss) $ 1,762 $ 0.02 $ (296 ) $ (0.00 ) $ (419 ) $ (0.00 ) $ 832 $ 0.01 $ (11,164 ) $ (0.11 )
Weighted average shares used in per share calculation 105,942 104,860 101,391 104,350 100,105
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,
2016 2016 2015 2016 2015

U.S. GAAP net loss

$ (3,919 ) $ (6,122 ) $ (4,145 ) $ (73,925 ) $ (23,952 )
Depreciation and amortization 5,064 5,014 5,816 20,484 20,904
Interest expense 54 406 25 918 29
Interest and other (income) expense 469 (159 ) 321 (25 ) (2,065 )
Income tax expense 199 130 46 603 267

EBITDA

$ 1,867 $ (731 ) $ 2,063 $ (51,945 ) $ (4,817 )
Provision for litigation - - - 54,000 -
Share-based compensation 3,683 2,987 2,863 13,459 12,338
Litigation expenses 1,998 2,837 402 7,284 (613 )

Adjusted EBITDA

$ 7,548 $ 5,093 $ 5,328 $ 22,798 $ 6,908

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 877-388-8480 within the United States or +1 678-809-1592 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 February 8, 2017, 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 (NASDAQ: LLNW), 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 award-winning Limelight Orchestrate™ platform includes an integrated suite of content delivery technology and services that helps organizations secure digital content, deliver exceptional multi-screen experiences, improve brand awareness, drive revenue, and enhance customer relationships — all while reducing costs. For more information, please visit www.limelight.com, read our blog, follow us on TwitterFacebook and LinkedIn and be sure to visit Limelight Connect.

Copyright (C) 2017 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

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

Source: Limelight Networks

MEDIA CONTACTS

Steve Milmore
smilmore@llnw.com
or
Deborah Hohler
dhohler@llnw.com

INVESTOR CONTACT

ir@llnw.com

LIMELIGHT NETWORKS, INC.

222 S. Mill Ave.
Tempe AZ 85281
602-850-5000
limelight.com

TRANSFER AGENT

American Stock Transfer and Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Phone: (800) 937-5449
Fax: (718) 236-4588
E-mail: Info@amstock.com
www.amstock.com

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