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Press Release -- August 3rd, 2021
Source: Limelight Networks
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Limelight Networks Reports Financial Results for the Second Quarter of 2021

Company Release - 07/29/2021

SCOTTSDALE, Ariz., July 29, 2021 /PRNewswire/ -- Limelight Networks, Inc. (NASDAQ:LLNW, news, filings) (Limelight), a leading provider of edge cloud services, today reported financial results for the second quarter ended June 30, 2021, delivering on several key milestones in its 2021 strategic plan, which resulted in over $3 million of adjusted EBITDA improvements quarter over quarter.

Limelight Networks (PRNewsfoto/Limelight Networks)

Highlights of Strategic Plan Progress – Improve, Expand & Extend to Position for Growth

Under the first full quarter with new leadership, Limelight made significant strides in a number of key areas to return momentum to the business, drive operational improvements and accelerate revenue growth and profitability.

  • Achieved a 30% reduction in rebuffer rates and increased global network throughput by 20% through the newly formed performance operations team.
  • Improved the service level agreement position with 8 of our top 10 clients.
  • Achieved a 55% increase in our traffic in Latin America quarter over quarter; expecting to increase our capacity by 60% in the second half of the year to support growth in the region.
  • Identified over $8 million in annualized network operations cost savings, which is expected to contribute $4 million to gross profit in the second half of the year.
  • Key client winback expected to yield over $6 million in annualized revenue. This client was formerly a top 10 revenue client.
  • Appointed Eric Armstrong as Senior Vice President of Growth. Most recently, Eric was Vice President, North American Sales and Services at Harmonic, Inc., a global leader in streaming, broadcast and service provider video infrastructure.
  • Acquired Layer0, a leading provider of SaaS development and deployment tools for frontend web apps and API's to diversify product offering, clients and deliver an expected revenue contribution of over $20 million in 2022, while being accretive to gross margins and adjusted EBITDA. With the acquisition, Layer0's founder Ajay Kapur will join Limelight as Chief Technology Officer.

"It has been a very productive quarter and I am pleased with our ability to manage change while also aggressively executing on the plans outlined in our last earnings call," said Bob Lyons, President and Chief Executive Officer. "We were able to make a number of meaningful improvements in the business that position us well for a strong run-rate exiting 2021. We improved our adjusted EBITDA by over $3 million, as savings from the actions taken in the first quarter delivered material operational improvements and most importantly, we see strong early signs of client confidence returning. Our three-pillar framework of improving, expanding and extending the core will continue to guide us as we push for continued momentum in the last half of the year.

"Additionally, I am pleased to welcome both Eric and Ajay to the executive management team and welcome the entire Layer0 team to Limelight. I believe the simplified organization and operating structure we established has allowed us to move more quickly and efficiently. The addition of Eric, Ajay and the Layer0 team is a great infusion of diversified experience and talent. The Layer0 team is filled with innovative, results-oriented people and we look forward to what our new combined organization will accomplish together," said Lyons.

Second Quarter 2021 Financial Results

  • Revenue of $48.3 million, down 6% compared to $51.2 million in the first quarter of 2021, and down 17% compared to $58.5 million in the second quarter of 2020.
  • GAAP net loss of $13.7 million, or $(0.11) per basic share, an improvement of $11.8 million from the net loss of $25.5 million, or $(0.21) per basic share, in the first quarter of 2021. GAAP net loss was $1.7 million, or $(0.01) per basic share in the second quarter of 2020. GAAP net loss included $2.2 million and $11.7 million in restructuring and transition related charges in the second and first quarters of 2021, respectively.
  • Non-GAAP net loss was $8.0 million, or $(0.06) per basic share, an improvement of $3.0 million from the net loss of 11.0 million, or (0.09) per basic share, in the first quarter of 2021. Non-GAAP net income was $3.5 million, or $0.03 per basic share in the second quarter of 2020.
  • EBITDA was $(5.3) million, an improvement of $12.3 million from $(17.6) million for the first quarter of 2021. EBITDA was $4.5 million for the second quarter of 2020.
  • Adjusted EBITDA was $0.2 million, an improvement of $3.5 million from $(3.3) million for the first quarter of 2021. Adjusted EBITDA was $9.7 million for the second quarter of 2020.
  • Cash and cash equivalents of $119.6 million increased $2.6 million from $117.0 million at the end of the first quarter 2021.
  • Limelight ended the second quarter of 2021 with 459 employees and employee equivalents, down from 510 at the end of the first quarter of 2021, and down from 627 at the end of the second quarter of 2020.

Based on current outlook, we are reducing the guidance on capital expenditures from $20-25 million to $15-20 million, but leaving all other components of our guidance unchanged:

July 2021

April 2021

Actual 2020

Revenue

$220 to $230 million

$220 to $230 million

$230.2 million

GAAP Basic EPS

$(0.35) to $(0.25) 

$(0.35) to $(0.25) 

$(0.16)

Non-GAAP EPS

$(0.15) to $(0.05)

$(0.15) to $(0.05)

$(0.01)

Adjusted EBITDA

$20 to $30 million

$20 to $30 million

$24.5 million

Capital expenditures

$15 to $20 million

$20 to $25 million

$25.1 million

"While much has been accomplished in a very short time, we have more to do," said Lyons. "We will continue our pursuit of operational excellence, restoring client confidence, improving performance and returning value to our shareholders." On August 24, Limelight will provide a more detailed overview of its go-forward strategy and long-term business plans. A press release with participation details will be issued by August 10 and also made available on the Investor Relations section of Limelight's website (www.llnw.com).

Financial Tables

LIMELIGHT NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

June 30, 

March 31, 

December 31, 

2021

2021

2020

(Unaudited)

(Unaudited)

ASSETS

Current assets:

  Cash and cash equivalents

$         44,065

$         35,620

$         46,795

  Marketable securities

75,471

81,308

76,928

  Accounts receivable, net 

24,867

29,151

31,675

  Income taxes receivable

57

102

68

  Prepaid expenses and other current assets

14,557

14,784

15,588

Total current assets

159,017

160,965

171,054

Property and equipment, net

42,406

46,863

46,418

Operating lease right of use assets

8,929

9,521

10,150

Marketable securities, less current portion

40

40

40

Deferred income taxes

1,604

1,577

1,530

Goodwill

77,642

77,421

77,753

Other assets

6,147

6,742

7,233

Total assets

$        295,785

$        303,129

$       314,178

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Accounts payable

$         12,459

$           8,029

$           4,587

  Deferred revenue

524

844

933

  Operating lease liability obligations

1,977

2,233

2,465

  Income taxes payable

388

322

253

  Other current liabilities

16,877

19,264

17,560

Total current liabilities

32,225

30,692

25,798

Convertible senior notes, net

121,371

121,200

100,945

Operating lease liability obligations, less current portions

10,358

10,781

11,265

Deferred income taxes

306

360

279

Deferred revenue, less current portion

272

226

220

Other long-term liabilities

369

476

479

Total liabilities

164,901

163,735

138,986

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; 126,705, 125,248 and 123,653 shares issued and 

    outstanding at June 30, 2021, March 31, 2021 and December 31, 2020, respectively

127

125

124

  Additional paid-in capital

550,205

545,516

556,512

  Accumulated other comprehensive loss

(7,965)

(8,462)

(7,511)

  Accumulated deficit

(411,483)

(397,785)

(373,933)

Total stockholders' equity

130,884

139,394

175,192

Total liabilities and stockholders' equity

$        295,785

$        303,129

$       314,178

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

2021

2021

Change

2020

Change

2021

2020

Change

Revenue

$         48,348

$         51,195

-6%

$         58,546

-17%

$         99,543

$        115,558

-14%

Cost of revenue:

  Cost of services (1)

32,976

33,021

0%

29,389

12%

66,021

60,502

9%

  Depreciation - network

5,929

5,679

4%

5,360

11%

11,608

10,510

10%

Total cost of revenue 

38,905

38,700

1%

34,749

12%

77,629

71,012

9%

Gross profit 

9,443

12,495

-24%

23,797

-60%

21,914

44,546

-51%

Gross profit percentage

19.5%

24.4%

40.6%

22.0%

38.5%

Operating expenses:

  General and administrative  (1)

7,515

12,948

-42%

8,187

-8%

20,412

16,069

27%

  Sales and marketing  (1)

5,784

9,835

-41%

10,929

-47%

15,631

22,823

-32%

  Research & development  (1)

5,187

6,113

-15%

5,572

-7%

11,315

11,189

1%

  Depreciation and amortization

549

540

2%

323

70%

1,089

665

64%

  Restructuring charges

2,155

6,873

NM

-

NM

9,028

-

NM

Total operating expenses 

21,190

36,309

-42%

25,011

-15%

57,475

50,746

13%

Operating loss

(11,747)

(23,814)

NM

(1,214)

NM

(35,561)

(6,200)

NM

Other income (expense):

  Interest expense

(1,305)

(1,286)

NM

(71)

NM

(2,591)

(82)

NM

  Interest income

42

45

NM

6

NM

87

31

NM

  Other, net

(440)

(214)

NM

(312)

NM

(655)

(421)

NM

Total other expense

(1,703)

(1,455)

NM

(377)

NM

(3,159)

(472)

NM

Loss before income taxes

(13,450)

(25,269)

NM

(1,591)

NM

(38,720)

(6,672)

NM

Income tax expense 

248

260

NM

136

NM

507

311

NM

Net loss

$        (13,698)

$        (25,529)

NM

$          (1,727)

NM

$        (39,227)

$          (6,983)

NM

Net loss per share:

    Basic 

$           (0.11)

$           (0.21)

$           (0.01)

$           (0.31)

$            (0.06)

    Diluted

$           (0.11)

$           (0.21)

$           (0.01)

$           (0.31)

$            (0.06)

Weighted average shares used in per share calculation:

  Basic 

126,050

124,290

120,230

125,170

119,597

  Diluted

126,050

124,290

120,230

125,170

119,597

(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,

2021

2021

2020

2021

2020

Share-based compensation:

Cost of services

$          458

$          246

$          792

$          704

$       1,555

General and administrative

1,874

6,028

2,257

7,902

4,498

Sales and marketing

395

563

1,322

958

2,550

Research and development

614

371

880

985

1,712

Restructuring and transition related charges

917

1,354

-

2,271

-

Total share-based compensation

$       4,258

$       8,562

$       5,251

$     12,820

$     10,315

Depreciation and amortization:

Network-related depreciation

$       5,929

$       5,679

$       5,360

$     11,608

$     10,510

Other depreciation and amortization

549

540

323

1,089

665

Total depreciation and amortization

$       6,478

$       6,219

$       5,683

$     12,697

$     11,175

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

$       2,608

$      (6,795)

$      (3,221)

$      (4,187)

$         (135)

End of period statistics:

Approximate number of active clients

533

527

560

533

560

Number of employees and employee equivalents

459

510

627

459

627

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,

2021

2021

2020

2021

2020

Operating activities

Net loss

$          (13,698)

$          (25,529)

$           (1,727)

$          (39,227)

$           (6,983)

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

Depreciation and amortization

6,478

6,219

5,683

12,697

11,175

Share-based compensation

4,258

8,562

5,251

12,820

10,315

Foreign currency remeasurement loss (gain) 

257

(71)

257

186

(140)

Deferred income taxes

(71)

(10)

59

(81)

15

Gain on sale of property and equipment

(107)

-

-

(107)

-

Accounts receivable charges 

381

466

155

847

313

Amortization of premium on marketable securities

573

609

-

1,182

-

Non-cash interest expense

201

199

-

400

-

Changes in operating assets and liabilities:

  Accounts receivable

3,903

2,059

(10,798)

5,962

(11,083)

  Prepaid expenses and other current assets

(7)

446

986

439

(447)

  Income taxes receivable

46

(36)

10

10

13

  Other assets

513

399

1,121

912

1,747

  Accounts payable and other current liabilities

1,523

5,209

1,045

6,732

6,937

  Deferred revenue

(273)

(84)

313

(357)

63

  Income taxes payable

68

73

-

141

2

  Other long term liabilities

(108)

(3)

(15)

(111)

(11)

Net cash provided by (used in) operating activities

3,937

(1,492)

2,340

2,445

11,916

Investing activities

Purchases of marketable securities

(20,537)

(10,874)

-

(31,411)

-

Sale and maturities of marketable securities

25,818

5,897

-

31,715

-

Purchases of property and equipment

(2,986)

(6,628)

(8,085)

(9,614)

(14,948)

Proceeds from sale of property and equipment

107

-

-

107

-

Net cash provided by (used in) investing activities

2,402

(11,605)

(8,085)

(9,203)

(14,948)

Financing activities

Payment of debt issuance costs

(30)

-

-

(30)

-

Payment of employee tax withholdings related to restricted stock vesting

(427)

(671)

(1,430)

(1,098)

(2,945)

Proceeds from employee stock plans

2,613

2,847

3,954

5,460

6,092

Net cash provided by financing activities

2,156

2,176

2,524

4,332

3,147

Effect of exchange rate changes on cash and cash equivalents

(50)

(254)

-

(304)

(250)

Net increase (decrease) in cash and cash equivalents

8,445

(11,175)

(3,221)

(2,730)

(135)

Cash and cash equivalents, beginning of period 

35,620

46,795

21,421

46,795

18,335

Cash and cash equivalents, end of period

$           44,065

$           35,620

$           18,200

$           44,065

$           18,200

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, non-cash interest expense and restructuring and transition related charges. 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 restructuring and transition related charges. 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

In accordance with the requirements of Item 10(e) of Regulation S-K, we are presenting the most directly comparable U.S. GAAP financial measures and reconciling the unaudited 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

Six Months Ended

June 30, 2021

March 31, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Amount

Per Share

Amount

Per Share

Amount

Per Share

Amount

Per Share

Amount

Per Share

U.S. GAAP net loss

$    (13,698)

$        (0.11)

$    (25,529)

$        (0.21)

$      (1,727)

$        (0.01)

$    (39,227)

$        (0.31)

$      (6,983)

$        (0.06)

Share-based compensation

3,341

0.03

2,644

0.02

5,251

0.04

5,985

0.05

10,315

0.09

Non-cash interest expense

201

0.00

199

0.00

-

-

400

0.00

-

-

Restructuring and transition related charges

2,155

0.02

11,700

0.09

-

-

13,855

0.11

-

-

Non-GAAP net (loss) income  

$      (8,001)

$        (0.06)

$    (10,986)

$        (0.09)

$       3,524

$         0.03

$    (18,987)

$        (0.15)

$       3,332

$         0.03

Weighted average basic shares used in per share calculation

126,050

124,290

120,230

125,170

119,597

LIMELIGHT NETWORKS, INC.

Reconciliation of U.S. GAAP Net 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,

2021

2021

2020

2021

2020

U.S. GAAP net loss

$    (13,698)

$    (25,529)

$      (1,727)

$    (39,227)

$      (6,983)

Depreciation and amortization

6,478

6,219

5,683

12,697

11,175

Interest expense

1,305

1,286

71

2,591

82

Interest and other (income) expense 

398

169

306

568

390

Income tax expense 

248

260

136

507

311

EBITDA 

$      (5,269)

$    (17,595)

$       4,469

$    (22,864)

$       4,975

Share-based compensation

3,341

2,644

5,251

5,985

10,315

Restructuring and transition related charges

2,155

11,700

-

13,855

-

Adjusted EBITDA 

$          227

$      (3,251)

$       9,720

$      (3,024)

$     15,290

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. EDT (1:30 p.m. PDT) 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 (loss), 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 clients, unforeseen changes in our hiring patterns, adverse outcomes in litigation, experiencing expenses that exceed our expectations, and acquisition activities and contributions from acquired businesses. 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 29, 2021, 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) is an industry-leader in edge access and content delivery services that provides powerful tools and a client-first approach to optimize and deliver digital experiences at the edge. We are a trusted partner to the world's biggest brands and serve their global customers with experiences such as livestream sporting events, global movie launches, video games or file downloads for new phone apps. Limelight offers one of the largest, best-optimized private networks coupled with a global team of industry experts to provide edge services that are fast, secure and reliable.  For more information, visit www.limelight.com, and follow us on TwitterFacebook and LinkedIn.

Copyright (C) 2021 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

Source: Limelight Networks

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SOURCE Limelight Networks

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