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Limelight Networks(R) Reports Third Quarter 2013 Financial Results

  • GAAP Revenue of $42.7 million, gross margin of 37%, loss from continuing operations of $10.9 million, or $0.11 per basic share
  • Non-GAAP net loss of $6.7 million, or $0.07 per basic share, break-even adjusted EBITDA
  • $112 million, or $1.15 per share, of cash and cash equivalents and marketable securities
  • Launched Orchestrate V2.5 to support faster content delivery

TEMPE, Ariz., Nov. 5, 2013 (GLOBE NEWSWIRE) -- Limelight Networks, Inc. (Nasdaq:LLNW) ("Limelight"), a global leader in Digital Presence Management, today reported revenue of $42.7 million for the quarter ended September 30, 2013, compared to $42.8 million for the quarter ended June 30, 2013, and compared to $45.0 million for the third quarter of 2012.

For the third quarter, on a GAAP basis, gross margin was 37%, and loss from continuing operations was $10.9 million or $0.11 per basic share. Gross margin was flat compared to the same period in 2012 when the company reported a loss from continuing operations of $0.6 million, or $0.01 per share. The third quarter of 2012 included a $9.4 million gain on the sale of the Company's cost basis investment in Gaikai Inc.

On a non-GAAP basis net loss was $6.7 million, or $0.07 per basic share compared to a non-GAAP net loss of $5.5 million or $0.05 per basic share in the third quarter of 2012.

"This quarter we took another step forward in our turnaround and simplification plan," said Bob Lento, Chief Executive Officer. "With our focus on account management, and initiatives to grow profitable revenue, we held quarter over quarter revenue flat, despite a significant decline in revenue from one of our largest customers. Our commitment to our customers through product and operational excellence is unwavering and we continued to invest in capacity and capabilities which we believe will help us create long-term customer relationships and grow revenue and profitability."

Financial Tables

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 30, December 31,
2013 2012
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 79,222 $ 108,915
Marketable securities 33,043 19,040
Accounts receivable, net 25,667 26,602
Income taxes receivable 339 471
Deferred income tax 83 38
Prepaid expenses and other current assets 10,232 12,308
Total current assets 148,586 167,374
Property and equipment, net 33,291 41,251
Marketable securities, less current portion 6 18
Deferred income tax, less current portion 2,862 2,838
Goodwill 80,658 80,278
Other intangible assets, net 4,343 6,387
Other assets 5,796 6,735
Total assets $ 275,542 $ 304,881
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,008 $ 6,730
Deferred revenue 6,015 6,892
Capital lease obligation 589 1,301
Income taxes payable 969 519
Other current liabilities 12,450 14,866
Total current liabilities 28,031 30,308
Capital lease obligation, less current portion 412 824
Deferred income tax 357 461
Deferred revenue, less current portion 1,931 797
Other long-term liabilities 4,832 5,261
Total liabilities 35,563 37,651
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 at September 30, 2013 and December 31, 2012; 97,239 and 98,038 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively 97 98
Additional paid-in capital 456,153 452,258
Contingent consideration 33 33
Accumulated other comprehensive loss (1,566) (709)
Accumulated deficit (214,738) (184,450)
Total stockholders' equity 239,979 267,230
Total liabilities and stockholders' equity $ 275,542 $ 304,881
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2013 2013 2012 2013 2012
Revenues $ 42,656 $ 42,763 $ 45,001 $ 131,232 $ 133,765
Cost of revenue:
Cost of services * 21,773 21,870 21,313 65,696 62,193
Depreciation - network 5,278 6,120 6,970 18,078 20,984
Total cost of revenue 27,051 27,990 28,283 83,774 83,177
Gross profit 15,605 14,773 16,718 47,458 50,588
Operating expenses:
General and administrative * 8,609 8,365 8,757 25,047 25,130
Sales and marketing * 10,363 10,699 11,037 31,545 34,431
Research and development * 5,423 5,650 4,956 16,814 15,108
Depreciation and amortization 1,433 1,442 1,481 4,325 4,329
Total operating expenses 25,828 26,156 26,231 77,731 78,998
Operating loss (10,223) (11,383) (9,513) (30,273) (28,410)
Other income (expense):
Interest expense (15) (21) (40) (64) (136)
Interest income 89 79 88 238 277
Gain on sale of cost basis investment -- -- 9,420 -- 9,420
Other, net (557) 143 (551) 154 (582)
Total other (expense) income (483) 201 8,917 328 8,979
Loss from continuing operations before income taxes (10,706) (11,182) (596) (29,945) (19,431)
Income tax expense 197 51 14 328 313
Loss from continuing operations (10,903) (11,233) (610) (30,273) (19,744)
Discontinued operations:
Loss from discontinued operations, net of income taxes (15) -- (218) (15) (918)
Net loss $ (10,918) $ (11,233) $ (828) $ (30,288) $ (20,662)
Net loss per share:
Basic
Continuing operations $ (0.11) $ (0.12) $ (0.01) $ (0.31) $ (0.19)
Discontinued operations $ (0.00) $ -- $ -- $ (0.00) $ (0.01)
Total $ (0.11) $ (0.12) $ (0.01) $ (0.31) $ (0.20)
Diluted
Continuing operations $ (0.11) $ (0.12) $ (0.01) $ (0.31) $ (0.19)
Discontinued operations $ (0.00) $ -- $ -- $ (0.00) $ (0.01)
Total $ (0.11) $ (0.12) $ (0.01) $ (0.31) $ (0.20)
Shares used in per share calculations:
Basic 96,949 96,257 99,359 96,675 102,123
Diluted 96,949 96,257 99,359 96,675 102,123
* Includes share-based compensation (see supplemental table for figures)
LIMELIGHT NETWORKS, INC.
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2013 2013 2012 2013 2012
Supplemental financial data (in thousands):
Share-based compensation:
Cost of revenues $ 499 $ 513 $ 604 $ 1,518 $ 1,594
General and administrative 1,591 1,605 1,571 4,817 4,638
Sales and marketing 638 595 836 1,896 2,503
Research and development 495 514 652 1,569 2,100
Total share-based compensation $ 3,223 $ 3,227 $ 3,663 $ 9,800 $ 10,835
Depreciation and amortization:
Network-related depreciation $ 5,278 $ 6,120 $ 6,970 $ 18,078 $ 20,984
Other depreciation and amortization 722 724 760 2,164 2,185
Amortization of intangible assets 711 718 721 2,161 2,144
Total depreciation and amortization $ 6,711 $ 7,562 $ 8,451 $ 22,403 $ 25,313
Net (decrease) increase in cash, cash equivalents and marketable securities: $ (6,603) $ (1,341) $ 5,340 $ (15,702) $ (10,265)
End of period statistics:
Approximate number of active customers 1,341 1,358 1,493 1,341 1,493
Number of employees 508 495 517 508 517
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2013 2013 2012 2013 2012
Operating activities
Net loss $ (10,918) $(11,233) $ (828) $ (30,288) $ (20,662)
Loss from discontinued operations (15) -- (218) (15) (918)
Net loss from continuing operations (10,903) (11,233) (610) (30,273) (19,744)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 6,711 7,562 8,451 22,403 25,313
Share-based compensation 3,223 3,227 3,663 9,800 10,835
Deferred income taxes 80 (118) (125) (209) (299)
Foreign currency remeasurement (gain) loss 641 (284) 517 (504) 173
Loss on sale of property and equipment 3 22 6 25 19
Accounts receivable charges 225 207 221 758 1,105
Amortization of premium on marketable securities 182 184 123 462 365
Gain on sale of cost basis investment -- -- (9,420) -- (9,420)
Non cash increase in cost basis investment -- -- -- -- (528)
Changes in operating assets and liabilities:
Accounts receivable (1,398) 2,835 (446) 177 (1,468)
Prepaid expenses and other current assets (33) 878 1,534 1,930 2,986
Income taxes receivable (17) 7 (135) 131 (393)
Other assets 341 461 580 908 (1,554)
Accounts payable 252 946 2,176 1,102 2,154
Deferred revenue (827) (615) 142 256 407
Other current liabilities 803 708 (732) (436) (1,023)
Income taxes payable 96 53 (22) 456 (200)
Other long term liabilities (166) (167) (72) (448) (531)
Net cash (used in) provided by operating activities (787) 4,673 5,851 6,538 8,197
Investing activities
Purchase of marketable securities (3,841) (7,931) (3,098) (49,811) (27,280)
Maturities of marketable securities 7,426 5,000 5,103 35,321 19,285
Purchases of property and equipment (5,563) (4,519) (7,362) (12,685) (17,474)
Proceeds from sale of cost basis investment -- -- 10,154 -- 10,154
Proceeds from sale of discontinued operations 5 119 367 124 7,217
Net cash (used in) provided by investing activities (1,973) (7,331) 5,164 (27,051) (8,098)
Financing activities
Payments on capital lease obligations (278) (417) (441) (1,124) (1,322)
Proceeds from exercise of stock options 27 2 30 29 155
Cash paid for purchase of common stock -- -- (3,171) (5,512) (16,273)
Payment of employee tax withholdings related to restricted stock (180) (771) (83) (2,309) (601)
Net cash used in financing activities (431) (1,186) (3,665) (8,916) (18,041)
Effect of exchange rate changes on cash and cash equivalents 310 (208) 89 (256) 61
Discontinued operations
Cash used in operating activities of discontinued operations (8) -- -- (8) --
Net (decrease) increase in cash and cash equivalents (2,889) (4,052) 7,439 (29,693) (17,881)
Cash and cash equivalents, beginning of period 82,111 86,163 95,029 108,915 120,349
Cash and cash equivalents, end of period $ 79,222 $ 82,111 $ 102,468 $ 79,222 $ 102,468

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use Non-GAAP net income (loss) and Adjusted EBITDA as a supplemental measure 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 because it allows us to illustrate the impact of the effects of share-based compensation, litigation expenses, amortization of intangibles, acquisition related expenses, gain on sale of cost basis investment and discontinued operations. We define EBITDA as GAAP net income (loss) before interest income, interest expense, gain on sale of cost basis investment, other income and expense, provision for income taxes, depreciation and amortization, and discontinued operations. We believe that EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA adjusted for operational expenses that we do not consider reflective of our ongoing operations. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors' use of operating performance comparisons from period to period. In addition, it should be noted that our performance-based executive officer bonus structure is tied closely to our performance as measured in part by certain non-GAAP financial measures.

The terms Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are not defined under United States generally accepted accounting principles, or United States GAAP, and are not measures of operating income, operating performance or liquidity presented in accordance with United States 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 United States 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;
  • they do not reflect changes in, or cash requirements for, our working capital needs;
  • they do not reflect the cash requirements necessary for litigation costs;
  • they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;
  • they 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 EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our GAAP results and using Non-GAAP net income (loss) 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 Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable GAAP measures.

LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Loss to Non-GAAP Net Loss
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2013 2013 2012 2013 2012
U.S. GAAP net loss $ (10,918) $ (11,233) $ (828) $ (30,288) $ (20,662)
Share-based compensation 3,223 3,227 3,663 9,800 10,835
Litigation defense expenses 149 109 148 299 166
Acquisition related expenses 146 (9) 48 113 (372)
Amortization of intangible assets 711 718 721 2,161 2,144
Gain on sale of cost basis investment -- -- (9,420) -- (9,420)
Loss from discontinued operations 15 -- 218 15 918
Non-GAAP net loss $ (6,674) $ (7,188) $ (5,450) $ (17,900) $ (16,391)
LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2013 2013 2012 2013 2012
U.S. GAAP net loss $ (10,918) $ (11,233) $ (828) $ (30,288) $ (20,662)
Depreciation and amortization 6,711 7,562 8,451 22,403 25,313
Interest expense 15 21 40 64 136
Gain on sale of cost basis investment -- -- (9,420) -- (9,420)
Interest and other (income) expense 468 (222) 463 (392) 304
Income tax expense 197 51 14 328 313
Loss from discontinued operations 15 -- 218 15 918
EBITDA (3,512) (3,821) (1,062) (7,870) (3,098)
Share-based compensation 3,223 3,227 3,663 9,800 10,835
Litigation defense expenses 149 109 148 299 166
Acquisition related expenses 146 (9) 48 113 (372)
Adjusted EBITDA (loss) $ 6 $ (494) $ 2,797 $ 2,342 $ 7,531

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 audiocast live from http://www.limelight.com and a replay will be available following the call from the Company's website.

Safe-Harbor Statement

This press release contains forward-looking statements concerning, among other things, the outlook for the Company's revenues, net loss and stock-based compensation expenses, customer growth, market growth, pricing pressures, expansion into additional market segments, product and services improvements, the integration of acquired businesses and litigation and acquisition related expenses. Forward-looking statements represent the current judgment and expectations of Limelight Networks and are not guarantees and are subject to a number of risks and uncertainties that could cause actual results to differ materially including, but not limited to, risks and uncertainties discussed in the Company's Annual Report on Form 10K and other filings with the Securities and Exchange Commission and the final review of the results and amendments and preparation of quarterly or annual financial statements, including consultation with our outside auditors. Accordingly, readers are cautioned not to place undue reliance on any forward-looking statements. The Company assumes no duty or obligation to update or revise any forward-looking statements for any reason.

About Limelight Networks, Inc.

Limelight Networks, Inc. (Nasdaq:LLNW) is a global leader in Digital Presence Management. For more information, please visit www.limelight.com, and be sure to follow us on Twitter at www.twitter.com/llnw.

Copyright (C) 2013 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

CONTACT: Gillian Reckler ir@llnw.com (602) 850-5000 famaPR on behalf of Limelight Networks (617) 986-5020 limelight@famapr.com

Source:Limelight Networks