Limelight Networks (Nasdaq:LLNW), a leading content delivery
network (CDN) for digital media, today reported financial results
for the second quarter ended June 30, 2007. For the second quarter
of 2007, Limelight Networks reported GAAP revenue of $21.2 million
and non-GAAP revenue of $24.7 million, representing growth of 43%
and 67%, respectively, over the $14.8 million of revenue the
company reported in second quarter of 2006. The company reported a
second quarter GAAP loss per diluted share of $(0.23) and non-GAAP
earnings per diluted share of $0.00. Non-GAAP Adjusted EBITDA for
the quarter was $4.4 million compared to $5.7 million for the
second quarter of 2006. A reconciliation of GAAP to non-GAAP
financials is provided in the table below. "We achieved numerous
milestones and executed well on our plan to establish Limelight
Networks as the premier content delivery and enablement partner for
businesses desiring to deliver rich media assets such as video,
music, games, software and social media over the Internet,�
commented Jeff Lunsford, chairman and chief executive officer.
Operating highlights in the quarter include: capitalizing the
business with over $200 million in growth capital raised in an IPO,
provisioning us with over $187�million in cash and marketable
securities on June 30, 2007 after paying down debt; achieving new
business bookings more than double those achieved in the second
quarter of 2006; the addition of 149 net new customers in the
quarter, bringing total customers up to 876 on June 30, 2007; the
hiring of 14 enterprise sales reps into a growing worldwide sales
force, bringing total quota-carry representatives up to 58 at the
end of June; and an increase of total network egress to a capacity
of approximately 1.4 terabits per second, positioning the company
as a scale leader in servicing the high-growth and high-traffic
publishers� Internet content. Limelight Networks also disclosed an
expanded 5-year individual customer arrangement pursuant to which
Limelight Networks will provide custom CDN consulting services and
will continue its content delivery services. Additionally,
Limelight and the customer agreed to cross-license certain
technologies, including certain components of Limelight�s CDN
software. This contract is a multi-element arrangement, which
required a change, beginning in the second quarter, in how
Limelight accounts for revenue from consulting, as well as the
company�s standard content delivery services delivered to this
customer. Because of the nature of the contract with this customer
and the company�s consequent revenue recognition, the company has
determined that it will present both GAAP and non-GAAP revenue and
earnings amounts to help illustrate the impact of this contract.
�We believe Limelight Networks is well positioned,� commented
Lunsford, �to grow our business as broadband Internet access
continues to propagate around the world, as content delivery shifts
from analog to digital networks and as consumers� content
consumption preferences shift to the online channel.� Guidance For
the third quarter of 2007, the company anticipates: GAAP revenue to
be in the range of $27�to $28�million Non-GAAP revenue to be in the
range of $25.5 to $26.5 million GAAP loss per diluted share to be
in a range of ($0.10) to ($0.08) Non-GAAP loss per diluted share to
be in a range of ($0.06).to ($0.04) Non-GAAP Adjusted EBITDA in the
range $1 to $2 million For the full year of 2007, the company
anticipates: GAAP revenue to be in the range of $101�to
$103�million Non-GAAP revenue to be in the range of $103 to $105
million GAAP (loss) per diluted share to be in a range of ($0.54)
to ($0.51) Non-GAAP earnings per diluted share to be in a range of
$0.00 to $0.02 Non-GAAP Adjusted EBITDA in the range of $16 to $19
million Conference Call Management will conduct a conference call
scheduled to begin at 6 a.m. PDT (9 a.m. EDT) on Thursday, August
9, 2007 to review the company�s financial results and its outlook
for the remainder of 2007. To participate in the conference call,
please call toll-free 877-574-8878 (or 706-634-6364 for
international callers) approximately 10 minutes prior to the start
time. You may also listen to the conference call live via the
Internet at www.llnw.com or www.earnings.com. These websites will
also host an archive of the call. About Limelight Networks
Limelight Networks is a high performance content delivery network
for digital media, providing massively scalable, global delivery
solutions for on-demand and live Internet distribution of video,
music, games and social media. Limelight Networks� infrastructure
is optimized for the large object sizes, large content libraries,
and large audiences associated with compelling rich media content.
Limelight is the content delivery network of choice for more than
700 of the world�s top media companies, including Akimbo, Amazon
Unbox�, Belo Interactive, Brightcove, �BuyMusic� @ Buy.com,
DreamWorks, LLC, Facebook, FOXNews.com, IFILM, ITV Play, Metacafe,
MSNBC.com, MySpace, NC Interactive, Valve Software, Radio Free
Virgin and Xbox Live. For more information, visit www.llnw.com.
Safe-Harbor Statement All forward-looking statements contained in
this release are made within the meaning of and pursuant to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements are all statements other
than statements of historical facts, including but not limited to
statements concerning the outlook for the company�s revenues,
Adjusted EBITDA and stock based compensation expense for the
third-quarter and full-year fiscal 2007; and all other statements
concerning the plans, intentions, expectations, projections, hopes,
beliefs, objectives, goals and strategies of management.
Forward-looking statements are not guarantees of future performance
or events and are subject to a number of known and unknown risks,
uncertainties and other factors that could cause actual results to
differ materially from those expressed, projected or implied by
such forward-looking statements. Important risks, uncertainties and
other factors include, but are not limited to, demand for the
company's products and services; the ability of the company to
successfully develop and expand its products, services,
technologies and markets; the effects of competition; changes in
customer and industry demand and preferences; seasonality; the
ability of the company to attract, retain and motivate key
personnel; the ability of the company to secure and maintain key
contracts and relationships; general economic, market and business
conditions; the effects of pending and future litigation, claims
and disputes; and other risks, uncertainties and other factors
identified from time to time in the company's filings with the
Securities and Exchange Commission. Accordingly, there can be no
assurance that the results expressed, projected or implied by any
forward-looking statements will be achieved, and readers are
cautioned not to place undue reliance on any forward-looking
statements. The forward-looking statements in this press release
speak only as of the date hereof and are based on the current
plans, goals, objectives, strategies, intentions, expectations and
assumptions of, and the information currently available to,
management. The Company assumes no duty or obligation to update or
revise any forward-looking statements for any reason, whether as
the result of changes in expectations, new information, future
events, conditions or circumstances or otherwise. LIMELIGHT
NETWORKS, INC. Condensed Consolidated Balance Sheets (In thousands)
(Unaudited) � June 30, 2007 December 31, 2006 Assets Cash and cash
equivalents $ 159,069 $ 7,611 Marketable securities, short term
28,875 - Accounts receivable, net 19,722 16,626 Income tax
receivable 3,833 3,317 Deferred income taxes 1,273 362 Prepaid
expenses and other current assets � 5,077 � 3,011 � Current assets
217,849 30,927 Property and equipment, net 46,124 41,784 Marketable
securities, long term 185 285 Deferred income taxes 50 173 Other
assets � 1,304 � 759 � Total assets $ 265,512 $ 73,928 � �
Liabilities and stockholders� equity Accounts payable � $ 8,510 $
6,419 Accounts payable, related parties 19 781 � � Deferred
revenue, current portion 3,232 197 Credit facilities, current
portion - 2,938 Capital lease obligations, current portion - 245
Other current liabilities � 12,063 � 6,314 � Current liabilities
23,82401 16,894 Deferred revenue, less current portion 598 - Credit
facilities, less current portion - 20,410 Capital lease
obligations, less current portion - 5 Other liabilities � � 30 � 30
Total liabilities 24,452 37,339 Stockholders� equity � � 241,060 �
36,589 Total liabilities and stockholders� equity $ � 265,512 $
73,928 LIMELIGHT NETWORKS, INC. Condensed Consolidated Statements
of Operations (In thousands, except per share data) (Unaudited) �
Three Months Ended Six Months Ended June 30,2007 March 31,2007 June
30,2006 March 31,2006 June 30,2007 June 30,2006 Revenues $ 21,213 $
22,876 $ 14,841 $ 10,838 $ 44,089 $ 25,679 Costs and operating
expenses: Cost of revenues1 3 14,835 14,497 7,266 5,280 29,332
12,546 General and administrative1 3 9,220 8,273 2,275 1,599 17,493
3,874 Sales and marketing 1 6,404 3,018 1,497 1,034 9,422 2,531
Research and development1 � 1,541 � 1,285 � 437 � 321 � 2,826 � 758
Total costs and operating expenses � 32,000 � 27,073 � 11,475 �
8,234 � 59,073 � 19,709 Operating income (loss) (10,787 ) (4,197 )
3,366 2,604 (14,984 ) 5,970 Interest expense2 (855 ) (585 ) (519 )
(505 ) (1,440 ) (1,024 ) Interest income 573 89 - - 662 - Other
income (expense) � - � - � - � - � - � - � Income (loss) before
income taxes (11,069 ) (4,693 ) 2,847 2,099 (15,762 ) 4,946 Income
tax expense (benefit) � (606 ) � (258 ) � 1,125 � 829 � (864 ) �
1,954 Net income (loss) $ (10,463 ) $ (4,435 ) $ 1,722 $ 1,270 $
(14,898 ) $ 2,992 Net income (loss) allocable to common
stockholders $ (10,463 ) $ (4,435 ) $ 1,722 $ 1,245 $ (14,898 ) $
2,967 Net income (loss) per share: Basic $ (0.23 ) $ (0.20 ) $ 0.05
$ 0.04 $ (0.44 ) $ 0.09 Diluted $ (0.23 ) $ (0.20 ) $ 0.04 $ 0.03 $
(0.44 ) $ 0.07 Shares used in per share calculations: Basic 45,702
21,886 31,848 35,188 33,794 33,518 Diluted 45,702 21,886 41,505
42,951 33,794 42,228 1 Includes stock-related compensation (see
supplemental table for figures) � 2 Includes approximately $417K
and $469K of deferred financing fees for the three and six month
periods ended June 30, 2007 � 3 Includes depreciation (see
supplemental table for figures) LIMELIGHT NETWORKS, INC.
Supplemental Financial Data (In thousands) (Unaudited) � Three
Months Ended Six Months Ended June30, 2007 March31, 2007 June30,
2006 March31, 2006 June30, 2007 June30, 2006 Supplemental financial
data (in thousands): Stock-related compensation: Cost of revenues $
346 $ 242 $ 93 $ 29 $ 588 $ 122 General and administrative 4,143
4,242 21 21 8,385 42 Sales and marketing 1,152 235 69 38 1,387 107
Research and development � 1,007 � 851 � 46 � 24 � 1,858 � 70 Total
stock-related compensation $ 6,648 $ 5,570 $ 229 $ 112 $ 12,218 $
341 Depreciation and amortization: Network-related depreciation $
5,020 $ 4,688 $ 2,035 $ 1,473 $ 9,708 $ 3,508 Other depreciation �
174 � 137 � 44 � 28 � 311 � 72 Total depreciation and amortization
$ 5,194 $ 4,825 $ 2,079 $ 1,501 $ 10,019 $ 3,580 Capital
expenditures: Purchases of property and equipment $ 5,641 $ 3,095 $
6,962 $ 3,470 $ 8,556 $ 10,432 � Net increase (decrease) in cash,
cash equivalents and marketable securities $ 175,195 $ 5,138 $ (506
) $ 541 $ 180,333 $ 35 � End of period statistics: Number of
customers under recurring contract 876 726 523 456 876 523 Number
of employees 215 167 91 77 215 91 LIMELIGHT NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows (In thousands)
(Unaudited) � Three Months Ended Six Months Ended June 30,2007
March 31,2007 June 30,2006 March 31,2006 June 30,2007 June 30,2006
Cash flows from operating activities: Net income $ (10,463 ) $
(4,435 ) $ 1,722 $ 1,270 $ (14,898 ) $ 2,992 Adjustments to
reconcile net income to net cash provided by (used in) operating
activities: Depreciation and amortization 5,194 4,824 2,079 1,502
10,018 3,580 Stock-based compensation 6,648 5,570 229 112 12,218
341 Deferred income tax expense (benefit) (83 ) (731 ) 80 (80 )
(814 ) - Accounts receivable charges 1,170 677 177 - 1,847 177
Accretion of debt discount 417 53 - 36 470 36 Changes in operating
assets and liabilities: Accounts receivable (7,418 ) 2,475 (2,542 )
(2,582 ) (4,943 ) (5,124 ) Prepaid expenses and other current
assets (3,661 ) (1,809 ) (301 ) (363 ) (5,470 ) (664 ) Income taxes
receivable (631 ) 116 (80 ) 80 (516 ) - Other assets (426 ) (119 )
(127 ) (109 ) (545 ) (236 ) Accounts payable (2,978 ) (732 ) 1,431
(417 ) (3,709 ) 1,014 Accounts payable, related parties (763 ) 1
958 (362 ) (762 ) 596 Deferred revenue and other current
liabilities � 9,065 � 650 � 720 � 1,225 � 9,715 � 1,945 Net cash
provided (used in) by operating activities: � (3,929 ) � 6,540 �
4,346 � 312 � 2,611 � 4,657 Cash flows from investing activities:
Purchase of marketable securities (28,875 ) - - - (28,875 )
Purchases of property and equipment � (5,461 ) � (3,095 ) � (6,962
) � (3,470 ) � (8,556 ) � (10,432 ) Net cash used in investing
activities � (34,336 ) � (3,095 ) � (6,962 ) � (3,470 ) � (37,431 )
� (10,432 ) Cash flows from financing activities: Borrowings on
credit facilities - - 2,515 4,040 - 6,555 Payments on credit
facilities (23,818 ) - (327 ) (171 ) (23,818 ) (498 ) Borrowings on
line of credit - 1,500 - - 1,500 - Payments on line of credit
(1,500 ) - - - (1,500 ) - Payments on capital lease obligations (91
) (159 ) (79 ) (20 ) (250 ) (99 ) Payments on notes payable �
related parties - - - (195 ) - (195 ) Escrow funds returned from
share repurchase 2,091 298 - - 2,389 - Tax benefit from share-based
compensation - 23 - - 23 - Proceeds from exercise of stock options
- 31 1 45 31 46 Proceeds from initial public offering, net of
issuance costs � 207,904 � - � - � - � 207,904 � - Net cash
provided by financing activities � 184,586 � 1,693 � 2,110 � 3,699
� 186,279 � 5,809 Net increase (decrease) in cash and cash
equivalents 146,320 5,138 (506 ) 541 151,458 35 Cash and cash
equivalents, beginning of period � 12,749 � 7,611 � 2,077 � 1,536 �
7,611 � 1,536 Cash and cash equivalents, end of period $ 159,069 $
12,749 $ 1,571 $ 2,077 $ 159,069 $ 1,571 Use of Non-GAAP Financial
Measures In evaluating our business, we consider and use Non-GAAP
revenue, Non-GAAP net income and Adjusted EBITDA as a supplemental
measure of our operating performance. We consider Non-GAAP revenue
and net income measurements to be an important indicator of overall
performance of the company because it allows us to illustrate the
impact of revenue generated from our multi-element contract as well
as to eliminate the effects of stock based compensation and
litigation expense. We define EBITDA as GAAP net income before net
interest expense, provision for income taxes, depreciation and
amortization. We define Adjusted EBITDA as EBITDA plus income from
our multi-element contract and expenses that we do not consider
reflective of our ongoing operations. We use Adjusted EBITDA as a
supplemental measure to review and assess our operating
performance. We also believe use of Adjusted EBITDA facilitates
investors� use of operating performance comparisons from period to
period and company to company by backing out potential differences
caused by variations in such items as capital structures (affecting
relative interest expense and stock-based compensation expense),
the book amortization of intangibles (affecting relative
amortization expense), the age and book value of facilities and
equipment (affecting relative depreciation expense) and other non
cash expenses. We also present Adjusted EBITDA because we believe
it is frequently used by securities analysts, investors and other
interested parties as a measure of financial performance. The terms
Non-GAAP revenue and net income, EBITDA and Adjusted EBITDA are not
defined under U.S. generally accepted accounting principles, or
U.S. GAAP, and are not measures of operating income, operating
performance or liquidity presented in accordance with U.S. GAAP.
Our Non-GAAP revenue and net income, EBITDA and Adjusted EBITDA
have limitations as analytical tools, and when assessing our
operating performance, you should not consider Non-GAAP revenue and
net income, EBITDA and Adjusted EBITDA 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; they do not
reflect changes in, or cash requirements for, our working capital
needs; they do not reflect the interest expense, or the cash
requirements necessary to service interest or principal payments,
on our debt; 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 often will have to be replaced in the future, and EBITDA
and Adjusted EBITDA do not reflect any cash requirements for such
replacements; while stock-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
assumed life of the options and 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 and Adjusted
EBITDA only supplementally. Non-GAAP Net Income, 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.
Reconciliation of GAAP Revenue to Non-GAAP Revenue (In thousands)
(Unaudited) � Three Months Ended Six Months Ended June 30, 2007
March 31, 2007 June 30, 2006 March 31, 2006 June 30, 2007 June 30,
2006 GAAP Revenue $ 21,213 $ 22,876 $ 14,841 $ 10,838 $ 44,089 $
25,679 � Deferred Traffic Revenue 2,645 - - - 2,645 - Deferred
Custom CDN Services - - - - - - Earned Custom CDN Services � 820 �
- � - � - � 820 � - Non-GAAP Revenue $ 24,678 $ 22,876 $ 14,841 $
10,838 $ 47,554 $ 25,679 Reconciliation of GAAP Net Income (Loss)
to Non-GAAP Net Income (Loss) (In thousands, except per share data)
(Unaudited) � Three Months Ended Six Months Ended June30,2007
March31,2007 June30,2006 March31,2006 June30,2007 June30,2006 GAAP
net income (loss) $ (10,463 ) $ (4,435 ) $ 1,722 $ 1,270 $ (14,898
) $ 2,992 � Stock based compensation 6,648 5,570 229 112 12,218 341
Litigation expenses 1,636 885 - - 2,521 - Deferred revenue 3,465 -
- - 3,465 - Deferred cost of traffic and services � (935 ) � - � -
� - � (935 ) � - � Non-GAAP net income $ 351 $ 2,020 $ 1,951 $
1,382 $ 2,371 $ 3,333 � GAAP net income (loss) per share Basic $
(0.23 ) $ (0.20 ) $ 0.05 $ 0.04 $ (0.44 ) $ 0.09 Diluted $ (0.23 )
$ (0.20 ) $ 0.04 $ 0.03 $ (0.44 ) $ 0.07 � Non-GAAP net income
(loss) per share Basic $ 0.01 $ 0.09 $ 0.06 $ 0.04 $ 0.07 $ 0.10
Diluted $ - $ 0.03 $ 0.05 $ 0.03 $ 0.03 $ 0.08 � Shares used in per
share calculations Basic 45,702 21,886 31,848 35,188 33,794 33,518
Diluted 79,240 69,292 41,505 42,951 74,266 42,228 Reconciliation of
GAAP Net Income (Loss) to EBITDA to Adjusted EBITDA (In thousands,
except per share data) (Unaudited) � Three Months Ended Six Months
Ended June30,2007 � March31,2007 � June30,2006 � March31,2006 �
June30,2007 � June30,2006 � GAAP net income (loss) $ (10,463 ) $
(4,435 ) $ 1,722 $ 1,270 $ (14,898 ) $ 2,992 � Add: depreciation
and amortization 5,194 4,825 2,078 1,502 10,019 3,580 Add: interest
expense 855 585 519 505 1,440 1,024 Less: interest income (573 )
(89 ) - - (662 ) - Plus (less) income tax expense (benefit) � (606
) � (258 ) � 1,125 � 829 � (864 ) � 1,954 EBITDA $ (5,593 ) $ 628 $
5,445 $ 4,105 $ (4,965 ) $ 9,550 Add: stock based compensation
6,648 5,570 229 112 12,218 341 Add: litigation expenses recoverable
from escrow1 818 442 - - 1,260 - Add: deferred traffic and services
revenue 3,465 - - - 3,465 - Less: deferred traffic and service
costs � (935 ) � - � - � - � (935 ) � - � Adjusted EBITDA $ 4,403 $
6,640 $ 5,674 $ 4,217 $ 11,043 � $ 9,891 � 1 During 2006, we
repurchased stock in a transaction with a total value of $102.1
million. Selling stockholders agreed to hold $10.1 million of the
proceeds to offset specific claims for reimbursement associated
with the Akamai lawsuit and other undisclosed obligations that may
arise. For the three month periods ended June 30, 2007 and 2006, we
had $0.8 million and $ -0- million, respectively, of litigation
costs subject to reimbursement from this escrow. For the six month
periods ended June 30, 2007 and 2006, we had $1.3 million and $ -0-
million, respectively, of litigation costs subject to reimbursement
from this escrow.
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