LLNW Limelight Networks Inc

- Grew revenue to $33.1 million, a 9% sequential increase from the second quarter and 18% increase from third-quarter 2007 non-GAAP revenue of $28.0 million TEMPE, Ariz., Nov. 6 /PRNewswire-FirstCall/ -- Limelight Networks, Inc. (NASDAQ:LLNW) today reported third-quarter 2008 revenue of $33.1 million and a net loss of $15.4 million, or 18 cents per basic share. Non-GAAP net loss, adjusted for certain charges, was $0.5 million or 1 cent per basic share. EBITDA, adjusted for share-based compensation, litigation and potential damage cost accruals, was $5 million. The non-GAAP loss of 1 cent per basic share excludes a charge of 13 cents per basic share related to litigation and potential damage cost accruals, and 5 cents per basic share of share-based compensation. A reconciliation of GAAP to non-GAAP net income is included in the attached tables. "Disciplined execution enabled us to achieve strong sequential growth in the third quarter," commented Jeff Lunsford, chairman and chief executive officer, Limelight Networks, Inc. "We experienced new traffic records across our network and, even in this tough economic environment, are continuing to see attractive growth opportunities within the media, software, game and enterprise customer segments." Financial Highlights Third-quarter revenue was $33.1 million, up 18 percent from $28.0 million of non-GAAP revenue in the year-ago third quarter and above the high end of the range of guidance previously provided by the Company. Capital purchases incurred were $6.8 million. The Company ended the quarter with no bank debt and approximately $177 million in cash and short-term marketable securities. Fourth-Quarter Outlook Limelight Networks anticipates fourth-quarter revenue to be in the range of $33 million to $34 million. The Company also expects substantially reduced potential damage accruals of under $750 thousand plus accrued interest related to ongoing litigation. LIMELIGHT NETWORKS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) September 30, December 31, 2008 2007 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $123,146 $113,824 Marketable securities 53,509 83,273 Accounts receivable, net of reserves of $5,401 at September 30, 2008 and $4,022 at December 31, 2007, respectively 31,274 21,407 Income taxes receivable 1,419 1,960 Prepaid expenses and other current assets 9,262 4,469 Total current assets 218,610 224,933 Property and equipment, net 42,355 46,968 Marketable securities, less current portion 16 87 Other assets 656 1,440 Total assets $261,637 $273,428 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $7,560 $8,523 Accounts payable, related parties - 230 Deferred revenue, current portion 7,987 4,237 Provision for litigation 64,350 48,130 Other current liabilities 14,043 9,312 Total current liabilities 93,940 70,432 Deferred revenue, less current portion 8,765 8,189 Other long-term liabilities 797 770 Total liabilities 103,502 79,391 Commitments and contingencies - - Stockholders' equity: Convertible preferred stock, $0.001 par value; 7,500 shares authorized; 0 shares issued and outstanding - - Common stock, $0.001 par value; 150,000 shares authorized; 83,082 and 82,541 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively 83 83 Additional paid-in capital 285,219 271,586 Accumulated other comprehensive income (304) 106 Accumulated deficit (126,863) (77,738) Total stockholders' equity 158,135 194,037 Total liabilities and stockholders' equity $261,637 $273,428 LIMELIGHT NETWORKS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September June September June September September 30, 30, 30, 30, 30, 30, 2008 2008 2007 2007 2008 2007 Revenue $33,116 $30,314 $29,190 $21,436 $93,632 $73,979 Costs and operating expenses Cost of revenue* ** 21,557 19,751 17,773 14,835 61,980 47,106 General and adminis- trative* ** 15,455 9,463 8,117 8,831 38,247 24,723 Sales and marketing* 8,577 8,965 7,421 6,404 25,684 16,843 Research & development* 2,008 1,694 1,294 1,541 5,293 4,119 Provision for litigation 2,343 6,743 - - 16,220 - Total costs and operating expenses 49,940 46,616 34,605 31,611 147,424 92,791 Operating loss (16,824) (16,302) (5,415) (10,175) (53,792) (18,812) Interest expense (11) (11) (18) (821) (43) (1,412) Interest income 1,203 1,334 2,456 573 4,428 3,118 Other income (expense) 410 (377) 33 - 203 33 Loss before taxes (15,222) (15,356) (2,944) (10,423) (49,204) (17,073) Income tax expense (benefit) 130 (25) 181 221 (78) 602 Net income (loss) $(15,352) $(15,331) $(3,125) $(10,644) $(49,126) $(17,675) Net loss per share: Basic $(0.18) $(0.18) $(0.04) $(0.23) $(0.59) $(0.35) Diluted $(0.18) $(0.18) $(0.04) $(0.23) $(0.59) $(0.35) Shares used in per share calculations: Basic 83,022 82,889 82,045 45,791 82,845 49,929 Diluted 83,022 82,889 82,045 45,791 82,845 49,929 * Includes share-based compensation (see supplemental table for figures) ** Includes depreciation (see supplemental table for figures) LIMELIGHT NETWORKS, INC. SUPPLEMENTAL FINANCIAL DATA (In thousands) (Unaudited) Three Months Ended Nine Months Ended September June September June September September 30, 30, 30, 30, 30, 30, 2008 2008 2007 2007 2008 2007 Supplemental financial data (in thousands): Share-based compensation: Cost of revenues $594 $558 $422 $346 $1,658 $1,010 General and administrative 1,669 1,698 1,702 3,754 5,031 9,199 Sales and marketing 1,400 1,431 1,289 1,152 4,137 2,676 Research and development 642 598 542 1,007 1,723 2,400 Total share-based compensation $4,305 $4,285 $3,955 $6,259 $12,549 $15,285 Depreciation and amortization: Network- related depreciation $6,607 $6,192 $5,602 $5,020 $18,812 $15,310 Other depreciation 343 311 268 174 901 579 Total depreciation and amortization $6,950 $6,503 $5,870 $5,194 $19,713 $15,889 Capital expenditures: Capital expenditures (cash and accrual) $6,803 $5,013 $7,291 $8,769 $14,911 $21,635 Net increase (decrease) in cash, cash equivalents and marketable securities $(7,844) $(10,194) $6,370 $174,891 $(20,513) $186,256 End of period statistics: Number of customers under recurring contract 1,304 1,291 988 876 1,304 988 Number of employees 285 252 218 213 285 218 LIMELIGHT NETWORKS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended Nine Months Ended September June September June September September 30, 30, 30, 30, 30, 30, 2008 2008 2007 2007 2008 2007 Cash flows from operating activities: Net loss $(15,353) $(15,331) $(3,125) $(10,644) $(49,126) $(17,675) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 6,951 6,502 5,870 5,194 19,713 15,889 Share-based compensation 4,304 4,285 3,955 6,259 12,549 15,285 Deferred income tax (benefit) expense 129 23 (294) 1,048 (82) 286 Provision for litigation 2,343 6,743 - - 16,220 - Loss (income) on foreign currency exchange (30) 12 - - (18) - Accounts receivable charges 1,802 1,925 1,689 1,170 5,289 3,536 Accretion of debt discount - - - 383 - 424 Accretion of marketable securities 11 21 (277) - (421) (277) Loss on marketable securities - 16 - - 71 Changes in operating assets and liabilities: Accounts receivable (11,006) (1,880) 1,202 (7,641) (15,157) (4,441) Prepaid expenses and other current assets 417 (4,452) (143) (545) (3,948) (2,495) Income taxes receivable 8 (129) 412 (848) 473 (126) Other assets 153 67 (153) (426) 784 (698) Accounts payable 2,348 (73) (1,883) (2,980) (2,359) (5,595) Accounts payable, related parties - (150) (19) (763) (230) (781) Deferred revenue 4,799 (774) 8,462 3,612 4,326 12,094 Other current liabilities 3,555 (3,859) 2,009 5,405 4,733 8,044 Other long term liabilities (64) 64 - - - - Net cash provided by (used in) operating activities 367 (6,990) 17,705 (776) (7,183) 23,470 Cash flows from investing activities: Purchases of property and equipment (7,870) (4,231) (12,094) (5,461) (14,536) (20,650) Purchase of marketable securities - (30,400) (43,411) (28,589) (65,125) (72,001) Sale of marketable securities 16,000 34,825 7,000 - 95,025 7,000 Net cash provided by (used in) investing activities 8,130 194 (48,505) (34,050) 15,364 (85,651) Cash flows from financing activities: Payments on credit facilities - - - (23,818) - (23,818) Borrowings on line of credit - - - - - 1,500 Payments on line of credit - - - (1,500) - (1,500) Payments on capital lease obligations - - - (91) - (250) Escrow funds returned from share repurchase - 1,070 1,029 2,091 1,070 3,418 Excess tax benefit related to stock option exercises - - - - - 23 Proceeds from exercise of stock options and warrants 31 53 4 - 191 35 Proceeds from initial public offering, net of issuance costs - - (586) 204,498 - 203,912 Net cash provided by financing activities 31 1,123 447 181,180 1,261 183,320 Effect of exchange rate changes on cash and cash equivalents (223) 260 (120) Net increase (decrease) in cash and cash equivalents 8,305 (5,413) (30,353) 146,354 9,322 121,139 Cash and cash equivalents, beginning of period 114,841 120,254 159,103 12,749 113,824 7,611 Cash and cash equivalents, end of period $123,146 $114,841 $128,750 $159,103 $123,146 $128,750 LIMELIGHT NETWORKS, INC. Reconciliation of GAAP Revenue to Non-GAAP Revenue (In thousands) (Unaudited) Three Months Ended Nine Months Ended September June September June September September 30, 30, 30, 30, 30, 30, 2008 2008 2007 2007 2008 2007 GAAP revenue NA NA $29,190 $21,436 NA $73,979 Deferred traffic revenue (2,645) 2,645 - Deferred custom CDN services 1,504 820 2,324 Non-GAAP revenue NA NA $28,049 $24,901 NA $76,303 LIMELIGHT NETWORKS, INC. Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss) (In thousands) (Unaudited) Three Months Ended Nine Months Ended September June September June September September 30, 30, 30, 30, 30, 30, 2008 2008 2007 2007 2008 2007 GAAP net loss $(15,352) $(15,331)$(3,125) $(10,644) $(49,126) $(17,675) Deferred revenue - - (1,141) 3,465 - 2,324 Deferred cost of traffic and services - - 649 (935) - (286) Provision for litigation 2,343 6,743 - - 16,220 - Share-based compensation 4,305 4,285 3,955 6,259 12,549 15,285 Litigation related expenses 8,189 2,667 2,002 1,636 16,222 4,523 Non-GAAP net (loss) income $(515) $(1,636) $2,340 $(219) $(4,135) $4,171 LIMELIGHT NETWORKS, INC. Reconciliation of GAAP Net Income (Loss) to EBITDA to Adjusted EBITDA (In thousands) (Unaudited) Three Months Ended Nine Months Ended September June September June September September 30, 30, 30, 30, 30, 30, 2008 2008 2007 2007 2008 2007 GAAP net loss $(15,352) $(15,331) $(3,125) $(10,644) $(49,126) $(17,675) Add: depreciation and amortization 6,950 6,503 5,870 5,194 19,713 15,889 Add: interest expense 11 11 18 821 43 1,412 Less: interest and other income (1,613) (957) (2,490) (573) (4,631) (3,151) Plus income tax (benefit) expense 130 (25) 181 221 (78) 602 EBITDA (9,874) (9,799) 454 (4,981) (34,079) (2,923) Add: deferred revenue - - (1,141) 3,465 - 2,324 Add: provision for litigation 2,343 6,743 - - 16,220 - Add: share-based compensation 4,305 4,285 3,955 6,259 12,549 15,285 Add: litigation related expenses 8,189 2,667 2,002 1,636 16,222 4,523 Less: deferred traffic and service costs - - 649 (935) - (286) Adjusted EBITDA $4,963 $3,896 $5,919 $5,444 $10,912 $18,923 Conference Call Management will host a quarterly conference call for investors beginning at 3:00 p.m. MT (5 p.m. ET). This call will be audiocast live at http://www.llnw.com/. It can also be accessed toll-free at 1-866-761-0748 within the United States or 1-617-614-2706 outside of the U.S using Conference ID 89097839. A replay will be available from the company's website following the call. 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 expense for the third quarter of 2008, customer growth, market growth, pricing pressures, expansion into additional market segments, product and services improvements and litigation and related expenses. Forward-looking statements 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 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 content delivery partner enabling the next wave of Internet business and entertainment. More than 1300 Internet, entertainment, software, and technology brands trust our robust, scalable platform to monetize their digital assets by delivering a brilliant online experience to their global audience. Our architecture bypasses the busy public Internet using a dedicated optical network that interconnects thousands of servers and delivers massive files at the speed of light -- directly to the access networks that consumers use every day. Our proven network and passion for service provides our customers confidence that every object in their library will be delivered to every user, every time. Read our blog at http://blog.llnw.com/ or visit http://www.limelightnetworks.com/ for more information. Copyright (C) 2008 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners DATASOURCE: Limelight Networks, Inc. CONTACT: Paul Alfieri of Limelight Networks, Inc., +1-917-297-4241, Web site: http://www.limelightnetworks.com/

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