LLNW Limelight Networks Inc

• Q4 Revenue of $44.0 million
• Q4 GAAP EPS of $(0.05) and Non-GAAP EPS of break-even
• Full year 2018 revenue of $195.7 million
• Full year 2018 GAAP EPS of $0.09 and Non-GAAP EPS of $0.12
• Cash and marketable securities of $50.5 million

Limelight Networks, Inc. (Nasdaq: LLNW) (Limelight), a leading provider of edge cloud services, today reported revenue of $44.0 million for the fourth quarter of 2018, down 9 percent, compared to $48.2 million in the fourth quarter of 2017. Currency negatively impacted year-over-year comparison by $0.2 million.

Gross margin was 40.7% in the fourth quarter of 2018, a decrease of 700 basis points from 47.7% in the fourth quarter of 2017.

Limelight reported a net loss of $5.2 million, or $0.05 per basic share for the fourth quarter of 2018, compared to a net loss of $0.9 million, or $0.01 per basic share in the fourth quarter of 2017.

Non-GAAP net income was $0.3 million or break-even per basic share for the fourth quarter of 2018, compared to non-GAAP net income of $3.9 million, or $0.04 per basic share in the fourth quarter of 2017.

EBITDA was negative $0.9 million for the fourth quarter of 2018, compared to $3.9 million for the fourth quarter of 2017. Adjusted EBITDA was $4.6 million for the fourth quarter of 2018 compared to $8.7 million for the fourth quarter of 2017.

For the full year ended December 31, 2018, Limelight reported revenue of $195.7 million, an increase of 6% compared to $184.4 million for the year ended December 31, 2017. Gross margin was 47.8% for the year ended December 31, 2018; an increase of 20 basis points compared to 47.6% for the year ended December 31, 2017.

Limelight reported net income of $9.8 million, or $0.09 per basic share, for the year ended December 31, 2018, compared to a net loss of $7.6 million, or $0.07 per basic share, in 2017. Net income for the full year of 2018 includes $14.9 million, or $0.13 per basic share, of non-operating income related to the settlement and patent license agreement.

Non-GAAP net income was $13.7 million, or $0.12 per basic share, for the year ended December 31, 2018, compared to non-GAAP net income of $10.6 million, or $0.10 per basic share, in 2017.

EBITDA was $28.7 million for the year ended December 31, 2018, compared to $12.4 million for the year ended December 31, 2017. Adjusted EBITDA was $32.5 million for the year ended December 31, 2018, compared to $30.7 million for the year ended December 31, 2017.

Limelight ended the fourth quarter with 563 employees and employee equivalents, up from 551 at the end of the third quarter of 2018, and up from 533 at the end of 2017.

Commenting on the fourth quarter and full year results, Chief Executive Officer, Robert Lento said, “We made some tough choices in the latter half of 2018, as new revenue grew slower than planned. As we closed the year, we were increasingly encouraged by the pace of business growth, including delivering all-time record traffic in December. In addition, the fourth quarter was marked by substantial progress in marketing our new products, launching a strategic partnership with Ericsson, putting in place new leadership for sales, and dedicating a new leader for our Edge services.

“Traffic volumes continue to grow at healthy rates, and customer satisfaction, as measured by Net Promoter Score, remains strong. We expect sequential growth each quarter in 2019, and stronger growth rates than 2018. Revenues from our initiatives in Edge computing and Realtime Streaming, and from our partnership with Ericsson, should meaningfully contribute to overall growth. At the same time, we continue to invest in geographic expansion, with an emphasis on Latin America. Revenue from China, India and Brazil should grow at significantly higher rates than the corporate average.

“While our 2019 guidance is ambitious, we’re entering the year with significant momentum, and the preparatory work underpinning our continued growth is well underway. Thank you for your support.”

Based on current conditions, our full-year 2019 guidance is as follows:

Limelight Networks, Inc.

2019 Guidance

        2019 2018 2017 Revenue $215 to $225 million $195.7 million $184.4 million   GAAP Basic EPS Break-even to $0.10 $0.09 ($0.07)   Non-GAAP EPS $0.10 to $0.20 $0.12 $0.10   Adjusted EBITDA $30 to $40 million $32.5 million $30.7 million   Capital expenditures $20 to $24 million $16.1 million $20.7 million  

Financial Tables

  LIMELIGHT NETWORKS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)       December 31, September 30, December 31, 2018 2018

2017

(Unaudited) (Unaudited)

ASSETS

Current assets: Cash and cash equivalents $ 25,383 $ 28,678 $ 20,912 Marketable securities 25,083 23,957 28,404 Accounts receivable, net 26,041 26,147 32,381 Income taxes receivable 122 154 98 Prepaid expenses and other current assets   14,789     17,859     5,397   Total current assets 91,418 96,795 87,192 Property and equipment, net 27,378 27,392 28,991 Marketable securities, less current portion 40 40 40 Deferred income taxes 1,462 1,590 1,506 Goodwill 76,407 76,683 77,054 Other assets   2,220     2,434     1,665   Total assets $ 198,925   $ 204,934   $ 196,448    

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities: Accounts payable $ 9,216 $ 8,976 $ 4,439 Deferred revenue 1,883 853 1,187 Income taxes payable 124 111 452 Provision for litigation 9,000 13,500 18,000 Other current liabilities   12,922     13,804     18,507   Total current liabilities 33,145 37,244 42,585 Deferred income taxes 152 174 144 Deferred revenue, less current portion 42 68 16 Provision for litigation, less current portion - - 9,000 Other long-term liabilities   435     385     558   Total liabilities 33,774 37,871 52,303 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; 114,246, 113,198 and 110,824 shares issued and outstanding at December 31, 2018, September 30, 2018 and December 31, 2017, respectively

114 113 111 Additional paid-in capital 513,682 509,846 502,312 Accumulated other comprehensive loss (10,033 ) (9,477 ) (8,328 ) Accumulated deficit   (338,612 )   (333,419 )   (349,950 ) Total stockholders' equity   165,151     167,063     144,145   Total liabilities and stockholders' equity $ 198,925   $ 204,934   $ 196,448       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 2018 2018 Change 2017 Change 2018 2017 Change   Revenue $ 43,992   $ 49,315   -11% $ 48,186   -9% $ 195,670   $ 184,360   6% Cost of revenue: Cost of services (1) 22,141 21,519 3% 20,665 7% 85,920 78,423 10% Depreciation - network   3,941     3,761   5%   4,544   -13%   16,277     18,138   -10% Total cost of revenue   26,082     25,280   3%   25,209   3%   102,197     96,561   6% Gross profit 17,910 24,035 -25% 22,977 -22% 93,473 87,799 6% Gross profit percentage 40.7 % 48.7 % 47.7 % 47.8 % 47.6 % Operating expenses: General and administrative (1) 7,482 7,851 -5% 8,656 -14% 32,372 32,053 1% Sales and marketing (1) 9,484 9,766 -3% 8,997 5% 39,553 36,098 10% Research & development (1) 5,781 5,882 -2% 5,965 -3% 24,075 25,342 -5% Depreciation and amortization   476     616   -23%   587   -19%   2,313     2,376   -3% Total operating expenses   23,223     24,115   -4%   24,205   -4%   98,313     95,869   3%   Operating (loss) income (5,313 ) (80 ) NM (1,228 ) NM (4,840 ) (8,070 ) -40%   Other income (expense): Interest expense (10 ) (10 ) NM (38 ) NM (86 ) (80 ) NM Interest income 230 177 NM 128 NM 670 494 NM Settlement and patent license income - - NM - NM 14,900 - NM Other, net   90     (246 ) NM   204   NM   (264 )   452   NM Total other income (expense)   310     (79 ) NM   294   NM   15,220     866   NM   (Loss) income before income taxes (5,003 ) (159 ) NM (934 ) NM 10,380 (7,204 ) NM Income tax expense (benefit)   190     113   NM   (22 ) NM   538     426   NM   Net (loss) income   (5,193 )   (272 ) NM   (912 ) NM   9,842     (7,630 ) NM   Net income (loss) per share: Basic $ (0.05 ) $ (0.00 ) $ (0.01 ) $ 0.09   $ (0.07 ) Diluted $ (0.05 ) $ (0.00 ) $ (0.01 ) $ 0.08   $ (0.07 )   Weighted average shares used in per share calculation: Basic 113,578 112,760 110,128 112,114 108,814 Diluted 113,578 112,760 110,128 120,010 108,814   (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, 2018 2018 2017 2018 2017     Share-based compensation:   Cost of services $ 756 $ 352 $ 375 $ 1,815 $ 1,450 General and administrative 2,792 1,887 1,729 8,458 6,502 Sales and marketing 963 638 622 2,837 2,470 Research and development   974     544   576     2,720   2,322     Total share-based compensation $ 5,485   $ 3,421 $ 3,302   $ 15,830 $ 12,744     Depreciation and amortization:   Network-related depreciation $ 3,941 $ 3,761 $ 4,544 $ 16,277 $ 18,138 Other depreciation and amortization   476     616   587     2,313   2,376     Total depreciation and amortization $ 4,417   $ 4,377 $ 5,131   $ 18,590 $ 20,514       Net increase (decrease) in cash, cash equivalents and marketable securities: $ (2,169 ) $ 7,065 $ (8,376 ) $ 1,150 $ (16,871 )     End of period statistics:   Approximate number of active customers 649 667 717 649 717   Number of employees and employee equivalents 563 551 533 563 533     LIMELIGHT NETWORKS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)               Three Months Ended Twelve Months Ended   December 31, September 30, December 31, December 31, December 31, 2018 2018 2017 2018 2017   Operating activities Net (loss) income $ (5,193 ) $ (272 ) $ (912 ) $ 9,842 $ (7,630 )   Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 4,417 4,377 5,131 18,590 20,514 Share-based compensation 5,485 3,421 3,302 15,830 12,744 Settlement and patent license income - - - (14,900 ) - Foreign currency remeasurement (gain) loss (65 ) 64 140 (162 ) 798 Deferred income taxes 103 (16 ) (108 ) 17 (325 ) Gain on sale of property and equipment (6 ) (18 ) (316 ) (137 ) (410 ) Accounts receivable charges 449 157 217 902 949 Amortization of premium on marketable securities 33 24 55 115 283 Realized loss on sale of marketable securities - - - - - Changes in operating assets and liabilities: Accounts receivable (343 ) 5,558 (3,886 ) 5,438 (5,912 ) Prepaid expenses and other current assets 64 (2,757 ) (887 ) (2,466 ) (342 ) Income taxes receivable 25 7 4 (31 ) 38 Other assets 201 (192 ) 249 (558 ) 270 Accounts payable and other current liabilities (1,807 ) 3,058 (730 ) (4,333 ) 4,019 Deferred revenue 1,004 (82 ) (507 ) 1,089 (957 ) Income taxes payable 17 (113 ) 69 (333 ) 249 Payments related to litigation, net (1,520 ) (1,520 ) (4,500 ) (9,060 ) (18,000 ) Other long term liabilities   51     (4 )   (206 )   (121 )   (790 ) Net cash provided by (used in) operating activities   2,915     11,692     (2,885 )   19,722     5,498     Investing activities Purchases of marketable securities (4,669 ) (15,962 ) (4,547 ) (20,631 ) (14,930 ) Sale and maturities of marketable securities 3,500 8,850 13,012 23,865 30,756 Purchases of property and equipment (5,618 ) (4,214 ) (4,919 ) (16,113 ) (20,725 ) Proceeds from sale of property and equipment   4     18     14     135     97   Net cash (used in) provided by investing activities   (6,783 )   (11,308 )   3,560     (12,744 )   (4,802 )   Financing activities Payment of employee tax withholdings related to restricted stock vesting (985 ) (996 ) (1,925 ) (4,793 ) (4,496 ) Cash paid for the purchase of common stock - - - (3,800 ) - Proceeds from employee stock plans   1,374     737     1,448     6,173     2,648   Net cash provided by (used in) financing activities   389     (259 )   (477 )   (2,420 )   (1,848 ) Effect of exchange rate changes on cash and cash equivalents   184     (166 )   (30 )   (87 )   330   Net increase (decrease) in cash and cash equivalents (3,295 ) (41 ) 168 4,471 (822 ) Cash and cash equivalents, beginning of period   28,678     28,719     20,744     20,912     21,734   Cash and cash equivalents, end of period $ 25,383   $ 28,678   $ 20,912   $ 25,383   $ 20,912    

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 the settlement and patent license income, share-based compensation and litigation expenses. 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 the settlement and patent license income, 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 Income (Loss) to Non-GAAP Net Income (In thousands) (Unaudited)                       Three Months Ended Twelve Months Ended   December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Amount Per Share

 

Amount Per Share Amount Per Share Amount Per Share Amount Per Share   U.S. GAAP net (loss) income $ (5,193 ) $ (0.05 ) $ (272 ) $ (0.00 ) $ (912 ) $ (0.01 ) $ 9,842 $ 0.09 $ (7,630 ) $ (0.07 )   Settlement and patent license income - - - - - - (14,900 ) (0.13 ) - - Share-based compensation 5,485 0.05 3,421 0.03 3,302 0.03 15,830 0.14 12,744 0.12 Litigation expenses   3     0.00     19     0.00     1,470     0.01     2,907     0.03     5,518     0.05     Non-GAAP net income $ 295   $ 0.00   $ 3,168   $ 0.03   $ 3,860   $ 0.04   $ 13,679   $ 0.12   $ 10,632   $ 0.10       Weighted average shares used in per share calculation

113,578

112,760 110,128

112,114

108,814   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, 2018 2018 2017 2018 2017   U.S. GAAP net (loss) income $ (5,193 ) $ (272 ) $ (912 ) $ 9,842 $ (7,630 )   Depreciation and amortization 4,417 4,377 5,131 18,590 20,514 Interest expense 10 10 38 86 80 Interest and other (income) expense (320 ) 69 (332 ) (406 ) (946 ) Income tax expense (benefit)   190     113     (22 )   538     426     EBITDA $ (896 ) $ 4,297 $ 3,903 $ 28,650 $ 12,444   Settlement and patent license income - - - (14,900 ) - Share-based compensation 5,485 3,421 3,302 15,830 12,744 Litigation expenses   3     19     1,470     2,907     5,518     Adjusted EBITDA $ 4,592   $ 7,737   $ 8,675   $ 32,487   $ 30,706    

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 877 296 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, 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 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 January 30, 2019, 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), a leading provider of digital content delivery, video, cloud security, and edge computing services, empowers customers to provide exceptional digital experiences. Limelight’s edge services platform includes a unique combination of global private infrastructure, intelligent software, and expert support services that enable current and future workflows. For more information, visit www.limelight.com, follow us on Twitter, Facebook and LinkedIn.

Copyright (C) 2019 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

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