| [August 09, 2007] |
 |
Limelight Networks Reports Second-Quarter 2007 Results
TEMPE, Ariz. --(Business Wire)-- 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(TM), 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, December 31,
2007 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
----------------------------------------
June 30, March 31, June 30, March 31,
2007 2007 2006 2006
--------- --------- --------- ---------
Revenues $ 21,213 $ 22,876 $ 14,841 $ 10,838
Costs and operating expenses:
Cost of revenues(1) (3) 14,835 14,497 7,266 5,280
General and
administrative(1) (3) 9,220 8,273 2,275 1,599
Sales and marketing (1) 6,404 3,018 1,497 1,034
Research and
development(1) 1,541 1,285 437 321
-------- --------- -------- --------
Total costs and
operating expenses 32,000 27,073 11,475 8,234
-------- --------- -------- --------
Operating income (loss) (10,787) (4,197) 3,366 2,604
Interest expense(2) (855) (585) (519) (505)
Interest income 573 89 - -
Other income (expense) - - - -
-------- --------- -------- --------
Income (loss) before income
taxes (11,069) (4,693) 2,847 2,099
Income tax expense (benefit) (606) (258) 1,125 829
-------- --------- -------- --------
Net income (loss) $(10,463) $ (4,435) $ 1,722 $ 1,270
======== ========= ======== ========
Net income (loss) allocable
to common stockholders $(10,463) $ (4,435) $ 1,722 $ 1,245
======== ========= ======== ========
Net income (loss) per share:
Basic $ (0.23) $ (0.20) $ 0.05 $ 0.04
Diluted $ (0.23) $ (0.20) $ 0.04 $ 0.03
Shares used in per share
calculations:
Basic 45,702 21,886 31,848 35,188
Diluted 45,702 21,886 41,505 42,951
Six Months Ended
----------------------------------------
June 30, June 30,
2007 2006
-------------------- -------------------
Revenues $ 44,089 $ 25,679
Costs and operating expenses:
Cost of revenues(1) (3) 29,332 12,546
General and
administrative(1) (3) 17,493 3,874
Sales and marketing (1) 9,422 2,531
Research and
development(1) 2,826 758
------------------- ------------------
Total costs and
operating expenses 59,073 19,709
------------------- ------------------
Operating income (loss) (14,984) 5,970
Interest expense(2) (1,440) (1,024)
Interest income 662 -
Other income (expense) - -
------------------- ------------------
Income (loss) before income
taxes (15,762) 4,946
Income tax expense (benefit) (864) 1,954
------------------- ------------------
Net income (loss) $ (14,898) $ 2,992
=================== ==================
Net income (loss) allocable
to common stockholders $ (14,898) $ 2,967
=================== ==================
Net income (loss) per share:
Basic $ (0.44) $ 0.09
Diluted $ (0.44) $ 0.07
Shares used in per share
calculations:
Basic 33,794 33,518
Diluted 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
------------------------------ ----------------
June March June March June June
30, 31, 30, 31, 30, 30,
2007 2007 2006 2006 2007 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
---------------------------------------
June 30, March 31, June 30, March 31,
2007 2007 2006 2006
--------- --------- --------- ---------
Cash flows from operating
activities:
Net income $(10,463) $(4,435) $ 1,722 $ 1,270
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
Stock-based compensation 6,648 5,570 229 112
Deferred income tax expense
(benefit) (83) (731) 80 (80)
Accounts receivable charges 1,170 677 177 -
Accretion of debt discount 417 53 - 36
Changes in operating assets
and liabilities:
Accounts receivable (7,418) 2,475 (2,542) (2,582)
Prepaid expenses and
other current assets (3,661) (1,809) (301) (363)
Income taxes receivable (631) 116 (80) 80
Other assets (426) (119) (127) (109)
Accounts payable (2,978) (732) 1,431 (417)
Accounts payable, related
parties (763) 1 958 (362)
Deferred revenue and
other current
liabilities 9,065 650 720 1,225
-------- -------- -------- --------
Net cash provided (used in)
by operating activities: (3,929) 6,540 4,346 312
-------- -------- -------- --------
Cash flows from investing
activities:
Purchase of marketable
securities (28,875) - - -
Purchases of property and
equipment (5,461) (3,095) (6,962) (3,470)
-------- -------- -------- --------
Net cash used in investing
activities (34,336) (3,095) (6,962) (3,470)
-------- -------- -------- --------
Cash flows from financing
activities:
Borrowings on credit
facilities - - 2,515 4,040
Payments on credit
facilities (23,818) - (327) (171)
Borrowings on line of
credit - 1,500 - -
Payments on line of credit (1,500) - - -
Payments on capital lease
obligations (91) (159) (79) (20)
Payments on notes payable -
related parties - - - (195)
Escrow funds returned from
share repurchase 2,091 298 - -
Tax benefit from share-
based compensation - 23 - -
Proceeds from exercise of
stock options - 31 1 45
Proceeds from initial
public offering, net of
issuance costs 207,904 - - -
-------- -------- -------- --------
Net cash provided by
financing activities 184,586 1,693 2,110 3,699
-------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents 146,320 5,138 (506) 541
Cash and cash equivalents,
beginning of period 12,749 7,611 2,077 1,536
-------- -------- -------- --------
Cash and cash equivalents,
end of period $159,069 $12,749 $ 1,571 $ 2,077
======== ======== ======== ========
Six Months Ended
---------------------------------------
June 30, June 30,
2007 2006
------------------ --------------------
Cash flows from operating
activities:
Net income $ (14,898) $ 2,992
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and
amortization 10,018 3,580
Stock-based compensation 12,218 341
Deferred income tax expense
(benefit) (814) -
Accounts receivable charges 1,847 177
Accretion of debt discount 470 36
Changes in operating assets
and liabilities:
Accounts receivable (4,943) (5,124)
Prepaid expenses and
other current assets (5,470) (664)
Income taxes receivable (516) -
Other assets (545) (236)
Accounts payable (3,709) 1,014
Accounts payable, related
parties (762) 596
Deferred revenue and
other current
liabilities 9,715 1,945
----------------- -------------------
Net cash provided (used in)
by operating activities: 2,611 4,657
----------------- -------------------
Cash flows from investing
activities:
Purchase of marketable
securities (28,875)
Purchases of property and
equipment (8,556) (10,432)
----------------- -------------------
Net cash used in investing
activities (37,431) (10,432)
----------------- -------------------
Cash flows from financing
activities:
Borrowings on credit
facilities - 6,555
Payments on credit
facilities (23,818) (498)
Borrowings on line of
credit 1,500 -
Payments on line of credit (1,500) -
Payments on capital lease
obligations (250) (99)
Payments on notes payable -
related parties - (195)
Escrow funds returned from
share repurchase 2,389 -
Tax benefit from share-
based compensation 23 -
Proceeds from exercise of
stock options 31 46
Proceeds from initial
public offering, net of
issuance costs 207,904 -
----------------- -------------------
Net cash provided by
financing activities 186,279 5,809
----------------- -------------------
Net increase (decrease) in
cash and cash equivalents 151,458 35
Cash and cash equivalents,
beginning of period 7,611 1,536
----------------- -------------------
Cash and cash equivalents,
end of period $ 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 March June March June June
30, 31, 30, 31, 30, 30,
2007 2007 2006 2006 2007 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
----------------------------------- -----------------
June March June March June June
30, 31, 30, 31, 30, 30,
2007 2007 2006 2006 2007 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
--------------------------------- ----------------
June March June March June June
30, 31, 30, 31, 30, 30,
2007 2007 2006 2006 2007 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
escrow(1) 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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