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Limelight Networks Reports Fourth-Quarter and Full-Year 2020 Results

Limelight Networks, Inc. (Nasdaq: LLNW) (Limelight), a leading provider of video delivery and edge cloud services, today reported results for its fourth quarter and year ended December 31, 2020.

Fourth-quarter Results

For the 2020 fourth quarter, the company generated revenue of $55.4 million, compared to $60.1 million in the fourth quarter of 2019.

GAAP net loss was $(8.3) million, or $(0.07) per basic share for the 2020 fourth quarter, compared to net income of $2.5 million, or $0.02 per basic share in the 2019 period. GAAP net loss included $2.2 million of interest expense related to Limelight’s senior convertible notes issued during the 2020 third quarter.

Non-GAAP net loss was $(3.8) million or $(0.03) per basic share for the 2020 fourth quarter, versus non-GAAP net income of $5.8 million, or $0.05 per basic share in 2019. The non-GAAP net loss excluded $1.0 million of interest expense related to the company’s convertible notes noted above.

Fourth-quarter adjusted EBITDA was $3.6 million, versus $11.4 million for the fourth quarter of 2019.

“I am excited to join Limelight, a company with an impressive list of blue-chip customers, in a large and growing market with a unique set of capabilities and solid foundation to build on,” said Bob Lyons, President and Chief Executive Officer. “Our global network and connectivity to billions of people, combined with the digital transformation creates enormous opportunity for us in edge content delivery, computing and cybersecurity.”

“Our immediate focus is the challenges we faced in the fourth quarter, specifically top-line growth and the resulting pressure on margins. Quite frankly, performance in these areas is not where it should be. I believe in our ability to close the gaps and position Limelight as a leader delivering edge-based solutions. While there is no doubt much has been accomplished, I know that our best days are ahead of us. I am confident in the direction we are headed, in our ability to better execute on a refined strategy and pursue rule-of-40 performance,” said Lyons.

Full-year Results

For the full year ended December 31, 2020, Limelight reported revenue of $230.2 million, a 15% increase from $200.6 million in 2019.

The company’s 2020 GAAP net loss was $(19.3) million, or $(0.16) per basic share, versus a net loss of $(16.0) million, or $(0.14) per basic share, in 2019. The 2020 GAAP net loss included $3.8 million of interest expense related to Limelight’s senior convertible notes noted above.

Non-GAAP net loss was $(1.6) million, or $(0.01) per basic share, for the year ended December 31, 2020, compared to non-GAAP net loss of $(2.3) million, or $(0.02) per basic share, in 2019.

Limelight reported adjusted EBITDA of $24.5 million for 2020, compared to $18.1 million in 2019.

The company does not plan to issue guidance for 2021 at this time. With new leadership and active efforts underway to evaluate all aspects of the business strategy and cost structure, the focus is on immediate and long-term steps to position the company as a leader delivering edge-based solutions. Additional details will be provided as the company formalizes these plans.

Said Lyons, “Limelight delivered a successful year on multiple fronts – but we have work to do. Our industry is on an upward trajectory – and we enter 2021 laser-focused on building a platform for profitable growth.”

Financial Tables

 
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 
 

December 31,

September 30,

December 31,

2020

2020

2019

(Unaudited)

(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents

$

46,795

$

75,169

$

18,335

Marketable securities

76,928

49,623

-

Accounts receivable, net

31,675

42,222

34,476

Income taxes receivable

68

81

82

Prepaid expenses and other current assets

15,588

12,561

9,920

Total current assets

171,054

179,656

62,813

Property and equipment, net

46,418

47,493

46,136

Operating lease right of use assets

10,150

10,844

12,842

Marketable securities, less current portion

40

40

40

Deferred income taxes

1,530

1,428

1,319

Goodwill

77,753

77,126

77,102

Other assets

7,233

7,459

9,117

Total assets

$

314,178

$

324,046

$

209,369

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

4,587

$

12,437

$

12,020

Deferred revenue

933

797

976

Operating lease liability obligations

2,465

2,654

2,056

Income taxes payable

253

153

178

Other current liabilities

17,560

17,584

13,398

Total current liabilities

25,798

33,625

28,628

Convertible senior notes, net

100,945

99,937

-

Operating lease liability obligations, less current portions

11,265

11,745

13,488

Deferred income taxes

279

251

239

Deferred revenue, less current portion

220

230

161

Other long-term liabilities

479

579

316

Total liabilities

138,986

146,367

42,832

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; 123,653, 122,824 and 118,368 shares issued and
outstanding at December 31, 2020, September 30, 2020 and December 31, 2019, respectively

124

123

118

Additional paid-in capital

556,512

552,559

530,285

Accumulated other comprehensive loss

(7,511

)

(9,379

)

(9,210

)

Accumulated deficit

(373,933

)

(365,624

)

(354,656

)

Total stockholders' equity

175,192

177,679

166,537

Total liabilities and stockholders' equity

$

314,178

$

324,046

$

209,369

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

2020

2020

Change

2019

Change

2020

2019

Change

 
Revenue

$

55,394

$

59,243

-6%

$

60,129

-8%

$

230,194

$

200,634

15%

Cost of revenue:

Cost of services (1)

33,103

31,905

4%

28,586

16%

125,509

99,897

26%

Depreciation - network

5,468

5,602

-2%

5,288

3%

21,579

19,193

12%

Total cost of revenue

38,571

37,507

3%

33,874

14%

147,088

119,090

24%

Gross profit

16,823

21,736

-23%

26,255

-36%

83,106

81,544

2%

Gross profit percentage

30.4

%

36.7

%

43.7

%

36.1

%

40.6

%

Operating expenses:

General and administrative (1)

7,464

7,751

-4%

7,554

-1%

31,284

30,785

2%

Sales and marketing (1)

9,666

10,456

-8%

10,399

-7%

42,945

43,078

0%

Research & development (1)

5,066

5,425

-7%

5,459

-7%

21,680

22,534

-4%

Depreciation and amortization

542

384

41%

328

65%

1,591

872

82%

Total operating expenses

22,738

24,016

-5%

23,740

-4%

97,500

97,269

0%

Operating (loss) income

(5,915

)

(2,280

)

NM

2,515

NM

(14,394

)

(15,725

)

NM

Other income (expense):

Interest expense

(2,183

)

(1,674

)

NM

(45

)

NM

(3,939

)

(76

)

NM

Interest income

29

10

NM

25

NM

69

427

NM

Other, net

28

25

NM

169

NM

(368

)

80

NM

Total other (expense) income

(2,126

)

(1,639

)

NM

149

NM

(4,238

)

431

NM

(Loss) income before income taxes

(8,041

)

(3,919

)

NM

2,664

NM

(18,632

)

(15,294

)

NM

Income tax expense

268

66

NM

206

NM

645

750

NM

Net (loss) income

(8,309

)

(3,985

)

NM

2,458

NM

(19,277

)

(16,044

)

NM

 
Net (loss) income per share:
Basic

$

(0.07

)

$

(0.03

)

$

0.02

$

(0.16

)

$

(0.14

)

Diluted

$

(0.07

)

$

(0.03

)

$

0.02

$

(0.16

)

$

(0.14

)

 
Weighted average shares used in per share calculation:
Basic

123,225

122,363

117,603

121,196

115,890

Diluted

123,225

122,363

123,801

121,196

115,890

(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,

2020

2020

2019

2020

2019

 
 
Share-based compensation:
 
Cost of services

$

313

$

130

$

376

$

1,998

$

1,495

General and administrative

1,840

1,272

1,858

7,611

8,098

Sales and marketing

764

206

597

3,519

2,263

Research and development

562

315

484

2,589

1,922

 
Total share-based compensation

$

3,479

$

1,923

$

3,315

$

15,717

$

13,778

 
Depreciation and amortization:
 
Network-related depreciation

$

5,468

$

5,602

$

5,288

$

21,579

$

19,193

Other depreciation and amortization

542

384

328

1,591

872

 
Total depreciation and amortization

$

6,010

$

5,986

$

5,616

$

23,170

$

20,065

 
 
Net increase (decrease) in cash, cash equivalents and marketable securities:

$

(1,069

)

$

106,592

$

285

$

105,388

$

(32,131

)

 
 
End of period statistics:
 
Approximate number of active customers

527

534

599

527

599

 
Number of employees and employee equivalents

618

620

610

618

610

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,

2020

2020

2019

2020

2019

 
Operating activities
Net income (loss)

$

(8,309

)

$

(3,985

)

$

2,458

$

(19,277

)

$

(16,044

)

 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization

6,010

5,986

5,616

23,170

20,065

Share-based compensation

3,479

1,923

3,315

15,717

13,778

Foreign currency remeasurement (gain) loss

327

27

79

214

(25

)

Deferred income taxes

(14

)

(95

)

300

(94

)

270

Loss (gain) on sale of property and equipment

7

(1

)

-

6

(56

)

Accounts receivable charges

325

163

519

801

1,793

Amortization of premium on marketable securities

519

87

1

606

30

Realized loss on marketable securities

(3

)

-

9

(3

)

9

Noncash interest expense

1,070

868

-

1,938

-

Changes in operating assets and liabilities:
Accounts receivable

10,221

2,862

823

2,000

(10,228

)

Prepaid expenses and other current assets

(3,038

)

(2,232

)

(324

)

(5,717

)

(1,101

)

Income taxes receivable

16

(10

)

(3

)

19

40

Other assets

258

757

(1,547

)

2,762

(4,188

)

Accounts payable and other current liabilities

(9,228

)

1,222

(2,383

)

(1,069

)

1,292

Deferred revenue

126

(172

)

(232

)

17

(789

)

Income taxes payable

86

(17

)

(143

)

71

61

Payments related to litigation, net

-

-

-

-

(3,040

)

Other long term liabilities

(99

)

276

15

167

(121

)

Net cash provided by operating activities

1,753

7,659

8,503

21,328

1,746

 
Investing activities
Purchases of marketable securities

(36,064

)

(52,690

)

-

(88,754

)

(10,279

)

Sale and maturities of marketable securities

8,272

2,900

3,211

11,172

35,364

Purchases of property and equipment

(2,957

)

(7,180

)

(10,480

)

(25,085

)

(34,704

)

Proceeds from sale of property and equipment

1

1

-

2

51

Net cash used in investing activities

(30,748

)

(56,969

)

(7,269

)

(102,665

)

(9,568

)

 
Financing activities
Proceeds from issuance of debt, net

-

121,600

-

121,600

-

Purchase of capped calls

-

(16,413

)

-

(16,413

)

-

Payment of debt issuance costs

(75

)

(784

)

-

(859

)

-

Payment of employee tax withholdings related to restricted stock vesting

(891

)

(1,041

)

(1,079

)

(4,878

)

(3,607

)

Proceeds from employee stock plans

1,377

2,598

3,290

10,068

4,406

Net cash provided by financing activities

411

105,960

2,211

109,518

799

Effect of exchange rate changes on cash and cash equivalents

210

319

58

279

(25

)

Net increase (decrease) in cash and cash equivalents

(28,374

)

56,969

3,503

28,460

(7,048

)

Cash and cash equivalents, beginning of period

75,169

18,200

14,832

18,335

25,383

Cash and cash equivalents, end of period

$

46,795

$

75,169

$

18,335

$

46,795

$

18,335

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 share-based compensation and non-cash interest expense. 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 share-based compensation. 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

In accordance with the requirements of Item 10(e) of Regulation S-K, we are presenting the most directly comparable U.S. GAAP financial measures and reconciling the unaudited 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 (Loss)
(In thousands)
(Unaudited)
 
 
Three Months EndedTwelve Months Ended
 
December 31, 2020September 30, 2020December 31, 2019December 31, 2020December 31, 2019
AmountPer ShareAmountPer ShareAmountPer ShareAmountPer ShareAmountPer Share
 
U.S. GAAP net (loss) income

$

(8,309

)

$

(0.07

)

$

(3,985

)

$

(0.03

)

$

2,458

$

0.02

$

(19,277

)

$

(0.16

)

$

(16,044

)

$

(0.14

)

 
Share-based compensation

3,479

0.03

1,923

0.02

3,315

0.03

15,717

0.13

13,778

0.12

Noncash interest expense

1,070

0.01

868

0.01

-

-

1,938

0.02

-

-

 
Non-GAAP net (loss) income

$

(3,760

)

$

(0.03

)

$

(1,194

)

$

(0.01

)

$

5,773

$

0.05

$

(1,622

)

$

(0.01

)

$

(2,266

)

$

(0.02

)

 
 
Weighted average shares used in per share calculation

123,225

122,363

117,603

121,196

115,890

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,

2020

2020

2019

2020

2019

 
U.S. GAAP net (loss) income

$

(8,309

)

$

(3,985

)

$

2,458

$

(19,277

)

$

(16,044

)

 
Depreciation and amortization

6,010

5,986

5,616

23,170

20,065

Interest expense

2,183

1,674

45

3,939

76

Interest and other (income) expense

(57

)

(35

)

(194

)

299

(507

)

Income tax expense

268

66

206

645

750

 
EBITDA

$

95

$

3,706

$

8,131

$

8,776

$

4,340

 
Share-based compensation

3,479

1,923

3,315

15,717

13,778

 
Adjusted EBITDA

$

3,574

$

5,629

$

11,446

$

24,493

$

18,118

For future periods, we are unable to provide a reconciliation of EBITDA and Adjusted EBITDA to net income (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 (loss), 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 February 11, 2021, 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, and follow us on Twitter, Facebook and LinkedIn.

Copyright (C) 2021 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

Contacts:

Limelight Networks, Inc.
Dan Boncel, 602 850 4810
ir@llnw.com

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