Limelight Networks Reports Strong Financial Results for the Third Quarter of 2021

SCOTTSDALE, Ariz., Nov. 4, 2021 /PRNewswire/ -- Limelight Networks, Inc. (Nasdaq: LLNW) (Limelight), a leading provider of content delivery services and AppOps at the edge, today reported financial results for the third quarter ended September 30, 2021.  Delivering on several key milestones in its 2021 strategic plan, the company reported significant revenue, gross margin and adjusted EBITDA growth quarter over quarter.

"As expected, our third quarter showed significant sequential quarterly improvement. Revenue for the third quarter came in at $55.2 million, up 14% quarter over quarter. Cash Gross Margin was 40%, up more than 7% quarter over quarter and Adjusted EBITDA margin was 11%, up from breakeven in the second quarter of 2021," said Bob Lyons, President and Chief Executive Officer. 

"We are executing against our previously outlined strategy and regaining our competitive position. We have been hard at work taking meaningful steps to improve the performance and cost of our globally scaled network, and to expand our client relationships and extend our edge enabled solutions. We remain confident in our ability to continue building on this progress and deliver on our Improve-Expand-Extend strategy," said Lyons.

Continued improvement in operational performance and cost structure:

• Completion of 90% of our $30 million in planned annualized costs savings
• 700 bps quarter over quarter cash gross margin expansion
• Improved operating leverage resulting in an 85% adjusted EBITDA flow through of the sequential quarterly revenue growth
• Our internal assessment of client sentiment improved +13 points quarter over quarter across our global top 20

Existing client and new logo growth driving meaningful revenue expansion:

• 14% sequential quarter over quarter revenue growth
• 18 of Top 20 Limelight customers grew revenue more than 20% for the second quarter in a row
• Closed more than 30 new customer opportunities, more than 10 of which have an Annual Contract Value (ACV) of greater than $100,000 and 2 of which have an ACV of greater than $1M
• Strong pipeline growth with new logo bookings up more than 3x quarter over quarter
• Our embedded CDN for Service Provider offering, EdgeXtend, gaining traction at ISPs globally as evidenced by the NTT Docomo announcement

Extension of new growth products:

• Completed acquisition of Layer0 and successfully launched our best-in-class AppOps solution
• Diverse new client wins include a large mattress retailer, a global travel industry leader, and a $6B retail giant and the renewal of a top ranked US Bank.
• Planned fourth quarter launch of our AppCDN offering and then proprietary integrated Security offerings

"We have made meaningful progress with our revitalization strategy and are seeing early traction with the groundwork we laid supporting continued momentum. Our acquisition of Layer0 and soon to be launched accretive Application and Security products, the successful acceleration of our EdgeXtend solution, coupled with two new large client wins, support this momentum and improving financial performance into the fourth quarter and beyond." said Lyons.

Third Quarter 2021 Financial Results

• Revenue of $55.2 million, up 14% from the second quarter of 2021 and down 7% compared to the third quarter of 2020.
• GAAP net loss of $10.1 million, or $(0.08) per basic share, an improvement of $3.6 million from the net loss of $13.7 million, or $(0.11) per basic share, in the second quarter of 2021. GAAP net loss was $4.0 million, or $(0.03) per basic share in the third quarter of 2020. GAAP net loss included $1.8 million and $2.2 million in restructuring and transition related charges in the third and second quarters of 2021, respectively.
• Non-GAAP net loss was $1.5 million, or $(0.01) per basic share, an improvement of $6.5 million from the Non-GAAP net loss of 8.0 million, or $(0.06) per basic share, in the second quarter of 2021. Non-GAAP net loss was $1.2 million, or $(0.01) per basic share in the third quarter of 2020.
• EBITDA was $(2.0) million, an improvement of $3.3 million from $(5.3) million for the second quarter of 2021. EBITDA was $3.7 million for the third quarter of 2020.
• Adjusted EBITDA was $6.1 million, an improvement of $5.9 million from $0.2 million for the second quarter of 2021. Adjusted EBITDA was $5.6 million for the third quarter of 2020.
• Cash and cash equivalents total $75.8 million at the end of the third quarter 2021.
• Limelight ended the third quarter of 2021 with 529 employees and employee equivalents, up from 459 at the end of the second quarter of 2021, and down from 620 at the end of the third quarter of 2020. Employee count as of the third quarter includes 55 Layer0 employees.

Guidance

"Based on forecasts from our larger clients and their view of their content and post COVID traffic patterns, we believe the fourth quarter will represent a return to both sequential and year over year growth; with this traction and new products to be launched over the next few months, we are also accelerating investments in rebuilding our sales team," continued Lyons. "We are making significant progress across the company. Much has been accomplished in a very short time and much work remains to be done. We will issue full year 2022 guidance with our fourth quarter earnings results in February 2022," said Lyons.

Financial Tables

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, non-cash interest expense, restructuring and transition related charges, acquisition and legal related expenses, and amortization of intangible assets. 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, restructuring and transition related charges and acquisition and legal related 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

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.

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. EDT (1:30 p.m. PDT) today, management will host a quarterly conference call for investors. Investors can access this call toll-free at 844-200-6205 within the United States or 929-526-1599 outside of the U.S. with access code 171804.  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, areas of investment, and product launches. 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 clients, unforeseen changes in our hiring patterns, adverse outcomes in litigation, experiencing expenses that exceed our expectations, and acquisition activities and contributions from acquired businesses. 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 November 4, 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) is an industry-leader in edge access and content delivery services that provides powerful tools and a client-first approach to optimize and deliver digital experiences at the edge. We are a trusted partner to the world's biggest brands and serve their global customers with experiences such as livestream sporting events, global movie launches, video games or file downloads for new phone apps. Limelight offers one of the largest, best-optimized private networks coupled with a global team of industry experts to provide edge services that are fast, secure and reliable. 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.

SOURCE Limelight Networks