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 Ended																						Twelve Months Ended
		December 31, 2020								September 30, 2020								December 31, 2019						December 31, 2020								December 31, 2019
		Amount				Per Share				Amount				Per Share				Amount			Per Share			Amount				Per Share				Amount				Per 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 [phone] 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.

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